Q3 2023 Canadian Pacific Kansas City Ltd Earnings Call

October 25, 2023

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Speaker 2: transcript

Speaker 2: The.

Operator: Good afternoon. My name is Travis, and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC's Q3 2023 Conference Call. The slides accompanying today's call are available at investor.cpkcr.com. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. I would now like to introduce Chris de Bruyn, Vice President, Capital Markets, to begin the conference. Please go ahead, sir.

Speaker 3: transcript

Speaker 3: Good afternoon. My name is Travis and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC's third quarter 2023 conference call. The slides accompanying today's call are available at investor.cpkcr.com.

Good afternoon. My name is Travis and I will be your conference operator today at this time I would like to welcome everyone to see PK six third quarter 2023 conference call.

Accompanying today's call are available at investors that see PK see our dot com all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star.

Speaker 3: transcript

Speaker 3: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two.

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Speaker 3: transcript

Speaker 3: I would now like to introduce Chris DeBruin, Vice President Capital Markets, to begin the conference.

I would now like to introduce Chris The Berlin, Vice President capital markets to begin the conference. Please go ahead Sir.

Chris de Bruyn: Thank you, Travis. Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on slide two, in the press release, and in the MD&A filed with Canadian and US regulators. This presentation also contains non-GAAP measures outlined on slide three. Please note, in addition to our regular quarterly financials, there is supplemental Q3 combined revenue and operating performance data available at investor.cpkcr.com, which some of today's discussion will focus on. With me here today is Keith Creel, President and Chief Executive Officer; Nadeem Velani, our Executive Vice President and Chief Financial Officer; John Brooks, our Executive Vice President and Chief Marketing Officer; and Mark Redd, our Executive Vice President and Chief Operating Officer.

Thank you Travis.

Speaker 4: transcript

Speaker 4: Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described on slide 2 in the press release and in the MD&A filed with Canadian and U.S. regulators.

Afternoon, everyone and thank you for joining us today before we begin I want to remind you. This presentation contains forward looking information.

Actual results may differ materially.

The risks uncertainties and other factors that could influence actual results are described on slide two in the press release and in the MD&A filed with Canadian and U S. Regulators. This presentation also contains non-GAAP measures outlined on slide three.

Speaker 4: transcript

Speaker 4: This presentation also contains non-GAAP measures outlined on slide 3. Please note, in addition to our regular quarterly financials, there is supplemental Q3 combined revenue and operating performance data available at investor.cpkcr.com, which some of today's discussion will focus on.

Please note in addition to our regular quarterly financials. There is supplemental Q3 combined revenue and operating performance data available at Investor <unk> Dot Com, which some of today's discussion will focus off with.

Speaker 4: transcript

Speaker 4: With me here today is Keith Creole, Chief Executive Officer, Nizim Belani, our Executive Vice President and Chief Financial Officer, John Brooks, our Executive Vice President and Chief Marketing Officer, and Mark Red, our Executive Vice President and Chief Operating Officer.

With me here today is Keith Creel.

Chief Executive Officer.

<unk>, our executive Vice President and Chief Financial Officer, John Brooks, Our executive Vice President and Chief Marketing Officer, and Margaret Our Executive Vice President and Chief operating officer. The formal remarks will be followed by Q&A and the interest of time, we would appreciate if you limit your questions to one.

Chris de Bruyn: The formal remarks will be followed by Q&A. In the interest of time, we'd appreciate if you limit your questions to one. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel.

Speaker 4: transcript

Speaker 4: The formal remarks will be followed by Q&A. In the interest of time, we'd appreciate if you limit your questions to one.

Speaker 5: transcript

Speaker 5: It is now my pleasure to introduce our President and CEO , Mr. Keith Creel. All right, thanks, Chris. Let me start by thanking the CPKC family of 20,000 railroaders across our three great nations.

It is now my pleasure to introduce our president and CEO, Mr. Keith Creel, Alright, Thanks, Chris Let me start by thanking the CDK family of 20000 railroad is across our three great Nations <unk>.

Keith Creel: All right. Thanks, Chris. Let me start by thanking the CPKC family of 20,000 railroaders across our three great nations, who've been hard at work providing service for our customers. The effort and passion they demonstrate each day as we integrate and execute is truly commendable. Let's take a look at the results of the quarter. Q2 produced revenues of CAD 3.3 billion on volumes that were down 3% versus last year, with an operating ratio of 61.7 and core EPS of CAD 0.92. No doubt, a challenging quarter, as we dealt with a softer demand environment and supply chain impacts from the strike at the Port of Vancouver. We'll let John talk more about that in a few minutes.

Speaker 5: transcript

Speaker 5: We've been hard at work providing service for our customers. The effort and passion they demonstrated each day as we integrate and execute is truly commendable. So let's take a look at the results of the quarter. The second quarter produced revenues of $3.3 billion on volumes that were down 3% versus last year with an operating ratio of 61.7 and core EPS of $0.92.

<unk> been hard at work, providing service for our customers the effort and passion they demonstrate each day as we integrate and execute is truly commendable. So let's take a look at the results for the quarter. The second quarter produced revenues of $3 3 billion on volumes that were down 3% versus last year with an operating ratio of $61 seven core PFS.

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Speaker 5: transcript

Speaker 5: So no doubt of challenging quarters, we dealt with the softer demand environment and subluching impacts from the strike at the Port of Vancouver. The little ed John talked more about that in a few minutes. As you've seen in the press release, giving a more challenging environment, further stress by the labor strike, we're adjusting our 23-gottens accordingly.

So no doubt a challenging quarters, we dealt with a softer demand environment and supply chain impacts from the strike at the port of Vancouver, but I'll, let John talk more about that in a few minutes as you've seen in the press release, given a more challenging environment further stressed by the labor strike for adjusting our 'twenty three guidance accordingly.

Keith Creel: As you've seen in the press release, given a more challenging environment, further stressed by the labor strike, we're adjusting our 2023 guidance accordingly. It's certainly not the outcome we had planned, but it's the prudent thing to do at this point. That said, it's not the challenges that define us, but rather how we respond, and I'm very proud of how this team, our collective CPKC family, is responding to the challenges. Let me say a few things about the Mexico task force. That's an excellent case in point to how we respond in the task force. You'll recall back in our Q2 call, we talked about an enhanced focus on operations in Mexico. Shortly after that, we deployed a task force to Mexico that was led by John Orr.

Speaker 5: transcript

Speaker 5: Certainly not the outcome we had planned, but it's the prudent thing to do at this point.

Certainly not the outcome, we plan, but its the prudent thing to do at this point.

Speaker 5: transcript

Speaker 5: That said, it's not the challenges that define us with whether how we respond. And I'm very proud of how this team a collective CP KC families are responding to the challenges.

That said, it's not the challenges that define us, but rather how we respond and I am very proud of how this team collective CP Casey families responding to the challenges, let's say a few things about the Mexico tax task Force Thats, an excellent case in point to how we respond and the task force you'll recall back in our second quarter call you talked about and.

Speaker 5: transcript

Speaker 5: We'll say a few things about the Mexico Task Force. That's an excellent case in point to how we respond in the Task Force. You'll recall back in our second quarter call.

Speaker 5: transcript

Speaker 5: We talked about enhanced focus on operations in Mexico. Shortly after that, we deployed a task force to Mexico that was led by John Orr. John , who many of you are familiar with, has a lot of experience in Mexico from his previous role as EVP officer for KCS and KCSM.

Focus on operations in Mexico. Shortly after that we deployed a task force to Mexico that was led by John <unk>.

Keith Creel: John, who many of you are familiar with, has a lot of experience in Mexico from his previous role as EVP Ops for KCS and KCSM. I can tell you this effort was monumental. It brought together railroaders from every part of the organization. Nearly 100 employees across information services, network services, marketing, engineering, mechanical, and many others came together to support John and the task force objectives. We're seeing the results from that effort. You can see noticeable progress across all the operating metrics, train speed improvements, terminal dwell reduction, car miles per car day improving, locomotive productivity improving, and ultimately, the most important part, the service experience for the customer. This transformation is ongoing, and the investment in people, process, infrastructure, and technology in our Mexican operations, as well as our US and Canadian operations, is a continual journey.

John who many of you are familiar with is a lot of experience in Mexico from his previous role as EVP of <unk> and I can tell you. This effort was monumental brought together railroad is from every part of the organization nearly 100 employees across information services network services marketing engineering mechanical and many others.

Speaker 5: transcript

Speaker 5: And I can tell you this effort was monumental. It brought together railroaders from every part of the organization.

Speaker 5: transcript

Speaker 5: nearly 100 employees across information services, network services, marketing, engineering, mechanical.

Speaker 5: transcript

Speaker 5: and many others came together to support John and the task force.

Came together to support John on the Task Force.

Speaker 5: transcript

Speaker 5: objectives and we're seeing the results from that effort. You can see noticeable progress across all the operating metrics, terrain speed improvements, terminal dwell reduction, car miles per car day improving, locomotive productivity improving, and ultimately the most important part, the service experience.

<unk> and we're seeing the results from that effort, you've see noticeable progress across all the operating metrics train speed improvements terminal dwell reduction car miles per car day, improving locomotive productivity, improving and ultimately the most important part of the service experience.

Speaker 5: transcript

Speaker 5: for the customer. And this transformation is ongoing. And the investment in people, process, infrastructure, and technology in our Mexican operations, as well as our U.S. and Canadian operations is a continuing priority.

So the customer and this transformation is ongoing and the investment in people process infrastructure the technology in our Mexican operations as well as our.

The U S and Canadian operations as a continual journey on.

Keith Creel: On the safety front, we've continued to rise to the challenge from a safety perspective. Mark will speak to some of this in more detail in a moment. I can tell on a combined basis, we've seen year-to-date improvement in FRA personal injuries of 12%, FRA train accident frequency of 37%, which is a tremendous result that I want to commend the entire team on as we continue to lead the industry in this space. Safety is a never-ending journey, and it continues and will always be our number one priority. A few comments on the integration. On the integration front, integrating these two companies obviously is a challenge in and of itself, particularly so in today's world, with an industry with a history of merger-related service challenges. We've certainly not been perfect. There are opportunities to improve that we're mining every day, 24/7.

Speaker 5: transcript

Speaker 5: On the safety front, we've continued to rise to the challenge from a safety perspective. Mark will speak to some of this in more detail in a moment, but I can tell on a combined basis we've seen year-to-day improvement in FRA personal injuries of 12 percent, FRA train accident frequency of 37 percent, which is a tremendous result that I want to commend the entire team on as we continue to lead the industry in this space.

On the safety front, we've continued to rise to the challenge from a safety perspective, Mark will speak to some of this in more detail in a moment, but I can tell on a combined basis, we've seen year to date improvement in FRE personal injuries of 12% for our train accident frequency at 37%, which is a tremendous result, and I want to commend the entire team on.

As we continue to lead the industry in this space safety is a never ending journey continues and will always be our number one priority.

Speaker 5: transcript

Speaker 5: Safety is a never-ending journey and it continues and will always be our number one priority.

Speaker 5: transcript

Speaker 5: Few comments on integration on the integration front, integrating these two companies, obviously, is a challenge in and of itself, particularly so in today's world.

A few comments on the integration on the integration front integrating these two companies obviously is a challenge in and of itself, particularly so in today's world with an industry with a history of merger related service challenges, we certainly not been perfect. There are opportunities to improve that that we're mining every day 24, seven but the teams from the legacy.

Speaker 5: transcript

Speaker 5: with an industry with a history of merger-related service challenges. We've certainly not been perfect. There are opportunities to improve that, that we're mining every day, 24-7, but the teams from the Legacy CP and Legacy KCS have embraced the challenge, they've united, working together to produce a unique outcome that will benefit our customers, our communities, and each other.

Keith Creel: The teams from the legacy CP and legacy KCS have embraced the challenge. They've united, working together to produce a unique outcome that will benefit our customers, our communities, and each other. A couple points on the MNBR. While we continue to make progress integrating these two railroads, we also continue to progress the MNBR transaction that we announced in June. Pleased to announce that we filed our application for the deal with the STB on 6 October. In closing, we're a little over 6 months into this combination, into our forever story. There's no doubt there's a few near-term challenges from a softer demand environment. Regardless, the differentiated growth opportunities we've laid out and guided to remain unchanged. We're successfully integrating this network. We maintained our commitments to our customers, to the regulators, and we're seeing momentum in our operating performance.

<unk> and legacy <unk> have embraced the challenge that United working together to produce unique outcome that will benefit our customers our communities and each other.

Points.

Speaker 5: transcript

Speaker 5: MNBR, while we continue to make progress integrating these two railroads, we also continue to progress.

Tim MBR, while we continue to make progress integrating these two railroads. We also continued to progress.

Speaker 5: transcript

Speaker 5: the MNBR transaction that we announced in June . Pleased to announce that we filed our application for the deal with the SDB on October 6.

Dr transaction that we announced in June please to announce that we filed our application.

The deal with the STB on October six.

Speaker 5: transcript

Speaker 5: So, in closing, we're a little over six months into this combination, into our forever story. There's no doubt there's a few near-term challenges from a softer demand environment, regardless of the differentiated growth opportunities we've laid out and guided to remain unchanged. We're successfully integrating this network, we've maintained our commitments to our customers, to the regulators, and we're seeing momentum in our operating performance.

So in closing, we're a little over six months and this combination into our forever story.

Theres no doubt Theres, a few near term challenges from a softer demand environment, regardless of the differentiated growth opportunities, we laid out and guided to remain unchanged. We're successfully integrating this network, we maintained our commitments to our customers to the regulators and we're seeing momentum in our operating performance.

Keith Creel: With that said, I'm going to hand it over to Mark to speak to the operations before John brings some color on the markets, and Nadeem elaborates on the numbers.

Speaker 5: transcript

Speaker 5: So that's it. I'm going to hand it over to Mark to speak to the operations before John brings some colors in the markets and Nadine elaborates on the numbers.

With that said I'm going to hand, it over to mark to speak to the operations before John break some colors on the markets and they deem elaborates on the numbers.

Chris de Bruyn: Thank you, Keith, and good afternoon. I'd like to start by thanking the CPKC operating professionals for their tireless work and dedication to safety and operational excellence. The first six months of the merger has been both exciting and challenging. This team is up to the task, and they're delivering on their mandate to integrate the CP and the KCS network seamlessly while maintaining safety as CP's top priority. If we look at safety for the quarter, I'm pleased to report that we continue to build on industry-leading record. Our Q3 FRA reportable injuries improved by 35% to a point 0.97. Our train accident is reported improving 9% to 1.3. As I discussed on last quarter, stakeholder engagement is a core pillar of our safety performance.

Speaker 5: transcript

Speaker 5: Thank you, Keith. And good afternoon. I'd like to start by thanking the CPKC operating professionals for their tireless work and dedication to safety and operational excellence.

Thank you Keith and good afternoon, I'd like to start by thanking the CP Casey operating professionals tireless work and dedication to safety and operational excellence. The first six months of the merger has been both exciting and challenging.

Speaker 4: transcript

Speaker 4: The first six months of the merger has been both exciting and challenging. This team is up to the task and they're delivering on their mandate to integrate the CP and the KSEF network seamlessly. While maintaining safety as CP.

Does that do to task and they are delivering on their mandate to integrate the CP and the case, yes network seamlessly maintaining safety as Cp's top priority. So.

Keith Creel: Davis. So no doubt of challenging quarters. We dealt with the softer demand environment and subplotting impacts from the strike at the Port of Vancouver. The little Ed John talked more about that in a few minutes. As you've seen in the press release, giving a more challenging environment, further stress by the labor strike. We're adjusting our 23 goddess accordingly. Certainly not the outcome of the plan, but it's the prudent thing to do at this point.

Speaker 5: transcript

Speaker 5: So if we look at safety for the quarter, I'm pleased to report that we continue to build on industry-leading record, our Q3 FRA reportable injuries improved by 35% to a point 97, our train accident has reported improvement 9% to 1.3. As I discussed on last quarter,

So if you look at safety for the quarter I'm pleased to report that will be continuing to build an industry leading record our Q3, FRE reportable injuries improved by 35% to $1, 97% our train accident as reported.

Keith Creel: That said, it's not the challenges that define us with whether how we respond. And I'm very proud of how this team collected CP Casey families are responding to the challenges and say a few things about the Mexico task force. That's an excellent case in point to how we respond in the task force. You'll recall back in our second quarter call. We talked about an enhanced focus on operations in Mexico shortly after that.

<unk>, 9% to one three.

As I discussed on our last quarter.

Speaker 4: transcript

Speaker 4: stakeholder engagement as a core pillar of our safety performance. We regularly engage our employees, our union leadership, our regulators to help collaborate, safety best efforts in sure and alignment. Since day one, we have had two safety walk-about for CPKC leadership and partners directly engage with the field's employees across the property. Our safety walk-about is key to a strong, consistent safety coach.

Stakeholder engagement is a core pillar of our safety performance, we regularly engage our employees our union leadership, our regulators, who collaborate safety best efforts ensuring alignment since day, one we have had two safety walk about or.

Chris de Bruyn: We regularly engage our employees, our union, leadership, our regulators to collaborate safety best efforts, ensuring alignment. Since day one, we have held two safety walkabouts where CPKC leadership and partners directly engage with the field employees across the property. Our safety walkabouts are key to a strong, consistent safety culture. Now turning to the operating performance, I'll speak on the metrics from a comparison to CPKC with a combined, if the combination occurred in 2022. Locomotive productivity improved 4% versus Q3 last year. Average train speed and length declined 2% and 1% respectively, and average train weight was down 2%. As we focus and remain on our aligning operating practices across our network, we feel very good about the progress that we have made in H1.

PKC leadership and partners directly engage with the field employees across the property our safety walk about your key to a strong consistent safety culture.

Keith Creel: We deployed a task force to Mexico that was led by John or John, who many of you are familiar with has a lot of experience in Mexico from his previous role is the VP office of KCS and KCS M. And I can tell you this effort was monumental. It brought together roaders from every part of the organization. Nearly 100 employees across information services, network services, marketing, engineering, mechanical, and many others came together to support John and the task force.

Speaker 5: transcript

Speaker 5: Now turning to the operating performance, I'll speak on the metric from a comparison to CPKC with the combined, if the combination occurred in 2022. Local motor productivity improved 4% versus Q3 last year. Average trains be then declined 2% and 1% respect.

Now turning to the operating performance I'll speak speak on the metrics from a comparison to CP Casey with a combined.

The combination that occurred in 2022 locomotive productivity improved 4% versus Q3 last year.

Average train speed and links declined 2% and 1% respectively.

Keith Creel: Object is and we're seeing the results from that effort. You've seen noticeable progress across all the operating metrics, terrain speed improvements from real dwell reduction, car miles per car, day improving, locomotive productivity, improving and ultimately the most important part, the service experience for the customer and this transformation is ongoing and the investment in people process infrastructure and technology in our Mexican operations, as well as our US and Canadian operations as a continual journey on the safety front.

Speaker 4: transcript

Speaker 4: and the average train weight was down 2%. As we focus and remain on our aligning operating practices across our network, we feel very good about the progress that we have made in the first six months. We're optimizing our train concepts to improve locomotive productivity and fuel efficiency.

And average train weight was down 2% as we focus will remain on our aligning operating practices across our network with no very good about the progress we have made in the first six months, we're optimizing our train concepts improved locomotive productivity and fuel efficiency to that fuel efficiency improved sequentially.

Chris de Bruyn: We're optimizing our train consists to improve locomotive productivity and fuel efficiency. To that, fuel efficiency improved substantially, Q2 to Q3, and I expect that to continue in the area for opportunity and as we look forward. If we look at where we sit today, network-wide dwell has improved 13% since the beginning of Q3. We have further to go, but the metrics across the board, locomotive productivity, car miles per car day, and dwell are all moving in the right direction. We feel confident that these gains are sustainable. If we look at our capital projects for the year, our construction of the second span of the Laredo Bridge is 35% complete. We remain on target operationally and should be in by the end of 2024.

Speaker 5: transcript

Speaker 5: to that fuel efficiency approves the Q2 and Q3, and I expect that to continue in the area for opportunity as we look forward.

Q2, Q3, and I expect that to continue in the area for opportunity.

As we look forward.

Speaker 5: transcript

Speaker 5: So if we look at where we sit today, network-wide dwell has improved 13% since the beginning of the third quarter. We have further to go, but the metrics across the board, locomotive productivity, car miles per car day, and dwell are all moving in the right direction. We feel confident that these gains are sustainable.

So if you look at where we sit today network, while dwell has improved 13% since the beginning of third quarter. We have further to go but the metrics across the board locomotive productivity Carmack car miles per car day.

Keith Creel: We've continued the rise of the challenge from a safety perspective. Mark will speak to some of this in more detail in a moment, but I can tell in a combined basis. We've seen here today improvement in FRA for so injuries of 12 percent. FRA train accident frequency of 37 percent, which is a tremendous result that I want to commit the entire team on as we continue to lead the industry in the space. Safety is a never ending journey and it continues and will always be our number one priority.

Dwell are all moving in the right direction, we feel confident that these gains are sustainable.

Speaker 6: transcript

Speaker 6: If we look at our capital projects for the year, construction in the second span of the Laredo Bridge is 35% complete. We remain on target operationally, should be in by the end of 2024. If we look at our $275 merger capital commitment we've made, we have put in service two of the five sidings. We look for the next three sidings to be in service within three months.

We look at our capital projects for the year, our construction in the second span of the Laredo Bridge is 35% complete we remain on target operationally should begin by the end of 2024, if we look at our 275 on our merger capital commitment. We've made we are put in service two of the five sidings we look for the next.

Chris de Bruyn: If we look at our $275 merger capital commitment we've made, we have put in service two of the five sidings. We look for the next three sidings to be in service within three months. In closing, when we look at the early stages of the journey as a combined company, I'm very confident in the actions and in taking the development, the network, and alignment operations. The story will continue to have continuous improvement, and my team will be laser focused on delivering strong results. With that, I'll turn it over to John.

Unknown Executive: A few comments on integration. On the integration front, integrating these two companies obviously is the challenge in and of itself, particularly so in today's world with an industry with a history of merger related service challenges. We certainly not been perfect. There are opportunities to improve that that we're mining every day, 24 or 7. But the teams from the legacy CP and legacy KCS have embraced the challenge. They've united working together to produce a unique outcome that will benefit our customers, our communities, and each other. A couple of points on the MNBR, while we continue to make progress integrating these two railroads, we also continue to progress the MNBR transaction that we announced in June.

Three signings to be within service within three months.

Speaker 6: transcript

Speaker 6: As we, in closing, when we look at the early stages of the journey as a combined company, I'm very confident in the actions and taking the development of the network and alignment operations. This story will continue to have continuous improvement, and my team will be laser-focused on delivering strong results. With that, I'll turn it over to John . All right. Thank you, Mark, and good afternoon, everyone.

In closing when we look at the early stages of the journey as a combined company I am very confident in the actions and the.

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Taken the development of network operations. This will the story will continue to work continue to have continuous improvement and my team will be laser focused on delivering strong results with that I'll turn it over to John Alright, Thank you Mark and good afternoon, everyone.

John Brooks: All right. Thank you, Mark, and good afternoon, everyone. As Keith said, we're just over half a year in as CPKC, and I want to say that I'm excited as ever about the unique opportunities that this franchise has to offer our customers. While it's certainly been a more challenging quarter than I expected, nothing that we've seen diminishes any of the exciting growth opportunities that we've guided to over the long term. My team has been hard at work at creating new markets, capturing new business, and I'm extremely proud of what we've accomplished to date despite this challenging economic backdrop. CPKC's unique footprint and our self-help initiatives are differentiators in this marketplace, and we are extremely well positioned as the volume environment rebounds. Now as I look to the Q3 results.

Speaker 6: transcript

Speaker 6: So as Keith said, we're just over a half a year in as CPKC, and I want to say that I'm as excited as ever about the unique opportunities that this franchise has to offer our customers. While it's certainly been a more challenging quarter than I expected, nothing that we've seen diminishes any of the exciting growth opportunities that we've guided to over the long term.

So as Keith said, we're over just over half of the year as CP KC and I want to say that I'm very excited as ever about the unique opportunities that this franchise has to offer our customers. While it's certainly been a more challenging quarter than I expected nothing that we've seen this miniatures any of the exciting growth.

Unknown Executive: Please announce that we filed our application for the deal with the STB on October 6. So in closing, we're a little over six months of this combination into our forever story. There's no doubt there's a few near term challenges from the softer demand environment. Regardless, the differentiated growth opportunities we've laid out and got it to remain unchanged. We're successfully integrating this network. We've maintained our commitments to our customers, to the regulators, and we're seeing momentum in our operating performance.

The opportunities that we've guided to over the long term.

Speaker 6: transcript

Speaker 6: My team has been hard at work at creating new markets, capturing new business, and I'm extremely proud of what we've accomplished today, despite this challenging economic backdrop. CPKP's unique footprint and our self-help initiatives are differentiators in this marketplace, and we are extremely well-positioned as the volume environment rebounds.

The team has been hard at work at creating new markets, capturing new business and Im extremely proud of what we've accomplished to date, despite the challenging economic backdrop, <unk> unique footprint and our self help initiatives initiatives. Our differentiators in this marketplace and we are extremely well.

Positioned as the volume environment rebounds.

Unknown Executive: So that's it.

Mark Redd: I'm going to hand it over to Mark to speak to the operations before John brings some colors in the markets and maybe elaborates on the numbers. Thank you Keith and a good afternoon. I'd like to start by thanking the CPKC operating professionals for their tireless work and dedication to safety and operational excellence. The first six months of the merger has been both exciting and challenging. This team is up to the task and they're delivering on their mandate to integrate the CP and the KCS network seamlessly while maintaining safety as CP's top priority.

Speaker 6: transcript

Speaker 6: Now as I look to the third quarter results, on a reported basis versus CP standalone in 2022, total revenues are up 44%, will volume to 31%.

Now as I look to the third quarter results on a reported basis versus CPE standalone in 2022.

John Brooks: On a reported basis versus CP standalone in 2022, total revenues were up 44%, while volumes were up 31%. On a combined basis, total revenue was down 4%, while volumes declined 3% versus pro forma CPKC a year ago. FX was a 3% tailwind, while fuel was a 6% headwind on the quarter. The pricing environment remains strong with inflation plus renewals across our book of business. Now taking a closer look at our Q3 revenue performance, I'll speak to the FX adjusted results on a comparison versus CPKC had the combination occurred in 2022. Starting with bulk, grain revenues were up 7% on 9% RTM growth. Canadian grain volumes were up 13% year over year, driven by the improved harvest lapping the drought-affected prior year.

Total revenues were up 44% while volumes were up 31% on.

Speaker 6: transcript

Speaker 6: On a combined basis, total revenue is down 4%, while volumes declined 3% versus pro-forma CPKC a year ago.

On a combined basis total revenue was down 4%, while volumes declined 3% versus pro forma CP Casey a year ago.

Mark Redd: So if we look at safety for the quarter, I'm pleased to report that we continue to build on industry-leading record, our Q3 FRA reportable injuries improved by 35% to a 0.97, our train accident has reported improvement 9% to 1.3. As I've discussed in the last quarter, stakeholder engagement as a core pillar of our safety performance, we regularly engage our employees, our union leadership, our regulators to help collaborate, safety best efforts in sure alignment.

Speaker 6: transcript

Speaker 6: FX was a 3% tailwind while fuel was a 6% headwind on the quarter. The pricing environment remains strong with inflation plus renewals across our book of business.

FX was a 3% tailwind while fuel was a 6% headwind on the quarter.

The pricing environment remained strong with inflation plus renewals across our book of business.

Speaker 6: transcript

Speaker 6: Now taking a closer look at our third quarter revenue performance, I'll speak to the FX adjusted results on a comparison versus CPKC had the combination occurred in 2022.

Now taking a closer look at our third quarter revenue performance I will speak to the FX. Adjusted result on a comparison versus CP Casey had the combination occurred in 2022.

Speaker 6: transcript

Speaker 6: Starting with bulk, grain revenues are up 7% on 9% RTM growth. Canadian grain volumes are up 13% year over year driven by the improved harvest, laughing the drought affected prior year. US grain volumes are up 6%, as this year's harvest has been solid in our service paratory, and we are getting spreading from our expanded destination market reach.

Starting with bulk grain revenues were up 7% on 9% RPM growth.

Mark Redd: Since day one, we have had two safety walkabouts for CPKC leadership and partners directly engage with the field employees across the property. Our safety walkabouts are key to a strong, consistent safety culture. Now turning to the operating performance, I'll speak on the metric from a comparison to CPKC with a combined, if the combination occurred in 2022, local motor productivity improved 4% versus Q3 last year. Average trains be then declined 2% and 1% respectively, and average train weight was down 2%.

Adrian grain volumes were up 13% year over year, driven by the improved harvest lapping the drought affected prior year U S. Grain volumes were up 6% as this year's harvest has been solid in our service territory and we are benefiting from our expanded destination market reach we can.

John Brooks: US grain volumes were up 6% as this year's harvest has been solid in our service territory, and we are benefiting from our expanded destination market reach. We continue to see new and unique grain flows emerge on the CPKC system. Customers are taking advantage of the opportunities to connect grain origination and destination in ways never available to them in the past. Now looking forward, projections for the current Canadian grain crop harvest have come down since our Q2 call. Our customers are now estimating the crop size to be in the 60 to 65 million metric tons range. Currently in Canada, we are seeing customer demand to start this crop year at levels below our resource planning, giving us available capacity to offset some of this headwind with shipments of US grain.

Speaker 6: transcript

Speaker 6: We continue to see new and unique grain flows emerge on the CPKP system. Customers are taking advantage of the opportunity to connect grain origination and destination in ways never available to them in the past.

Continue to see new and unique grain flows emerge on the CP JP system customers are taking advantage of the opportunities connect grain origination and destination in ways never available to them in the past.

Speaker 6: transcript

Speaker 6: Now looking forward, projections for the current Canadian grain crop harvest has come down since our Q2 call. Our customers are now estimating crop size to be in the 60 to 65 million metric ton range. Curtain Canada, we are seeing customer demand to start this crop year as levels below our resource planning, giving us available capacity to offset some of this headwind with shipments of US grain.

Now looking forward projections for the current Canadian grain crop harvests has come down since our Q2 call. Our customers are now estimating the crop size to be in the 60% to 65 million metric tonne range.

Mark Redd: As we focus and remain on our aligning operating practices across our network, we feel very good about the progress that we have made in the first six months, we're optimizing our train consists and improve local motor productivity and fuel efficiency. To that fuel efficiency, it improves the comfort rate, Q2 and Q3, and I expect that to continue in the area for opportunity as we look forward. So if we look at where we sit today, network-wide dwell has improved 13% since the beginning of the third quarter.

Currently in Canada, we are seeing customer demand to start this crop year at levels below our resource planning, giving us available capacity to offset some of this headwind with shipments of U S grain.

John Brooks: As a reminder, the CPKC combination has further diversified our grain franchise, and the US grain markets now make up more than half of our grain revenues. On the potash front, revenues were down 22% on a 28% volume decline. Our potash volumes were impacted in the quarter by the strike at the Port of Vancouver and continued outage of Canpotex Portland terminal. To say this has been a challenging supply chain year for our export potash volumes with Canpotex is a true understatement. Now looking ahead, although we do not expect the Portland terminal to come back online before the end of the year, we do have a strong demand outlook for Q4, and we're working hard to maximize our volumes through all available terminals to build some momentum with Canpotex as we close out the year.

Speaker 6: transcript

Speaker 6: As a reminder, the CPKT combination has further diversified our grain franchise. In the U.S. grain markets now make up more than half of our grain revenue.

As a reminder, the CPE Casey combination has further diversified our grain franchise in the U S grain markets now make up more than half of our grain revenues.

Mark Redd: We have further to go, but the metrics across the board, local motor productivity, car miles per car day, and dwell are all moving in the right direction. We feel confident that these gains are sustainable. If we look at our capital projects for the year, a construction of the second span of the laureate of bridge is 35% complete. We remain on target operationally should be in by the end of 2024. If we look at our 275 on our merger capital commitment, we've made, we have put in service two of the five sightings.

Speaker 6: transcript

Speaker 6: On the potash front, revenues were down 22% on a 28% volume decline.

On the potash front revenues were down 22% on a 28% volume decline.

Speaker 6: transcript

Speaker 6: Our potash volumes were impacted in the quarter by the strike at the Port of Vancouver and continued outage of Camp Protect's Portland terminal.

Our potash volumes were impacted in the quarter by the strike at the port of Vancouver.

Continued outage of Canpotex Portland terminal.

Speaker 6: transcript

Speaker 6: To say this has been a challenging supply chain year for our export potash lines with Campotex is a true understatement. Now looking ahead, although we do not expect the Portland terminal to come back online before the end of the year, we do have a strong demand outlook for Q4 and we're working hard to maximize our volumes through all available terminals to build some momentum with Campotex as we close out the year.

This has been a challenging supply chain year for our export potash volumes with Canpotex is a true understatement.

Now looking ahead, although we do not expect the Portland terminal to come back online before the end of the year. We do have a strong demand outlook for Q4, and we're working hard to maximize our volumes through all available terminals to build some momentum with canpotex as we close out the year.

Mark Redd: We look for the next three sightings to be within service within three months. As we, in closing, when we look at the early stages of the journey as a combined company, I'm very confident in the actions and in the taking the development of network and alignment operations.

Mark Redd: The story will continue to have continuous improvement, and my team will be laser focused on delivery strong results.

John Brooks: To finish out on our bulk business, coal revenue was flat on 7% volume growth. With favorable compares in Q4 following last year's outage of Teck Elkview Mine and higher met coal prices as we sit here today, I see a very strong growth in coal as we finish out the rest of this year. Now moving on to merchandise. The Energy, Chemicals & Plastics portfolio saw a 3% decline in revenue on a 5% decline in volumes. Lower volumes were driven by a decrease in crude business as a result of a facility maintenance, and less demand in LPG. However, this was partially offset by growth in our refined fuels, including new business with Shell that began in August and continues to ramp up. Plastics growth out of Canada into the US and all the way down into Mexico.

Speaker 6: transcript

Speaker 6: And to finish out on our bulk business, coal revenue was flat on 7% volume growth. With favorable compares in Q4 following last year's outage of text LVMines and higher met coal prices as we sit here today, I see a strong, a very strong growth in coal as we finish out the rest of this year.

And to finish out on our bulk business coal revenue looks flat on 7% volume growth with favorable compares in Q4 following last year's outage of tax <unk> mined and higher met coal prices as we sit here today I see a strong a very strong growth in coal as we finish out the rest of this year.

John Brooks: With that, I'll turn it over to John. All right. Thank you, Mark, and good afternoon, everyone. So as Keith said, we're over just over a half a year in a CPKC, and I want to say that I'm excited as ever about the unique opportunities that this franchise has to offer our customers. Well, it's certainly been a more challenging quarter than I expected. Nothing that we've seen just manages any of the exciting growth opportunities that we've guided to over the long term.

Here.

Speaker 6: transcript

Speaker 6: Now moving on to merchandise, the energy chemicals are plastic for folio. So 3% decline in revenue and a 5% decline in volume.

Now moving on to merchandise the energy chemicals, and plastics portfolio saw a 3% decline in revenue on a 5% decline in volumes lower volumes were driven by a decrease in crude business as a result of our facility maintenance and less demand in LPG.

Speaker 6: transcript

Speaker 6: Lower volumes were driven by a decrease in crude business as a result of a facility maintenance and less demand in LPG. However, this was partially offset by growth in our refined fuels, including new business with shell that began in August and continues to ramp up. And plastics grow.

John Brooks: My team has been hard at work at creating new markets, capturing new business, and I'm extremely proud of what we've accomplished today, despite this challenging economic backdrop. CP KP's unique footprint in our self-help initiatives are differentiators in this marketplace, and we are extremely well positioned as the volume environment rebounds. Now as I look to the third quarter results on a reported basis versus CP standalone in 2022, total revenues are up 44% will volume to up 31%.

However, this was partially offset by growth in our refined fuels, including new business with shell that began in August and continues to ramp up and plastics growth out of Canada into the U S and all the way down into Mexico now as we move into the fourth quarter I expect positive RPM growth in energy chemicals <unk>.

Speaker 6: transcript

Speaker 6: out of Canada into the U.S. and all the way down into Mexico. Now, as we move into the fourth quarter, I expect positive RTM growth in energy chemicals plastics, driven by continued strength and refined fuels as Shell continues to ramp up and we onboard new share wins.

John Brooks: Now as we move into Q4, I expect positive RTM growth in Energy, Chemicals & Plastics, driven by continued strength in refined fuels as Shell continues to ramp up and we onboard new share wins. Forest Products revenues declined 6% on a 4% decline in volumes. While we are seeing the impact of a softer economy and slower housing markets, we are very encouraged about the quick development of long-haul forest product shipments from Canada down to our southern markets. The combination of our seamless route to market and the development of our transload network will position us well to capture synergies in this market as it rebounds. The Metals, Minerals and Consumer Products portfolio was up 2% on a 1% decline in volumes. Performance in this space was mixed as consumer products and frac sand were down, but metals continued to have a strong performance.

<unk> driven by continued strength in refined fuels as shell continues to ramp up and we onboard new share wins.

Forest products revenues declined 6% on a 4% decline in volumes, while we are seeing the impact of a softer economy and slower housing market. We are very encouraged about the quick development of long haul forest product shipments from Canada down to our southern markets.

Speaker 6: transcript

Speaker 6: For-products revenues declined 6% on a 4% decline in volumes. Well, we are seeing the impact of a softer economy and slower housing markets. We are very encouraged about the quick development of long-haul for-product shipments from Canada down to our southern markets.

John Brooks: On a combined basis, total revenue of down 4%, will volume decline 3%, versus pro forma CPKC a year ago. FX was a 3% tailwind, while fuel was a 6% headwind on the quarter. The pricing environment remains strong with inflation plus renewals across our book of business. Now taking a closer look at our third quarter revenue performance, I'll speak to the FX adjusted results on a comparison versus CPKC had the combination occurred in 2022.

Speaker 6: transcript

Speaker 6: The combination of our seamless route to market and the development of our Translow Network will position us well capture synergies in this market as it revounds.

The combination of our seamless route to market and the development of our trans load network will position us well to capture synergies in this market as it rebounds.

Speaker 6: transcript

Speaker 6: The metal minerals and consumers product portfolio was up 2% on a 1% decline in volume.

The metals minerals and consumers products portfolio was up 2% on a 1% decline in volumes.

Speaker 6: transcript

Speaker 6: Performance in this space was mixed as consumer products and track fans were down, but metals continued to have a strong performance.

Performance in this space was mixed as consumer products and Frac sand were down but metals continue to have a strong performance.

John Brooks: Starting with bulk, grain revenues are up 7% on 9% RTM growth. Canadian grain volumes are up 13% year over year driven by the improved harvest, laughing the drought affected prior year. US grain volumes are up 6%, as this year's harvest has been solid in our service territory, and we are getting spreading from our expanded destination market reach. We continue to see new and unique grain flows emerge on the CPKC system. Customers are taking advantage of the opportunities to connect grain, origination, and destination in ways never available to them in the past.

John Brooks: We are particularly encouraged by continued growth from the Mexico steel space. Production is ramping up to support strong demand for the auto industry and for infrastructure construction projects, and CPKC's footprint in Mexico is uniquely positioned to service this growing market. Automotive revenues continued to be strong, up 21% on 11% volume growth, a record quarter. Demand for finished vehicles remains strong as the auto industry continues to be challenged with high finished vehicle ground counts exceeding available supply chain capacity to move these vehicles to market. We are working with many of the OEMs to create unique solutions to improve rail efficiencies that will increase capacity and help clear this inventory.

Speaker 6: transcript

Speaker 6: We are particularly encouraged, particularly encouraged, by continued growth from the Mexico steel space. Production is ramping up to support strong demand for the auto industry and for infrastructure construction projects. And CPCA's East footprint in Mexico is uniquely positioned to serve as this growing market.

We are particularly encouraged particularly encouraged by continued growth from the Mexico steel space production is ramping up to support strong demand for the auto industry and for infrastructure construction project in CP cadences footprint in Mexico.

<unk> positioned to service this growing market.

Speaker 6: transcript

Speaker 6: Automotive revenues continue to be strong, up 21% on 11% volume growth, a record quarter. Demand for finished vehicles remains strong as the auto industry continues to be challenged with high finished vehicle ground counts exceeding available supply chain capacity to move these vehicles to market.

Automotive revenue continued to be strong up 21% on 11% volume growth a record quarter.

<unk> for finished vehicles remained strong as the auto industry continues to be challenged with high finished vehicle ground counts exceeding available supply chain capacity to move these vehicles to market.

John Brooks: Now looking forward, projections for the current Canadian grain crop harvest has come down since our Q2 call. Our customers are now estimating crop size to be in the 60 to 65 million metric ton range. Currently in Canada, we are seeing customer demand to start this crop year at levels below our resource planning, giving us available capacity to offset some of this headwind with shipments of US grain. As a reminder, the CPKC combination has further diversified our grain franchise in the US grain markets now make up more than half of our grain revenues.

Speaker 6: transcript

Speaker 6: We are working with many of the OEMs to create unique solutions to improve rail efficiencies that will increase capacity and help clear this inventory.

We are working with many of the Oems to create unique solutions to improve rail and efficiencies that will increase capacity and help clear this inventory.

John Brooks: I'll note that as of now, we do not expect the auto strike to materially impact our business as we are focused on servicing the strong demand from our production facilities in Canada and in Mexico. Finally, on the intermodal side, revenue was down 19% on a 10% volume decline. Domestic intermodal volumes continued to be pressured by soft market demand, higher inventories, and competitive over-the-road rates. However, we remain extremely encouraged by the uptake of our new 181 cross-border service. The opportunity in the cross-border intermodal space is significant. Our service is consistent and truck-like, and we are in the earliest stages of developing this premium rail market. Moving over to the international intermodal area, volumes were challenged in the quarter by the Vancouver port strike and softer demand.

Speaker 6: transcript

Speaker 6: I'll note that as of now we do not expect the auto strike to materially impact our business as we are focused on servicing the strong demand from our production facilities in Canada and in Mexico.

I'll note that as of now we do not expect the auto strike to materially impact our business as we are focused on servicing the strong demand from our production facilities in Canada and in Mexico.

Speaker 6: transcript

Speaker 6: And finally, on the intermodal side, revenue was down 19% on a 10% volume decline. Domestic intermodal volumes continue to be pressured by soft market demand, higher inventories, and competitive over-the-road rates.

And finally on the intermodal side revenue was down 19% on a 10% volume decline domestic intermodal auto volumes continued to be pressured by soft market demand higher inventories and competitive over the road rates. However.

John Brooks: On the potash front, revenues were down 22% on a 28% volume decline. Our potash volumes were impacted in the quarter by the strike at the port of Vancouver and continued outage of Campus Tech's Portland terminal. To say this has been a challenging supply chain year for our export potash volumes with Campus Tech is a true understatement. Now looking ahead, although we do not expect the Portland terminal to come back online before the end of the year, we do have a strong demand outlook for Q4 and we're working hard to maximize our volumes through all available terminals to build some momentum with Campus Tech as we close out the year.

Speaker 6: transcript

Speaker 6: However, we remain extremely encouraged by the uptake of our new 181 cross-border service. The opportunity in the cross-border and a modal space is significant. Our service is consistent and truck-like, and we're in the early stages of developing this premium rail market.

However, we remain we remain extremely encouraged by the uptake of our new 180, 181 Cross border service.

The opportunity in the cross border intermodal space is significant our services consistent and truck like and we are in the earliest stages of developing this premium rail market.

Moving over to the international intermodal area volumes were challenged in the quarter by the Vancouver Port strike and soft softer demand.

Speaker 6: transcript

Speaker 6: Moving over to the international intermodal area, volumes were challenged in the quarter by the Vancouver port strike and softer demand.

John Brooks: Although we are excited as ever about this space, and we look to continue to expand our services out of the Port of Saint John and to grow Lázaro Cárdenas, we expect near-term headwinds as ocean carriers continue to blank sailings and right-size their capacity in reaction to the softer demand. In closing, certainly while we are not immune to the headwinds impacting the economy and certainly the entire rail and transportation sectors, we remain uniquely positioned to deliver long-term differentiated growth. This powerful combined franchise is creating new opportunities for our customers to grow, and our synergy gains and the opportunities ahead of us continue to exceed our expectations. With that, I'll now pass it over to Nadeem.

Speaker 6: transcript

Speaker 6: Although we are excited that ever about this space and we look to continue to expand our services out of the port of St. John and to grow Lazarus Cardinals, we expect near-turned-head winds as ocean carriers continue to blank failings and right-side their capacity in reaction to the softer demand.

Although we are excited as ever about this space and we will look to continue to expand our services out of the port of St John and to glow grow Lazar railcars.

John Brooks: To finish out on our bulk business, coal revenue was flat on 7% volume growth with favorable compares in Q4 following last year's outage of Tech's LVMine and higher met coal prices as we sit here today. I see a very strong growth in coal as we finish out the rest of this year. Now moving on to merchandise, the energy chemicals of plastics portfolio saw 3% decline in revenue on a 5% decline in volume.

We expect near term headwinds as ocean carriers continue to blank sailings and rightsize their capacity in reaction to the strong software demand.

Speaker 6: transcript

Speaker 6: In closing, so certainly while we are not immune to the headwinds impacting the economy and certainly the entire rail and transportation sectors, we remain uniquely positioned to deliver long-term differentiated growth. This powerful combined franchise is creating new opportunities for our customers to grow and our synergy gains and the opportunities ahead of us continue to exceed our expectations.

In closing so certainly well if we are not immune to the headwinds impacting the economy and certainly the entire rail and transportation sectors. We remain uniquely positioned to deliver long term differentiated growth. This powerful combined franchise is creating new opportunities for our customers to.

John Brooks: Lower volumes were driven by a decrease in crew business as a result of a facility maintenance and less demand in LPG. However, this was partially offset by growth in our refined fuels, including new business with shell that began in August and continues to ramp up and plastics broke out of Canada into the US and all the way down into Mexico. Now as we move in the fourth quarter, I expect positive RPM growth in energy chemicals plastics driven by continued strength and refined fuels as shell continues to ramp up and we onboard new share wins.

Grow and our synergy gains and the opportunities ahead of us continue to exceed our expectations. So with that I'll now pass it over to Nadeem alright, Thanks, John and good afternoon.

Speaker 3: transcript

Speaker 3: So with that, I'll now pass it over to Nadine. All right. Thanks, John . And good afternoon. I would like to first thank the entire CPKC team for its hard work, focus, and resilience. This team of railroaders is making history, and I'm very pleased with their perseverance and dedication in the face of a more challenging operating and macro environment.

Nadeem Velani: All right. Thanks, John, and good afternoon. I would like to first thank the entire CPKC team for its hard work, focus, and resilience. This team of railroaders is making history, and I'm very pleased with their perseverance and dedication in the face of a more challenging operating and macro environment. Now looking at the quarter, CPKC's re-reported operating ratio was 64.9%, and the core adjusted combined operating ratio came in at 61.7%. Earnings per share was $0.84, and core adjusted combined earnings per share was $0.92. Results this quarter were impacted by the change in fuel price on both revenue and operating expenses. The impact of fuel price was a $95 million headwind to combined operating income. This includes a $72 million unfavorable lag effect on combined fuel revenue.

Like the first thank the entire CDK <unk> team for its hard work focus and resilience with FEMA Railroad railroader is making history and I'm very pleased with their perseverance and dedication in the face of a more challenging operating and macro environment.

John Brooks: For products revenues declined 6% on a 4% decline in volumes. Well, we're seeing the impact of a softer economy and slower housing markets. We are very encouraged about the quick development of long haul forth product shipments from Canada down to our southern markets. The combination of our seamless route to market and the development of our translow network will position us well capture synergies in this market as it rebounds. The metal minerals and consumers products portfolio was up 2% on a 1% decline in volumes.

Speaker 6: transcript

Speaker 6: Looking at the quarter, CBKC's reported operating ratio was 64.9 percent and the core adjusted combined operating ratio came in at 61.7 percent. Earnings per share was 84 cents and core adjusted combined earnings per share was 92 cents.

Now looking at the quarter CDK six reported operating ratio was 64, 9% and the core adjusted combined operating ratio came in at 61, 7%.

Earnings per share was 84% and core adjusted combined earnings per share was <unk> 92.

Speaker 6: transcript

Speaker 6: Results this quarter were impacted by the change in fuel price on both revenue and operating expenses. The impact of fuel price was a $95 million headwind to combined operating income.

Results this quarter were impacted by the change in fuel price on both revenue and operating expenses the impact of fuel price was $95 million headwind to combined operating income this.

Speaker 6: transcript

Speaker 6: This includes a $72 million unfavorable lag effect on combined fuel revenue. The $95 million impact to combined operating income translated to a 70 basis point and 8 cent headwind to core adjusted combined operating ratio and EPS respectively.

This includes a $72 million unfavorable lag effect on combined fuel revenue.

Nadeem Velani: The $95 million impact to combined operating income translated to a 70 basis point and $0.08 headwind to core adjusted combined operating ratio and EPS, respectively. Based on where fuel prices sit today, we expect the fuel price headwind from Q3 to be a slight tailwind in Q4. Now taking a closer look at our income statement, reported operating expenses provided on slide 14 and combined operating expense on slide 15. Similar to what we shared last quarter, our combined operating expense illustrates the estimated effects of the acquisition for the third quarter as if the acquisition closed on 1 January 2022. Reported comp and benefits expense was $598 million, down 4% on an FX adjusted basis when compared to combined comp and benefits expense a year ago.

John Brooks: Performance in this space was mixed as consumer products and fraction were down but metals continued to have a strong performance. We are particularly encouraged, particularly encouraged by continued growth from the Mexico field space. Production is ramping up to support strong demand for the auto industry and for an infrastructure construction project. In C.P.K.C. 's footprint in Mexico is uniquely positioned to serve as this growing market. Automotive revenues continued to be strong up 21% on 11% volume growth a record quarter.

The $95 million impact the combined operating income translated to a 70 basis point and <unk> <unk> headwind to core adjusted combined operating ratio and EPS respectively.

Speaker 6: transcript

Speaker 6: Based on where fuel prices sit today, we expect the fuel price headwind from Q3 to be a slight tailwind in Q4.

Just on where fuel prices sit today, we expect the fuel price headwind from Q3 to be a slight tailwind in Q4.

Speaker 6: transcript

Speaker 6: Now taking a closer look at our income statement, reported operating expenses provided on slide 14 and combined operating expense on slide 15.

Now taking a closer look at our income statement our reported operating expenses provided on slide 14, and combined operating expense on slide 15.

Speaker 5: transcript

Speaker 5: Similar to what we shared last quarter, our combined operating expense illustrated estimated effects of the acquisition for the service quarter, is that the acquisition closed on January 1, 2022.

Similar to what we shared last quarter, our combined operating expense illustrates the estimated effects of the acquisition for the third quarter and since the acquisition closed on January one 2022.

John Brooks: The man for finished vehicles remains strong as the auto industry continues to be challenged with high finished vehicle ground counts exceeding available supply chain capacity to move these vehicles to market. We are working with many of the OEMs to create unique solutions to improve rail efficiencies that will increase capacity and help clear this inventory. I'll note that as of now we did not expect the auto sprites to materially impact our business as we are focused on servicing the strong demand from our production facilities in Canada and in Mexico.

Speaker 6: transcript

Speaker 6: Afforded comp and benefits expense was $598 million, down 4% on an FX-adjusted basis when compared to combined comp and benefits expense a year ago. Driving the FX-adjusted decline was lower current service costs in the DB pension plan resulting from higher discount rates and lower stock-based compensation. That decline is partially offset by the current service costs.

Reported comp and benefits expense was 598 million down 4% on an FX adjusted basis, when compared to the combined comp and benefits expense a year ago.

Nadeem Velani: Driving the FX adjusted decline with lower current service costs in the DB pension plan, resulting from higher discount rates and lower stock-based compensation. That decline was partially offset by wage inflation. Headcount was down slightly sequentially in Q3. We expect headcount to be down sequentially again in Q4, which will continue to give us improved operating leverage as volumes accelerate into the end of the year. Fuel expense was down CAD 86 million or 21% on an FX adjusted basis when compared to combined fuel in Q3 2022. The decline was primarily driven by a CAD 93 million or 16% decline in combined fuel price, along with lower GTMs versus prior year. As I mentioned a moment ago, that reduction in fuel expense due to price was more than offset by a $188 million headwind from a decline in combined fuel surcharge revenue.

Driving the FX adjusted decline with lower current service costs in the DB pension plan, resulting from higher discount rates and lower stock based compensation.

That decline was partially offset by wage inflation.

Speaker 5: transcript

Speaker 5: Headcount was down slightly sequentially in Q3. We expect headcount to be down sequentially again in 4Q, which will continue to give us improved operating leverage as volumes accelerate into the end of the year.

Head count was down slightly sequentially in Q3, we expect head count to be down sequentially again in <unk>, which will continue to give us improved operating leverage as volumes accelerate into the end of the year.

John Brooks: And finally on the going to model side revenue was down 19% on a 10% volume decline. The domestic intermole total volumes continued to be pressured by soft market demand higher inventories and competitive over the road rates. However, we remained extremely encouraged by the uptake of our new 181 cross-border service. The opportunity in the cross-border intermodal space is significant. Our service is consistent and truck-like and we are in the early stages of developing this premium rail market.

Speaker 6: transcript

Speaker 6: Fuel expense was down 86 million or 21% on an FX-adjusted basis when compared to combined fuel in Q3 2022. The decline was primarily driven by a 93 million or 16% decline in combined fuel price along with lower GTM sources prior year. As I mentioned a moment ago, that reduction in fuel expense due to price was more than offset by a $188 million headwind from a decline in combined fuel search and reducing fuel damage to fuel usage.

Fuel expense was down $86 million or 21% on an FX adjusted basis, when compared to combined fuel in Q3 2022.

The decline was primarily driven by a $93 million or 16% decline in combined fuel price along with lower GTS versus prior year as.

As I mentioned, a moment ago that reduction in fuel expense due to prices more than offset by a $188 million headwind from a decline in combined fuel surcharge revenue.

Nadeem Velani: Combined materials expense was down 4% on an FX adjusted basis. The decline was largely driven by reduced locomotive maintenance material spend. Equipment rents were up CAD 24 million on a combined basis, or 34% on an FX adjusted basis. Equipment rents increased due to higher car hire payments resulting from automotive volume growth, lower use of CPKC intermodal equipment by other roads, and increased use of pooled equipment. Combined depreciation expense was up CAD 32 million, or an FX adjusted 6% resulting from a higher asset base. Combined purchase services and other was CAD 506 million, or roughly flat year over year on an FX adjusted basis. A business interruption insurance recovery in the quarter related to 2021 flooding and wildfires in British Columbia offset increased casualty expense, and cost inflation.

Speaker 5: transcript

Speaker 5: Combined materials expense was down 4% on an FX-adjusted basis. The decline was largely driven by reduced locomotive maintenance material spend.

Combined materials expense was down 4% on an FX suggested basis. The decline was largely largely driven by reduced locomotive maintenance material spend.

John Brooks: Moving over the international intermodal area volumes were challenged in the quarter by the Vancouver Port Strike and soft software demand. Although we are excited that ever about this space and we look to continue to expand our services out of the port of St. John and to grow Lazarus Cardinals. We expect near-turned-head winds as ocean carriers continue to blank failings and right-side their capacity in reaction to the Management. In closing, so certainly, well, we are not immune to the headwinds impacting the economy and certainly the entire rail and transportation sectors.

Speaker 6: transcript

Speaker 6: Equipment rents were up $24 million on a combined basis, or 34% on an FX-adjusted basis. Equipment rents increased due to higher car hire payments resulting from automotive volume growth, lower use of CPKC intermodal equipment by other roads, and increased use of pooled equipment.

Equipment rents were up $24 million on a combined basis or 34% on an FX suggested basis equipment rents increased due to higher car hire payments, resulting from automotive volume growth.

Lower use of CP Casey intermodal equipment by other roads and increased use of pooled equipment fleet.

Speaker 5: transcript

Speaker 5: Combined depreciation expense was up $32 million, or an FX adjusted 6%, resulting from a higher asset base.

Combined depreciation expense was up $32 million or foreign FX, adjusted 6%, resulting from a higher asset base.

Speaker 6: transcript

Speaker 6: Combined purchase services and other was $506 million, roughly flat year-over-year on an FX-adjusted basis.

Combined purchased services and other was $506 million were roughly flat year over year on an FX suggested basis.

John Brooks: We remain uniquely positioned to deliver long-term differentiated growth. This powerful combined franchise is creating new opportunities for our customers to grow, and our synergy gains and the opportunities ahead of us continue to exceed our expectations.

Speaker 6: transcript

Speaker 6: A business interruption insurance recovery in the quarter related to 2021 flooding and wildfires in British Columbia offset increased casualty expense and cost inflation.

Business interruption insurance recovery in the quarter related to 2021 flooding and the wildfires in British Columbia, offset increased casualty expense and cost inflation.

Nadeem Velani: Looking to Q4, I still expect PSS coming around CAD 530 million to close the year. Moving below the line, other components of net periodic benefit recovery decreased CAD 17 million, reflecting higher discount rates compared to 2022, and other expense was up CAD 6 million in Q3 on a reported basis. Net interest expense was CAD 207 million or CAD 202 million on an adjusted basis. The decline was driven by a reduced debt balance. On a combined basis, income tax expense was CAD 258 million. We now expect the CPKC core adjusted combined effective tax rate to be approximately 25% for the year, a reduction of 50 basis points from the outlook provided in Q2.

Speaker 6: transcript

Speaker 6: Looking to 4Q, I still expect PS&O to come in around $530 million to close the year.

Looking to the <unk> I still expect <unk> to come in around $530 million to close the year.

Nadeem Velani: So with that, I'll now pass it over to Nadeem. Thanks, John, and good afternoon. I would like to first thank the entire CBKC team for its hard work, focus, and resilience.

Speaker 6: transcript

Speaker 6: Moving below the line, other components of net periodic benefit recovery decreased $17 million, reflecting higher discount rates compared to 2022, and other expense was up $6 million in the third quarter on a reported basis.

Moving below the line other components of net periodic benefit recovery decreased $17 million, reflecting higher discount rates compared to 2022 and other expense was up $6 million in the third quarter on a reported basis.

Nadeem Velani: This team of rail roaders is making history, and I'm very pleased with their perseverance and dedication in the face of a more challenging operating and macro-environment. Looking at the quarter, CBKC's reported operating ratio was 64.9%, and the core adjusted combined operating ratio came in at 61.7%. Earnings per share was 84 cents, and core adjusted combined earnings per share was 92 cents. Results as quarter were impacted by the change in fuel price on both revenue and operating expenses.

Speaker 6: transcript

Speaker 6: Net interest expense was $207 million or $202 million on an adjusted basis. The decline was driven by a reduced debt balance.

Net interest expense was $207 million or $202 million on adjusted basis. The decline was driven by our reduced debt balance.

Speaker 6: transcript

Speaker 6: On a combined basis, income tax expense was $258 million. We now expect the CPKC core adjusted combined effective tax rate to be approximately 25% for the year, a reduction of 50 basis points from the outlook provided in Q2.

On a combined basis income tax expense was $258 million. We now expect the CP Casey core adjusted combined effective tax rate to be approximately 25% for the year a reduction of 50 basis points from the outlook provided in Q2.

Nadeem Velani: Turning to slide 17, we are generating strong cash flow with cash provided by operating activities of CAD 1,027 million in Q3. Our first call on capital remains the business and growth, and in the quarter we reinvested over CAD 700 million in line with our expectation to invest approximately CAD 2.7 billion in combined capital in 2023. We generated CAD 454 million in adjusted combined free cash flow on the quarter and just under CAD 1.4 billion year to date. Our combined leverage is 3.6 times on our path back to our target leverage of 2.5 times. In review of the quarter, despite challenges, John's teams continue to bring on synergies and our operations are gaining momentum, especially in Mexico.

Speaker 5: transcript

Speaker 5: Turning the slide 17, we are generating strong cash flow with cash provided by operating activities of...

Turning to slide 17, we are generating strong cash flow with cash provided by operating activities.

Nadeem Velani: The impact of fuel price was a $95 million headwind to combine operating income. This includes a $72 million unfavorable lag effect on combined fuel revenue. The $95 million impact that combined operating income and translated to a 70 basis point, an 8 cent headwind to core adjusted combined operating ratio and EPS respectively. Based on where fuel prices sit today, we expect the fuel price headwind from Q3 to be a slight tailwind in Q4.

Speaker 6: transcript

Speaker 6: 1,027 million in Q3.

1020 $7 million in Q3.

Speaker 6: transcript

Speaker 6: Our first call on capital remains the business and growth, and in the quarter we reinvested over $700 million in line with our expectation to invest approximately $2.7 billion in combined capital in 2023.

Our first call on capital remains the business growth and in the quarter, we reinvested over $700 million in line with our expectation to invest approximately $2 7 billion in combined capital in 2023.

Speaker 6: transcript

Speaker 6: We generated 454 million in adjusted combined pre-tash flow on the quarter and just under 1.4 billion year-to-date.

We generated $454 million and adjusted combined free cash flow in the quarter and just under $1 4 billion year to date.

Speaker 6: transcript

Speaker 6: Our combined leverage is 3.6 times on our path back to our target leverage of 2.5 times.

Nadeem Velani: Taking a closer look at our income statement, reported operating expenses provided on slide 14 and combined operating expense on slide 15. Similar to what we shared last quarter, our combined operating expense illustrates the estimated effects of the acquisition for the service quarter as if the acquisition closed on January 1, 2022. Ported common benefits expense was $598 million down 4% on an effect-adjusted basis when compared to combined common benefits expense a year ago.

Our combined leverage is three six times on our path back to our target leverage of two five times.

Speaker 6: transcript

Speaker 6: In review of the quarter, despite challenges, John's teams continue to bring on synergies and our operations are gaining momentum, especially in Mexico. We remain well-positioned to deliver on our long-term guidance, and I am extremely confident in this team's ability to execute. I'm excited about what this franchise can deliver, and I look forward to sharing our success with you going forward. With that, Keith, let me turn things over to you. Okay. Thank you, gentlemen. Let's go ahead and open it up to questions.

And review of the quarter. Despite challenges John teams continue to bring on synergies and our operations are gaining momentum, especially in Mexico, we remain well positioned to deliver on our long term guidance and I'm extremely confident in this team's ability to execute them.

Nadeem Velani: We remain well positioned to deliver on our long-term guidance, and I am extremely confident in this team's ability to execute. I'm excited about what this franchise can deliver, and I look forward to sharing our success with you going forward. With that, Keith, let me turn things over to you.

I am excited about what this franchise can deliver and I look forward to sharing our success with you going forward.

Keith Let me turn things over to you.

Operator: Okay. Thank you, gentlemen. Let's go and open it up to questions.

Okay. Thank you gentlemen, let's go and open it up to questions.

Nadeem Velani: So driving the effect-adjusted decline was lower current service costs in the DB pension plan, resulting from higher discount rates and lower stock rates compensation. That decline was partially offset by wage inflation. Headcount was down slightly sequentially in Q3. We expect headcount to be down sequentially again in 4Q, which will continue to give us improved operating leverage as volumes accelerate into the end of the year. Fuel expense was down 86 million or 21% on an effect-adjusted basis when compared to combined fuel in Q3, 2022.

Operator: Thank you. Our first question comes from Christian Wetherbee, Citi.

Speaker 3: transcript

Speaker 3: Thank you. If you would like to ask a question, simply press star then the number one on your telephone keypad.

Thank you if you would like to ask a question simply press Star then the number one on your telephone keypad.

Speaker 3: transcript

Speaker 3: If you would like to withdraw your question, press star 2. As previously highlighted, please limit yourself to one question.

If you would like to withdraw your question Press Star two.

As previously highlighted please limit yourself to one question.

Speaker 3: transcript

Speaker 3: Our first question comes from Chris Weatherby, Citi.

Our first question comes from Chris Wetherbee Citi.

Christian Wetherbee: Hey, thanks. Good afternoon, guys. You know, I guess you just mentioned that you've been able to capture some of the synergies from the deal. So maybe if you could help us sort of understand what you think from a synergy perspective you'll be able to realize here in 2023. And then, you know, I guess what it'll take to maybe re-accelerate earnings growth back towards some of the longer term targets that you have. Is it simply just getting into a better macro environment, or are there some, you know, incremental cost actions or others that you can take sort of early in 2024 to kind of re-accelerate the earnings growth profile?

Hey, Thanks, good afternoon guys.

Speaker 6: transcript

Speaker 6: Hey, thanks. Good afternoon, guys. You know, I guess you just mentioned that you've been able to capture some of the synergies from the deal. So maybe

I guess, you just mentioned that you've been able to capture some of the synergies from the deal so maybe.

Speaker 6: transcript

Speaker 6: you can help us sort of understand what you think from a synergy perspective you'll be able to realize here in 2023 and then I guess what it'll take to maybe re-accelerate earnings growth back towards some of the longer-term targets that you have. Is it simply just getting into a better macro environment or are there some incremental cost actions or others that you can take sort of early in 2024 to kind of re-accelerate the earnings growth profile?

If you could help us sort of understand what you think from a synergy perspective, you'll be able to realize here in 2023, and then I guess, what it will take to maybe Reaccelerate earnings growth back towards some of the longer term targets that you have is it simply just getting into a better macro environment or are there some.

Nadeem Velani: The decline was primarily driven by a 93 million or 16% decline in combined fuel price along with lower GTMs versus prior year. As I mentioned a moment ago, that reduction in fuel expense due to price was more than offset by a $188 million headwind from a decline in combined fuel surcharge revenue. Combined materials expense was down 4% on an effect-adjusted basis. The decline was largely driven by reduced locomotive maintenance material spend.

Incremental cost actions or others that you can take sort of early in 2024 to kind of reaccelerate the earnings growth profile.

Nadeem Velani: Well, maybe I'll start, Chris, on the synergy piece. This is John. So as I said, I'm really pleased, despite the challenges we're facing, certainly in the macro and all the geopolitical things going on that we're all facing, the team has been laser focused on the synergies and certainly delivering on a lot of things we laid out at Investor Day. I think we said at Investor Day we saw an immediate run rate of CAD 240 million sort of annualized. I can tell you, I know we pushed that to CAD 350 million that we talked about at some conferences, and I'm comfortable in telling you that we're beyond that now.

Well, maybe I'll start Chris on the synergy piece of this is John.

Speaker 6: transcript

Speaker 6: Well, maybe I'll start Chris on the Synergy piece. This is John . So, as I said, I'm really pleased. Despite the challenges we're facing, certainly in the macro and all the geopolitical things going on that we're all facing, the team has been laser focused on the Synergies and

As I said I'm I'm really pleased.

Despite the challenges we're facing.

Nadeem Velani: Equipment Rents, we're up 24 million on a combined basis for 34% on an FX-adjusted basis. Equipment Rents increased due to higher-car, higher payments resulting from automotive volume growth, lower use of CPKC intermodal equipment by other roads, and increased use of pooled equipment. Combined appreciation expenses up 32 million or an FX-adjusted 6% resulting from a higher acid base. Combined purchase services in other was 506 million or roughly flat year-over-year on an FX-adjusted basis.

Certainly in the macro and all the geopolitical things going on that we're all facing.

The team has been laser focused on the synergies then.

Speaker 7: transcript

Speaker 7: and certainly delivering on a lot of things we laid out at Investor Day. I think we said at Investor Day we saw an immediate run rate of $240 million.

Certainly delivering on a lot of things we laid out at Investor Day, I think we said at Investor Day, we saw immediate run rate of.

$240 million.

Speaker 7: transcript

Speaker 7: Sort of annualized I can tell you I know we pushed that the 350 million That we talked about it some conferences and I'm comfortable in telling you that we're beyond that now

Sort of annualized I can tell you I know, we push that the $350 million.

We talked about in some conferences and I'm comfortable in telling you that we're beyond that now.

Nadeem Velani: I'm not gonna peg quite a number for you at this time, but I'm quite comfortable we're gonna end up north of a number like that. I'm quite pleased. I'll tell you, there's a number of contracts and opportunities that are ready to go but will start up in 2024. That'll continue to add to that story.

Speaker 7: transcript

Speaker 7: I'm not gonna peg quite a number for you at this time, but I'm quite comfortable. We're gonna end up north of a number like that. So I'm quite pleased and I'll tell you, there's a number of...

Nadeem Velani: A business interruption insurance recovery in the quarter related to 2021 flooding in wildfires in British Columbia offset increased casualty expense and cost inflation. Looking to 4Q, I still expect PS&O to come in around 530 million to close the year. Moving below the line, other components of net periodic benefit recovery decreased 17 million, reflecting higher discount rates compared to 2022, and other expenses up 6 million than the third quarter on a reported basis.

I'm not going to peg quite a number for you at this time, but I am quite comfortable we're going to end up north of a number like that so I'm quite pleased and I will tell you.

There's a number of of contracts and opportunities that are ready to go but it will start up in 2024, but that will continue to add to that story.

Speaker 7: transcript

Speaker 7: of contracts and opportunities that are ready to go, but we'll start up in 2024, but that'll continue to add to that story.

Keith Creel: Chris, I'll just add a little color on the cost side. We're ahead of our target on the cost side as well. If we talk about accelerating, what I expect to see in 2024, you know, as we debottleneck and continue to improve upon even numbers that Mexico was experiencing back to November of last year, that momentum will continue. We've got the investments that we made this year in the physical infrastructure that's tied to the merger application. I think we've got five sidings. Few are online now. Two more come on within about a month, and then we've got one more to close the year out, so we'll get the benefit of that in 2024.

Speaker 5: transcript

Speaker 5: Chris, I'll just add a little color on the call side. We're ahead of.

Chris I'll, just add a little color on the cost side. We are ahead of us.

Nadeem Velani: Net interest expense was 207 million or 202 million on an adjusted basis, the decline was driven by a reduced debt balance. On a combined basis, income tax expense was 258 million. We now expect the CPKC core adjusted combined affected tax rate to be approximately 25% for the year, a reduction of 50 basis points from they would have provided in Q2. Turning the slide 17, we are generating strong cash flow with cash provided by operating activities of 1,027 million in Q3.

Speaker 5: transcript

Speaker 5: Head of our target on the call side as well. Now, if we talk about accelerating my expectancy in 2024, you know, as we devodel next and continue to prove upon, even numbers that Mexico is experiencing.

Net of our target on the cost side as well if we talk about accelerating what I expect to see in 2024.

Debottleneck to continuing to prove upon EBIT numbers that Mexico is experiencing.

Speaker 5: transcript

Speaker 5: back to November of last year. That momentum will continue. We've got the investments we made this year in the physical infrastructure that's tied to the merger application. I think we've got five sidings that are online now. Two more come on.

Back to November of last year.

That momentum will continue we've got the investments that we've made this year and the physical infrastructure Thats tied to the merger application I think we've got five sidings that are fewer online now to two more come on.

Speaker 5: transcript

Speaker 5: within about a month and then we've got one more to close the year out. So we'll get the benefit of that in 24. So what I expect is

Was it about a month and then we've got more and more to close the year out. So we'll get the benefit of that in 'twenty. Four so what I expect is the railroad to continue to incrementally improve improve from the fluidity standpoint, the locomotive productivity standpoint, and ultimately you put those two together you are going to turn your assets faster, we will have better car productivity car miles per car day and Youll.

Keith Creel: What I expect is the railroad to continue to incrementally improve from a fluidity standpoint, a locomotive productivity standpoint, and ultimately, you put those two together, you're gonna turn your assets faster. We'll have better car productivity, car miles per car day, and you'll see operating expense tied to the synergies of putting these two networks accelerate a bit from the run rate that we've been at for the last six months. Again, I'll finish where I started. We're exceeding our expectations. You know, there's some puts and takes to that, but as far as where we thought we would be or where we should be, to realize the synergies we committed to on the cost side, we're in a good spot, getting better every day.

Speaker 5: transcript

Speaker 5: The road to continue to incrementally improve from the fluidity standpoint.

Nadeem Velani: Our first call on capital remains the business and growth and in the quarter we reinvested over 700 million in line with our expectations to invest approximately 2.7 billion in combined capital in 2023. We generated 454 million in adjusted combined free cash flow on the quarter and just under 1.4 billion year to date. Our combined leverage is 3.6 times on our path back to our target leverage of 2.5 times.

Speaker 5: transcript

Speaker 5: the locomotive productivity standpoint, and ultimately, you put those two together, you're going to turn your assets faster, we'll have better car productivity, car miles per car day, and you'll see operating expense tied to the synergies of putting these two networks

See operating expense tied to the synergies of putting these two networks accelerated a bit from the run rate that we see.

Speaker 5: transcript

Speaker 5: accelerate a bit from the run rate that we've been after the last six months. And again, I'll finish where I started. We're exceeding our expectations. You know, there's some puts and takes to that. But as far as where we thought we would be or where we should be to realize the synergies we committed to on the call side, we're in a good spot getting better every day.

We've been after the last six months and again I'll finish where I started we're exceeding our expectations.

Some puts and takes to that but as far as where we thought we would be or where we should be.

Nadeem Velani: In review of the quarter, despite challenges, John seems continued to bring on synergies and our operations are gaining momentum, especially in Mexico. We remain well positioned to deliver on our long-term guidance and I am extremely confident this team's ability to execute. I'm excited about what this franchise can deliver and I look forward to sharing our success with you going forward.

To realize the synergies that we committed to you on the cost side. We're in a good spot getting better every day and Chris I'd, just add running a fluid network, which we're seeing clearly today is going to help us on the operating cost side ex synergies.

Nadeem Velani: Yeah, Chris, I'd just add, you know, running a fluid network, which we're seeing clearly today, is gonna help us on the operating cost side, you know, synergies. We had talked about finishing the year with a lower labor headcount number, and that's certainly gonna be the case. I think we'll have incrementally, sequentially about a 1,000-person reduction in headcount, and that's just attributed to timing of some of the work projects and also just your normal seasonality. You're gonna see us see the benefits of operating leverage. We do expect to see growth in this quarter from a volume standpoint, so that operating leverage is gonna naturally provide us the ability to take our costs down and improve our margins.

Speaker 6: transcript

Speaker 6: Chris, I just had, you know, running a fluid network, which we're seeing clearly today is gonna help us on the operating cost, right? You know, X synergies.

Speaker 6: transcript

Speaker 6: We had talked about finishing the year with a lower labour headcount number and that's certainly going to be the case. I think we'll have incrementally, sequentially about a thousand person reduction in headcount and that's just attributed to.

We had talked about finishing the year with a lower labor head count number and Thats certainly going to be the case I think we will have incrementally sequentially.

Unknown Executive: But that keeps, let me turn things over to you.

Unknown Executive: Okay, thank you, Jeremy. Let's go and open up your questions.

For some reduction in head count and Thats just attributed to.

Unknown Executive: Thank you. If you would like to ask a question, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star two.

Speaker 6: transcript

Speaker 6: to timing of some of the work projects and also just your normal seasonality. So you're gonna see the benefits of operating leverage. We do expect to see growth in this quarter from a volume standpoint. So that operating leverage is gonna naturally provide us some ability to take our costs down, improve our margins. And I fully expect, I'm sure we're gonna get this question, so might as well hit it now. I fully expect a sub 60 OR in this quarter. Okay.

The timing of some of the projects and also.

Just your normal seasonality so.

Youre going to see us.

You can see the benefits of operating leverage we do expect to see growth in this quarter from a volume standpoint, so that operating leverage is going to naturally provide us the ability to take our costs down and improve our margins and I fully expect and I'm sure. We're going to get the question, sometimes I'll hit it now I fully expect a sub 60 or in this quarter.

Unknown Executive: As previously highlighted, please limit yourself to one question.

Chris Weatherby: Our first question comes from Chris Weatherby City. Thanks, good afternoon guys. You know, I guess you just mentioned that you've been able to capture some of the synergies from the deal.

Nadeem Velani: I fully expect, and I'm sure we're gonna get this question, so might as well hit it now. I fully expect a sub six OR in this quarter.

Keith Creel: So maybe if you can help us sort of understand what you think from a synergy perspective, you'll be able to realize you're in 2023 and then I guess what it will take to maybe re-accelerate earnings for a back towards some of the longer-term targets that you have is it's simply just getting into a better macro environment or are there some incremental cost actions or others that you can take serverally in 2024 to kind of re-accelerate the earnings for a Well, maybe I'll start Chris on the synergy piece of the John. So as I said, I'm really pleased.

Operator: Okay. That's very helpful. Appreciate the time. Thank you. Our next question comes from Scott Group, Wolfe Research.

Okay. That's very helpful. Appreciate the time thank you.

Speaker 3: transcript

Speaker 3: Our next question comes from Scott Group, Wolf Research.

Our next question comes from Scott Group Wolfe Research.

Scott Group: Hey, thanks. Afternoon. Nadeem, you got me on the OR question already, so I won't ask it again. How are you thinking about-

Hey, Thanks afternoon.

Speaker 5: transcript

Speaker 5: Hey, thanks, afternoon. So, Nadini, you got me on the OR question already, so I want to ask it again. How are you doing? I'm sorry, I'm just kidding.

Nadeem you got me on the MLR question already so I won't I won't.

I'll ask it again.

Nadeem Velani: Next question, Travis. No, I'm just kidding. Go ahead, Scott. Sorry.

Good question.

Kevin.

Scott Group: How are you thinking about RTM growth in the quarter? I know it's early, but you know, when I think back to the analyst day, you talked about high single-digit revenue growth, mid-teens kind of earnings growth. Do you have visibility to getting to those kinds of growth rates in 2024? Is it just too early to tell at this point?

Go ahead Scott.

Speaker 4: transcript

Speaker 4: Go ahead, Scott. How are you? How are you thinking about our GM growth in the quarter? And then I know it's early, but when I think back to the analysts that you talked about, I single digit revenue growth, mid teams kind of earnings growth. Do you do have visibility to getting to those kinds of growth rates in 24? Is it just too early to tell?

How are you thinking about RPM growth in the quarter and then I know, it's early but when I think back to the analyst day, you talked about.

Keith Creel: Despite the challenges we're facing, certainly in the macro and all the geopolitical things going on that we're all facing, the team has been laser focused on the synergies and certainly delivering on a lot of things we laid out at Investor Day. I think we said at Investor Day, we saw it on a immediate run rate of 240 million sort of annualized. I can tell you, I know we pushed that to 350 million that we talked about at some conferences and I'm comfortable in telling you that we're beyond that now.

High single digit revenue growth mid teens kind of earnings growth.

Do you have visibility to getting to those kinds of growth rates in 'twenty. Four is it just too early to tell at this point.

Keith Creel: Yeah, let me take the RTM piece. We're slightly positive now for the quarter, Scott. We continue to expect to ramp up in November, December, and I fully expect a quarter, probably mid-single, 4% to 5% RTM growth, versus last year.

Speaker 5: transcript

Speaker 5: Now let me take the RTN piece. We're slightly positive now for the quarter. Scott, we continue to expect to ramp up in November , December , and I fully expect the quarter probably mid-single, four to five percent RTN growth versus last year.

Yes, let me take the <unk> piece that were slightly positive now for the quarter. Scott We continue to expect to ramp up in November December.

I fully expect the quarter, probably mid single, 4% to 5% <unk> growth versus last year.

Nadeem Velani: Yeah. Scott, I mean, when we gave our guidance, I guess three or four months ago now, you know, we had talked about a five-year plan. You know, nothing's changed on that front when you look at it from a long-term perspective. You know, we didn't expect it to just be without some level of cycle during that timeframe. We're seeing that macro challenge now. You know, I think we'll see a bit of a softer grain crop in Canada next year. I mean, we've diversified our franchise, as John pointed out. We're not as reliant on Canadian grain, but it's gonna affect us probably Q2 of 2024.

Speaker 6: transcript

Speaker 6: Yeah, and Scott, I mean, when we gave our guidance, I guess three or four months ago now.

And Scott I mean, when we gave our guidance three or four months ago now.

Speaker 6: transcript

Speaker 6: You know, we talked about the five-year plan. You know, nothing's changed on that front when you look at it from a long-term perspective. You know, we didn't expect it to just be a —

We had talked about the five year plan.

Nothing has changed on that front when you look at it from a long term perspective.

Keith Creel: I'm not going to peg quite a number for you at this time, but I'm quite comfortable we're going to end up north of the number like that. So I'm quite pleased. And I'll tell you, there's a number of of contracts and opportunities that are ready to go, but we'll start up in 2024 that will continue to add to that story. Chris, I'll just add a little color on the call side. We're ahead up. Head of our target on the call side as well.

We didn't expect to just be.

Speaker 6: transcript

Speaker 6: without some level of cycle in during that time frame and so we're seeing that macro challenge now you know I think we'll see a bit of a softer grain crop in Canada next year I mean we've diversified our franchise as John pointed out.

Without some level of cycle and during that timeframe and so we're seeing that macro challenge now.

I think we'll see a bit of a softer grain.

Crop in Canada next year, I mean, we've diversified our franchise as John pointed out we're not as reliant on Canadian grain, but it's going to affect us probably Q2 of 2024 that being said I fully expect when we when we give guidance in January.

Speaker 6: transcript

Speaker 6: We're not as reliant on Canadian grain, but it's going to affect us probably Q2 of 2024. That being said, I fully expect when we give guidance in January , consistent with what we described in June , that we're going to have double-digit EPS growth in our sites.

Nadeem Velani: That being said, you know, I fully expect when we give guidance in January, consistent with what we described in June, that we're gonna have double-digit EPS growth in our sights. We always said that, you know, over that four or five-year period of guidance, that we're gonna ramp up the synergies. In the outer years, you're gonna be at stronger levels, not only because of the ramp-up in synergies, but also the benefit of some, you know, the ability to buy back shares and lower the share count and what that provides from EPS accretion. From our perspective, as we stand here today, I certainly expect double-digit EPS growth.

Consistent with what we've described in June that we're going to have double digit EPS growth is in our in our sites.

Keith Creel: Now, if we talk about accelerating my expectancy in 2024, you know, as we devodel neck to continue to prove upon even numbers that Mexico was experiencing back to November of last year. That momentum will continue. We've got investments we made this year in the physical infrastructure that's tied to the merger application. I think we've got five sightings that are here on mine now to two more come on within about a month, and then we've got more more to close to your house.

Speaker 6: transcript

Speaker 6: We always said that over that four or five-year period of guidance that we're going to ramp up the synergies and in the outer years you're going to be at stronger levels not only because of the ramp up in synergies but also the benefit of the ability to buy back shares and lower the share count and what that provides from EPS accretion. So from our perspective as we stand here today I certainly expect double-digit EPS growth.

We always said that over that four five year period of guidance, we're going to ramp up the synergies and in the outer years youre going to be at.

At stronger levels, not only because of the ramp up in synergies, but also the benefit of some.

The ability to buy back shares and lower the share count, but that provide some EPS accretion so.

Keith Creel: So we'll get the benefit of that in 24. So what I expect is there are to continue to continually improve from the validity standpoint, the locomotive productivity standpoint. And ultimately you put those two together. You're going to turn your assets faster. We'll have better car productivity, car miles per car day. And you'll see operating expense tied to the synergies of putting these two networks, accelerate a bit from the run rate that we've been after the last six months.

From our perspective as we stand here today.

Certainly expect double digit EPS growth.

Scott Group: Thank you, guys.

Thank you guys.

Nadeem Velani: Thanks, Scott.

Scott.

Operator: Our next question comes from Brandon Oglenski, Barclays.

Speaker 3: transcript

Speaker 3: Our next question comes from Brandon Oglinski, Barclays.

Our next question comes from Brandon Glinski Barclays.

Brandon Oglenski: Hey, good evening, and thanks for taking the question. John, I think, you know, on the last earnings call here, we were talking about incremental business wins that had you guys pretty relatively bullish on the volume outlook in your network for Q4. Is that still coming through the way you thought back then? Can you talk to some of those specific opportunities that we should be looking for coming online in the near term?

Speaker 3: transcript

Speaker 3: Hey, good evening. Thanks for taking the question, John . I think, you know, on the last earnings call here, we were talking about incremental business ones that have you guys pretty relatively bullish on the volume outlook in your network for the fourth quarter. Is that still coming through the way you thought back then? And can you talk to some of those specific opportunities that we should be looking for coming online in the near term?

Hey, good evening and thanks for taking my question.

I think on the last earnings call here, we're talking about incremental business wins that have you guys pretty.

Keith Creel: And again, I'll finish where I started. We're exceeding our expectations. You know, there's some puts and takes to that. But as far as what we thought we would be or what we should be to realize the synergies we committed to on the call side. Now we're in a good spot getting better every day. Chris, I just had, you know, running a fluid network, which we're seeing clearly today is going to help us on the operating cost side, you know, ex synergies.

Relatively bullish on the volume outlook and your network for the fourth quarter is that still coming through the way you thought back in and can you talk to some of those specific opportunities that we should be looking for coming online in the near term.

Nadeem Velani: Yeah, Brandon. You know, certainly we've seen. We talked about the winning the ECP area with Shell. We have definitely seen that volume ramp up, and that frankly has caused the ECP area to inflect positive. I'll tell you that that's an area where I continue to see ramp up. There's 2 or 3 recent contract renewals in that area that I feel really good about the share growth that CPKC and the team has delivered in that area. I think you'll continue to see upside in that space. You know, I said we're just getting started on that 180 and 181 train pair north-south. There's a number of pieces of business

Speaker 7: transcript

Speaker 7: Yeah, Brandon. So, you know, certainly we've seen, we talked about the winner needs the ETP area with Shell. We have definitely seen that volume ramp up.

Yes, Brandon So certainly we've seen we've talked about the the winning the ECP area with shell, we have definitely seen that volume ramp up and we and that frankly is caused by ECP area to inflect positive.

Speaker 7: transcript

Speaker 7: And we and that frankly has caused the ECP area to inflect positive. I'll tell you that that's an area where I continue to see ramp up. There's two or three recent contract renewals in that area.

Keith Creel: We had talked about finishing the year with a lower labor headcount number, and that's certainly going to be the case. I think we'll have incrementally sequentially about a thousand person reduction and headcount. And that's just attributed to, to timing of some of work projects and also just your normal seasonality. So you're going to see us see the benefits of operating leverage. We do expect to see growth in this quarter from a volume standpoint. So that operating leverage is going to naturally provide us some the ability to take our costs down and improve our margins. And I fully expect.

I'll tell you that's an area, where I continue to see ramp up there's two or three recent contract renewals in that area that I feel really good about the share growth that <unk> and the team has delivered in that area. So I think youll continue to see upside in that space.

Speaker 7: transcript

Speaker 7: that I feel really good about the share growth that CPKC and the team has delivered in that area. So I think you'll continue to see upside in that space.

Speaker 7: transcript

Speaker 7: You know, I said we're just getting started on that 180 and 181 train pair north south. There's a number of pieces of business.

I said, we're just getting started on that 180, and 181 train pair north south.

There is a number of pieces of business that you should expect to see start up.

John Brooks: That you should expect to see start up on that train pair, Chicago, Kansas City, down to and into Mexico and at Laredo. You know, we're projecting nearly, I'm gonna say 10% growth in our reefer business this year. In a year where much of intermodal is down, that's been an area of growth, and it's gonna be an area of growth you're gonna see to continue to come on to that north-south train pair. Then maybe last, I'll leave you with this. As you look across, you know, all the North American ports, I'm quite pleased with where Lázaro Cárdenas sits today. It's got you know, we're seeing import-export growth of about 26% at that terminal.

Speaker 7: transcript

Speaker 7: that you should expect to see start up on that train pair, Chicago, Kansas City.

Keith Creel: I'm sure we're going to get this question, so I'll hit it now. I fully expect the sub six, you are in this quarter.

On that train pair.

Chicago, Kansas City down to and into Mexico and at Laredo.

Speaker 7: transcript

Speaker 7: down to and into Mexico and at Laredo. You know, we're projecting nearly, I'm going to say, 10% growth in our reefer business this year, in a year where much of Intermodal's down. That's been an area of growth, and it's going to be an area of growth you're going to see to continue to come on to that north-south train pair. And then maybe last, I'll leave you with this. As you look across, you know, all the North American ports,

Scott Group: Grant, that's very helpful, appreciate the time, thank you.

We're projecting yearly.

Scott Group: Our next question comes from Scott Group, Wolf Research. Hey, thanks, afternoon. So, Nadeem, you got me on the OR question already, so I won't ask it again. How are you thinking about RGM growth in the quarter? And then I know it thoroughly, but when I think back to the analysts, you talked about high single digit revenue growth, mid-teens kind of earnings growth. Do you have visibility to getting to those kinds of growth rates in 24, is it just too early to tell us this point?

Let's say, 10% growth in our reefer business this year and a year where much of intermodal down.

Been an area of growth and it's going to be an area of growth youre going to see to continue to come on to that north South train pair.

And then maybe last I'll leave you with this as you look across all of the North American ports.

Speaker 7: transcript

Speaker 7: I'm quite pleased with where Lazaro Cardenas sits today. It's got, you know, we're seeing import-export growth of about 26 percent at that terminal. And you think about LA-Long Beach minus 20, Rupert minus 30, the East Coast ports, you know, minus certainly double digits.

I'm quite pleased with where Lazar row Cardinal sits today, it's Scott, we're seeing import export growth of about 26%.

At that terminal and you think about L. A long beach minus 20, Rupert minus 30 East coast ports.

John Brooks: You think about LA Long Beach -20, Rupert -30, the East Coast ports, you know, minus certainly double digits. Lázaro is seeing growth. I'm not suggesting we got a long ways to go and a lot of work to do in a challenged international area, but we are making some headway. We're doing a lot of ease-of-business thing. We're working with Cafe. I don't know if you saw, but Zim recently announced a new port of call into Lázaro that's gonna start up 9 November for not only domestic Mexico, but also for shipments into the US. That's another area that I just think you're gonna see us continue to position ourselves well. When things rebound, we're gonna be in a really good spot there.

Nadeem Velani: Now, let me take the RTN piece. We're slightly positive now for the quarter. Scott, we continue to expect to ramp up in November, December, and I fully expect to quarter probably mid single, 4% to 5% part hand growth versus last year. Yeah, and Scott, I mean, when we gave our guidance, I guess three or four months ago now, you know, we talked about the five year plan, you know, nothing's changed on that front.

Certainly double digits.

Speaker 7: transcript

Speaker 7: Lazaro's theme growth. And I'm not suggesting we got a long ways to go and a lot of work to do in a challenged international area. But we are making some headway. We're doing a lot of keys to business thing. We're working with.

<unk> seen growth and I'm, not suggesting we got a long ways to go and a lot of work to do.

In a challenged international area.

But we are making some headway we're doing a lot of ease of business thing were working with have bag I don't know if you saw them recently announced a new port of call into <unk> Thats going to startup November nine not only domestic Mexico, but for also shipments into the U S.

Speaker 7: transcript

Speaker 7: Half egg, I don't know if you saw, but Zim recently announced a new port of call into Lazaro that's going to start up November 9th, or not only domestic Mexico, but for also shipments into the U.S. So that's another area that I just think you're going to see. You know, I'll continue to position ourselves well. And when things rebound, we're going to be in a really good spot there.

Nadeem Velani: When you look at it from a long-term perspective, you know, we didn't expect it to just be without some level of cycle in during that time frame. And so we're seeing that macro challenge now. You know, I think we'll see a bit of a softer grain crop in Canada next year. I mean, we've diversified our franchise as John pointed out. We're not as relying on Canadian grain, but it's going to affect us probably Q2 of 2024.

Yes.

So thats another area that I, just think youre going to see.

As we continue to to position ourself, well and when things rebound, we're going to be in a really good spot there.

Fadi Chamoun: Thanks, John.

Thanks, Sean.

John Brooks: Yep.

Yes.

Operator: Our next question comes from Fadi Chamoun, BMO.

Our next question comes from <unk> <unk> BMO.

Speaker 3: transcript

Speaker 3: Our next question comes from Fadeh Shaman, BMA.

Nadeem Velani: That being said, you know, I fully expect when we give guidance in January, consistent with what we described in June that we're going to have double digit EPS growth in our sites. We always said that, you know, over that four or five year period of guidance, that we're going to ramp up the synergies. And in the outer years, you're going to be at the stronger levels, not only because of the ramp up in synergies, but also the benefit of some, you know, the ability to buy back shares and lower the share count and what that provides from EPS accretion. And so from our perspective, as we stand here today, I certainly expect double digit EPS growth.

Fadi Chamoun: Thank you. Good evening. John, I'm not sure if you're willing to take a stab at, like, this CAD 350 million. What would that number you know you hope to look like kind of a year from now, given the pipeline of all these kind of opportunities that you seem to have your eyes on? Just to follow up on some of the cost commentary, and Nadeem, you had a 10% decline in your ex-fuel costs kind of Q3 versus Q2 on flat volume, which is impressive obviously. Was there any unique items in there? Or, I mean, you're calling headcount going down again going into Q4.

Thank you good evening.

Speaker 8: transcript

Speaker 8: Thank you, good evening. John , I'm not sure if you're willing to take a stab, but let this 350 million.

John I'm not sure if youre willing to take a stab at this $350 million what would that number.

Speaker 8: transcript

Speaker 8: What would that number, you know, you hope to look like kind of a year from now, given the pipeline of all these kind of opportunities that you seem to have your eyes on? And just to follow up on some of the comments there, and I think...

Unknown Executive: Thank you, guys.

Looked like a year from now.

Given the pipeline of all these opportunities that you seem to have.

<unk> gone in.

Just a follow up on some of the commentary you had.

Speaker 8: transcript

Speaker 8: You had a 10% decline in your X fuel cost can accuse three versus Q2 on flat volume, which is impressive obviously, but.

A 10% decline in your ex fuel cost kind of Q4 Q3 versus Q2 on slide long in which which are impressive obviously, but.

Sure.

Speaker 8: transcript

Speaker 8: Was there any unique items in there or I mean you're you're calling headcount going down again going into Cuba or like is this a new level that we get to improve from or are there some unique items maybe in the second quarter. I mean in the third quarter that we should take into account.

Are there any unique items in there or.

Youre, calling head count going down again going into Q4.

Brandon Eglinski: It's got our next question comes from Brandon Eglinski, Barclays. Hey, good evening. Thanks for taking the question. John, I think, you know, on the last earnings call here, we were talking about incremental business ones that had you guys pretty relatively bullish. And the volume outlook in your network to the fourth quarter, is that still coming through the way you thought back then? And can you talk to some of those specific opportunities that we should be looking for coming online in the near term?

Fadi Chamoun: Like, is this a new level that we get to improve from, or are there some unique items maybe in Q2, I mean, in Q3, that we should take into account?

Is this the new level.

We get to improve from or are there some unique items, maybe in the second quarter.

Third quarter that we should take into account.

John Brooks: No, this is a new base. Now, we're gonna expect some volume growth in Q4, so you're gonna have some volume expenses related to volume ramp up. We did have an insurance recovery in purchased services. Now, we also had higher casualties, so you know, the net of two was a small benefit in purchased services and other, and that's why I mentioned that we'll ramp that up a little bit from CAD 506 closer to CAD 530. Certainly we expect labor costs to come down as the headcount comes down, and we don't backfill. You know, attrition does its job on that front. Fadi, I'll just say that I continue to see us exceeding in our revenue synergy area.

Speaker 6: transcript

Speaker 6: No, this is a new base. Now we're going to expect some volume growth in Q4, so you're going to have some volume, except the volume ramp up. We did have an insurance recovery in purchase services. Now we also had higher casualties. So the net up to was a small benefit in purchase.

No. This is.

This is a new base now we're going to expect some some volume growth in Q4, so youre going to have some some volume exposure.

The volume ramp up.

We did have an insurance recovery and purchase services now we also had higher casualties. So.

Brandon Eglinski: Yeah, Brandon. So, you know, certainly we've seen, we talked about the the winner needs the EP area with Shell. We have definitely seen that volume ramp up. And that frankly has caused the ECP area to inflect positive. I'll say that's an area where I continue to see ramp up. There's two or three recent contract renewals in that area that I feel really good about the share growth that CPKC and the team has delivered in that area. So, I think you'll continue to see upside in that space.

The net of two was a small benefit in purchase services and other and Thats why I mentioned that we will ramp that up a little bit from $5 six closer to $5 30.

Speaker 6: transcript

Speaker 6: services and other, and that's why I mentioned that we'll ramp that up a little bit from 5.06 closer to 5.30, but certainly we...

Certainly we expect.

Speaker 6: transcript

Speaker 6: labor costs come down as as the headcount comes down and we don't backfill you know attrition does its job on that front so.

Labor costs come down as the head count comes down.

Don't backfill attrition does this job on that front so.

Speaker 9: transcript

Speaker 9: And, Patty, I'll just say that I continue to see us exceeding in our revenues energy area. And I would say, you know what, we, and our investor day, we guided to, you know, sort of our multi-year plan expectations would be annually. We're right on pace for that, or even again, some upside as I look to that. Now, just like Daniel Martin, I'm willing to agree with that as I look to that. I'm willing to agree with that.

And Pat.

I'll, just say that I continue to.

See us exceeding in our revenue synergy area and I would say.

John Brooks: You know, I said we're just getting started on that 180 and 181 train pair north south. I there, there's a number of pieces of business that you should expect to see start up on that train pair. Chicago, Kansas City, down to, and into Mexico and out Laredo. You know, we're projecting nearly, I'm gonna say 10% growth in our reefer business this year in a year where much of intermodal down. That's been an area growth and it's going to be an area growth. You're going to see to continue to come on to that north south train pair.

John Brooks: I would say, you know what? At our Investor Day, we guided to, you know, sort of what our multi-year plan expectations would be annually. We're right on pace for that or even, again, some upside as I look to that.

In our Investor day, we guided to sort of our what our multi year plan expectations would be annually, we're right on pace for that or or even again, some upside as I as I look to that.

Fadi Chamoun: Okay, thanks.

Okay, great. Thanks.

Operator: Our next question comes from Steve Hansen, Raymond James.

Our next question comes from Steve Hansen Raymond James.

Fadi Chamoun: Yeah, good afternoon, guys. Thanks for the time. John, question for you perhaps. The disruptions and constraints facing potash have been significant thus far as you've described. You've now got some constraints in the eastern direction, with the seaway as well. I mean, do you wanna maybe just give us a sense for how the potash volume outlook looks through the next quarter or two as we sort of get through some of these constraints?

Steve Hansen: Yeah, good afternoon, guys. Thanks for the time. John, question for you perhaps. The disruptions and constraints facing potash have been significant thus far as you've described. You've now got some constraints in the eastern direction, with the seaway as well. I mean, do you wanna maybe just give us a sense for how the potash volume outlook looks through the next quarter or two as we sort of get through some of these constraints?

Speaker 6: transcript

Speaker 6: Yeah, good afternoon guys, thanks for the time. John , question for you perhaps, the disruptions and constraints facing potash have been significant thus far as you've described. You've now got some constraints in the eastern direction with the seaway as well. I mean, do you want to maybe just give us a sense for how the potash volume outlook looks through the next quarter or two as we sort of get through some of these constraints?

Yes, good evening guys. Thanks for the time.

John question for you, perhaps the disruptions of the constraints seizing potash has been significant thus far as you've described you've now got some constraints in the eastern direction with the Seaway as well just wanted to maybe just give us a sense for how the potash volume outlook looks through the next quarter or two.

John Brooks: And then maybe last I'll leave you with this is you look across, you know, all the North American ports. I'm quite pleased with where Lazaro Cardenas says today, it's got, you know, we're seeing import export growth of about 26% at that terminal. And you think about Kelly Long Beach, minus 20, Rupert, minus 30, East Coast ports, you know, minus certainly double digits. Lazaro is seeing growth and I'm not suggesting we got a long ways to go and a lot of work to do in a challenged international area.

Get through some of these constraints.

John Brooks: Yeah. Thanks, Steve. You know, Canpotex has a pretty good sales book on for Q4. It's just their ability to execute without the Portland terminal, which is a significant workhorse for them and a good route for us. It's been horribly challenging. I'm optimistic that we're gonna sequentially improve. The numbers were so low, we better sequentially improve as we move through Q4 in potash. We'll get that terminal back up at the end of the year. As I said, I'm hoping we gain some momentum in November and December, and really hit the ground running as you look to 2024.

Yes, Thanks, Steve.

Speaker 7: transcript

Speaker 7: Yeah, thanks, Steve. You know, so the Ampatex has a pretty good sales book on for Q4, it's their ability to execute without the Portland terminal, which is a significant workhorse for them and a good route for us. It's been horribly challenging. So I'm optimistic that we're gonna sequentially improve

So.

Canpotex has a pretty good sales book on for Q4 is just.

Their ability to execute.

Without the Portland terminal, which is a significant workhorse for them and a good route for us.

It's been horribly challenging.

So I'm optimistic that we're going to sequentially improve.

Speaker 7: transcript

Speaker 7: The numbers were so low, we better sequentially improve as we move through Q4 in podash.

If the numbers are so low we better sequentially improve as we move through Q4 in potash and we will get that terminal back up at the end of the year and as I said I'm, hoping we gained some momentum in November and December and really hit the ground running as you look to 2024 I know canpotex.

John Brooks: But we are making some headway. We're doing a lot of ease of business thing. We're working with half egg. I don't know if you saw, but them recently announced a new port of call into Lazaro. That's going to start up November 9th or not only domestic Mexico, but for also shipments into the U.S. So that's another area that I just think you're going to see, you know, us continue to position ourselves well. And when things rebound, we're going to be in a really good spot there. Thanks, Sean.

Speaker 9: transcript

Speaker 9: And we'll get that terminal back up at the end of the year. And as I said, I'm hoping we gain some momentum in November and December and really hit the ground running as you look to 2024. I know Campotex has ambitious plans to sort of gain back the market share that they've lost in over 2023 into 2024 as a result of a number of these challenges they've faced. That's great for you, Sam.

John Brooks: I know Canpotex has ambitious plans to sort of gain back the market share that they've lost in over 2023 into 2024 as a result of a number of these challenges they've faced.

Has ambitious plans to sort of gain back the market share that they lost.

Over 2023 into 2024 as a result of a number of these challenging.

Challenges they faced.

Fadi Chamoun: That's great for you, John.

That's great for you there.

Operator: Our next question comes from Tom Wadewitz, UBS.

Our next question comes from Tom Walnuts.

UBS.

Fadi Chamoun: Yeah. Our next question comes from Fadi Chamoun, VMA. Thank you, good evening. John, I'm not sure if you're willing to take a stab, but let this 350 million, what would that number, you know, you'll hope to look like kind of a year from now, given the pipeline of all these kind of opportunities that you seem to have your eyes on. And just to follow up on some of the cost commentary, Nadeem, you had a 10% decline in your ex-fueled cost, then a Q3 versus Q2 on slide volume, which is impressive, obviously.

Fadi Chamoun: Yeah, good afternoon. So I know you've had a couple questions on 2024. I wanna kind of circle back to that a little bit. You know, I think the broader theme for transports has been, you know, somewhat weaker freight markets, lowering of expectations for 2024, you know, just to reflect that kind of lower momentum. I think you have a lot of puts and takes, right? Like, clearly the conversation on potash, you would think that's easy comps.

Tom Wadewitz: Yeah, good afternoon. So I know you've had a couple questions on 2024. I wanna kind of circle back to that a little bit. You know, I think the broader theme for transports has been, you know, somewhat weaker freight markets, lowering of expectations for 2024, you know, just to reflect that kind of lower momentum. I think you have a lot of puts and takes, right? Like, clearly the conversation on potash, you would think that's easy comps.

Speaker 10: transcript

Speaker 10: Yeah, good afternoon. So I think that a couple of questions on 24. I want to kind of circle back to that a little bit. I think the broader theme for transport has been some of weaker freight markets, lowering of expectations for 2024, just to reflect that kind of lower momentum. I think you have a lot of puts and takes, right? Like the conversation on Pada, as you would think that's easy-com.

Yes, good afternoon.

So I think that a couple of questions on 24, I want to kind of circle back to that a little bit.

I think the broader theme for transports has been.

Somewhat weaker freight markets lowering of expectations for 2024.

Just to reflect that kind of lower momentum I think you have a lot of puts and takes right clearly the conversation on potash you would think thats easy comps.

Cherilyn Radbourne: In 2024, I know you got, you know, Canadian grain down a little bit. So maybe just at a high level as you go into 2024, do you view that as kind of a, you know, low base or easy comp so you can have, you know, kind of stronger growth than normal and that maybe gets you up towards where the street is with 20% earnings growth? Or do you think that it's like, "Hey, well, let's be a little careful because there is enough weakness that's kinda macro weakness in the markets that we ought to be, you know, a little bit careful on expectations." Thank you.

Tom Wadewitz: In 2024, I know you got, you know, Canadian grain down a little bit. So maybe just at a high level as you go into 2024, do you view that as kind of a, you know, low base or easy comp so you can have, you know, kind of stronger growth than normal and that maybe gets you up towards where the street is with 20% earnings growth? Or do you think that it's like, "Hey, well, let's be a little careful because there is enough weakness that's kinda macro weakness in the markets that we ought to be, you know, a little bit careful on expectations." Thank you.

Speaker 10: transcript

Speaker 10: in 24 but I know you got Canadian grain down a little bit. So maybe just at a high level as you go into 24, do you view that as kind of a low base or easy comp so you can have kind of stronger growth than normal and that maybe gets you up towards where the street is with 20% earnings growth? Or do you think that it's like, hey, well, let's be a little careful because there is enough weakness that's kind of macro weakness in the markets that we ought to be a little bit careful on expectations.

In 24, but I know you've got Canadian grain down a little bit. So maybe just at a high level. As you go into 2004 do you view that as kind of a.

Low base or easy comps that you can have.

Fadi Chamoun: But, was there any unique items in there, or I mean, you're calling headguards going down again, going into Q4? Like, is this a new level that we get to improve? So, from, or are there any unique items, maybe in the second quarter, I mean, the third quarter that we should take into account?

Kind of stronger growth than normal and then maybe gets you up towards where the street is with 20% earnings growth or do you think that it's like hey, let's be a little careful because there is enough weakness thats kind of macro weakness in the markets that we have.

Ought to be the.

Careful on expectations. Thank you.

Speaker 7: transcript

Speaker 7: Thank you, Tom. I'll make a couple comments and then maybe you want to make a comment or two. But look, I got bit in 2023. I thought I was had easy comp for potash.

John Brooks: Tom, I'll make a couple comments and then if maybe you wanna make a comment or two. Look, I got bit in 2023. I thought I had easy comps for potash coming into 2023 and, well, frankly, the numbers were, I saw 10% growth in potash and we're at a 10% decline in potash. It's fool me once, but we're gonna be a little more cautious on that front. Again, in that area, I expect to be set up well. You know what? We're gonna move a lot of Canadian grain, US grain over the next couple quarters here, and we'll watch what materializes, Tom, as we move into Q2 and beyond with this crop.

Tom I'll make a couple of comments and then maybe you mean, you want to make a comment or two but look I guess.

Nadeem Velani: No, this is a new base. Now, we're going to expect some volume growth in Q4, so you're going to have some volume, the volume ramp up. We did have an insurance recovery in purchase services. Now, we also had higher casualties. So, you know, the Nadeem 2 was a small benefit in purchase services and other. And that's why I mentioned that we'll ramp that up a little bit from 506 closer to 530.

In 2023, I thought I was had easy comps for potash coming into 2023 and.

Speaker 7: transcript

Speaker 7: coming into 2023 and well frankly the numbers are I saw 10% growth in Potash and we're at a 10% decline in Potash. So it's fool me once but we're going to be a little more cautious.

Well frankly, the numbers are I saw a 10% growth in potash and <unk>.

10% decline in potash so for me one but.

Going to be a little more cautious.

Speaker 7: transcript

Speaker 7: I'm at front. Again, in that area, I expect to be set up well. You know what, we're going to move a lot of Canadian grain, US grain over the next you know, couple quarters here and we'll watch what materializes Tom as we move into Q2 and beyond with this crop. That's certainly more challenged in the southern part of Canada. Maybe my last comment is, you know, overall, I feel

On that front again in that area I expect to be set up well.

Nadeem Velani: But, certainly, we expect labor costs come down as the headcount comes down, and we don't backfill, you know, nutrition does this job on that front. So, in fact, I'll just say that I continue to see us exceeding in our revenue synergy area. And I would say, you know what, we, and our investor day, we guided to, you know, sort of our multi-year plan expectations would be annually. We're right on pace for that, or even again, some upside as I looked at that.

We're going to move a lot of Canadian grain U S grain over the next.

Couple of quarters here, and we will watch slip materializes.

Fadi Chamoun: Great. Thanks.

Tom as we move into Q2 and beyond with this crop that certainly more challenged than the southern part of of Canada, mainly my last comment is.

John Brooks: That's certainly more challenged in the southern part of Canada. Maybe my last comment is, you know, overall I feel, hopefully good about the synergies and that ramp up as we look to next year. I do believe this pricing environment continues to be favorable. As I look to next year it's all about the macro in the base and how the intermodal business and some of these, you know, very heavy consumer driven areas rebound or not. We're just gonna be very prudent about how we look at those volumes into 2024.

Overall I feel.

Speaker 7: transcript

Speaker 7: hopefully good about the synergies and that ramp up as we look to next year. I do believe this pricing environment continues to be favorable as I look to next year. It's all about the macro in the base and how the intermodal business and some of these, you know, very heavy consumer-driven areas rebound or not. And we're just going to be very prudent about how we look at those volumes into 2024.

Hopefully good about the synergies in that ramp up as we look to next year I do believe this pricing environment.

<unk> used to be favorable as I look to next year. It. It's all about the macro in the basin and how the intermodal business and some of these.

Steve Hansen: Our next question comes from Steve Hansen. Raymond James. Yeah, good afternoon, guys. Thanks for the time. John, question for you, perhaps the disruptions and constraints facing podash have been significant as far as you've described. You've now got some constraints in the eastern direction with the seaway as well. I mean, do you want to maybe just give us a sense for how the podash volume outlook looks through the next quarter or two, as we sort of get through some of these constraints.

Very heavy consumer driven areas rebounder or not and we're just going to be very prudent about how we how we look at those volumes in the 2024.

Nadeem Velani: Yeah. Tom, not to get into too much detail, I mean, it is still October here, about 2024. But I think just fundamentally, you should think about it in the usual way of how we've been successful in the past, which is, you know, some volume growth, you know, pricing. We've been hurt by inflation. It's been a significant impact, I think, in transportation in general in 2023. But I think the ability to price above inflation comes back in 2024, which will be positive and accretive. I think currency could be supportive as well. You factor that in and you can get to that kind of mid to high single revenue number.

Speaker 6: transcript

Speaker 6: Yeah, and so I'm not not to get into too much detail. I mean, it's still October here, about 24, but I think just fundamentally you should think about it in

Yes, so im not to get into too much detail I mean, it is still October here about 24, but I think just fundamentally you should think about it.

Speaker 6: transcript

Speaker 6: uh the usual way of how uh how we've been successful in the past which is

The usual way of how we've been successful in the past which is.

Steve Hansen: Yeah, thanks, Steve. You know, so the tax has a pretty good sales book on for Q4. It's their ability to execute without the Portland terminal, which is a significant workhorse for them and a good route for us. It's been horribly challenging. So I'm optimistic that we're going to sequentially improve the numbers or so low. We better sequentially improve as we move through Q4 in podash. And we'll get that terminal back up at the end of the year.

Speaker 6: transcript

Speaker 6: some volume growth. Pricing, we've been hurt by inflation. It's been, I'll call it a significant impact I think in transportation in general in 2023.

Some volume growth.

Pricing.

We've been hurt by inflation, that's been a call. It a significant impact I think in transportation in general in 2023.

Speaker 6: transcript

Speaker 6: But I think the ability to price above inflation comes back in 24, which will be positive and accretive. I think currency is going to be could be...

But I think the ability to price above inflation comes back in 'twenty four.

Which will be positive and accretive I think currency is going to be could be supportive as well and so you factor that into and you can get to that kind of mid <unk> mid to high single revenue number.

Speaker 6: transcript

Speaker 6: as well. And so you factor that in, and you can get to that kind of mid-to-high single revenue number.

Nadeem Velani: I think the more important thing is the operating leverage. You know, as this network starts humming, as we start to continue to invest the capacity sidings that Keith mentioned and Mark mentioned, you get the benefits of running a better network as a whole. You get the benefits of some of the synergies both on the top line and on the operating costs. I think it formulates a pretty decent EPS growth number. I'm not backing off. We're not backing off what we think we can achieve. Sure there's gonna be some challenges on the macro side that we're fully aware of, and we'll get into that in January and have a better view of that.

Speaker 6: transcript

Speaker 6: And then I think the more important thing is the offering leverage, you know, is

And then I think the more important thing is the operating leverage.

Speaker 6: transcript

Speaker 6: This network starts humming as we start to continue to invest the capacity sightings that Keith mentioned and Mark mentioned, you get the benefits of running a better network as a whole. You get the benefits of some of the synergies both on the top line and on the operating costs. I think it...

This network.

Steve Hansen: And as I said, I'm hoping we gain some momentum in November and December and really hit the ground running as you looked at 2024. I know Kampitex has ambitious plans to sort of gain back the market share that they've lost in over 2023 into 2024 as a result of a number of these challenges they face. David.

It starts humming as we start to continue to invest the capacity sidings that Keith mentioned and Mark mentioned, you get the benefits of running.

Better network as a whole you get the benefits of some of the synergies.

Both on the top line and on the operating costs I think it formulates, a pretty decent EPS growth number so.

Speaker 6: transcript

Speaker 6: Form lights are pretty decent, EPS growth numbers. So I'm not backing off. We're not backing off what we think we can achieve. Sure, there's gonna be some challenges on the macro side that we're fully aware of, and we'll get into that in January and have a better view of that. But as we stand here now, I don't think we're changing the kind of the earnings model of how we've been successful in the past, both at CP and at KCS.

Steve Hansen: That's great for you, Sam.

I'm not backing off we're not backing off what we think we can achieve.

Tom Watterwitz: Our next question comes from Tom Watterwitz, UBS. Yeah, good afternoon. So I think you had a couple questions on 24. I want to kind of circle back to that a little bit. You know, I think the broader theme for transport has been, you know, weaker freight markets, lowering of expectations for 2024, you know, just to reflect that kind of lower momentum. I think you have a lot of puts and takes, right?

Sure Theres going to be some some challenges on the macro side that we're fully aware of and then we'll get into that in January.

Tom Watterwitz: Like the conversation on Podash, you would think that's easy comps in 24, but I know you got, you know, Canadian grain down a little bit. So maybe just at a high level as you go into 24, do you view that as kind of a low base or easy comp so you can have, you know, kind of stronger growth than normal? And that maybe gets you up towards where the street is with 20% earnings growth?

Nadeem Velani: As we stand here now, I don't think we're changing the kind of earnings model of how we've been successful in the past, both at CP and at KCS.

A better view of that but as we stand here now I don't think we're changing that kind of the the earnings model of how.

Nadeem Velani: As we stand here now, I don't think we're changing the kind of earnings model of how we've been successful in the past, both at CP and at KCS.

We've been successful in the past both at CP at Tcs.

Cherilyn Radbourne: Okay, great. Thank you.

Tom Wadewitz: Okay, great. Thank you.

Okay, great. Thank you.

Nadeem Velani: Thanks, Tom.

Sure.

Operator: Our next question comes from Jonathan Chappell, Evercore ISI.

Speaker 3: transcript

Speaker 3: Our next question comes from John Chappell, Evercore ISI.

Our next question comes from Jon Chappell Evercore ISI.

Jonathan Chappell: Thank you and good afternoon. John, about six months in, where do you think you stand on the unique pricing true up opportunities that you had across the entire portfolio? Is that something that's easier to do, you know, once you've integrated for a full year when you have more of a demand tailwind at your back? Was that something where you can enact pretty quickly and we should start to see the benefit of that as soon as Q4?

Speaker 3: transcript

Speaker 3: Thank you and good afternoon. I'm John O'Neal, about six months in. Where do you think you stand? I'm a unique pricing true of opportunities that you had across the entire portfolio. Is that something that's easier to do? You know, once you've integrated for a full year, when you have more of a demand tail and at your back, or was that something where you can enact pretty quickly and we should start to see the benefit of that as soon as the fourth quarter?

Thank you and good afternoon.

John <unk> about six months, then where do you think you stand on the unique pricing true up opportunities that <unk> had across the entire portfolio is that something that's easier to do once you've integrated for a full year. When you have more of a demand tail wind at your back or was that something that you can enact pretty quickly and we should start to see the benefit of that as soon as the fourth quarter.

Tom Watterwitz: Or do you think that it's like, hey, well, let's be a little careful because there is enough weakness that's kind of macro weakness in the markets that we ought to be, you know, the careflon expectations. Thank you.

John Brooks: Yeah. I would say John, we've attacked that pretty aggressively. I feel good. You know, in terms of where we are, we're still discovering things and I don't know, maybe we're in the mid-innings of that story as a whole. I can tell you, I think you'll start to see some of those benefits become probably Q1 of next year. We still have a number of areas of opportunity that we're gonna work over the next certainly this quarter and into Q1. I do believe that that's given us, that does give us a little bit of tailwind as you think about some of our pricing in terms of our RTM as you look to 2024.

Yes, I would say, we Don we've attacked that pretty aggressively.

Speaker 7: transcript

Speaker 7: Yeah, I would say we, John , we've attacked that pretty aggressively. I feel good, you know, in terms of where we're at, we're still discovering things and I don't know, maybe we're in the mid-innings of that story as a whole. I can tell you, I think you'll start to see some of those.

I feel good.

In terms of where we are.

Tom Watterwitz: Tom, I'll make a couple comments and then it's maybe you want to make comments or two, but look, I got a bit in 2023. I thought I was a said easy comp for Podash coming into 2023. And well, frankly, the numbers are, I saw 10% growth in Podash and we're at a 10% decline in Podash. So it's fool me once, but we're going to be a little more cautious on that front.

We're still discovering things.

I don't know maybe were in the <unk>.

Mid innings of that story as well as a whole.

I can tell you I think youll start to see some of those.

Speaker 7: transcript

Speaker 7: those benefits become probably Q1 of next year, but we still have a number of areas of opportunity that we're going to work over the next, certainly this quarter and into Q1.

Those benefits.

Probably Q1 of next year, but we still have a number of areas of opportunity that we're going to work over the next certainly this quarter and in the <unk>.

Into Q1.

Tom Watterwitz: Again, in that area, I expect to be set up well. You know what, we're going to move a lot of Canadian grain, US grain over the next, you know, couple quarters here. And we'll watch what materializes Tom as we move into Q2 and beyond with this crop. That's certainly more challenged in the southern part of Canada. And maybe my last comment is, you know, overall, I feel hopefully good about the synergies and that ramp up as they look the next year.

Speaker 7: transcript

Speaker 7: And I do believe that that's given us, that does give us a little bit of tail. And as you think about some of our pricing in Census Baratheon, is it looked at 2024? Yeah.

Okay.

And I do believe that that's given us.

That does give us a little bit of tailwind as you think about.

Some of our pricing in <unk> as you look to 2024.

Jonathan Chappell: Yep, that makes sense. Thank you.

That makes sense. Thank you.

Operator: Our next question comes from Cherilyn Radbourne, TD Cowen.

Our next question comes from Cherilyn Radbourne TD Cohen.

Speaker 3: Our next question comes from Sheryl and Redborn, TD Cohen.

Cherilyn Radbourne: Thanks very much. Good afternoon. As everyone is aware, the industry is facing a softer freight demand environment. I'd be curious whether there are any capital projects that you would contemplate accelerating to take advantage of lower network activity levels and better condition the company for synergy capture once we get into an eventual recovery scenario.

Thank you very much good afternoon.

Speaker 11: transcript

Speaker 11: Thanks very much for that afternoon. As everyone is aware, the industry is facing a softer, freaky man environment. And I'd be curious whether there are any capital projects that you would contemplate accelerating to take advantage of lower network activity levels and better condition the company for synergy capture once we get into an eventual recovery scenario.

As everyone is aware the industry is facing software.

NAND environment, and I'd be curious, whether or any capital projects that you would contemplate accelerating to take advantage of lower network activity level in better condition. The company from synergy capture once we get to an eventual recovery scenario.

Tom Watterwitz: I do believe this pricing environment continues to be favorable as I look to next year. It's all about the macro in the base and how we in a modal business and some of these heavy consumer driven areas rebound or not. And we're just going to be very prudent about how we, how we look at those volumes in the 2024. Yeah. And so I'm not, not to get into too much detail. I mean, it's still October here, about 24.

Keith Creel: You know, Cherilyn, I would say that from a sourcing standpoint, maybe materials, we'll look at that. As far as actually executing capital projects uniquely in this industry, we've got a pretty full plate across our network in line with the commitments we made to the STB, the Laredo Bridge, the expansion in Bensenville, the sidings. For us to have too much of an aggressive appetite, I don't think would be the right thing to do because we certainly don't want to size up and start laying a bunch of people off. I don't think that's a cycle we want to get into. We'll be opportunistic on material purchase perhaps, on steel perhaps, maybe look at locomotives.

Speaker 5: transcript

Speaker 5: You know, Shera, I would say that from a sourcing standpoint, maybe materials, we'll look at that. But as far as actually executing...

Sure I would say that from a sourcing standpoint, maybe materials, we will look at that but as far as actually executing <unk>.

Speaker 5: transcript

Speaker 5: capital projects uniquely in this industry we've got a pretty full plate across our network in line with.

Capital projects uniquely in this industry, we've got to push full plate across our network in line with the commitments we've made to the STB. The Laredo bridge the expansion at Bensenville. The sidings so for us to have too much of an aggressive appetite.

Tom Watterwitz: But I think just fundamentally, you should think about it in the usual way of how we've been successful in the past, which is, you know, some volume growth pricing. We've been, we've been heard by inflation. It's been called a significant impact, I think, in transportation in general in 2023. But I think the ability to price above inflation comes back in 24, which will be positive and accretive. I think currency is going to be, could be supportive as well.

Speaker 5: transcript

Speaker 5: The commitments we made to the SDB, the Laredo Bridge, the expansion of Bensonville, the sightings. So for us to have too much of an aggressive appetite, I don't think would be the right thing to do because we certainly don't want to size up and start laying a bunch of people off.

I don't think that would be the right thing to do because we certainly don't want to size up and start late a bunch of people off.

Speaker 5: transcript

Speaker 5: I don't think that's a cycle we want to get into. So we'll be opportunistic on material purchase perhaps, on steel perhaps.

I don't think that's the cycle, we want to get into so we will be opportunistic.

On material purchase perhaps some steel perhaps maybe look at locomotives. We are looking at our locomotive fleet and developing overall long term strategy relative.

Speaker 5: transcript

Speaker 5: Maybe look at locomotives. We are looking at our locomotive fleet and developing overall long-term strategy relative to our demands, our unique industry demands for the business growth as well as some of our U.S.C. objectives and commitments. So those two together may give us some chances, but...

Keith Creel: We are looking at our locomotive fleet and developing overall long-term strategy relative to our demands, our unique industry demands for the business growth, as well as some of our ESG objectives and commitments. So those two together may give us some chances to leverage. Again, I think they'll be opportunistic and not anything large scale.

Two our demands our unique industry demands for the business growth as well as some of our ESG objectives and commitments.

Tom Watterwitz: And so you factor that in and you can get to that kind of mid to high single revenue number. And then I think the more important thing is the operating leverage. You know, as this network starts humming, as we start to continue to invest the capacity sideings that Keith mentioned and Mark mentioned, you get the benefits of running a better network as a whole. You get the benefits of some of the synergies, both on the top line and on the operating costs.

So those two together may give us some chances.

Deleverage, but again I think there'll be opportunistic and not anything large scale.

Speaker 6: transcript

Speaker 6: Deliverage, but again, I think there'll be opportunistic and not anything large scale. Yeah, it's helping some of our tier blinds at overall capital efficiency on what we can get done in terms of the fundamental of changing ties and putting values and getting access to the network. So that's where we're seeing the benefit overall, Sherlyn. Thanks.

John Brooks: Yeah, it's helping to your point, the overall capital efficiency on what we can get done in terms of, you know, the fundamentals of changing tides and putting ballast and getting access to the network. So that's where we're seeing the benefit overall, Sherilyn.

Helping some of our to your point the overall capital efficiency on what we can get done in terms of the fundamentals of changing tide, and putting Dallas and getting access to the network. So so that's where we're seeing the benefit overall cherilyn.

Tom Watterwitz: I think it formlights a pretty decent EPS growth number. So I'm not backing off. We're not backing off what we think we can achieve. Sure, there's going to be some challenges on the macro side that we're fully aware of. And we'll get into that in January and have a better view of that. But as we stand here now, I don't think we're changing the kind of the earnings model of how we've been successful in the past, both at CP and at KCS.

Scott Group: Thank you for the time.

Thank you for the time.

John Brooks: Thanks.

Keith Creel: Thank you.

Thank you.

Unknown Executive: Okay, great.

Operator: Our next question comes from Konark Gupta, Scotia Capital.

Our next question comes from Qunar Gupta Scotia capital.

Speaker 3: transcript

Speaker 3: Our next question goes from Konark Gupta, Scotia Capital.

Konark Gupta: Thanks for taking my question. Just on the Q4, John, wanted to, you know, figure out mid-single digit RTM growth. Currently, you are down about maybe flat to down in the first three weeks of October. Coal, potash are doing fine. They're easy comps, but I think intermodal and grain are still a bit soft here. Do you expect some sort of rebound in grain, intermodal as you head into November, December? Any new contracts you can point to which might start there this month?

Speaker 5: transcript

Speaker 5: Thanks for giving my question. So, the Q4, John , you know, they're out there. You're mid-single with on-cam, bro.

Thanks for taking my question.

Q4, John wanted to figure out mid single digit RPM growth.

Speaker 12: transcript

Speaker 12: Currently you're down about maybe flat to down in the close three weeks of October . Core pot pressure during spine, they're either caused.

Currently you are down about maybe flat to down in the first three weeks of October core potash are doing fine.

But I think intermodal and bringing us.

Speaker 12: transcript

Speaker 12: I think Intermodal and Green are still a bit soft here. Do you expect some sort of rebound in Green and Intermodal as you head into November , December ? And any new contracts you can point to which might start there this month?

<unk> do you expect some sort of rebound in intermodal as we head into November December add any new contracts, you can point to which might start this month.

John Chappell: Thank you. Next question comes from John Chappell, Evercore ISI. Thank you and good afternoon.

John Chappell: John Odenbeam, about six months in, where do you think you stand on the unique pricing true up opportunities that you had across the entire portfolio? Is that something that's easier to do, you know, once you've integrated for a full year, when you have more of a demand talent at your back, or was that something that you can enact pretty quickly, and we should start to see the benefit of that as soon as the fourth quarter?

John Brooks: Yeah. You know, as I sit here today, actually we're slightly positive from an RTM perspective, Konark, in October. I do expect acceleration as we move into November and December. I think the grain outlook, not only Canadian grain, but also our US grain franchise, looks positive, as I said. Frankly, the potash area couldn't have been more troubling, and I'm optimistic we're gonna gain some rhythm to close out the year with potash. Again, we're just really ramping. You know, met coal prices are high. Teck has really strong demand. We're lapping that outage. We've got pretty strong growth in not only our met coal, but also some of our thermal coal in the US.

Yes.

Speaker 7: transcript

Speaker 7: Yeah, so, you know, as I said here today, actually we're, we're, so the positive from an RTM perspective to our in October .

As I sit here today actually were.

We're slightly positive.

From an RPM perspective tire.

October.

Speaker 7: transcript

Speaker 7: I do expect acceleration as we move into November and December . I think the grain outlook

Do expect acceleration as we move into November and December I think the grain outlook.

Speaker 7: transcript

Speaker 7: Um, not only Canadian grain, but also our US Grain franchise, uh, looks positive. As I said, um, frankly, the potash area couldn't have been more troubling. And, um, I'm optimistic we're gonna gain some some rhythm to close out the year with

John Chappell: Yeah, I would say we, John, we've attacked that pretty aggressively. I feel good. You know, in terms of where we're are, we're still discovering things, and I don't know, maybe we're in the mid innings of that story as a whole. I can tell you, I think you'll start to see some of those, those benefits as you come, probably Q1 of next year, but we still have a number of areas of opportunity that we're going to work over the next, certainly this quarter and in the Q1.

Not only Canadian grain, but also our U S grain franchise.

Looks positive as I said.

Frankly, the potash area Couldnt have been more troubling.

I'm optimistic we're going to gain some some rhythm to close out the year with.

Speaker 7: transcript

Speaker 7: But, actually, and again, we're just really ramping, you know, met coal prices are high, tech is really strong.

With potash and again, where we're just really ramping.

Met coal prices are high Tech is really strong demand, we're lapping that outage. So we've got pretty strong growth in not only our net coal, but also some of our <unk>.

Speaker 7: transcript

Speaker 7: demand were slapping that out. It's so we've got pretty strong growth in not only our net coal, but also some of our thermal coal in the US. And I do believe, as I said, you'll continue to see a, at strategically volume two or 181, 181, will continue to ramp up from more ECP, synergy, wins and share wins. That'll all help.

Thermal coal in the U S.

John Brooks: I do believe, as I said, you'll continue to see us add strategically volume to our 180, 181. We'll continue to ramp up some more ECP synergy wins and share wins. That'll all help sort of carry the day to get us to that low mid-single digits for our Q4.

We do believe.

John Chappell: And I do believe that that's given us, that that does give us a little bit of tail. And as you think about some of our pricing in Census by our TMZ, you looked at 2024. Yep, the next one. Thank you.

As I said, you'll continue to see us.

Add strategically volume to our 180 181 will continue to ramp up some more ECP synergy wins and share wins.

That all health.

Speaker 7: transcript

Speaker 7: Sort of carry the day to get us to that low new single digits for

Carrier today to get us to that low mid single digits for for our fourth quarter I'd say the last bit of color I would add to that is don't underestimate.

Cherilyn Radbourne: Our next question comes from Sheryl and Radborne, TD Cohen. Thanks very much, good afternoon. Everyone is aware of the industry is facing a softer, free-to-man environment, and I'd be curious whether there are any capital projects that you would contemplate accelerating to take advantage of lower network activity levels and better condition the company for synergy capture once we get into an eventual recovery scenario. You know, Sheryl, I would say that from a sourcing standpoint, maybe materials, we'll look at that, but as far as actually executing capital projects uniquely in this industry, we've got a pretty full plate across our network in line with the commitments we made to the SDB, the Laredo bridge, the expansion of Bensonville, the sightings.

Speaker 5: transcript

Speaker 5: 4.4 quarter. I say the last to the color I put after that is don't underestimate the power.

Keith Creel: I'd say the last bit of color I'd add to that is don't underestimate the power of revenue and RTM generation with the pent-up demand that we have in Mexico. That's obviously been subdued because of the lack of capacity and the operational challenges as we continue to free that railroad up. In fact, I think right now we're at an all-time high GTM, RTM level in the Mexico franchise, with no shortage of demand. So the automotive market, the metals market, those are two key economic drivers and demand drivers that the more capacity we free up, the more of that we get to move.

Power.

Speaker 5: transcript

Speaker 5: Our revenue and our team's generation with the PINTAF demand that we have in Mexico. It's obviously been subdued because of...

Revenue in our TM generation with the pent up demand that we have in Mexico, that's obviously been subdued because of.

Speaker 5: transcript

Speaker 5: The lack of capacity and the operational challenges is we continue to free that railroad up. In fact, I think right now, we're at an all time high GTMR TM level in the Mexico franchise, but no shortage of demand. So the automotive market, the metals market, those are two key economic drivers and demand drivers that the more capacity we free up, the more that we get to move. I'm sure they're going to be a great thing.

The lack of capacity in the operational challenges as we continue to free that railroad up in fact I think.

Right now we are at an all time high <unk> level in the Mexico franchise, but.

And no shortage of demand so the automotive market the metals market.

Two key economic drivers and demand drivers that the more capacity, we free up the more that we get to move.

Konark Gupta: Appreciate the color, guys. Thanks.

I appreciate the color. Thank you.

Operator: Our next question comes from Walter Spracklin, RBC.

Our next question comes from Walter <unk> RBC.

Walter Spracklin: Thanks very much, operator. Good afternoon, everyone. I wanted to actually come back to John on the West Coast port volumes and the strike that you had alluded to there. It's, you know, the July strike occurred in July and you cleared out your backlog pretty quickly. But the volume declines have continued quite substantially here into August and now September. I'm just wondering if you're concerned at all that, you know, given some of this is discretionary into Vancouver, and certainly we saw the decline, you know, it doesn't take you up in Prince Rupert very strongly. This discretionary aspect of these volumes going to Chicago, have they found another route? Are you concerned that that's gonna be a while to come back?

Speaker 5: transcript

Speaker 5: Thanks very much, Alfred. Good afternoon, everyone. So I want to actually come back to John on the West Coast Court volumes and the strike that you had alluded to there.

Thanks very much.

Good afternoon, everyone. So I wanted to actually come back to John on the West Coast.

West Coast Port volumes, and the strike that you had alluded to there.

Cherilyn Radbourne: So for us to have too much of an aggressive appetite, I don't think would be the right thing to do because we certainly don't want to size up and start laying a bunch of people off. I don't think that's a cycle we want to get into. So we'll be opportunistic on material purchase perhaps, on steel perhaps, maybe look at locomotives, we are looking at our locomotive fleet and developing overall long-term strategy relative to our demands, our unique industry demands for the business growth, as well as some of our UC objectives and commitments.

Speaker 5: transcript

Speaker 5: And it's, you know, the July , the strike occurred in July and you cleared out your backlog pretty quickly, but the volume declines have continued quite substantially here into August and...

Alright.

The July the strike occurred in July and you cleared out your.

Our.

Backlog pretty quickly, but the volume declines have continued quite substantially here into August.

Speaker 5: transcript

Speaker 5: and now September , and I'm just wondering if you're concerned at all that given some of this is discretionary into Vancouver, and certainly we saw the decline, you know, it doesn't affect you up in Prince Rupert very strongly, this discretionary aspect of these volumes going into Chicago, have they found another route?

And now September and I'm, just wondering if youre concerned at all that.

Given some of this is discretionary into Vancouver, and certainly we saw the decline.

Up in Prince Rupert very.

Very strongly.

Cherilyn Radbourne: So those two together may give us some chances, but to leverage, but again, I think they'll be opportunistic in not anything large scale. Yeah, it's helping some of our dear point that overall capital efficiency on what we can get done in terms of the fundamental of changing ties and putting balance and getting access to the network. So that's where we're seeing the benefit overall, Sheryl. Thank you for the time. Thanks.

Discretionary aspect of these volumes going into Chicago have they found another route.

Speaker 5: transcript

Speaker 5: Are you concerned that that's going to be a while to come back? You have an eB one? How long it comes back? And is Mexico enough for the North? That I know when you look at those port volumes, they're off the charts for Mexico, which is great in this attempt. And is that enough to offset if there is some more?

Are you concerned that that's going to be a while to come back do you have any view on how long it comes back and as Mexico enough with enough that I know when you look at those port volumes were off the charts for Mexico, which is which is great in the September.

Walter Spracklin: Do you have any view on how long it comes back? Is Mexico enough of an offset? I know, you know, when you look at those port volumes, they're off the charts for Mexico, which is great, into September. Is that enough to offset if there is some more, let's call it structural, impact from this strike that happens in Vancouver? Can you entirely offset that by Mexico, or is it just not big enough to offset that kind of decline if it were to continue?

And is that enough to offset if there is some more.

Speaker 13: transcript

Speaker 13: let's call it structural impact from this strike that happens in Vancouver, can you entirely offset that by Mexico, or is it just not big enough to offset that kind of decline if it were to continue?

Let's call it structural.

<unk> from the strike that happens in Vancouver.

Konark Gupta: Thank you. Our next question goes from Konark Gupta, Scotia Capital. Thanks for taking my question.

You entirely offset by Mexico or is it just not big enough to offset that kind of decline if it were to continue.

John Brooks: Yeah. Maybe to answer that question first, Walter, I think that's a fair call-out. No. I mean, we expect growth at Lázaro. I said I'm excited about the future of what we can do at that port, but it's gonna take some time to ramp that up. That is not a one for one by any means. I do believe structurally there's been somewhat of a change on the West Coast ports. By far, and you just look at our train lengths and where our import volume is going, it's all domestic Canada. We've got very little volume going into the US. You know, I think it'll be a function of two things.

Speaker 7: transcript

Speaker 7: Yeah, so maybe to answer that question first, Walter, I think that's a fair call out. No. I mean, we expect growth at Lazaro, and I said I'm excited about the future of what we can do at that port, but it's going to take some time.

John Brooks: Just on the keyboard, John, why don't you figure out that you might be missing with our team growth. Currently, you're down about maybe flat to down and in the close three weeks of October. Call Potash are doing fine, they're easy costs, but I think into model and creating up to bits off here, do you expect some sort of rebound and cleaning the model as you head into the level of December and any new contrast you can point to, which might start there this month.

Yes, so maybe to answer that question first Walter I think Thats, a fair call out no.

We expect growth.

It allows our ROE and I said I'm excited about the future of what we can do at that point, but.

Speaker 7: transcript

Speaker 7: to ramp that up so that that is not a one for one by any means. I do believe structurally there's been somewhat of a change on the WebCoast ports. By far, and you just look at our train lanes and where our volume import volume is going, it's all domestic Canada. And you've got very little volumes going into the US.

To ramp that up so that is not a one for one by any means.

I do believe structurally there has been somewhat of a change on that.

The West Coast ports.

By far and you just look at our train length and are and where our volume import volume is going it's all domestic Canada.

John Brooks: Yeah, so as I said here today, actually, we're probably the positives from an RTM perspective in October. I do expect acceleration as we move in November and December. I think the grain outlook, not only Canadian grain, but also our U.S, grain franchise looks positive. As I said, frankly, the Potash area couldn't have been more troubling, and I'm optimistic we're going to gain some rhythm to close out the year with the Potash.

And we've got very little little volume going into the U S.

Speaker 7: transcript

Speaker 7: You know, I think it'll be a function of two things. One is how...

No.

John Brooks: One is how quickly this market actually does rebound. I just had my team visiting all the steamship carriers over in Asia and also in Europe, and they didn't paint it a very bright picture. Certainly it's going to be through 2024 as we see that ramp up. You know, we'll have to watch. Certainly there's a reason why Vancouver and Prince Rupert and that had success. We have port fluidity. We have some economic advantages. As things tighten back.

It'll be a function of two things one is how quickly this market actually does rebound I'd just add Mike.

Speaker 6: transcript

Speaker 6: Quickly this market actually does rebound by just head.

Speaker 7: transcript

Speaker 7: My team visiting all the steamship carriers over in Asia and also in Europe . And they didn't pay in a very bright picture. Certainly it's going to be through 2024. As we see that ramp up.

My team visiting all the steamship carriers over in Asia and also in Europe.

They didn't Dana has a very bright picture.

Certainly it's going to be through 2024.

As we see that ramp up.

Speaker 7: transcript

Speaker 7: And then, you know, we'll have to watch. Certainly there's a reason why Vancouver and Prince Rupert.

John Brooks: Again, we're just really ramping. Met coal prices are high, tech is really strong demand. We're wrapping that out, so we've got pretty strong growth in not only our Met coal, but also some of our thermal coal in the U.S. Again, I do believe, as I said, you'll continue to see a add strategically volume to our 181-81. We'll continue to ramp up from more ECP synergy wins and share wins that all help sort of carry the day to get us to that low mid-single digits for a fourth quarter.

And then what.

We'll have to watch certainly there is a reason why Vancouver, and Prince Rupert and that had success.

Speaker 7: transcript

Speaker 7: And that had success. We have port validity. We have some economic advantages. As things tighten back up and...

We have a portfolio today, we have some economic advantages.

Nadeem Velani: As the volume improves in LA Long Beach, that is really what will be the tell on if you see that freight moves back up there. In the meantime, I can tell you we're focused on the business that we're handling within domestic Canada. We are laser focused on how we grow this and leverage that port with a ton of capacity down at Lázaro Cárdenas. Again, it won't be a one for one offset, but I'm confident we will grow domestically into Mexico and also into that Texas market.

As things tightened back up.

Speaker 7: transcript

Speaker 7: as the volume improves and LA won't reach it. That is really what is the tell on if you see that freight moves back up there. But in the meantime, I can tell you, we're focused on the business that we're handling within domestic.

As the volume improves in La long beach or that is really what will be the tell on an EPC that freight moves back up there, but in the meantime, I can tell you where.

We're focused on.

Business that we're handling within domestic.

Speaker 7: transcript

Speaker 7: Canada and we are laser focused on how we grow this and leverage that torque with a ton of capacity down at Lazaro. And again, it won't be a one-for-one offset, but I'm confident we will grow domestically into Mexico and also into that Texas market.

Canada.

Our laser focused on how we grow this and leverage that port with a ton of capacity.

John Brooks: I say the last bit of color I could add to that is don't underestimate our revenue and RTM generation with a pent-up demand that we have in Mexico. It's obviously been subdued because of the lack of capacity and the operational challenges is we continue to free that railroad up. In fact, I think right now we're at an all-time high GTM RTM level in the Mexico franchise and no shortage of demand, so the automotive market, the metals market, those are two key economic drivers and demand drivers that the more capacity we free up, the more that we get to move. I'm sure they're going to have bad things.

Lazar ROE and again it won't be a one for one offset.

I am confident we will grow domestically into Mexico, and also into that Texas market.

Keith Creel: I think a very encouraging comment about the Port of Lázaro Cárdenas. We just had a trade mission. Actually, the governor of Michoacán came up and met with John and myself and the team two weeks ago in Kansas City. That's a local government, the state governor that is motivated for economic growth. He understands the potential that Lázaro Cárdenas has. I can tell you this, historically, KCS had challenges. I think structurally, perhaps, you know, they didn't go deep into the US and have an opportunity to provide competitive interline rates to a West Coast alternative. That's not the case now. We do. I think the other challenge was the reliability of the gateway. There was a lot of issues with teacher strikes, with blockades.

Speaker 5: transcript

Speaker 5: I think a very encouraging comment about the Port of Lazaro. We just had a trade mission. Actually, the governor of Michoacan came up and met with John and myself and the team two weeks ago in Kansas City. So that's a local government, the state governor, that is motivated for economic growth. He understands the potential that Lazaro has. And I can tell you this. Historically, KCS has had challenges, I think, structurally, perhaps.

I think a very encouraging comment about the port of laser or we just had a <unk>.

Trade mission actually the government, our mutual can came up and met with John and myself.

And the team two weeks here in Kansas City, So that's a.

That's a local government the state government that is motivated for economic growth. He understands the potential that <unk> has and I can tell you. This historically <unk> had challenges I think structurally perhaps.

Speaker 5: transcript

Speaker 5: You know, they didn't go deep into the US and have an opportunity to provide competitive interlund rates.

They didn't go deep into the U S and have an opportunity to provide.

Walter Spracklin: Our next question comes from Walter Sprackling, RBC. Thank you very much, Robert. Good afternoon, everyone. So I want to actually come back to John on the West Coast Port volumes and the strike that you alluded to there. The strike occurred in July and you cleared out your backlog pretty quickly. But the volume declines have continued quite substantially here into August and now it's September. I'm just wondering if you're concerned at all that given some of this is discretionary into Vancouver and certainly we saw the decline.

Competitive interline rates too.

Speaker 5: transcript

Speaker 5: to a West Coast alternative. That's not the case now we do. And I think the other challenge was the reliability of the gateway. There was a lot of issues with...

To a west coast alternative that's not the case now we do.

The other challenge was the reliability of the Gateway there was a lot of issues with with the teacher strikes with blockades and I can tell you that governor was proud to tell us that they met with US two weeks ago that was days 702. He is committed to keeping that track open he is committed to growth over that port.

Speaker 5: transcript

Speaker 5: with teacher strikes with blockades. I can tell you that governor was proud to tell us today you met with us two weeks ago. That was day 702. He is committed to keeping that track open. He is committed to growth over that port. And not just that port, there are many other...

Keith Creel: I can tell you that governor was proud to tell us the day he met with us two weeks ago, that was day 702. He is committed to keeping that track open. He is committed to growth over that port. Not just that port, there are many other products. Once you create the ecosystem, and the transportation, the reliable trains back and forth to take products that are grown in that state, that are consumed in the Midwest and consumed, in parts of Canada, that this new reefer ecosystem we're creating can benefit from and serve. More to come on that. Again, does it ever replace all of it? No, but it's certainly a unique growth opportunity for us coming from Mexico, both on a domestic move as well as leveraging the international opportunity.

Not just that point there are many other products once you create the ecosystem.

Speaker 5: transcript

Speaker 5: Once you create the ecosystem in the transportation, they're reliable.

The transportation the reliable trains back and forth to take products that are grown in that state that are consumed in the Midwest and consumed and parts of Canada that this new reefer ecosystem are creating can benefit from and serve so more to come on that again does it ever replace all of it no, but it's certainly a uni.

Speaker 14: transcript

Speaker 14: trains back and forth to take products that are grown in that state that are consumed in the Midwest and consumed in parts of Canada that this new refer ecosystem we're creating can benefit from and serve. So more to come on that again, is it ever replaced all of it? No, but it's certainly a unique growth opportunity for us coming from Mexico, both of the domestic move as well as leveraging the international opportunity. Thank you.

Walter Spracklin: You know, it doesn't thank you up in Prince Rupert very strongly. This discretionary aspect of these volumes going into Chicago, have they found another route? Are you concerned that that's going to be a while to come back? Do you have any view on how long it comes back? And is Mexico enough of enough that I know when you look at those port volumes, they're off the charts for Mexico which is great into September.

Growth opportunity for us coming from Mexico, both on a domestic move as well as leveraging the international opportunity.

Nadeem Velani: Appreciate that color, Keith and John. Thank you.

Appreciate that color Keith and John Thank you.

Walter Spracklin: And is that enough to offset if there is some more, let's call it, structural impact from the strike that happens in Vancouver. Can you entirely offset that by Mexico? Or is it just not big enough to offset that kind of decline if it were to continue? Yeah, so maybe to answer that question first, Walter, I think that's fair call out. No, I mean, we expect growth that allows the row, and I said, I'm excited about the future of what we can do at that port, but it's time to ramp that up.

Operator: Our next question comes from Ken Hoexter, Bank of America.

Our next question comes from Ken Hester Bank of America.

Ken Hoexter: Hey, great, good afternoon, Keith and team. I think, Nadeem, just a quick numbers question, then a long-term question. Just the CAD 51 million, is there a reason why you didn't take that out of, I mean, you took CAD 1 million here and there in 2022 million numbers. Just want to understand why that was left in, if it was a historical thing. Long term, you kind of the, it's kind of a tale of two cities here on the, I guess, prepared remarks. It was a bit more sanguine about the economy, and it was, you know, maybe even more negative than what we heard from your Canadian peer or the Eastern rail that we just heard from.

Speaker 6: transcript

Speaker 6: great uh... good afternoon keyton team uh... so i think the team just a quick numbers question and a long-term question just the fifty one million dollars you know reason why you didn't take that out of them he took million dollars here and there in twenty two million numbers understand why that was left in it was a historical thing and long-term you can't that it's kind of a tale of two city here on on the i guess prepared remarks it was a bit more sanguine about the economy and it was

Hey, great good afternoon.

Keith and team.

I think maybe just a quick numbers question and then a long term question just the $51 million is there a reason why you didnt take that out of that $6 million here and there and 22 million numbers just want to understand why that was left and if it was a historical thing and then long term you got it.

A tale of two cities here.

I guess prepared remarks, it was a bit more sanguine about the economy.

Speaker 15: transcript

Speaker 15: It was, you know, maybe even more negative than what we heard from your Canadian peer or the Eastern Rail that we just heard from.

Walter Spracklin: So that is not a one for one by any means. I do believe structurally there's been somewhat of a change on the West Coast ports. By far and you just look at our train lanes and our and where our volume import volume is going, it's all domestic Canada. And we've got a very little volume going into the US. You know, I think it'll be a function of two things. One is how quickly this market actually does rebound.

It was maybe even more negative than what we heard from your Canadian peer or the Eastern Railroad. We just heard from but now youre talking about kind of mid single digits and it seems like a much more upbeat I don't know Q&A, it's just a very different.

Ken Hoexter: Now you're talking about kind of mid-single digits and it seems like a much more upbeat, I don't know, Q&A. It's just a very different position. I just want to understand the message that you're trying to send here in terms of the outlook, because Nadeem, you know, talking about sub 60 or into the upper 50s on the OR. Just maybe delve into the thoughts there.

Speaker 15: transcript

Speaker 15: but now you're talking about kind of mid-single digits and it seems like a much more of the under the q and a it's a very different uh... position i just want to understand the message

I just want understand the message.

Speaker 15: transcript

Speaker 15: that you're trying to send here in terms of the outlook because Nadine you know talking about

That youre trying to send here in terms of the outlook, because maybe talking about sub 60 or into the upper 50% or just maybe delve into the thoughts there.

Speaker 15: transcript

Speaker 15: sub-fixie or or into the upper fifties on the O.R. Maybe gelvin to the thoughts there.

Nadeem Velani: Yeah, I mean, we answer them like we see them. Ken, you know, you've known us for a long time, and that's the visibility we have on near term and what we expect for 2024. You know, that's our honest and transparent answers of what we think we can deliver and what we hold each other accountable for. I'll leave it at that. I mean, there is cause for, you know, concern with the macro environment. We're not of the view that it's a robust economy by any stretch. We think that what we can control, we're focused on controlling and we'll deliver.

Walter Spracklin: I just had my team visiting all the steamship carriers or in Asia and also in Europe. And I think it will be a function of two things. One is how quickly this market actually does rebound. I just had my team visiting all the steamship carriers or in Asia and also in Europe and they didn't pay in a very bright picture. Certainly, it's going to be through 2024. As we see that ramp up.

Speaker 6: transcript

Speaker 6: I mean, we answer them like we see them. You've known us for a long time, and that's the visibility we have on near-term, and what we expect for 2024. So that's our honest and transparent answers of what we think we can deliver, and what we've each other accountable for. So I'll leave it at that. I mean, I don't...

Yes.

We answer them likely see them Ken.

Ken you've known us for a long time and that's that's the visibility we have on near term and what we expect for 2024 or so.

That's that's our honest and transparent answers of of what we think we can deliver and what we hold each other accountable for solvay.

So I'll leave it at that.

Walter Spracklin: And then, you know, we'll have to watch. Certainly, there's a reason why Vancouver and Prince Rupert and that had success. We have port fluidity. We have some economic advantages. As things tighten back up and as the volume approves until a long beach, that is really will be what it will be. To tell on if you see that freight moves back up there. But in the meantime, I can tell you where we're focused on the business that we're handling within domestic Canada.

I don't.

Speaker 6: transcript

Speaker 6: There is pause for concern with the macro environment. We're not of the view that it's...

There is pause for.

Concerned with the macro environment, we're not we're not of the view that it's a.

Speaker 6: transcript

Speaker 6: robust economy by any stretch. What we think that what we can control we're focused on controlling and we'll deliver and the visibility that we have on the top line. As John mentioned in the near term over the RTM of call it three to five percent, I think is genuine.

Robust economy by any stretch, but we think that what we can control we're focused on controlling and we'll we'll deliver and the visibility that we have on the topline.

Nadeem Velani: The visibility that we have on the top line, as John mentioned in the near term over the RTM of, call it 3% to 5%, I think is genuine. Why we didn't strip out the insurance. You know, we had, I think, CAD 40 million increase in casualty made up of a bunch of one-time items through the year. You know, $20 million jury settlements and such. You know, same reason I guess we didn't strip out when we had about $150 million impact from the flooding and costs associated in 2021. We're just being consistent with how we approach that would be how we thought about that insurance recovery.

As John mentioned in the near term over the RPM of call it 3% to 5%. So I think as is.

Is genuine.

Speaker 6: transcript

Speaker 6: why we didn't strip out the insurance.

While we didn't strip out.

The insurance.

Walter Spracklin: And we are laser focused on on how we grow this and leverage that torque with a ton of capacity. And again, it won't be a one for one offset, but I'm confident we will grow domestically into Mexico and also into that Texas market. I think a very encouraging comment about the portalizer. We just had a three mission. Actually, the governor of Mitchell can came up and met with John and myself. And the team to you and Kansas City.

Speaker 6: transcript

Speaker 6: You know, we had I think a 40 million increase in casualty made up of a bunch of one-time items through the year, you know, $20 million jury settlements and such, you know.

We had I think a $40 million.

Increase in casualty made up of a bunch of one time items through the year.

$20 million jury settlements in and such.

Speaker 6: transcript

Speaker 6: same reason I guess we didn't strip out when we had about a $150 million impact from the flooding and costs associated in 2021. So we're just being consistent with how we approach that would be how we thought about that insurance recovery.

Same reason, where I guess, we didn't strip out when we had about $150 million impact from the flooding and costs associated in 2021. So we're just being consistent with how we approach that.

B, how we thought about that insurance recovery.

Walter Spracklin: So that's a that's a local government, the state governor that is motivated for economic growth. He understands the potential that Lazarus has. And I can tell you this historically case, yes, that challenges. I think structurally, perhaps, you know, they didn't go deep into the US and have an opportunity to provide competitive interline rates to a West Coast alternative. That's not the case now we do. And I think the other challenge was the reliability of the gateway.

Ken Hoexter: Great. If I can just squeeze in a follow-up. Again, you were just talking about Mexico. You sent a team of 50 or 200 down there. I guess, Keith, is there any update on that? Have you changed any operations around?

Speaker 15: transcript

Speaker 15: Great. And if I can just squeeze in a follow up the, I get you were just talking about Mexico. You sent a team of 50 or 200 down there.

Great and if I could just squeeze in a follow up.

Again, you were just talking about Mexico, you said the team of 50 or 200 down there.

Speaker 15: transcript

Speaker 15: I guess Keith is earning an update on that. Have you changed any operations around?

I guess Keith is there any update on that or have you changed any operations around.

Keith Creel: Yeah, of course we have. We've tweaked and adjusted. Yeah, we initially started, Ken, with 52 officers that were down there around the clock. You know, it was a group of every discipline within the company, from engineering to operating to IT to customer service, to kind of de-scramble the egg, for the lack of a better term. We were locked up. We were congested. We de-bottlenecked. We've now shifted from a response phase to an enhance and build phase. We made structural changes from a leadership standpoint. John Orr, who led the team, is now focused day-to-day. He's responsible for all of Mexican operations and actually up to Beaumont, which is the crew change point with the Tex Mex to take the train south through Houston. That's a natural break.

Speaker 5: transcript

Speaker 5: Yeah, of course, of course we have we've tweaked and adjusted but yeah, we we initially started with 50 52 officers that were down there around the clock, you know, was a

Yeah of course of course, we have we've tweaked and adjusted but yes.

We initially started with 50 52 officers that were down there around the clock.

Speaker 5: transcript

Speaker 5: It was a group of every discipline within the company from engineering to operating to IT to customer service.

It was a group of every discipline within the company from engineering to operating to the.

Walter Spracklin: There was a lot of issues with with teacher strikes with blockades. I can tell you that governor was proud to tell us today you met with us two weeks ago. That was day 702. He is committed to keeping that track open. He is committed to growth over that port. And not just that point, there are many other products which you create the ecosystem in the transportation, the reliable. Trains back and forth to take products that are grown in that state that are consumed in the Midwest and consumed in parts of Canada that this new refer ecosystem we're creating can benefit from and serve.

Customer service.

Speaker 5: transcript

Speaker 5: to kind of de-scramble the egg, for the lack of a better term. We were locked up. We were congested.

To kind of be scrambled the egg for lack of a better term we were locked up we were congested. So we debottleneck. We've now shifted from a response phase two and enhance and build phase we made structural changes from a leadership standpoint, John or who led the team is now focused day to day, he's responsible for all our Mexican operations and actually.

Speaker 5: transcript

Speaker 5: So we deep out of next. We've now shifted from a response phase to an enhanced and build phase. We made structural changes from a leadership standpoint. John Orr, who led the team, is now focused day-to-day. He's responsible for all of that to get operations and actually have to Beaumont, which is the crew change point with the Tex-Mex to take the train south through Houston. That's a natural break. And then of course, Mark has everything north of there. So structurally, we've got a very focused team. He's continuing to develop talent.

I have to Beaumont, which is the crude change point, where the <unk> to take the train south through Houston, That's a natural break and then of course, Mark has everything north of there.

Keith Creel: Of course, Mark has everything north of there. Structurally, we've got a very focused team. He's continuing to develop talent. We've got the place running smoothly again. We're making progress with labor, which is very encouraging. It's not the kind of progress that creates monumental quantum change like we've experienced in other parts of our network and our history. I'll tell you this, to make the change that we're talking about relative to what's been changed in the past is a testament to the understanding and commitment of the union leadership. I met personally with the president of the union, explained our journey, explained our opportunity, and how we could uniquely partner with our employees, his members, and I can tell you he and our members are excited and energized by it.

So structurally we've got a very focused team is continuing to develop talent.

Walter Spracklin: So more to come on that again, is it ever replaced all of it? No, but it's certainly a unique growth opportunity for us coming from Mexico, both of the domestic move as well as leveraging the international opportunity. Keith and John, thank you.

Speaker 5: transcript

Speaker 5: We've got the place running smoothly again. We're making progress with labor, which is very encouraging. It's not the kind of progress that creates

Got to place running smoothly again, we're making progress with labor, which is very encouraging its not the kind of progress that creates monumental quantum change like we've experienced in other parts of our network in our history, but I will tell you. This.

Speaker 5: transcript

Speaker 5: monumental quantum chains like we've experienced another parts of our network in our history, but I'll tell you this.

Ken Hexter: Our next question comes from Ken Hexter, Bank of America. Hey, great, good afternoon, Keith and team. I think the team just a quick numbers question and a long-term question, just the $51 million. Is there a reason why you didn't take that out of them? You took $1 million here and there and 22 million numbers. Just want to understand why that was left in, if it was a historical thing. And then long-term, it's kind of a tale of two cities here on the, I guess, prepared remarks.

Speaker 5: transcript

Speaker 5: To make the change that we're talking about relative to what's been changed in the past is a testament to the understanding and commitment of the union leadership. I met personally with the president of the union and explained our journey, explained our opportunity and how we could uniquely partner with our employees, his members, and I can tell you he and our members are excited and energized by it. So there's structural change, there's progress that's ongoing, and what I would say is expect it to continue.

To make the change that we're talking about relative to what's been changed in the past, it's a testament to the understanding and commitment of the Union leadership met personally with the president of the Union explained our journey explained our opportunity and how we can do uniquely partner with our employees as members and I can tell you he and our member.

Keith Creel: There's structural change, there's progress that's ongoing, and what I would say is expect it to continue.

They are excited and energized by it so they're structural change theres progress thats ongoing and what I would say is expected to continue.

Keith Creel: There's structural change, there's progress that's ongoing, and what I would say is expect it to continue.

Ken Hexter: It was a bit more sanguine about the economy and it was, you know, maybe even more negative than what we heard from your Canadian peer or the Eastern Railroad we just heard from. But now you're talking about kind of mid-single digits and it seems like a much more upbeat, I don't know, Q and A. It's just a very different position.

Speaker 16: Thanks for the time. Appreciate it.

Thanks for the time I appreciate it.

Operator: Our next question comes from Brian Ossenbeck, J.P. Morgan.

Speaker 3: transcript

Speaker 3: Our next question comes from Brian Austin Beck, JP Morgan.

Our next question comes from Brian Austin back Jay.

J P Morgan.

Speaker 16: Hey, good afternoon. Thanks for taking the question. Just wanted to ask maybe John about the closed loop automotive potential. It looks like you've been making some significant progress more recently. I don't think we heard an update on it this call, but just if you can go back to that. Are you close to ordering the cars? What's been the uptake and the interest level from some of the OEMs? Obviously, some noise with the UAW right now, but is that something we could see perhaps coming forward in 2024? Thank you.

Brian Ossenbeck: Hey, good afternoon. Thanks for taking the question. Just wanted to ask maybe John about the closed loop automotive potential. It looks like you've been making some significant progress more recently. I don't think we heard an update on it this call, but just if you can go back to that. Are you close to ordering the cars? What's been the uptake and the interest level from some of the OEMs? Obviously, some noise with the UAW right now, but is that something we could see perhaps coming forward in 2024? Thank you.

Speaker 6: transcript

Speaker 6: Hey, good afternoon. Thanks for taking the question. So just wanted to ask maybe John about the closed loop automotive potential. It looks like you've been making some significant progress more recently. I don't think we're hurting up there on this call, but just if you can go back to that, you're close to the ordering the cars, what's been the, to get the guarantee car supply, what's been the uptake and the interest level from some of the OEMs, I would say some noise with the UAW right now, but is that something we could see perhaps coming forward in 20 seconds?

Hey, good afternoon. Thanks for taking the question. So just wanted to ask maybe John about the closed loop automotive potential.

Ken Hexter: I just want to understand the message that you're trying to send here in terms of the outlook. Because Nadeem, you know, talking about sub 60 or into the upper 50s on the OR, should maybe delve into the thoughts there. I mean, we answer them like we see them. You've known us for a long time and that's the visibility we have on near-term and what we expect for 2020-24. So, you know, that's our honest and transparent answers of what we think we can deliver and what we each other accountable for.

Potential it looks like you've been making some significant progress more recently I don't think we heard an update on at this call, but just if you go back to that are you close to the ordering the cars with what's been the biggest the guarantee car supply what's been the uptake and interest level from some of the Oems obviously, some noise with the UAW right now but.

Is that something we could see perhaps coming forward in 2024.

Nadeem Velani: Yeah, Brian, it's been strong. Maybe as far as an update, we've got construction underway in the Dallas market for our auto compound there. We expect to see that up and active and frankly sold out by mid next year. Quite excited about that. I said the closed loop we've got currently receiving new buy levels right now. I think we'll receive upwards of 1,200 or so over the coming months to really be targeted at that closed loop model. We've got some good early wins there, and I expect you to see that being fully deployed as we move into the start of 2024.

Speaker 7: transcript

Speaker 7: Thank you. Yeah, Brian , it's it's been strong. Um, maybe as far as an update, we've got construction underway.

Yeah, Brian it's been strong.

Maybe as far as an update we've got construction underway in the Dallas market for auto compound there.

Ken Hexter: So I'll leave it at that. I mean, there is pause for, you know, concern with the macro environment. We're not of the view that it's robust economy by any stretch. What we think that what we can control, we're focused on controlling and we'll deliver and the visibility that we have on the top line. As John mentioned in the near-term over the RTM, I'll call it 3-5%. I think it's genuine. Why we didn't strip out the insurance.

Speaker 7: transcript

Speaker 7: in the Dallas market for AutoCompound there. We expect to see that up in active and frankly sold out by mid next year. So quite excited about that. I said the closed loop we've got currently receiving new buy levels right now. I think we'll receive upwards of 1200 or so over the coming months to really be targeted at that closed loop model. So we've got some good early winds there and I expect you to see that being fully deployed as we move into the start of 2024.

We expect to see that up in active and frankly sold out by.

By mid next year, so quite excited about that I would say the closed loop we've got.

Currently receiving new bi levels right now.

I think we'll receive upwards of 200 or so.

Over the coming months to to really be targeted asset closed loop model, though.

Ken Hexter: You know, we had I think a 40 million increase in casualty made up of a bunch of one-time items through the year. You know, $20 million jewelry settlements and such, you know, the same reason, I guess we didn't strip out when we had about $150 million impact from the flooding and costs associated in 2021. So, we're just being consistent with how we approach that would be how we thought about that insurance recovery.

We've got some good early wins, there and I expect you to see that being fully deployed as we move into the start of 2024.

Speaker 16: Okay. Thanks, John.

Brian Ossenbeck: Okay. Thanks, John.

Speaker 9: transcript

Speaker 9: Yeah, thanks, John . Mm-hmm. Our next question.

Nadeem Velani: Mm-hmm.

Okay. Thanks Pam.

Mhm.

Operator: Our next question comes from Ben Nolan, Stifel.

Our next question comes from Ben Nolan Stifel.

Speaker 16: Yeah, thanks. Appreciate you guys letting me in. John, I remember as it relates to potash, I remember a couple of years ago or last year maybe you mentioned that there might be some opportunities to move potash to the Gulf Coast. Just given everything that's gone on in Portland, is that something that's materializing or is there an opportunity to maybe do that?

Ben Nolan: Yeah, thanks. Appreciate you guys letting me in. John, I remember as it relates to potash, I remember a couple of years ago or last year maybe you mentioned that there might be some opportunities to move potash to the Gulf Coast. Just given everything that's gone on in Portland, is that something that's materializing or is there an opportunity to maybe do that?

Speaker 10: transcript

Speaker 10: Yeah, thanks. Appreciate you guys for the time. John , I remember, as it relates to POT-ASH, or remember a couple of years ago, or last year, maybe you mentioned that there might be some opportunities to move POT-ASH to the golf coast, just given everything that's gone on in Portland. Is that something that's materializing, or is there an opportunity to maybe do that?

Yes. Thanks, I appreciate you guys, let Mac John.

Yes, I remember as it relates to potash you remember couple of years ago or last year, maybe you mentioned that there might be some opportunities move potash to the Gulf Coast, just given everything that's gone on in Portland is that something that's materializing or is there an opportunity maybe to do that.

Ken Hexter: Great. And if I can just squeeze in a follow-up. Again, you were just talking about Mexico. You sent a team of 50 or 200 down there. I guess Keith, is there any update on that? Have you changed any operations around? Yeah, of course we have. We tweaked and adjusted, but yeah, we initially started with 50-52 officers that were down there around the clock. You know, it was a group of every discipline within the company from engineering to operating to IT to customer service to kind of discramble the egg for the lack of better term.

Nadeem Velani: Yeah, Ben, I think right now, given everything that's gone on, there's a little bit of pause in terms of that. I don't think anything's changed in terms of what we believe the opportunity to create sort of a what I would consider a true third outlet for export potash out of Canada, whether it's K+S, Canpotex, future BHP. I think we continue to see that as a long-term opportunity. In terms of timing on that, it's probably pushed out a little bit further than when we were thinking about it about a year ago when I spoke about it.

Speaker 7: transcript

Speaker 7: Yeah, Ben, I think right now given everything that's gone on, there's a little bit of pause in terms of that. I don't think anything's changed in terms of...

Yes, Ben.

Right now given everything that's gone on that a little bit of pause in terms of that I don't think anything's changed in terms of.

Speaker 7: transcript

Speaker 7: What we believe the opportunity to create sort of a what I would consider a true third outlet for export potash out of Canada. Whether it's K plus up campus acts future BHP. I think we continue to see that as they is a long term opportunity in terms of timing on that. It's probably pushed out a little bit further than when we're thinking about it about a year ago and I when I spoke about it. I appreciate it. Thanks.

We believe the opportunity to create sort of what I would consider a truth third outlet for export potash out of Canada.

Whether it's K plus S canpotex future BHP.

I think we continue to see that as a as a long term opportunity in terms of.

Ken Hexter: We were locked up. We were congested. So we'd be bottlenecked. We've now shifted from a response phase to an enhanced and build phase. We made structural changes from a leadership standpoint. John Orr, who led the team, is now focused day-to-day. He's responsible for all of that to get operations and actually have to Beaumont, which is the crew change point with the Tex-Mex to take the train south through Houston. That's a natural break.

Timing on that it's probably pushed out a little bit further than when we're thinking about it about a year ago when I spoke about it.

Speaker 16: All right. I appreciate it. Thanks.

Nadeem Velani: Thanks, Ben.

Alright, I appreciate it thanks.

Matt.

Operator: Our next question comes from Justin Long, Stephens.

Speaker 3: transcript

Speaker 3: Our next question comes from Justin Long, students.

Our next question comes from Justin Long Stephens.

Speaker 16: Thanks. I was wondering if you could provide an update around your expectations for the level of inflation that you're seeing in the business this year and how that compares to your early expectation for inflation as we move into 2024. When you think about that kind of price versus cost gap, how you see that trending in the quarters ahead.

Justin Long: Thanks. I was wondering if you could provide an update around your expectations for the level of inflation that you're seeing in the business this year and how that compares to your early expectation for inflation as we move into 2024. When you think about that kind of price versus cost gap, how you see that trending in the quarters ahead.

Speaker 16: transcript

Speaker 16: Thanks. I was wondering if you could provide an update around your expectations for the level of inflation that you're seeing in the business this year and how that compares to your early expectations where inflation is we move into 2024. And when you think about that, kind of price versus cost gap, how you see that trending in the quarters ahead.

Thanks, I was wondering if you could provide an update around your expectations for the level of inflation that you're seeing in the business. This year and how that compares to your early expectation for inflation as we move into 2024, and when you think about that kind of price versus cost.

Ken Hexter: And then of course Mark has everything north of there. So structurally we've got a very focused team. He's continuing to develop talent. We've got the place running smoothly again. We're making progress with labor, which is very encouraging. It's not the kind of progress that creates monumental quantum change like we've experienced on other parts of our network and our history, but I'll tell you this. To make the change that we're talking about relative to what's been changed in the past is a testament to the understanding and commitment of the union leadership.

Cost gap, how you see that trending in the quarters ahead.

Nadeem Velani: Sure. I'll take that, Justin. You know, we've seen all-in inflation closer to that 7% level. As you know, I mean, it's been pretty apparent a lot of that has been on the labor side, so the biggest cost buckets. You know, we have seen also up north the impact of some of the work rest rule changes that have also impacted comp and benefits. Overall, inflation has been a challenge. It's been a headwind much higher than we anticipated at the beginning of the year. It's partly the reason I think that margins have been where they are. I would say that you know, we expect in 2024 that to moderate.

Speaker 6: transcript

Speaker 6: Sure, I'll take that, Justin. So, you know, we've seen all-in inflation closer to that 7% level. And as you know, I mean, it's been pretty apparent. A lot of that has been on the labor side.

Sure I'll take that Justin So we've seen all in inflation closer to that 7% level.

And as you know I mean, it's been pretty.

Pretty apparent a lot of that has been on the labor side. So the biggest.

Ken Hexter: I met personally with the president of the union and explained our journey, explained our opportunity and how we could uniquely partner with our employees as members. And I can tell you he and our members are excited and energized by it. So there's structural change. There's progress that's ongoing. And what I would say is expected to continue, and I should have that appreciate it.

Speaker 6: transcript

Speaker 6: cost buckets. You know, we had seen also

Cost buckets.

We have seen also.

Speaker 6: transcript

Speaker 6: up north the impact of some of the work-wrestled changes that have also impacted the common benefits. So overall inflation has been a challenge and it's been a headwind much higher than we anticipated at the beginning of the year. And it's partly the reason I think that margins have been where they are.

Up north.

Impact of some of the <unk> rule changes that have also impacted comp and benefits. So overall inflation has been a challenge and it's been a headwind.

Much higher than we anticipated at the beginning of the year. That's partly the reason I think that margins have been where they are.

Brian Ossenbeck: Our next question comes from Brian Ossenbeck, JP Morgan. Hey, good afternoon, thanks for taking the question. So I just wanted to ask, maybe John about the closed-loop automotive potential.

Speaker 6: transcript

Speaker 6: I would say that some, you know, we expect.

I would I would say that.

Speaker 6: transcript

Speaker 6: In 24 that's a moderate, I think, you know, as some of the rate hikes and some of the action by the Fed and Bank of Canada kind of moderate, I think we should start seeing that settle. I think we should start seeing, you know, even some of the recent inflation numbers have moderated. So, you know, I think we'll be closer to call it a 4% level rather than that 7% level. And I think that will give me.

We expect in 2000 and for that to moderate I think.

John Brooks: It looks like you've been making some significant progress more recently, I don't think we're hurting up this call, but just do you think we'll go back to that, and get the guaranteed car supply, what's been the uptake in the interest bubble, some of the OEMs, I would see some noise with the UAW right now, but is that something we could see perhaps coming forward in 2024? Thank you. Brian, it's been strong.

Nadeem Velani: I think, you know, as some of the rate hikes and some of the action by the Fed and Bank of Canada kind of moderate, I think we should start seeing that settle. I think we should start seeing, you know, even some of the recent inflation numbers have moderated. I think we'll be closer to call it a 4% level rather than that 7% level. I think that's what gives me confidence in our ability to price above inflation. You know, we're still getting strong pricing. John and his team have done an excellent job. It's just, it's been a high bar this year in particular just because of the call it one-time nature of some of the labor increases.

Some of the rate hikes in and some of the action by the fed and bank of Canada kind of moderates I think we should start seeing that subtle I think we should start seeing even some of the recent inflation numbers.

Have moderated so.

I think we will be closer to call it a 4% level rather than that 7% level and I think thats, what gives me confidence in our ability to price above inflation.

Speaker 6: transcript

Speaker 6: confidence and our ability to surprise above inflation. You know, we're still getting strong pricing. John and his team have done an excellent job. It's just, it's been a high bar this year, particularly just because of the call it one time nature of some of the labor increases.

We're still getting strong pricing John and his team have done an excellent job. It's just it's been a high bar.

John Brooks: Maybe as far as an update, we've got construction underway in the Dallas market for auto compound there. We expect to see that up in active and frankly sold out, I mid next year. So quite excited about that. I said the closed-loop we've got currently receiving new by-levels right now. I think we'll receive upwards of 1200 or so over the coming months to really be targeted at that closed-loop model.

This year in particular, just because of the call it onetime nature of some of the labor increases.

Speaker 16: Got it. Thank you.

Justin Long: Got it. Thank you.

Got it thank you.

Nadeem Velani: Justin.

Got it.

Operator: Our next question comes from Benoit Poirier, Desjardins Capital Markets.

Speaker 3: transcript

Speaker 3: Our next question comes from Binwapurian, Disgardance Capital Mark.

Our next question comes from Ben <unk> Korea.

This Jordan capital markets.

Speaker 16: Yes. Thank you very much. Good afternoon, gentlemen. Keith, you provide great color about the opportunities and John about the, obviously, Mexico, but you also great rationale around Vancouver, what's happening. Could you maybe provide more color about the eastern part of your network? If we look at the Port of Montreal, there's an upcoming labor agreement with the dock workers. So I'm just wondering if you are having any discussion with shippers about some potential cargo diversion and whether the Port of Saint John could get some volume uptick. With respect to Contrecoeur expansion, we've seen some announcements lately. I know it's a very long-term opportunity, which is having some challenges, but how do you see the potential opportunities for CPKC longer term? Thank you.

Benoit Poirier: Yes. Thank you very much. Good afternoon, gentlemen. Keith, you provide great color about the opportunities and John about the, obviously, Mexico, but you also great rationale around Vancouver, what's happening. Could you maybe provide more color about the eastern part of your network? If we look at the Port of Montreal, there's an upcoming labor agreement with the dock workers. So I'm just wondering if you are having any discussion with shippers about some potential cargo diversion and whether the Port of Saint John could get some volume uptick. With respect to Contrecoeur expansion, we've seen some announcements lately. I know it's a very long-term opportunity, which is having some challenges, but how do you see the potential opportunities for CPKC longer term? Thank you.

Speaker 13: transcript

Speaker 13: Yes, thank you very much. Good afternoon, gentlemen. Keith, you provide great color about the opportunities and John about the obviously Mexico, but also great rational around Vancouver with Stephanie. Could you maybe provide more color about the eastern part of your network? If we look at the part of Montreal, there's an upcoming labor agreement with the dock worker. So I'm just wondering if you're having any discussion with shippers about some potential cargo diversion and whether the port of St. John could get some volume up thick and with respect to contraction extension, we've seen some announcement lately. I know it's a very long term opportunity, which is having some challenges, but how do you see the potential opportunities for safety case here longer term? Thank you.

Yes. Thank you very much good afternoon gentlemen.

Can you provide great color about the opportunities and John about obviously in Mexico, but also great rationale around Vancouver, what's happening could you maybe provide more color about the eastern part of the your network. If we look at the port of Montreal Bear the upcoming labor agreement with the dock work.

Benjamin Nolan: So we've got some good early wins there, and I expect you to see that being fully deployed as we move into the start of 2024. Our next question comes from Ben Nolan. Steve? Yeah, thanks. I appreciate you guys for that, man. John, I remember as it relates to Podash, or remember a couple years ago, for the last year maybe you mentioned that there might be some opportunities to move Podash to the Gulf Coast.

So I'm just wondering if you're having any discussion with shippers about some potential cargo diversion and whether the port of St. John.

Get some volume uptick and with respect.

Respect to contract kind of expansion, we've seen some announcements lately I know, it's a very long term opportunity, which is having some challenges, but how do you see potential opportunities for <unk> longer term. Thank you.

Benjamin Nolan: Just given everything that's gone on in Portland, is that something that's materializing or is there an opportunity to maybe do that? Yeah, Ben, I think right now given everything that's gone on, there's a little bit of pause in terms of that. I don't think anything's changed in terms of what we believe the opportunity to create sort of a, what I would consider a true third outlet for export podash out of Canada. Whether it's K++, CampusEx, future BHP, I think we continue to see that as a long-term opportunity, in terms of timing on that.

Nadeem Velani: I would say yes. Again, I had the team just recently overseas meeting with all the various ocean lines, and certainly Montreal and the, I don't know, it seems like annual struggles there with labor, certainly is a big topic. You know, unlike years past, we really didn't have an option, but now we've got a ready-made option with a lot of capacity and new equipment and an eager partner in DP World to get after it. I do believe those backstops in terms of if freight does need to move out of Port of Montreal, St. John's presents us now a great opportunity to move that freight.

Speaker 7: transcript

Speaker 7: Kevin, I would say yes. Again, I had the team just recently.

Kevin.

I would say yes.

Again I had the team just recently.

Speaker 10: transcript

Speaker 10: overseas meeting with all the various ocean lines and certainly Montreal and the, I don't know, it seems like annual travel there with labor, certainly of the big topic. Unlike your past, we really didn't have an option, but now we've got a ready-made option with a lot of capacity and new equipment and eager partner and DP world to get after it. So.

Overseas meeting with all the various ocean lines and certainly Montreal in the.

It seems like annual rentals, there with labor certainly is a big topic.

Unlike years past, we really didn't have an option, but now we've got a.

Readymade option with a lot of capacity.

New equipment, and eager partner and DP world to get after it.

Justin Long: It's probably pushed out a little bit further than when we're thinking about it about a year ago when I, when I spoke about it. All right, appreciate that. Our next question comes from Justin Long, Steven? Thanks. I was wondering if you could provide an update around your expectations for the level of inflation. And you're saying in the business this year, and how that compares to your early expectation for inflation, as we move into 2024.

So.

Speaker 10: transcript

Speaker 10: I do believe those backstops in terms of if freight does need to move out of Port of Montreal, St. John Presents us now a great opportunity to move that freight. In terms of Contra Court, you know, as of right now, it's not a facility or port that

I do believe.

Those backstops in terms of if freight does need to move out of port of Montreal, St. John curve presents us now a great opportunity to that too.

Nadeem Velani: In terms of Contrecoeur, you know, as of right now, it's not a facility or port that we will be looking to serve. Now, who knows? Those discussions and the maneuvering of access to that port is ongoing, but frankly, our efforts are focused on continuing to service Port of Montreal and grow St. John as fast as we can grow it.

Move that freight.

In terms of the cost curve as of right now.

Not a facility or a port.

Speaker 10: transcript

Speaker 10: that we will be looking to serve. Now, who knows those discussions and the maneuvering of access to that port is ongoing, but our frankly, our efforts are focused on continuing to service port of Montreal and grossing John is absolutely growing. Thank you, Vernon.

That we will be looking to serve now who knows.

Those discussions and Nuvaring of access to the port is ongoing but our frankly, our efforts are focused on continuing to.

Justin Long: And when you think about that, kind of price versus cost gap, how you see that trending in that quarter's ahead. Sure, I'll take that, Justin. So we've seen all the inflation closer to that 7% level. And as you know, I mean, it's been pretty apparent. A lot of that has been on the labor side, so the biggest cost bucket. You know, we have seen also up north the impact of some of the work rest rule changes that have also impacted compound benefits. So overall inflation has been a challenge. It's been a headwind much higher than we anticipated the beginning of the year. And it's probably the reason I think that that margins have been where they are.

Service point of Entre, all and grow St. John This ethylene growth.

Keith Creel: Okay. Thank you very much, Benoit Poirier.

Okay. Thank you very much.

Nadeem Velani: Thanks, Benoit Poirier.

Okay.

Operator: Our final question comes from David Vernon, Bernstein.

Speaker 3: transcript

Speaker 3: A final question comes from David Vernon. First team.

Our final question comes from David Vernon Bernstein.

Speaker 17: Hey, good afternoon, guys, and thanks for hosting the call. I wanted to dig in a little bit to the headcount commentary. You know, sequentially, it looked like we had headcount growth, and Nadeem, I think you mentioned we're gonna be coming down in headcount. Can you help us understand kind of what we should be expecting in sort of Q4 for cost per employee and where the heads are shifting and what's driving sort of the shift? Is this in the transportation function? Is this overhead functions? Is this just moving jobs up and down the bigger network here? I'm just trying to get a sense for what's happening with the choppiness in the headcount. Thanks.

David Vernon: Hey, good afternoon, guys, and thanks for hosting the call. I wanted to dig in a little bit to the headcount commentary. You know, sequentially, it looked like we had headcount growth, and Nadeem, I think you mentioned we're gonna be coming down in headcount. Can you help us understand kind of what we should be expecting in sort of Q4 for cost per employee and where the heads are shifting and what's driving sort of the shift? Is this in the transportation function? Is this overhead functions? Is this just moving jobs up and down the bigger network here? I'm just trying to get a sense for what's happening with the choppiness in the headcount. Thanks.

Speaker 4: transcript

Speaker 4: Hey, good afternoon, guys. And thanks for listening to call. I wanted to dig in a little bit to the head count commentary. It sequentially looked like we had head count growth. And Nadim, I think you mentioned we're going to be coming down to head count. Can you help us understand kind of what we should be expecting in sort of Q4 for a cost for employee? And where the heads are shifting and what's driving sort of the shift is this in the transportation function, is this overhead function, is this just moving jobs up and down the bigger network here. I'm just trying to get a sense of what's happening with the choppiness in the head count. Thanks.

Hey, good afternoon guys.

Thanks for hosting the call I wanted to dig in a little bit to the head count commentary and sequentially. It looked like we had head count growth and Nadeem I think you mentioned, we're going to be coming down in head count.

Can you help us understand kind of what we should be expecting in sort of Q4 for cost per employee and where the heads are shifting and what's driving sort of the shift in the transportation function. In this overhead functions is this just moving jobs up and down the bigger network here I'm, just trying to get a sense for what's happening with the choppiness in the head count.

Nadeem Velani: I would say that some, you know, we expect in 24 that to moderate. I think, you know, as some of the rate heights and some of the action by the Fed and Bank of Canada kind of moderate. I think we should start seeing that subtle. I think we should start seeing, you know, in some of the recent inflation numbers have moderated. So, you know, I think we'll be closer to call it a 4% level rather than that that's 7% level. And I think that's what gives me confidence our ability to price above inflation. You know, we're still getting strong pricing. John and his team have been an excellent job. It's just it's been a high bar.

Nadeem Velani: Yeah. No, fair question. You know, we had anticipated this for some time. I'd kinda pointed to Q4 as an opportunity to see that inflection. You know, we've been ahead of the curve in terms of hiring and training, just given the challenges I think the economy has seen in terms of getting qualified employees and servicing customer. That doesn't change. But you know, as you see attrition work through our industry and work through our system and as volumes don't materialize in the same way that you can expect, you know, grain, for example, you know, we know that it's gonna be a less robust next year than this year.

Speaker 6: transcript

Speaker 6: No fair question. So, you know, we didn't just make it this for some time. I kind of pointed to key for as an opportunity to see that inflection. You know, we've been ahead of the curve in terms of hiring and training, just given the challenges. I think the economy has seen in terms of getting qualified employees and servicing customer. That doesn't change, but, you know, as you see, attrition,

No fair question. So we had we had anticipated that for some time.

Pointed to Q4 as.

Soon to see that that inflection.

We've been ahead of the curve in terms of hiring and training just given the.

The challenges I think the economy is seen in terms of getting.

Qualified employees and servicing customer that doesn't that doesn't change but.

As you see attrition.

Speaker 6: transcript

Speaker 6: through our industry and work through our system. And as volumes don't materialize the same way that you can expect, you know, grain, for example, we know that it's gonna be a less robust next year than this year. You can make a call in terms of what you do from hiring and training. And so there's some seasonality as well that I mentioned earlier in terms of headcount. And then when you think about some...

Through our industry and worked through our system.

Volumes don't materialize the same way that you can expect.

Benoit Poirier: This year particular just because of the call it one time nature of some of the labor increase. Francis, Katta, thank you. Our next question comes from Benoit Poirier, Disgardance, Cat, Roll Markets. Yes, thank you very much. Good afternoon, gentlemen. Keith, you provide great color about the opportunities and John about the obviously Mexico, but also great, rational around Vancouver, what's happening? Could you maybe provide more color about the eastern part of your network?

Grain for example, we know that it's going to be.

Less robust next year than this year, you can make a call in terms of what you do from a hiring and training.

Nadeem Velani: You can make a call in terms of what you do from a hiring and training. There's some seasonality as well, as I mentioned earlier, in terms of headcount. When you think about the opportunity as far as you know, synergies, we were gonna have some natural opportunities as far as headcount on the synergy side. You know, as you get operating leverage, so as you turn to being able to run longer trains, more density, and so forth, you need less employees per GTM and for the volumes you're moving. It's a combination of all those factors that's gonna drive a bit of a reduction in headcounts sequentially.

And so there is some seasonality as well as I mentioned earlier in terms of head count and then when you think about some of the.

Speaker 6: transcript

Speaker 6: The opportunity as far as synergies, we were going to have some natural opportunities as far as headcount on the synergy side.

The opportunity as far as.

Synergies.

Going to have some natural opportunities as far as head count on the synergy side and then.

Speaker 6: transcript

Speaker 6: And then, you know, as you get offering leverage, so as you turn to being able to run longer trains, more density and so forth, we need less employees per GTM and for the volumes you're moving. So it's a combination of all those factors that's gonna drive a bit of overduction and head counts sequentially. And as far as comfort, employee, you know, somewhat dependent on stock-based comp now.

As you get operating leverage so as you turn to.

Being able to run.

Benoit Poirier: If we look at the port of Montreal, there's an upcoming labor agreement with the dock worker, so I'm just wondering if you're having any discussion with shippers about some potential cargo diversion and whether the port of St. John could get some volume optic and with respect to contract expansion, we've seen some announcement lately. I know it's a very long-term opportunity, which is having some challenges, but how do you see the potential opportunities for a safety case here longer term?

Longer trains more density and so forth you need less employees for <unk> and for the volumes are moving.

It's a combination of all those factors.

That's going to drive a bit of a reduction in head count sequentially.

Nadeem Velani: As far as comp per employee, you know, somewhat dependent on stock-based comp. Now, that's been a bit of a tailwind near term. Who knows where that's gonna end of the year, but kinda mid-single digits is probably a fair estimate as we stand here today.

And as far as comp per employee somewhat dependent on stock based comp now.

Speaker 15: transcript

Speaker 15: That's been a bit of a tailwind near term, who knows where that's gonna end into the year, but kind of mid-single digits is probably a fair estimate as we stand here today. All right, thanks very much for the added call, Agas.

That's been a bit of a tailwind near term, who knows where that's going to end.

At the end of the year, but kind of mid single digits.

Is probably a fair estimate as we stand here today.

Speaker 17: All right. Thanks very much for the added color, guys.

Benoit Poirier: Thank you. I would say yes. Again, I have the team just recently overseed the meeting with all the various ocean lines and certainly Montreal and I don't know, it seems like annual travel there with labor, certainly of the big topic. Unlike your past, we really didn't have an option, but now we've got a ready-made option with a lot of capacity and new equipment and eager partner in DP World to get after it.

Alright, thanks, very much for data color guys.

Nadeem Velani: Okay. Thanks, David.

Thanks, David.

Operator: We have reached our allotted time for Q&A.

Speaker 3: transcript

Speaker 3: We have a lot of time for Q&A. Yes, sir. My turn to call back over to you.

We have retained income for Q&A, Sir I'd like to turn the call back over to you.

Keith Creel: Okay. Well,

Operator: Yes, sir. I'd like to turn the call back over to you.

Keith Creel: Okay. Thank you, operator. Well, listen, thanks for everyone taking the time to spend with us this afternoon. I can say in closing that we're six months into our forever story, and I'm extremely proud of the progress that we're making, both integrating and executing. We're realists. We're not immune to the macro challenges that we're all facing with this economy. But I can tell you, we're focused on controlling what we can control, and that's to operate safely, always efficiently, and continue to sell to what is a very unique three-nation network that we've created that's allowing us to grow in a unique way at a micro level, be it share shift, be it customer solutions with new markets, be it take trucks off the road in spite of the micro environment. When the macro comes back and turns favorable, now it gets exciting.

Speaker 5: transcript

Speaker 5: Okay, thank you operator. Well, listen, thanks for everyone taking their time to spend with this this afternoon. And I can say in closing that...

Okay. Thank you operator, Melissa thanks for everyone, taking their time to spend with US This afternoon and I can say in closing that.

Speaker 5: transcript

Speaker 5: We're six months into our forever story and I'm extremely proud of the progress that we're making both integrating.

We're six months into our forever story, and I am extremely proud of the progress that we're making both integrating and executing.

Speaker 5: transcript

Speaker 5: and executing. Um, we're real, us, we're not immune to the macro challenges that we're all facing with this economy, that I can tell you, we're focused on controlling what we can't control.

We're realists, we're not immune to the macro challenges that we're all facing with this economy that I can tell you. We're focused on controlling what we can control and that is to operate safely always sufficiently and continue to sell to what is a very unique three nation network that we've created that's allowing us to grow in a unique way at a micro level.

Speaker 5: transcript

Speaker 5: And that's operating safely always, efficiently, and continue to sell to what is a very unique three-nation network that we've...

Benoit Poirier: So I do believe those back stops in terms of if freight does need to move out of port of Montreal, St. John could present us now a great opportunity to move that freight. In terms of contract current, as well right now, it's not a facility or port that we will be looking to serve. Now, who knows, those discussions and the maneuvering of access to that port is ongoing, but our frankly, our efforts are focused on continuing to serve this port of Montreal and grow St. John is absolutely growing.

Speaker 5: transcript

Speaker 5: that's allowing us to grow in a unique way at a micro level, be it's sheer shift, be it customer solutions, renew markets, be it trucks off the road, and spot on the micro environment. And when the macro comes back and turns favorable, now it gets decided.

The share shift via customer solutions with new markets take trucks off the road in spite of the microenvironment and when the macro funds back in turns favorable now gets side. So we look forward to sharing our fourth quarter results next time, we talk in January.

Keith Creel: We look forward to sharing our Q4 results next time we talk in January. Thank you.

Speaker 5: transcript

Speaker 5: So we look forward to sharing our fourth quote results next time we talk in January . Thank you.

Thank you.

Operator: This concludes today's conference call. You may now disconnect.

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

Okay.

[music].

Benoit Poirier: Thank you very much, Chancellor. Thank you very much. Our final question comes from David Vernon, bursting. Good afternoon, guys, and thanks for the call. I wanted to dig in a little bit to the head count commentary. Sequentially, it looked like we had head count growth and Nadeem, I think you mentioned we're going to use them a down-to-head count. Can you help us understand what we should be expecting in sort of Q4 for a cost for employee and where the heads are shifting and what's driving sort of the shift? Is this in the transportation function? Is this overhead function? Is this just moving jobs up and down the bigger network here?

Nadeem Velani: I'm just trying to get a sense of what's happened with the choppiness in the head count. Thanks. No fair question. So, you know, we had anticipated this for some time. I kind of pointed to Q4 as an opportunity to see that inflection. You know, we've been ahead of the curve in terms of hiring and training, just given the challenges. I think the economy has seen in terms of getting qualified employees and servicing customer.

Nadeem Velani: That doesn't change, but, you know, as you see, attrition through our industry and work through our system, and as volumes don't materialize the same way that you can expect, you know, grain, for example, you know, we know that it's going to be a less robust next year than this year. You can make a call in terms of what you do from hiring and training. And so there's some seasonality as well that's mentioned earlier in terms of headcount.

Nadeem Velani: And then when you think about some, the bottom of the opportunity as far as, you know, synergies, we were going to have some natural opportunities as far as headcount on the synergy side. And then, you know, as you get operating leverage, so as you turn to being able to run longer trains, more density and so forth, you need less employees per GTM and for the volumes you're moving. So it's a combination of all those factors that's going to drive a bit of over time.

Nadeem Velani: And that's a lot of production and headcounts sequentially. And as far as comfort, boy, you know, somewhat dependent on stock based on now that's been a bit of a tailwind near term, who knows where that's going to end into the year, but kind of mid single digits is probably a fair estimate as we stand here today. All right, thanks very much for the ethical guys. We have a lot of time for Q&A. Yes, sir, my turn to call back over you.

Keith Creel: Okay, thank you operator. Well, listen, thanks for everyone taking their time to spend with us this afternoon. I can say in closing that we're six months into our forever story. And I'm extremely proud of the progress that we're making both integrating and executing. We're real us. We're not immune to the macro challenges that we're all facing with this economy that I can tell you we're focused on controlling what we can control.

Keith Creel: And that's to operate safely always efficiently and continue to sell to what is a very unique three nation network that we've created that's allowing us to grow in a unique way at a micro level. Be it sheer shift, be it customer solutions, renew markets, be it take trucks off the road and spiral the micro environment.

Unknown Executive: And when the macro comes back and turns favorable, now gets society. So look forward to sharing our fourth quarter results next time we talk in January. Thank you.

Unknown Executive: This concludes today's conference call. You may now disconnect.

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