Q4 2020 Canadian Pacific Railway Ltd Earnings Call

Good afternoon. My name is Jason and I will be conference operator today at this time I would like to welcome everyone to Canadian Pacific's fourth quarter 2020 conference call. The slides accompanying today's call are avail.

And at Www Dot G. P. R. G E.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

I'd like to ask the question simply press Star then the number one on your telephone keypad if.

If you would like to withdraw your question press the pound key.

I would now like to introduce Christa Brennan and managing director of Investor Relations and Treasury to begin the conference.

Thank you Jason Good afternoon, everyone and thank you for joining us today and.

Some of you are aware negatives at home of two new your new beautiful twin Baby Boys and I'm happy to report that everyone is doing well before.

Before we begin I want to remind you. This presentation contains forward looking information actual results may differ materially the.

And the risks uncertainties and other factors that could influence actual results are described on slide two in the press release and in the MD&A filed with Canadian and U S. Regulators. This presentation also contains non-GAAP measures outlined on slide three with me here today is our president and Chief Executive Officer, Keith Creel.

Our executive Vice President and Chief Financial Officer, Nadeem, Delaney and our executive Vice President and Chief Marketing Officer, John Brooks. The form of marks will be followed by Q&A and the interest of time, we would appreciate if you limit your questions to one.

It is now my pleasure to introduce our president and CEO, Mr. Keith Creel.

Hey, good afternoon, Thanks, Chris and I appreciate the opening comments.

No let me let me start my comments.

But thinking of our CP family.

12000 strong team of railroad or is that I'm honored to serve and lead and produce with daily their grit and resilience that they have demonstrated and continue to demonstrate that the toughest times of <unk> and 'twenty and on and as we progressed through 'twenty. One enabled these results and it's it's without without those collective efforts none of this would be possible.

Certainly the debt of appreciation and particular to the operating employees at the heroic efforts day in and day out to keep the north economy moving.

And at the time of exceptional need again, as inspiring and step out every day to put your own life and risks to protect the livelihoods of others to protect the livelihoods of our fellow employees. The communities, we serve and our customers again very inspiring some super Super proud of the team I'm Super proud of the body of results of it.

We're going to get to to discuss the day.

Speaking of that price and we talk about proud of a lot of C P and talk.

Talk about sacrifice of lot of GP.

Contribution certainly not a shortage of opportunities the sacrifice from this industry, nor the demand for People's contributions to recognize that given it was such an extraordinary year and 2020 the.

And that's the extraordinary effort that enabled what I would call external ordinary financial results. We made a decision and his leadership team late in December to recognize all of our non union and pull on our union employees non management.

[noise] employees with a special one time.

Recognition bonus that was payable on December the 32.

Thanks, Tim.

Their efforts for their contributions and their sacrifices again that enabled this unique result that we're able to share with our shareholders and the investment community Jay So moving on to the results.

I can tell you is the phenomenal quarter overall, we delivered fourth quarter revenues of 2 billion, which was an all time quarterly record operating ratio of the 53.9.

And adjusted EPS growth of 6% and industry leading performance.

For the year of total revenues were down only 1%.

Produced an all time record operating ratio of 57.1 operating income was up 6% the $3 3 billion.

Which enabled of record adjusted EPS of <unk>, 17, and 67 and an increase of 7% vs.

Last year truly announcing and achievement across the board.

Yeah.

On the operating in front of the CP family again finished the year with another strong operating performance result, and many full year records being set for several of the metrics, including train links which improved 9% year over year of train weight, 6% locomotive productivity took another step off the 2% improvement over here so just to say.

The Mark read and the operating team continue to demonstrate what <unk> is all of that would be an understatement the depth and the.

And the breadth of the bench of C. P strong.

Absolutely the what I consider to be the industry best from my hat is off to each mark and his team thinking there for their contributions and on.

On the safety of fraud, what's even more impressive and inspiring was the strong safety performance of the team produced in 2020 train accidents were down 9% 2022 of 0.96, which is an all time record for the company. This marks the 15th consecutive year that we've been the safest class one railroad in North America and at the same time and 2020, we realized the 22.

2% production and personal injuries, which again was another all time record for the Canadian Pacific.

<unk> always said, the Fs and I'll be committed to the safety is the journey. It's a constant pursuit of improvement. It's an area that we're never going to be satisfied and it's foundational to of precision scheduled railroad environment, It's about running the business the right way, earning of the financial return so the.

We can continue to invest and and the same physical plant and creating and maintaining the right culture, which is the culture of accountability care and concern for each other and as the result, the safety performance will follow.

A couple of parts of announcements for the quarter as well outside of the financial and the operational performance that we're super excited about it it's C. P on the environmental front and.

In November we announced that we were named on the Dow Jones Sustainability Index North America. This is something that's the milestone for the company and we're very proud of two two of achieved and and recognize that.

Net of recognition and December we were honored also by CDP for our leadership on climate action and a modest ratings.

Put those two together with the other progress that we're making and the space of cash the tremendous year of environmental progress and development of Canadian Pacific and scenario that we're just beginning to.

To.

Produce and we will continue to set the bar high and continue to be leaders and moving this fall for all of the same Q. Another exciting announcement John's going to provide some color too we were able to announce.

And the fourth quarter that have had void of great partner of Canadian Pacific's announced that theyre going to be calling on the port of St. John beginning in 'twenty and 'twenty, one as well and rest assured as we've talked about on the past and will provide more color to this is just the beginning as we scale out and grow and partner with St. John to create out of World class Port on the east.

Coast of of.

Of Canada.

Moving onto guidance looking forward I can tell you the momentum that we created and 20th.

Carried into 2021.

We're targeting high single digit RPM growth, we're going to have the opportunity to continue to improve margins.

And 21, well in excess of 100 basis points, producing double digit earnings growth.

I'll note. The 2020 was the third consecutive year, the Cps delivered the best funds and the industry and on.

And realized some naysayers may say that there's less upside of this company.

Given the compares but rest assured this is the team.

That loves to be challenged we relish the opportunity I don't view of track record of success as the negative success breeds success rest assure of this team knows what it takes to create success for each other for our customers and our shareholders and you can expect another successful year in 2021, the Canadian Pacific I've never been more confident and our.

Team's ability to deliver.

So with that said I'm going to hand, it over to John and bring some color to the on the markets and then we'll let nadeem wrap up with the bit of color on the numbers.

Alright, so thank you Keith and good afternoon, everyone. So it's Keith said our T M.

Seller aided in the quarter and finished positive up 2%.

Total revenues were down 3%, the 2 billion FX and fuel combined to be about a 3% headwind and.

And pricing gained further momentum well mixed results were negative.

I'm very pleased though with how volumes have steadily improved through the quarter, we were up over 9% sequentially.

Continuing the trend we saw and in Q3 and I frankly believe that we have hit the inflection point through this pandemic and the issues faced in 'twenty and 'twenty and we will continue to gain momentum and see positive volume as we move into 'twenty and 'twenty one.

Yeah.

On the year total volumes were down 1%.

And revenues were up were actually the total total revenues, where I'm sorry, total revenues were down 1% on and FX adjusted basis to $7 5 billion.

We led the industry with the lowest volume decline and this unprecedented year.

Our self help growth initiatives disciplined pricing combined with our resilient business mix and strong service and.

Enabled us to continue to outperform.

So now let's take a look at our fourth quarter results.

On the next slide and I'll speak to the results on a currency adjusted basis.

The grain volumes were up 18% on the quarter, where revenues were up 8%.

This operating team executed a record fourth quarter the cap of full year of record grain performance and we delivered records and 11 of 12 months in 'twenty and 'twenty.

Our franchise is the only getting stronger and the power of our innovative 8500 foot high efficiency operating model.

Driving these results.

We currently have 31, Orange and elevators qualified as 8500 foot 23 are running our highly efficient power on model and we will add at least 15 more 8500 foot facilities to our franchise in 'twenty and 'twenty one.

The record level of network development combined with our new high capacity Hopper cars will enable the CP team and our customers to continue to raise the bar in 'twenty and 'twenty one.

And our U S grain franchise continues the Steve strong demand with rpms up over 30% year over year.

Demand for corn and soybeans to the PNW export markets remains very robust.

With a record harvest and Canada, and the strongest demand and the U S that I've seen for a number of years, we expect the momentum and grain to continue into 'twenty and 'twenty one.

Moving on to the potash front volumes were up 25% on the quarter, the closeout and all time full year record for revenue and tonnage.

Canpotex has done very well to diversify its customer base beyond China, and India and they are fully committed through Q1 just sort.

The real reflection of solid global market fundamentals supporting the agricultural industry and we expect potash the continued to be the area of strength for us in 'twenty and 'twenty one.

And the round out our bulk business coal volumes were down 1% as a result of demand pressures from the pandemic and supply chain challenges I expect coal tonnage is to increase in 'twenty and 'twenty, one with our T. M is roughly flat.

The energy chemicals, and plastics portfolio saw revenues decreased 25% will volume declined 27%.

Q4 saw very tough comps with crude as last year, we moved 36000 carloads and Q4 and.

And this year, we saw on favorable spreads continuing to weigh on crude by rail.

Excluding crude ECP volumes were up 9% and the quarter.

With the improving export and domestic demand for LPG gasoline and diesel.

And I'm now looking at 'twenty 'twenty, one we will face tough crude comps in Q1, but with the continued economic recovery, we anticipate improved performance across our energy portfolio, and specifically and our refined products area.

For crude by rail we are seeing increased activity and spreads have become more favorable and.

Additionally, we are very excited to begin moving later this year D. R. U crude volumes from our exclusively served facility at Hardisty, Alberta the.

Dr. Yu volumes will provide a safer pipeline competitive option for shippers and.

And will help to stabilize our crude business into the future.

Moving on to forest products volumes were up 17% and revenues were up 14% as we continued to see strong lumber prices and significant demand for pulp and paper products.

We had a record year in 'twenty and 'twenty and I expect continued strength in this space given the strong demand environment.

Further enhanced by our acquisition of the <unk> Q and the continued execution of our trans load strategy.

And MMC volumes declined 3% largely driven by lower Frac sand volumes as a result of downward oil pressure on oil prices and reduced drilling.

Excluding frac sand volumes and this space for positive.

In the automotive business revenues were up an impressive 31% to an all time quarterly record.

While volumes were up 57% on the quarter.

And this is an excellent demonstration of the power of our unique customer solutions.

The globus contract ramp up was seamless.

And is proving to be even more volume than we initially anticipated.

Our unique land holdings, and our automotive playbook execution has laid the foundation for this key contract win that this franchise will benefit for years to come.

I continue to expect to grow automotive revenues and a strong double digit pace.

And finally on the intermodal side of the business quarterly volumes were down 1%.

On the domestic intermodal front, we had a record fourth quarter and our fourth consecutive record year.

I fully expect continued growth in 'twenty and 'twenty, one and our domestic book as CP is well positioned to capture the sustained consumer demand.

<unk> E commerce and inventory restocking as it continues.

Coming out of the pandemic.

On the international side I.

And I'm pleased with our contract with <unk> Lloyd has been extended and Habig as Keith mentioned will begin regularly calling on the port of St. John.

This is an important milestone and our journey to reestablish cp's presence and Atlantic Canada.

We also welcomed merits to the franchise with their first vessel arriving in December.

We are looking forward to this new partnership with Maersk and the volumes will continue to ramp up effective March one.

The partnership with the Maersk will deliver supply chain solutions that will drive growth not only and are intact international business.

But also and our domestic intermodal volumes in 'twenty and 'twenty one.

So, let me close by saying and and echoing some of Keith comments.

Looking back at at 'twenty, and 'twenty I'm extremely pleased with how this team of railroads took control of what we could control.

And manage through these unprecedented times that we all faced.

We demonstrated exceptional resilience, we found unique ways to go aftermarket and we generated momentum and volumes. Despite all the uncertainty.

Volume steadily improved through the back half of the year and I can tell you. We finished the year strong and we're carrying momentum into 2021.

Now as I look ahead to 'twenty 'twenty, one there remains the full pipeline of opportunities that have yet to ramp up and that are under development or.

Our playbooks continued to bring incremental volumes to CP at a price the reflects the value of our capacity and service.

We will continue to drive sustainable profitable growth through.

Through leveraging our unique strengths and deepening our relationships with our key partners.

With that I'll pass it over to Nadeem.

Thanks, John and good afternoon.

As Keith mentioned these are tremendous results and our team of 12000 Railroader is delivered and a very challenging environment and I'm honored to present them.

We overcame the financial impact of a pandemic and still delivered the low and the guidance, we presented a year ago.

And this should not go unnoticed it wasn't easy, but it is the only company and our industry to continue to provide guidance throughout 2020. It shows the confidence we have and our business model and our team's ability to execute.

The team does not make excuses when faced with headwinds we focus on controlling what we can control we have a culture of accountability that starts from the top.

And we are paid to execute and deliver and that's what we will continue to do.

Now getting into the results overall the.

The operating ratio decreased 310 basis points to an all time quarterly record of 53, 9% driven by a strong operating efficiencies, including record train lengths and weights improved casualty of performance and lower fuel prices.

Taking a look a closer look at a few items on the expense side comp.

Comp and benefits expense was up 9% or $37 million versus last year the <unk>.

Primary drivers of the increase were higher stock based compensation of $15 million the.

And one time bonus paid to the frontline Union employees, Keith mentioned totaling 17 million and of continued pension headwind from current service costs.

Fuel expense decreased $58 million or 26%, primarily as a result of lower fuel prices. This year, we achieved a full year record fuel efficiency, helping us to avoid 40000 tons of Cotwo emissions.

Materials expense was up 10% of $5 million as a result of higher repair materials for track and operations and increased volumes.

Depreciation expense was up was $197 million and increase of 11% as a result of a higher asset base.

Purchased services was $197 million, a decrease of $97 million or 33%. The main driver of the decrease is the gain related to the true up of our existing ownership percentage and the Detroit River tunnel for a total of $68 million.

The remaining decrease was largely driven by lower casualty costs on the quarter.

Moving below the line other components of net periodic benefit recovery were effectively flat with lower discount rates offsetting higher amortization of actuarial losses.

Income tax decreased $37 million or 16%, primarily as a result of of onetime tax recovery.

This has been backed out of adjusted earnings.

Rounding of the income statement adjusted diluted EPS grew 6% to a record $5.06 and the quarter.

Moving on to full year results on the next slide.

The fourth quarter performance caps and the impressive year for the CP family.

Our full year operating ratio was a record 57, 1% of 280 basis point improvement year over year as we continue to demonstrate our ability to improve margins and deliver the best of war and the industry.

Adjusted income grew 5%.

And a record adjusted diluted EPS increased 7% and we achieved this all while achieving record safety performance.

As we look forward to 2021, our guidance assumes high single digit or Tam growth.

Capex of $1, $5 5 billion and double digit adjusted EPS growth of <unk>.

Few specifics to call out you.

You should model and increase of approximately $30 million and comp and benefits from pension and current service costs largely largely as a result of of lower discount rate at year end 2020.

Similarly, depreciation is expected to be approximately $45 million higher in 2021, as a result of of larger asset base.

But as I said earlier, we are paid to overcome headwinds and we see and we see further opportunity to continue to improve margins in 2021, and I fully expect us to continue to lead the industry on that measure.

Moving onto free cash to wrap things up.

2020 cash from ops decreased by 6% to $2 8 billion and Capex came in slightly above the guided $1 6 billion as we pulled forward certain capital projects in order to leverage the economic recovery in 2021.

We are of discipline disciplined approach the capital investment and the strong returns we are generating are evidenced by and adjusted ROIC of 16, 7% also and the industry best.

As we go forward, we expect to bring the capital envelope down and 2021, given the pull forward I mentioned and anticipate the spend of 1.55 billion.

Free cash came in at $1 2 billion as we continue to grow earnings and remain disciplined on capital you can expect to see Cp's free cash conversion continue and improve both in 'twenty and 'twenty, one and beyond.

I think another area, we differentiated ourselves from our industry peers is that despite the volatility we all endured this year, we've continued to reward shareholders.

The pause our buyback early and the second quarter, given the uncertainty and credit markets, but in June with confidence and our outlook combined with the strength of our balance sheet.

Resumed our buyback.

Timidly, we completed 90% of our latest share buyback program and average price of $369 per share Cigna.

Significantly below current prices.

And 2020, we returned $2 billion to shareholders through share buybacks and dividends and just this morning, we announced the new two 5% buyback program.

We also announced the proposed five five to one share split that will be presented to shareholders that R 22.

2021, the AGM.

This is an appropriate step to enhance liquidity and the stock and provide better access to ownership for a wide range of investors.

Our balance sheet remains strong with leverage of two five times adjusted net debt to adjusted EBITDA.

So let me wrap up by saying 2020 was a challenging year and CP demonstrated resilience and the space of significant uncertainty.

We were able to provide guidance and the investment community throughout the year and will continue to provide transparent and achievable guidance as the uncertainty lingers.

This is the team that sets a high bar and has a track record of over achieving.

If you look back of the first four years of Keith John and I have worked together and these rules. The company has delivered a CAGR of 16% EPS growth.

Our ROIC has also improved from 14% to 16, 7% during that period and.

And I can tell you we're not done.

All excited about the opportunities ahead of us if we can deliver the lowest operating ratio and best revenue performance of the pandemic, it's extremely exciting and we think about the art of the possible as the economy recovers in 2021, and we benefit from operating leverage.

It's why I don't worry about headwinds.

And with that I'll pass it over to Keith to wrap up.

Okay. Thanks for the color on John and Nadeem and <unk>.

Exceptional that's the word I think about an exceptional year.

Enabled by the exceptional group of railroad as of this company.

Set us up for an exceptional 2021, and we're ready for the year, we've got the momentum.

Moving into 'twenty, one wins at our back the.

The teams ready to produce so with Atlas and open it up the questions.

Thank you if you would like to ask a question simply press star one of the number one on your telephone keypad. If you would like to withdraw your question press the pound Canadian as previously highlighted please limit your questions to one there.

And there will be a brief pause while we compile the Q&A roster.

Your first question comes from the line of Chris Wetherbee from Citi. Your line is open.

Hey, Thanks, and good afternoon, guys, maybe wanted to sort of dig into the RPM growth outlook, a little bit deeper so I think as you mentioned.

And theres sort of an inflection that's been going on here.

I guess, maybe if you could help us sort of highlight maybe some of the specific biggest opportunity D. C would it be on the intermodal or otherwise as you look at 2021, and then can you also help us a little bit with the the cents per RPM. Two if you don't mind just there are some FX headwinds I think you will be facing to some degree. So I just wanted to get it and get a sense of how that might translate.

Relative to total revenues.

Yes, so maybe Chris I'll start on the cents per our T M a little bit.

And.

Think looking back at Q4, we did see a little bit of mix.

And we had a really strong bulk quarter.

The long haul Vancouver grain long haul PNW grain.

As I said record potash and created a little bit of headwind overall on on that front.

You know, we're face and that since per our T M and a negative VR CPI and the regulated grain at least through through August of 2021 looking ahead.

We did lap some pretty big LDS from last year Q4, as it relates to our crude by rail business and.

And we will face a little bit of that I would say it of declining rate as you move through 2021.

And as you mentioned and we'll get to some point, where we start lapping that the fuel and <unk> and ultimately <unk>.

<unk> headwind that we faced on the cents per our T M.

Looking at the volume at the moment.

And we're excited.

This year is going to be a big year for CP in terms of a lot of the the projects that have been underdevelopment and really the last couple of years.

A number of all of them have come to fruition fruition, but we've got a quite number.

Them that are really just starting to ramp up and hit their full potential.

As I mentioned the automotive space.

Continues and it looks to be a really solid tailwind for us not only in terms of the volumes also cents per our T M. The glue.

<unk> business, frankly is looking to be about 30% bigger than we anticipated.

We've got our Schiller Park compound that we're just on the verge of.

Of starting to get some volume running through that facility. We've we've taken a dormant facility and in Calgary and filled that up with with FCA and and others and of course, our we've had a ton of success and our and our Vancouver auto compound.

And I'm quite bullish and the automotive sector, but really as I go down the list.

And I expect big things and the bulk franchise and we should continue to sustain what you've seen and in grain and grain products.

Our biofuel plants are back running at 97% to 100% capacity across our network. We've got a couple of facilities actually and in Biofuels and also frac sand that add debt had shut down during the pandemic that are that are coming up and I expect to give us a little bit of a tailwind and in those areas.

The AG nutrient side.

Is is I think quite exciting for 2021, Canpotex has and its pretty ambitious growth rates.

For us as we continue to enjoy that business.

Our general Fertiliser business, particularly with the mosaic looks particularly.

The strong so I'm I'm bullish across the board in and that's without even getting to the full ramp up of our mirrors the business and and.

And as Keith mentioned, the opportunities that we're going to see and and St. John and 2021.

Okay, that's great and so the only clarification just on the cents per Archie I'm going back to that sort of been flattish maybe slightly negative on that just kind of curious.

You know what I think to start 2021.

And maybe slightly negative and then and inflection I think Chris as you move towards the back half of of the year.

Perfect. Thanks for the time.

Your next question comes from the line of Tom Waterworks from UBS. Your line is open.

Yeah great.

I don't know of Pi.

And I'll touch more color on the kind of the green comment that the.

And Chris was hitting on I don't know if you want to count that is the question or not but my primary question.

On the crude business.

Seems like you.

I guess.

You know the Keystone XL getting cancer.

Cancel the gain and.

The D are you ramping up and second half I'm wondering if you see you would expect to see some indication that there might be more interesting and additional D. R. U or you know more optimistic look on crude I know its pretty volatile business, but the I guess that that's kind of of the primary question and then I don't know if you mind, adding of.

A little further thought on the green.

Revenue cap impact from first half.

Yes. Thanks.

Go ahead, Keith I'll take I'll take the Tru Vue, and then I'll, let John speak to the grain piece so.

So Tom to your point the answer is yes, we do think debt.

The administration.

Actions executive order of the pipeline that bodes for more strength and more potential demand for crude and we think it creates more support for scaling up and expansion of the day argue.

So we're bullish on that opportunity and then overall, although we still see the short term long term eventually pipeline capacity is going to catch up we just think there's a longer tail on it now so we think theres going to be of space for some potential upside and both spaces and again the the most exciting part about the Dr. Yu as that scales up is that the ratable business. It is.

Going to be part of our book of business on a go forward.

And it's protected its pipeline of competitive we're talking about 10 year contracts. So it's environmentally positive so again across the board that the argue piece is really really exciting for us and given that the facility. That's being built now is going to come on line mid year, and we exclusively serve it and hardesty and it's scalable.

It can go up to twice as large as it's coming out of the gate at <unk>, that's pretty exciting it's really exciting.

Yeah, and Tom just the come back to your Green question. So just.

On the regulated Canadian grain, we've got the the headwind on the VR CPI. So we'll we'll manage that like we do every year our regulated grain rates and then we actually we expect that to inflect and and turn positive as we move into the new crop year.

Okay. Thanks for the time alright.

Your next question comes from the line of Ravi Shanker from Morgan Stanley. Your line is open.

Thanks, Good evening, everyone. The Keith you said that on the or side.

You're targeting well over 100 basis points improvement maybe you were in the beam can kind of give us a little bit more of a walk there.

Does that I mean, what sort of over 100 is at $1 50, or the 300, sorry, I know and being a little bit greedy here.

And maybe kind of how do we think about some puts and takes here I know you mentioned and depreciation but any other big items keep in mind.

Revenue you got to tell me what the spreads are going to do and crews you've got to tell me what the crop year is going to be next.

I'm around if you could give me those numbers and a few other inputs.

And on that one of our number but of telecom and better than 100 points for sure I don't know if I'm going to commit the three but it's going to be somewhere between hey, Dave you want to provide some color.

And I think theres too much more to add on that I think Ravi you look at of.

Some of the opportunities of what we've delivered and the last two years with volume is actually declining.

And if you.

Listen to the John and what we believe as far as our RCM growth.

And I think we are very bullish on the volumes and we've seen the volumes return and and we have a lot of initiatives that John mentioned are ramping up and addition to.

Things, we're doing today, so with the volume increase and a low cost basis. The operating leverage that this team has shown we can deliver on the.

Cost structure Thats entering 2021.

And so low and we feel very good about what we can do from our operating leverage and the incremental margin point of view.

Yes, I think I heard of coin last week as the double nickel, we're not going to commit to the delta in FY 'twenty, one, but we certainly have our line of sight.

It's in our and our cross sales would be the best way to say it.

Understood. Thank you.

Your next question comes from the line of thought he should moving from BMO. Your line is open.

Thank you.

Good afternoon.

Quick point Keith.

Clarification related to each other.

The first what is the FX that you're baking into the EPS guidance second.

The energy.

Since the RPM was five nine and the fourth quarter, which I talked to the big drop from the trend and we saw on the first second and third quarter. If you can talk to that as well and kind of talk to us through how does that look like going into 'twenty and 'twenty one and.

And overall I mean, the related because that makes sense since we're on.

The EM youre, saying, the RPM growth kind of high single digits.

And then to 8%.

And of what you mean.

When you include FX and the mix issues like does that number and kind of stay around.

The same does it go up.

<unk>.

Is the mix overall for fiscal 2021 would be positive or neutral.

Sure. So let me start and John can add jump in.

FX, we're looking at around current levels of around 128 level.

Through the year.

And could there be.

Upside or downside I, just point out that FX. It has the translation impact, but the reason that the.

The Canadian dollar strengthening the supportive to us so that means that the the Canadian economy is recovering and our.

Positive manner, and it means that typically commodity prices and namely crude is improving so.

Sure it can be of translation headwinds, but net net it's an overall positive.

It helps our balance sheet as far as our leverage metrics and as far as our U S dollar denominated debt and low.

Our capex spend and and like I said it helps the overall our volumes.

If you look at the to your point on the.

The crude since per TM.

And as John mentioned, we lost some.

Liquidated damages and Q4, and so you see the the impact of that and in the sense for our team on crude we.

And we talked about.

That likely will continue through the year, especially if you assume a certain level of crude we are being very conservative and our view.

So I think of.

If you get the benefits of spreads widening if you get some of the the longer term benefits of production ramping up.

We could have further upside on the on crude volumes.

Which again will impact our cents per our Tam right. So we'll have less liquidated damages, but we'll be moving more business, which again is a positive.

Net net.

With currency.

As to Keith's point going to be somewhat dependent on what fuel prices do from a cents per exam of point of view, but.

I think you would have a modest.

Modest decline.

Is where we're seeing things as we stand here today.

And if fuel surcharge ramps up.

It can be kind of neutral.

Well I guess the only thank you yeah.

Your next question comes from.

Your next question comes from a line of Walter's Brooklyn from RBC capital markets. Your line is open and thanks very much good evening everyone.

And I guess I wanted to go into the or question and with the double nickel.

Target.

And I know Keith when you came over to GP. You had you had a model that you had executed on before and you were looking forward to executing it on <unk>.

Organization and and certainly have done. So my question, though I guess is what are you and unchartered territory now in terms of new improvements and how much of or improvement and that was going to come as a result of technology I noted.

In your appendix you have got a few slides on technology.

I'm I'm sitting at home not being able to go out with the.

With the pandemic and Ivan.

And going through your Linkedin profile and you've got some pretty interesting.

Videos on some of the technology that you're implementing both from a safety standpoint and from a.

From a from a.

Efficiency standpoint, so is this now new new new territory.

How much is technology going to have to play a role here and getting your or improvement down further and just any thoughts on that would be helpful.

Well I would say that we certainly have not mined all of that opportunity Walter It is new given that we're just deployed the.

The exemptions, we got per transport, Canada, using the portal and using the the Coldwell technology that's literally.

Two months old.

And so we'll continue to grow and that's going to be incremental.

Change is going to be incremental benefits of protecting our margins and that's part of the formula, allowing US is it just the natural outcome of running our business as long as we bring on.

Sustainable profitable growth those are key words, and those aren't just cash prizes.

Got to bring the right business mix, you got to make about doing it and its kind of fits your network you cant overstress your network and create some kind of congestion that debt jeopardizes your ability and destroys your cost structures of drives additional capital expense. There is a fine balance that has to be managed we've got a commitment of our customers.

Asset turns matter of velocity matters all of those things of the <unk> formula It's truly based upon its foundational and you've got to respect that but if you layer on technology on top of that whenever you can improve the safety performance average around what we prevent those realm of every time you have the number one.

It's a challenge.

Social responsibilities the challenged our social license and certainly nothing that we desire to occur. So everyone. We can prevent as the positive there, but from a dollars and cents standpoint, youre talking and billions of dollars. Every time, you put of mainline train or most times that you put of trained on the ground at track speed Thats, a lot of money and it's a lot of adverse impact.

And to the network fluidity, given the way we run the business because essentially apply capital and we've got a lot of planes flying around Pearson are quarter, O'hare with with and over in Atlanta, and they are burning fuel and.

Burnt and dollars and.

Taken out efficiency and consume and capacity.

So these technologies that's the approach that were taken and they've got to be practical they've got to be executable and I'm not going to be bleeding edge, we're going to develop technologies that we can convert and not talk about the 456 years convert with data to make it a safer more reliable more efficient lower cost better <unk>.

<unk> railroad.

And so what we're doing with our <unk> technology, that's what we're doing with our big data analytics and algorithms that we used to.

Have more predictive analytics to allow us to identify the mechanical defects before they become an issue with the trade.

And that's what we're doing with our broken rail detection that we've created ourself are our home built.

Solution to that challenge, where we don't have CTC that we're deploying we've got about four subdivisions.

That we've completed by the end of this year, we will have 11, and we're doing it at a fraction of the cost. So again those are all part of upper.

Our pursuit of operational excellence, it's just part of consistently getting better and what we do becoming better railroader and leveraging technology not to hit a home run, but just to consistently hit singles and doubles and singles and doubles add up the runs and and.

And you start out and those runs up and you start with and Ballgames.

Pretty exciting stuff I appreciate the time.

Thank you all.

Your next question comes from the line of Allison Landry from Credit Suisse. Your line is open.

Oh, Thanks, good afternoon.

The main competitor has been talking about scaling up the business and focusing on management I would think.

Yes, a clear positive for CP, but maybe if you could speak to your thoughts just on on the AUM.

Overall the pricing.

Pricing environment.

And whether you think maybe there is a structural acceleration.

And that's taking place as a result of late.

These actions, but just the fact that debt rail service.

And it's getting better and he thought that Eddie.

Your thoughts there would be great. Thank you.

Yep. Thanks.

Thanks Allison.

What I do I think this feels a lot like the environment, we faced back in I guess it would be 2018.

And where we saw I think pretty strong year across the board and the rails on on pricing.

The.

The just the volume growth that debt IC out there in and literally they look down on.

And our list of commodities.

I think there's pricing opportunities and just about every one of those sectors.

I can tell you we've been we've been very creative and and how we've approached the managing this capacity and working with our customers around around surge equipment, and but but capturing the price for the value of that debt service.

Q4 renewals were were quite strong.

Say on the upper end of the targets, we traditionally talk about that and and all.

I'll remind you.

Sales team is largely compensated on on their ability to deliver price and to have the price disciplined.

But.

I would maybe close by saying, it's not a flavor of the day at CP. It has been.

And since I've taken this role and under Keith guidance and working with Nadine.

Our effort has been around pricing day in day out for the capacity, we have and the service we are bringing to the table and and that is that's not going to change.

It was wildly pleased with how we performed in the face of of pandemic and now with some tailwind and I can tell you theres a lot of focus to do the same as we move into 'twenty and 'twenty one.

Okay. Thanks, John Yep.

Your next question comes from the line of kind of extra from Bank of America. Your line is open.

Hey, great good afternoon.

Just to clarify nadeem on debt to Robbie's answer there you include youre, including the gain from the sale of Youre not normalizing it out so when you talk about 100 basis points.

And Keith Youre talking about on the 57, one right and I just wanted to clarify that before I ask my main question.

But the the question I had was Oh go ahead.

So yes, I mean, we reported of 57, one or we would expect to improve off of that that's where you get to the double nickels that Keith was talking about we're not we're not saying on an and.

And any sort of adjusted the OS.

Sure.

Perfect. Thanks, and then.

Given the the American intermodal growth and.

All the.

The scale of that you're talking about on all of our Tms can you just talk maybe.

John about your thoughts on the capacity out west or I don't know if the team. If you think there is need for siding or capital deployment, you talked about keeping capex the same but maybe talk about how that's going to be deployed.

Yes.

Yeah I mean.

And typically Ken looking at port capacity out and Vancouver.

And we feel quite comfortable with the relationships and the direction that debt GCT and DP world.

Tween between Delta Port between Vande term and send term to handle the business.

We've got a new train pair and designed that well will.

And I think we're super excited about how we can compete and the market from Vancouver into certainly day and day out Toronto and in Eastern Canada, but but as we grow our business into the Minneapolis market with the capacity, we've added and our Shoreham intermodal terminal and and also into Benson.

Bill.

Debt that we're gonna have quite of product.

And you look out east and and Keith mentioned this we are in the port of St. John's embarked upon.

About a 200 million dollar of modernization project and and that's going to quickly step there capabilities up to three.

300000, Teus annually, but we've got line of sight and working with the port and the province, and and frankly, all stakeholders out there to get that port up two and 800000 Teu facility.

And so I don't see capacity at the terminals being an issue and <unk>.

<unk> railroading and all of the things we've talked about I think we feel quite comfortable around our product.

The deliver inland from the sports.

Ken Let me, let me add a bit of color on the line capacity, we're not in any.

Location constrained from loading capacity that said part of our normal cadence of doing business every year, we're spending what I call capacity capital dollars surgically investing and strategic sidings. We've got a list based on delays based on velocity based on capacity across every corridor with our <unk>.

<unk> based on the return and we've continued to invest to create that additional on capacity that if we don't need it from the business level and we haven't.

And we return it through asset terms.

So we think about 2020 when everybody else is cutting capital we didn't cut our capital we spent more capital in 'twenty than we ever have and the Companys history. So rest assured we've got some capacity and our back pocket to execute on these contracts and these contracts when it comes to service and you talk about the cost of destruction when you Overcommit the railway.

And <unk>.

Talk about the reputation of destruction when yogurt convention of railway when we go and negotiate these contracts I'm at the table with John So all of these contracts. These major contracts that we're committing I've got a commitment.

To my customers that exist with us today, and we're putting our word and our reputation to align with those new customers and the commitment and I make to each and every one of them is im not going over some of my railway.

I know the value of that of destroys for the customer as well as for this company and that is not going to happen on my watch at Canadian Pacific.

And I'll just add Ken the from a capital point of view.

Many of these.

Deals we ended up doing that requires capital.

We partner with our customers to co invest so theres, we both have skin in the game.

We both have a certain level of return and and conviction and it tends to be of long term deal.

So John knows from me and my team and the expectations.

Far as what the returns need to be and I think that thats added to.

And what you see the output of relics of close to 17% that we.

Put that discipline into the process.

We don't need the practice of moving it is Keith says it's the.

It has to have the generate the right return.

Thank you Eddie and John I appreciate it.

Your next question comes from the line of Steve Hansen from Raymond James Your line is open.

Yeah. Good afternoon, guys. Thanks.

A question for John on the Green opportunity.

John Youre coming off of record year that should be congratulated, but the bar is now higher.

Fundamentals do look really outstanding right now, which I think plays in your favor for 'twenty, one, but I think I was most struck by your comments on the number of of new elevators. The planned to come on line for your 8500 foot model could you maybe just elaborate a little bit on where the was elevated at all coming for you referred to and network developments, but I'm just trying to get a sense for your confidence and those all coming on this year.

And your ability to push higher and the 'twenty one here. Thanks.

Steve.

I think what a lot of folks are maybe don't sometimes understand and our AG franchise is we've been the leader of developing these the big high throughput elevators.

And.

What we're doing now is less about adding new dots on the map in terms of elevators, but more working with our grain shippers to now reinvest and know their elevators to expand them do our 8500 foot model.

And and as I said, we've got 31 of those active today.

In the coming year, we're going to add 15, so that's 15.

I think the the numbers would breakout the three new ones coming on line and 12.

Existing elevators that'll be expanding to the 8500 foot model.

So that means 56 car facilities one.

12 facilities expanding up to two handle of 134 plus cars.

That's debt the converting ladder tracks and the loop track across the paired prairie's, that's that's adding sidings outside of facilities. So trains can can get off of our mainline.

And it's allowing the ability to keep our power on our trains when they land at origin and so they can be quickly loaded and launched and when I say quickly loaded.

And under 12 hour load times.

It's adding that next level of efficiency.

Cross all of our elevators.

And then when you combine that with with the investment and the covered hoppers.

That becomes the powerful thing and frankly, that's what gives me the optimism when you.

Spread that across.

Canadian franchise that continues to grow in terms of yields and production.

And frankly are quite of bit of headway across our U S franchise to develop it and it also to meet the growing demands that we think is going to have a continued tailwind for exports of the PNW.

That's what that's what gives me so much excitement.

The excitement about the ongoing growth of our of our grain franchise.

That's great color. Thanks.

Your next.

Question comes from the line of Jon Chappell from Evercore ISI. Your line is open.

Thank you good afternoon, everyone Keith.

And at the very beginning and thought it was interesting your comments on proving the naysayers wrong.

The grid of the years and you've had everyone thinks it is at a certain point you you hit a ceiling.

So as you think about not just 'twenty, one but also beyond that and are there. Other <unk> out there are you chasing big fish like Globus and mers contracts or is it just basically taking this.

On capital envelope that you continue to spend and and blocking and tackling with the current network and the current group of customers and just trying to keep taking share from the service that you provide.

And I would say there so I'm not aware of any C and <unk> opportunities I would say that we keep a strong financial.

Physician or Keith or keep our balance sheet strong and pattern of our pockets. So that we can the opportunistic and one of those comes up and in the meantime, it's about building out. This network that we have we've just began to do this great work with the <unk> and all of that that potential to realize that potential and.

And I firmly believe I've said this before and made a comment that success breeds success.

We're working with some of these big players like of Maersk Youre working with some of these automotive companies you work with the goal of as Youre working with competitors they have competitors and if youre, helping become part of their success story that gives them a competitive advantage and their marketplace.

And then their competitors are going to say wait a second and I've got to match that I've got to try to develop some of those same synergies. So again that gets the pick and your partners and pick and your partners wisely, we're never going to be everything to everyone, but rest assured the partners that we partner with.

We're going to give them of service and gives them and experience that allows us allows them to compete and their space and allows them to take share and through that we will grow with them. So thats the strategy.

John's got a list of opportunities still of these things don't happen overnight.

This big what I'll call it and all of them swingers momentum creators they take several years and the making its not something thats going to happen overnight, we announced just recently I guess it was last quarter as well about our intentions to build out our facility, our trans load facility and our terminal in Vancouver.

Rest assured there's already been discussions that debt.

And that announcement has enabled and the sound before some after where theyre going to be customers that have come in there, they're going to create capacity and create commerce for Canada as well as CP at the same time and that's the two to three year timeline before we get to that point and beyond.

So again the one thing we are blessed with size of the greatest railroad is and the world and our franchise and the lanes, we run and it can't be parallel borrower of the rail comparator, because we run shorter length of haul is plenty of land currency.

To convert and grow and our own footprint without having to get into bores with.

Municipalities are trying to buy land that may not be obtainable I can grow and Vancouver, I can grow and Calgary I can grow out of Toronto, I can grow and Winnipeg, I can grow and Chicago I can grow and Montreal, we have land holdings contiguous to every one of those terminals that can create customer solutions and thats exactly of what we're about.

The business and do it so you can continue.

Expect to continue to see that playbook play itself out of this company for the years to come outside of any kind of.

Acquisition, we might participate in.

Great. Thank you Keith.

Your next question comes from the law and all of the Jordan <unk> from Goldman Sachs. Your line is open.

Yeah, Hi, just a couple of cost questions I'm curious on the purchase services side and just was wondering is that sort of snap back to more normalized ranges and as a percentage of revenue.

Most of this quarter and then maybe you can just touch a little bit on and sort of your thoughts around cost per employee and wage inflation as we move through next year. Thanks.

Sure. So a couple of things to add.

Yes, I would expect purchase services.

To get more normalized absolutely we get the benefit of the Detroit River tunnel.

This quarter, which are which is of the size of absolutely.

And.

Cost per employee so.

Based on our high single digit RPM growth you should expect kind of low single digit employee increase and on the cost side I mentioned, the $30 million impact from current service costs related to pension.

And we'll see how we perform.

We have comp tied to our performance and.

Our RF chip or our annual bonus.

Paid out is going to pay out of it of very high level. This year, meaning for 2020, so we accrued at.

The high level.

Hopefully it's at the same level that means we're executing if not and then that would be a tailwind.

Stock based comp the same thing where the.

The best performing.

Stock in 2020.

We had significant headwind from.

Stock based comp as a result of on the Mark to market of.

The stock price.

Hopefully we have the same problem sure shareholders of all complain so that's somewhat dependent on on that.

And how we perform.

And how the market performs.

Far as the CP stock. So if we if we have another strong year then.

And then there'll be neutral and you would expect of the cents.

Part of it seem to be so.

Similar levels, if we if our stock doesn't have the same level of increase than you should assume the.

The cost per employee to to come down a bit.

So those of the element.

And relatively from Jordan infill.

Inflation I would assume about a 2% type of level.

And as well for our overall inflation.

Thank you.

Your next question comes from the line of Brian Awesome Buck from JP Morgan Your line is open.

Hey, good evening, Thanks for taking the question maybe one for you Keith when.

And when you talk about being part of the success for the partners and the shippers sort of.

And growth and capacity, obviously and part of that but you have a couple of extra slides on the ESG reported and ratings just came out.

Debt angle or is that initiative really starting to resonate.

With some of your customers or partners is that more on the short term basis from he has got the attention or do you feel like you've really.

<unk> started the performance and partnerships that maybe are being driven.

By this by this factor above and beyond what you normally provide for them.

Yes, that's an area that obviously is becoming more and more topical every day and more.

Its importance is growing.

And it's growing stronger it's not the meeting at all and and it is part of the sales cycle is part of the discussion of that John and his team are having with our customers because our customers. Obviously have the same concerns we do about the environment and when they can see the rail as an opportunity to partner with and again Thats why its important and my mind that we take a leadership role in the space we're proud of.

Talk about we announced our our hydrogen hybrid battery and locomotive that we're developing so I've got we're blessed with the team of very intelligent talented engineers led by Dr. Mulligan debt they've created their own lab theyre developing.

Our hydrogen fuel of locomotive for the rail industry Thats the game changer, they're hot Theres hydrogen solutions out there in Europe not for freight though more per passenger so is it robust enough strong enough. So the challenge is how do we do that well that's the challenge they've taken on and when you take that kind of a leadership role and it's not just again semantics of words it's.

And I've been in the lab I've seen the hydrogen fuel sales they've create created create electricity and power and electrical motor and I've seen the locomotive and the process of converting a year from now.

We will have a call on locomotive and maybe year and a half of it. The most will have a pile of locomotive and Calgary this could be switching customers using hydrogen.

And it is not our objective.

To get into the locomotor producing business, it's our objective to prove what's possible to prove out the concept and then go to the Oems and say listen here. It is this is what it looks like.

And make it better.

The solution for the industry because this industry needs of that so those are all spaces that our employees get behind it we get behind it and it absolutely is becoming part of not only what we do and who we are but how we sell.

The other one thing I'll comment too that we're super proud of the lit.

Currently.

And another four weeks left we'll finish our completion of our solar farm and <unk>.

Calgary, if you've ever been to our corporate office, it's the converted rail yard.

We are blessed with the big footprint of physical footprint, and we said hey, how can we innovate here and why are we burning fossil fuel created energy why don't we create our own. So why don't we build of solar power and we built the single largest solar farm about the complete.

I would suggest outside of the commercial space and Canada will be I think the only corporate office thats the 100%.

<unk> carbon footprint.

Third run on a power runner and our lives right on the business that we do and our corporate office Thats something again, we're extremely proud of its great for the environment, It's great for our employees and it's great for society.

Alright, Thank you Keith.

Your next question.

Comes from the line of Scott Group from Wolfe Research. Your line is open.

Hey, Thanks afternoon guys.

Nadeem wanted to ask on Capex and free cash flow. So it's below 20% of revenue this year and the guidance do you think thats sort of the new normal and then with Capex down and earnings up what's realistic for free cash flow conversion this year and longer term.

Thanks, Scott So, yes, I mean, our capital spend when we look through the next three years it's in that.

The range coming down a bit over and 2022 and and into 2023 as we roll off the investment of the hoppers and so we'll have.

Less hoppers, and 'twenty threes and that'll be our final year, so youll, probably get down to about the one 5 billion capex level at that point.

Outside of any other major investments debt.

But nothing.

Upcoming that's and our and our pipeline as we speak.

And so certainly we do feel that our free cash.

Generation is going to conversion is going to improve rather dramatically as we increase our income and Capex comes down.

And I think we're kind of and that 335% level right. Now do we think we can get to four and approaching five.

Over that timeframe, yes.

So what is that metric youre, referring to sorry.

Our free cash.

Our free cash yield.

Okay perfect Okay.

Our free cash conversion approaching 80%.

Super helpful. Thank you guys.

Thanks Scott.

Your next question comes from the line of Justin Long from Stephens. Your line is open.

Thanks, and good afternoon I just wanted to ask one about the 2021 guidance Nadeem could you talk about any gains on sales that are baked in and do that guidance and then as we think about the first quarter anything Directionally you can give us to help think through the DLR the youre, assuming within the guidance as well.

Yeah.

Not to get too much and the quarterly or guidance.

Just.

The sub 60 or.

And obviously Q1 is a bit more challenging.

And with the weather with with the seasonality on the volumes.

And with some of the the stock based comp payments.

Payments that occur.

So thats a natural naturally will improve.

From there and get.

Well, if you want to get to the numbers. We're talking about you know you could probably do the math, but.

I would expect Q1 will be the tougher kind of year over year comp.

And then as we sorry your second question.

Any gains on sale and the 2021 and one of the guidance you gave.

Yes. They are I mean, we didn't give our guidance but.

I would say that we do expect some level of gains on sales. We do have a couple of projects, we'll see if they close or not.

But our EPS guidance of double digit EPS growth.

And does not.

Necessitate any level of gains on sales.

Okay. That's helpful. Congrats on a great year. Thanks.

Thank you. Thank you.

Your next question comes from the line of Brent and the old Glinski from Barclays. Your line is open.

Hey, good evening, everyone and thanks for taking my question I know, it's been a long call, but I do always love the enthusiasm that you guys help and.

And it shows through in the results I guess, the deem coming off of Scott's question on cash flow.

Is this the time to be having the healthy discussion and buyback versus dividend and.

And as the thought process changed and there at all.

No I mean, I'd say that we've.

Had a bit of a more balanced return of the last call. It three years, we've been increasing our dividend and I think that we have been pretty.

Transparent in terms of our goal of getting our payout ratio closer to 25% 30%.

We've been the fastest dividend.

Increaser and the industry from the last five years.

And agree.

And we will be named to the dividend aristocrat Fund S&P, Canada.

Starting next week, we'll answer that so we're making headway.

The problem is.

First of class problems I guess is our EPS is growing like I said.

The 16% of the last four years.

And so we're mindful that we want to debt our shareholder base has also changed and there is there is and increasing.

And do that says they.

And they want a bit more dividend and we're trying to and have a balanced approach.

We've also been very mindful that debt, our stock's been under priced.

There is other rails that.

Non executed as well, but they get better premiums and so.

It's been an opportunity to continue to buy back our stock cheaper, which I think are shareholders of being very pleased with.

I think we've bought back.

<unk>.

I think close to.

The 10 billion of.

Stock over the last since 2014.

Half of the half of today's price. So it's been a good opportunity to have a balanced approach.

So we are also price dependent so bottom line is and you can expect us to continue to increase the dividend probably at a faster pace to get to the 25% to 30% payout ratio.

But we will still continue to have share buybacks as our natural opportunity and of course of returning cash to shareholders in the.

That around 3% level.

Thanks to the.

Your next question comes from the line of the mall part of it from Duchenne on capital markets. Your line is open.

Yes, good afternoon jumped on them.

Quick question could you maybe provide some color about the capital envelope or share buyback this year and maybe also to provide some color on the old fortunate.

To deploy the available thousand acres of excess land.

In terms of how big of Euro maybe more specifically about the patents and 2021. Thank you.

So our buyback I mean, we.

For the most part complete our buybacks for the first time, we didn't do.

Complete and in CIB.

Since the since we've been at CP.

So we announced the two 5%.

Program.

I'm not sure how much it's going to cost of the market's volatile.

And so.

Dependent on what you think the stock price.

And it's going to be.

And why.

And that's going to drive really the the math of it so.

We will.

We constrain ourselves to not.

And push our leverage more than two five times.

And we wanted to make sure that.

That we protect our balance sheet as Keith talked about earlier.

And so the sockets too expensive, we will we will hold back and.

And so stagger, our buyback decisions and our dividend decisions, partly for that reason as to give us a bit more visibility on that decision, making and a bit of time to see how the the market is reacting.

And so that's how we think about it I won't tell you what we are expecting to pay.

And because I can't predict the stock price.

On the land question, just can you clarify I didn't fully.

Here of the entire piece of.

Piece of the question.

<unk> been quite good over the years to leverage the available real estate and I.

Still the Theres still a thousand acres of available land that you could leverage down the road in the future the.

And it's always just curious.

Maybe.

More color about the <unk>.

Fortunate. These you see in 'twenty and 'twenty, one to two leverage the X.

The real estate.

Sure.

Sure. So we do have a number of trans loads.

And the investments that are we are and in the midst of.

Across the across the property, so whether that's Vancouver, Southern Ontario, Chicago.

This completed.

And some trends will of work in Montreal as well.

So that's kind of and on ongoing basis now there's a lot that's a lot of land the.

Acres.

So.

We'll see what what comes up but that's enough land for a long time, but as far as selling land.

We have a little bit of opportunities, it's somewhat dependent on the market somewhat dependent on.

On interest out there, we're not actively usually actively looking to sell land until and unless there is and operational aspect to it and we could benefit.

Benefit from R. R.

Use of an opportunity so.

Right now I think theres, a little bit of land available.

And we're getting some act of interest and that's why I said we.

May have some land sales in the in 2021, Meg to the which I mean in the range of $25 million to $50 million type of range is what the what could occur, but but again, we're not counting on it.

That's great color thanks for the time.

It's been low.

Your next question comes from a lot of David Vernon from Bernstein. Your line is open.

Hey, guys two.

Two questions for you John on the end market side.

And whether a closure of the Dakota access pipeline would be material for your guidance on crude.

Crude by rail franchise and the second question is really about.

St John's and opening up that intermodal flow I'm curious to know what type of what type of inland ports on the steamship lines, you're looking at from that traffic as it is it kind of the bound traffic of the U S. On traffic and then how do you think about the margin profile on the project because I would imagine there's going be some trade imbalances as as you said to the initial launch that service.

Yeah No David.

Water access.

Yeah, no we're watching it closely we we do ship.

Bakken crude out of out of North Dakota, and obviously if something happened.

With that pipeline.

Think that would generate an opportunity of course, there's been a lot of noise around that pipeline for a number of years.

We've been able to generate some pretty.

I would call it stable crude by rail business out of North Dakota.

But I think certainly there is an opportunity for upside if and if they do move towards shutting it down or or or putting it on the sideline for a certain amount of time.

And <unk>.

And as it relates to the St. John.

And I can't be more excited about the opportunity and it's just not the import export business that we've talked about extensively.

And that ramping up but it's also the domestic intermodal opportunity and in and out of the Maritimes there.

And our competitor has enjoyed the that Atlantic Canada market.

And with really without another competitor for quite some time.

Certainly theres, a theres a lot of capacity.

On existing trains that are running there today I don't have a lot of concerns relative to two of the initial margin play there is there's a ton of upside to add at a number of.

Incremental cars into the train movements from from St John over to Montreal.

I think what we'd see initially of the.

And maybe a little bigger mix going down into the U S and the Chicago market.

But.

But but I would say as it balances out.

It'll be it'll be Canada, it'll be Montreal, it'll be Toronto.

And there might even be a little bit of.

Moving into the Western Canada, but principally Chicago of Montreal, and Toronto is the key markets.

Alright, thanks, very much and zone that was very helpful. Thank you.

We are now out of time on the.

Turn the call back over to Mr. Keith Creel.

Alright, well, thank one of <unk>.

Thank everyone for the attention of their questions. Thanks for sticking with US this afternoon and allow us the chance to.

The share of our exciting story.

And in the beginning the had a phenomenal exceptional 2020 set us up for and exceptional 21.

And we certainly expect to overachieve.

Stay safe and we look forward to talk to you too.

Share our first quarter results.

And April.

On April take care.

This concludes today's conference call you may now disconnect.

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