Q4 2020 Canadian Pacific Railway Ltd Earnings Call
Good afternoon, My name is Jason and I will be your conference operator today at this time I would like to welcome everyone to Canadian Pacific's fourth quarter. She tells and 'twenty conference call the slides accompanying today's call.
Are available at Www Dot G. P. R dossier.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
And would like to ask a 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, Brent 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 negative day at home with two new new beautiful twin Baby boys and on.
I'm happy to report that everyone is doing well.
Before we begin I want to remind you. This presentation contains forward looking information actual results may differ materially the.
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, the Lenny and our executive Vice President and Chief Marketing Officer, John Brooks. The former remarks 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.
Let me, let me start my comments.
But thinking of our CP family.
12000 strong team of railroad or that I'm honored to serve and lead and produced with daily their grit their resilience that they've 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 it's without without those collective efforts none of this would be possible.
Certainly the data of appreciation and particular to the operating employees that 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.
We're going to get to to discuss today.
And speaking of that price, we talk about proud of a lot of C P and talk.
Talk about sacrifice a lot of C P.
Contribution certainly not a shortage of opportunities the sacrifice from this industry nor of demand for People's contributions to recognize that given it was such an extraordinary year and 2020 to match the extraordinary effort that enabled what I would call external ordinary financial results, we made a decision.
His leadership team late in December to recognize all of our non union and pull on our union employees non management.
Employees with a special one time.
Recognition bonus that was payable on December the 30th too.
Thanks, Tim for.
Their efforts for their contributions and their sacrifices again that enabled this unique result that we're able to share for with our shareholders and with the investment community to do 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 $53 nine and.
And adjusted EPS growth of 6% and industry leading performance.
For the year of total revenues were down only 1% we.
And we produced an all time record operating ratio of $57. One operating income was up 6% to $3 3 billion.
Which enabled of record adjusted EPS of <unk>, 67, and an increase of 7% versus.
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 up of 2% improvement over a year. 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 the breadth of the bench of Cp's strong.
Absolutely the what I consider to be the industry best of my hat is off to each mark and his team thinking of them for their contributions and on the safety front, 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 <unk> 96, which is an all time record for the company the <unk>.
For 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% production and personal injuries, which again was another all time record for the Canadian Pacific.
And I've always said this and I will be committed to the safety. The journey, it's a constant pursuit of improvement the scenario that we're never going to be satisfied and it's foundational to precision scheduled railroad environment, it's about running the business the right way, earning the financial return. So that we can continue to invest and and the same physical plant and creating and maintaining the right culture.
<unk>, which is the culture of accountability care and concern for each other and as the result, the safety performance will follow.
A couple of positive announcements for the quarter as well outside of the financial and the operational performance that we're super excited about it CP on the environmental front and November we announced that we renamed of the Dow Jones Sustainability Index North America. This is something Thats the milestone for the company, we're very proud of to two of achieved and and.
<unk> net.
Net of recognition and December we were honored also by CDP for our leadership on climate action with an a minus rating puts.
Put those two together with the other progress that we're making in the space of caps the tremendous year of environmental progress and development of Canadian Pacific and scenario that we're just beginning.
Two for.
Produce and we will continue to set the bar high and continue to be leaders and moving this fall for on the same Q. Another exciting announcement, John is going to provide some color too we were able to announce.
And the fourth quarter that <unk> Lloyd the great partner of Canadian Pacific's announced that theyre going to be calling on the port of St. John beginning in 2021, as well and rest assured as we've talked about in 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.
Most of.
And of Canada.
Moving on the guidance looking forward I can tell you the momentum that we created in 2000.
Carried into 2021.
We're targeting high single digit RPM growth for.
And I have on opportunity to continue to improve margins.
And 21, well in excess of 100 basis points, producing double digit earnings growth.
I will note that 2020 was the third consecutive year, the Cp's delivered the best volumes and the industry and on.
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 and <unk>.
Canadian Pacific I've never been more confident and our teams 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 Tms accelerated 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 pricing gained further momentum with mixed results were negative.
And 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 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 volumes as we move into 2021.
On the year total volumes were down 1% and revenues were up were actually the total total revenues for 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 in this unprecedented year.
Our self help growth initiatives disciplined pricing.
Combined with our resilient business mix and strong service 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 for 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 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 is 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 2021 day.
And 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 and 2021.
And our U S grain franchise continues to 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 day.
The reflection of solid global market fundamentals supporting the agricultural industry, and we expect potash to continue to be in the area of strength for us and 2021.
And the round out our bulk business coal volumes were down 1% as the 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 Tms roughly flat.
The energy chemicals, and plastics portfolio saw revenues decreased 25%, while volume declined 27%.
Q4 saw very tough comps with crude as last year, we moved 36000 carloads and Q4.
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.
Now looking at 2021, 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.
Additionally, we are very excited to begin moving later this year D. R. U crude volumes from our exclusively served facility at Hardisty, Alberta.
<unk> volumes will provide a safer pipeline competitive option for shippers.
And will help to stabilize our crude business into the future.
Moving on to forest products volumes were up 17% and revenues were up for it.
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 the 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.
This is an excellent demonstration of the power of our unique customer solutions.
And the Globus contract ramp up was seamless and.
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.
And I fully expect continued growth and 2021 and our domestic book at CP is well positioned to capture the sustained consumer demand.
<unk> E commerce, and the 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 <unk> 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 <unk> will deliver supply chain solutions that will drive growth not only and are intact international business.
But also and our domestic intermodal volumes and 2021.
So, let me close by saying and and echoing some of Keith comments.
Looking back at 2020, I'm extremely pleased with how this team of Railroader 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 of 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 2021, there remains the full pipeline of opportunities that have yet to ramp up and that are under development.
Our playbooks continued to bring incremental volume 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 strength 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 that 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.
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 Thats, 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 closer look at a few items on the expense side comp.
Comp and benefits expense was up 9% for $37 million versus last year the <unk>.
Primary drivers of the increase for higher stock based compensation of $15 million the.
And one time bonus paid for frontline Union employees, Keith mentioned totaling 17 million and of continued pension headwind for current service costs.
Fuel expense decreased $58 million for 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% for $5 million and.
As a result of higher repair and materials for track and operations and increased volumes.
Depreciation expense was up was $197 million and increase of 11% as a result of 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 six and the quarter.
Moving on to full year results on the next slide.
The fourth quarter performance caps and an impressive year for the CP family of.
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 ore and the industry.
Adjusted income grew 5%.
And of 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 RPM growth.
Capex of $1 55 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 the results of a 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 on to 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.
And we go for we expect to bring the capital envelope down and 2021, given the pull forward I mentioned and anticipate the spend of $155 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 2021 and beyond.
I think another area, we differentiated ourselves from our industry peers.
Despite the volatility we all endured this year, we've continued to reward shareholders.
We 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.
Ultimately, we completed 90% of our latest share buyback program at an 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.
And just this morning, we announced the new two 5% buyback program.
We also announced the proposed five 5% to one share split that will be presented to shareholders that R 20.
2021, the AGM.
We think this and appropriate step to enhance liquidity and the stock and provide better access to ownership for a wide range of investors.
And 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 pace 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 for years of Keith John and I have worked together and these rules. The company has delivered a CAGR of 16% EPS growth.
And our ROIC has also improved from 14% to 16, 7% during that period.
And I can tell you we're not done we're 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.
So with that I'll pass it over to Keith to wrap up.
Okay. Thanks for the color on John and Nadeem and <unk>.
Exceptional thats the way to 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 teams ready to produce so with Atlas and open it up for questions.
Thank you and 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 will be a brief pause while we compile the Q&A roster.
Your first question comes from the line of the 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.
I think as you mentioned.
And there is sort of an inflection that's been going on here. So I guess, maybe if you could help us sort of highlight maybe some of the specific biggest opportunity D. C. One of you 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 free.
And 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 sense for our T M a little bit.
Net.
Looking back at Q4, we did see a little bit of mix.
We had a really strong bulk quarter.
The long haul of Vancouver grain long haul PNW grain.
As I said record potash and created a little bit of headwind overall on on that front.
We're facing that since for our TM 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 will get to some point, where we start lapping that the fuel and <unk> and ultimately <unk>.
Ex headwind that we faced in the sense of our Tam.
Looking at the volume and.
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 and have come to fruition fruition, but we've got a quite number.
Of 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 volume is also sense for RPM 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.
I am quite bullish and the automotive sector, but really as I go down the list.
And I expect big things and the bulk franchise, we should continue to sustain what <unk> seen and grain and grain products.
Our biofuel plants are back running at 97% of 100% capacity across our network. We've got a couple of facilities actually and Biofuels and also frac sand that add that 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 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 and and that's without even getting to the full ramp up of our <unk> business and.
And then as Keith mentioned, the opportunities that we're going to see and <unk> and St John and 2021.
Okay, that's great and the only clarification just on the cents per our team 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 One of what's from UBS. Your line is open.
Yeah great.
I don't know of Pi.
And yes.
And I'll touch more color on the kind of the green comment that the.
And I guess, Chris was hitting on and I don't know if you want to count that is the question or not but my primary question.
On the crude business.
It seems like.
I guess.
The Keystone XL getting.
Cancel the gain and.
The D are you ramping up and second half.
Wondering if you see you would expect and see some indication that there might be more interesting and additional Dr. Yu of.
Or more optimistic look on crude I know its pretty volatile business, but I guess that that's kind of of the primary question and then I don't know if you mind, adding a quick 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.
Tom to your point the answer is yes, we do think that.
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 not 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 <unk> as that scales up is that the ratable business. It is.
And to be part of our book of business on a go for.
It's protected as pipeline 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 hardisty and it's scalable.
It can go up to twice as large as it's coming out of the gate at the.
That's pretty exciting it's really exciting.
And Tom just the come back to your grain question. So just.
On the regulated Canadian grain, we've got the the headwind on the BRC Epi. So 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 in the queue.
And you said that on the or side.
You're targeting well over 100 basis points improvement, maybe youre in the beam can kind of give us a little bit more of a walk there.
Does that I mean, whats well over 100 is at $1 50, or the 300, sorry, I know and being a little greedy here.
And maybe kind of how do we think about some puts and takes here I know you've mentioned and depreciation but any other big items keep in mind.
Ravi 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 of our number but I felt confident 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.
I don't think there's too much more to add on that I think Ravi you look at.
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.
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 the.
John mentioned are ramping up in 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 and we can deliver on.
For the cost structure Thats entering 2021.
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 a delta of nickel and 'twenty, one, but we certainly have our line of sight.
It's and it's in our cross sales would be the best way to say it.
Understood. Thank you.
Your next question comes from the line of Felicia moving from BMO. Your line is open.
Thank you.
Good afternoon.
The quick.
Clarification related to each other.
For what is the FX that you're baking into the EPS guidance second.
The energy.
Since the RPM was $5 nine and the fourth quarter, which I talked to the big drop from the trend that 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 related does that make sense since we're on.
The M. You are saying the RPM growth kind of high single digits.
And then.
The 8% and Thats kind of what you mean.
When you include FX and the mix issue does that number and kind of stay around the same does it go up.
<unk>.
The mix of overall for fiscal 'twenty, and 'twenty, one will 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 so.
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 Ah.
Positive manner, and it means that typically commodity prices and namely crude is improving so.
Sure it can be of translation headwind, but net net it's an overall positive.
And it helps our balance sheet as far as our leverage metrics and as far as our U S dollar dominated that and lowers our capex spend and and like I said it helps overall our volumes.
If you look at the to your point on the crude since per TM.
As John mentioned, we lost some.
And liquidated damages and Q4, and so you see the the impact of that and in the sense for our team on crude.
We talked about that likely will continue through the year, especially if you assume a certain level of crude we've been very conservative and our view.
So I think of.
If you get the benefits of spreads.
<unk>, if you get some of the the longer term benefits of production.
Ramping up.
I think we could have further upside on the on crude volumes.
And again will impact our sense for RCM right. So we'll have less liquidated damages, but we'll be moving more business, which again is a positive.
Net net.
With currency.
It is to Keith's point going to be somewhat dependent on what fuel prices due from us sense for our exam and point of view, but.
And you'd have a modest.
Modest decline.
And where we're seeing things as we stand here today.
The fuel surcharge ramps up that can be kind of neutral.
Well I guess the only thank you yeah.
Your next question comes from.
Your next question comes from the line of Walter <unk> from RBC capital markets. Your line is open.
Thanks, very much good evening everyone.
And just wanted to go into the your 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 it.
Of this organization and.
And certainly have done so my question, though and I guess is.
Are you and unchartered territory now in terms of new improvements and how much of or improvement now is going to come as a result of technology I noted.
In your appendix, you've 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.
And I have been going through your Linkedin profile and you've got some pretty interesting.
<unk> 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 of technology going to have to play a role here and getting your or improvement down further just any.
And so on that would be helpful.
Hello, and I'd 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 for transport, Canada, using the portal and using the the Coldwell technology that's literally.
Two months old so.
We will continue to grow and that it's going to be incremental.
Change is going to be incremental benefits of protecting our margins and it'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've 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 jeopardizes your ability and destroys your cost structures of drives additional capital expense there as of.
The fund balance that has to be managed we've got a commitment of our customers.
Asset turns matter of velocity matters all of those things at the <unk> formula it's truly baked 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 is a positive there but from a dollars and cents standpoint, youre talking millions 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 Airporter, O'hare with with and over in Atlanta, and they are burning fuel and <unk>.
Burn and dollars.
The <unk>.
<unk> taken out efficiency and consuming capacity.
So these technologies that's the approach that were taken and they've got to be practical and they've got to be executable I'm not going to be bleeding edge, we're going to develop technologies that we can convert not talk about for four of five six 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.
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 our home built.
Solution to that challenge, where we don't have CTC that we're deploying we've got about for subdivisions.
And then 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.
Our pursuit of operational excellence, which is 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.
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.
Thanks, Good afternoon.
So the main competitor has been talking about scaling up the business in total.
And I think on yield.
Management I would think.
Yes clear positive for CP, but maybe if you could speak to your thoughts on the overall the pricing environment.
Ironman.
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 that rail service.
And frankly, it's getting better and if any.
And there would be great. Thank you.
Yep.
Thanks Allison.
What I do I think this feels a lot like the environment, we faced back in I guess it would be 2018.
Where we saw I think pretty strong year across the board and the rails on on pricing.
The just the volume growth that I see out there in and literally as I look down on.
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 service.
Q4 renewals were were quite strong.
I'd say on the upper end of the targets, we traditionally talk about that and and <unk>.
I'll remind you.
The sales team is largely compensated 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 and day.
The out for for the capacity, we have and the service for 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 the pandemic and now with some tailwind and I can tell you theres a lot of focus to do the same as we move into 2021.
Okay. Thanks, John Yeah.
And.
Your next question comes from the line of Ken extra from Bank of America. Your line is open.
Hey, great good afternoon.
The clarify nadeem on the two.
The Ravi the 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 Keith.
Keith you were 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.
Yes, Ken 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 seeing on on in.
And you sort of adjusted the or.
Perfect. Thanks, and then.
Given the the American intermodal growth and.
And all.
The scale 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 day 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.
Yes, I mean.
Specifically can you know looking at port capacity out and Vancouver.
And we feel quite comfortable with the relationships and the direction that that GCT and DP world.
Tween between Delta Port between van term and send term to handle the business.
We've got a new train pair and designed that.
<unk>.
I think for Super excited about how we can compete and the market from Vancouver into certainly day and day out Toronto, and 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 also into Benson.
Bill.
That that we're going to have quite of product.
And you look out east and and Keith mentioned this we are the port of St. John's embarked upon and.
Out of $200 million of modernization project, and and that's going to quickly step there capabilities up to three <unk>.
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 terminal as being an issue and.
DSR 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.
And Ken Let me, let me add a bit of color on the line capacity, we're not in any.
Location constrained from loan and capacity with that said part of our normal cadence of doing business every year, we're spending but 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 proud.
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 company's 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.
The cost destruction, when you're Overcommit to railway.
Talk about the reputation of <unk>.
<unk> and 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 for 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 our 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 of Canadian Pacific.
And I'll just add Ken the from a capital point of view.
Many of these <unk>.
We ended up doing that requires capital.
And we partner with our customers to co invest so we both have skin in the game.
We both have a certain level of return and conviction and it tends to be of long term deal.
So John knows from me and my team and the expectations.
For us 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 it has to have the generate the right return.
Thanks, Keith 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 grain opportunity.
John Youre coming off of record year that should be congratulated, but the bar is now higher.
AG 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 the new elevators that plant to come on line for your 8500. The model could you maybe just elaborate a little bit on where those elevators all coming for you referred to and network development, but I'm just trying to get a sense for your confidence and those are 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 these 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 numbers would breakout Steve 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 112.
12 facilities expanding up to two handle of 134 plus cars.
That's that the converting ladder tracks and the loop track across the pair 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. So they can be quickly loaded and launched and when I say quickly loaded.
And Thats under 12 hour load times.
It's adding that next level of efficiency.
Across all of our elevators.
And then when you combine that with with the investment and the covered hoppers.
And that becomes the powerful thing and frankly, that's what gives me the optimism when you.
The spread that across.
Canadian franchise that continues to grow in terms of yields and production.
And frankly quite of bit of headway across our U S franchise to develop it. 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 give 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 <unk> had ever.
The one thing that is at a certain point 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.
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 this I'm not aware of any C and <unk> opportunities I would say that we keep a strong financial.
Physician or Keith keep our balance sheet strong and pattern of our pockets of it 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.
We began to do this great work with the <unk> and all of that that potential to realize that potential and I firmly believe I've said this before and made a comment that success breeds success. When you are working with some of these big players like of Maersk Youre working with some of these automotive companies Youre working with the goal of us 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 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 to pick on 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.
Give them a service and gives them and experienced that allow 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.
And this big what I'll call Center, and 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 intention is to build out our facility our trans load facility and our terminal in Vancouver, and rest assured there has already been <unk>.
Discussions.
And that that announcement has enabled and the sound before some after where theyre going to be customers that come and there theyre going to create capacity and create commerce for Canada as well as CP at the same time and on Thats. The two to three year timeline before we get to that point and beyond.
So again the one thing we are blessed with the size of the greatest railroad is and the world and our franchise and the lanes, we run and the can't be parallel borrower of the rail comparator because we've 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.
And Cooper I can grow and Calgary I can grow and 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 of do it. So you can continue expect to continue to see that playbook play itself out of this.
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 line all of the Jordan.
And from Goldman Sachs. Your line is open.
Yes, 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 of <unk>.
<unk> revenue post the.
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.
Sure. So a couple of things to add.
Yes, I would expect purchase services.
To get more normalized absolutely we get.
And that's the benefit of the Detroit River tunnel.
This quarter, which are which is outside the absolutely.
The cost per employee so.
Based on our high single digit RPM growth, you should expect kind of low single digit.
<unk> 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 tip of our annual bonus.
Payout is going to pay out of at a very high level. This year, meaning for 2020, so we accrued and at a very high level.
So hopefully it's at the same level that means we're executing.
And if not and then that would be the tailwind.
Stock based comp the same thing for the.
The best performing.
<unk> stock in 2020.
We had significant headwind from.
Stock based comp as a result of that on the mark to market of.
The stock price.
And hopefully we have the same problem for our shareholders won't complain so thats somewhat dependent on on that.
And how we perform.
And how the market performs is for.
Far as the CP stock. So if we have another strong year then and.
And then it will be neutral and you would expect of the sense for our team to be similar levels. If we if our stock doesn't have the same level of increase than you should assume the.
Cost per employee to come down a bit.
So those of the element.
And relatively from Jordan.
Inflation I would assume about a 2% type of level.
And as well for our overall inflation.
Thank you.
Yes.
Your next question comes from the line of Brian Awesome Buck from Jpmorgan. Your line is open.
Hey, good evening, thanks for taking the question.
The one for you Keith.
When you talk about being part of the success for the partners and the shippers.
Service and growth and capacity, obviously and part of that but you have a couple of extra slides on ESG for your reports and ratings just came out.
Is that angle or is that initiative really starting to resonate.
And with some of your customers and partners is that more on the short term basis and he has got the attention or do you feel like you've really.
Starting with 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 it's important.
<unk> is growing.
It is growing stronger and not the meaning 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 in 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 <unk>.
Very intelligent talented engineers led by Dr. From all again that they've created their own lab they are developing.
The hydrogen fuels locomotive for the rail industry Thats, the game changer, and other hot Theres hydrogen solutions out there in Europe not for freight the more for passenger so is it robust enough strong enough. So the challenge is how do we do that we'll let 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 lap of seeing the hydrogen and fuel sales they have create created.
Electricity and power and electrical motor and I've seen the locomotive there net of 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, that's going to be switching customers using hydrogen.
And it is not our objective to get into the locomotive 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 and 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 literally.
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're 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 commercial space and Canada will be I think the only corporate office that is the 100%.
Euro carbon footprint.
Third run on our power running on our lives right on the business and 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 that's 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.
We look through the next three years.
And that.
The range coming down a bit over and 2022 and into 2023 as we roll off the investment of the offers that we will 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 investment.
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.
For free cash.
Our free cash yield.
Okay. 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 <unk>.
Are the you're assuming within the guidance as well.
Not to get too much and a quarterly for guidance.
And just expect 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 stock based comp payment.
Payments that occur.
So thats a natural naturally will improve.
From there and get.
Well, if you want to get to the numbers for talking about 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 on 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 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 Bruce.
And in 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 loved the enthusiasm that you guys help on it.
Goes through and the results I guess nadeem coming off of Scott's question on cash flow.
And this the time to be having the healthy discussion buyback versus dividend and.
The thought process changed and there at all.
No.
I would say that we have.
Had a bit of a more balanced return on the last call. It three years.
And 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 of closer to 25% to 30%.
We've been the fastest dividend.
Increaser and the industry for the last five years.
<unk>.
And we will be named for the dividend Aristocrats 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.
Most of the 16% for the last for years.
So.
We're mindful that we want to that our shareholder base has also changed and there is there is and increasing.
Do 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 our stock has been under priced.
There's other rails that.
On execute as well, but they get better premiums and so.
It's been the opportunity to continue to buy back our stock cheaper, which I think are shareholders of being very pleased with.
We bought back.
<unk>.
I think close to.
10 billion of.
Stock over the last since 2014.
At half of the.
For today's price so it's been a good opportunity to have a balanced approach.
We are also price dependent so bottom line is you can expect us to continue to increase the dividend and probably get a faster pace to get to that 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 and that around 3% level.
Thanks, Tim for you.
Your next question comes from the line of the mall and from <unk> Capital markets. Your line is open and yes.
Yes, good afternoon gentlemen.
Quick question could you maybe provide some color about the capital envelope for share buyback this year and maybe also to provide some color on the fortunate.
To deploy the available thousand acres of excess land.
In terms of how many year or maybe more specifically about the cabins and 2021. Thank you.
So our buyback I mean, we.
For the most part complete our buybacks for the first time, we Didnt do a <unk>.
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 and the market is volatile.
So.
Dependent on what you think off price is.
Going to be.
And why.
And that's going to drive really the the math of it so.
We will.
We constrain ourselves too.
And push our leverage more than two five times.
We want to make sure that.
That we protect our balance sheet as Keith talked about earlier.
So the sockets to expenses, we will hold back and but we also 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 thats, 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.
And here the entire piece of the question so you've been quite good over the years to leverage the available real estate.
And I still there are still a thousand acres of available land that you could leverage down the road in the future.
And it's always just curious.
Maybe.
More color about the fortunate these you see in 'twenty and 'twenty, one to two leverage the.
Excess real estate.
Andy.
Sure. So we do have a number of trans loads.
And the investments that are we are and in the midst of.
Cross.
Ross the property, so whether thats Vancouver, Southern Ontario, Chicago.
This completed.
Some transfer 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 1000 acres.
No.
On.
We'll see what what comes up but that's enough land for 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.
On <unk>.
The out there we're not actively usually actively looking to sell land until and unless there is an operational aspect to it and we could.
Benefit from or for that can.
Use of an opportunity so.
Right now I think theres, a little bit of land available that we're.
We're getting some act of interest and that's why I said.
And we may have some land sales and 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.
And it's been well.
Your next question comes from a lot of David Vernon from Bernstein. Your line is open.
Hey, guys.
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 Youre looking at for that traffic as it is it kind of the bound traffic and the U S. On traffic and then how do you think about the margin profile on the project because I would imagine there was maybe some trade imbalances is as you say to the initial launch that service.
Yeah No David.
To 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.
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.
And would call 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 for a certain amount of time.
Yes.
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.
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 May.
And maybe a little bigger mix going down into the U S and the Chicago market.
<unk>.
But I would say as it balances out it'll be it'll be Canada, there'll be Montreal, it'll be Toronto.
And there might even be a little bit of <unk>.
Moving into the Western Canada, but principally Chicago, Montreal, and Toronto is the key markets.
Alright, thanks, very much of those all of those very helpful. Thank you.
Yes.
We are now out of time on would now turn the call back over to Mr. Keith Creel.
Alright, well, thank I want to thank everyone for their attention of the questions. Thanks for sticking with US this afternoon and allow us the chance to the.
The share of our exciting story.
And in the beginning of.
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 of our first quarter results.
And April.
For March April take care.
This concludes today's conference call you may now disconnect.
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