Q2 2023 Canadian National Railway Co Earnings Call

July 25, 2023

Okay.

Good afternoon.

My name is Emma and I will be your conference operator today.

Welcome to CN second quarter, 2023 financial and operating results conference call.

All participants are in a listen only mode.

After the Speakers' remarks, there will be a question and answer session during which we ask that you kindly limit yourself to one question.

I would now like to turn the call over to Stacy Alderson interim assistant Vice President Investor Relations.

Ladies and gentlemen, Mis alderson.

Thank you and good afternoon, everyone and thank you for joining us for Cn's second quarter 2023 financial results conference call before we begin I'd like to draw your attention to the forward looking statements and additional legal information available at the beginning of the presentation.

As a reminder, today's conference call contains certain projections and other forward looking statements within the meaning of the U S and Canadian Securities laws.

These statements are subject to risks and uncertainties that may actually cause results to differ materially from those expressed or implied in these statements.

They are more fully described in our cautionary statement regarding forward looking statements in our presentation.

After the prepared remarks, we will conduct a Q&A session I do want to remind you to please limit yourself to one question.

The IR team will be available after the call for any follow up questions.

Joining us on the call today are Tracy Robinson, our president and CEO , Doug Macdonald, our Chief marketing Officer.

It's not who's our Chief Financial Officer, and Ed Harris, our Chief operating officer.

It is now my pleasure to turn the call over to <unk>, President and Chief Executive Officer Tracy Robinson.

Now see them be them to new a tooth he put to sea put silicon PA webcast.

It has been a couple of months since we saw many of you in Chicago at our Investor Day, and we're continuing to execute the plan. We laid out for you then we're running a scheduled operation that moves our assets quickly and services our customers consistent.

Recently, and this is the central theme and we're driving our growth initiatives on that foundation.

Over the three year period, we discussed in Chicago and beyond our path is very clear.

The longer term fundamentals remains strong the growth opportunities are real.

Continue to progress that growth agenda built on the foundation of strong service driven by disciplined adherence to our plant.

Now the immediate term the little less certain this team has dealt with a number of external weather related issues over this past few months as well as the west coast Port strike over the last few weeks.

As we sit here today, we're also seeing a little bit more weakness on the economic front than we modeled earlier this year.

Now all of this is temporary as you know and our team is doing a great job of managing through it with an eye on the longer term.

The heat and the wildfires in parts of both eastern and Western Canada over the last few months have impacted our operations and the operations of some of our customers and that's had a temporary impact on volume and.

And we've seen more generally a softer volume market economically are particularly in some of our commodity segments.

I must say I have been impressed by our team's response they are managing.

Through this theyre staying true to our plan the running the plant and still through all of it improving year over year velocity network train speed dwell time and customer service, you'll noticed its in our operating stats they've done a great job and it's a testament not only the team, but also to the strength of our plan.

The plan is working.

As we look forward our focuses on continuing to be nimble adjusting to the softer volumes in the near term and ensuring that we're prepared for the lift we continue to refine the operating plan to match the volume levels that we're consolidating train starts we're laying down locomotives and cars, where it makes sense.

Keeps our network balanced and our assets moving quickly it maintained our service levels and it mitigates cost and as we said we would do should we find ourselves in this situation. We're adjusting our hiring plans to match what is now a slower expected return to some of our commodity segments.

And we're taking the opportunity to advance the locomotive engineer training to ensure that we're ready for the medium and longer term.

And all of these are the right near term actions that mitigate the impact of lower volumes without jeopardizing, our ability to respond when the rebound comes and it will come and we will be ready.

This puts our margins under a little bit of pressure right now, but our margin leverage will return with the volume.

So let's talk about what this all means.

Our second quarter EPS of about 76 is 9% lower than last year on an adjusted basis.

And our 66% operating ratio is 160 basis points higher now this is the impact of both the macroeconomic being softer than we anticipated and the challenges presented by the weather events here in Canada.

And on the basis of what we saw in the second quarter and are seen in these a few weeks in July we've taken a hard look at our year end outlook. We're now assuming that the economic recovery is pushed into 2024.

So we expect the year over year change in annual adjusted EPS to be flat to slightly negative. The team is going to provide you today with more details about our thinking on this but before I hand, it over to them.

Just wanted to say a few words about the situation on the Canadian West Coast ports. We are pleased to see an end to the work stoppage.

And we're working hard to get those supply chains back in sync.

We expect to move most of the volumes that Didnt move during the first two weeks of July over the coming weeks.

This event is another reminder, that what happens on one part of the supply chain impacts the full supply chain.

A major disruptions like the I L. W strike, the wildfires and now some flooding in Nova Scotia have impacts across the North American supply chain and it is critical that we respond is an entire supply chain community to minimize the impact and build.

Ongoing confidence in the North America, and the global supply chain performance. This is how we approach our work here at CN.

Proud of this team's ability demonstrated again in this past quarter to respond in a way that minimizes the impact for our customers for our employees or our supply chain partners and the communities in which we operate.

So I'll try to the team ed's going to first give us a little more color on the state of our operations and how his team has been working to mitigate the impact of these events, Doug will follow up with an update on the markets and what our customers are telling us about the volumes as we look forward and she is as always on cleanup bring it all together with the numbers Ed.

Thank you Tracy.

The second quarter has been a tough one.

I want to acknowledge and thank the entire operations team for all the great work to keep the network running as well as it has this quarter.

Tracey just recently.

You mentioned the floods in Nova Scotia.

<unk> seen a disruption in the news clips just outside of the Halifax.

We're working around the clock and I would like to thank especially thank.

Mel Brooks first nations in Nova Scotia for their intention.

Taken care and feeding our engineering people through this disruption.

Relationships like these that makes railroads run smoother.

Safer and we hope we do our part for the community as well too. So we're going to try to get this track open as quickly as we can and we really appreciate the help that you've given us at the work site.

You heard me say this at Investor day back in May and it's important to repeat now the plan is sacred we're not going to change how we operate the network in face of weather and volume challenges.

Our scheduled operating model is the right model for our network through all economic cycles.

Turning to the quarter car velocity averaged 216 miles per day in quarter, two up 3% year over year, a meaningful improvement considering the challenges I'll talk about in a minute Rick.

Remember that we were also lapping the improvement the team started delivering last year.

Not going to take our eyes off of car velocity moving forward, but I'm very happy.

With that level of us I'm very happy with that level of speed velocity.

Velocity provides fluidity and creates capacity across the network. While this was done moving 9% less gross ton miles that provides an important foundation for the eventual recovery in demand.

We continue to see improvements in our origin train performance I have to give the team is holiday for.

Solid.

We're achieving above 90% in the quarter, we aim to maintain that level of performance going forward.

These operating results were achieved despite some unexpected challenges this quarter.

We had to contend with record wildfires in eastern and Western Canada portions.

Of the network, which also had an impact on our customers' ability to operate.

Necessity is the mother of invention and we have been actively engaged to protect our infrastructure with sprinkler systems deployed on many of our wooden structures and high risk areas and our precise firefighting train has been deployed since may for those who Maine.

For those who may be unfamiliar the presiding concept transforms a bulkhead flatcar into a self contained rail mounted fire suppression system, which jurors water from attach tank cars. In fact, we recently made the decision to enhance our fire response by building two additional precise.

And trains to better protect our network and support the communities in which we operate.

We experienced a.

Nearly 800% increase in heat related delay hours in Western Canada, with almost 750 hours a delay versus 80 last.

Last year.

It slows main running trains slower than track speed, which impacts network train speed and car velocity.

Even requiring a new heat category called extreme heat conditions and.

And finally, we had an orderly ramp down and traffic moving in and out of the West coast ports that were affected by the recent work stoppage is the right way to prepare for this sort of thing, but it's not without additional cost.

These events were impactful, but didn't distract us from executing the plan.

In this lower volume environment, we took steps to adjust the plan looking at every train start every local service every crew start to make sure we operated as efficiently as we could.

By June our intermodal train starts were down 15% and manifest train starts were down about 5% versus the first quarter we.

We did this while maintaining car velocity and maybe some of our best customer service levels.

<unk> said that a couple of our operating measures, including train length fuel efficiency and locomotive utilization took a short term hit because of the softer volumes fuel efficiency was also impacted by disruptions in the related stops and starts that we had to endure during the worst of the fire.

Even when things were changing quickly out there we need to keep railroading simple when we focus on running a scheduled operation that allows us to recover from issues and outages much quicker.

Before I hand, it over to Doug I want to say an important word on safety I know I speak for Tracy and the whole leadership team when I say that safety is of utmost importance and needs to be at the core of how we operate this railroad we were deeply saddened on April 28, when we lost one of our own.

We have made great strides in recent years, but it's all for nothing if we don't go all go home safely at the end of the day with that I'll pass it on to Doug to discuss topline performance and market outlook. Thanks, Ed I wanted to take a moment to acknowledge the operations and customer service teams they have been helping our employees.

Customers and communities affected by the ongoing wildfires in Canada throughout the quarter. The teams remained engaged and our customers are saying that CN is providing the best service in the industry.

Before turning to the quarter I'd like to recap the current situations with the wildfires and the <unk> strike.

That gave some good color about the impacts of the fires on our operations.

Wildfires are affected also affected customers some of whom are forced to take intermittent shutdowns. This mainly affected forest products customers, but also our coal sulphur frac sand and NGL customers.

Most of the business impacted in Q2 will not be recoverable, but I can say that San did not lose any market share with customers customers are simply shipping less and matching the demand in the economy.

For the <unk> strike there was a minor impact on Q2 results as we took steps to meter flows into the port terminals before the strike began on July one.

The strike lasted 13 days plus a 24 hour Wildcat last week CMS recovery plan kicked into action on July 14th.

We are running additional trains out of Vancouver, and Rupert to clear the backlog.

<unk> to take up to eight weeks to be current if all areas of the supply chain work together.

Second quarter revenues were $4 1 billion down 7% versus last year on 8% lower Rpms, we saw a softer than expected demand environment for consumer related products with significant volume step downs in intermodal, both international and domestic as well as forest.

<unk> in.

In particular lumber shipments were down with depressed prices and some producers running at cost.

As mentioned the wildfires in northern Alberta, and BC as well as Quebec also impacted forest products volumes.

Petroleum and chemicals volumes declined reflecting lower spot crude business this year and softer demand for chemical feedstocks.

Most bulk business lines continued to be strong with rpms up 12%.

Met coal remains solid in the second quarter, but we did lose some trains due to the wildfires thermal coal volumes were weaker due to lower export demand, but volumes are picking up in Q3 already.

U S grain volumes were down year over year, reflecting strong U S corn and soybean shipments down to the Gulf last year due to the strong export demand.

Canadian grain was the bright spot in the quarter with close to 50% more rpms versus last year, we continued to deliver for our grain customers and to engage closely to optimize the supply chain.

In April the Canadian Transportation Agency announced the 12% pricing index increase for the upcoming 2023 2020 for crop year for CF.

We saw positive growth for both domestic and export potash in the second quarter due to the Optionality of Cn's network going to St. John .

Core pricing remains strong and we continue to price above rail inflation, but notably we had had for intermodal storage revenues this year and that headwind will continue through the back half of 2023.

Let me take this opportunity to update you on our Falcon service.

We started the premium service back in May the product is performing well and meeting the posted transit times and in some cases exceeding them and volumes continue to grow.

Turning to the outlook on slide 10 for the remainder of the year, we see continued uncertainty in the economy.

Aside from the impact of the strikes the broader environment for intermodal continues to be challenging we see improvement being pushed into 2020 for pricing.

Pricing for short haul domestic lanes will be under pressure due to the increasingly available truck capacity.

Lumber also remains under pressure, but commodity prices have started to pick up there is still a shortage of about 7 million homes in the U S that need to be built.

Chemicals and petroleum production may be soft for the remainder of the year due to the extended recovery.

For Canadian grain, we are now anticipating that 2023 2020 for crop to be in the mid 60 million ton range below last year's 74 million ton crop and we are closely monitoring the moisture levels across our priorities. This revised view will not affect volumes in 2023, we will be running full outcome harvest.

But will be a headwind next spring.

Canadian coal demand will be whether we retain steady and potash should be strong in Q4.

Automotive should continue to outperform with new import business via Vancouver.

To finish there is no doubt lots of uncertainty right now what is certain is that we are working closely with our customers. We are committed to providing industry, leading service and we will be ready when the economy improves we remain on track to deliver on our longer term growth plan that we outlined at Investor day with that.

I'll pass it on to just like.

The Civil code, Doug just visit the <unk> entity Miss I.

I will start to slide 12 of the presentation, which will provide more visibility on our second quarter performance.

As you heard from Ed we had strong operating results in the quarter despite challenging conditions.

Our financial results reflect it.

Demand environment.

Altogether volumes were significantly impacted with 8% lower rpms on a year over year basis.

Let me provide you with more details on the quarter My comments will reflect adjusted results, which exclude advisory costs related to shareholder matters in the second quarter of 2022.

We delivered operating income of around $1 6 billion, 10% lower than adjusted operating income of last year. Our operating ratio came in at 66% up 160 basis points versus the adjusted operating ratio for the same period last year.

For the quarter finished at $1 76, 9% lower than last year on an adjusted basis.

We have estimated the impact of wildfires was unfavorable to EPS by <unk> <unk>.

And dilutive to deal or by 100 basis points.

In terms of expenses labor was up over $50 million FX adjusted versus last year, mostly due to an 8% higher head count given.

Given the current environment, we have slowed or in some cases path higher.

Fuel expense was over 200 million lower from the same period last year FX adjusted mostly due to a 30% decrease in price and a 9% lower workload in terms of GTS, partly offset by a 6% worsening and fuel efficiency shorter trains along with the impact of operation.

Disruptions that Ed and Doug talked about negatively impacted our fuel efficiency performance.

Fuel surcharge lag was favorable this quarter.

Moving on to Slide 13, let me provide some visibility to our revised guidance for 2023.

Several unforeseen headwinds now inform our view for the full year.

First the second quarter results came in lower than we expected.

Second we now anticipate the demand environment to be both weaker and for longer with the recovery in intermodal pushed into next year and forest products weakness continuing into 2024.

We are pleased that the port strike is behind us with volume recovery efforts underway and we expect to recover some business, but not all of it.

So far in July volumes on an RPM basis are down about 11% year over year.

We are therefore, revising our full year outlook and now expect to deliver flat to slightly negative EPS growth in 2023 versus our previous guidance of mid single digit growth.

This assumes FX of approximately 75, MW Ti of 75 U S dollar per barrel.

We remain committed to shareholder distributions and under our current share repurchase program, we have repurchased over 11 million shares for around $1 8 billion.

We still expect to deliver on our budget of about $4 billion for our current program, which runs through January 31 2024.

In conclusion, let me reiterate a few points.

The team is committed to the scheduled railroad model through all economic cycles, which provides reliable service for our customers.

We expect volume to remain soft with a recovery pushed to 2024.

Given our year to date results and the continued weak economic environment. We are now guiding for flat to slightly negative EPS growth for the year.

We have a strong balance sheet that provides us financial flexibility and we will allocate our capital in a manner that drives long term value for our shareholders let.

Let me pass it back to Tracy.

Thank you.

Emma let's open the line for questions. Please.

Thank you.

We will now begin the question and answer session.

At this time in order to ask a question Press Star then the number one on your telephone keypad.

As previously mentioned, we ask that you kindly limit yourself to one question.

The first question comes from the line of Cherilyn Radbourne with TD Cowen Your line is open.

Thanks, very much and good afternoon.

In terms of your latest view that the recovery will be pushed into 2024 I was just hoping for a bit of color on what youre expecting for the peak season, this year and whether Youre thinking is that the 2020 for recovery will be evident prior to or after the Chinese new year holiday.

Hi, Cherilyn, it's Doug Thanks for the question right now what our customers are telling US is they are expecting a weaker than expected Q3, Q4, which is why we've actually changed our guidance. So we're not really sure what's going to happen in Q1 and beyond but what we are doing is we're kind of forecasting a normal.

A year beyond that and that's as far as we've gone based on what the customers have told us.

Thank you that's all from me.

Your next question comes from the line of Ravi Shankar with Morgan Stanley .

Your line is open.

Thanks, a lot for me one maybe as a follow up to that question I think your macro outlook for the rest of the Youre going in 'twenty four is.

Much more bearish than what you've heard from many of your regular trucking peer so far so.

Again do you feel like it's something reasonably unique to the end markets you're exposed to the geographies you are exposed to or do you feel like are you being more conservative or do you feel like it is just a realization that hasnt for lease on kidney Ed for everybody else.

That's a great question are obvious Doug again, so listen we can only forecast based on what our customers are telling us so really everyone's a little bit bearish right now for the rest of the year, it's a little bit more positive starting in 2024, and that's really all we're forecasting all were guiding towards now cutting over top of that a little bit Ravi I mean, I think that.

Without a doubt this is something that nobody knows for sure and so as we approach the way. We can operate. This railroad is we are ready for whatever happens and I think that we've demonstrated that we can be nimble and turning our service levels up or down to the plan and so we're ready if it comes we will be there if it's not.

Wait a little longer than we have a plan for what we're going to do in that case as well.

Very good thank you.

Your next question comes from the line of Scott Group with Wolfe Research.

Your line is open.

Hey, Thanks afternoon, guys. So you said a couple of times adjusting the hiring plan any color on exactly what youre doing with head count going forward in the back half of the year and then I thought I heard a comment about short haul pricing slowing a little but maybe just talk more broadly what you're seeing from a pricing renewal standpoint.

Pricing is holding up.

Thank you I'll start with that one Scott.

Scott and then I'll pass it over to Doug I think you can talk about pricing I think you can it's hard to comment on.

From a hiring perspective, we said right from the beginning that what we would the first lever that we would pull as we look at the number of people we were hiring and so we've done that and I think just outlined we had stopped in some areas and even though it's hard to hire hard to keep locations. We had slowed down considerably with the view to what we expect volume.

<unk> to be say Q1, Q2 next year is when those employees would be operational.

We are still managing through a level of attrition as we look forward. So if you think about kind of.

Ftes and.

And people levels, you can expect to see it stabilize through the remainder of the year and of course, if things change.

We've got the plans in place to do that as well. So that's how I think about it Doug pricing. After the pricing that we mentioned is really talking about the intermodal product and obviously with the lots of I'll say trucking industry issues right now our biggest competition is within the short haul trucking market. So thats where were seeing some price pressures just in that market most.

Of our market in intermodal is long haul so it's not a big portion, but we just like to highlight the fact that there is some pressure there and that we are starting to see it.

Yeah.

Okay, but you didnt give like an overall pricing renewal number or anything.

No we did not.

Alright, Thank you guys.

Your next question comes from the line of Walter <unk> with RBC capital markets. Please go ahead.

Thanks, very much good afternoon, everyone. So as you say when you did.

<unk> discussed the impact I think you bucket the mall together lower demand wildfires in port strike being a 10% hit to your original forecast.

I wanted to see if I could isolate a little bit the nonrecurring or the real nonrecurring being the wildfires and the port strike. If we were to strip that out if you could quantify that impact.

What I'm wondering is if that hit you this year and it was unexpected versus what you were anticipating when you set your guidance would we see the potential for a higher growth rate.

In 2024, given you're lapping a bunch of fairly significant.

The nonrecurring items or is there something changed as well in your outlook for 2024, I noticed you adjust your grain as well as does that offset some of that what would have been a higher growth rate in 2014 for 2024.

Yes, thanks, Walter so thanks for the question so as I said in the remarks, we did quantify the impact of the wildfires in the second quarter to be.

Seven of EPS, or <unk> or 100 basis point of <unk> I think in our guidance right now we're not assuming a.

Significant impacts of wildfires going forward and as you know some of those wildfires are still occurring as we speak they're not touching our network as we speak they're not impacting our customers. So we're not assuming.

As I said wildfires going forward the other thing on the strike.

It did impact us.

<unk> to date.

We believe that we will recover a good chunk of it over the next couple of weeks. So I don't think this will be a significant impact going forward now we're assuming that this tentative agreement will be will be ratified.

And then the last big piece that guided that supports our guidance our new guidance is the fact that as we said before we were assuming some type of recovery in the second half and now.

Having better visibility Walter today, we feel that most of that recovery will be booked in 2024, I think when you put all of those pieces together, that's that's where.

Give us the guidance that we've just talked about today.

Okay I appreciate the time.

Thanks, Thanks Walter.

Your next question comes from the line of David Vernon with Bernstein.

Your line is open.

Good afternoon, Doug maybe first question for you on.

Set of market opportunities you kind of laid out for us back at Investor Day is it pretty bullish set of volumes out there how should we be thinking about that opportunity set in relation to a weaker 2023 should be fixing those numbers kind of in the same range and there'll be incremental.

As as the economy recovers or is that scope of opportunity.

When adjusted for.

Should we be adjusting that scope of opportunity in line with economic weakness.

That's a great question. Thanks, David So with respect to our 2020 for 2026 plant I think that's all still on targets. Those are very specific projects that we outlined none of them are really being impacted right. Now we have two projects that were due to start that we highlighted out to the team with respect to in 2023.

One of those is our north northeast BC, where we're putting in a new siding to add capacity that is moving ahead, we have the volumes kind of locked in their ed's team is busy building that siding as we speak and we still have our Toronto fuels terminal, which should be up and running in Q4 to receive volume and Thats moving full steam ahead. So right now everything is on time and on.

Target. So it is actually doing really well.

Okay, and then just maybe just a quick follow up.

The Capex numbers that you guys presented at Investor Day. We're also I think maybe a little bit higher than the market had been expecting are you at a point now where where you need to recalibrate the level of spending given what we're seeing either to the up or downside maybe to repair the damage thats been done or to delay some some capacity investments based on what's happening with volume.

Yes, I think that we are looking at Capex very closely David we always do.

We are looking at every project, we are making sure that there is a.

Appropriate return, we are continuing to do a basic maintenance and when when typically when volumes are lower it allows the engineering team to actually get better word blocks and we can actually put rail and ties at a lower unit cost. So we're continuing that program, but as volumes if volumes continue to.

We can absolutely we're looking at discretionary capex, and making and making sure to question ourselves, whether we need to spend the money or not but.

So far I mean, I think our plan is continuing.

And we're continuing to add capacity in Western Canada, because we believe that we will need it.

And yes volumes are a little lower so maybe you'll have a little bit the time value of money.

The team right now is being very productive putting the capital, especially the construction capital in with lower volumes. So David I can add at Harris here I can add were taken advantage of some of these disruptions by hardening the railroad.

We're spending money smartly.

The outage at the washout at.

Halifax for instance were going with bigger culverts more coverts. So we don't have to go through this again and the same thing goes for the areas that we suffered some buyers and we saw opportunities for sprinklers and pumps and things like that we just can't go through this type of risk.

Disruption any more to be honest about it.

Alright, thank you.

Okay.

Your next question comes from the line of Saudi Shimon with BMO capital markets.

Your line is open.

Good afternoon. Thank you.

Apologies if youll have this out in the press release I Didnt see it.

The RCM group.

<unk> guidance for this year, maybe more so.

About half of the year.

Q4, if you could give us some.

But what you are assuming in guidance in terms of RPM growth, but the main question maybe for Doug.

Prince Rupert has has kind of struggled underperformed relative to most of the north American ports even.

Even prior to all of this is going to be fee strike issues in Asia that we saw this year going back into the supply chain initiatives last year.

Do you characterize some of these issues that are hampering Rupert more.

Transitory argue from compensation, whereas your partner that support them customers seeing a change in behavior and how people view us.

Cotton in August of that portal two <unk>.

Just wondering if this is just come out.

A transitory issue because of the supply chain, obviously the weakness in the demand that we saw it would skew.

As more towards them out.

Fatty it's Doug Thanks for that very long questions. So I'll kind of address.

So for the listen we're expecting for the RPM forecast that being above industrial production that was always what we've said we continue to see that moving forward into Q3 and Q4, we will finish the year above industrial production and we're very confident in that with respect to Rupert It's a great question listen before.

The port strike, we are starting to see actually some green shoots if you want for Rupert were starting to pick up some business. There again. So Rupert is one of those cutting edge parts is in a great location. It's really there to serve both the U S market and Canada and as we see some of the volumes are starting to shift there and then we had a port strike. So we're waiting for that to recover we've actually.

Added four trains into the network right now that are moving extra business for it. So we're going to recover and then we're going to see where those markets are but it continues to be listen the jewel in the crown for us the customers love. It. The service has been excellent there for the last year and Thats all they can talk about and we're pretty sure we're going to see all of that volume recover.

Okay.

Your next question comes from the line of Chris Wetherbee with Citigroup.

Please go ahead.

Hey, Thanks, good afternoon.

I wanted to ask maybe two things around how youre looking at kind of the rest of the year and into next year first of all the macro side and then maybe a little bit more specifically to the business, but I guess what are the what are the sort of indicators that you're looking at to get a sense of maybe how long. Some of this downturn may last I know you said that you can do what the customers are telling you can kind of plan around what the customers are telling you I'm guessing that.

B B answer, but if theres any sort of guidepost that you think are important to look forward over the course of the next quarter or two that would be great. And then just maybe one for you. When you think about incremental cost levers that you can pull I know sort of protecting the workforce because it's been so difficult to acquire these employees is important to you are there other things you can pull or at what point do you think it does.

It makes sense to look at the workforce and let attrition work its course to get a little bit lower just kind of curious how youre thinking about that.

I'll start on that Chris and then I'll hand, it over to Doug and just add a little bit of color.

Listen I think Doug did a great job of going through a different commodity segments and what we're expecting I will do it in short fund.

The very strong bulk franchise.

<unk>.

It's continuing to operate very well the demand is strong you talked about what we're looking at the great on the grain portfolio on potash.

And what we're expecting on the pricing on that front if you.

<unk> piece of our portfolio is more the merchandize Pete I and that is pretty strong pretty flat pretty strong we're not seeing a big downside. There is a few pieces in there that softer, but generally fairly strong. The big question Mark is on the consumer centric, it's the containers and its lumber are right now.

And housing starts.

There is no doubt that that start to pick back up again with the with the construction is going to take place in North America. It's just a matter of win same thing with the container demand we.

We're not anticipating based on what Doug can you see a big peak.

Before the holiday period, but we are expecting to see some strength start to grow and return to more normalized levels next year. So that's kind of how we're looking at in automotive we think more on the in.

The consumer side is going to continue to be strong from everything that we that we hear and from our customers as well and on the cost side without a doubt I mean, what we want to do is be really good at managing and responding to the third party impacts that we can't control and I think this team has done a really good job of that very strong and then the <unk>.

Things.

That we can control, we're very methodical about it and we're doing that through as we laid out for you in Chicago, We're doing that your network operations and the plan so that when we execute we secure the full benefit of those cost mitigation.

Mitigation and we continue to service our customers.

As we go along it is we believe we're taking all the right actions as we go along if we come to a different view.

The what the economy is going to look like next year and what.

Volumes may look like and will make other decisions, but right. Now these are the decisions, we're making on the best information that we have.

Tracey cover that all really well so the only thing I'll add in from a signpost is I always tend to look Chris our petroleum <unk> chemicals business, and it's actually pretty flat and Thats always a leading indicator as the economy improves and we just haven't seen it start to go up yes. That's one of the indicators I would suggest you always watch for the economy, especially for the railways.

And then just just to give some examples of cost that we can pull out and we are pulling out actually is is for example, we talked a lot of center beams. Okay. So a lot of those center beams.

Our leased and they have staggered expiry date, we do this intentionally and were able to return some of these cars to the lessors and obviously reduce our car hire expense the other the other place where we.

Port costs as we parked locomotives and of course, we probably are the ones that other gas guzzlers and older locomotives and use this as an opportunity to rejuvenate our active fleet that's out there pulling freight. So those are those are outside of and as we said in our in our remarks, we are looking at hiring we still have.

Good attrition at CN, So attrition is helping us and we are pacing ourselves on hiring and slowing it down in some cases, but want to be clear that we have some harder to hire locations in western Canada that we're thinking the mid to long term, we are continuing to to hire in those locations because they're very difficult to get.

People to come on the network.

That's great color. Thanks for the time appreciate it.

Okay.

Your next question comes from the line of Ken <unk> with Bank of America.

Your line is open.

Hey, great. Good afternoon, just to clarify that last answer part of it Tracy.

Target volumes to outpace it.

I just want understand this with the fire strikes floods cutting the grain crop pushing intermodal volumes for next year pushing demand into next year.

Youre still targeting outpacing IP is maybe.

IP much larger negative from your point of view or maybe just talk about that that perspective, and then you mentioned, Doug you mentioned truck competition.

You haven't mentioned anything about rail is.

Peer rail is being measured on rail to rail competition.

On <unk> have you seen that step up in any fashion in this environment.

Yes.

Hey, Ken Yeah, as you know IP is a public number and it is it moves around a little bit it's still showing negative for the year as we add up the.

Total volume expectations based on what we've what kind of what we've outlined to you we see ourselves Doug says coming in stronger than industrial production in any scenario.

So we're pretty we're pretty firm on that Doug.

The only thing I'll add into Ken is on the rail competition, we haven't really seen any market share loss with our customers at all both the rail or truck. So we are seeing obviously like I said some price pressure on the trucking side for short haul business, but outside of that all of our customers are very happy with our service and we continue to push product.

We've seen some temporary gains due to the port shutdown like moving potash to Saint John instead of it going to Vancouver, but thats about it.

Got you.

<unk> said you did lose to truck given you Couldnt move it. So some volume was was lost in that.

Given that.

We lost some temporary business I'll say it like so we lost some temporary coal business and some going to Vancouver during the strike in Q2 Q3, sorry that'll show up in Q3 business in Q2, we lost a little bit of lumber as mills were closed due to the fires and things like that that isn't recoverable.

Okay.

Alright, thank you.

Your next question comes from the line of Dunbar Poirier with Desjardins capital markets. Please go ahead.

Yeah.

Wondering if you could provide more detail given the lack of material charges.

Bruce what are you I assume that you will be facing a tough compare and very rapidly just in terms of the average length of haul for intermodal I thought that you work closer to 1600 miles.

<unk> 1800 miles. So I was just curious how much of your intermodal is exposed to short all thank you.

And while the first part of your question got cut off could you repeat it.

Yes, just in terms of yield expectation for the balance of the year I was wondering what we should expect in terms of yield for the sick enough given that the accessorial charges.

<unk> be a boost anymore.

Okay. So for the accessorial charges, we have about $100 million plus headwind on that in Q2, and we expect that to continue through Q3 and Q4.

Alright, so thats part of the yield issue.

Questioning and on the short haul and on.

On the short haul versus long haul. So you are right you have the huge numbers that on we actually have our most of our long haul business and that really big market, but we do move a bunch of short haul, but it's a small percentage of our business right. It's almost always long haul. So we do move traffic between Montreal, and Toronto, Toronto and marked in so it's a little bit shorter haul than <unk>.

Coming off Vancouver, going all the way to Toronto, Montreal, Chicago, So, that's where we're facing that price pressures in that short haul market.

Okay. Thanks for the color.

Yeah.

Your next question comes from the line of Tom <unk> with UBS.

Your line is open.

Yes, good afternoon.

Wanted to ask you about how we might think about.

Operating ratio and maybe inflation, how that would have an effect I think.

Transports are certainly dealt with inflation in the cost base and as the revenue slows down.

More challenging from a margin perspective, finding ways to offset that.

I know the Canadian dynamics, a little bit different than what we see from some of the U S companies, but how do you think about that.

It kind of profile for inflation as you look into 2024 with a little softer view and what you might be able to do to kind of stabilize the or.

On kind of a year over year basis. Thank you.

Thanks, Tom Tracy listen.

We've been pretty clear that we see opportunity in our margins as we go forward over the longer term.

We see that a number of places we're not yet where we need to be from an operating efficiency perspective, we've made significant gains and we've handled some of the external events extremely well, there's still more work to do there and we're excited about getting that debt.

Certainly we're standing behind our our pricing above inflation and prospective and Debbie is doing a great job at delivering that on the basis of a service that is providing him that's going to continue we do have the headwind on some of the storage and other charges that occurred last year when the supply chain Scott pretty congested so is.

We look forward you can see us improve our margin.

Right now, we're going to have a little bit of fun.

The way to be a little bit lighter on operating margin, while the volumes are down, but we are positioned extremely well to get at a very low cost the upside when the volumes return. That's the model. That's how we're going to run it and Youll see us, we'll see that leverage pick up as the volumes come back.

So you think it's much more driven by volumes and then by price just in terms of when we might transition to seeing improvement.

Yes, absolutely.

Okay. Thank you.

Your next question comes from the line of connect Gupta with Scotiabank. Your line is open.

Thanks for taking my question just wanted to dig into the guidance.

Hi, Ken.

What are some of the puts and takes explaining the gap between the top and bottom end of the EPS guidance range of flat to slightly negative and I'm not sure what the slightly negative.

Could that be a lower mid single digit decline.

So thanks, John Rx So what explains the gap between flat to negative is really volume so when one scenario.

Get a little bit more volume.

Than we expected and in the slightly negative slightly negative.

And then we get less volume in the second half of the year than than what we expected. So it's really a volume story.

Okay.

Your next question comes from the line of Amit Malhotra with Deutsche Bank.

Your line is open thanks, operator, hi, everyone. Good afternoon.

I guess I wanted to stress test the 10% to 15% earnings growth framework I guess for next year.

You guys are operating pretty well if I look at the cost structure and you are responding at least in terms of what you can control pretty well.

I'm just trying to understand if we're kind of in this.

Lackluster volume environment, you've got headwinds on Grand you've got headwinds on forest products next year, but.

But you've also got on the other hand, a lot of volume opportunity that you outlined at Investor day.

I mean, what's the likelihood that we're sitting here 12 months from now.

Weak environment, and EPS is not growing or staying the same or do you feel like you have enough idiosyncratic volume opportunity, where you can kind of move the needle on EPS, how much how much do you need that's out of your control to get to that 10 to 15 next year.

So I welcome you to the dialogue around our cable if we knew for sure what's going to happen from an economic perspective, we could narrow in on this pretty quickly. So it just has taken you through what we're modeling next year and as Doug from a volume perspective, Youre right. Our railroad is running extremely well and we're poised.

To capture the upside.

And since a lot of that to the bottom line as soon as it comes so we have a plan in place for next year. If it's wrong. Then we will adjust the growth initiatives that we put in front of you in Chicago are there that exists outside of the economic ebbs and flows and so Doug and Ed are continuing to work on actually knows.

<unk> talked to you about a couple that are going to come in and we'll be moving volume prior to the end of the year and that plan remains intact. So that is something that will move that.

More positively than whatever is going on in the economic environment at that time can you can you ring fence just to clarify.

Yeah, sorry, just to clarify Amit as well that 10% to 15%. We said was over the three year period. So we did not specifically guide by by year. Obviously, we're looking at what's happening we're going to do our business plan with our board. This fall as we typically do and then we typically provide visibility on to you in January .

So so I want to clarify that the 10% to 15% was over the three year period.

Yes, just assumed it was linear because that would imply like 15% to 25% in the back half, but I understand what youre, saying. Thank you for taking the question.

Thanks.

Your next question comes from the line of Brian <unk> with Jpmorgan.

Please go ahead.

Hey, Thanks. Good afternoon question for Doug can you just walk through the assumptions for the Canadian greenhouses, Steven that sufficiently de risked at this point given all the weather conditions that were seeing out there on some of the crop.

Conditions as well and also.

You have screened forecast sequence that you raised.

When we came sort of challenges out there.

<unk> crops. So can you just give us some puts and takes amongst levels went in opposite directions.

Sure Brian So thanks for the question so with respect to the Canadian grain, obviously, you can't really count it until it's off the fields, but from everything we're seeing both from our customers crop forecast, which are very accurate, especially in Canada to the government forecast, we're seeing that roughly that 65 million metric ton number.

So we're pretty confident in that now at this time of year, unless there's a big change and whether that really has a big impact on the crops.

It should come in very close right. So we're pretty confident on that crop on our network on <unk> network has more moisture. So we think we're actually fairly well set up to move things through up until Q2 next year and then we will only be able to determine that later with respect to the U S crop it started off as a very dry crop almost a <unk>.

<unk> crop, we've seen significant amounts of rain on our network over the last four weeks, so that crop forecast on CN through Illinois, and Ohio has come up dramatically for us. So we're actually looking at a normal crop in the U S. Right now now things could still change it still has to come off the field as well, but the corn and soy.

These are actual have caught up almost to the average right now.

Okay.

Okay. Thanks, Doug.

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

Your line is open.

Oh, yes, good afternoon, thanks for the time.

Just to follow up on the grain crop if I may.

It's obviously been dry in stressed as you indicated Doug.

I suspect we likely get an early harvest this year, which should provide some help on the margin, but I also think we're comping up against a pretty benign winter through Q4, and probably even more so in Q1 next year, how do we think about that in relative context can you actually move as much green as last year, if the winters as more normal.

So for our network Steve It's a good question. So we think our network is going to have slightly lower but not dramatically lower crop overall, just because theres been a lot more moisture across the north.

So we feel pretty comfortable on our numbers with respect to moving it we had we had a fairly normal winter I know, we characterize it as a late winter, sometimes but we had the same number of cold days like below minus 30, as we do in a normal winter, we just with the operating plan that <unk> put together with the team. They just delivered so much better than our prior year.

So what we're planning we're planning on moving the exact same type of volumes that we did before for our customers and we think will be very successful with that and the team at I don't know if you want to add anything no I.

I can tell you.

I don't see any any real problems at all I mean, today's technology allows us to run repeater cars. When it gets extremely cold we always run distributed power on a loaded grain trains will do just as well this year as we did last year.

Okay very good thank you.

Your next question comes from the line of Justin long with Stephens.

Please go ahead.

Thanks, and good afternoon, I wanted to ask about the lag impact from fuel that's getting baked into the guidance for the second half and how that compares to what you saw on the first half and then just to clarify on the volume guidance could you share the industrial production number to date.

You are using as a benchmark for this year.

The industrial the industrial production number is as you saw consensus came out.

A couple of days ago, and it was negative two so it's in that range and on the last question I think that we don't expect.

A lag.

If fuel prices remain the same we don't expect a lag.

In Q3.

And.

And neither in Q4 now on a year over year basis, if you look at Q3.

Had a positive lag last year of about <unk> 10 on a year over year basis that will be negative it will impact negatively.

Our year over year fuel lag in Q3 by about <unk>.

Okay, great. Thanks.

Your next question comes from the line of Brandon <unk> with Barclays.

Please go ahead.

Hi, Thanks for taking my question I guess just to recap a couple of things here, Doug does the pricing hurdle or inflation hurdle remain mid single digits. Because I think you had implied about 5% looking at your longer term outlook may be even higher in 2023, do you think youre getting that outside of some of the markets that you called out and add it looks like your service metric.

This quarter were actually pretty decent despite some of those headwinds. So would you expect incremental efficiencies. If you can get beyond some of these hurdles.

Absolutely.

Others, when I said it was a tough quarter I meant it was a tough quarter the fires the.

The disruptions we had to deal with we are very well positioned going into third and remainder of third and fourth quarter head count power equipment.

We ought to be able to do even better than we did last year at the same time.

And Brandon on the pricing, we continue to be strong on that obviously, we talked a little bit about the pressures in some of the intermodal. So the short haul but outside of that on the rest of the carload business, we're still being fairly aggressive seeing a great pricing environment based on the service that adds providing so I don't see that changing for the rest of the year.

Okay.

Thank you.

Your next question comes from the line of Jon Chapell with Evercore.

Please go ahead.

Thank you good afternoon, just talking a bunch of things together, Doug you've laid out a pretty detailed bottoms up view of a lot of the growth opportunities that your customers are pursuing but now in the kind of more maybe uncertain macro backdrop, even youre looking at your Capex budget going forward have you seen any type of reluctance to move forward with <unk>.

The projects that you've laid out from the shipper community.

As both some of the temporary issues have intensified in the uncertainty has probably been elevated as well.

John not not to this time right. We've seen a lot of these projects are longer term big projects that customers looking at the immediate environment Theyre looking macro theyre looking two to three years out and we're working there with them. So like you take an example, like a BHP potash mine as an example, like they are well.

Under construction, it's only going to come up in two or three years, we don't see them slowing down in fact, we're seeing them try to speed up. So there's lots of examples like that where people will try and take advantage of the market and the conditions in their spending as much money if not more because there's more labor availability.

So each market is going to be different each opportunity, but we're working with everyone and we havent seen anyone slowdown to this point.

Great. Thanks, Doug.

This concludes the question and answer session I would like to turn the call back over to Tracy Robinson.

Thanks, Emma so an interesting quarter from an external events perspective, and I think we've managed it well and we're all looking for a.

A few less interesting quarters coming up but we'll manage what comes at us.

Our plan, though it's clear and it's not changing the discipline around building the plant running the plant selling the plan is doing exactly what we wanted it to its working is delivering consistent reliable service for our customers and then making effective use of our assets and as we've talked today as our volumes lift we're going to see that operating leverage policy.

And we're ready we've got our eyes on a future where advance advancing our growth projects preparing for the rebound and doing exactly what we said we'd do that can mean.

That being said as you've heard to date, we are reiterating our 2024 to 26 financial perspective of 10% to 15% diluted EPS CAGR that sell for now thanks very much for joining us today.

The conference call has now ended.

Thank you for your participation you.

You may disconnect your lines at this time.

Okay.

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Good afternoon.

My name is Emma and I will be your conference operator today.

Welcome to C and second quarter, 2023 financial and operating results conference call.

All participants are in a listen only mode.

After the Speakers' remarks, there will be a question and answer session during which we ask that you kindly limit yourself to one question.

I would now like to turn the call over to Stacy Alderson interim assistant Vice President Investor Relations, ladies and gentlemen, Mis Alderson.

Thank you Emma and good afternoon, everyone and thank you for joining us for CN second quarter 2023 financial results conference call before we begin I'd like to draw your attention to the forward looking statements and additional legal information available at the beginning of the presentation.

As a reminder, today's conference call contains certain projections and other forward looking statements within the meaning of the U S and Canadian Securities laws.

These statements are subject to risks and uncertainties that may actually cause results to differ materially from those expressed or implied in these statements.

There are more fully described in our cautionary statement regarding forward looking statements in our presentation.

After the prepared remarks, we will conduct a Q&A session I do want to remind you to please limit yourself to one question.

The IR team will be available after the call for any follow up questions.

Joining us on the call today are Tracy Robinson, our president and CEO , Doug Macdonald, our Chief marketing Officer.

Just like our Chief Financial Officer, and Ed Harris, our Chief operating Officer.

It is now my pleasure to turn the call over to <unk>, President and Chief Executive Officer Tracy Robinson.

The C b and vanilla tooth key part to see Pup telephone or webcast.

Instantly and this is the central theme and we're driving our growth initiatives on that foundation.

Over the three year period, we discussed in Chicago and beyond our path is very clear.

The longer term fundamentals remains strong the growth opportunities are real.

Continue to progress that growth agenda built on the foundation of strong service driven by disciplined adherence to our plan.

As we sit here today, we're also seeing a little bit more weakness on the economic front than we modeled earlier this year.

Now all of this is temporary as you know and our team is doing a great job of managing through it with an eye on the longer term.

And we've seen more generally a softer volume market economically, particularly in some of our commodity segments.

I must say I have been impressed by our team's response they are managing.

Through this theyre staying true to our plan the running the plant and still through all of it improving year over year velocity network train speed dwell time and customer service, you'll notice in our operating steps they've done a great job and it's a testament not only the team, but also to the strength of our plan.

The plan is working.

As we look forward our focus is on continuing to be nimble adjusting to the softer volumes in the near term and ensuring that we're prepared for the lift we continue to refine the operating plan to match the volume levels that we can.

Consolidating train starts we're laying down locomotives and cars, where it makes sense.

And we're taking the opportunity to advance some locomotive engineer training to ensure that we're ready for the medium and longer term.

And all of these are the right near term actions that mitigate the impact of lower volumes without jeopardizing, our ability to respond when the rebound comes and it will come and we will be ready.

This puts our margins under a little bit of pressure right now, but our margin leverage will return with the volume.

So let's talk about what this all means.

Our second quarter EPS of about 76 is 9% lower than last year on an adjusted basis and are 66% operating ratio is 160 basis points higher.

Now this is the impact of both the macroeconomic being softer than we anticipated and those challenges presented by the weather events here in Canada.

And on the basis of what we saw in the second quarter and are seen in these few weeks in July we've taken a hard look at our year end outlook here and we're now assuming that the economic recovery is pushed into 2024.

Just wanted to say a few words about the situation on the Canadian West Coast ports. We are pleased to see an end to the work stoppage.

And we're working hard to get those supply chains back in sync.

We expect to move most of the volumes that Didnt move during the first two weeks of July over the coming weeks.

This advantage is another reminder, that what happens on one part of the supply chain impacts the full supply chain.

<unk> disruptions like the IOW strike, the wildfires and now some flooding in Nova Scotia have impacts across the North American supply chain.

It is critical that we respond is an entire supply chain community to minimize the impact and build.

Ongoing confidence in the North America, and the global supply chain performance.

This is how we approach our work here at CN and <unk>.

So I'll turn it to the team Ed's going to first give us a little more color on the state of our operations and how his team has been working to mitigate the impact of these events, Doug will follow up with an update on the markets and what our customers are telling us about the volumes as we look forward and she is as always on cleanup to bring it all together with the numbers Ed.

Thank you Tracy.

The second quarter has been a tough one.

I want to acknowledge and thank the entire operations team for all the great work to keep the network running as well as it has this quarter.

Tracey just recently.

You mentioned the floods in Nova Scotia.

You've no doubt seen them disruptions and the news clips just outside of the Alf X.

We're working around the clock and I would like to thank especially thank Milton.

Millbrook first nations in Nova Scotia for their intention and taken care and feeding our engineering people through this disruption.

Relationships like these that makes railroads run smoother.

You heard me say this at Investor day back in May and it's important to repeat now the plan is sacred we're not going to change how we operate the network in face of weather and volume challenges. Our scheduled operating model is the right model for our network through all economic cycles.

Turning to the quarter car velocity averaged 216 miles per day in quarter, two up 3% year over year.

Paul improvement considering the challenges I'll talk about in a minute.

Remember that we were also lapping the improvement the team started delivering last year.

We're not going to take our eyes off of car velocity moving forward, but I am very happy.

With that level of I'm, very happy with that level of speed.

Velocity provides fluidity and creates capacity across the network.

This was done moving 9% less gross ton miles that provides an important foundation for the eventual recovery in demand.

We continue to see improvements in our origin train performance I have to give the team is holiday for.

A solid eight four achieving above 90% in the quarter, we aim to maintain that level of performance going forward.

These operating results were achieved despite some unexpected challenges this quarter.

We had to contend with record wildfires in eastern and Western Canada portions.

Of the network, which also had an impact on our customers' ability to operate.

Transforms a bulkhead flatcar into a self contained rail mounted fire suppression system, which jurors water from attach tank cars. In fact, we recently made the decision to enhance our fire response by building two additional Poseidon trains to better protect our network and support the commute.

Cities in which we operate.

We experienced a Nick.

Nearly 800% increase in heat related delay hours in Western Canada, with almost 750 hours of delay versus 80 last.

Last year he.

<unk> main running trains slower than track speed, which impacts network train speed and car velocity.

Even requiring a new heat category called extreme heat conditions and.

These events were impactful, but didn't distract us from executing the plan.

In this lower volume environment, we took steps to adjust the plan looking at every train start every local service every crew start to make sure we operated as efficiently as we could.

By June our intermodal train starts were down 15% and manifest train starts were down about 5% versus the first quarter we.

We did this while maintaining car velocity and maybe some of our best customer service levels.

Having said that a couple of our operating measures, including train length fuel efficiency and locomotive utilization took a short term hit because of the softer volumes fuel efficiency was also impacted by disruptions in the related stops and starts that we had to endure during the worst of the fire.

Even when things were changing quickly out there we need to keep railroading simple when we focus on running a scheduled operation that allows us to recover from issues and outages much quicker.

Before I hand, it over to Doug I want to say an important word on safety I know ice.

Speak for Tracy and the whole leadership team when I say that safety is of utmost importance and needs to be at the core of how we operate this railroad we were deeply saddened on April 28, when we lost one of our own.

Customers and communities affected by the ongoing wildfires in Canada throughout the quarter. The teams remains engaged and our customers are saying that CN is providing the best service in the industry.

Before turning to the quarter I'd like to recap the current situations with the wildfires and the <unk> strike. It gave some good color about the impacts of the fires on our operations. The wildfires are affected also affected customers some of whom are forced to take intermittent shutdowns. This mainly affected forest products customers.

But also our coal sulphur frac sand and NGL customers.

For the IOW use strike there was a minor impact on Q2 results as we took steps to meter flows into the port terminals before the strike began on July one.

The strike lasted 13 days plus a 24 hour Wildcat last week CNS recovery plan kicked into action on July 14th.

We are running additional trains out of Vancouver, and Rupert to clear the backlog.

Back to take up the eight weeks to be current if all areas of the supply chain work together.

<unk> in.

In particular lumber shipments were down with depressed prices and some producers running at cost.

As mentioned the wildfires in northern Alberta, and BC as well as Quebec also impacted forest products volumes.

Petroleum and chemicals volumes declined reflecting lower spot crude business this year and softer demand for chemical feedstocks.

Most bulk business lines continued to be strong with rpms up 12%.

Coal remains solid in the second quarter, but we did lose some trains due to the wildfires.

Thermal coal volumes were weaker due to lower export demand, but volumes are picking up in Q3 already.

U S grain volumes were down year over year, reflecting strong U S corn and soybean shipments down to the Gulf last year due to the strong export demand.

Canadian grain was the bright spot in the quarter with close to 50% more rpms versus last year, we continued to deliver for our grain customers and to engage closely to optimize the supply chain.

In April the Canadian Transportation Agency announced a 12% pricing index increase for the upcoming 2023 2020 for crop year for CF.

We saw positive growth for both domestic and export potash in the second quarter due to the Optionality of Cn's network going to St. John .

Core pricing remained strong and we continue to price above rail inflation, but notably we had had for intermodal storage revenues this year and that headwind will continue through the back half of 2023.

Let me take this opportunity to update you on our Falcon service.

We started the premium service back in May the product is performing well and meeting the posted transit times and in some cases exceeding them and volumes continue to grow.

Turning to the outlook on slide 10 for the remainder of the year, we see continued uncertainty in the economy.

Aside from the impact of the strikes the broader environment for intermodal continues to be challenging we see improvement being pushed into 2020 for pricing.

Pricing for short haul domestic land will be under pressure due to the increasingly available truck capacity.

Lumber also remains under pressure, but commodity prices have started to pick up there is still a shortage of about 7 million homes in the U S that need to be built.

Chemicals and petroleum production may be soft for the remainder of the year due to the extended recovery.

But will be a headwind next spring.

Canadian coal demand will be whether we retain steady and potash should be strong in Q4.

Automotive should continue to outperform with new import business via Vancouver.

I'll pass it on to just lie.

The Civil code, Doug just visit the <unk> entity mess I.

I will start with slide 12 of the presentation, which will provide more visibility on our second quarter performance.

As you heard from Ed we had strong operating results in the quarter despite challenging conditions.

Our financial results reflect it.

Demand environment.

Altogether volumes were significantly impacted with 8% lower rpms on a year over year basis.

Let me provide you with more details on the quarter My comments will reflect adjusted results, which exclude advisory costs related to shareholder matters in the second quarter of 2022.

We delivered operating income of around $1 6 billion, 10% lower than adjusted operating income last year, our operating ratio came in at 66% up 160 basis points versus the adjusted operating ratio for the same period last year.

For the quarter finished at $1 76, 9% lower than last year on an adjusted basis.

We have estimated the impact of wildfires was unfavorable to EPS by <unk> <unk>.

And dilutive to deal or by 100 basis points.

In terms of expenses labor was up over $50 million FX adjusted versus last year, mostly due to an 8% higher head count given.

Given the current environment, we have slowed or in some cases path higher.

Disruptions that Ed and Doug talked about negatively impacted our fuel efficiency performance.

Fuel surcharge lag was favorable this quarter.

Moving on to Slide 13, let me provide some visibility to our revised guidance for 2023.

Several unforeseen headwinds now inform our view for the full year.

First the second quarter results came in lower than we expected.

Second we now anticipate the demand environment to be both weaker and for longer with the recovery in intermodal pushed into next year and forest products weakness continuing into 2024.

We are pleased that the port strike is behind us with volume recovery efforts underway and we expect to recover some business, but not all of it.

So far in July volumes on an RPM basis are down about 11% year over year.

We are therefore, revising our full year outlook and now expect to deliver flat to slightly negative EPS growth in 2023 versus our previous guidance of mid single digit growth.

This assumes FX of approximately <unk> 75, and <unk> of 75 U S dollar per barrel.

We remain committed to shareholder distributions and under our current share repurchase program, we have repurchased over 11 million shares for around $1 8 billion.

We still expect to deliver on our budget of about $4 billion for our current program, which runs through January 31 2024.

In conclusion, let me reiterate a few points.

The team is committed to the scheduled railroad model through all economic cycles, which provides reliable service for our customers.

We expect volume to remain soft with a recovery pushed to 2024.

Given our year to date results and the continued weak economic environment. We are now guiding for flat to slightly negative EPS growth for the year.

We have a strong balance sheet that provides us financial flexibility and we will allocate our capital in a manner that drives long term value for our shareholders let.

Let me pass it back to Tracy.

Thank you.

Emma let's open the line for questions. Please.

Thank you.

We will now begin the question and answer session.

At this time in order to ask a question Press Star then the number one on your telephone keypad.

As previously mentioned, we ask that you kindly limit yourself to one question.

The first question comes from the line of Cherilyn Radbourne with TD Cowen Your line is open.

Thanks, very much and good afternoon.

A year beyond that and that's as far as we've gone based on what the customers have told us.

Thank you that's all from me.

Your next question comes from the line of Ravi Shankar with Morgan Stanley .

Your line is open.

Thanks, a lot for me one maybe as a follow up to that question I think your macro outlook for the rest of the Youre going in 'twenty four is.

Much more bearish than what you've heard from many of your regular trucking peer so far so.

Well that's a great question are obvious Doug again, so listen we can only forecast based on what our customers are telling us so really everyone's a little bit bearish right now for the rest of the year, it's a little bit more positive starting in 2024, and that's really all we're forecasting all were guiding towards now cutting over top of that a little bit Ravi I mean, I think that.

Just a little longer than we have a plan for what we're going to do in that case as well.

Very good thank you.

Your next question comes from the line of Scott Group with Wolfe Research.

Your line is open.

Our pricing is holding up.

I'll start with that one.

Scott and then I'll pass it over to Doug I think you can talk about pricing I think you misheard the comment.

From a hiring perspective, we said right from the beginning.

What we would the first lever that we would pull as we look at the number of people we were hiring and so we've done that.

Just outlined we have stopped in some areas and even though it's hard to hire hard to keep locations. We had slowed down considerably with the view to what we expect volumes to be say Q1 Q2 next year is when those employees would be operational.

We are still managing through a level of attrition.

As we look forward. So if you think about kind of.

Ftes and.

People levels, you can expect to see it stabilize through the remainder of the year and of course, if things change.

Of our market in intermodal is long haul so it's not a big portion, but we just like to highlight the fact that there is some pressure there and that we are starting to see it.

Okay, but you didnt give like an overall pricing renewal number or anything.

No we did not.

Okay, Alright, thank you guys.

Your next question comes from the line of Walter <unk> with RBC capital markets. Please go ahead.

Yes, thanks very much good afternoon, everyone. So as you think when you.

<unk> discussed the impact I think you bucket the mall together lower demand wildfires in port strike being a 10% hit to your original forecast.

I wanted to see if I could isolate a little bit the nonrecurring or the real nonrecurring being the wildfires and the port strike. If we were to strip that out if you could quantify that impact.

What I'm wondering is if that hit you this year and it was unexpected versus what you were anticipating when you set your guidance would we see the potential for a higher growth rate.

In 2024, given youre lapping a bunch of fairly significant.

Yes, thanks, Walter so thanks for the question so as I said in the remarks, we did quantify the impact of the wildfires in the second quarter to be.

Seven of EPS, or <unk> or 100 basis point of <unk> I think in our guidance right now we're not assuming a cigna.

As I said wildfires going forward the other thing on the strike.

It did impact us.

<unk> to date.

And then the last big piece that guided that supports our guidance our new guidance is the fact that as we said before we were assuming some type of recovery in the second half and now.

Having better visibility Walter today, we feel that most of that recovery will be booked in 2024, I think when you put all of those pieces together, that's that's where.

Give us the guidance that we've just talked about today.

Okay I appreciate the time.

Thanks, Thanks Walter.

Your next question comes from the line of David Vernon with Bernstein.

Your line is open.

Good afternoon, Doug maybe first question for you on.

As as the economy recovers or is that scope of opportunity.

When adjusted for.

Should we be adjusting that scope of opportunity in line with economic weakness.

It's a great question. Thanks, David So with respect to our 2020 for 2026 plant I think that's all still on target. Those are very specific projects that we outlined none of them are really being impacted right. Now we have two projects that were due to start that we highlighted out to the team with respect to in 2023.

One of those is our north northeast BC, where we're putting in a new siding to add capacity that is moving ahead, we have the volumes kind of locked in their ed's team is busy building that siding as we speak and we still have our at our Toronto fuels terminal, which should be up and running in Q4 to receive volume and Thats moving full steam ahead. So right now everything is on time and on.

Target. So it is actually doing really well.

Okay, and then just maybe just a quick follow up.

Yes, I think that we are looking at Capex very closely David we always do.

We're looking at every project, we are making sure that there is a.

We can absolutely we're looking at discretionary capex, and making and making sure to question ourselves, whether we need to spend the money or not but.

So far I mean, I think our plan is continuing.

And we're continuing to add capacity in Western Canada, because we believe that we will need it.

Yes volumes are a little lower so maybe you'll have a little bit the time value of money.

We're spending money smartly.

The outage at the washout at.

<unk> for instance were going with bigger culverts more coverts. So we don't have to go through this again and the same thing goes for the areas that we suffered some buyers and we saw opportunities for sprinklers and pumps and things like that we just can't go through this type of risk.

Disruption anymore to be honest about it.

Alright, thank you.

Okay.

Your next question comes from the line of Saudi Shimon with BMO capital markets.

Your line is open.

Good afternoon. Thank you.

Apologies if youll have this out in the press release I Didnt see it.

The RCM group.

Gross guidance for this year, maybe more more so for the back half of the year Q3, Q4, if you could give us some.

Claudia both what youre, assuming in guidance in terms of <unk> growth, but the main question maybe for Doug.

Prince Rupert has has kind of struggled.

Underperformed relative to most of the North American ports.

Even prior to all of this is going to be fee strike issues in Asia that we saw this year.

Going back into the supply chain initiative last year.

Do you characterize some of these issues that are hampering group or more.

Transitory argue from compensation, whereas your partner the deport them customers seeing a change in behavior and how people view us.

CT in August of that portal two <unk>.

I am just wondering if this is just come out.

A transitory issue because of the supply chain and obviously the weakness in the demand that we saw with SKU.

More towards them.

Fatty it's Doug Thanks for that very long questions. So I'll kind of address.

So for the <unk>.

And we're expecting for the RPM forecast that being above industrial production that was always what we've said we continue to see that moving forward into Q3 and Q4, we will finish the year above industrial production and we're very confident in that with respect to Rupert. It's a great question listen before the Port strike, we are starting to see actually.

Some green shoots if you want for Rupert were starting to pick up some business. There again. So Rupert is one of those cutting edge parts is in a great location. It's really there to serve both the U S market and Canada and as we see some of the volumes are starting to shift there and then we had a port strike. So we're waiting for that to recover we've actually added four trains into the network right now.

Batter moving extra business for it so we're going to recover and then we're going to see where those markets are but it continues to be listen the jewel in the crown for us the customers love. It. The service has been excellent there for the last year and Thats all they can talk about and we're pretty sure we're going to see all of that volume recover.

Okay.

Your next question comes from the line of Chris Wetherbee with Citigroup.

Please go ahead.

Hey, Thanks, good afternoon.

I guess what are the what are the sort of indicators that you're looking at to get a sense of maybe how long. Some of this downturn may last I know I think you said that you can do what the customers are telling you can kind of plan around what the customers are telling you I'm guessing that might be the answer, but if theres any sort of guidepost that you think are important to look forward over the course of the next quarter or two that would be great and then just maybe one for you when you.

About incremental cost levers that you can pull I know sort of protecting the workforce because it's been so difficult to acquire these employees is important to you are there other things that you can pull or at what point do you think it does make sense to look at the workforce and let attrition work its course to get it a little bit lower just kind of curious how youre thinking about that.

I'll start on that Chris and then I'll hand, it over to Doug and just add a little bit of color listen I think Doug did a great job of going through our different commodities segments and what we're expecting I will do it in short fund we have a very strong bulk franchise.

It's continuing to operate very well the demand is strong you talked about what we're looking at the great on the grain portfolio on potash.

And what we're expecting on the pricing on that front if you.

The next piece of our portfolio is more the merchandize Pete.

And that is pretty strong pretty flat pretty strong we're not seeing a big downside theres a few pieces in there that softer, but generally fairly strong. The big question Mark is on the consumer centric, it's the containers and its lumber are right now.

Given housing starts.

There is no doubt that that's got to pick back up again with the with the construction is going to take place in North America. It's just a matter of win same thing with the container demand.

Not anticipating based on what Doug can you see a big peak before the holiday period, but we are expecting to see some strength start to grow and return to more normalized levels next year. So that's kind of how we're looking at in automotive we think more on the.

<unk> side is going to continue to be strong from everything that we that we hear and from our customers as well and on the cost side without a doubt I mean, what we want to do is be really good at managing and responding to the third party impacts that we can't control and I think this team has done a really good job of that very strong and then the things.

Is that we can control, we're very methodical about it and we're doing that through as we laid out for you in Chicago, we're doing that through network operations and the plan. So that when we execute we secure the full benefit of those cost mitigation.

Mitigation and we continue to service our customers.

As we go along it is we believe we're taking all the right actions as we can.

Go along if we come to a different view of what the economy is going to look like next year and what.

Volumes may look like and will make other decisions, but right. Now these are the decisions, we're making on the best information that we have.

And then just just to give some examples of cost that we can pull out and we are pulling out actually is as for example, we've talked a lot of center beams. Okay. So a lot of those center beams.

Port costs as we parked locomotives and of course, we probably are the ones that are the gas guzzlers and older locomotives and use this as an opportunity to rejuvenate our active fleet thats out there pulling freight. So those are those are outside of and as we said in our in our remarks, we are looking at hiring we still have.

People to come on the network.

That's great color. Thanks for the time appreciate it.

Okay.

Your next question comes from the line of Ken <unk> with Bank of America.

Your line is open.

Hey, great. Good afternoon, just to clarify that last answer part of it Tracy.

Target volumes to outpace it.

I just want understand this with the fires strikes floods cutting the grain crop pushing intermodal volumes for next year pushing demand into next year.

Youre still targeting outpacing IP is maybe.

IP much larger negative from your point of view or maybe just talk about that that perspective, and then you mentioned, Doug you mentioned truck competition.

You had mentioned about rail is.

Peer rail is being measured on rail to rail competition.

On gains have you seen that step up in any fashion in this environment.

Hey, Ken.

As you know IP is a public number and it is it moves around a little bit it's still showing negative for the year as we add up the total volume expectations based on what we've what kind of what we've outlined to you we see ourselves Doug says coming in stronger than industrial production in any scenario.

So we're pretty we're pretty firm on that Doug.

The only thing I'll add into Ken is on the rail competition, we haven't really seen any market share loss with our customers at all both to rail or truck. So we are seeing obviously like I said some price pressure on the trucking side for short haul business, but outside of that all of our customers are very happy with our service and we continue to push product.

We've seen some temporary gains due to the port shutdown like moving potash to Saint John instead of it going to Vancouver, but thats about it.

Hello, guys.

Said, you did lose to truck given you could move it. So some volume was lost in that.

And that's also given the Portugal.

We lost some temporary business I'll say it like so we lost some temporary coal business and some going to Vancouver during the strike in Q2 Q3, sorry that will show up in Q3 business in Q2, we lost a little bit of lumber as mills were closed due to the fires and things like that that isn't recoverable.

Okay.

Alright, thank you.

Your next question comes from the line of Bundwall Korea with Desjardin capital markets. Please go ahead.

Okay.

Wondering if you could provide more detail given the lack of the serial charges.

Bruce what are you I assume that you will be facing a tough compare and very rapidly just in terms of the average length of haul for intermodal I thought that you work closer to 1600 miles.

1800 miles. So I was just curious how much of your intermodal is exposed to short all thank you.

And while the first part of your question got cut off could you repeat it.

Yes, just in terms of yield expectation for the balance of the year I was wondering what we should expect in terms of yield for the second half given that the exit serial charges.

<unk> be a boost anymore.

Okay. So for the accessorial charges, we have about $100 million plus headwind on that in Q2, and we expect that to continue through Q3 and Q4.

Alright, so thats part of the yield issue.

Questioning and on the short haul and on the short haul versus long haul. So you are right you have the huge numbers that on we actually have our most of our long haul business and that really big market, but we do move a bunch of short haul, but it's a small percentage of our business right. It's almost always long haul. So we do move traffic between Montreal and Toronto.

Toronto and markdown, so it's a little bit shorter haul that are coming off Vancouver going all the way to Toronto Montreal, Chicago, So that's where we are facing that price pressures in that short haul market.

Okay. Thanks for the color.

Yeah.

Your next question comes from the line of Tom <unk> with UBS.

Your line is open.

Yes, good afternoon.

Wanted to ask you about how we might think about.

Operating ratio and maybe inflation, how that would have an effect I think.

Transports are certainly dealt with inflation in the cost base and as the revenue slows down.

More challenging from a margin perspective, finding ways to offset that.

I know the Canadian dynamics, a little bit different than what we see from some of the U S companies, but how do you think about that.

It kind of profile for inflation as you look into 2024 with a little softer view and what you might be able to do to kind of stabilize the or.

On <unk>.

The year over year basis. Thank you.

Thanks, Tom Tracy listen.

We've been pretty clear that we see opportunity in our margins as we go forward over the longer term.

We see that a number of places we're not yet where we need to be from an operating efficiency perspective, we've made significant gains and we've handled some of the external events extremely well there is still more work to do there and we're excited about getting that debt.

Certainly we're standing behind our our pricing above inflation and prospective indesit is doing a great job at delivering that on the basis of a service that is providing him that's going to continue we do have the headwind on some of the storage and other charges that occurred last year, when the supply chain Scott pretty congested so.

We look forward you can see us improve our margin.

Right now, we're going to have a little bit of.

The way to be a little bit lighter on operating margin, where the volumes are down, but we are positioned extremely well to get at a very low cost the upside when the volumes return. That's the model. That's how we're going to run it and Youll see us youll see that leverage pick up as the volumes come back.

So you think it's more.

Much more driven by volume than by price just in terms of when we might transition to seeing improvement.

Yes, absolutely.

Okay. Thank you.

Your next question comes from the line of <unk> Gupta with Scotiabank. Your line is open.

Thanks for taking my question.

Wanted to dig into the guidance.

If I can so what are some of the puts and takes explaining the gap between the top and bottom end of the EPS guidance range of flat to slightly negative and I'm not sure what the slightly negative mean, because it could that be a lower mid single digit decline.

So thanks <unk>. So what explains the gap between flat to negative is really volume so when one scenario.

Get a little bit more volume.

And then we expected and in the slightly negative slightly negative.

Then we get less volume in.

In the second half of the year than than what we expected. So it's really a volume story.

Your next question comes from the line of Amit Malhotra with Deutsche Bank.

Your line is open thanks, operator, hi, everyone. Good afternoon.

I guess I wanted to stress test the 10% to 15% earnings growth framework I guess for next year.

You guys are operating pretty well, if I look at the cost structure and you're responding at Lee.

In terms of what you can control pretty well.

I'm just trying to understand if we're kind of in this.

Lackluster volume environment, you've got headwinds on Grand you've got headwinds on forest products next year.

<unk> also got on the other hand, a lot of volume opportunity that you outlined at Investor day.

I mean, what's the likelihood that we're sitting here 12 months from now and it's still weak environment in <unk>.

<unk> is not growing or staying the same or do you feel like you have enough idiosyncratic volume opportunity, where you can kind of move the needle on EPS, how much how much do you need that's out of your control to get to that 10 to 15 next year.

So I welcome you to the dialogue around our table, if we knew for sure about what's going to happen from an economic perspective, we could narrow in on this pretty.

Pretty quickly. So it just has taken you through what we're modeling next year and as Doug from a volume perspective, Youre right. Our railroad is running extremely well and we're poised to capture the upside.

And since a lot of that to the bottom line as soon as it comes so we have a plan in place for next year. If it's wrong, then we will adjust the.

The growth initiatives that we put in front of you in Chicago are there that exists outside of the economic ebbs and flows and so Doug and Ed are continuing to work on actually knows them talk to you about a couple that are going to come in and we'll be moving volume prior to the end of the year and that plan remains intact. So that.

Is something that will move that.

More positively than whatever is going on in the economic environment at that time can you can you ring fence.

Yeah, sorry, just to clarify I admit as well that 10% to 15%. We said was over the three year period. So we did not specifically guide by by year. Obviously, we're looking at what's happening we're going to do our business plan with our board. This fall as we typically do and then we typically provide visibility.

Under you in January so so I want to clarify that the 10% to 15% was over the three year period.

Yes, just assumed it was linear because that would imply like 15% to 25% in the back half, but I understand what youre, saying. Thank you for taking the question.

Thanks.

Your next question comes from the line of Brian <unk> with Jpmorgan.

Please go ahead.

Hey, Thanks. Good afternoon question for Doug can you just walk through the assumptions for the Canadian greenhouses do you think that sufficiently de risked at this point given all the weather conditions that were seeing out there on some of the crop.

Conditions as well and also the.

You will screen forecast sequence that you raised.

Same sort of challenges out there.

That crop. So can you just give some puts and takes amongst levels went in opposite directions.

Sure sure Bryan so thanks for the question so with respect to the Canadian grain, obviously, you can't really count it until it's off the fields, but from everything we're seeing both from our customers crop forecast, which are very accurate, especially in Canada to the government forecast, we're seeing that roughly that 65 million metric ton number.

Right. So we're pretty confident in that now at this time of year, unless there's a big change in weather that really has a big impact on the crops.

It should come in very close right. So we're pretty confident on that crop on our network on Cn's network has more moisture. So we think we're actually fairly well set up to move things through up until Q2 next year and then we will only be able to determine that later with respect to the U S crop it started off as a very dry crop almost a <unk>.

Crop, we've seen significant amounts of rain on our network over the last four weeks, so that crop forecast on CN through Illinois, and Ohio has come up dramatically for us. So we're actually looking at a normal crop in the U S. Right now now things could still change it still has to come off the field as well, but the corn and soy.

These are actual have caught up almost to the average right now.

Okay.

Okay. Thanks, Doug.

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

Your line is open.

Oh, yes. Good afternoon. Thanks for the time just.

Just to follow up on the grain crop if I may.

It's obviously been dry in stressed as you indicated Doug.

Can tell yes.

Okay.

Very good thank you.

Your next question comes from the line of Justin long with Stephens. Please.

Please go ahead.

Thanks, and good afternoon, I wanted to ask about the lag impact from fuel that's getting baked into the guidance for the second half and how that compares to what you saw in the first half and then just to clarify on the volume guidance could you share the industrial production number to date.

You are using as a benchmark for this year.

The industrial the industrial production number is as you saw consensus came out.

A couple of days ago, and it was negative two so it's in that range and on the last question I think that we don't expect.

A lag.

If fuel prices remain the same we don't expect a lag.

In Q3.

And.

And neither in Q4 now on a year over year basis, if you look at Q3.

Had a positive lag last year of about <unk> 10 on a year over year basis that will be negative it will impact negatively.

Our year over year fuel lag in Q3 by about <unk>.

Okay, great. Thanks.

Your next question comes from the line of Brandon <unk> with Barclays.

Please go ahead.

Hi, Thanks for taking my question I guess.

To recap a couple of things here, Doug does the pricing hurdle or inflation hurdle remain mid single digits. Because I think you had implied about 5% looking at your longer term outlook, maybe even higher in 2023 do you think youre getting that outside of some of the markets that you called out and add it looks like your service metrics. This quarter were actually pretty decent despite some of those headwinds so.

Would you expect incremental efficiencies if you can get beyond some of these hurdles.

Absolutely.

When I said it was a tough quarter I meant it was a tough quarter the fires the.

The disruptions we had to deal with we are very well positioned going into third and remainder of third and fourth quarter head count power equipment.

We ought to be able to do even better than we did last year at the same time.

Okay.

Thank you.

Your next question comes from the line of Jon Chapell with Evercore.

Please go ahead.

Thank you good afternoon, just talking to a bunch of things together, Doug you laid out a pretty detailed bottoms up view of a lot of the growth opportunities that your customers are pursuing but now in the kind of more maybe uncertain macro backdrop, even youre looking at your Capex budget going forward have you seen any type of reluctance to move forward with.

The projects that you've laid out from the shipper community.

Both some of the temporary issues have intensified in the uncertainty has probably been elevated as well.

John not not to this time right. We've seen a lot of these projects are longer term big projects that customers looking at the immediate environment Theyre looking macro theyre looking two to three years out and we're working there with them. So you take an example, like a BHP potash mine as an example like <unk>.

Under construction, it's only going to come up in two or three years, we don't see them slowing down in fact, we're seeing them try to speed up. So there's lots of examples like that where people will try and take advantage of the market and the conditions and they are spending as much money if not more because there's more labor availability.

So each market is going to be different each opportunity, but we're working with everyone and we havent seen anyone slowdown to this point.

Great. Thanks, Doug.

This concludes the question and answer session I would like to turn the call back over to Tracy Robinson.

Thanks, Emma so an interesting quarter from an external events perspective, and I think we've managed it well and we're all looking for a.

A few less interesting quarters coming up but we will manage what comes at us.

Our plan, though is clear and it's not changing the discipline around building the plant running the plant is selling the plan is doing exactly what we wanted it to its working is delivering consistent reliable service for our customers and then making effective use of our assets and as we've talked today as our volumes lift we're going to see that operating leverage policy.

And we're ready we've got our eyes on the future.

Vance advancing our growth projects preparing for the rebound and doing exactly what we said we'd do back in May.

That being said as you've heard to date, we are reiterating our 2024 to 26 financial perspective of 10% to 15% diluted EPS CAGR that sell for now. Thank you very much for joining us today.

The conference call has now ended.

Thank you for your participation you.

You may disconnect your lines at this time.

Q2 2023 Canadian National Railway Co Earnings Call

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