Q4 2023 Canadian National Railway Co Earnings Call

Good afternoon. My name is Julian I'll be your conference operator today.

Good afternoon. My name is Julianne and I will be your conference operator today.

Julianne: Welcome to CN's 4th Quarter and Full Year 2023 Financial and Operating Results Conference Call.

Welcome to CN fourth quarter, and full year 2023 financial and operating results conference call.

Julianne: All participants are now in listen-only mode.

All participants are now in listen only mode.

Julianne: After the speaker's remarks, there will be a question and answer session.

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

Julianne: During which, we ask that you kindly limit yourself to one question.

During which we ask that you kindly limit yourself to one question.

Julianne: I'd now like to turn the call over to Stacey Alderson, Assistant Vice President, Investor Relations.

I'd now like to turn the call over to Stacie Alderson.

Just didn't vice President Investor Relations, ladies and gentlemen, that's all of a sudden.

Stacey Alderson: Ladies and gentlemen, Ms. Alderson.

Stacey Alderson: Thank you, Operator. Bonjour à tous et merci de vous joindre à notre après-conference sur les résultats du quatrième trimestre et l'année 2023.

Thank you operator, bullshit <unk> pedal comfort also leases have you kept the emptiness H Lenny do no that's.

Stacey Alderson: Good afternoon, everyone, and thank you for joining us for CM's fourth quarter and full year 2023 Financial and Operating Results Conference.

Good afternoon, everyone and thank you for joining us for Cn's fourth quarter and full year 2023 financial and operating results conference call before we begin I'd like to draw your attention to the forward looking statements and additional legal information available at the beginning of the presentation. As a reminder, today's conference call contain.

Stacey Alderson: Before we begin, I'd like to draw your attention to the forward-looking statements and additional legal information available at the beginning of the presentation.

Stacey Alderson: As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the U.S. and Canadian securities law.

Certain projections and other forward looking statements within the meaning of the U S and Canadian Securities laws.

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

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

Stacey Alderson: They are more fully described in our cautionary statement regarding forward-looking statements in our presentation.

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

Stacey Alderson: After the prepared remarks, we will conduct a Q&A session.

After the prepared remarks, we will conduct a Q&A session I would ask that you. Please limit yourself to one question. So we can get to hear from as many of you as possible.

Stacey Alderson: I would ask that you please limit yourself to one question so we can get to hear from as many of you as possible.

Stacey Alderson: The IR team will be available after the call for any follow-up questions.

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

Speaker Change: Joining us on the call today are Tracy Robinson, our President and CEO,

Joining us on the call today are Tracy Robinson, our president and CEO Pat.

Speaker Change: Pat Whitehead, our Chief Network Operations Officer

Whitehead, our Chief Network operations Officer.

Speaker Change: Derrick Taylor, our Chief Field Operations Officer

Eric Taylor, our Chief Field operations Officer.

Speaker Change: Doug McDonald, our Chief Marketing Officer, and Jishma Kul, our Chief Financial Officer.

It doesn't Donald our Chief marketing Officer, and just Matt Walsh, our Chief Financial Officer.

Speaker Change: It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robin.

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

Tracy Robin: Merci, c'est fait, bienvenue à tous.

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Tracy Robin: I want to start today by welcoming Derek and Pat to their first call. It's great to have you guys with.

I want to start today by welcoming Derek can pass through their first call. It's great to have you guys with us and I also want to extend a warm welcome to Remy who's out in the field today immersing himself in the operation you all have a chance to meet him over the next two months yourself.

Tracy Robin: And I also want to extend a warm welcome to Remy, who's out in the field today, immersing himself in the operation. You'll all have a chance to meet him over the next few months or so.

Tracy Robin: Doug remains in charge of our commercial organization and our growth efforts, and he is, of course, here today with us. Doug will be retiring this year.

Doug remains in charge of our commercial organization and our growth efforts and he has of course here today with us that will be retiring this year and there'll be a little more to say on this at that time, but that's very much appreciated Doug your presence and partnership over the last couple of years and I know that some.

Tracy Robin: There will be a little more to say on this at that time, but I very much appreciated, Doug, your presence and partnership over the last couple of years. And I know that Doug will do a great job in getting running set up with our commercial team. Now this transition later this year will be seamless to both our customers and our employers.

Doug will do a great job in getting ready set up with our commercial team now. This transition later this year will be seamless to both our customers and our employees.

Tracy Robin: We are railroading here for the long term.

We are railroading here for the long term and we're fortunate to have a lot of very strong experienced talent.

Tracy Robin: and we're fortunate to have a lot of very strong and experienced talent.

Tracy Robin: And we're going to supplement that now and again with different backgrounds and perspectives.

And we're going to supplement that knowing again with talent with different backgrounds and perspectives and this was going to make us even stronger which is important as we continue to refine our path forward and advance our growth mandate.

Tracy Robin: This is going to make us even stronger, which is important if we continue to refine our path forward and advance our growth network.

Tracy Robin: And we're also taking a long-term approach when it comes to our network.

And we're also taking a long term approach when it comes to our network.

Tracy Robin: We know that our network has always been core to the CM Advantage and to our ability to provide our customers with solutions for their business.

We know that our network has always been core to see an advantage and to our ability to provide our customers with solutions for their businesses.

Tracy Robin: Where it makes sense to add to our network the position of to do more or better of this, we'll do so.

Where it makes sense to add to our network to position us to do more and better of this we'll do it when the fourth quarter, we closed on the CBS, which will give us more opportunities to densify the eastern part of our network in coming years.

Tracy Robin: and in the fourth quarter

Tracy Robin: Closed on the CBNN

Tracy Robin: will give us more opportunities to densify the eastern part of our network in coming years.

Tracy Robin: and in December we signed an agreement to purchase the Iowa Northern, a nice addition to our network in the Midwest. It will give customers in that area better market access

And in December we signed an agreement to purchase.

The Iowa Northern is a nice addition to our network in the Midwest. It will give customers in that area of better market access and for US It will deepen our network reach and boost our AG business.

Tracy Robin: And for us, it will deepen our network reach and boost our age.

Tracy Robin: So I want to welcome those who might be listening in for the first time today to our railroad.

So I want to welcome those who might be listening in for the first time today to a railroad.

Tracy Robin: We do expect to fully integrate the Iowa Northern property later this year pending a positive outcome of the SCB review process.

Do we expect to fully integrate the Iowa Northern property later this year pending a positive outcome with the STB review process.

Tracy Robin: Before I ask the team to get into the details, I'll just recap where we are, and I'll start

So before I ask the team to get into the details I'll, just recap, where we are and I'll start with safety.

Tracy Robin: We end the year with some meaningful improvements in both our accidents and injuries.

We ended the year with meaningful improvements in both our accident and injury.

Tracy Robin: and I am very pleased with the worst of the incidents and the impact.

And I am very pleased with both of them work and funding to this and the impact it has had.

Tracy Robin: And we're going to continue those efforts. This will be a relentless drive.

We're going to continue those efforts this will be a relentless drive to zero.

Tracy Robin: and the operation.

And on the operation.

Tracy Robin: We came into the fourth quarter a little battle-hardened after a couple of difficult quarters left.

We came into the fourth quarter, a little battle hardened after a couple of difficult quarters last year.

Tracy Robin: and where we managed to reframe the session and a number of external charges.

We managed through a freight recession and a number of external shocks and in Q4, we have the gift of so kind of with and our operations team took full advantage posting some really strong online and velocity metrics.

Tracy Robin: And in Q4, we had the gift of some kinder weather, and our operations team took full advantage, posting some really strong on-time and velocity.

Tracy Robin: And with regard to the corners of this year, we kicked off with some extreme winter temperatures across the network. But as we lift out of that, the team is well on their way to getting this place back to that same level of opportunity.

So as we rounded the corner into this year, we kicked off with some extreme winter temperatures across the network, but as we lift out of that the team is well underway to getting this place back to that same level of operation.

Tracy Robin: Whatever comes at us, we know that sticking with this model will ensure resiliency, enabling us always to perform at our best.

Whenever it comes out as we know that sticking with this model will ensure resiliency, enabling us always to perform at our best.

Tracy Robin: Our full year car velocity, for example, and this is including the challenges of the second and third quarter, was 215 miles per day. That's a 9% improvement over 2020.

Our full year car velocity for example, and this is including the challenges of the second and third quarter with 213 miles per day, that's a 9% improvement over 2022.

Tracy Robin: We're running the plant, we're getting more out of our assets, and this is driving some very consistent service levels to our customers.

Running to plan, we're getting more out of our assets and this is driving some very consistent service levels to our customers a strong consistent resilient operation is table Stakes in this industry and the necessary foundation to move the economy and for us to deliver our growth agenda.

Tracy Robin: Strong, consistent.

Tracy Robin: The resilience operation is table space in this industry and the necessary foundation to move the economy and for us to deliver our growth.

Tracy Robin: The end of the day, this is about doing what we say we do.

At the end of the day. This is about doing what we say.

Tracy Robin: We have a plan, and we're exiting.

We have a plan and we're executing.

Tracy Robin: We've been building up our track record operationally over these last seven quarters, and I think I speak for the entire...

We've been building up our track record operationally over these last seven quarters, and I think I speak for the entire team that it feels really good to have that CN we're back.

Tracy Robin: It feels really good to have that CN group back.

Tracy Robin: Turning to our quarter and full year results. I'll keep it to just a few highlights.

Turning to our quarter and full year results I'll keep it to just a few highlights.

Tracy Robin: Our fourth quarter is just VCS with 4% lower than us.

Our fourth quarter, adjusted EPS was 4% lower than last year, and our operating ratio was 59, 3%.

Tracy Robin: and our operating ratio was 59.3%.

Tracy Robin: For more information, visit www.fema.gov.

For the year adjusted EPS was 2% lower and our operating ratio was 68%. These are the kind of results. We can be very proud of in a challenging environment.

Tracy Robin: These are the kind of results we can be very proud of in a challenging environment.

Tracy Robin: And we said last quarter that we've seen the bottom of the volumes, and this is played out as we've

And we said last quarter that we've seen the bottom in volumes and this has played out as we expected we've seen sequential improvement in our Q4 rpms were up 10%.

Tracy Robin: We've seen sequential improvement, and our Q4 RTMs were up 10%.

Tracy Robin: Now there remains question marks on the economy as we move into 2021.

Now there remains a question mark on the economy as we move into 2024, we're expecting a continued improvement as the year progresses, and just now will give you more detail on all of our assumptions.

Tracy Robin: We're expecting a continued improvement as the year progresses, and just now we'll give you more details on all of our...

Tracy Robin: Beyond the Lifts from a Strengthening Economy, we're also working on our growth

Beyond the lift from a strengthening economy, we're also working our growth initiatives.

Tracy Robin: Leverage our network, our strong service, and our customer and supply chain partnerships.

Leverage our network, our strong service and our customer and supply chain partnerships and these are starting to bear fruit and in some cases more quickly than we plan Doug will give you some color on that and you'll hear path endured review the state of our operations and we're ready for the volumes to start to lift.

Tracy Robin: and these are starting to bear fruit and in some cases more quickly than they

Tracy Robin: Doug will give you some color on this and you'll hear Pat and Derek review the state of our operations and we're ready for the volumes to start.

Doug McDonald: This gives me the confidence in our EPS guidance of approximately 10% growth over 2025.

This gives me the confidence in our EPS guidance of approximately 10% growth over 2023.

Speaker Change: I'll now hand it over to the team to fill out the details. Pass, you're up.

I'll now hand, it over to the team to fill out the detail that Europe.

Pass: Mel C. Tracy, and Bienvenue a tous. It's great to be on the call today. I'll begin with safety. In the fourth quarter, our injury-preventive ratio was down 14%, and our accident rate was down 29%.

Tracy.

It's great to be on the call today I'll begin with safety in the fourth quarter, our injury frequency ratio was down 14%.

Our accident rate was down 29%.

Pass: These results cast a solid four-year performance, demonstrating our progress toward a commitment-based safety culture.

These results capped a solid full year performance demonstrating our progress toward a commitment based safety culture for.

Pass: For the whole year, injury frequency ratio improved 13% and the accident rate improved 17%.

For the full year injury frequency ratio improved 13% and the App.

Accident rate improved 17%.

Pass: This represents a record low year for injuries at CN, but we know we can and that we must do better.

This represents a record low year for injuries at CES, but we know we can and that we must do better.

Pass: I'm proud of the positive stride we're making on our safety metrics, but this is a journey, and we won't be satisfied until all employees go home safely at the end of every shift. We are focused on our vision of a workplace that is free of accidents and injuries.

I am proud of the positive strides, we're making on our safety metrics, but this is a journey and we won't be satisfied until all employees go home safely at the end of every shift we are focused on our vision of a workplace that is free of accidents and injuries. We are committed to working as a team across all crafts and departments to achieve.

Pass: We are committed to working as a team across all crafts and departments to achieve this vision.

This vision training and development.

Pass: Training and Development

Pass: Technology and behavior-based safety activities are essential to enhancing our safety.

Technology and behavior based safety activities are essential so enhancing our safety culture.

Pass: One of the keys to supporting better safety outcomes is running a more predictable operation.

One of the key supporting better safety outcomes is running a more predictable operation.

Pass: Predictability is what underpins our velocity and our resilience.

Predictability is what underpins our velocity and our resiliency.

Pass: CN's Scheduled Operating Model has delivered seven consecutive quarters of operational and service activities.

He is scheduled operating model has delivered seven consecutive quarters of operational and service excellence.

Pass: Now, as we've said, the plane is dynamic and needs to adjust to our traffic. So, with volumes rising, we have been refining our train pack.

No as we said the plan is dynamic and needs to adjust to our track so with volumes rising we have been refining our training package. For example, we added a train start out of Prince Rupert and we adjusted the Vancouver train plan to accommodate an uptick in volume in this quarter.

Pass: For example, we added a train star out of Prince Rupert, and we adjusted the Vancouver train plan to accommodate an uptick of volume in this course.

Pass: Departing and arriving trains on time, what we call launch and land, continues to be a key focus of both the network operations and field.

Departing and arriving trains on time, what we call launch and land continues to be a key focus of both the network operations and field teams.

Pass: These are the basics of scheduled railroads.

These are the basics of scheduled railroading fourth quarter origin train performance remained solid and in line with prior quarters at around 90% right, where we needed to be to ensure on time train meets.

Pass: Fourth quarter origin train performance remained solid and in line with prior quarters at around 90%, right where we needed to be to ensure on-time train performance.

Pass: Q4 destination train performance was 70.

Q4 destination train performance was 70% and we know there's room for improvement here by continuing to reduce our train me delays in making timely crew swaps and intermediate terms.

Pass: And we know there's room for improvement here by continuing to reduce our training delays and making timely crew swaps at intermediate perm.

Pass: Please refer to how the network and field teams have managed the complexity to crew scheduling introduced by the new Canadian work rest.

I am pleased with how the network and field teams that manage the complexity to crew scheduling introduced by the new Canadian work rest rules, we continue to learn and adjust train schedules to adapt to this new requirement.

Pass: We continue to learn and adjust training schedules to adapt to this new requirement.

Speaker Change: Now you're going to hear more from Doug on volumes, but my team is getting ready for the business.

Now you're going to hear more from Doug on volumes, but my team is getting ready for the business, making sure. We have the right resources in place we have a number of capital projects that will enable a short term operating efficiency and unlock long term growth across the core mainline from the west coast to Chicago.

Speaker Change: Making sure we have the right resources in place.

Doug McDonald: We have a number of capital projects that will enable short-term operating efficiency and unlock long-term growth across the core mainline from the west coast to Chicago.

Doug McDonald: In 2024, we are investing in additional double track along our Vancouver to Chicago corridors with projects on our Edson sub and on the former EJ&E around Chicago.

In 2024, we are investing in additional double track to lower our Vancouver to Chicago corridor with projects on our essence and.

And on the former EJ any around Chicago.

Doug McDonald: We continue to invest in rolling stock.

We continue to invest in rolling stock.

Doug McDonald: The Locomotive Modification Program is well underway and we are renewing a number of our parks.

The locomotive modification program is well underway and we are renewing a number of our car fleets.

Our training campuses were very busy in 2023.

Doug McDonald: Our training campuses were very busy in 2023. We qualified 900-plus new conductors to cover attrition and meet the requirements of the work rest changes in Canada, and we're now ramping up to align with our growth forecast.

We quantified 900, plus new conductors to cover attrition and meet the requirements of the work risk changes in Canada, and we're now ramping up to align with our growth forecast.

Doug McDonald: So overall, from a resource perspective, we're poised to meet the forecasted demands and grow with our company.

So overall from a resource perspective, we are poised to meet the forecasted demand and grow with our customers.

Doug McDonald: I'll now pass it to my good friend Derek to talk about how the team executed in the fourth quarter.

I'll now pass it to my good friend Darren to talk about how the team executed in the fourth quarter.

Derek: Thanks, Pat, and good afternoon, everyone.

Thanks, Pat and good afternoon, everyone.

Derek: The team finished the last quarter of 2023 with strong operational momentum, and we started the new year with a very fluid number.

The team finished the last quarter of 2023 with strong operational momentum and we started the new year with a very fluid network.

While we benefited from unseasonably mild weather and no major disruptions in the fourth quarter I give full credit to the team for remaining focused and continuing to deliver excellent customer service.

Derek: Finishing with positive momentum was key because over the last two weeks, we've had more seasonal weather across the network with frigid temperatures, significant snow, and blizzard conditions.

Finishing with positive momentum was key because over the last two weeks, we've had more seasonal weather across the network with frigid temperatures significant snow and blizzard conditions.

Derek: As we've said before,

As we've said before.

Derek: Our make the plan, run the plan approach is not just about driving velocity and reliability.

Or make the plan from the plan approach is not just about driving velocity and reliability.

Derek: It also builds an operational resilience.

It also builds an operational resiliency, allowing us to bounce back quicker after this kind of disruption.

Derek: Allowing us to bounce back quicker after this kind of disruption.

Derek: We're talking days instead of weeks.

We're talking days instead of weeks.

Derek: I'll now cover off some of the key operating methods.

I'll now cover off some of the key operating metrics.

Derek: Starting with Car Velocity

Starting with car velocity.

Derek: What we view as the all-in metric of how well the railway is running

We view as the all in metric of how well the <unk> is running.

Derek: It averaged 215 miles per day in Q4.

It averaged 215 miles per day in Q4.

Derek: That is a 4% versus last year and one of our best Q4s ever.

That is up 4% versus last year, and one of our best Q4 as ever.

Derek: Importantly, we maintain this level of velocity right up to the end of the year, even as volumes are ramping up.

Importantly, we maintain this level of velocity right up to the end of the year, even as volumes are ramping up.

Derek: True Dwell of 6.9 hours was a 4% improvement over last year.

Through dwell of $6 nine hours was a 4% improvement over last year.

Derek: This is even more impressive given our traffic mix had less than our modal volume this year, which we know typically does not sit in a terminal for very long.

This is even more impressive given our traffic mix had less intermodal volume this year, which we know typically does not sit in a terminal for very long.

Derek: Continued focus on terminal throughput and collaboration between yards and the operations centers enabled this further improvement.

Continued focus on terminal throughput and collaboration between yards in the operation centers enabled this further improvement.

Derek: To give you a bit more color on a solid operating performance,

To give you a bit more color on our solid operating performance.

Derek: Network train speed of 19.6 mph for Q4 is flat versus last year, but improved 5% on a full year basis to 19.8 mph versus 18.9 in 2022.

Network train speed of $19 six miles per hour for Q4 is flat versus last year, but improved 5% on a full year basis to $19 eight miles per hour versus $18 nine in 2022.

Speaker Change: Doug will talk about the customer's perspective of our service in a minute.

Doug will talk about the customer's perspective of our service in a minute but.

Speaker Change: But the metric I keep a close eye on is our local service commitment performance.

But the metric I keep a close eye on is our local service commitment performance.

Speaker Change: or LSVP.

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Speaker Change: This means getting the customers the right cars, on the right day, and in the right service window.

This means getting the customers the right cars on the right day, and then the right service window.

Speaker Change: Our fourth quarter LSTP was nearing all-time high.

Our fourth quarter LSC P was nearing all time highs.

Speaker Change: I am confident the team will continue to execute and keep it at or above our 90% goal as we go through 2024.

I am confident the team will continue to execute and keep it at or above our 90% goal as we go through 2024.

Incremental metric improvement is a continuous journey looking for every game, we can through process and execution.

Speaker Change: Incremental Metric Improvement is a continuous journey looking for every gain we can through process and execution.

Speaker Change: The team is always looking for any types of operational efficiencies in everything they do.

The team is always looking for any types of operational efficiencies in everything they do.

Speaker Change: Some of our recent performance, as Ed used to say, has hit the sweet spot for this demo.

Some of our recent performance is that used to say has hit the sweet spot for this network.

Speaker Change: Our focus is to have balance in our metrics.

Our focus is to have balance in our metrics not focused solely on one to the detriment of the other and always being mindful of cost versus benefits now I will turn it over to Doug.

Speaker Change: Not focused solely on one to the detriment of the other, and always being mindful of cost versus benefit.

Speaker Change: Now, I will turn it over to Doug.

Doug McDonald: Thanks, Eric. Tracy already touched on a transition later this year with Remy, who is out in the field getting his boots dirty and seeing the operations up close.

Thanks, Eric Tracy I already touched on the transition later this year with Remy, who is outlet feels getting us foods dirty and seeing the operations up close I got ahead, it's Eric can Pat and the whole operating team who continue to deliver top notch service. The feedback from customers is that we're continuing to price.

Doug McDonald: I got ahead of Derek and Pat and the whole operating team who continue to deliver top-notch service.

Doug McDonald: The feedback from customers is that we're continuing in the right spot and make adjustments where needed.

Spot and make adjustments where needed.

Doug McDonald: We continue to deliver core pricing ahead of CN cost inflation.

We continue to deliver core pricing ahead of CN cost inflation.

Doug McDonald: Turn your slide a little now.

Turning to slide 11, now fourth quarter revenues were down 2% versus last year on lower intermodal storage fees and a lower applicable fuel surcharge, partially offset by volumes and solid same store pricing.

Doug McDonald: Fourth quarter revenues were down 2% versus last year on lower intermodal storage fees and a lower applicable fuel surcharge.

Doug McDonald: Partially offset by volumes and solid stain store pricing.

Doug McDonald: RCNs, which we view as the best measure of volume, were up 2% in the quarter, driven by record potash movements, strong propane, Canadian met coal exports, and refined petroleum products.

Rpms, which we view as the best measure of volume were up 2% in the quarter driven by record potash movements strong propane Canadian met coal exports and refined petroleum products.

Doug McDonald: We've seen sequential volume improvement since we hit the trough in July, as we said on our last call.

We've seen sequential volume improvement since we hit the trial in July as we said on our last call.

Doug McDonald: P&C volumes were up 12% in the quarter.

<unk> volumes were up 12% in the quarter.

Doug McDonald: With the exception of crude oil, all segments were up on a year-over-year basis.

With the exception of crude oil all segments were up on a year over year basis.

Doug McDonald: We are handling record propane exports and in line with the CN Specific Growth Initiative laid out at Investor Day.

We are handling record propane exports and in line with our CN specific growth initiatives laid out at Investor day.

Doug McDonald: We also saw increased gas and diesel shipments out of Alberta and a modest recovery for chemicals and plastics feedstock.

We also saw increased gas and diesel shipments out of Alberta, and a modest recovery for chemicals and plastics feedstocks.

Doug McDonald: Metals and minerals, RTMs were up 3% with positive growth across all segments, including frac sand, scrap steel, and aluminum, except for iron ore where cars were up and RTMs were down due to a shift back to more short-haul domestic shipping.

Metals and minerals Rpms were up 3% with positive growth across all segments, including Frac sand scrap steel and aluminum.

Except for iron ore, where cars were up and rpms were down due to a shift back to more short haul domestic shipments.

Doug McDonald: To finish off on merchandise, Forrest Products volumes were down 5%, driven by softer market conditions.

To finish off on merchandise forest products volumes were down 5% driven by softer market conditions.

Doug McDonald: For bulk, starting with fertilizers, RTMs were up 85%.

For bulk starting with fertilizers rpms were up 85%.

Doug McDonald: We handle incremental domestic and record product exports using our available capacity in the eastern and southern region.

We handle incremental domestic and record potash exports using our available capacity in the eastern and southern regions.

Doug McDonald: Coal was up 1%, with Canadian coal up 5% due to strong export met coal from northern BC and U.S. coal down 9% due to an operational issue at one of our customers' lines.

Core was up 1% with Canadian coal up 5% due to strong export met coal from northern BC and U S coal down 9% due to our operational issue at one of our customers minds.

Doug McDonald: Canadian grain shippers did not use all of the available supply chain capacity in Q4.

Canadian grain shippers did not use all of the available supply chain capacity in Q4.

Doug McDonald: Weaker global commodity pricing led to a holdback in grain, shifting volumes into H1 2024.

Weaker global commodity pricing led to a hold back in grain shifting volumes into H, one and 2024.

Doug McDonald: Our Q4UX grain exports were tempered by lower demand in China and increased global supply.

Our Q4 U S grain exports were tempered by lower demand in China and increased global supply.

Doug McDonald: Automotive RTMs were up 22%, continuing the strong trend that started in early 2023 with dealer inventory restocking.

Automotive rpms were up 22% continuing the strong trend that started in early 2023 with dealer inventory restocking.

Turning to intermodal international was down 11%, mainly due to the lingering effect of the port strike, particularly for Prince Rupert traffic.

Doug McDonald: Turning to intermodals, international was down 11%, mainly due to the lingering effect of the port strike, particularly for Prince Rupert traffic.

Doug McDonald: However, imports of both West Coast ports return to pre-ILWU strike levels by December.

However, imports at both West Coast Port returned to pre <unk> used strike levels by December we are encouraged by the sequential uptick in volume in the fourth quarter and with our ongoing discussions with steamship line customers.

Doug McDonald: We are encouraged by the sequential uptake in volume in the fourth quarter and with our ongoing discussions with seamstress line customers.

Doug McDonald: Domestic was down 3%, mainly in our retail segment. Our efforts in the CM-specific initiatives like Falcon and EMP produced volumes, mitigating some of the overall market stock.

Domestic was down 3% mainly in our retail segment our efforts in the CN specific initiatives like Falcon and E&P produced volumes mitigating some of the overall market softness.

Doug McDonald: Moving to the outlook on slide 12.

Moving to the outlook on slide 12, as Tracy said, we will benefit from a more favorable economy, but more importantly, our CN specific growth initiatives are starting to deliver.

Doug McDonald: As Tracy said, we will benefit from a more favorable economy, but more importantly, our CM-specific growth initiatives are starting to deliver.

Doug McDonald: We see lumber and panels coming back gradually in 2024. There is optimism in the economy about interest rates coming down, which should help stimulate new construction permits, and there is still a shortage of approximately 6 million homes in the U.S.

We see lumber and panels coming back gradually in 2024.

Optimism in the economy about interest rates coming down which should help stimulate new construct.

Instruction permits and there is still a shortage of approximately 6 million homes in the U S.

Doug McDonald: We project more crack stands and LPG shipments due to increased drilling in northeast BC, and this will be supported by the new sliding near Fort St. John, as mentioned in our investor data initiatives.

We project more frac sand and LPG shipments due to increased drilling in northeast BC and this will be supported by the new siding near Fort St. John as mentioned in our Investor day initiatives.

Doug McDonald: In 2023, crew shipments were at an almost five-year low, but driven to given the forecast for Canadian crew production along with the delays in the startup of the Trans Mountain Pipeline, we see opportunities to handle incremental crew business in 2024.

In 2023 crude shipments were adding almost five year low, but driven given the forecast for Canadian crude production along with the delay in the startup of the Trans Mountain pipeline, we see opportunities to handle incremental crude business in 2024.

Doug McDonald: GM Fuel Facility in our Magnolia Yard will begin WEC commissioning this month and will start producing Carlos and ramping up through Q1.

The CN fueled facility in our Macmillan yard will begin wet commissioning this month, and we'll start producing carloads and ramping up through Q1.

Doug McDonald: We have now sold out capacity in Phase 2 of this project and construction is underway.

We have now sold out capacity in phase two of this project and construction is underway.

Doug McDonald: For product exports, we expect to see a year-over-year headwind starting in Q1 related to the business we picked up in 2023 while the Portland terminal was down.

For potash exports, we expect to see a year over year headwind starting in Q1 related to the business. We picked up in 2023, while the Portland terminal was down.

Doug McDonald: We continue to get strong rateable volumes with our premium service and utilizing our available capacity in Eastern Canada.

We continue to get strong ratable volumes with our premium service and utilizing our available capacity in eastern Canada.

Doug McDonald: In Canadian coal, we have met coal production capacity coming online in the back half of the year related to the new Valerie mine and the Quintet restart in Q4.

And Canadian call, we haven't met coal production capacity coming online in the back half of the year related to the new Valerie mine and the quintet restart in Q4.

Doug McDonald: As mentioned earlier, this year's Canadian harvest is down versus last year, but we are expecting a normal crop for the 2024-25 crop year and a better Q4 than what we just saw.

As mentioned earlier this year's Canadian harvest is down versus last year, but we're expecting a normal crop where the 'twenty 'twenty four 'twenty five crop year and a better Q4 than what we just saw.

Doug McDonald: Recall that this year's inflation index for regulated grain movement is 12% and will receive our 2024-2025 pricing determination in the spring.

Recall that this year's inflation index for regulated grain movement is 12% and we will receive our 'twenty 'twenty four 'twenty five 'twenty five pricing determination in the spring.

Doug McDonald: U.S. Green will benefit from the acquisition of the IANR pending SCB approval, which we anticipate being completed sometime by next fall.

U S grain will benefit from the acquisition of the INR pending STB approval, which we anticipate being completed sometime by next fall.

Doug McDonald: We are projecting automotive demand to remain strong and volumes roughly on par with 2023, even with some outages related to retooling for EV production.

We are projecting automotive demand to remain strong and volume is roughly on par with 2023, even with some outages related to retooling for EV production.

Doug McDonald: For international intermodal, we continue to work on filling up Prince Rupert and building on recent momentum in Vancouver.

For International Intermodal, we continue to work on filling up Prince Rupert and building on recent momentum in Vancouver.

Doug McDonald: We also expect growth in our southern ports in the Gulf driven by new service offerings into the Midwest.

We also expect growth in our southern ports in the Gulf driven by new service offerings into the Midwest.

Doug McDonald: Overall, we see a gradual return to pre-COVID volume levels over the next few quarters.

Overall, we see a gradual return to pre COVID-19 volume levels over the next few quarters.

Doug McDonald: Domestic growth will come from our new interline partnerships specifically targeting truck volume.

Domestic growth will come from our new interline partnerships, specifically targeting truck volumes.

Doug McDonald: We have capacity on the network, in our terminals, and with our police to grow volume as the economy improves.

We have capacity on the network in our terminals and with our fleet to grow volumes as the economy improves.

Doug McDonald: In summary, we've rotated through some of the headwinds which challenged us in 2023.

In summary, we've rotated through some of the headwinds which challenged us in 2023.

Doug McDonald: We have good momentum, CM's customer service is excellent, and our CM-specific growth projects are delivering.

We have good momentum.

Customer service is excellent and our CN specific growth projects are delivering.

Speaker Change: With that, I'll pass it over to Jeff Lang and go through the numbers.

With that I'll pass it over to just land and go through the numbers.

Jeff Lang: Merci beaucoup. J'ai très hâte à parler de nos résultats ce quatrième temps.

Merci Beaucoup Doug.

Is it a little or no. This is does get the NPS.

Jeff Lang: Turning to slide 14, volumes in terms of RTMs were higher by 2% on a year-over-year basis while revenues were down roughly.

Turning to slide 14 volumes in terms of Rpms were higher by 2% on a year over year basis, while revenues were down roughly 2%.

Jeff Lang: We delivered operating income of around $1.8 billion, 5% lower than last year, with an operating ratio of 59.3%, 140 basis points higher than last year.

We delivered operating income of around $1 8 billion, 5% lower than last year with an operating ratio of 59, 3%, a 140 basis points higher than last year.

Operator: Good afternoon,

My name is Julianne, and I will be your conference operator today. Welcome to CN's 4th Quarter and Full Year 2023 Financial and Operating Results Conference Call.

Jeff Lang: We have two non-recurring items due to the line.

We have two nonrecurring items below the line.

Jeff Lang: During the quarter, we implemented a taxi organization that produced around $700 million of one-timing,

During the quarter, we implemented a tax reorganization that produced around $700 million of one time income.

Operator: All participants are now in listen-only mode. After the speaker's remarks, there will be a question and answer session, during which we ask that you kindly limit yourself to one question.

Jeff Lang: As a consequence of this, our overall tax status, both in Canada and in the U.S., has not materially changed, and our effective tax rate for 2024 will be approximately 25%.

As a consequence of this our overall tax status, both in Canada and in the U S has not materially changed and our effective tax rate for 2024 will be approximately 25%.

I'd now like to turn the call over to Stacey Alderson, Assistant Vice President, Investor Relations. Ladies and gentlemen, Ms. Alderson.

Jeff Lang: So about 50 basis points higher than in 2023.

So about 50 basis points higher than in 2023.

Jeff Lang: Cash taxes will be around 80% of our overall effective tax, which is in line with prior years.

Cash taxes will be around 80% of our overall effective tax which is in line with prior years.

Jeff Lang: We also monetize the surplus right-of-way in Ontario, amounting to approximately $130 million.

Thank you, Operator. Bonjour à tous et merci de vous rejoindre à notre après-conference sur les résultats du quatrième trimestre et l'année 2023.

We also monetize a surplus right of way in Ontario, amounting to approximately $130 million.

Good afternoon, everyone, and thank you for joining us for CM's fourth quarter and full year 2023 Financial and Operating Results Conference.

On a reported basis EPS was $3 29 up 57% versus last year.

Jeff Lang: On a reported basis, EPS was $3.29 of 57% versus last year.

Jeff Lang: I wonder.

However, excluding these onetime items adjusted EPS was $2 two.

Jeff Lang: Excluding these one-time items, adjusted EPS was $2.02, down 4% year-over-year.

Before we begin, I'd like to draw your attention to the forward-looking statements and additional legal information available at the beginning of the presentation. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of U.S. and Canadian securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. These risks and uncertainties are more fully described in our cautionary statement regarding forward-looking statements in our presentation.

Down 4% year over year.

In terms of expenses labor was 12% higher versus last year, driven by 5% higher average head count and general wage increases.

Jeff Lang: In terms of expenses, labor was 12% higher versus last year, driven by 5% higher average headcount and general wage increase.

Jeff Lang: Fuel expense was more than $100 million lower than in the same period last year, mostly due to a 17% decrease in fuel prices.

Fuel expense was more than $100 million lower than in the same period last year, mostly due to a 17% decrease in fuel prices.

Jeff Lang: Turning to our full year results on slide 15, we delivered an adjusted EPS of 2% lower than last year, which is aligned with our revised guidance.

Turning to our full year results on slide 15, we delivered an adjusted EPS of 2% lower than last year, which is aligned with our revised guidance.

After the prepared remarks, we will conduct a Q&A session. I would ask that you please limit yourself to one question so we can get to hear from as many of you as possible. The IR team will be available after the call for any follow-up questions.

Jeff Lang: Our full year operating ratio of 60.8% was up 90 basis points versus last year on an adjusted basis.

Our full year operating ratio of 68% was up 90 basis points versus last year on an adjusted basis. Despite significant disruptions in Q2 and Q3 from forest fires floods.

Jeff Lang: Despite significant disruptions in Q2 and Q3, from forest fires,

Jeff Lang: Flooding and the West Coast forest strike that negatively impacted EPS by roughly 17 cents.

Flooding and the West coast Port strike that negatively impacted EPS by roughly 17.

Joining us on the call today are Tracy Robinson, our President and CEO; Pat Whitehead, our Chief Network Operations Officer; Derrick Taylor, our Chief Field Operations Officer; Doug McDonald, our Chief Marketing Officer; and Jishma Kul, our Chief Financial Officer. It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.

Jeff Lang: Generated close to $3.9 billion of free cash flow per year.

We generated close to $3 $9 billion of free cash flow for the year.

Jeff Lang: Discipline capital expenditures of $3.1 billion, excluding capital recoverable from customers, represents around 18.5% of revenue.

Disciplined capital expenditures of $3 1 billion.

Excluding capital recoverable from customers represents around 18, 5% of revenues.

Jeff Lang: We are investing in our rail car fleet and continue to invest steadily in track maintenance.

We are investing in our railcar fleet and continue to invest steadily in track maintenance as well as capacity expansions time with our customers volumes and always with a view to capital efficiency.

Jeff Lang: As well as capacity expansion.

Jeff Lang: Time was our customer's volume and always with a view to capital addition.

Tracy Robinson: Merci, c'est fait, bienvenue à tous.

Tracy Robinson: I want to start today by welcoming Derek and Pat to their first call.

Jeff Lang: ROIC, which is highly sensitive to the income numerator, came in slightly under 15%.

Tracy Robinson: It's great to have you guys with us, and I also want to extend a warm welcome to Remy, who's out in the field today, immersing himself in the operation. You'll all have a chance to meet him over the next few months or so. Doug remains in charge of our commercial organization and our growth efforts, and he is, of course, here today with us. Doug will be retiring this year. There will be a little more to say on this at that time, but I very much appreciated your presence and partnership over the last couple of years.

ROIC, which is highly sensitive to the income numerator came in slightly under 15% and three.

Jeff Lang: Moving to slide 16, let me provide some visibility to 2024.

Moving to slide 16, let me provide some visibility to 2024.

We believe the economy for the year will be more constructive than in 2023 with slightly positive industrial production growth and interest rates stabilizing.

Jeff Lang: We believe the economy for the year will be more constructive than in 2023, with slightly positive industrial production growth and interest rates stabilizing.

Jeff Lang: In addition, consensus opinion on the risk of an economic recession appears to have diminished.

In addition consensus opinion on the risk of an economic recession appears to have diminished.

Jeff Lang: However,

Tracy Robinson: And I know that Doug will do a great job in getting running set up with our commercial team. Now, this transition later this year will be seamless for both our customers and our employers. We are railroading here for the long term, and we're fortunate to have a lot of very strong and experienced talent.

However, the.

Jeff Lang: The environment remains quite volatile with continued monetary policy and geopolitical risk.

The environment remains quite volatile with continued monetary policy and geopolitical risk.

Jeff Lang: With sectors, particularly intermodal international and forest products, continuing to improve sequentially and to stabilize to pre-pandemic levels.

With sector, particularly intermodal international and forest products continued to improve sequentially and should stabilize to pre pandemic levels.

Jeff Lang: We assume that Canadian grain will come back to a three-year average in the second half of the year.

We assume the Canadian grain will come back to a three year average in the second half of the year.

Tracy Robinson: And we're going to supplement that now and again with different backgrounds and perspectives.

Jeff Lang: With this in mind, and along with our CM-specific growth initiatives, we expect volumes in terms of RTMs to be in the mid-single digital.

With this in mind and along with our CN specific growth initiatives, we expect volumes in terms of rpms to be in the mid single digit range.

Tracy Robinson: This is going to make us even stronger, which is important if we continue to refine our path forward and advance our growth network. And we're also taking a long-term approach when it comes to our network. We know that our network has always been core to the CM Advantage and to our ability to provide our customers with solutions for their business. Where it makes sense to add to our network the position of to do more or better of this, we'll do so, and in the fourth quarter, we closed on the CBNN, which will give us more opportunities to densify the eastern part of our network in the coming years, and in December we signed an agreement to purchase the Iowa It will give customers in that area better market access, and for us, it will deepen our network reach and boost our image. So I want to welcome those who might be listening in for the first time today to our railroad.

Jeff Lang: As volumes come back, we should see the positive impact of our operating leverage, particularly with merchandise business, where we currently have capacity on our trains and can bring in on volumes at low incremental costs.

As volumes come back we should see the positive impact of our operating leverage, particularly with merchandise business, where we currently have capacity on our trains and can bring them on volumes at low incremental cost.

Jeff Lang: However, we have roughly $200 million in cost headwinds, mostly related to depreciation,

However, we have roughly $200 million.

Cost headwinds, mostly related to depreciation and incentive compensation and pension.

Jeff Lang: Incentive Compensation and Pension

Jeff Lang: We assume foreign exchange for the year of around 75 cents and WTI of 70 to 80 U.S. dollars per barrel.

We assume foreign exchange for the year of around 75, and WTO of 70 to 80 million U S dollar per barrel.

Jeff Lang: In this environment, we expect to deliver about 10% EPS growth in 2024 versus 2023.

In this environment, we expect to deliver about 10% EPS growth in 2024 versus 2023.

Jeff Lang: Our cap tax for 2024 will be around $3.5 billion net of customer contributions, and we expect ROIT to be 15% to 17% within the targeted range provided at our investors.

Our capex for 2024 will be around $3 5 billion net.

Net of customer contributions and we expect ROIC to be 15% to 17% within the targeted range provided at our Investor day.

Tracy Robinson: We do expect to fully integrate the Iowa Northern property later this year pending a positive outcome of the SCB review process. Before I ask the team to get into the details, I'll just recap where we are, and I'll start by saying we end the year with some meaningful improvements in both our accidents and injuries, and I am very pleased with the worst of the incidents and the impact. And we're going to continue those efforts.

Jeff Lang: In terms of shareholder distributions, we are pleased to announce that our board of directors approved a 7% dividend increase for 2024.

In terms of shareholder distributions, we are pleased to announce that our board of directors approved a 7% dividend increase for 2024.

Jeff Lang: This represents the 28th consecutive year of dividend increase since the 1995 IPO.

This represented the 28th consecutive year of dividend increase since the $19 95 IPO.

Jeff Lang: The Board also approved a new share buyback program of up to 32 million shares for an amount in the range of $4 billion through a normal court issuer bid from February 1, 2024 to January 31, 2025, in line with our previous program budget before we opportunistically increased it last October.

The board also approved a new share buyback program of up to 32 million shares for an amount in the range of $4 billion.

Through our normal course issuer bid from February one 2024 to January 31, 2025 in line with our previous programs budget before we Opportunistically increased it last October.

Tracy Robinson: This will be a relentless drive and an operation.

Tracy Robinson: We came into the fourth quarter a little battle-hardened after a couple of difficult quarters left, where we managed to reframe the session and a number of external charges. And in Q4, we had the gift of some kinder weather, and our operations team took full advantage, posting some really strong on-time and velocity. And with regard to the corners of this year, we kicked off with some extreme winter temperatures across the network. But as we lift out of that, the team is well on their way to getting this place back to that same level of opportunity.

Jeff Lang: In conclusion, let me reiterate a few points.

In conclusion, let me reiterate a few points we.

Jeff Lang: We have delivered seven consecutive quarters of exceptional operating performance.

We have delivered seven consecutive quarters of exceptional operating performance.

Jeff Lang: We are providing excellent customer service.

We are providing excellent customer service.

Jeff Lang: We have managed through significant external challenges to deliver strong relative financial performance.

We have managed through significant external challenges to deliver strong relative financial performance.

Jeff Lang: Although we remain mindful of ongoing economic and geopolitical volatility, we are calling for some recovery in 2024.

Although we remain mindful of ongoing economic and geopolitical volatility, we're calling for some recovery in 2024.

Jeff Lang: In particular, we expect Intermodal International to return to pre-COVID levels and forest products to gradually ramp up over the next 16 months.

Tracy Robinson: Whatever comes at us, we know that sticking with this model will ensure resiliency, enabling us always to perform at our best. Our full-year car velocity, for example, and this includes the challenges of the second and third quarters, was 215 miles per day. That's a 9% improvement over 2020.

In particular, we expect intermodal international to return to pre Covid levels and forest products to gradually ramp up over the next 18 months.

Jeff Lang: Our pivot to growth is underway, and assuming a positive economic backdrop, we are guiding for EPS growth of around 10% versus 2023, underpinned by mid-single-digit volume growth.

Our pivot to growth is underway and assuming a positive economic backdrop, we are guiding for EPS growth of around 10% versus 2023 underpinned by mid single digit volume growth.

Tracy Robinson: We're running the plant, we're getting more out of our assets, and this is driving some very consistent service levels to our customers.

Jeff Lang: We have a strong balance sheet and we plan on using that financial flexibility to take advantage of opportunities.

We have a strong balance sheet and we plan on using our financial flexibility to take advantage of opportunities.

Tracy Robinson: Strong and consistent.

Jeff Lang: Let me pass it back to Chris.

Tracy Robinson: The resilience operation is table space in this industry and the necessary foundation to move the economy and for us to deliver our growth. At the end of the day, this is about doing what we say we do. We have a plan, and we're exiting. We've been building up our track record operationally over these last seven quarters, and I think I speak for the entire... It feels really good to have that CN group back. Turning to our quarter and full year results. I'll keep it to just a few highlights.

Let me pass it back to Tracy.

Chris: Thank you, Zion. Well said. Operator, we'll now go to questions.

Well said operator, we will now go to questions.

Speaker Change: Thank you. We will now begin the question and answer session. As previously mentioned, we ask that you kindly limit yourself to one question.

Tracy: Thank you we will now begin the question and answer session. As previously mentioned, we ask that you kindly limit yourself to one question.

Speaker Change: Our first question will come from Chris Wetherbee from Citi. Please go ahead, your line is open.

Our first question will come from Chris Wetherbee from Citi. Please go ahead. Your line is open.

Chris Wetherbee: Hey, thanks, good afternoon. Maybe starting on the 24 guide, if we could maybe unpack some of the moving parts a little bit. So, RTM guide, mid-single digits, and then I think just when you talked about maybe $200 million of some cost headwinds there, and about 5% coming below the line. So, I just want to make sure I understand sort of the operating leverage of the business. Is it mostly offset by the 200, or maybe we can kind of think about how you should be able to generate incremental margins on that mid-single discharge then.

Hey, Thanks, good afternoon.

Maybe starting on the 24 guide if we could maybe unpack some of the moving parts a little bit so.

<unk> guide mid single digits.

And I think generally you talked about maybe $200 million of some cost headwinds there of about 5% coming below the lines I just want to make sure I understand sort of the operating leverage of the business, mostly offset by the 200 or maybe we can kind of think about how you should be able to generate incremental margins on that mid single digit RPM growth.

Tracy Robinson: Our fourth quarter was just VCS with 4% lower than us, and our operating ratio was 59.3%. For more information, visit www.fema.gov. These are the kind of results we can be very proud of in a challenging environment. And we said last quarter that we've seen the bottom of the volumes, and this has played out as we've seen sequential improvement, and our Q4 RTMs were up 10%.

Chris Wetherbee: Okay, Chris, this is Tracy. Let me take a shot at this. So, we've got a forecast of 10% EPS, and then volume, as you've noted, you know, the forecast assumes, you know, a gentle kind of recovery economically as we go through the year, but it also assumes those customer-specific growth initiatives that you heard Doug talk about. On margins, as volumes come back, we should see the positive impacts of our operating leverage. So, as volumes went down, we, you know, we saw it go down. As volumes come back up, we're going to lift, especially in the merchandise business, where we currently have capacity on our trains. And, of course, the pricing environment.

Okay. Chris This is Jason let me take a shot at that so it was kind of forecast of 10% EPS and then volume as you've noted the forecast assumes.

Cancel kind of recovery economically as we go through the year, but it also assumes.

Tracy Robinson: Now there remains question marks on the economy as we move into 2021. We're expecting continued improvement as the year progresses, and just now, we'll give you more details on all of our... Beyond the lifts from a strengthening economy, we're also working on our growth, Leveraging our network, our strong service, and our customer and supply chain partnerships, and these are starting to bear fruit and in some cases more quickly than they did. Doug will give you some color on this, and you'll hear Pat and Derek review the state of our operations, and we're ready for the volumes to start. This gives me confidence in our EPS guidance of approximately 10% I'll now hand it over to the team to fill out the details.

As customer specific growth initiatives that you've heard desktop about on margin.

As volumes come back we should see the positive impact of our operating leverage.

As volumes went down we saw go down and volumes come back upward lift, especially in the merchandise business, where we currently have capacity.

On our training and of course, the pricing environment.

Tracy: If you've watched us for the last 18 months, we continue to both deliver and we continue to expect pricing above our inflation. So that's all positive news. We do have the headwinds that you're going to talk about, but that's going to be offset to the extent that we'll drive the 10% to the bottom.

Inflections in the last 18 months, we continue to both deliver and we continue to expect pricing above rail inflation. So that's all positive news, we do have the headwinds that <unk> talked about that.

That's going to be offset to the extent that will drive the 10% to the bottom line that makes sense.

Speaker Change: That makes sense?

Pass, you're up.

Speaker Change: It does. So just the way to think about it is there still is a sort of normal operating leverage on the revenue growth, mostly offset by those incremental costs, but that kind of gets you to, you know, kind of core growth before the buyback in line with RQM growth. Is that roughly the right way to think about it? Yeah, you got it pretty much. Thanks. Okay, thank you.

Mel C. Tracy, and Bienvenue a tous. It's great to be on the call today.

It does so just the way to think about it is there still is sort of normal operating leverage on the revenue growth, mostly offset by the by those incremental costs that could that kind of gets you to kind.

I'll begin with safety. In the fourth quarter, our injury-preventive ratio was down 14%, and our accident rate was down 29%. These results illustrate a solid four-year performance, demonstrating our progress toward a commitment-based safety culture.

Kind of core growth before the buyback in line with RPM growth is that roughly the right way to think about it.

You got it pretty much.

Next okay. Thank you.

For the whole year, the injury frequency ratio improved 13%, and the accident rate improved 17%. This represents a record low year for injuries at CN, but we know we can and that we must do better.

Our next question comes from Cherilyn Radbourne from TD Cowen. Please go ahead. Your line is open.

Speaker Change: Our next question comes from Cherilyn Radbourne from TD Cowan. Please go ahead, your line is open.

Okay.

Cherilyn Radbourne: Thanks very much. Good afternoon. I just wanted to dig in a little bit in terms of international, intermodal. And you did mention that the Canadian West Coast market share was back to pre-strike levels in December. Just curious, given what we're seeing in the Red Sea and on the Panama Canal, just be curious whether you're seeing inquiries at this point that could be incremental to that market share and how likely those volumes might be to be sticking.

Cherilyn Radbourne: Thanks, very much good afternoon.

Just wanted to dig in a little bit in terms of international intermodal.

I'm proud of the positive stride we're making in our safety metrics, but this is a journey, and we won't be satisfied until all employees go home safely at the end of every shift.

<unk> had mentioned that the Canadian West coast market share with back to pre strike levels in December just curious given what we're seeing in the Red Sea and on the back.

We are focused on our vision of a workplace that is free of accidents and injuries. We are committed to working as a team across all crafts and departments to achieve this vision. Training and Development, Technology, and behavior-based safety activities are essential to enhancing our safety. One of the keys to supporting better safety outcomes is running a more predictable operation. Predictability is what underpins our velocity and our resilience. CN's Scheduled Operating Model has delivered seven consecutive quarters of operational and service activities.

Panama Canal, just be curious whether youre seeing inquiries at this point that could be incremental to that market share.

And how likely those volumes might be sticky.

Cherilyn Radbourne: Thanks, Charlene. It's Doug. No, it's a great question. It's obviously an ever-changing environment out there. So, we spend a lot of time talking with customers about it. We are seeing, obviously, some capacity come out of the vessel market with them having to go around Africa now. So, we see some tightening overall. And with that, we're starting to hear with the different problems that both Panama and the Suez Canal, that the West Coast is looking like a more viable option moving forward. We haven't seen those volumes come in yet, but we're expecting them to gradually ramp up if they do come forward. But so far, so good. We've actually just been able to maintain our pre-COVID levels now for the last, I'll say, almost eight weeks. And we see that continuing on moving forward on both Prince Rupert and...

Thanks, Charlene its Doug.

That's a great question, it's obviously an ever changing environment out there. So we spent a lot of time talking with customers about it.

Seeing obviously some capacity come out of the vessel market with them having to go around to go around Africa now so we see some tightening overall and with that we're starting to hear with the different problems that both the Panama and the Suez Canal that the West Coast is looking like a more viable option moving forward we haven't seen.

Now, as we've said, the plane is dynamic and needs to adjust to our traffic. So, with volumes rising, we have been refining our train pack. For example, we added a train star out of Prince Rupert, and we adjusted the Vancouver train plan to accommodate an uptick in volume on this course. Departing and arriving trains on time, what we call launch and land, continues to be a key focus of both the network operations and the field. These are the basics of scheduled railroads.

And those volumes come in yet, but we're expecting them to gradually ramp up if they do come forward, but so far so good we've actually just who have been able to maintain our pre COVID-19 levels now for the last I'll say almost eight weeks and we see that continuing on moving forward on both pressure bird at Vancouver.

That's my one thank you.

Speaker Change: That's my one. Thank you.

Speaker Change: Our next question comes from Ken Hoexter from Bank of America. Please go ahead and line the door.

Our next question comes from Ken <unk> from Bank of America. Please go ahead. Your line is open.

Fourth quarter origin train performance remained solid and in line with prior quarters at around 90%, right where we needed to be to ensure on-time train performance.

Ken Hoexter: Great. Hey, good afternoon. Trey, if you're just playing, I guess in the ETF target of 10%, you're looking at long-term going up to 10 to 15. I just want to understand the acceleration. You talked about hiring, I guess, pre-hiring employees. Are you saying you're pre-resourced now because of the work rule changes, or are you going to accelerate the hiring? I just want to understand the cost implications versus your growth targets. Thanks.

Great Hey, good afternoon.

Tracy just plain I guess in the EPS target of 10% Youre looking at long term going up to 10 to 15, just want to understand the acceleration you talked about hiring.

Q4 destination train performance was 70, and we know there's room for improvement here by continuing to reduce our training delays and making timely crew swaps at intermediate perm. Please refer to how the network and field teams have managed the complexity of crew scheduling introduced by the new Canadian work rest requirement. We continue to learn and adjust training schedules to adapt to this new requirement. Now you're going to hear more from Doug on volumes, but my team is getting ready for business, making sure we have the right resources in place. We have a number of capital projects that will enable short-term operating efficiency and unlock long-term growth across the core mainline from the west coast to Chicago. In 2024, we are investing in additional double track along our Vancouver to Chicago corridors with projects on our Edson sub and on the former EJ&E around Chicago. We continue to invest in rolling stock. The Locomotive Modification Program is well underway, and we are renewing a number of our parks. Our training campuses were very busy in 2023. We qualified 900-plus new conductors to cover attrition and meet the requirements of the work rest changes in Canada, and we're now ramping up to align with our growth forecast.

I guess pre hiring employees are you, saying you are pre resource now because of the.

Because of the work rule changes or are you going to accelerate the hiring I just wanted to stand the cost implications versus your growth targets. Thanks.

Trey: I'll start with that one, Ken. So we've been hiring through the year to offset attrition. And that's the lever we're using right now to manage our workforce size is hiring relative to ill attrition. And as we look forward, you'll see our hiring ramp up to match the volumes as we see them coming back. We've got great line of sight on a number of the areas. Doug kind of took you through them. And so we're getting ready for this.

I'll start that one Ken so we've been hiring through the year to offset attrition in Q. That's lever. We're using right now are to manage our workforce is hiring relative to attrition and as we look forward you will see our hiring ramp up to match the volumes as we see them coming back we've got great line of sight on a number of.

The areas that kind of.

It took you through them.

And so we're getting ready for that.

Our next question will come from Scott Group from Wolfe Research. Please go ahead. Your line is open.

Speaker Change: Our next question will come from Scott Group from Wolf Research. Please go ahead, your line is open.

Scott H. Group: Hey, thanks. Good afternoon. So, when you talk about price above inflation, I'm just wondering, do you see that spread widening or moderating this year? And then, just near term, any way to quantify the weather impact for CM&Q1, and then any update you can give us on the labor front with the conductors in Canada? Thank you.

Thanks, Good afternoon. So.

When you talk about price above inflation I'm, just wondering do you see that spread widening or moderating. This year and then just near term any way to quantify the weather impact we're seeing in Q1, and then any update you can give us on on the labor front.

Conductors in Canada. Thank you.

Speaker Change: Thank you so much for having me.

Sounded like an awful lot of questions.

So overall, from a resource perspective, we're poised to meet the forecasted demands and grow with our company.

But Ted.

I'm going to kick it quick run over them if I can remember them and then you guys can come in behind me, but we want one question.

I'll now pass it to my good friend Derek to talk about how the team performed in the fourth quarter. Thanks, Pat, and good afternoon, everyone. The team finished the last quarter of 2023 with strong operational momentum, and we started the new year with a very fluid number. Finishing with positive momentum was key because, over the last two weeks, we've had more seasonal weather across the network, with frigid temperatures, significant snow, and blizzard conditions. As we've said before, our make the plan, run the plan approach is not just about driving velocity and reliability, but it also builds operational resilience. Allowing us to bounce back quicker after this kind of disruption. We're talking days instead of weeks. I'll now cover off some of the key operating methods.

Sure.

Speaker Change: The first one was on price. So, I mean, I think it depends. Clearly, it's a little tighter pricing environment than we've seen in the past. But we have, the guys have given Doug a pretty solid customer service product to sell. And so we are achieving pricing and continue to achieve pricing that's above inflation. The margin above inflation is going to be different in different commodities and in different areas. But we've seen a reason to believe that that's not going to happen.

The first one was done on.

On price.

It depends clearly it's not as it's a little tighter pricing environment that we've seen in the past but.

But we have seen you guys have given dug in pretty solid.

Customer service product to sell and so we are achieving.

Pricing, we continue to achieve pricing above inflation the margin above inflation is going to be different in different commodities and different areas, but we see no reason to believe that that can continue.

Speaker Change: Thank you.

What was the next winter items on the weather.

Speaker Change: It's on the weather.

Speaker Change: The Winter Weather, and I can take that one. So, we had a very cold snap of minus 40 to minus 50 Celsius about a week. We did see some disruption during that period of time as we had difficulty moving throughout that period. I will tell you this, to speak to the strength, the resiliency of our discipline scheduled operating plans, just as we saw as we recovered from the ILWU strike, the wildfires and flooding last year in 2023, the way we run the network and we're always working back to the plan, but that's our North Star. We're able to get our legs back under us, get the operation moving again, and we're regaining our momentum, getting our speed and our velocity back. Metrics are improving already.

The winter weather and I can I can take that one so we had a very cold snap of minus 40 to minus 50 Celsius about a week.

Week, we did see some disruption during that period of time as we had difficulty moving throughout that period, but I will say this to speak to the strength the resiliency of our disciplined scheduled operating plan just as we saw as we recovered from the IOW strike the wildfires and the flooding last year in 2023.

Starting with Car Velocity, what we view as the all-in metric of how well the railway is running, it averaged 215 miles per day in Q4.

We run the network and we're always working back to the plan, but that's our north star we were able to get.

Our legs back under us get the operation moving again, and where we're regaining our momentum getting our speed and our velocity back metrics are improving already.

That is 4% versus last year and one of our best Q4s ever. Importantly, we maintain this level of velocity right up to the end of the year, even as volumes are ramping up. True Dwell of 6.9 hours was a 4% improvement over last year. This is even more impressive given our traffic mix had less than our modal volume this year, which we know typically does not sit in a terminal for very long. Continued focus on terminal throughput and collaboration between yards and the operations centers enabled this further improvement. To give you a bit more color on a solid operating performance, Network train speed of 19.6 mph for Q4 is flat versus last year, but it improved 5% on a full year basis to 19.8 mph versus 18.9 in 2022. Doug will talk about the customer's perspective of our service in a minute, but the metric I keep a close eye on is our local service commitment performance, or LSVP. This means getting the customers the right cars, on the right day, and in the right service window. Our fourth quarter LSTP was nearing an all-time high.

Speaker Change: Okay, thanks to Scott, David, for who sent.

Okay. Thanks, Thanks for that Scott David <unk>.

Speaker Change: Our next question comes from David Vernon from Bernstein. Please go ahead. Your line is open. Hey, good afternoon. Thanks for taking the question. So, Doug, you know, the RTM, the single-digit RTM expectations, can you give us some sense of visibility into some of the bigger chunks and when missions are coming in? And we're off to a little bit of a weaker start on the year. I'm just trying to get a sense for, as you can see, the ramp that you've got much more detail on. If you could share with us any color on, you know, when we expect to see the inflection and the sequential volumes.

Our next question comes from David Vernon from Bernstein. Please go ahead. Your line is open.

Hey, good afternoon, thanks for taking the question.

The RPM the mid single digit RPM expectations can you give us some sense of visibility into some of the bigger chunks and when they when they should start coming in and we're off to a little bit of a weaker start on the year and I'm just trying to get a sense for as you think of the ramp that you have got much more detail on if you could share with us any color on when we expect to.

See the inflection in the sequential volumes.

Doug McDonald: Thanks, David. So, you know, I guess like the slide falls is a great indicator, but, you know, we're expecting a gradual ramp up over the year and things like forest products, which we expect to see a gradual recovery and it's not going to be anything. It's not going to be a straight up arrow or anything. So, you know, that's going to happen. Same with most of the products that are on there. And a lot of those are going to tie right into the economy. That gradual recovery that Tracy talked about, that's what we're expecting. So, we're going to see that. So, you're going to see more come in the back half than the front half. But, you know, we're working with the customers to do that as quickly as possible. We talked about the two coal mines that are coming on and those are both in H2 as well. But with international and mobile, seeing that perk up as of last December, which we just talked about. So, we're going to see that start to pull right away. And we're expecting a gradual recovery in the domestic.

Thanks, David.

Slide 12 is a great indicator, but we're expecting a gradual ramp up over the year in things like forest products, which we expect to see a gradual recovery and it's not going to be anything it's not going to be a straight up arrow or anything. So we know that's going to happen same with most of the products that are on there and a lot of those are going to die right into.

The economy at that gradual recover that Tracy talked about that's what we're expecting so we're going to see that so youre going to see more come in in the back half than the front half, but we're working with the customers to do that as quickly as possible. We talked about the two coal mines that are coming on and those are both at <unk> as well, but with international intermodal seeing that.

I am confident the team will continue to execute and keep it at or above our 90% goal as we go through 2024. Incremental Metric Improvement is a continuous journey looking for every gain we can through process and execution. The team is always looking for any types of operational efficiencies in everything they do. Some of our recent performance, as Ed used to say, has hit the sweet spot for this demo.

As of last December, which we just talked about so we're going to see that start to poke right away and we're expecting a gradual recovery in the domestic market.

Speaker Change: All right, thank you. And then the labor costs for accommodating the work rule changes, you know, is that, has that been sort of seasoned now? Are we kind of running it at the right level as far as kind of staffing and resourcing? Or are we still kind of figuring out how to make the schedules work with the new hours of service regulation?

Alright. Thank you and then the labor costs for accommodating the worker will changes is that has that been sort of season now or are we kind of running it at the right level as far as kind of staffing and resourcing or are we still kind of figuring out how to make the schedules work with.

The new hours of service regulations, sorry, David we're only taking one four versions.

Speaker Change: Sorry, David, we're only picking one per person.

Our focus is to have balance in our metrics, not focused solely on one to the detriment of the other, and always being mindful of cost versus benefit.

Speaker Change: I thought I'd give it a shot. I think that's it.

Thought I'd give it a shot at it thanks guys.

Speaker Change: Thank you.

You are.

Speaker Change: Our next question comes from Fadi Chamoun from BMO. Please go ahead, your line is open.

Our next question comes from <unk> <unk> from BMO. Please go ahead. Your line is open.

Now, I will turn it over to Doug.

Fadi Chamoun: Yes, thank you. Um,

Doug: Thanks, Eric. Tracy already touched on a transition later this year with Remy, who is out in the field getting his boots dirty and seeing the operations up close. I got ahead of Derek and Pat and the whole operating team, who continue to deliver top-notch service. The feedback from customers is that we're continuing in the right spot and making adjustments where needed. We continue to deliver core pricing ahead of CN cost inflation.

Yes. Thank you.

Fadi Chamoun: Just one clarification first, the comment around volume back to 2019 level, is that for total RTM or are you talking about intermodal specifically as well?

Just one clarification first the comment that our own volume back to 2019 level is that for total RPM or are you talking about intermodal specifically as well.

And then my main question is really.

Fadi Chamoun: and then my main question is really

Fadi Chamoun: If you can extend kind of the outlook that you talked about, mid-single-digit, RTM, like, if we take that into revenues, what are the moving parts, like, from a mixed perspective? I'm guessing pricing incremental to that five that gets you high single digits, but what's your thought on mixed, and how should we think about all these moving pieces from a revenue perspective?

You can extend kind of the outlook that you talked about mid single digit RPM.

Our revenues what are the moving parts like from a mix perspective, I am guessing pricing incremental to the $5 gets you a high single digit, but what's your thoughts on mix and how should we think about all the moving pieces from a revenue perspective.

Doug: Turn your slide a little now.

Doug: Fourth quarter revenues were down 2% versus last year due to lower intermodal storage fees and a lower applicable fuel surcharge.

Speaker Change: Well, those are long two questions, but I'll see. So, really, the second one is the critical one. So, we don't forecast on the revenues, Fadi, but on the mid-single digits, we expect that to carry out in our usual fashion. We expect the average dollar per car to apply, and I think you guys can do the math from there. But, yeah, we're pretty happy with the forecast.

Well those are long two questions but.

Doug: Partially offset by volumes and solid stain store pricing. RCNs, which we view as the best measure of volume, were up 2% in the quarter, driven by record potash movements, strong propane, Canadian met coal exports, and refined petroleum products. We've seen sequential volume improvement since we hit the trough in July, as we said on our last call. P&C volumes were up 12% in the quarter. With the exception of crude oil, all segments were up on a year-over-year basis. We are handling record propane exports, and this is in line with the CN Specific Growth Initiative laid out at Investor Day. We also saw increased gas and diesel shipments out of Alberta and a modest recovery for chemicals and plastics feedstock. For metals and minerals, RTMs were up 3% with positive growth across all segments, including frac sand, scrap steel, and aluminum, except for iron ore, where cars were up, and RTMs were down due to a shift back to more short-haul domestic shipping.

So really the second one is the critical one so we don't forecast on the revenues fatty but on the mid single digits, we expect that to carry out in our usual fashion, we expect the average.

Dollars per car to apply and I think you guys can do the math from there, but yes, we were.

We're pretty happy with the forecast.

Speaker Change: And with respect to the comment around 2019 level or pre-COVID level, is that an intermodal forecast or volume could be back to 2019 or is that a total up here?

Thank you and with respect to the comp.

Comment that on 2019 level or pre COVID-19 levels is that intermodal.

Pass for volume could be back between.

Total RPM.

Speaker Change: I think that was your one question. You can go to the investor relations team after the call for the other.

Yeah, I think that was your one question and you can go to the Investor Relations team after the call for the other one.

Thanks.

Speaker Change: Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead. Your line is open.

Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead. Your line is open.

Ravi Shanker: Thanks, everyone. Chris here. Can you give us an update on the Falcon service, please? What's the operational rollout been like over the first few months? What's it been like selling the product to customers, et cetera?

Hello, everyone.

Tracy or Doug can you give us an update on the Falcon service. Please.

What's the operational rollout been like after the first few months.

What's it been like selling the product the customer et cetera.

Speaker Change: Okay, well, that's a good question. We'll have Derek start off on the operational side. Yeah, hey, good afternoon. No, it's been a very exciting product we've had with our partners at the FXC and Union Pacific. It is acting as one seamless service. You know, we're consistently delivering on the public transit time with our customers. And we will, of course, continue to grow that here in 2024. So, solid momentum in 2023, and I see that partnership between the three of us only continuing to grow in 2024. Yeah, and on the revenues, listen, we told everyone it's going to be very slow growth off the truck market, and that's what it is. But that's okay, right? We're expecting it. Both the UP and FXC and us are working hand-in-hand to grow that. The big business cycle is really only starting up in Q1, where we'll be going after truck business that's out there. And we hope to see some solid growth moving into the rest of the year.

Okay, well that's a good question will hub Derek start off on the operational side, Yes, Hey, good afternoon, no. It's been a very exciting product we have with our partners at the FX and the Union Pacific is acting as one seamless service, we're consistently delivering on the public transit time with our customers and we look forward to continuing to grow that here in 2024.

Doug: To finish off on merchandise, Forrest Products volumes were down 5%, driven by softer market conditions. For bulk, starting with fertilizers, RTMs were up 85%. We handle incremental domestic and record product exports using our available capacity in the eastern and southern regions. Coal was up 1%, with Canadian coal up 5% due to strong export met coal from northern BC and U.S. coal down 9% due to an operational issue at one of our customers' lines. Canadian grain shippers did not use all of the available supply chain capacity in Q4. Weaker global commodity prices led to a holdback in grain, shifting volumes into H1 2024.

So solid momentum in 2023, and I see the partnership between the three of US only continuing to grow in 'twenty four.

The revenue is listen as we've told everyone is going to be very slow growth off the truck market and that's what it is.

But that's okay right, we're expecting at where both the <unk> and efficacy and US are working hand in hand to grow that the big bid cycle is really only starting up in Q1 will be going after truck business. That's out there and we hope to see some solid growth moving into the rest of the year.

Speaker Change: Thanks for your question.

Thanks for your questions. Thank.

Speaker Change: Thank you.

Thank you.

Speaker Change: Our next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead, your line is open.

Our next question comes from Walter <unk> from RBC Capital markets. Please go ahead. Your line is open.

Walter Spracklin: Thanks very much. Good afternoon, everyone. So I wanted to zero in here on the first quarter, and I know you don't typically give quarterly guidance, but I think it's important given last year was such a tough compare, and now you've come up to a tough start here due to the weather. Is it possible, do you think, when we frame the 10% over a quarterly basis, is it possible that you can see any growth in the first quarter given how tough the compare is and the weather to start, and therefore is most of it all kind of back-end loaded for the 10%?

It's very much good afternoon, everyone. So I wanted to zero in here on on the first quarter and I know you're not you don't typically give quarterly guidance, but I think it's important given last year was such a tough compare and now you have come up.

Doug: Our Q4UX grain exports were tempered by lower demand in China and increased global supply. However, automotive RTMs were up 22%, continuing the strong trend that started in early 2023 with dealer inventory restocking. Turning to intermodals, international was down 11%, mainly due to the lingering effect of the port strike, particularly for Prince Rupert traffic. However, imports of both West Coast ports returned to pre-ILWU strike levels by December. We are encouraged by the sequential uptake in volume in the fourth quarter and with our ongoing discussions with seamstress line customers. Domestic was down 3%, mainly in our retail segment. Our efforts in CM-specific initiatives like Falcon and EMP have produced volumes, mitigating some of the overall market supply. Moving to the outlook on slide 12,

Ill start here due to the weather.

Alright.

Is it possible do you think when we frame the 10% over a quarterly basis.

Is it possible that you can see any growth in the first quarter given given how tough the compare is in.

And the weather to start and therefore is most of it all kind of backend loaded with the 10%.

Speaker Change: Thanks, Walter. Maybe I'll just start. I'll hand it over to you, but I'll start by saying it is going to be a tough compare. We had a big quarter last year and some very different weather than the way we started off this year, but did you want to make any comments on that? No, I think that's right. I think we told the market, you know, on many conferences that Q1 was going to be a very tough comp. If you remember last year, our EPS was up 38% and our OR was 61, which is not kind of winter-like type of OR. So we know that. We've based that into our forecast and into our 10% when we've accounted for a regular winter. We did start, and as Pat said, we had seven days of deep freeze in the west. Hopefully, that's behind us. It's behind us for now, and hopefully, as we get into February, then we don't get that sustained cold. But yeah, I mean, we know that the Q1 was going to be a tough comp, but that's all factored into our 10% EPS growth for the year. Thanks, Walter, for the question. Thank you.

Thanks alternate maybe I'll just start I'll hand, it over to MS. Linda I'll start by saying it is going to be a tough compare we had a big quarter last year and some.

Very different weather than the way we started off this year, but just as you wont make any comments on that no I think thats right I think we told the market.

On many conferences that.

Q1 was going to be a very tough comp. If you remember last year, our EPS was up 38% and ror was 61, which is not kind of winter like <unk>. So we know that we've baked that in into our forecasts and into our 10% we have accounted for a regular winter.

Doug: As Tracy said, we will benefit from a more favorable economy, but more importantly, our CM-specific growth initiatives are starting to deliver. We see lumber and panels coming back gradually in 2024. There is optimism in the economy about interest rates coming down, which should help stimulate new construction permits, and there is still a shortage of approximately 6 million homes in the U.S. We project more crack stands and LPG shipments due to increased drilling in northeast BC, and this will be supported by the new slide near Fort St. John, as mentioned in our investor data initiatives. In 2023, crew shipments were at an almost five-year low, but given the forecast for GM Fuel Facility in our Magnolia Yard will begin WEC commissioning this month and will start producing Carlos and ramping up through Q1.

Did start in that as Pat said, we had seven days of deep freeze in the west hopefully.

That's behind us its behind us for now and hopefully as we get into February than we don't get that sustained coal, but yes. I mean, we know that Q1 was going to be a tough comp, but that's all factored into our 10% EPS growth for the year. Thanks Walter for the question. Thank you.

Speaker Change: Our next question comes from Konark Gupta from Scotiabank. Please go ahead, your line is open.

Our next question comes from <unk> Gupta from Scotiabank. Please go ahead. Your line is open.

Konark Gupta: Good evening everyone and best wishes to Doug and Renny for their respective roles. Questions for Pat, you said destination performance is improving, but what's your realistic target there, Pat, and what's required from your interchange partners to get to that level?

Good evening everyone.

Best wishes to Doug in Miami for the respective roles.

Question for Pat.

Pat: You said destination performance.

Is it improving.

But what's your realistic target their past and what's required from your interchange partners to get to that level.

The corner. Thank you for the question.

Pat Whitehead: Thank you for the question, and we desire to continue to squeeze that delta between launch and land. We look to get another few percentage points out of that, squeeze that gap between how we launch trains and how we arrive and then to terminals. We originate, terminate the majority of our traffic on our own lines, so we're not as dependent on the other carriers for that metric. And that's where I talked a bit about reducing train meet delays online, which is a product of getting trains out on time, train schedules make the train meet, and making timely crew swaps. So that's really our focus, to continue to squeeze that delta between launch and land. Thank you very much for the question. Thank you.

<unk> <unk>.

<unk> desire to continue to squeeze that delta between launch and land, we look to get another two percentage points out of that squeeze that gap between how we launch trained in how we arrived them into terminals, we originate terminated.

Doug: We have now sold out capacity in Phase 2 of this project, and construction is underway. For product exports, we expect to see a year-over-year headwind starting in Q1 related to the business we picked up in 2023 while the Portland terminal was down. We continue to get strong rateable volumes with our premium service and utilize our available capacity in Eastern Canada. For Canadian coal, we have met coal production capacity coming online in the back half of the year related to the new Valerie mine and the Quintet restart in Q4. As mentioned earlier, this year's Canadian harvest is down versus last year, but we are expecting a normal crop for the 2024-25 crop year and a better Q4 than what we just saw.

The majority of our traffic on our own lines. So we're not as dependent on the other carriers for that metric and Thats, where I talked a bit about reducing train meet delays online, which is a product of getting trains out on time train schedules make the train meets and making timely crew swaps. So that's really our focus to continue to squeeze that Dell.

Between launch and land. Thank you very much for the questions. Thank you.

Speaker Change: Our next question comes from Brandon Oglenski from Barclays. Please go ahead, your line is open.

Our next question comes from Brandon <unk> from Barclays. Please go ahead. Your line is open.

Brandon Oglenski: Hey, good afternoon, everyone. Thanks for taking my one question. Just, Lane, I'm hoping you could update us here on, you know, the change in the dividend. And obviously, if you were to go to that full, you know, repurchase this year, that'd be quite a bit of, you know, cash flow out the door. So where are you seeing leverage in the near term, and especially in the context of, you know, that 10 to 15 percent plan over the next three years? Would you be willing to take it up higher right now?

Hey, good afternoon, everyone and thanks for taking my one question just.

Helane I was hoping you could update us here on the change in the dividend and obviously if you were to go to that Paul.

Repurchase this year that'd be quite a bit of.

Doug: Recall that this year's inflation index for regulated grain movement is 12%, and we will receive our 2024-2025 pricing determination in the spring. U.S. Green will benefit from the acquisition of the IANR pending SCB approval, which we anticipate being completed sometime by next fall. We are projecting automotive demand to remain strong and volumes roughly on par with 2023, even with some outages related to retooling for EV production. For international intermodal, we continue to work on filling up Prince Rupert and building on recent momentum in Vancouver.

Cash flow out the door, so where are you seeing leverage in the near term and especially in the context of that 10% to 15% plan over the next three years would you be willing to take it up higher right now.

Lane: Yeah, so as we said, we're looking at a targeted leverage over time of 2.5. I mean, if you look at this year, we finished at 2.25.

Yes, so as we said.

We're looking at the targeted leverage over time of two five I mean, if you look at this year, we finished at $2 25.

Lane: We typically, you know, grow our dividends in line with earnings growth. You'll see that we're slightly below because we do that over time. If you remember in 2023, our dividends were up 8% and our earnings are down 2%. So, we have a long-term view. We have a long-term view on these two things. I think that, as we said in Investor Day, our leverage will be 2.5% over time if economic conditions warrant. So, that's why we went back and toned back a little bit of our share buyback to $4 billion. Last year, we wanted to be optimistic due to the stock price and where it was. And, again, I think in terms of dividends, I'm very proud to say that it's the 28th year that we've increased our dividend. And that's very good. So, that's what we're thinking, and we're thinking long-term and without any jerky reaction.

We typically grow our dividends in line with earnings growth Youll see that were slightly below because we do that over time and if you remember in 2023, our dividends were up 8% and our earnings are down too. So we have a long term view, we have a long term.

View on these two things I think that as we said in Investor day, our leverage will be 2.5 over overtime, if economic conditions warrant. So why we that's why we went back and toned back a little bit of our share buyback two 4 billion last year, we wanted to be opportunistic due to the stock price and where it was.

Doug: We also expect growth in our southern ports in the Gulf driven by new service offerings into the Midwest. Overall, we see a gradual return to pre-COVID volume levels over the next few quarters. Domestic growth will come from our new interline partnerships specifically targeting truck volume. We have capacity on the network, in our terminals, and with our police to grow truck volume as the economy improves. In summary, we've rotated through some of the headwinds that challenged us in 2023. We have good momentum, CM's customer service is excellent, and our CM-specific growth projects are delivering.

And again I think in terms of dividend I am very proud to say that the 28% a year that we've increased our dividend and that's very good. So that's what we're thinking and we're thinking long term and without any jerky reaction.

Speaker Change: Thanks for the question, Brendan.

For the question Brandon.

Yes.

Speaker Change: Our next question comes from Tom Wadowitz from UBS. Please go ahead, your line is open.

Our next question comes from Tom Waterworks from UBS. Please go ahead. Your line is open.

Thomas Wadewitz: Yeah, good afternoon. I wanted to ask you a little bit about train lengths and how you view that opportunity. I think where you're running now is, you know, a little bit below where you've achieved in the past. And so would you expect to see that expand? I don't know if you can get to, you know, 80, 200, 80, 300 feet, something like that. And is that, you know, if you realize that, is that a potential driver of upside on what the margin might be relative to your guidance?

Yes. Good afternoon wanted to ask you a little bit about train lengths and how you view that opportunity I think where youre running now.

Jeff Lang: With that, I'll pass it over to Jeff Lang and go through the numbers. Merci beaucoup. J'ai très hâte à parler des résultats de notre quatrième période. Turning to slide 14, volumes in terms of RTMs were higher by 2% on a year-over-year basis while revenues were down roughly. We delivered operating income of around $1.8 billion, 5% lower than last year, with an operating ratio of 59.3%, 140 basis points higher than last year. We have two non-recurring items due to the line. During the quarter, we implemented a taxi organization that produced around $700 million of one-timing. As a consequence of this, our overall tax status, both in Canada and in the U.S., has not materially changed, and our effective tax rate for 2024 will be approximately 25%, so about 50 basis points higher than in 2023.

Pat: A little bit below where you've achieved in the past.

And so would you expect to see that expand I don't know if you can get to 80 to 180 to 300 feet something like that.

And is that if you realize that is that a potential driver of upside on on what the margin might be relative to your guidance.

Thomas Wadewitz: Hey Tom, it's Derek. Good afternoon. I think when you look at it, you know, right now we can go at a lower incremental cost with our manifest business because we can add to traffic on existing trains. You know, part of the schedule operation is remaining balanced and turning and splitting the assets.

Hey, Tom its theyre good afternoon, I think when you look at it.

Now we can grow at a lower incremental cost with our manifest business because we can add the traffic on existing trades part of the schedule operation is remaining balanced and turn it into sweating. The assets now when you look at it from an intermodal point of view that as something Thats been down that's coming back that will actually help our train length out as that grows throughout the year. So.

Derek: Now, when you look at it from an intermodal point of view, that is something that's been down, that's coming back. That will actually help our train length out as that grows throughout the year. So, overall, we're well positioned to grow at a low incremental cost, and that's the key as we look at it going forward.

So we're overall, we're well positioned to grow at a low incremental cost.

Jeff Lang: Cash taxes will be around 80% of our overall effective tax, which is in line with prior years.

The key is we look at it going forward.

Speaker Change: Thanks for the question.

Thanks for the question.

Speaker Change: Our next question comes from Amit Mehrotra from Deutsche Bank. Please go ahead to line the billboard.

Our next question comes from Amit Mehrotra from Deutsche Bank. Please go ahead. Your line is open.

Jeff Lang: We also monetize the surplus right-of-way in Ontario, amounting to approximately $130 million. On a reported basis, EPS was $3.29, 57% versus last year. I wonder.

Amit Mehrotra: Thanks. Hi, everyone. I guess my one question would just be on yield. Obviously, there's a pricing component of yield, there's a mix component, there's a fuel component. I think fuel was a pretty nice benefit, at least on a lag basis in the fourth quarter. And just saying, can you just talk about like,

Thanks, Hi, everyone.

My one question would just be on yield.

We see there's a pricing component of yield there's a mix component as a fuel component I think fuel was a pretty nice benefit at least on a lag basis in the fourth quarter.

Jeff Lang: Excluding these one-time items, adjusted EPS was $2.02, down 4% year-over-year. In terms of expenses, labor was 12% higher versus last year, driven by a 5% higher average headcount and general wage increase. Fuel expense was more than $100 million lower than in the same period last year, mostly due to a 17% decrease in fuel prices. Turning to our full-year results on slide 15, we delivered an adjusted EPS of 2% lower than last year, which is aligned with our revised guidance. Our full-year operating ratio of 60.8% was up 90 basis points versus last year on an adjusted basis.

And.

Just wondering can you just talk about like.

Amit Mehrotra: Does yield take a step down when you adjust to that fuel and when do we actually see like the pricing benefit in the yield number obviously mixed adjusted or not adjusted for mixed because the concern I guess I have at least is that yield comes down in the first quarter as these fuel surcharges lag and I'm just trying to understand what the outlook or cadence of that yield improvement is as you progress this year.

This does you'll take a step down when you adjust for that you will.

And when do we as we see like the pricing benefit in the yield number obviously mix adjusted or not adjusted for mix because.

The concern I guess I have at least as the yield comes down in the first quarter as these fuel surcharges wagon and I'm just trying to understand what the outlook of cadence of that yield improvement is as you progressed through the year.

So I can I can open up and then I can let Doug talk more a little bit about yield but on fuel.

Speaker Change: So I can open up and then I can let Doug talk more a little bit about yield, but on fuel, Amit, I think when you look at the lag in the fourth quarter, it was around four or five cents favorable in the quarter and on a year-over-year basis, it was as well. So it wasn't a big deal, and I can turn it over to you, Doug, for the mix of it.

When you look at the lag in the fourth quarter. It was around four five <unk> favorable.

In the quarter and on a year over year basis, it was as well.

Jeff Lang: Despite significant disruptions in Q2 and Q3, from forest fires, flooding, and the West Coast forest strike that negatively impacted EPS by roughly 17 cents.

So it wasn't a big deal.

Pat: And I can turn it over to you Doug for the mix piece.

Doug McDonald: Yes, our traffic is relatively stable, but there's always going to be a mixed component. So, depending upon which product line you're talking about, it's going to have a very different impact. I mean, I'm not going to get all of them on the cotter in it, but we can always sit down with a trade and go and do it after. The other thing that I want to just highlight is we should not see any impact on the container storage fees moving forward into Q1 and beyond. That'll have a big impact.

Yes, if our.

Traffics relatively stable, but there's always going to be a Mexican ponant, so depending upon which product line you are talking about it it's going to have a very different impact.

Jeff Lang: Generated close to $3.9 billion of free cash flow per year. Discipline capital expenditures of $3.1 billion, excluding capital recoverable from customers, represents around 18.5% of revenue. We are investing in our rail car fleet and continue to invest steadily in track maintenance, as well as capacity expansion. Time was our customer's volume and always with a view to capital addition. ROIC, which is highly sensitive to the income numerator, came in slightly under 15%. Moving to slide 16, let me provide some visibility to 2024. We believe the economy for the year will be more constructive than in 2023, with slightly positive industrial production growth and interest rates stabilizing. In addition, the consensus opinion on the risk of an economic recession appears to have diminished.

I'm not going to get on all of them want to call here, Amit So, but we can always sit down with the trade. It would go and do it after all the other thing that I'll. Just highlight is we did we should not see any impact on the container storage fees moving forward into Q1 and beyond that will have a big impact.

Thanks for the question.

Speaker Change: Thanks for the question.

Speaker Change: Our next question comes from Brian Ossenbeck from J.P. Morgan. Please go ahead, your line is open.

Our next question comes from Brian Austin back from Jpmorgan. Please go ahead. Your line is open.

Brian Ossenbeck: Hey, thanks for taking the question. I just wanted to ask if you can give us an update on the CN-specific projects which you quantified at the investor day. It sounds like maybe some of them are moving a little bit forward faster than you thought, but how does that shape look like in 2024? Is it back-athleted like some of the broader economy stuff that you've been highlighting? And I think in the past you've also given...

Hey, Thanks for taking the question.

Just wanted to ask if you can give us an update on the CN specific projects, which you quantified it in Investor day. It sounds like maybe some of them are moving a little bit faster than you thought, but how does that shape look like in 'twenty 'twenty four is it back half weighted like some of the broader economy stuff that you've been highlighting and I think in the past you also given some.

Jeff Lang: However, the environment remains quite volatile with continued monetary policy and geopolitical risk, with sectors, particularly intermodal international and forest products, continuing to improve sequentially and to stabilize to pre-pandemic levels. We assume that Canadian grain will come back to a three-year average in the second half of the year. With this in mind, and along with our CM-specific growth initiatives, we expect volumes in terms of RTMs to be in the mid-single digits. As volumes come back, we should see the positive impact of our operating leverage, particularly in the merchandise business, where we currently have capacity on our trains and can bring in volumes at low incremental costs.

Brian Ossenbeck: Some visibility to how much of that is sort of contracted or...

Pat: Visibility as to how much of that is sort of contracted or.

Speaker Change: Thank you.

<unk> spoken for in terms of those carloads, so an update there would be helpful. Thanks.

Speaker Change: Thanks Brian, I actually have the presentation in front of me because I know I get this question too often, right, so when you're talking about some of the bulk commodities, you know, a lot of that's going to be in the new canola crush and as well as the new mine coming online, so an example is like obviously BHP, we're expecting to see some volumes there, but that won't be until 2026, and the canola crush plants look like they've been pushed back a little, so it'll be more back-end weighted towards 2026. When you look at the renewables, right, we're starting to see some of that with respect to the crush plants as well, but we're starting to see some of the renewable projects come on and some of the ethanol, but once again, that'll be a little bit more back-ended, except we should see some ethanol synergies this year. The big one that we've managed to move forward with, obviously, is the announcement we did with AltaGas on the export of LPG, so I'll be honest, we've actually hit our target already with respect, but it'll be going forward, but I'll be going forward basically. We've hit the 40,000 Carlos that we had at the bottom end of the forecast just with that one contract, so that's a huge, huge win for us.

Thanks, Bryan I actually have the presentation in front of me.

Yes, I don't want to get.

This question too often right. So when you are talking about some of the bulk commodities and a lot of that's going to be in the new can all across <unk> as well as the new mines coming online. So and an example is like obviously BHP, we're expecting to see some volumes there, but that won't be till 2026, and the canola crush plants look like they've been pushed back a little bit more.

Back end weighted towards 2020, when you look at the renewables right. We're starting to see some of that with respect to the crush plants as well, but we're starting to see some of the renewable projects come on and some of the ethanol, but once again that will be a little bit more back ended except when we should see some ethanol third of synergies. This year. The big one that we have managed to move forward with <unk>.

Jeff Lang: However, we have roughly $200 million in cost headwinds, mostly related to depreciation, Incentive Compensation, and pension. We assume foreign exchange for the year of around 75 cents and WTI of 70 to 80 U.S. dollars per barrel.

Obviously as the announcement, we did with Alta gas on the export of LPG. So I'll be honest, we've actually hit our target already with respect, but it'll be going forward, but on a going forward basis. We've hit the 40000 carloads that we had at the bottom end of the forecast just with that one contract. So thats a huge huge win for us now.

Jeff Lang: In this environment, we expect to deliver about 10% EPS growth in 2024 versus 2023. Our cap tax for 2024 will be around $3.5 billion net of customer contributions, and we expect ROIT to be 15% to 17% within the targeted range provided by our investors. In terms of shareholder distributions, we are pleased to announce that our board of directors approved a 7% dividend increase for 2024. This represents the 28th consecutive year of dividend increases since the 1995 IPO. The Board also approved a new share buyback program of up to 32 million shares for an amount in the range of $4 billion through a normal court issuer bid from February 1, 2024 to January 31, 2025. In conclusion, let me reiterate a few points. We have delivered seven consecutive quarters of exceptional operating performance and are providing excellent customer service.

The Toronto fuel facility that is also almost done while it's actually done construction of phase one, but we actually delayed startup because we sold out phase III now and we're actually integrating the phase II construction before it starts up so that'll be starting up in Q1, but thats a phenomenon that we've actually got it sold so we're actually at the high end of that one by the end of the end of this year.

So thats fantastic again, and then you got some of the EV supply chains now Thats, one thats actually were a little uncertain. Now we are we did move about 800 carloads or product lithium minds from northern Quebec for export so that is moving forward, but with the EV pushed back a little bit with some of the announcements we're expecting some of that to get pushed back, but we still see.

The battery plants progressing on our line there is still moving forward with nor halt in some of the others and some are still under NDA that we can't talk about and then the last big one is that.

The northern BC projects that we put forward and that we did put a siding in there last year, we're starting to see the growth on the Frac sand moving up there as well as some of the propane coming down so that one is moving forward as well on target and I will say the very last one was our expansion within the intermodal so listen we're starting to see some progress there with the volumes.

Jeff Lang: We have managed through significant external challenges to deliver strong relative financial performance. Although we remain mindful of ongoing economic and geopolitical volatility, we are calling for some recovery in 2024. In particular, we expect Intermodal International to return to pre-COVID levels and forest products to gradually ramp up over the next 16 months. Our pivot to growth is underway, and assuming a positive economic backdrop, we are guiding for EPS growth of around 10% versus 2023, underpinned by mid-single-digit volume growth. We have a strong balance sheet, and we plan on using that financial flexibility to take advantage of opportunities.

Starting to come back we're working with our customers diligently both on all of our parts in Halifax, and Montreal, even St. John We restarted service there.

Prince Rupert and in Vancouver, but we also start up of new servicing Gulfport as well and we're trying and we're growing mobile. So I think overall, it's moving forward and I won't be able to give you specific numbers on that one because we are working with our customers to sell that out I hope that was a comprehensive answer.

Speaker Change: Yeah, no need for a second. Thanks.

Yes, no need for a second.

Yeah.

Okay.

Speaker Change: Our next question comes from Justin Long from Stevens. Please go ahead, your line is open.

Our next question comes from Justin Long from Stephens. Please go ahead. Your line is open.

Chris: Let me pass it back to Chris.

Chris: Thank you, Zion.

Chris: Well said,

Operator: Operator, we'll now go to questions. Thank you. We will now begin the question and answer session.

Justin Long: Thanks, and good afternoon. You mentioned earlier the $200 million of cost headwinds this year, but could you break that out in a little bit more detail across the three different buckets that you mentioned, and does the guidance assume that you can improve the OR year over year despite these cost headwinds, or will that be challenging?

Thanks, and good afternoon, you mentioned earlier, the $200 million of cost headwinds this year, but could you break that out in a little bit more detail across the three different buckets that you mentioned and does the guidance assume that you can improve the or.

Chris Wetherbee: As previously mentioned, we ask that you kindly limit yourself to one question. Our first question will come from Chris Wetherbee from Citi. Please go ahead, your line is open. Hey, thanks, good afternoon.

Year over year, despite these cost headwinds or will that be challenging.

Tracy Robinson: Maybe starting on the 24 guide, if we could maybe unpack some of the moving parts a little bit. So, RTM guide, mid-single digits, and then I think just when you talked about maybe $200 million of some cost headwinds there, and about 5% coming below the line. So, I just want to make sure I understand sort of the operating leverage of the business. Is it mostly offset by the 200, or maybe we can kind of think about how you should be able to generate incremental margins on that mid-single discharge then. Okay, Chris, this is Tracy. Let me take a shot at this. So, we've got a forecast of 10% EPS, and then volume, as you've noted, the forecast assumes, you know, a gentle kind of recovery economically as we go through the year, but it also assumes those customer-specific growth initiatives that you heard Doug talk about. On margins, as volumes come back, we should see the positive impacts of our operating leverage. So, as volumes went down, we, you know, we saw it go down. As volumes come back up, we're going to increase capacity, especially in the merchandise business, where we currently have capacity on our trains. And, of course, the pricing environment.

Speaker Change: Yeah, thanks Justin. So the $200 million, if you want, you know, breaking it out is about $100 million on depreciation. And I would say the other half, the other $100 million, call it half and half on incentive compensation and pensions.

Yeah, Thanks, Justin so the $200 million.

Breaking it out as about $100 million on depreciation and I would say the other half the other 100 million call it half and half on incentive compensation and pension.

Speaker Change: and absolutely I think that having these headwinds we still believe that we will improve our margins and Tracy made the point actually that it's tough on margins when actually volumes is down and when volumes pick up we do have space as we've mentioned before to add the traffic on some of our trains including and especially the merchandise range so we are definitely believe and you know that we will improve margins you know in 2024. Let me just add to that Justin you know I'd have to say that I have been really pleased with our operational confidence over the past you know two years and especially in light of some of the headwinds that we've had over that time I think our record speaks pretty positively there and it just folks around you know how we think it'll play out this year but we'll be managing costs closely and we expect that our margin leverage is going to continue to grow over time.

And absolutely I think that you know.

Having these cost headwinds we still.

We still believe that we will improve our margins and Tracy made the point actually that.

It's tough on margins when actually volumes is down when volumes pick up we do have space as we've mentioned before to have to add the traffic on some of our trains, including and especially the Merchandised range. So we are definitely believe.

We will improve margins.

In 2024, let me just add to that Jeff.

To say that.

I have been really pleased with our operational costs.

Over the past two years, especially in light of some of the headwinds that we've had over that time I think our record speaks pretty positively there.

And you spoke to around how we think it will play out this year, but we'll be managing costs closely and we expect that our margin leverage is going to continue to grow over time.

Tracy Robinson: If you've watched us for the last 18 months, we continue to both deliver and expect pricing above inflation. So that's all positive news. We do have the headwinds that you're going to talk about, but that's going to be offset to the extent that we'll drive the 10% to the bottom. Does that make sense?

Speaker Change: You know, as the volume strengthens. So, that would be the way to think about it.

The volume strength and so that.

That would be the way to think about it.

Speaker Change: I understand. That's helpful. Thanks.

Thanks for this understood that's helpful. Thanks.

Speaker Change: Our next question comes from John Chappell from Evercore ISI. Please go ahead, your line is open.

Tracy Robinson: It does.

Our next question comes from Jon Chapelle from Evercore ISI. Please go ahead. Your line is open.

Chris Wetherbee: So just the way to think about it is that there still is a sort of normal operating leverage on revenue growth, mostly offset by those incremental costs, but that kind of gets you to, you know, kind of core growth before the buyback in line with RQM growth. Is that roughly the right way to think about it?

Jonathan Chappell: Thank you. Doug, I want to go back to Rupert. You noted back to pre-COVID levels, but you also mentioned a little bit later you're continuing the work to fill Rupert. So is there any way to quantify what capacity is available in Rupert right now and how much international, intermodal can grow if the economy touches the hard landing and maybe Rupert gets up to the full capacity you envision?

Thank you Doug I want to go back to Rupert We noted back to pre Covid levels, but you also mentioned a little bit later, you are continuing to work to fill Rupert. So is there any way to quantify what capacity is available and Rupert right now and how much international intermodal can grow with the economy does as a hard landing and maybe Rupert gets up to full capacity you envisioned.

Tracy: Yeah, you got it pretty much covered.

Chris Wetherbee: Thanks.

Chris Wetherbee: Okay, thank you.

Cherilyn Radbourne: Our next question comes from Cherilyn Radbourne from TD Cowan. Please go ahead, your line is open. Thanks very much. Good afternoon. I just wanted to dig in a little bit in terms of international and intermodal.

Doug McDonald: Um, oh, it's a good question. So, you know, Rupert is one of our, you know, the crown jewel we have up there, right? So, I would sit there and say, not only are we growing the intermodal, but, you know, we're growing our propane franchise, our export out there, we're growing the coal still going out there. So, there's, and the wood pulse as well. So, not just that, but, you know, really hitting on the intermodal. I'll say the international probably dipped down to the lowest. It's just over half a million TEUs that we're running through the terminal. It's got a capacity of just over one. So, one, 1.2, really, that we can go up to easily. And then you start to stretch the terminal a little bit, but that's great. That's where we'd love to get to with our partner, DP World. So, we're working with our customers on how we fill that out. So, we're being very structured about it. And with the changes that are going on, obviously, with the Red Sea and the Suez Canal and the Panama Canal, we're seeing some, a lot of interest come to try and fill that up. So, we just want to be very diligent. We want to match it to our operation with both Pat and Derek, and we don't want to oversell it. We've got to make sure if we're going to contract it out with our customers that we're going to be able to move it as efficiently as we have been and keep that terminal as well down under three days, which is really what our goal is.

Yeah.

It's a good question. So Rupert is one of our crown Jewel, we have up there right. So I would sit there and say not only are we growing the intermodal, but we're growing our propane franchise for export out there we're growing the coal still going out there. So there is and the wood pellets as well so not just that but it's really hitting on the intermodal I'll say the international.

Doug: And you did mention that the Canadian West Coast market share was back to pre-strike levels in December.

Cherilyn Radbourne: Just curious, given what we're seeing in the Red Sea and on the Panama Canal, whether you're seeing inquiries at this point that could be incremental to that market share and how likely those volumes might be to stick.

Dip down to the Lois at just over half a million teus that were running through the terminal. It's got a capacity just over one so one to really that we can go up too easily and.

Doug: Thanks, Charlene.

And then you start to stretch the terminal a little bit, but thats, great Thats, where wed love to get to with our partner DP World. So we're working with our customers on how we fill that out so we're being very structured about it and with the changes that are going on obviously with the Red Sea in the Suez Canal in the Panama Canal.

Doug: It's Doug.

Doug: No, it's a great question. It's obviously an ever-changing environment out there.

Doug: So, we spend a lot of time talking with customers about it. We are seeing, obviously, some capacity come out of the vessel market with them having to go around Africa now. So, we see some tightening overall. And with that, we're starting to hear about the different problems with both Panama and the Suez Canal, that the West Coast is looking like a more viable option moving forward. We haven't seen those volumes come in yet, but we're expecting them to gradually ramp up if they do come forward. But so far, so good. We've actually just been able to maintain our pre-COVID levels now for the last, I'll say, almost eight weeks. And we see that continuing on moving forward on both Prince Rupert and...

We're seeing some a lot of interest come to try and fill that up. So we just want to be very diligent we want to match it to our operation with both patent Derrick and we wont want to oversell. It we've got to make sure. If we're going to have contracted out with their customers that we're going to be able to move it as efficiently as we have been and keep that terminal dwell down under three days, which is really what our goal is.

Speaker Change: Thank you.

Thank you Doug.

Speaker Change: Our last question will come from Michael Kiprios from Des Alpines Capital Markets. Please go ahead, your line is open.

Our last question will come from Michael Kim from Daiwa Capital markets. Please go ahead. Your line is open.

Michael Kiprios: Good afternoon and thanks for taking my question. Your fourth quarter grain volume is about 13% and you had mentioned earlier that maybe some of the grain farmers decide to hold back on some volume to the end of the year. Do you have an idea what percentage of this grain you expect to be carried over and recooked in the first half and maybe an update on the discussion with the farmers and the current grain dynamics that play? Thank you.

Good afternoon, and thanks for taking my question.

Cherilyn Radbourne: That's my one. Thank you.

Fourth quarter grain volumes were down 13%. Then you had mentioned earlier that maybe someone that green farmers decided to hold back on some volume through the end of the year do you have an idea of what percentage of this screen you expect be carried over and recouped in the first half and maybe an update on the discussion with the farmers and the Korean Green dynamics separately. Thank you.

Our next question comes from Ken Hoexter from Bank of America. Please go ahead and line the door. Great. Hey, good afternoon. Trey, if you're just playing, I guess in the ETF target of 10%, you're looking at long-term going up to 10 to 15. I just want to understand the acceleration. You talked about hiring, I guess, pre-hiring employees. Are you saying you're pre-resourced now because of the work rule changes, or are you going to accelerate the hiring? I just want to understand the cost implications versus your growth targets. Thanks.

Sure.

Speaker Change: Sure, I'll talk specifically about Canadian grain first, and then the U.S. grain is a little bit, well, I'll just go Canadian grain first, how's that? So, listen, the prices, farmers have had great pricing the last couple of years, so they're used to getting a very good price on the market. So this year, the world market, actually, there's a lot of surplus from other countries out there. They've had good crops, it's driven the price down, so the Canadian farmer is sitting there saying, I'm going to hold on to grain until I get a better price. So we've had probably one of the lowest Q4 demands I've seen in my history as a company, but they still have to sell, right? So they're sitting on farm, that inventory is there, anything that we didn't move in Q4 will shift into Q1 and Q2, so that's great. Now, I think you can just really take what we did last year, say what didn't move, and it just moves further out, so I won't give specific numbers. At the same time, I do believe we've had a fairly good crop. You know, the staff tank brought it up to $67 million. They took tons in their forecast, finally, and that is actually a good price crop, not as good as last year, but a really great crop, and I think a lot of it was really good on our network. So I think we have a lot of grain to move. We're going to be very busy for the rest of Q1 with Pat and Derek, and I think we're going to have a really good tail end to Q3.

<unk>, specifically about Canadian grain first and then the U S grain is a little bit I'll just go Canadian Greenfield, how that so listen the prices farmers have had great pricing in the last couple of years. So they are used to getting a very good price on the market. So this year the world market actually Theres a lot of surplus from other countries out there they've had a good <unk>.

Scott H. Group: I'll start with that one, Ken. So we've been hiring throughout the year to offset attrition. And that's the lever we're using right now to manage our workforce size is hiring relative to ill attrition. And as we look forward, you'll see our hiring ramp up to match the volumes as we see them coming back. We've got great lines of sight on a number of the areas, and Doug kind of took you through them. And so we're getting ready for that.

Crops, it's driven the price down so the Canadian farmer is sitting there, saying I'm going to hold onto Grand until I get a better price. So we've had probably one of the lowest Q4 demands I've seen in my history at the company, but they still have to sell right. So they're sitting on farm that inventory is there anything that we didn't move in Q4, we will shift into Q1 and Q2.

So that's great now I think you can just really take what we did last year or say what didn't move and it just moves further out so I won't give specific numbers at the same time I do believe we've had a fairly good crop.

Scott H. Group: Our next question will come from Scott Group from Wolf Research.

Scott H. Group: Please go ahead; your line is open.

Scott H. Group: Hey, thanks.

Scott H. Group: Good afternoon. So, when you talk about price above inflation, I'm just wondering whether you see that spread widening or moderating this year? And then, just near term, any way to quantify the weather impact for CM&Q1, and then any update you can give us on the labor front with the conductors in Canada? Thank you. Thank you so much for having me. The first one was on price. So, I mean, I think it depends. Clearly, it's a little tighter pricing environment than we've seen in the past. But we have, the guys have given Doug a pretty solid customer service product to sell, and so we are achieving prices and will continue to achieve prices that are above inflation.

SaaS.

Got it up to 67 million metric tons in their forecast finally, and that is actually a good sized crop not as good as last year, but I really great crop and I think a lot of it was really good on our network. So I think we have a lot of grain to move we're going to be very busy for the rest of Q1 with patent Derek and I think we're going to have a really good tail into Q2.

Speaker Change: Thanks for your time. Thank you.

Thanks, Jerry Thank you I appreciate it.

Yes.

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

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

Tracy Robinson: Thanks, Julianne. So a strong finish to 2023, tapping off seven quarters now of operational and service activities.

Thanks Julien.

A strong finish to 2023 capping off seven quarters now of operational and service excellence and a great set up as we start into 2024 Star plan is working our make the plan around the planned sale of the plant approach is driving the right results and this railroad right now is running as well as ever.

Tracy Robinson: and a great setup as we start into 2024 so our plan is working our make the plan run the plan sell the plan approach is driving the right results and this railroad right now is running as well as ever and I like the team that we have our growth initiatives are ramping up I'm really excited about the momentum and the opportunities we have over the next quarters I want to thank you all for being here with us today and we look forward to talking again very soon thank you

Mike and team that we have our growth initiatives are ramping up.

Scott H. Group: The margin above inflation is going to be different in different commodities and in different areas. But we've seen a reason to believe that that's not going to happen. Thank you. It's the weather.

Really excited about the momentum and the opportunities we have over the next quarters I want to thank you all for being here with US today, and we look forward to talking again very soon thank you.

Scott H. Group: The Winter Weather, and I can take that one. So, we had a very cold snap of minus 40 to minus 50 Celsius for about a week. We did see some disruption during that period of time as we had difficulty moving throughout that period.

Okay.

Speaker Change: The conference call has now ended. Thank you for your participation. You may now disconnect your line.

The conference call has now ended thank you for your participation you may now disconnect your line.

Speaker Change: Thank you for watching! Thank you for watching! Thank you for watching!

Scott H. Group: I will tell you this, to speak to the strength and resiliency of our disciplined scheduled operating plans, just as we saw as we recovered from the ILWU strike, the wildfires and flooding last year in 2023. The way we run the network, and we're always working back to the plan, but that's our North Star. We're able to get our legs back under us, get the operation moving again, and we're regaining our momentum, gaining our speed and our velocity back.

Okay.

Yes.

Scott H. Group: Metrics are improving already. Okay, thanks to Scott, David, and everyone who sent them.

David Vernon: Our next question comes from David Vernon from Bernstein. Please go ahead. Your line is open. Hey, good afternoon. Thanks for taking the question.

Doug: So, Doug, you know, the RTM, the single-digit RTM expectations. Can you give us some sense of visibility into some of the bigger chunks and when missions are coming in?

David Vernon: And we're off to a little bit of a weaker start this year. I'm just trying to get a sense for, as you can see, the ramp that you've got much more detail on.

Yes.

Yes.

Doug: If you could share with us any color on when we expect to see the inflection and the sequential volumes, thanks, David. So, you know, I guess the slide falls are a great indicator, but, you know, we're expecting a gradual ramp-up over the year and things like forest products, which we expect to see a gradual recovery from, and it's not going to be anything. It's not going to be a straight up arrow or anything. So, you know, that's going to happen. Same with most of the products that are on there. And a lot of those are going to tie right into the economy. That gradual recovery that Tracy talked about, that's what we're expecting. So, we're going to see that. You're going to see more come in the back half than the front half. But, you know, we're working with the customers to do that as quickly as possible.

Yes.

Yes.

David Vernon: We talked about the two coal mines that are coming on, and those are both in H2 as well.

Doug: But with international and mobile, seeing that perk up as of last December, which we just talked about, so we're going to see that start to pull right away, and we're expecting a gradual recovery in the domestic market.

David Vernon: All right, thank you. And then the labor costs for accommodating the work rule changes, you know, has that been sort of seasoned now? Are we kind of running it at the right level as far as staffing and resourcing go?

Operator: Or are we still kind of figuring out how to make the schedules work with the new hours of service regulation?

David Vernon: Sorry, David, we're only picking one per person.

Operator: I thought I'd give it a shot.

David Vernon: I think that's it.

Operator: Thank you.

Our next question comes from Fadi Chamoun from BMO. Please go ahead, your line is open. Yes, thank you. Um, just one clarification first: the comment around volume back to the 2019 level, is that for total RTM or are you talking about intermodal specifically as well?

unknown: and then my main question is really, If you can extend the kind of the outlook that you talked about, mid-single-digit, RTM, like, if we take that into revenues, what are the moving parts, like, from a mixed perspective?

I'm guessing pricing incremental to that five that gets you high single digits, but what's your thought on mixed, and how should we think about all these moving pieces from a revenue perspective?

unknown: Well, those are two long questions, but I'll see.

So, really, the second one is the critical one.

unknown: So, we don't forecast revenues, Fadi, but on the mid-single digits, we expect that to go out in our usual fashion.

We expect the average dollar per car to apply, and I think you guys can do the math from there.

unknown: But, yeah, we're pretty happy with the forecast.

And with respect to the comment around the 2019 level or the pre-COVID level, is that an intermodal forecast or volume that could be back to 2019, or is that a total up here?

unknown: I think that was your only question.

Operator: You can go to the investor relations team after the call for the other one.

Ravi Shanker: Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead. Your line is open. Thanks, everyone. Chris here. Can you give us an update on the Falcon service, please? What was the operational rollout been like over the first few months? What was it like selling the product to customers, et cetera?

Derek: Okay, well, that's a good question. We'll have Derek start off on the operational side. Yeah, hey, good afternoon. No, it's been a very exciting product we have had with our partners at the FXC and Union Pacific. It is acting as one seamless service. You know, we're consistently delivering on public transit times with our customers. And we will, of course, continue to grow that here in 2024. So, solid momentum in 2023, and I see that partnership between the three of us only continuing to grow in 2024.

Unnamed Speaker: Yeah, and on revenues, listen, we told everyone it's going to be very slow growth in the truck market, and that's what it is. But that's okay, right? We're expecting it. Both the UP and FXC and us are working hand-in-hand to grow it. The big business cycle is really only starting up in Q1, where we'll be going after truck business that's out there, and we hope to see some solid growth moving into the rest of the year.

Unnamed Speaker: Thanks for your question.

Unnamed Speaker: Thank you.

Our next question comes from Walter Spracklin of RBC Capital Markets.

Unnamed Speaker: Please go ahead; your line is open.

Thanks very much.

Good afternoon, everyone. So I wanted to zero in on the first quarter, and I know you don't typically give quarterly guidance, but I think it's important given last year was such a tough comparison, and now you've come up to a tough start here due to the weather. Is it possible, do you think, when we frame the 10% over a quarterly basis, is it possible that you can see any growth in the first quarter given how tough the comparison is and the weather to start, and therefore is most of it all kind of back-end loaded for the 10%? Thanks, Walter.

Unnamed Speaker: Maybe I'll just start.

Unnamed Speaker: I'll hand it over to you, but I'll start by saying it is going to be a tough comparison. We had a big quarter last year and some very different weather than the way we started off this year, but did you want to make any comments on that? No, I think that's right. I think we told the market, you know, at many conferences that Q1 was going to be a very tough comp. If you remember last year, our EPS was up 38%, and our OR was 61, which is not a winter-like type of OR. So we know that We've based that into our forecast and into our 10% when we've accounted for a regular winter. We did start, and as Pat said, we had seven days of deep freeze in the west. Hopefully, that's behind us. It's behind us for now, and hopefully, as we get into February, we won't get that sustained cold. But yeah, I mean, we know that Q1 was going to be a tough comp, but that's all factored into our 10% EPS growth for the year.

Thanks, Walter, for the question.

Unnamed Speaker: Thank you.

Our next question comes from Konark Gupta from Scotiabank.

Unnamed Speaker: Please go ahead; your line is open.

Good evening, everyone, and best wishes to Doug and Renny for their respective roles.

Pat: Questions for Pat: you said destination performance is improving, but what's your realistic target there, Pat, and what's required from your interchange partners to get to that level?

Thank you for the question, and we desire to continue to squeeze that delta between launch and land.

Pat: We look to get another few percentage points out of that, squeeze that gap between how we launch trains and how we arrive at terminals. We originate and terminate the majority of our traffic on our own lines, so we're not as dependent on the other carriers for that metric. And that's where I talked a bit about reducing train meet delays online, which is a product of getting trains out on time, train schedules making the train meet, and making timely crew swaps. So that's really our focus, to continue to squeeze that delta between launch and land.

Thank you very much for the question.

Unnamed Speaker: Thank you.

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

Unnamed Speaker: Please go ahead; your line is open.

Brandon Oglenski: Hey, good afternoon, everyone.

Brandon Oglenski: Thanks for taking my one question.

Just, Lane, I'm hoping you could update us on, you know, the change in the dividend.

Brandon Oglenski: And obviously, if you were to go to that full repurchase this year, that'd be quite a bit of cash flow out the door. So where are you seeing leverage in the near term, and especially in the context of, you know, that 10 to 15 percent plan over the next three years?

Would you be willing to take it up higher right now?

Brandon Oglenski: Yeah, so as we said, we're looking at a targeted leverage over time of 2.5.

I mean, if you look at this year, we finished at 2.25. We typically, you know, grow our dividends in line with earnings growth. But you'll see that we're slightly below because we do that over time.

If you remember, in 2023, our dividends were up 8%, and our earnings were down 2%.

So, we have a long-term view. We have a long-term view on these two things. I think that, as we said on Investor Day, our leverage will be 2.5% over time if economic conditions warrant it. So, that's why we went back and toned down a little bit of our share buyback to $4 billion.

Last year, we wanted to be optimistic due to the stock price and where it was.

And, again, in terms of dividends, I'm very proud to say that this is the 28th year that we've increased our dividend, and that's very good.

Speaker: 159.3%, 140 basis points higher than last year. We have two non-occurring items below the line. During the quarter, we implemented a tax reorganization that produced around $700 million of one-time income.

Brandon Oglenski: So, that's what we're thinking, and we're thinking long-term and without any jerky reaction.

Unnamed Speaker: Thanks for the question, Brendan.

Our next question comes from Tom Wadowitz from UBS.

Unnamed Speaker: Please go ahead; your line is open.

Speaker: As a consequence of this, our overall tax status, both in Canada and in the U.S., has not materially changed, and our effective tax rate for 2024 will be approximately 25%, so about 50 basis points higher than in 2023. Cash taxes will be around 80% of our overall effective tax, which is in line with prior years. We also monetize the surplus right-of-way in Ontario, amounting to approximately $130 million. On a reported basis, EPS was $3.29, up 57% versus last year. However, excluding these one-time items, Adjusted EPS was $2.02, down 4% year-over-year. In terms of expenses, labor was 12% higher versus last year, driven by a 5% higher average headcount and a general wage increase. Fuel expense was more than $100 million lower than in the same period last year, mostly due to a 17% decrease in fuel prices.

Yeah, good afternoon. I wanted to ask you a little bit about train lengths and how you view that opportunity. I think where you're running now is, you know, a little bit below where you've achieved in the past.

Derek: And so would you expect to see that expand?

I don't know if you can get to, you know, 80, 200, 80, 300 feet, something like that. And is that, you know, if you realize that, is that a potential driver of upside on what the margin might be relative to your guidance?

Derek: Hey Tom, it's Derek.

Derek: Good afternoon. I think when you look at it, you know, right now, we can go at a lower incremental cost with our manifest business because we can add to the traffic on existing trains. You know, part of the schedule operation is remaining balanced and turning and splitting the assets. Now, when you look at it from an intermodal point of view, that is something that's been down, but it's coming back. That will actually help our train length out as that grows throughout the year. So, overall, we're well positioned to grow at a low incremental cost, and that's the key as we look at it going forward.

Speaker: Turning to our full-year results, on slide 15, we delivered an adjusted EPS of 2% lower than last year, which is aligned with our revised guidance. Our full-year operating ratio of 60.8% was up 9 basis points versus last year on an adjusted basis. Despite significant disruptions in Q2 and Q3, from forest fires, flooding, and the west coast forest strike that negatively impacted EPS by roughly 17 cents, to generate close to 3.9 billion dollars of free cash flow for the year. Disciplined capital expenditures of $3.1 billion, excluding capital recoverables from customers, represents around 18.5% of revenue.

Thanks for the question.

Amit Mehrotra: Our next question comes from Amit Mehrotra of Deutsche Bank.

Unnamed Speaker: Please go ahead to line the billboard.

Amit Mehrotra: Thanks. Hi everyone. I guess my one question would just be on yield.

Unnamed Speaker: Obviously, there's a pricing component to yield, there's a mix component, and there's a fuel component.

Doug: I think fuel was a pretty nice benefit, at least on a lag basis, in the fourth quarter.

Amit Mehrotra: And just saying, can you just talk about like, does yield take a step down when you adjust for that fuel, and when do we actually see the pricing benefit in the yield number, obviously mixed adjusted or not adjusted for mixed, because the concern I guess I have at least is that yield comes down in the first quarter as these fuel surcharges lag, and I'm just trying to understand what the outlook or cadence of that yield improvement is as you progress this year

Speaker: We are investing in our rail car fleet and continue to invest steadily in track maintenance, as well as capacity expansion in line with our customers' volumes and always with a view to capital additions. RYC, which is highly sensitive to the income numerator, came in slightly under 15% in spring. Moving to slide 16, let me provide some visibility to 2024. We believe the economy for the year will be more constructive than in 2023, with slightly positive industrial production growth and interest rates stabilizing. In addition, consensus opinion on the risk of an economic recession appears to have diminished. However, the environment remains quite volatile with continued monetary policy and geopolitical risks.

Unnamed Speaker: So I can open up and then I can let Doug talk a little bit more about yield, but on fuel, Amit, I think when you look at the lag in the fourth quarter, it was around four or five cents favorable in the quarter and on a year-over-year basis, it was as well.

Doug: So it wasn't a big deal, and I can turn it over to you, Doug, for the mix of it. Yes, our traffic is relatively stable, but there's always going to be a mixed component.

Amit Mehrotra: So, depending upon which product line you're talking about, it's going to have a very different impact.

Speaker: Will sectors, particularly intermodal and international, and forest products, continue to improve sequentially and to stabilize to pre-pandemic levels? We assume that Canadian grain will come back to a three-year average in the second half of the year. With this in mind, and along with our TN-specific growth initiatives, we expect volumes in terms of our TNs to be in the mid-single digit range. As volumes come back, we should see the positive impact of our operating leverage, particularly with the merchandise business, where we currently have capacity on our trains and can bring in volumes at low economic costs. However, we have roughly $200 million in cost headwinds, mostly related to depreciation. Incentive Confrontation, and Penny. We assume foreign exchange for the year of around $0.75 and WTI of $70-80 USD per barrel.

Doug: I mean, I'm not going to get all of them on the chart in it, but we can always sit down with a trade and go and do it after. The other thing that I want to just highlight is we should not see any impact on the container storage fees moving forward into Q1 and beyond. That'll have a big impact. Thanks for the question.

Our next question comes from Brian Ossenbeck from J.P. Morgan.

Unnamed Speaker: Please go ahead; your line is open.

Hey, thanks for taking the question. I just wanted to ask if you can give us an update on the CN-specific projects which you quantified at the investor day. It sounds like maybe some of them are moving a little bit forward faster than you thought, but what does that shape look like in 2024? Is it back-to-basics like some of the broader economic stuff that you've been highlighting? And I think in the past you've also given some visibility to how much of that is sort of contracted or... Thank you.

Speaker: In this environment, we expect to deliver about 10% EPS growth in 2024 versus 2023. Our CapEx for 2024 will be around $3.5 billion net of customer contributions, and we expect ROIT to be 15-17% within the targeted range provided at our investor meetings. In terms of shareholder distributions, we are pleased to announce that our board of directors approved a 7% dividend increase for 2024. This represents the 28th consecutive year of dividend increases since the 1995 ICP.

Unnamed Speaker: Thanks Brian, I actually have the presentation in front of me because I know I get this question too often, right, so when you're talking about some of the bulk commodities, you know, a lot of that's going to be in the new canola crush and as well as the new mine coming online. So an example is, obviously, BHP, we're expecting to see some volumes there, but that won't be until 2026, and the can When you look at renewables, right, we're starting to see some of that with respect to the crush plants as well, but we're starting to see some of the renewable projects come on and some of the ethanol, but once again, that'll be a little bit more back-ended, except we should see some ethanol synergies this year.

Speaker: The board also approved a new share buyback program of up to 32 million shares for an amount in the range of $4 billion through a normal court issuer bid from February 1st, 2024 to January 31st, 2025, in line with our previous program budget before we opportunistically increased its lack of solar. In conclusion, let me reiterate a few points. We have delivered seven consecutive quarters of exceptional operational performance. We are providing excellent customer service. We have managed through significant external challenges to deliver strong relative financial performance. Although we remain mindful of ongoing economic and geopolitical volatility, we are calling for some resolve in 2024. In particular, we expect Intermodal International to return to pre-COVID levels and for its products to gradually ramp up over the next 18 months. Our pivot to growth is underway, and assuming a positive economic backdrop, we are guiding for EPS growth of around 10% versus 2023, underpinned by mid-single-digit volume growth. We have a strong value chain, and we plan on using that financial flexibility to take advantage of opportunities. Now, let me pass the mic to Chris.

Unnamed Speaker: The big one that we've managed to move forward with, obviously, is the announcement we did with AltaGas on the export of LPG. So I'll be honest, we've actually hit our target already with respect, but it'll be going forward, but I'll be going forward basically. We've hit the 40,000 Carlos that we had at the bottom end of the forecast just with that one contract, so that's a huge, Yeah, no need for a second. Thanks.

Brandon Oglenski: Our next question comes from Justin Long from Stevens.

Speaker: Thank you, Zion. Well said. The operator will now go to questions. Thank you. We will now begin the question and answer session. As previously mentioned, we ask that you kindly limit yourself to one question. Our first question will come from Chris Wetherbee from Citi. Please go ahead, your line is open. Hey, thanks. Good afternoon.

Unnamed Speaker: Please go ahead; your line is open.

Justin Long: Thanks, and good afternoon. You mentioned earlier the $200 million of cost headwinds this year, but could you break that out in a little bit more detail across the three different buckets that you mentioned, and does the guidance assume that you can improve OR year over year despite these cost headwinds, or will that be challenging?

Chris Wetherbee: Maybe starting on the 24 guide, if we could maybe unpack some of the moving parts a little bit. So, RTM guide, mid-single digits, and then I think, Justine, you talked about maybe $200 million of some cost headwinds there, and about 5% coming below the line. So, I just want to make sure I understand sort of the operating leverage of the business. Is it mostly offset by the $200 million, or maybe we can kind of think about how you should be able to generate incremental margins on that mid-single digit RTM guide. Okay, Chris. This is Tracy.

Unnamed Speaker: Yeah, thanks Justin. So the $200 million, if you want, you know, breaking it out, is about $100 million in depreciation. And I would say the other half, the other $100 million, call it half and half on incentive compensation and pensions. And absolutely, I think that having these headwinds, we still believe that we will improve our margins, and Tracy made the point actually that it's tough on margins when volumes are down, and when volumes pick up, we do have space, as we've mentioned before, to add the traffic on some of our trains, including and especially the merchandise Let me just add to that Justin, I'd have to say that I have been really pleased with our operational confidence over the past, you know, two years and, especially in light of some of the headwinds that we've had over that time, I think our record speaks pretty positively there, and just folks around you know how we think it'll play out this year, but we'll be managing costs closely, and we expect that our margin leverage is going to continue You know, as the volume strengthens. So, that would be the way to think about it.

Tracy: Let me take a shot at this. So, you know, we've got our forecast at 10% EPS, and then volume is just noted. The forecast assumes, you know, a gentle kind of recovery economically as we go through the year, but it also assumes those customer-specific growth initiatives that you heard Doug talk about. On margins, as volumes come back, we should see the positive impact of our operating leverage.

Speaker: So, as volumes went down, we, you know, we saw it go down, and as volumes come back up, we're going to lift them, especially in the merchandise business, where we currently have capacity on our train. And, of course, in the pricing environment, if you've watched us over the last 18 months, we continue to both deliver on our promises, and we continue to expect pricing above real inflation. So that's all positive news. We do have the headwinds that Jerrion talked about, but that's going to be offset to the extent that we'll drive the 10% to the bottom. Does that make sense? Yes, it does.

Justin Long: I understand.

Unnamed Speaker: That's helpful. Thanks.

Our next question comes from John Chappell from Evercore ISI.

Speaker: So just the way to think about it is that there still is a certain normal operating leverage on revenue growth, mostly offset by the incremental cost, but then that kind of gets you to, you know, kind of core growth before the buyback in line with RPM growth. Is that roughly the right way to think about it? Yeah, you got it pretty much.

Unnamed Speaker: Please go ahead; your line is open.

Thank you.

Doug: Doug, I want to go back to Rupert.

You noted back to pre-COVID levels, but you also mentioned a little bit later that you're continuing the work to fill Rupert.

Doug: So is there any way to quantify what capacity is available in Rupert right now and how much international, intermodal traffic can grow if the economy touches the hard landing and maybe Rupert gets up to the full capacity you envision? Um, oh, it's a good question. So, you know, Rupert is one of our, you know, the crown jewels we have up there, right?

Cherilyn Radbourne: Thanks. Next. Okay, thank you. Our next question comes from Cherilyn Radbourne from TD Cowan. Please go ahead, your line is open. Thanks very much.

Speaker: Good afternoon. I just wanted to dig in a little bit in terms of international and intermodal transport. And you did mention that the Canadian West Coast market share was back to pre-strike levels in December. Just curious, given what we're seeing in the Red Sea and on the Panama Canal, whether you're seeing an increase at this point that could be incremental to that market share and how likely those volumes might be to be staked. Thanks, Cherilyn and Doug. No, it's a great question.

Doug: So, I would sit there and say, not only are we growing the intermodal, but, you know, we're growing our propane franchise, our export out there, we're growing the coal still going out there. So, there's, and the wood pulse as well. So, not just that, but, you know, really hitting on the intermodal. I'll say the international probably dipped down to the lowest.

Doug: It's just over half a million TEUs that we run through the terminal every day. It's got a capacity of just over one million. So, one, 1.2, really, that we can go up to easily. And then you start to stretch the terminal a little bit, but that's great. That's where we'd love to get to with our partner, DP World. So, we're working with our customers on how we can fill that out.

Speaker: It's obviously an ever changing environment out there, so we spent a lot of time talking with customers about it. We are seeing, obviously, some capacity come out of the vessel market with them having to go around Africa now. So we see some tightening overall. And with that, we're starting to hear about the different problems with both the Panama and the Suez Canal that the West Coast is looking like a more viable option moving forward. But we haven't seen those volumes come in yet.

Doug: So, we're being very structured about it. And with the changes that are going on, obviously, with the Red Sea and the Suez Canal and the Panama Canal, we're seeing some, a lot of interest come to try and fill that up. So, we just want to be very diligent. We want to match it to our operation with both Pat and Derek, and we don't want to oversell it. We've got to make sure if we're going to contract it out with our customers that we're going to be able to move it as efficiently as we have been and keep that terminal as well under three days, which is really what our goal is.

Speaker: But we're expecting them to gradually ramp up if they do come forward. But so far, so good. We've actually just been able to maintain our pre-COVID levels now for the last, I'll say, almost eight weeks.

Thank you.

Unnamed Speaker: Our last question will come from Michael Kiprios of Des Alpines Capital Markets.

Ken Hoexter: And we see that continuing on moving forward on both Prince Rupert and. That's my question, thank you. Our next question comes from Ken Hoexter from Bank of America. Please go ahead, your line is open. Great. Hey, good afternoon. I guess in the EPS target of 10%, you're looking at long-term going up to 10 to 15. I just want to understand the acceleration.

Please go ahead; your line is open.

Unnamed Speaker: Good afternoon, and thanks for taking my question. Your fourth-quarter grain volume is about 13%, and you had mentioned earlier that maybe some grain farmers would decide to hold back on some volume to the end of the year. Do you have an idea what percentage of this grain you expect to be carried over and recooked in the first half and maybe an update on the discussion with the farmers and the current grain dynamics that are playing out? Thank you. Sure, I'll talk specifically about Canadian grain first, and then the U.S. grain is a little bit, well, I'll just go with Canadian grain first. How's that? So, listen, the prices. Farmers have had great prices for the last couple of years, so they're used to getting a very good price on the market.

Speaker: You talked about hiring, I guess, pre-hiring employees. Are you saying you're pre-resourced now because of the work rule changes, or are you going to accelerate the hiring? I just want to understand the cost implications versus your growth targets. I'll start with that one, Ken.

Speaker: So we've been hiring through the year to offset attrition, and to, you know, that's the lever we're using right now to manage our workforce size is hiring relative to illiteracy. And as we look forward, you'll see our hiring ramp up to match the volumes as we see them coming back. We've got great line of sight on a number of the areas, just kind of took you through them, and so we're getting ready for those. Our next question will come from Scott Group from Wolfe Research. Please go ahead; your line is open. Hey, thanks. Good afternoon,

Unnamed Speaker: So this year, the world market, actually, there's a lot of surplus from other countries out there. They've had good crops, and it's driven the price down, so the Canadian farmer is sitting there saying, I'm going to hold on to grain until I get a better price. So we've had probably one of the lowest Q4 demands I've seen in my history as a company, but they still have to sell, right? So they're sitting on the farm, that inventory is there, anything that we didn't move in Q4 will shift into Q1 and Q2, so that's great. Now, I think you can just really take what we did last year and say what didn't move, and it just moves further out, so I won't give specific numbers.

Scott H. Group: So when you talk about price above inflation, I'm just wondering, do you see that spread widening or moderating this year? And then, just near term, any way to quantify the weather impacts we're seeing in Q1 and then any update you can give us on the labor front with the conductors in Canada? Thank you. It sounded like an awful lot of questions, but, you know, I'm going to take a quick run over them if I can remember them, and then you guys can come in behind me. But we just want one question. The first one was on price. So, I mean, I think it depends.

Unnamed Speaker: At the same time, I do believe we've had a fairly good crop. You know, the staff tank brought it up to $67 million. They took tons in their forecast, finally, and that is actually a good price crop, not as good as last year, but a really great crop, and I think a lot of it was really good on our network. So I think we have a lot of grain to move. We're going to be very busy for the rest of Q1 with Pat and Derek, and I think we're going to have a really good tail end to Q3. Thanks for your time. Thank you.

Speaker: Clearly, it's not as, it's a little tighter pricing environment than we've seen in the past, but we have, the guys have given us a pretty solid customer service product to sell, and so we are achieving prices, we continue to achieve prices that are above inflation. The margin above inflation is gonna be different in different commodities and in different areas, but we've seen a reason to believe that that's not gonna happen It's on the weather.

Tracy Robinson: This concludes the question and answer session.

I would like to turn the call back over to Tracy Robinson.

Tracy Robinson: Thanks, Julianne.

Tracy Robinson: So a strong finish to 2023, tapping off seven quarters now of operational and service activities, and a great setup as we start into 2024 so our plan is working our make the plan run the plan sell the plan approach is driving the right results and this railroad right now is running as well as ever and I like the team that we have our growth initiatives are ramping up I'm really excited about the momentum and the opportunities we have over the next quarters I want to thank you all for being here with us today and we look forward to talking again very soon thank you, The conference call has now ended. Thank you for your participation.

Speaker: We had a very cold snap of minus 40 to minus 50 Celsius about a week, we did see some disruption during that period of time as we had difficulty moving throughout that period, but I will tell you this, to speak to the strength, the resiliency of our discipline and scheduled operating plans, just as we saw as we recovered from the IOWU strike, the wildfires and flooding last year in 2023, the way we run the network and we're always working back to the plan, but that's our North Star, we were able to get our legs back under us, get the operation moving again and we're regaining our momentum, getting our speed and our velocity back, metrics are improving already. Okay, thank you. Thanks to Scott Davis for presenting. Our next question comes from David Vernon from Bernstein. Please go ahead, your line is open. Hey, good afternoon.

David Vernon: Thanks for taking the question. So, Doug, you know, the RTM, the mid-single-digit RTM expectations. Can you give us some sense of visibility into some of the bigger chunks and when they should start coming in? And we're off to a little bit of a weaker start this year.

Speaker: I'm just trying to get a sense for, as you're looking at the ramp that you've got much more detail on, if you could share with us any color on when we expect to see the inflection in the sequential volumes. Thanks, David. So, you know, I guess slide 12 is a great indicator, but, you know, we're expecting a gradual ramp-up over the year, and things like forest products, which we expect to see a gradual recovery and it's not going to be anything, it's not going to be a straight up arrow or anything. So, you know, that's going to happen. Same with most of the products that are on there.

Unnamed Speaker: You may now disconnect your line.

Unnamed Speaker: Thank you for watching!

Unnamed Speaker: Thank you for watching!

Unnamed Speaker: Thank you for watching!

Speaker: And a lot of those are going to tie right into the economy, that gradual recovery that Tracy talked about. That's what we're expecting. So we're going to see that. And you're going to see more come in the back half than the front half. But you know, we're working with the customers to do that as quickly as possible. We talked about the two coal mines that are coming on, and those are both in H2 as well. But with international intermodals, seeing that perk up as of last December, which we just talked about, we're going to see that start to pick up right away.

Speaker: And we're expecting a gradual recovery in the domestic market. All right, thank you. And then the labor costs for accommodating the work rule changes, you know, have that been sort of seasoned now? Are we kind of running it at the right level as far as staffing and resourcing go? Or are we still kind of figuring out how to make the schedules work with the new hours of service regulation? Sorry, David, we're only taking one per person. I thought I'd give it a shot. Thanks, guys.

Fadi Chamoun: Thank you. Our next question comes from Fadi Chamoun from BMO. Please go ahead, your line is open. Yeah, thank you. Just one clarification first, the comments around volume back to 2019 levels, is that for total RTM or are you talking about intermodal specifically as well? And then my main question is really.

Speaker: If you can extend the kind of the outlook that you talked about in a single-digit RTM, like if we take that into, I have a question. So, when you're talking about revenues, what are the moving parts? Like, from a mixed perspective, I'm guessing pricing incremental to that five gets you high single digits, but what's your thought on mixed, and how should we think about all these moving pieces from a revenue perspective? Well, that was a long two questions, but I'll see. So really, the second one is the critical one.

Speaker: So we don't forecast revenues, Fadi, but on the mid-single digits, we expect that to carry out in our usual fashion. We expect the average dollar per car to apply, and I think you guys can do the math from there. But yeah, we're pretty happy with the forecast. And with respect to the comment around the 2019 level or the pre-COVID level, is that an intermodal forecast for volume to be back to 2019? Yeah, I think that was your only question. You can go to the investor relations team after the call for the other.

Ravi Shanker: Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead, your line is open. Thanks, everyone.

Speaker: Can you give us an update on the Fountain Service, please? What's the operational rollout been like over the first few months? What's it been like selling the product to customers, et cetera? Okay, well, that's a good question.

Speaker: I'll have Derek start off on the operational side. Yeah, hey, good afternoon. No, it's been a very exciting product we have had with our partners at the FXC and Union Pacific. It is acting as one seamless service. You know, we're consistently delivering on the public's grants this time with our customers, and we look forward to continuing to grow that here in 2024. So, solid momentum in 2023, and I see that partnership between the three of us only continuing to grow in 2024. Yeah, and on the revenues, listen, as we told everyone, it's going to be very slow growth in the truck market, and that's what it is, but that's okay, right? We're expecting it.

Speaker: Both the UT and FXC and us are working hand-in-hand to grow that. The big bid cycle is really only starting up in Q1, where we'll be going after truck business that's out there, and we hope to see some solid growth moving into the rest of the year. Thanks for your questions.

Walter Spracklin: Thank you. Our next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead, your line is open. Yeah, thanks very much. Good afternoon, everyone.

Speaker: So I wanted to zero in here on the first quarter, and I know you don't typically give quarterly guidance, but I think it's important given last year was such a tough comparison, and now you've come up to a tough start here due to the weather. Is it possible, do you think, when we frame the 10% over a quarterly basis, is it possible that you can see any growth in the first quarter given how tough the comparison is and the weather to start, and therefore, is most of it all kind of back in loaded for the 10%? Thanks Walter, maybe I'll just start, I'll hand it over to your friend, but I'll start by saying it is going to be a tough comparison, we had a big quarter last year and some very different weather than the way we started off this year, but just, did you want to make any comments on that?

Speaker: No, I think that's right, I think we told the market, you know, on many conferences that Q1 was going to be a very tough con, if you remember last year our EPS was up 38% and our OR was 61, which is not kind of winter-like type of OR, so we know that, we've baked that in into our forecast and into our 10%, we've accounted for a regular winter, we did start, and as Pat said, we had 7 days of deep freeze in the west, hopefully that's behind us, it's behind us for now, and hopefully as we get into February, then we don't get that sustained cold, but yeah, I mean we know that Q1 was going to be a tough con, but that's all factored into our 10% EPS for the year. Thanks Walter for the question. Thank you. Our next question comes from Konar Gupta from Scotiabank. Please go ahead, your line is open.

Speaker: Good evening everyone, and best wishes to Doug and Renny for their respective roles. Questions for Pat: you said destination performance was improving. What's your realistic target there, Pat, and what's required from your interchange partners to get to that level? Mr. Carr, thank you for the question. We desire to continue to squeeze that delta between launch and land. We look to get another few percentage points out of that, squeeze that gap between how we launch trains and how we arrive at the terminals. We originate and terminate the majority of our traffic on our own lines, so we're not as dependent on other carriers for that metric.

Speaker: And I talked a bit about reducing train meet delays online, which is a product of getting trains out on time, train schedules making the train meet, and making timely crew swaps. So that's really our focus, to continue to squeeze that delta between launch and land. Thank you very much for the question. Thank you. Our next question comes from Brandon Oglenski from Barclays. Please go ahead, your line is open. Hey, good afternoon, everyone.

Brandon Oglenski: Thanks for taking my one question. Just lay, I'm hoping you could update us on, you know, the change in the dividend. And obviously, if you were to go to that full repurchase this year, that'd be quite a bit of cash flow out the door. So where are you seeing leverage in the near term, and especially in the context of, you know, that 10 to 15% plan over the next three years? Would you be willing to take it up higher right now? Yeah, so as we said, we were looking at the targeted leverage over time of 2.5. I mean, if you look at this year, we finished at 2.25.

Speaker: We typically, you know, grow our dividends in line with earnings growth. You'll see that we're slightly below because we do that over time. And if you remember, in 2023, our dividends were up 8%, and our earnings were down 2%. So we have a long-term view. We have a long-term view on these two things. I think that, as we said on Investor Day, our leverage will be 2.5 over time if economic conditions warrant it. So that's why we went back and toned down a little bit of our share buyback to $4 billion. Last year, we wanted to be more optionistic due to the stock price and where it was.

Thomas Wadewitz: And again, I think in terms of dividends, I'm very proud to say that it's the 28th year that we've increased our dividend, and that's very good. So that's what we're thinking, and we're thinking long-term and without any jerky reaction. Thanks for the great introduction. Our next question comes from Tom Wadewitz from UBS. Please go ahead; your line is open. Yeah, good afternoon.

Speaker: I wanted to ask you a little bit about train length and how you view that opportunity. I think where you're running now is, you know, a little bit below where you've achieved in the past. And so, would you expect to see that expand? I don't know if you can get to, you know, 8,200 feet, something like that.

Speaker: And is that, you know, if you realize that, is that a potential driver of upside on what the margin might be relative to your guidance? Hey, Tom, it's Derek. Good afternoon. I think when you look at it, you know, right now, we can go at a lower incremental cost with our manifest business because we can add the traffic and existing trains. You know, part of the schedule operation is remaining balanced and turning and splitting the assets. Now when you look at it from an intermodal point of view, that is something that's been down, that's coming back. That will actually help our train length balance as that grows throughout the year. So overall, we're well positioned to grow at a low incremental cost, and that's the key as we look at it going forward. Thanks for the question. Our next question comes from Amit Mehrotra from Deutsche Bank. Please go ahead with the line, Adelbert.

Amit Mehrotra: Thanks. Hi everyone. I guess my one question would just be on yield. Obviously, there's a pricing component to yield, there's a mix component, there's a fuel component. I think fuel was a pretty nice benefit, at least on a lag basis, in the fourth quarter. And just saying, can you just talk about like, does yield take a step down when you adjust for that fuel? And when do we actually see the pricing benefit in the yield number, obviously mixed adjusted or not adjusted for mixed, because the concern I guess I have at least is that yield comes down in the first quarter as you feel surcharges lag, and So I can open up, and then I can let Doug talk more, a little bit about yield. But on fuel, Amit, I think when you look at the lag in the fourth quarter, it was around $0.04, $0.05 favorable in the quarter, and on a year-over-year basis, it was as well. So it wasn't a big deal.

Speaker: And I can turn it over to you, Doug, for the mix. Yes, our traffic's relatively stable, but there's always going to be a mixed component. So, depending upon which product line you're talking about, it's going to have a very different impact.

Speaker: I mean, I'm not going to get all of them on the cover of it, but we can always sit down with a tracer, and we'll go and do it afterward. So, the other thing that I want to just highlight is we should not see any impact on the container storage fees moving forward into Q1 and beyond. That'll have a big impact. Thanks for the questions. Our next question comes from Brian Ossenbeck from J.P. Morgan. Please go ahead; your line is open.

Brian Ossenbeck: Hey, thanks for taking the question. I just wanted to ask if you can give us an update on the CN-specific projects which you quantified at the investor day. It sounds like maybe some of them are moving a little bit forward faster than you thought, but what does that shape look like in 2024? Is it back-athleted like some of the broader economic stuff that you've been highlighting?

Speaker: And I think in the past you've also given some visibility to how much of that is sort of contracted or spoken for in terms of those carloads. So an update there would be helpful. Thanks. Thanks Brian. I actually have the presentation in front of me because I know I get this question too often.

Speaker: Right, so when you're talking about some of the bulk commodities, you know, a lot of that's going to be in the new Canola Crush and as well as the new mine coming online. So an example is, obviously, BHP. We're expecting to see some volumes there, but that won't be until 2026. And the Canola Crush plants look like they've been pushed back a little, so it'll be more back-end weighted towards 2026. When you look at renewable energy, right, we're starting to see some of that with respect to the Crush plants as well, but we're starting to see some of the renewable projects come on and some of the ethanol. But once again, that'll be a little bit more back-ended, except we should see some ethanol-fueled synergies this year. The big one that we've managed to move forward with is the announcement we did with AltaGas on the export of LPG.

Speaker: So I'll be honest, we've actually hit our target already with respect to, it'll be going forward, but on a going forward basis, we've hit the 40,000 carloads that we had at the bottom end of the forecast just with that one contract. So that's a huge, huge win for us. Now, the Toronto Fuel Facility is also almost done, well, it's actually done construction in Phase 1, but we've actually delayed start-up because we pulled out Phase 2 now, and we're actually integrating the Phase 2 construction before it starts up, so that'll be starting up in Q1, but that's phenomenal that we've actually got it pulled, so we're actually at the high end of that one by the end of this year, so that

Speaker: And then you've got some of the EV supply chains, now that's one that's actually, we're a little uncertain now, we are, we did move about 800 carloads of products by the lithium lines from Northern Quebec for export, so that is moving forward, but the EV pushed back a little bit with some of the announcements, we're expecting some of that to get pushed back, but we still see all the battery plants progressing on our line, they're still moving forward with Norfolk and some of the others, and some are still under NDA that we can't talk about. And then the last big one is the Northern DC projects that we put forward, and that we did put a siding in there last year, we're starting to see the growth on the frac stand moving up there, as well as some of the propane coming down, so that one is moving forward as well on target, and I'll say the very last one was our expansion within the intermodal, so listen, we're starting to see some progress there with the volume starting to come back, we're working with our customers diligently both on all of our ports, in Halifax, in Montreal, even St. John will be starting service there in Prince Rupert and in Vancouver, but we also started up a new service in Gulfport as well, and we're growing Mobile, so I think overall it's moving forward, I won't be able to give you specific numbers on that one because we're working with our customers to solve that out. I hope that was a comprehensive answer. Yeah, no need for a second.

Speaker: Thank you. Our next question comes from Justin Long from Stephens. Please go ahead. Your line is open. Thanks and good afternoon.

Justin Long: You mentioned earlier the 200 million cost headwinds this year, but could you break that out in a little bit more detail across the three different buckets that you mentioned, and does the guidance assume that you can improve the OR year over year despite these cost headwinds, or will that be challenging? Yeah, thanks, Justin. So, the $200 million, if you want, you know, breaking it out is about $100 million on depreciation, and I would say the other half, the other $100 million, call it half and half on incentive compensation and pension.

Speaker: And absolutely, I think that, you know, having these headwinds, we still believe that we will improve our margins. And Tracy made the point, actually, that, you know, it's tough on margins when, actually, volumes are down. When volumes pick up, we do have space, as we've mentioned before, to add traffic on some of our trains, including, and especially, the merchandise trains. So, we are definitely believing, you know, that we will improve margins, you know, in 2024. Let me just add to that, Justin.

Speaker: You know, I'd have to say that I have been really pleased with our operational confidence over the past, you know, two years, especially in light of some of the headwinds that we've had over that time. I think our record speaks pretty positively there. And it just goes to show, you know, how we think it will play out this year. But we'll be managing costs closely, and we expect that our margin leverage is going to continue to grow over time. You know, as the law strengthens, so that would be the way you think about it.

Speaker: Thanks for the opportunity. That's helpful. Thanks. Our next question comes from John Chappell from Evercore ISI. Please go ahead, your line is open.

Jonathan Chappell: Thank you. Doug, I want to go back to Rupert. You noted back to pre-COVID levels, but you also mentioned a little bit later that you're continuing the work to fill Rupert. So is there any way to quantify what capacity is available in Rupert right now and how much international and intermodal traffic can grow if the economy does just a hard landing and maybe Rupert gets up to the full capacity you envisioned? Oh, it's a good question.

Speaker: So, you know, Rupert is one of our, you know, the crown jewels we have up there, right? So I would sit there and say, not only are we growing the intermodal, but we're growing our protein franchise for export out there. We're growing the coal still going out there. So there's, and the wood pulp as well.

Speaker: So not just that, but, you know, really hitting on the intermodal, the international probably dipped down to the lows. It's just over half a million TEUs that we're running through the terminal. It's got a capacity of just over one, so 1.2 really, that we can go up to easily. And then you start to stretch the terminal a little bit, but that's great.

Speaker: That's where we'd love to get to with our partner DP World, so we're working with our customers on how we can fill that out. So we're being very structured about it. And with the changes that are going on, obviously, with the Red Sea and the Suez Canal and the Panama Canal, we're seeing a lot of interest come to try and fill that out. So we just want to be very diligent. We want to match it to our operation with both Pat and Derek.

Speaker: And we don't want to oversell it. We've got to make sure if we're going to contract it out with our customers, that we're going to be able to move it as efficiently as we have been and keep that terminal dwell time down under three days, which is really what our goal is. Thank you. Our last question will come from Michael Kiprios from Desjardins Capital Markets. Please go ahead, your line is open.

Michael Kiprios: Good afternoon, and thanks for taking my question. Your fourth-quarter grain volume is about 13%, and you had mentioned earlier that maybe some grain farmers would decide to hold back on some volume to the end of the year. Do you have an idea of what percentage of this grain you expect to be carried over and recouped in the first half? And maybe an update on the discussion with the farmers and the current grain dynamics at play? Thank you. Sure, I'll talk specifically about Canadian grain first, and then the U.S. grain is a little bit, well, I'll just go with Canadian grain first, how about that?

Speaker: So, listen, the prices, farmers have had great prices for the last couple of years, so they're used to getting a very good price on the market. So this year, the world market actually has a lot of surplus from other countries out there, they've had good crops, and it's driven the price down. So the Canadian farmer is sitting there saying, I'm going to hold on to grain until I get a better price.

Speaker: So we've had probably one of the lowest Q4 demands I've seen in my history at the company, but they still have to sell, right? So they're sitting on farms, that inventory is there, and anything that we didn't move in Q4 will shift into Q1 and Q2, so that's great. Now, I think you can just really take what we did last year and say what didn't move, and it just moves further out, so I won't give specific numbers. But at the same time, I do believe we've had a fairly good crop. You know, the Stats Tank brought it up to 67 million metric tons in their forecast, finally, and that is actually a good price crop. Not as good as last year, but a really great crop, and I think a lot of it was really good on our network.

Speaker: So I think we have a lot of grain to move, we're going to be very busy for the rest of Q1 with Pat and Derek, and I think we're going to have a really good tail into Q2. Thank you. This concludes the question and answer session. I would like to turn the call back over to Tracy Robinson.

Tracy Robinson: Thanks Joanne. So a strong finish to 2023, tapping off seven quarters now of operation and service, and a great setup as we start into 2024. So our plan is working. Our make the plan, run the plan, sell the plan approach is driving the right results. And this railroad, right now, is running as well as ever, and I like the team that we have. Our growth initiatives are ramping up. I'm really excited about the momentum and the opportunities we have over the next quarters. I wanna thank you all for being here with us today, and we look forward to talking again very soon. Thank you. The conference call has now ended; thank you for your participation; you may now disconnect your line.