Q2 2024 Canadian National Railway Co Earnings Call

Julianne: Good afternoon. My name is Julianne, and I will be your operator today. All participants are now in a listen-only mode.

Julianne: My name is Julianne, and I will be your operator today.

Stacy Alderson: Good afternoon. My name is Julianne and I will be your operator today. All participants are now in a listen-only mode. At this time, I would like to turn the call over to Stacy Alderson, CN's Assistant Vice President of Investor Relations. Ladies and gentlemen, Ms. Alderson.

Operator: Operatives are now in the listen-only mode.

Stacy Alderson: At this time, I would like to turn the call over to Stacy Alderson, CIAN's Assistant Vice President of Investor Relations. Ladies and gentlemen, Ms. Alderson. Thank you, Julianne. Bonjour à tous et merci de vous rejoindre à notre conférence sur les résultats du deuxième primaire 2024.

Stacy Alderson: At this time, I would like to turn a call over to Stacy Alderson. Everyone, thank you for joining us for CM Second Quarter 2024 Financial and Operating Results Conference Call.

Stacy Alderson: Thank you, Julianne! Bonjour à tous et merci de vous joindre à notre conférence sur les résultats du deuxième trimestre 2024 du CN.

Stacy Alderson: Good afternoon, everyone, and thank you for joining us for CM's second quarter 2024 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 contains certain projections and other forward-looking statements within the meaning of U.S. and Canadian securities law. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.

Speaker Change: Good afternoon, everyone, and thank you for joining us for CN's second quarter 2024 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.

Unknown Executive: 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 protections and other forward-looking statements within the meeting of the US and Canadian securities laws. These statements are subjects to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. They are more fully described in the forward-looking statement section of the presentation.

Stacy 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 laws.

Stacy 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. They are more fully described in the forward-looking statements section of the presentation.

Stacy Alderson: They are more fully described in the forward-looking statement section of the presentation. After the prepared remarks, we will conduct a Q&A session with our analysts. As usual, we would ask that you please limit yourself to one question.

Unknown Executive: After the prepared remarks, we will conduct Q&A sessions with our analysts. As usual, we would ask you please limit yourselves to one question.

Stacy Alderson: After the prepared remarks, we will conduct a Q&A session with our analysts. As usual, we would ask that you please limit yourself to one question.

Stacy Alderson: Joining us on the call today are Tracy Robinson, our President and CEO, Derek Taylor, our Chief Field Operations Officer, Patrick Whitehead, our Chief Network Operations Officer, Remy Lalonde, our Chief Commercial Officer, and Ghislain Houle, our Chief Financial Officer. It is now my pleasure to turn the call over to CMS President and CEO, Tracy Robinson. Merci et bienvenue à tous.

Unknown Executive: Joining us on the call today are Tracy Robinson, our President and CEO; Derek Taylor, our Chief Deal Operations Officer; Patrick Whitehead, our Chief Network Operations Officer; Remy LaLond, our Chief Commercial Officer; and Jislant Wolf, our Chief Financial Officer.

Speaker Change: Joining us on the call today are Tracy Robinson, our President and CEO , Derek Taylor, our Chief Field Operations Officer,

Speaker Change: Patrick Whitehead, our Chief Network Operations Officer, Remy Lalonde, our Chief Commercial Officer, and Ghislain Houle, our Chief Financial Officer.

Tracy Robinson: It is now my pleasure to turn the call over to CM's President and Chief Executive Officer, Tracy Robinson.

Speaker Change: It is now my pleasure to turn the call over to CMS President and Chief Executive Officer, Tracy Robinson.

Tracy Robinson: Thank you, Stacy and BNVNua, to us. Thanks everyone for joining our call today. I'll turn to the quarter in just a moment, but first I'll make a few comments on the broader landscape. The macro level, the economy is shaping up to be in line with what we expected when we developed our plan. With North American industrial production trending slightly positive, some mixed signals and consumer areas that are mostly timing issues related to interest rates, and continued strength in the bulk portfolio. So, at a high level, pretty much what we expected. Outside of the macro, I remain very encouraged with the progress we're making with our CM specific growth initiatives, which are coming online very nicely.

Tracy A. Robinson: Thank you everyone for joining our call today. I'll turn to the quarter in just a moment. But first, I'll make a few comments on the broader landscape. Now at the macro level, the economy is shaping up to be in line with what we expected when we developed our plans, with North American industrial production trending slightly positive, some mixed signals in consumer areas that are mostly timing issues related to interest rates, and continued strength in the bulk portfolios.

Tracy A. Robinson: Merci Stacy and Bienvenue a tous. Thanks everyone for joining our call today.

Tracy A. Robinson: I'll turn to the quarter in just a moment, but first I'll make a few comments on the broader landscape.

Tracy A. Robinson: So at a high level, pretty much what we expected. Outside of the macro, I remain very encouraged with the progress we're making with our CN specific growth initiatives, which are coming online very nicely. We are building a portfolio of business that works for us, fits our network, and enables us to efficiently provide strong customer service. The recent strength in our Petroleum and Fuels Business, the growth of our SAN franchise, and the rebuild of our international portfolio are all part of this.

Tracy A. Robinson: At the macro level, the economy is shaping up to be in line with what we expected when we developed our plan.

Tracy A. Robinson: With North American industrial production trending slightly positive

Tracy A. Robinson: Some mixed signals in consumer areas that are mostly timing issues related to interest rates and Continued strength in the bulk portfolios. So at a high level pretty much what we expected

Tracy A. Robinson: Outside of the macro, I remain very encouraged with the progress we're making with our CN-specific growth initiatives, which are coming online very nicely.

Tracy Robinson: We are building the portfolio of business that works for us, fits our network, and enables us to efficiently provide strong customer service. The recent strengths in our petroleum and fuels business, the growth of our stand franchise, and the rebuild of our international portfolio are all part of this.

Tracy A. Robinson: We are building the portfolio of business that works for us, fits our network, and enables us to efficiently provide strong customer service. The recent strength in our petroleum and fuels business

Tracy A. Robinson: The growth of our SAN franchise, the rebuild of our international portfolio are all part of this.

Tracy Robinson: Now I know you're looking forward to hearing from Remy today, and he'll give you more insight in a few minutes on both the base business and our more specific customer efforts, which will continue to be a key driver of our growth. And on operation, the scheduled model continues to serve us well. The East and South regions this year are posting velocity and on-time numbers that are better than last year. The West has had some issues in Q2, which we will discuss today, but have listed out of that in Q3. And customer service levels continue to be very strong across the entire network.

Tracy A. Robinson: Now, I know you're looking forward to hearing from Remy today, and he'll give you more insight in a few minutes on both the base business and our more specific customer efforts, which will continue to be a key driver of our growth, and on operations. The scheduled model continues to serve us well.

Tracy A. Robinson: Now I know you're looking forward to hearing from Remy today, and he'll give you more insight in a few minutes on both the base business and our more specific customer efforts, which will continue to be a key driver of our growth.

Tracy A. Robinson: The East and South regions this year are posting velocity and on-time numbers that are better than last year. The West had some issues in Q2, which we will discuss today, but they have lifted out of that in Q3. And customer service levels continue to be very strong across the entire network.

Tracy A. Robinson: And our operation?

Remy: The scheduled model continues to serve us well. The East and South regions this year are posting velocity and on-time numbers that are better than last year.

Remy: The West has had some issues in Q2, which we will discuss today, but have lifted out of that in Q3. And customer service levels continue to be very strong across the entire network.

Tracy Robinson: The fundamentals of our business are good.

Tracy A. Robinson: The fundamentals of our business are good. The question for this quarter is leverage. And for the remainder of the year, it's more about the labor situation in Canada. And we'll get into both of these in our comments today. So first, on labor and the status of our TCRC situation in Canada. Now, as you know, the CIRB has now advised that they will release the decision on or about August 9th on the question of the essential service designation.

Tracy Robinson: The question in this quarter is leveraged, and for the remainder of the year it's more about the labor situation in Canada. Delta, and we're getting to both of these in our comments today. So first on labor and the status of our GCRC situation in Canada. Now, as you know, the CIRB has now advised that they will release the decision on or about August night on the question of the essential service designation. Now, there cannot be a work stoppage until they render a decision and subject to any direction they provide on the cooling-off period. The parties are then required to give a 72-hour notice of a strike or a lockout.

Remy: The fundamentals of our business are good. The question in this quarter is leverage, and for the remainder of the year, it's more about the labor situation in Canada, and we'll get into both of these in our comments today.

Remy: So first on labor and the status of our TCRC situation in Canada. Now as you know the CIRB has now advised that they will release the decision on or about August 9th on the question of the essential service designation.

Tracy A. Robinson: Now, there cannot be a work stoppage until they render a decision, and subject to any direction they provide on a cooling off period, the parties are then required to give 72 hours notice of a strike or a lockout.

Remy: Now, there cannot be a work stoppage until they render a decision.

Remy: And subject to any direction they provide on the cooling off period, the parties are then required to give a 72-hour notice of a strike or a lockout.

Tracy Robinson: Now the prolonged nature of this process, which prior to CIRB referral was to conclude in May, is impacting our customers and it's impacting our business, particularly in the international winter model, where customers have taken actions to reroute vessels away from Canadian ports until the labor questions have been resolved. Now our intents with the TCRC have not changed. We prefer a negotiated agreement that would do two things. Create a structure on work scheduling that would be positive to current employees and our ability to attract an ex-generation and improve crew availability, which has been significantly impacted by the Canadian duty and rest period rules issued by the federal government last year.

Tracy A. Robinson: Now, the prolonged nature of this process, which prior to the CRRB referral was to conclude in May, is impacting our customers, and it's impacting our business, particularly in the international intermodal, where customers have taken actions to reroute vessels away from Canadian ports until the labor question has been resolved. Now, our intent with the TCRC has not changed. We prefer a negotiated agreement that would do two things.

Remy: The prolonged nature of this process

Remy: which prior to the CRRB referral was to conclude in May, is impacting our customers.

Remy: And it's impacting our business, particularly in the international intermodal, where customers have taken actions to reroute vessels away from Canadian ports until the labour question has been resolved.

Remy: Now our intent with the TCRC has not changed. We prefer a negotiated agreement that would do two things.

Tracy A. Robinson: Create a structure for work scheduling that would be positive for current employees and our ability to attract the next generation, and Improved Crew Availability, which has been significantly impacted by the Canadian duty and rest period rules issued by the federal government last year. We need better availability provisions so that we're able to move our customers' volumes safely, cost-efficiently, and on time. The offers that we've made to the TCRFC have been consistent.

Remy: Create a structure on work scheduling that would be positive to current employees and our ability to attract the next generation.

Remy: and Improved Crew Availability, which has been significantly impacted by the Canadian duty and rest period rules issued by the federal government last year.

Tracy Robinson: We need better availability provisions so that we're able to move our customers' volumes safely, cost efficiently, and on time. The offers that we've made to the TCRC have been consistent with it. So now in the quarter, overall volumes came in on plan, but not exactly in the way that we expected. We were tracking well ahead of plan, overall, up until the third week in May, driven by growth in international, as well as fraction, petroleum and chemicals, and the late rush on Canadian grains of Vancouver. Starting late May, we saw a sharp reduction, primarily in our international volumes, on concerns of a work stoppage.

Remy: We need better availability provisions so that we're able to move our customers' volumes safely, cost-efficiently, and on time. The offers that we've made to the TCRFC have been consistent with this.

Tracy A. Robinson: So now, overall volumes came in on plan, but not exactly in the way that we expected. We were tracking well ahead of plan overall up until the third week in May, driven by growth in international, as well as fracking stand, petroleum, and chemicals, and a late rush on Canadian grain to Vancouver. Starting late May, we saw a sharp reduction, primarily in our international volumes, on concerns of a work stop.

Remy: So now in a quarter. Overall volumes came in on plan.

Remy: but not exactly in the way that we expected.

Remy: We were tracking well ahead of plan overall up until the third week in May, driven by a growth in international, as well as frack stand, petroleum and chemicals, and a late rush on Canadian grain to Vancouver.

Remy: Starting late May we saw a sharp reduction, primarily in our international volumes, on concerns of a work stoppage.

Tracy A. Robinson: Now this is volume destined for the U.S. that has shifted to U.S. ports. So we had lighter volumes in the Rupert corridor than expected. And at the same time, a heavy grain flow has made us much busier in Vancouver. In fact, we moved record volumes in this corridor during a period of a very heavy work block program on our system and in the directional running zone in which both Canadian rails operate. The team got it done, but it wasn't efficient.

Tracy Robinson: Now this is volume depth into the US that shifted to US ports. So we had lighter volumes in the group recorder than expected. And at the same time, a heavy grain flow made us much busier in the Vancouver corridor. In fact, we moved record volumes in this corridor during the period of a very heavy work block program on our system and in the directional running zone in which both the Canadian rails operate. The team got it done, but it wasn't efficient. We saw this in our velocity metrics in the West and in labor productivity. Now it's important to note that the velocity issue has been temporary, and the operation the West has returned to normal levels as the work blocks had moved to other parts of the network.

Remy: Now this is volume destined to the U.S. that shifted to U.S. ports.

Remy: So we had lighter volumes in the group recorder than expected.

Remy: And at the same time, the heavy grain flows made us much busier in the Vancouver Corridor.

Remy: In fact, we moved record volumes in this corridor during a period of a very heavy work block program on our system and in the directional running zone in which both the Canadian rails operate.

Tracy A. Robinson: We saw this in our velocity metrics in the West and in labor productivity. Now, it's important to note that the velocity issue has been temporary, and the operation in the West has returned to normal levels as the work blocks have moved to other parts of the network. In the quarter, we delivered on the overall volume level, but we lost traction on leverage. Now Derek and Pat will take you through the details and how we're responding.

Remy: The team got it done, but it wasn't efficient. We saw this in our velocity metrics in the West and in labor productivity.

Remy: Now, it's important to note that the velocity issue has been temporary and the operation in the west has returned to normal levels as the work blocks have moved to other parts of the network.

Tracy Robinson: So, on the quarter, we delivered on the overall volume level, but we lost traction on leverage.

Remy: So on the quarter, we delivered on the overall volume level.

Tracy Robinson: Now, Derek and Pat will take you through the details and how we're responding. Here's where it is at a high level. The mix of business was different than what we planned, with more bulk and intermodal and less manifest traffic, where we had the most leveraged opportunity. We had more demand in the West than expected and less demand than planned in the South and the East. And as a result, we had more unproductive labor, particularly in the South, given lower grain and coal volumes through the quarter. And we had lower labor productivity in the Vancouver corridor as we managed record volumes through a heavy work block period.

Speaker Change: but we lost traction on leverage. Now Derek and Pat will take you through the details and how we're responding. Here's where it is though at a high level. The mix of business was different than what we planned with more bulk and intermodal and less manifest traffic where we had the most leverage opportunities.

Tracy A. Robinson: Here's where it is at a high level. The mix of business was different than what we planned, with more bulk and intermodal and less manifest traffic where we had the most leverage opportunities. We had more demand in the west than expected and less demand than planned in the south and the east. As a result, we had more unproductive labor, particularly in the South, given lower grain and coal volumes through the corridor.

Speaker Change: We had more demand in the west than expected and less demand than planned in the south and the east.

Speaker Change: As a result, we had more unproductive labor, particularly in the South, given lower grain and coal volumes through the corridor. We had lower labor productivity in the Vancouver Corridor as we managed record volumes through a heavy work block period.

Tracy A. Robinson: And we had lower labor productivity in the Vancouver Corridor as we managed record volumes through a heavy work block period. We also had a headwind on fuel in the corner of about 10 cents, which Jizz will take. So as we move through July, the velocity in the West is back to normal levels, and we're taking action on unproductive labor. We continue to monitor international volumes to ensure that we are positioned well for their return once we have labor stability.

Tracy Robinson: We also had a headwind on fuel in the corner of about 10 cents, which just will take you through.

Jiz: We also had a headwind on fuel in the corner of about 10 cents, which Jiz will take you through.

Tracy Robinson: Circelli. So as we move through July, the velocity in the West is back to normal level, and we're taking actions on unproductive labor. We continue to monitor the international volumes to ensure that we are positioned well for their return once we have labor stability.

Jiz: As we move through July , the velocity in the West is back to normal levels and we're taking actions on unproductive labor. We continue to monitor the international volumes to ensure that we are positioned well for their return once we have labor stability.

Tracy Robinson: So, with you two in mind, and with the anticipated continued rerouting of international volumes for a period, we are revising our full year guidance to mid- to high-single-digit EPS growth. So this assumes no labor disruptions on the rails or at the ports, and it assumes the current traffic diversion is not increased. And while there's no doubt that 2024 has and will continue to have its fair share of challenges, our longer-term outlook can grow to gender remain intact. And we remain confident that our operating model will drive leverage as our volumes normalize post labor uncertainty.

Tracy A. Robinson: So with Q2 in mind, and with the anticipated continued rerouting of international volumes for a period, we are revising our full year guidance to mid to high single-digit EPS growth. This assumes no labor disruptions on the rails or at the ports, and it assumes the current traffic diversions do not increase. And while there's no doubt that 2024 has and will continue to have its fair share of challenges, our longer-term outlook and growth agenda remain intact.

Speaker Change: With Q2 in mind, and with the anticipated continued rerouting of international volumes for a period, we are revising our full-year guidance to mid- to high-single-digit EPS growth.

Speaker Change: This assumes no labour disruptions on the rails or at the ports, and it assumes the current traffic diversions do not increase.

Speaker Change: While there is no doubt that 2024 has and will continue to have its fair share of challenges, our longer-term outlook and growth agenda remain intact, and we remain confident that our operating model will drive leverage as our volumes normalize post-labor uncertainty.

Tracy A. Robinson: And we remain confident that our operating model will drive leverage as our volumes normalize post-labor uncertainty. So I'll hand it over to the team to provide more details, and you're up first there. Thanks, Tracy. Good afternoon, everyone.

Unknown Executive: So I'll hand it over to the team to provide more details when you're up first.

Derek Taylor: Thanks, Tracy.

Derek Taylor: I'm on slide seven for Overall, the railroad ran relatively well in the second quarter, which bears out with overall car velocity at 210 miles per day, which is down 3% from last year. Some of our other operating metrics, like network train speed and 32-hour cars, aren't quite where they were last year, but are still demonstrating a fluid railroad that is handling the growth. Notably, the southern and eastern regions continue to perform well operationally throughout the entire quarter.

Speaker Change: So I'll hand it over to the team to provide more details, and you're up first, Derek. Thanks, Tracy. Good afternoon, everyone. I'm on slide 7 for reference.

Derek Taylor: Good afternoon, everyone. I'm on slide 7 forever. Overall, the railroad ran relatively well in the second quarter, which bears out with overall car velocity at 210 miles per day, which is down 3 percent from last year. Some of our other operating metrics, like network trains fee and 32 hour cars, aren't quite where they were last year, but are still demonstrating a fluid railroad that is handling the growth. Notably, the Southern and Eastern regions continue to perform well operationally throughout the entire quarter. The Western region was quite busy with growth weighted more towards Intermol and both.

Derek Taylor: Overall, the railroad ran relatively well in the second quarter, which bears out with overall car velocity at 210 miles per day, which is down 3% from last year.

Speaker Change: Some of our other operating metrics, like network train speed and 32-hour cars, aren't quite where they were last year, but are still demonstrating a fluid railroad that is handling the growth.

Speaker Change: Notably, the southern and eastern regions continue to perform well operationally throughout the entire corridor.

Derek Taylor: The western region was quite busy, with growth weighted more towards intermodal than bulk. To give you a sense of how busy we were, Q2 was the all-time highest average daily GTMs through the Vancouver Corridor in CN's history. We added train starts to accommodate the growth as we had planned and have been successful in onboarding those volumes overall. However, our operating metrics reflect the fact that we were impeded by ongoing track maintenance work in the critical Vancouver corridor throughout the entire corridor.

Speaker Change: The western region was quite busy, with growth weighted more towards intermodal and bulk.

Derek Taylor: To give you a sense of how busy we were, Q2 was the all-time highest average daily GTMs through the Vancouver quarter and CN's history. We added train starts to accommodate the growth as we had planned and had been successful in onboarding those volumes overall. However, our operating metrics reflect the fact that we were impeded by ongoing track maintenance work in the critical Vancouver corridor throughout the entire quarter. There wasn't a single week in the second quarter where there wasn't some form of planned or unplanned maintenance in the directional running zone for DRZ. Recall that this is the area where CN and CPC run on each other's tracks to effectively create double track capacity.

Speaker Change: To give you a sense of how busy we were, Q2 was the all-time highest average daily GTMs through the Vancouver Corridor in CN's history.

Speaker Change: We added train starts to accommodate the growth as we had planned and have been successful in onboarding those volumes overall.

Speaker Change: However, our operating metrics reflect the fact that we were impeded by ongoing track maintenance work in the critical Vancouver corridor throughout the entire corridor.

Derek Taylor: There wasn't a single week in the second quarter where there wasn't some form of planned or unplanned maintenance in the Directional Running Zone, or DRZ. Recall that this is the area where CN and CPKC run on each other's tracks to effectively create double track capacity.

Speaker Change: There wasn't a single week in the second quarter where there wasn't some form of planned or unplanned maintenance in the directional running zone for DRZ.

Speaker Change: Recall that this is the area where CN and CPKC run on each other's tracks to effectively create double track capacity.

Derek Taylor: When this work is being done, it squeezes capacity because we can't run trains for four to eight-hour blocks at a time. We also know that any type of maintenance work in the DRZ has a disproportionate impact on CN because we run more trains through that specific corridor. As work blocks wrapped up on the DRZ, fluidity returned. In July, car velocity has been trending toward 220 miles per day, and our network train speed is running towards 20 miles per hour. That is right where we want them to be. I am confident these health of network metrics will continue to trend favorably.

Derek Taylor: When this work is being done, it squeezes capacity because we can't run trains for four to eight-hour blocks at a time. We also know that any type of maintenance work in the DRZ has a disproportionate impact on CN because we run more trains through that specific corridor. As worklocks wrapped up on the DRZ polluted your return, in July, car velocity has been trending toward 220 miles per day, and our network train speed is trending toward 20 miles per hour. That is right where we want them to be. I am confident these health of network metrics will continue to trend favorably.

Speaker Change: When this work is being done,

Speaker Change: It squeezes capacity because we can't run trains for four to eight hour blocks at a time.

Speaker Change: We also know that any type of maintenance work in the DRZ has a disproportionate impact on CN because we run more trains through that specific corridor.

Speaker Change: As work was wrapped up on the DRZ, fluidity returned.

Speaker Change: In July , car velocity has been trending toward 220 miles per day, and our network train speed is trending towards 20 miles per hour.

Speaker Change: That is right where we want them to be.

Derek Taylor: We had good thermal performance in the second quarter. Our yards were quite fluid throughout the entire network, and our local service commitment performance approached an all-time high of 94 percent, topping last year's excellent 91 percent result. This performance also enabled us to really deliver for our customers in first and last mile execution. Foundation, great rarity by the entire team in the field.

Speaker Change: I am confident these health of network metrics will continue to trend favorably.

Derek Taylor: We had good terminal performance in the second quarter. Our yards were quite fluid throughout the entire network, and our local service commitment performance approached an all-time high of 94 percent, topping last year's excellent 91 percent result. This performance also enabled us to really deliver for our customers in first and last mile execution. Great railroading by the entire team in the field. As you heard Tracy mention in her remarks, we have taken action in terms of operating leverage when it comes to both labor and physical assets. In terms of labor, we stopped hiring in both the southern region and eastern region.

Speaker Change: We had good terminal performance in the second quarter.

Speaker Change: Our yards were quite fluid throughout the entire network, and our local service commitment performance approached an all-time high of 94%, topping last year's excellent 91% result.

Speaker Change: This performance also enabled us to really deliver for our customers in first and last mile execution.

Derek Taylor: As you heard Tracy mentioned in her remarks, we have taken action in terms of operating leverage when it comes to both labor and physical assets. In terms of labor, we stop hiring in both the Southern region and Eastern region. We have also offered voluntary furloughs in both of those respective regions that employees have been utilizing. Another action has been offering permanent transfers from the Eastern region to the Western region. Where more than demand has been to balance out our people requirements. In terms of physical assets, we have put down both locomotives and specific heartleets to adjust for the current demand profile that is out there.

Derek Taylor: We have also offered voluntary furloughs in both of those respective regions that employees have been utilizing. Another action has been offering permanent transfers from the eastern region to the western region where more of the demand has been to balance out our workforce requirements. In terms of physical assets, we have put down both locomotives and specific car fleets to adjust to the current demand profile that is out there. I'll just wrap up by saying that Rarit is running well and will continue to run well, especially with some of these short-lived challenges behind us as we deliver for our customers. Now, I'll turn it over to Pat. Thanks Derek, and good afternoon.

Speaker Change: Great rarity by the entire team in the field.

Speaker Change: As you heard Tracy mention in her remarks, we have taken action in terms of operating leverage when it comes to both labor and physical assets.

Tracy A. Robinson: In terms of labor, we stopped hiring in both the southern region and eastern region.

Speaker Change: We have also offered voluntary furloughs in both of those respective regions that employees have been utilizing.

Speaker Change: Another action has been offering permanent transfers from the eastern region to the western region.

Speaker Change: where more than demand has been to balance out our people requirements.

Speaker Change: In terms of physical assets, we have put down both locomotives and specific car fleets to adjust to the current demand profile that is out there.

Derek Taylor: I'll just wrap up by saying that the rarity is running well, and we'll continue to run well, especially with some of these short-lived challenges behind us as we deliver for our customers.

Speaker Change: I'll just wrap up by saying that the Rarit is running well, and will continue to run well, especially with some of these short-lived challenges behind us as we deliver for our customers.

Patrick Whitehead: Now, I'll turn it over to Pat. Thanks, Derek, for a good afternoon. I'd like to start today by talking about safety. We are committed to building a safety culture where zero serious injuries and mentalities is possible. In the quarter, we saw a 22% improvement in the accident frequency ratio, though as Tislayen will speak to, the accident for more consequential, which drove higher costs in the quarter. We continue to work with our leaders in the United States and invest in and leverage technology and training to drive improvement in our accident metrics. We are currently providing training for managers focusing on behavior-based safety best practices to reduce human factor incidents and accidents.

Patrick Timothy Whitehead: I'd like to start today by talking about safety. We are committed to building a safety culture where zero serious injuries and fatalities are possible. In the quarter, we saw a 22% improvement in the accident frequency ratio, though, as Ghislain will speak to, the accidents were more consequential, which drove higher costs in the quarter. We continue to work with our leaders and unionized teammates and invest in and leverage technology and training to drive improvement in our access.

Speaker Change: Now, I'll turn it over to Pat.

Pat: Thanks Derek and good afternoon. I'd like to start today by talking about safety. We are committed to building a safety culture where zero serious injuries and fatalities is possible.

Pat: In the quarter, we saw a 22% improvement in the accident frequency ratio, though as Ghislain will speak to, the accidents were more consequential, which drove higher costs in the quarter.

Ghislain: We continue to work with our leaders and unionized teammates and invest in and leverage technology and training to drive improvement in our accident metrics.

Patrick Timothy Whitehead: We are currently providing training for managers focusing on behavior-based safety best practices to reduce human factor incidents and accidents. We saw a 13% deterioration in our injury frequency ratio, driven by our leading cause of injury: blips, trips, and falls while walking.

Ghislain: We are currently providing training for managers focusing on behavior-based safety best practices to reduce human factor incidents and accidents.

Patrick Whitehead: We saw a 13% deterioration in our injury frequency ratio driven by our leading cause of injuries, flips, trips, and falls while walking. We have taken note that there has been a 30% reduction in these injuries with employees that have been trained on our walking simulator. We will be investing in additional mobile simulators to train our folks in the field across all of operations.

Ghislain: We saw a 13% deterioration in our injury frequency ratio driven by our leading cause of injuries.

Patrick Timothy Whitehead: We have taken note that there has been a 30% reduction in these injuries with employees that have been trained on our walking circuit. We will be investing in additional mobile simulators to train our folks in the field across all of our operations. I also want to mention our real-time hazard and near-miss reporting app, and Abe Longo. We have had great adoption of the tool amongst our employees.

Ghislain: Blips, trips, and falls while walking.

Ghislain: We have taken note that there has been a 30% reduction in these injuries with employees that have been trained on our walking simulator.

Ghislain: We will be investing in additional mobile simulators to train our folks in the field across all of operations.

Patrick Whitehead: I also want to mention our real-time hazard and near-miss reporting app in a long go. We have had great adoption of the tool amongst our employees. This is a huge asset in reducing hazards and injury prevention. We have already resolved over 1,000 walking conditions received by employees utilizing the tool. As Eric mentioned, we were impacted in the quarter by work blocks in the Vancouver corridor. When we say the plan is sacred, that also applies to the engineering maintenance plan. Across much of Canada, we have a finite window to perform a significant amount of mission-critical track maintenance work.

Ghislain: I also want to mention our real-time hazard and near-miss reporting app, Enable OnGo. We have had great adoption of the tool amongst our employees.

Patrick Timothy Whitehead: This is a huge asset in reducing hazards and injury prevention. We have already resolved over 1,000 walking conditions received by employees utilizing. Derek mentioned we were impacted in the quarter by work blocks in the Vancouver Corridor. But when we say the plan is sacred, that also applies to engineering maintenance. Across much of Canada, we have a finite window to perform a significant amount of mission-critical track maintenance. Work blocks mean we do not operate trains when the work is happening, which reduces our capacity.

Speaker Change: This is a huge asset in reducing hazards and injury prevention.

Speaker Change: We have already resolved over 1,000 walking conditions received by employees utilizing the tool.

Speaker Change: Derek mentioned we were impacted in the corridor by work blocks in the Vancouver Corridor.

Derek Taylor: But when we say the plan is sacred, that also applies to the engineering maintenance plan.

Speaker Change: Across much of Canada, we have a finite window to perform a significant amount of mission-critical track maintenance work.

Patrick Whitehead: Work blocks mean we do not operate trains when the work is happening, which reduces our capacity. These plans and disruptions are factored into the training plan. What made Q2 particularly challenging from a planning perspective was the complexity arising from both the amount of maintenance work it was done, and that a lot of this work happened in close proximity in and around the direction running zone. As a rule, we do not schedule work blocks so close together because it requires trains to stop. For two work blocks within a short time.

Speaker Change: Work blocks mean we do not operate trains when the work is happening, which reduces our capacity.

Patrick Timothy Whitehead: These plans and disruptions are factored into the train plan. What made Q2 particularly challenging from a planning perspective was the complexity arising from both the amount of maintenance work that was done and that a lot of this work happened in close proximity, in and around the directional running. As a rule, we do not schedule work blocks so close together because it requires trains to stop for two work blocks within a short time. This leads to congestion and crewing challenges during startup operations. The urgent nature of some of the unplanned work meant that we had to do it anyway.

Speaker Change: These plans and disruptions are factored into the train plan.

Speaker Change: What made Q2 particularly challenging from a planning perspective was the complexity arising from both the amount of maintenance work that was done

Speaker Change: and that a lot of this work happened in close proctivity in and around the directional running zone.

Speaker Change: As a rule, we do not schedule work blocks so close together because it requires trains to stop for two work blocks within a short distance.

Patrick Whitehead: Business. This leads to congestion and crewing challenges during start-up operations. The urgent nature of some of the unplanned work meant that we had to do this anyway. As they were mentioned with the maintenance issues and the BC South now behind us, we have seen strong improvements in overall car velocity and train speed.

Speaker Change: This leads to congestion and crewing challenges during startup operations.

Speaker Change: The urgent nature of some of the unplanned work meant that we had to do this anyway.

Patrick Timothy Whitehead: As Derek mentioned, with the maintenance issues in the B.C. South now behind us, we have seen strong improvements in overall car velocity and train reliability. However, I want to add a final point which bears review. The government mandated duty and rest period rules in Canada, which have now been in place since the end of May 2023, have made crew scheduling very complicated. It amplifies the challenges to crew availability and productivity when we have disruptions, which include word block. This was even more so in the quarter because we didn't go a single week without some work being done in the B.C. South.

Speaker Change: As Derek mentioned, with the maintenance issues in the B.C. South now behind us, we have seen strong improvements in overall car velocity and train speed.

Patrick Whitehead: I want to add a final point, which bears repeating. The government-mandated duty and respirator rules in Canada, which have now been in place as of the end of May 2023, have made crew scheduling very complicated. It amplifies the challenges to crew availability and productivity when we have disruptions, which include work blocks. This was even more so in the quarter because we didn't go a single week without some work being done in the BC South. In closing, we're looking at all levers to be able to increase crew availability, including looking for additional opportunities to extend the crew runs.

Speaker Change: I want to add a final point which bears repeating.

Speaker Change: The government-mandated duty and rest period rules in Canada, which have now been in place since the end of May 2023, have made crew scheduling very complicated. It amplifies the challenges to crew availability and productivity when we have disruptions, which include work blocks.

Speaker Change: This was even more so in the quarter because we didn't go a single week without some work being done in the B.C. South.

Patrick Timothy Whitehead: In closing, we're looking at all levers to be able to increase crew availability, including looking for additional opportunities to extend crew runs. Our plan continues to produce positive results. Ordnance train performance remains solid at 93% quarter-to-date, and destination train performance is approaching 70% quarter-to-date, in line with our expectations. You've already heard Derek talk about what we are doing in the east and the south. In the west, we are resourcing for strong volumes, and the network is well-positioned moving into the third and fourth quarters. I'll now turn the call over to Remy. Remy, your turn. Hey, thanks, Pat. Bon après-midi. It's a grand plaisir d'être with you.

Speaker Change: In closing, we're looking at all levers to be able to increase crew availability, including looking for additional opportunities to extend crew runs.

Patrick Whitehead: Our plan continues to produce positive results. Origin's train performance remains solid in 93% quarter to date, and destination train performance is approaching 70% quarter to date, in line with our expectations. You already heard Derek talk about what we're doing in the East of the South. In the west, we are resourcing for strong volumes, and the network is well positioned moving into the third and fourth quarter.

Speaker Change: Our plan continues to produce positive results. Origin's train performance remains solid at 93% quarter-to-date, and destination train performance is approaching 70% quarter-to-date, in line with our expectations.

Speaker Change: You've already heard Derek talk about what we are doing in the east and the south. In the west, we are resourcing for strong volumes and the network is well positioned moving into the third and fourth quarter.

Remi Lalonde: I'll now turn the call over to Remi.

Remi Lalonde: Remi, your turn. Hey, thanks, Pat.

Remi Lalonde: When I'm in season, I get off to the other side of the group.

Speaker Change: I'll now turn the call over to Rémi. Rémi, your turn. Hey, thanks, Pat. Bon après-midi. C'est un grand plaisir d'être avec vous.

Remi G. Lalonde: CN's revenues grew by 7% in the second quarter compared to last year on stronger pricing, higher volume, and favorable foreign exchange, offset in part by lower fuel surcharges. Our RTMs were 7% higher, in line with plan, mostly from shipments of international intermodal, Canadian grain, and refined petroleum. Revenue per RTM was down slightly on account of mix, specifically the longer average length of haul for these products. I'll emphasize that we are delivering same-store prices ahead of our cost inflation.

Remi Lalonde: CN's revenues grew by 7% in the second quarter compared to last year on stronger pricing, higher volume, and favorable foreign exchange, offset in part by lower fuel surcharge. Our RTMs were 7% higher in line with plan, mostly from shipments of international intermodal Canadian grain and refined petroleum. Revenue per RTM was down slightly on account of mix, specifically the longer average length of haul for these products. I'll emphasize that we are delivering same-store price ahead of our cost inflation.

Speaker Change: CN's revenues grew by 7% in the second quarter compared to last year on stronger pricing, higher volume, and favorable foreign exchange, offset in part by lower fuel surcharge.

Speaker Change: Our RTMs were 7% higher, in line with plan, mostly from shipments of International Intermodal, Canadian Grain, and Refined Petroleum.

Speaker Change: Revenue per RTM was down slightly on account of mix, specifically the longer average length of haul for these products.

Speaker Change: I'll emphasize that we are delivering same-store price ahead of our cost inflation.

Remi Lalonde: Before turning to the individual business units, I want to underscore some of the CN specific growth initiatives that appear in the results. Stelling service reliability for international intermodal through Western gateways by leveraging the strategic benefit of the Rupert option in our chain plan design and building our book of business accordingly. Moving fraction from Wisconsin to Western Canada and hauling the resulting propane for export through Prince Rupert. Delivering incremental volume growth through Canadian and US crushed plants with inbound grain and outbound renewable feed stocks and protein and inaugurating with our partners, the first phase of the Greater Toronto Area fuel facility.

Remi G. Lalonde: Before returning to the individual business units, I want to emphasize some of the CM-specific growth initiatives that appear in the results. Selling Service Reliability for International Intermodal Through Western Gateways by leveraging the strategic benefit of the Rupert option in our train plan design and building our book of business accordingly. Moving Fractan from Wisconsin to Western Canada and hauling the resulting propane for export through Prince Rupert.

Speaker Change: Before returning to the individual business units, I want to underscore some of the CM-specific growth initiatives that appear in the results.

Speaker Change: Selling service reliability for international intermodal through Western Gateways by leveraging the strategic benefit of the Rupert option in our train plan design and building our book of business accordingly.

Speaker Change: Moving Fraxan from Wisconsin to Western Canada and hauling the resulting propane for export through Prince Rupert.

Remi G. Lalonde: Delivering incremental volume growth through Canadian and U.S. crushed plants with inbound grain and outbound renewable feedstocks and protein and inaugurating, with our partners, the first phase of the Greater Toronto Area Fuel Facility. So, overall, the business is growing on plan, except for some headwinds around lumber and labor uncertainty. Let's take a sector by sector look at the corridor. On an FX adjusted basis, intermodal revenues grew by 6% with a 13% increase in overall RTMs, reflecting international up by 19% but domestic down by 1%.

Speaker Change: Delivering incremental volume growth through Canadian and U.S. crush plants with inbound grain and outbound renewable feedstocks and protein and inaugurating with our partners the first phase of the Greater Toronto Area Fuel Facility.

Remi Lalonde: So overall, the business is growing on plan, except for some headwind around lumber and labor uncertainty.

Speaker Change: So, overall, the business is growing on plan, except for some headwind around lumber and labor uncertainty.

Remi Lalonde: Let's take a sector-by-sector look at the quarter on an FX-adjusted basis. Intermodal revenues grew by 6% with a 13% increase in overall RTMs, reflecting international up by 19% but domestic down by 1. Year-over-year growth in international is due to higher traffic through western gateways and key customer wins as we push to sell service reliability, but also the 2023 impact of the then imminent ILWU port strike. The domestic business, on the other hand, faces more pressure due to market softness combined with an oversupply of truck capacity. The resulting change in mix caused a 3% increase in average length of haul and therefore pushed revenue per RTM down by 6%.

Speaker Change: Let's take a sector-by-sector look at the corridor on an FX-adjusted basis.

Speaker Change: Intermodal revenues grew by 6%, with a 13% increase in overall RTMs, reflecting international up by 19%, but domestic down by 1%.

Remi G. Lalonde: Year-over-year growth in international is due to higher traffic through Western Gateways and key customer wins as we push to sell service reliability, but also the 2023 impact of the then imminent ILWU port strike. The domestic business, on the other hand, faces more pressure due to market softness combined with an oversupply of truck capacity.

Speaker Change: Year-over-year growth in international is due to higher traffic through western gateways and key customer wins as we push to sell service reliability but also the 2023 impact of the then imminent ILWU port strike.

Speaker Change: The domestic business, on the other hand, faces more pressure due to market softness combined with an oversupply of truck capacity.

Remi G. Lalonde: The resulting change in mix caused a 3% increase in average length of haul and therefore pushed revenue per RTM down by 6%. It's worth noting that intermodal is the most sensitive to the ongoing uncertainty around the labor situation with the TCRC. Accordingly, we saw volumes soften toward the end of the quarter as ocean lines and domestic shippers activated contingency plans, including port diversions and modal shifts. Grain and fertilizer revenues and RTMs each rose by 7%, reflecting a stronger than expected 24% increase in Canadian grain shipments, which was partially offset by lower shipments of export potash and U.S. corn. The strength of Canadian grain comes from de-stalking and farm optimism toward new crop growth after low moisture levels earlier this year.

Speaker Change: The resulting change in mix caused a 3% increase in average length of haul and therefore pushed revenue per RTM down by 6%.

Remi Lalonde: It's worth noting that intermodal is the most sensitive to the ongoing uncertainty around the labor situation with the TCRC. Courtney, we saw volumes soften toward the end of the quarter as ocean lines and domestic shippers activated contingency plans, including port diversions and modal shifts. Brain and fertilizer revenues and rtms each rose by 7%, reflecting a stronger than expected 24% increase in Canadian grain shipments, which was partially offset by lower shipments of export pot ash and US corn. The strength of Canadian grain comes from destocking; the form of farm optimism toward the new crop grows after low moisture levels earlier this year.

Speaker Change: It's worth noting that intermodal is the most sensitive to the ongoing uncertainty around the labor situation with the TCRC.

Speaker Change: Accordingly, we saw volumes soften toward the end of the quarter as ocean lines and domestic shippers activated contingency plans, including port diversions and modal shifts.

Speaker Change: Grain and fertilizer revenues and RTMs each rose by 7%, reflecting a stronger than expected 24% increase in Canadian grain shipments, which was partially offset by lower shipments of export potash and U.S. corn.

Speaker Change: The strength of Canadian grain comes from de-stalking, as farm optimism towards the new crop grows after low moisture levels earlier this year.

Remi Lalonde: Indeed, as the 2023-24 crop year draws to a close, I'm pleased to note that we move more grain in a smaller crop year, increasing our share. Our pot ash volumes were lower; on the other hand, some of the business has largely, but not entirely, naturally reverted to the western terminal that experienced a lengthy outage last year. Revenues for petroleum and chemicals were 14% higher in the quarter on a 12% increase in rtms. This includes strong domestic demand for gasoline, diesel, and jet fuel in Ontario and Quebec, higher shipments of polyethylene, and more export NGL shipments from north to B.C.

Remi G. Lalonde: Indeed, as the 2023-2024 crop year draws to a close, I'm pleased to note that we move more grain in a smaller crop year, increasing our share. Our potash volumes were lower, on the other hand, as some of the business has largely, but not entirely, naturally reverted to the Western Terminal that experienced a lengthy outage last year. Revenues for petroleum and chemicals were 14% higher in the quarter on a 12% increase in RTM.

Speaker Change: Indeed, as the 2023-24 crop year draws to a close, I'm pleased to note that we move more grain in a smaller crop year, increasing our share.

Speaker Change: Our potash volumes were lower, on the other hand, as some of the business has largely, but not entirely, naturally reverted to the Western Terminal that experienced a lengthy outage last year.

Speaker Change: Revenues for petroleum and chemicals were 14% higher in the quarter on a 12% increase in RTMs.

Remi G. Lalonde: This includes strong domestic demand for gasoline, diesel, and jet fuel in Ontario and Quebec, higher shipments of polyethylene, and more export NGL shipments from Northeast BC, mostly through Rupert. Metals and Minerals revenues grew by 6% on 12% higher RTMs, which reflects a 36% increase in FRAXAM for the robust drilling activity in Northeast BC and Alberta and the shorter breakup period. On the other hand, steel product shipments have been softer due to production inconsistencies, a weaker market, and volume leakage to the oversupplied truck.

Speaker Change: This includes strong domestic demand for gasoline, diesel, and jet fuel in Ontario and Quebec, higher shipments of polyethylene, and more export NGL shipments from Northeast BC, mostly through Rupert.

Remi Lalonde: mostly through Rupert. Metals and minerals revenues grew by 6% on 12% higher rtms, which reflects a 36% increase in fraction for the robust drilling activity in northeast B.C. and Alberta and the shorter breakout area. On the other hand, steel product shipments have been softer due to production and consistencies in weaker market and volume leakage to the oversupplied truck market. Revenues in automotive grew by 9% and RTMs by 12% due mainly to an increase in long haul imports through Vancouver and North American origins into western Canada, offset by lower short haul due to Canadian plants retooling.

Speaker Change: Metals and Minerals revenues grew by 6% on 12% higher RTMs, which reflects a 36% increase in FRAXAM for the robust drilling activity in Northeast BC and Alberta and the shorter breakup period

Speaker Change: On the other hand, steel product shipments have been softer due to production inconsistencies, a weaker market, and volume leakage to the oversupplied truck market.

Remi G. Lalonde: Revenues in the automotive segment grew by 9% and RTMs by 12%, due mainly to an increase in long-haul imports through Vancouver and North American origins into Western Canada, offset by lower short-haul due to Canadian plant retooling. Forest product revenues improved by 4% in the quarter despite flat RTM.

Speaker Change: Revenues in automotive grew by 9% and RTMs by 12%, due mainly to an increase in long-haul imports through Vancouver and North American origins into Western Canada, offset by lower short-haul due to Canadian plant retooling.

Remi Lalonde: Forest product revenues improved by 4% in the quarter, displayed flat rtms. While rtms were 4% higher in pulp and paper, they slipped by 3% in lumber, given the ongoing demand slump. Indeed, shipments were particularly soft in June.

Speaker Change: Forest Product Revenues improved by 4% in the quarter despite flat RTMs.

Remi G. Lalonde: While RTMs were 4% higher in pulp and paper, they slipped by 3% in lumber given the ongoing demand. Indeed, shipments were particularly soft in June. Coal business lagged in the quarter with revenues down by 8% on an 11% drop in RTM. Shipments fell in both Canada and the U.S., reflecting lower available-to-ship inventory in western Canada and throughput challenges in that corridor, as well as lower thermal coal demand in the U.S. As we turn to the outlook, let me say first that our comments assume that we will have certainty around our labor situation by the end of summer and that there is no other Canadian labor disruption, rail or port.

Speaker Change: While RTMs were 4% higher in pulp and paper, they slipped by 3% in lumber given the ongoing demand slump.

Remi Lalonde: The coal business lagged in the quarter with revenues down by 8% on an 11% drop in rtms. Conference, shipments fell in both Canada and the US, reflecting lower available to ship inventory in Western Canada, and throughput challenges in that corridor, as well as lower thermal demand, thermal cold demand in the US.

Speaker Change: Indeed, shipments were particularly soft in June .

Speaker Change: The coal business lagged in the quarter with revenues down by 8% on an 11% drop in RTMs.

Speaker Change: Shipments fell in both Canada and the U.S., reflecting lower available-to-ship inventory in western Canada and throughput challenges in that corridor, as well as lower thermal coal demand in the U.S.

Remi Lalonde: As we turn to the outlook, let me say first that our comments assume that we will have certainty around our labor situation by the end of summer, and that there is no other Canadian labor disruption, neither rail nor port. We expect to carry intermodal momentum through our Western gateways in the second half of the year, and to come in higher over the strike-affected same period last year, but we will face headwinds with the overhang of uncertainty around further potential labor disruptions in the Canadian supply chain. We also see rising pricing pressure with domestic intermodal and light of the less than strong consumer and business sentiment in Canada and oversupply truck market.

Speaker Change: As we turn to the outlook, let me say first that our comments assume that we will have certainty around our labour situation by the end of summer and that there is no other Canadian labour disruption, neither rail nor port.

Remi G. Lalonde: We expect to carry intermodal momentum through our western gateways in the second half of the year and to come in higher over the strike-affected same period last year, but we will face headwinds with the overhang of uncertainty around further potential labor disruptions in the Canadian supply chain. We also see rising pricing pressure with domestic intermodal in light of the less than strong consumer and business sentiment in Canada and the oversupplied truck. While the prospects for the 2024-25 Canadian crop year are brighter than expected, that will show up more with the Q4 fall harvest. The U.S. crop looks good overall, despite some excess rain in certain areas, but the outlook for export demand is soft.

Speaker Change: We expect to carry intermodal momentum through our western gateways in the second half of the year, and to come in higher over the strike-affected same period last year, but we will face headwinds with the overhang of uncertainty around further potential labour disruptions in the Canadian supply chain.

Speaker Change: We also see rising pricing pressure with domestic intermodal in light of the less-than-strong consumer and business sentiment in Canada and oversupplied truck market.

Remi Lalonde: While the prospects for the 2024-25 Canadian crop year are brighter than expected, that will show up more with the Q4 fall harvest. US crop looks good overall, despite some excess rain in certain areas, but the outlook for export demand is soft. Fertilizer volumes will be lower than last year, given the 2023 opportunistic potash spot moves, but we should continue to see good momentum with crush capacity on both sides of the border. Our expectation is for continued growth in petroleum and chemicals during the second half, mainly from refined products to the GTA fuel facility and a new distribution platform in Prince Rupert, and continued growth in propane exports through Rupert.

Speaker Change: While the prospects for the 2024-25 Canadian crop year are brighter than expected, that will show up more with the Q4 fall harvest.

Speaker Change: U.S. crop looks good overall, despite some excess rain in certain areas, but the outlook for export demand is soft.

Remi G. Lalonde: Fertilizer volumes will be lower than last year, given the 2023 opportunistic potash spot moves, but we should continue to see good momentum with crush capacity on both sides of the board. Our expectation is for continued growth in petroleum and chemicals during the second half, mainly from refined products to the GTA fuel facility and a new distribution platform to Prince Rupert, and Continued Growth in Propane Exports Through Rail. With active drilling in the B.C.

Speaker Change: Fertilizer volumes will be lower than last year, given the 2023 opportunistic potash spot moves, but we should continue to see good momentum with crush capacity on both sides of the border.

Speaker Change: Our expectation is for continued growth in petroleum and chemicals during the second half, mainly from refined products to the GTA fuel facility and a new distribution platform to Prince Rupert, and continued growth in propane exports through Rupert.

Remi Lalonde: With active drilling in the BC Northeast and growing terminal capacity, we expect fraction shipments to stay strong. We also expect incremental minerals shipments, mainly lithium and gifson, to offset software metals, especially for steel on commodity prices and excess trucks. Automotive RTMs should be flat in the second half of the year based on the mix of business as market fundamentals trend back toward pre-pandemic levels. The underlying market for lumber is weak and is likely to remain that way through the end of the year, which will drag on forest products volume. We expect to see the same runway run rate in US thermal coal shipments due to high domestic stockpiles and soft export demand, but there should be incremental production gains as various Western Canadian sites for metallurgical coal.

Remi G. Lalonde: Northeast and growing torque terminal capacity, we expect Fractan shipments to stay strong. We also expect incremental minerals shipments, mainly lithium and gypsum, to offset softer metals, especially for steel, on commodity prices and excess trucks. Automotive RTMs should be flat in the second half of the year based on the mix of business as market fundamentals trend back toward pre-pandemic levels.

Speaker Change: With active drilling in the B.C. Northeast and growing torque terminal capacity, we expect fracked hand shipments to stay strong.

Speaker Change: We also expect incremental minerals shipments, mainly lithium and gypsum, to offset softer metals, especially for steel, on commodity prices and excess trucks.

Speaker Change: Automotive RTMs should be flat in the second half of the year based on the mix of business as market fundamentals trend back toward pre-pandemic levels.

Remi G. Lalonde: The underlying market for lumber is weak and is likely to remain that way through the end of the year, which will drag on forest products volumes. We expect to see the same run rate in U.S. thermal coal shipments due to high domestic stockpiles and soft export demand, but there should be incremental production gains at various Western Canadian sites for metallurgical coal. So overall, the business is growing on plan, except for some headwinds around lumber and labor uncertainty.

Speaker Change: The underlying market for lumber is weak and is likely to remain that way through the end of the year, which will drag on forest products volume.

Speaker Change: We expect to see the same run rate in U.S. thermal coal shipments due to high domestic stockpiles and soft export demand, but there should be incremental production gains at various Western Canadian sites for metallurgical coal.

Remi Lalonde: So overall, the business is growing on plan set for some headwind around lumber and labor uncertainty. And for RTMs in the second half compared to last year, we should see a good outtick in the merchandise business, especially for petroleum products, chemicals, and plastics, despite softer forest products. Flat to slightly positive in bulk with Q4 grain, offset by lower pot ash and incrementally positive consumer products, thanks to international intermodal, despite the headwind from the labor situation.

Speaker Change: So, overall, the business is growing on plan, except for some headwind around lumber and labor uncertainty.

Remi G. Lalonde: For RTMs in the second half compared to last year, we should see a good uptick in the merchandise business, especially for petroleum products, chemicals, and plastics, despite softer force products. Flat to Slightly Positive in Bulk with Q4 Grain Offset by Lower Potash and Incrementally Positive Consumer Products Thanks to International Intermodal despite the headwind from the labor situation. Before I pass it over to Ghislain, I'd like to say that I'm very excited to join the CM team on this journey.

Speaker Change: And for RTMs in the second half compared to last year, we should see a good uptick in the merchandise business, especially for petroleum products, chemicals, and plastics, despite softer forest products.

Speaker Change: Flat to Slightly Positive in Bulk with Q4 Grain Offset by Lower Potash Incrementally Positive Consumer Products Thanks to International Intermodal Despite the Headwind from the Labor Situation

Unknown Executive: Corporation. I'd like to say that I'm very excited to join the CM team on this journey. First couple months have been a lot of fun, as I've plunged deep in the inner workings of the business to learn how the railroad runs, get to know the team, and start to build crucial relationships with our customers, business partners, and communities. With forward to working with my colleagues and to contribute my diverse experience to make a difference here and to drive value for the company and its shareholders. The end is an amazing business, and the path ahead is very exciting.

Speaker Change: Before I pass it over to Ghislain, I'd like to say that I'm very excited to join the CM team on this journey.

Remi G. Lalonde: The first couple months have been a lot of fun as I've plunged deep into the inner workings of the business to learn how the railroad runs, get to know the team, and start to build crucial relationships with our customers, business partners, and community. I look forward to working with my colleagues and contributing my diverse experience to make a difference here and to drive value for the company and its shareholders. CN is an amazing business, and the path ahead is very exciting. Over to you, Justin. Merci beaucoup, Rémi. J'ai le plaisir de parler des résultats de notre deuxième semester.

Speaker Change: First couple of months have been a lot of fun as I've plunged deep in the inner workings of the business to learn how the railroad runs, get to know the team, and start to build crucial relationships with our customers, business partners, and communities.

Speaker Change: I look forward to working with my colleagues and to contribute my diverse experience to make a difference here and to drive value for the company and its shareholders. CN is an amazing business and the path ahead is very exciting. Over to you, Ghislain.

Unknown Executive: Over years, tonight. That's typical cool to me.

Ghislain Houle: Turning to slide 14, Q2 diluted EPS was down 1% versus last year, but up 5% on an adjusted basis after removing the impact of the loss on assets held for sale related to the transfer of the Quebec Bridge to the federal government. Adjusted OR increased by 160 basis points to 62.2%, mainly due to higher costs, versus Q1. OR improved by 140 basis points. While volumes were very strong up until the third week of May, we saw some meaningful softening in June as some intermodal international business diverted to U.S. ports due to the possibility of labor disruption in Canada. At the same time, lumber prices plummeted to historical low levels and below breakeven.

Cristina Circelli: Je tige de la palle de nos risos des NCMS. Turning to slide 14, Q2 diluted EPS was down 1% versus last year, but up 5% on an adjusted basis after removing the impact of the loss on assets held for sale related to the transfer of the Quebec Bridge to the federal government. Adjusted OR increased by 160 basis points to 62.2% mainly due to higher costs, versus Q1 OR and through by 140 basis points. While volumes were very strong up until the third week of May, we saw some meaningful softening in June as some intermodal international business diverted to U.S. ports due to the possibility of labor disruption in Canada.

Ghislain: Merci beaucoup Rémi. J'ai très hâte de parler de nos résultats du deuxième semestre.

Ghislain: Turning to slide 14, Q2 diluted EPS was down 1% versus last year, but up 5% on an adjusted basis after removing the impact of the loss on assets held for sale related to the transfer of the Quebec Bridge to the federal government.

Ghislain: Adjusted OR increased by 160 basis points to 62.2% mainly due to higher costs.

Ghislain: versus Q1 OR improved by 140 basis points.

Ghislain: While volumes were very strong up until the third week of May, we saw some meaningful softening in June as some intermodal international business diverted to U.S. ports due to the possibility of labor disruption in Canada.

Cristina Circelli: At the same time, lumber prices plummeted to historical low levels and below breakeven. Overall, revenues were up 7% for over years.

Ghislain: At the same time, lumber prices plummeted to historical low levels and below break-even.

Ghislain Houle: Overall, revenues were up 7% year-over-year. I will provide you with more details during the quarter. Fueled with a headwind of around 10 cents of EPS and diluted to the operating ratio by 130 bases per hour. As for the fuel impact, the operating ratio from the underlying operations slipped 30 bases points over here on account of the challenges mentioned by Pat and Derek. We continue to monitor fuel prices very closely. Applicable OHD rates, which drive fuel surcharge revenue, decreased by 5% versus last year, while average fuel prices for expenses increased 6% year-over-year in Q2.

Cristina Circelli: Let me provide you with more details on the quarter. Fuel was the headwind of around 10 cents of EPS and was diluted to the operating ratio by 130 basis points. Accent of fuel impact, the operating ratio from the underlying operations slipped 30 basis points year over year on account of the challenges mentioned by Pat and Derek. We continued to monitor fuel prices very closely. Applicable OHD rates, which drive fuel surcharge revenue, decreased by 5% versus last year, while average fuel price for expenses increased 6% year over year in Q2. In terms of expenses, which I will speak to on an exchange-adjusted basis, starting with labor, which was 13% higher versus last year on 2% higher average headcount, general wage increases, and higher current service pension costs.

Ghislain: Overall, revenues were up 7% year-over-year.

Ghislain: Let me provide you with more details in the quarter.

Ghislain: Fuel was a headwind of around 10 cents of EPS and was diluted to the operating ratio by 130 basis points.

Speaker Change: Absent of fuel impact, the operating ratio from the underlying operations slipped 30 bases pointy over year on account of the challenges mentioned by Pat and Derek.

Speaker Change: We continue to monitor fuel prices very closely.

Speaker Change: Applicable OHD rates, which drive fuel surcharge revenue, decreased by 5% versus last year, while average fuel price for expenses increased 6% year-over-year in Q2.

Ghislain Houle: In terms of expenses, which I will speak to on an exchange-adjusted basis, starting with labor, which was 13% higher versus last year, on 2% higher average headcount, general wage increases, and higher current service pension costs. We also saw higher short-term unproductive costs in the quarter related to deadheading, re-cruise, and held-away costs in the Vancouver Corridor, which was amplified by the impact Fuel expense increased 11% versus the same period last year, mostly due to a 7% increase in gross miles combined with a 6% increase in price per gallon that I just mentioned.

Speaker Change: In terms of expenses, which I will speak to on an exchange-adjusted basis, starting with labor, which was 13% higher versus last year, on 2% higher average headcount, general wage increases, and higher current service pension costs.

Cristina Circelli: We also saw higher short term unproductive costs in the quarter related to debt heading, recrues and held away costs in the Vancouver corridor, which was amplified by the impact of the government mandated WordPress rules. Fuel expense increased 11% versus the same period last year, mostly due to a 7% increase in gross amounts combined with a 6% increase in price for gallon that I just mentioned, partly offset by a 2% improvement in fuel efficiency. Equipment rents was up 20%, driven by higher intermodal car hire, and other increased 20% on higher incident costs.

Speaker Change: We also saw higher short-term unproductive costs in the quarter related to deadheading, re-cruise, and held-away costs in the Vancouver Corridor, which was amplified by the impact of the government-mandated work rest rules.

Speaker Change: Fuel expense increased 11% versus the same period last year, mostly due to a 7% increase in gross ton-miles, combined with a 6% increase in price per gallon that I just mentioned.

Ghislain Houle: Partly offset by a 2% improvement in fuel efficiency, equipment rents were up 20% driven by higher intermodal car hire, and other costs increased 22% on higher incident costs. In other income, we benefited from roughly $30 million in higher earnings from the sale of property within a subsidiary. We generated around $1.5 billion of free cash flow year-to-date at the end of June, about $200 million lower than last year, mainly due to lower net cash from operating activities and higher capital expenditures.

Speaker Change: Partly offset by a 2% improvement in fuel efficiency.

Speaker Change: Equipment rents was up 20% driven by hire intermodal car hire and other increased 22% on higher incident costs.

Cristina Circelli: Another income we benefited from roughly $30 million and higher earnings from the sale. We generated around $1.5 billion of free cash low year-to-date at the end of June, about $200 million lower than last year, mainly due to lower net cash from operating activities and higher capital expenditures. Under our current share repurchase program, which runs from February 1, 2024, to January 31, 2025, we have repurchased close to 10 million shares for almost $1.7 billion as at the end of June.

Speaker Change: In other income, we benefited from roughly $30 million in higher earnings from the sale of property within a subsidiary.

Speaker Change: We generated around $1.5 billion of free cash flow year-to-date at the end of June , about $200 million lower than last year, mainly due to lower net cash from operating activities and higher capital expenditures.

Ghislain Houle: Under our current share repurchase program, which runs from February 1, 2024 to January 31, 2025, we have repurchased close to 10 million shares for almost $1.7 billion as of the end of. Moving to slide 15, let me provide some visibility to our revised guidance for 2024. Note that our revised guidance assumes that we do not have a labor disruption and that the labor uncertainty is behind us by the end of August.

Speaker Change: Under our current share repurchase program, which runs from February 1st, 2024 to January 31st, 2025, we have repurchased close to 10 million shares for almost $1.7 billion as of the end of June .

Cristina Circelli: Moving to slide 15, let me provide some visibility to our Revive guidance for 2024. Know that our Revive Guidance assumes that we do not have a labor disruption and that the labor uncertainty is behind us by the end of August. Our Revive Guidance accounts for our year-to-date actuals as well as civil unforeseen headlines. From a volume outlook perspective, the mere potential of a well-emport labor disruptions dampened overseas in the model volume starting in June, and we expect that to continue until the labor uncertainty is resolved. We've also adjusted our outlook for lumber and now expect a 2025 recovery given current commodity prices.

Speaker Change: Moving to slide 15, let me provide some visibility to our revised guidance for 2024.

Speaker Change: Note that our revised guidance assumes that we do not have a labor disruption and that the labor uncertainty is behind us by the end of August .

Ghislain Houle: Our revised guidance accounts for our year-to-date actuals, as well as several unforeseen headwinds. From a volume outlook perspective, the mere potential of rail and port labor disruptions dampened overseas moral volume starting in June, and we expect that to continue until the labor uncertainty is resolved. We've also adjusted our outlook for lumber and now expect a 2025 recovery given current commodity prices. More broadly, overall industrial production remains slightly positive, but tepid, in part because inflation has been persistent and interest rate cuts have yet to come or have been more modest than expected.

Speaker Change: Our revised guidance accounts for our year-to-date actuals, as well as several unforeseen headwinds.

Speaker Change: From a volume outlook perspective, the mere potential of a rail and port labor disruptions dampen overseas in a modal volume starting in June , and we expect that to continue until the labor uncertainty is resolved.

Speaker Change: We've also adjusted our outlook for lumber and now expect a 2025 recovery given current commodity prices.

Cristina Circelli: More broadly, overall industrial production remains slightly positive, but tested in part because inflation has been persistent and interest rate cuts have yet to come or been more modest and expected. On the other hand, we're encouraged that early concerns about moisture levels for the Canadian grain crop have evaded. We also continue to advance on our CN specific growth initiatives in line with our expectations. Overall, we now expected the liver RTN growth in the range of 3 to 5% versus 2023, compared to our previous assumptions of mid-single-digit growth. On cost, we are already seeing the positive and class have improved fluidity in Vancouver, the rational running corridor, and expect you over your operating ratio improvement in the back half of the year.

Speaker Change: More broadly, overall industrial production remains slightly positive, but tepid, in part because inflation has been persistent and interest rate cuts have yet to come or been more modest than expected.

Ghislain Houle: On the other hand, we're encouraged that early concerns about moisture levels for the Canadian grain crop have abated. We also continue to advance on our CN specific growth initiatives in line with our expectations. Overall, we now expect to deliver RTM growth in the range of 3% to 5% versus 2023 compared to our previous assumptions of mid-single-digit growth. On cost, we are already seeing the positive impacts of improved fluidity in Vancouver, the rational running corridor, and expect year-over-year operating ratio improvement in the back half of the year. Our foreign exchange and WTI assumptions continue to be around $0.75 and $80-90 USD per barrel, respectively.

Speaker Change: On the other hand, we're encouraged that early concerns about moisture levels for the Canadian grain crop have abated.

Speaker Change: We also continue to advance on our CN-specific growth initiatives in line with our expectations.

Speaker Change: Overall, we now expect to deliver RTM growth in the range of 3% to 5% versus 2023 compared to our previous assumptions of mid-single-digit growth.

Speaker Change: On cost, we are already seeing a positive impact of improved fluidity in Vancouver Directional Running Corridor and expect year-over-year operating ratio improvement in the back half of the year.

Cristina Circelli: Our foreign exchange and WTI assumptions continue to be around 75 cents and 80 to 90 US dollars per barrel, respectively. Putting it all together, we are not targeting to deliver mid-to-high single-digit EPS growth in 2024. Our 2024-26 financial outlook of 10 to 15% K-GAR remains unchanged.

Speaker Change: Our foreign exchange and WTI assumptions continue to be around $0.75 and $80-90 USD per barrel respectively.

Ghislain Houle: Putting it all together, we are now targeting to deliver mid to high single-digit EPS growth in 2024. Our 2024-26 financial outlook of 10-15% CAGR remains unchanged. In conclusion, let me reiterate a few points. Our CN-specific growth opportunities are coming online as expected. The network is fluid with car velocity and well suited to seasonal traffic.

Speaker Change: Putting it all together, we are now targeting to deliver mid- to high-single-digit EPS growth in 2024.

Speaker Change: Our 2024-26 financial outlook of 10-15% CAGR remains unchanged.

Tracy Robinson: In conclusion, let me reiterate a few points. Our CN specific growth opportunities are coming online as expected. The network is fluid with car velocity and well at seasonal levels. We are delivering industry-leading service to our customers, and we remain intensely focused on delivering growth at low incremental costs. Back to you, Tracy.

Speaker Change: In conclusion, let me reiterate a few points.

Speaker Change: Our CN-specific growth opportunities are coming online as expected.

Tracy A. Robinson: We are delivering industry-leading service to our customers, and we remain intently focused on delivering growth at low incremental cost. Back to you, Tracy. Thanks, Josiah.

Speaker Change: The network is fluid with car velocity and well at seasonal levels.

Speaker Change: We are delivering industry-leading service to our customers.

Speaker Change: And we remain intently focused on delivering growth at low incremental costs.

Julianne: And over to you, Julian. We'll take questions now. Thank you. We will now begin the question and answer session. As previously mentioned, we ask that you kindly limit yourselves to one question. The first question will come from Chris Wetherbee from Wells Fargo. Please go ahead.

Tracy Robinson: Thank you, Zain.

Julianne: And over to you, Julian. We'll take questions now. Thank you.

Speaker Change: Back to you, Tracy. Thanks, Suzanne. And over to you, Julian. We'll take questions now.

Operator: We will now begin the question and answer session. As previously mentioned, we ask that you kindly limit yourselves to one question.

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

Scott Group: The first question will come from Chris Weatherby from Wells Fargo. Please go ahead. Your line is open.

Christian F. Wetherbee: Your line is open. Hey, thanks. Good afternoon, guys. Maybe, Ghislain, I can pick up where you left off on the operating ratio as you think about the second half of the year. So I guess I'm just curious how much of what you saw in the second quarter related to some of the cost and congestion around maintenance carries over, if any, into the third and fourth quarters. And I guess, thinking in that context, how would we expect that OR to progress relative to normal seasonality?

Speaker Change: The first question will come from Chris Wetherbee from Wells Fargo. Please go ahead, your line is open.

Scott Group: Yeah. Thanks. Good afternoon, guys.

Christian F. Wetherbee: In other words, is there some cost embedded in 2Q that we could see naturally come out and think more about things seasonally from there? I just want to get a sense of how to think about profitability. Hey, Chris. It's Tracy.

Scott Group: Maybe just like I could pick up where you ended there on the operating ratios. You think about the second half of the year. So I guess I'm just curious how much of what you saw in the second quarter related to some of the cost and congestion around maintenance carries over, if any, into the third and fourth quarters. And I guess thinking in that context, how would we expect sort of that OR to progress relative to normal seasonality? I guess, in other words, these are some costs embedded in 2Q that we can see naturally come out and think more about things seasonally.

Christian F. Wetherbee: Yeah, hey, thanks. Good afternoon, guys.

Christian F. Wetherbee: Maybe, Ghislain, I could pick up where you ended there on the operating ratio as you think about the second half of the year. So I guess I'm just curious, how much of what you saw in the second quarter related to some of the cost and congestion around maintenance?

Speaker Change: carries over, if any, into the third and fourth quarters. And I guess.

Speaker Change: Thinking in that context, how would we expect sort of that OR to progress relative to normal seasonality? In other words, is there some cost embedded in 2Q that we could see naturally come out and think more about things seasonally from there? I just want to get a sense of how to think about profitability.

Scott Group: From there, I just want to get a sense of how to think about profitability.

Tracy A. Robinson: I'll start on that, and then I'll hand it over to Ghislain. So this was the issue with the work blocks; the maintenance program in the Vancouver corridor where the grain was moving was something that largely happened at the tail end of Q2. And so those work blocks have since moved off now. And as you heard Derek say, the railroad's back to operating at normal levels from an on-time performance and from a velocity perspective.

Tracy Robinson: Hey, Chris, it's Tracy. I'll start on that, and then I'll hand it over to you. So this was the issue with the work blocks, the maintenance program in the Vancouver quarter, where the grain was moving with something that largely happened at the tail end of Q2. And so those work blocks have moved off now. And as you heard Derek say, you know, the railroads back to operating at Act, you know, normal levels from an on-time performance and from a lossy perspective. In fact, I think in the last seven days or so, you know, the railroad overall is now running about 216 carmels per day versus the last year about 210.

Tracy A. Robinson: Hey Chris, it's Tracy. I'll start on that and then I'll hand it over to Gilles. So this was the issue with the work blocks, the maintenance program in the Vancouver corridor where the grain was moving was something that largely happened at the tail end of Q2. And so those work blocks have moved off now, and as you heard Derek say,

Derek Taylor: You know that the railroads back to operating at

Tracy A. Robinson: In fact, I think in the last seven days or so, the railroad overall is now running about 216 car miles per day versus about 210 last year. So the railroad's operating well right now. If we think about, you know, OR and where we'll end up in the quarter.

Speaker Change: You know normal levels from an on-time performance and from a velocity perspective. In fact, I think in the last seven days or so You know the railroad it overall is now running about 216

Derek Taylor: So the railroads operating well right now, if we think about, you know, OR and where we'll end up in the quarter enough, we assume that there is, as you heard just say, no labor outage this year and no significant impact from fires. We are watching this Jasper situation that we've got going on right now closely, but if there's no major impact from fires, then you'll see us come in in the second half to 3NQ4 and an operating ratio of sub-60, as you would expect us to do. Does anything doubt on that?

Gilles: Carmel for Day versus the last year, about 210. So the railroads operating well right now, if we think about, you know, OR and where we'll end up in the quarter now, if we assume that there is

Tracy A. Robinson: Now, if we assume that there is, as you heard Jen say, no labor outage this year and no significant impact from fires, we are watching this Jasper situation that we've got going on right now closely. But if there's no major impact from fires, then you'll see us come in, in the second half, Q3 and Q4, in an operating ratio of something. As you would expect. Yeah, maybe.

Speaker Change: As you heard just saying, no labor outage this year and no significant impact from fires.

Gilles: We are watching this Jasper situation that we've got going on right now closely, but if there's no major impact from fires.

Gilles: Then you'll see us come in, in the second half, Q3 and Q4, in an operating ratio of sub-60.

Ghislain Houle: First of all, by the way, Chris, congratulations on your new position. And let me give you a few examples of some of the costs that we're referring to, and this is mostly related to what we call the Mountain South sub-region, which is really the Vancouver Corridor that Pat was referring to. So our recruit cost per GTM over Q2 was as high as 130%, our deadhead cost per GTM was up 37%, and our held-away cost per GTM was up 74%.

Derek Taylor: Yeah, maybe. First of all, by the way, Chris, congratulations on your new position. And let me give you a few examples of some of the costs that we're referring to. And this is mostly related to what we call the Mountain South sub-region, which is really the Vancouver Corridor that Pat was referring to. So our recoup cost per GTM over 2.2 was as high as 130%. Our deadhead cost per GTM was up 37%. And our held away cost per GTM was up 74%. So obviously, these costs are coming way more in line now as some of this work is behind us in terms of the unplanned workloads and so on.

Gilles: as you would expect us to do.

Gilles: Do you have anything to add on that? Yeah, maybe. First of all, by the way, Chris, congratulations on your new position.

Speaker Change: And let me give you a few examples of some of the costs that we're referring to. And this is mostly related to what we call the Mountain South sub-region, which is really the Vancouver Corridor that Pat was referring to. So our recruit cost for GTM...

Speaker Change: Over Q2 was as high as 130%. Our deadhead cost per GTM was up 37%. And our held-away cost per GTM was up 74%.

Ghislain Houle: So, obviously, these costs are coming way more in line now as some of this work is behind us in terms of the unplanned work blocks and so on, so you'll see, you should see a much better Q3 than what we saw in. Thanks for the question. Our next question comes from Cherilyn Radbourne from T.D. Cowan.

Speaker Change: So, obviously these costs are coming way more in line now as some of this work is behind us in terms of the unplanned work blocks and so on, so you'll see, you should see a much better Q3 than what we saw in Q2.

Derek Taylor: So you'll see, you should see a much better Q3 than what we saw in Q2.

Scott Group: Thanks for the question.

Cherilyn Radbourne: Our next question comes from Sherylyn Radborn from TD Cowan. Please go ahead. Your line is open.

Cherilyn Radbourne: Please go ahead. Your line is open. Thank you very much. Good afternoon.

Speaker Change: Thanks for the question.

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

Cherilyn Radbourne: Thanks very much.

Derek Taylor: My question is for the operating team. Could you speak to, number one, whether investors should feel comfortable that the Vancouver-Edmonton corridor otherwise has enough capacity to handle the record volumes that you saw on the corridor? And, number two, are you pleased with how the team managed the disruption and the pace of the recovery? Or, Okay, I'll take that one.

Cherilyn Radbourne: Good afternoon. My question is pretty operating team. Could you speak to number one, if we set aside the planned and unplanned maintenance outages, should investors feel comfortable that the Vancouver Edmonton corridor, otherwise has enough capacity to handle the record volumes that you saw in the quarter.

Cherilyn Radbourne: Thanks very much. Good afternoon.

Cherilyn Radbourne: My question is for the operating team.

Cherilyn Radbourne: Could you speak to, number one, if we set aside the planned and unplanned maintenance outages?

Cherilyn Radbourne: Should investors feel comfortable that that Vancouver-Edmonton corridor otherwise has enough capacity to handle the record volumes that you saw in the corridor?

Derek Taylor: And I guess number two, are you pleased with how the team managed the disruption and the pace of the recovery, or is there something that in hindsight you think you could have done differently? Thanks.

Speaker Change: And I guess, number two, are you pleased with how the team managed the disruption and the pace of the recovery, or is there something that, in hindsight, you think you could have done differently? Thanks.

Derek Taylor: Okay, I'll take that one. And I would say first thing is that when you look at the volume that moved to Vancouver, we talk about record volume, and our share of that volume was two thirds of the trains running through the DRZ. We're seeing trains. So much bigger impact to see in through this corridor. I am pleased with, as we plan work blocks, we coordinate with our partners; we plan the material to be distributed. We plan the maintenance employees, the engineering department employees, and the gang to be in place to do this work. So as you look at this and the way we do the planning, we try to keep work blocks separated where they're not in such close proximity to one another.

Derek Taylor: And I would say the first thing is that when you look at the volume that moved to Vancouver, we talk about record volume, and our share of that volume was two thirds of the trains running through the DRZ were sea and train, a much bigger impact to see through this corridor. I am pleased with as we plan work blocks. Coordinating with our partners, we plan the material to be distributed, we plan the maintenance employees, the engineering department employees, and the gang to be in place to do this work.

Speaker Change: Okay, I'll take that one. And I would say, first thing is that when you look at the volume that moved to Vancouver, we talk about

Speaker Change: Record volume, and our share of that volume was two-thirds of the trains running through the DRZ were CN trains, so much bigger impact to CN through this corridor. I am pleased with, as we plan work blocks, we...

Speaker Change: We coordinate with our partners, we plan the material to be distributed, we plan the

Speaker Change: Maintenance employees, the engineering department employees, the gang to be in place to do this work. So as you look at this

Derek Taylor: So as you can see, the way we do the planning, we try to keep work blocks separated where they're not in such close proximity to one another. We did a lot of that work. We had some unplanned...

Speaker Change: In the way we do the planning, we try to keep work blocks separated where they're not in such close proximity to one another.

Derek Taylor: We did a lot of that work; we had some unplanned work that needed to be done, and we had these work blocks closer to one another than we would have liked to see as it relates to our network and getting into the DRZ.

Speaker Change: We did a lot of that work. We had some unplanned.

Speaker Change: rt that needed to be done. And we have these work blocks close r to one another than we would have liked to see, as it rel ates to our network, nd getting into the DRZ. What I would do different ly, I would say

Derek Taylor: What I would do differently, I would say, A lot of the work that we are doing and where we're investing is to get ourselves out of unplanned work blocks. We're doing the work in a manner that we want to minimize unplanned work blocks. We had an emergent rail issue that we had to deal with that was right adjacent to the DRZ. That's a takeaway for us to make sure that as we plan our work, we're doing our best. Stick to the plan and not have unplanned workloads. That would be one thing that we would change.

Derek Taylor: What I would do differently, I would say we, the lot of the work that we are doing and where we're investing, is to get ourselves out of unplanned work blocks. We're doing the work in a manner that we want to minimize the unplanned work blocks. We had an emergent rail issue that we had to deal with, that was right adjacent to the DRZ. That's a takeaway for us is to make sure that we plan our work, that we're doing our best. to stick to the plan and not have unplanned work blocks.

Speaker Change: We a lot of the work that we are doing and where we're investing is to get ourselves out of

Speaker Change: Unplanned Work Blocks. We're doing the work in a manner that we want to minimize the unplanned work blocks. We had an emergent

Speaker Change: Rail Issue that we had to deal with, that was right adjacent to the DRZ. That's a takeaway for us, is to make sure that as we plan our work, that we're doing our best to stick to the plan and not have unplanned work blocks.

Derek Taylor: That would be one thing that we would change. I am pleased with the capacity in that corridor, though, as we see, as we've looked it out of the work block, the maintenance season. We have seen a significant uptick in the speed and velocity. In fact, we are approaching last year's levels with both train speed and core velocity.

Derek Taylor: I am pleased with the capacity. In that corridor, though, as we see, as we lift it out of the work block, the main, we have seen a significant uptick in the speed and velocity, in fact. We're approaching last year's levels of both train speed and car velocity. Please, before we're trending, and we would certainly not plan to have those blocks and such.

Speaker Change: That would be one thing that we would change. I am pleased with the capacity in that corridor, though, as we see, as we've lifted out of the work block, the maintenance.

Speaker Change: Season, we have seen a significant uptick in the speed and velocity. In fact, we're approaching last year's levels of both train speed and car velocity. So, pleased with where we're trending, and we would certainly not plan to have those blocks in such close proximity, to wrap it up.

Derek Taylor: So, please, before we're trending, and we would certainly not plan to add those blocks in such close proximity to wrap it up.

Tracy A. Robinson: And I'll just add a little bit to that, Cherilyn. So we're being quite thoughtful. We don't sell capacity that we don't have, and so we've been thoughtful in how we've constructed this portfolio. You know, as Remy's put together this international portfolio, you know, we know that whatever grain's coming, whatever the grain crop is, this corridor can handle that capacity. We have turned away business in the Vancouver corridor that wouldn't fit either our network or our capacity. And so the work blocks in this particular corridor were significant enough, particularly the unplanned work blocks, that they had an unexpected impact. Unknown Attendee.

Tracy Robinson: Now, I'll just add a little bit to that, Sherlyn. So, we're being quite thoughtful. We don't sell capacity that we don't have. And so, we've been thoughtful in how we've constructed this portfolio.

Speaker Change: And I'll just add a little bit to that, Cherilyn. So we're being quite thoughtful. We don't sell capacity that we don't have.

Tracy Robinson: You know, it's Remy's put together this international portfolio. You know, we know that what grain's coming with the grain crop is; this corridor can handle that capacity. We have turned away business in the Vancouver corridor that wouldn't fit either our network or capacity.

Speaker Change: And so we've been thoughtful in how we've constructed this portfolio. You know, DREMI's put together this international portfolio. You know, we know what the grain's coming, what the grain crop is.

Speaker Change: This corridor can handle that capacity. We have turned away business in the Vancouver Corridor that wouldn't fit either a network or a capacity, and so the work blocks in this particular corridor were significant enough

Tracy Robinson: And so, the work block in this particular corridor were significant enough, particularly the unplanned work blocks that it had an unexpected impact. Going forward, we've sold the capacity that we have. Thanks.

Speaker Change: particularly the unplanned work walks that it had an unexpected impact. Going forward, we've sold the capacity that we have.

Unknown Executive: Our next question. Go ahead. Thanks.

Ken Hexter: Our next question comes from Scott Group from Wolf Research.

Scott H. Group: Thanks. Go ahead. Thank you. Our next question comes from Scott Group from Wolfe Research. Please go ahead.

Speaker Change: Our next question.

Ken Hexter: Please go ahead. Your line is open. Hey, thanks Afternoon.

Speaker Change: Go ahead, thanks.

Speaker Change: Our next question comes from Scott Group from Wolfe Research. Please go ahead, your line is open.

Tracy A. Robinson: Your line is open. Hey, thanks, afternoon. So I just want to clarify, the guidance now assumes continued diversions, but no strike. Is that right? And then just bigger picture, I just want to understand what's going on with price. You guys talked about price above inflation, but since PRRTM is down slightly, why aren't we seeing better yield growth, given what you're talking about is still inflation plus price? When do we start to see that? I'll take the first one first, Scott.

Ken Hexter: So, I just want to clarify. The guidance now assumes continued diversions, but no strike. Is that right?

Scott H. Group: Hey thanks afternoon so I just want to clarify the guidance now assumes continued diversions but no strike this is that right and then just

Ken Hexter: And then just take your picture. I just want to understand what's going on with price. You guys talked about price above inflation, but since part of TM are down slightly. Why aren't we seeing better yield growth given what you're talking about is so inflation plus price. When do we start to see that?

Speaker Change: Bigger picture, I just want to understand what's going on with price. You guys talked about price above inflation, but since PRTM are down slightly, why aren't we seeing

Speaker Change: Better yield growth given what you're talking about is still inflation plus price. When do we start to see that? Thank you

Remi Lalonde: Thank you.

Cristina Circelli: I'll take the first one first, Scott, and so what we're for the guidance going forward. We are assuming, as you said, that there's no labor outage. There's no strike or lockout as far as the diversion. There are diversions taking place now. We're assuming that we get certainty on labor by say the end of August. And that those diversions continue at the level that they are. They don't come back immediately, but they don't get any worse. And so we aren't expecting that it will take a period of time to get that international business back routed up to the Canadian ports, hopefully not as long as it did after the strike on the ports last year.

Tracy A. Robinson: And so what we're doing for guidance going forward, we are assuming, as you said, that there's no labor outage. So there's no strike or lockout. As far as the diversions are concerned, there are diversions taking place now. We're assuming that we get certainty on labor by, say, the end of August and that those diversions continue at the level that they are; they don't come back immediately, but they don't get any worse.

Speaker Change: I'll take the first one.

Speaker Change: First Scott and so what we're what we're for the guidance going forward. We are assuming as you said that there's no labor outage

Speaker Change: As far as the diversions, there are diversions taking place now. We're assuming that we get certainty on labor by, say, the end of August.

Speaker Change: And that those diversions continue at the level that they are. They don't come back immediately, but they don't get any worse. And so we are expecting that it will take a period of time.

Tracy A. Robinson: And so we are expecting that it will take a period of time to get that international business back routed to the Canadian ports, hopefully not as long as it did after the strike at the ports last year. But that's what we're assuming.

Speaker Change: To get that international business back routed up to the Canadian ports. Hopefully not as long as it did after the strike.

Cristina Circelli: But that's what we're assuming when we reverted the guidance.

Speaker Change: on the ports last year. But that's what we're assuming when we reverted to guidance.

Cristina Circelli: And I'm sorry, I don't recall.

Cristina Circelli: It was on revenue for a TM. So I can take that.

Scott H. Group: It was on revenue for RTM, so I can take that. So I did mention and you pointed out, Scott, that we are delivering same store price.

Remi Lalonde: So I did mention, and you pointed out, Scott, that we are delivering same store price ahead of rail inflation. What we see, though, is that the mix of business is changed in favor largely of bulk. So in this case, it was a lot of fractionant and Canadian grain in particular, and more international business for the intermodal stuff.

Remi G. Lalonde: And when we reverted to guidance, and I'm sorry, I don't recall, it was on revenue for TM. So I can take that. And I did mention, and you pointed out, Scott, that we are delivering same store prices ahead of rail inflation. What we see, though, is that the mix of business has changed in favor largely of bulk.

Scott H. Group: Ahead of Rail Inflation

Speaker Change: What we see, though, is that the mix of business has changed.

Remi G. Lalonde: So in this case, it was a lot of Fraxant and Canadian Grain in particular, and more international business for the intermodal stuff. So that shows up as a drag on RTM because our average length of haul has gone up across the business by five. Nominator widens on that. Thanks for your question.

Speaker Change: promises AUD$2billion in favour largely of bulk. So in this case it was a lot of frax bottle oldu Fraxond and Canadian Grain in particular and more international business for the intermodal stuff. So that shows up as a drag on RTM because our average length of haul has gone up across our business by 5%. So the denominator widens and that dilutes.

Remi Lalonde: So that shows up as a drag on our TM because our average length of haul has gone up across the business by 5%, so the denominator widens and that dilutes the yield simple answer. Thanks for your question.

Steve Hansen: Our next question comes from Steve Hansen from Raymond James. Please go ahead. Your line is open.

Steven P. Hansen: Our next question comes from Steve Hansen from Raymond James. Please go ahead. Your line is open. Yeah, good afternoon. Thanks, guys. Appreciate the time. As you contemplate this new grain harvest that's coming in, we've seen revisions to the upside now at least once and probably another to come. We'll see.

Speaker Change: The EEL. Simple answer.

Speaker Change: Thanks for your question.

Speaker Change: Our next question comes from Steve Hansen from Raymond James. Please go ahead, your line is open.

Tracy A. Robinson: You know, how do you think about preparing for that, you know, relative to some of these constraints that have existed? It sounds like you feel confident and will be able to handle the volumes, but are there any additional preparations we'll need to make to handle this harvest if it is indeed a big one? Well, we hope it is a big one, and we're ready for that. Steve, thanks. I would say this: there's more than one port that the grain moves through, you know. So we've got Vancouver, which is an important port for grain; we've also got Rupert, Thunder Bay, and then into Eastern Canada.

Steve Hansen: Yeah, good afternoon. Thanks for that. Appreciate the time.

Steve Hansen: As you contemplate this new green harvest that's coming in, we've seen revisions to the upside now, at least once, and probably another to come. We'll see, you know, how do you think about preparing for that, you know, relative to some of these constraints that have existed. It sounds like you feel confident in the evil hand of the volumes, but is there any additional preparations will need to make to handle this harvest if it isn't need a big one? Well, we hope it is a big one, and we're ready for that.

Steven P. Hansen: Yeah, good afternoon. Thanks, guys. Appreciate the time. As you contemplate this new grain harvest that's coming in, we've seen revisions to the upside now at least once and probably another to come. We'll see. You know, how do you think about preparing for that, you know, relative to some of these constraints that have existed? It sounds like you feel confident and be able to handle the volumes. But is there any additional preparations you'll need to make to handle this harvest if it is indeed a big one?

Tracy A. Robinson: So as we think about how we're going to put that portfolio together, we'll use all of those are great ways to use our network, and we'll make sure that we focus on getting the right volumes in the right places. Thanks for the question. Our next question comes from Ken Hoexter from Bank of America. Please go ahead, your line is open. Hey, great. Good afternoon.

Tracy Robinson: Steve, thanks. I would say this: that there's more than one port that the grain moves through. You know, so we've got Vancouver, which is an important port for grain. We've also got Rupert, Thunder Bay, and then into Eastern Canada. So as we think about how we're going to put that portfolio together, we'll use all of those; are great ways to use our network, and we'll make sure that we focus on getting the right volumes in the right quarters.

Steven P. Hansen: Well we hope it is a big one and we're ready for that. Steve, thanks.

Speaker Change: I would say this, that there's more than one port that the grain moves through.

Speaker Change: So we've got Vancouver, which is an important port for grain. We've also got Rupert, Thunder Bay, and then into Eastern Canada. So as we think about how we're going to put that portfolio together, we'll use all of those are great ways to use our network. And we'll make sure that we focus on getting the right volumes in the right corridors.

Tracy Robinson: Thanks for the questions.

Ken Hexter: Our next question comes from Ken Hexter from Bank of America. Please go ahead. Your line is open. Hey, great. Good afternoon. Just thinking about the outlook shifting to mid single digitized single digit earnings, you've obviously got a big uptick in coming in third quarter, but you know, maybe some concern on yields with better grain. What are the upside down side risks in that target? And then does the unproductive costs that you talked about today accelerate as business returns and labor gets more stretched, or not necessarily. Thanks.

Speaker Change: Thanks for the questions.

Speaker Change: Our next question comes from Ken Hoexter from Bank of America. Please go ahead, your line is open.

Kenneth Scott Hoexter: Just thinking about the outlook shifting to mid single-digit to high single-digit earnings. You've obviously got a big uptick coming in the third quarter, but maybe some concern on yields with better grain. What are the upside and downside risks in that target?

Ken Hoexter: Hey, great. Good afternoon. Just thinking about the outlook shifting to mid-single-digit to high-single-digit earnings.

Ken Hoexter: You've obviously got a big uptick coming in third quarter, but...

Speaker Change: Maybe some concern on yields with better grain.

Speaker Change: What are the upside downside risks in that target and then does the Unproductive costs that you talked about do they accelerate as business returns and labor gets more stretched or or not necessarily?

Tracy A. Robinson: And then do the unproductive costs that you talked about today accelerate as business returns, and labor gets more stretched, or not necessarily? Thanks, Ken. I'll start that off, and then I'll hand it over to Giz or Remy if you have some comments. On the unproductive costs, we experienced them, as we said earlier, in a couple of ways. One is that we did have lighter coal and grain down in the U.S. We were resourced to handle more volume, so we had some unproductive costs there, a little bit less in the east, but a little bit in the east, and so we're taking some action on those.

Ken Hexter: Thanks, Ken.

Tracy Robinson: I'll start that off, and then I'll hand it over to Jiz or Remy if you have some comments on the unproductive costs. We experienced them as we said earlier, in a couple of ways. One is that we did have lighter coal and grain down in the US. We were resource to handle more volume. So we had some unproductive costs there, a little bit less in the East, but a little bit in the East. And so we're taking some action on those, and as Derek went through, stopped hiring, we're offering voluntary furloughs, and we're coming and will continue to adjust as we look forward to make sure that the resources crews, but also all the equipment.

Speaker Change: Thanks, Ken. I'll start that off and then I'll hand it over to Jiz or Remy if you have some comments.

Speaker Change: On the unproductive costs, we experienced them, as we said earlier, in a couple of ways.

Speaker Change: One is that we did have lighter coal and grain down in the U.S. We were resourced to handle more volume.

Speaker Change: So we had some unproductive costs there, a little bit less in the east, but a little bit in the east, and so we're taking some action on those, and as Derek went through, we stopped hiring, we're offering voluntary furloughs, and we're coming, and we'll continue to adjust as we look forward to make sure that the resources

Tracy A. Robinson: As Derek went through, we stopped hiring, we're offering voluntary furloughs, and we'll continue to adjust as we look forward to make sure that the resources, crews, but also all the equipment are matched for the volumes that we are expecting. If we look at the west, the unproductive labor productivity issue was more related to the work blocks and so the lumpiness of how that volume was moving through the corridor.

Tracy Robinson: Our match for the volumes that we are expecting. If we look at the west, you know, the unproductive labor or sort of labor productivity issue was more related to the work blocks and so the lumpiness of how that volume was moving through the corridor. You heard Jiz go through kind of the recruits and some of the deadhead issues that we had. So, as the work blocks have come off there, then that is adjusting back.

Derek Taylor: Crews, but also all the equipment, are matched for the volumes that we are expecting. If we look at the West...

Gis: The unproductive labor or labor productivity issue was more related to the work blocks and so the lumpiness of how that volume was moving through the corridor. You heard Jiz go through kind of the re-cruise and

Tracy A. Robinson: You heard Giz go through the recruits and some of the deadhead issues that we had, so as the work blocks have come off there, then that is adjusting back. We do have an ongoing structural issue with the duty and work rest rules that have come in. As you know, we've said that this is costing us in Canada. In the year that it's been in place, about 100 plus million annualized.

Gis: and some of the deadhead issues that we had. So as the work blocks have come off there, then that is adjusting back. We do have

Tracy Robinson: We do have an ongoing structural issue with the duty and work rest rules that have come in. Is, you know, we said that this is costing us in Canada in the year that it's been in place about 100 plus million annualized. We're working through how it basically this is a this is appearing for us and crew availability. And this is something that we've been attempting to address in the collective negotiation collective bargaining. And if we can't do that, then there's some self-help that we're going to do with some of the local agreements that would address some of the redundancy that's been created there.

Gis: and ongoing structural issue with the duty and work rest rules that have come in. As you know, we've said that this is costing us in Canada in the year that it's been in place about 100, 100 plus million annualized.

Tracy A. Robinson: We're working through how this basically is appearing for us in crew availability, and this is something that we've been attempting to address in collective bargaining, and if we can't do that, then there's some self-help that we're going to do with some of the local agreements that would address some of the redundancy that's been created there. So the temporary issues with labor productivity, we're all over those. The more structural one is around the work rest rules, and we'll deal with them as we go forward in our labor negotiations.

Gis: We're working through how, basically, this is appearing for us in crew availability.

Gis: And this is something that we've been attempting to address in the collective bargaining, and if we can't do that, then there's some self-help that we're going to do with some of the local agreements that would address some of the redundancy that's been created there.

Tracy Robinson: So the temporary issues on labor productivity were all over those the more structural one around the work rest rules, and we'll deal with them as we go forward in our labor negotiations.

Gis: So, the temporary issues on labor productivity, we're all over those. The more structural one around the work rest rules, and we'll deal with them as we go forward in our labor negotiations.

Cristina Circelli: Tracy, I think you covered it well. Maybe just one more point, Ken, is when you look at fuel. I mean we talked about fuel impact in this quarter of about 10 cents, and we had a even bigger impact in Q1, as you know. So with fuel prices, i.e. OHD and WTI remains where it is, then you can expect a fuel headwind on a year-over-year basis and the second half in the same water as the first half of this year, but probably more skew to Q4 versus Q3. So that's something else to take into consideration in our revised guidance.

Tracy A. Robinson: Tracy, I think you covered it well. Maybe just one more point, Ken, is when you look at fuel. I mean, we've talked about fuel impact in this quarter of about 10 cents, and we had an even bigger impact in Q1. So if fuel prices, i.e., OHD and WTI, remain where they are, then you can expect a fuel headwind on a year-over-year basis in the second half in the same order as the first half of this year, but probably more skewed to Q4 versus Q3. So that's something else.

Tracy A. Robinson: Tracy, I think you covered it well. Maybe just one more point, Ken, is when you look at fuel, I mean, we've talked about fuel impact in this quarter of about 10 cents, and we had an even bigger impact in Q1, as you know.

Speaker Change: So if fuel prices, i.e. OHD and WTI, remains where it is, then you can expect a fuel headwind.

Speaker Change: On a year-over-year basis and the second half in the same order as the first half of this year But probably more skewed to Q4 versus Q3. So that's something else to take into consideration in our revised guidance

Ghislain Houle: Consideration and our revised, thanks for the question. Our next question comes from Konark Gupta from Scotiabank. Please go ahead, your line is open.

Konark Gupta: Thanks for taking my question. Just wanted to understand what drove the increase in the number of unplanned work blocks during the second quarter. And where are you performing the planned work blocks now? Okay, I'll take that. So they were unplanned work blocks both in the DRZ and just adjacent.

Cristina Circelli: Thanks for the question.

Konark Gupta: Our next question comes from Konark Gupta from Scotia Bank. Please go ahead; your line is open. Thanks for taking my question. I just want to understand one drew the increase in number of unplanned workloads during the second quarter and where are you performing the planned workloads now. Okay, I'll take that so we're unplanned workloads both in the DRZ and just adjacent to the DRZ, and the way we plan the work is a mention we have this finite window of time where, as the weather breaks, we typically start in Western Canada where the weather breaks first. We move our way east across the network and we distribute the material and we align the engineering gang's work schedules around that progression.

Speaker Change: Thanks for the question.

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

Konark Gupta: Thanks for taking my question. I just wanted to understand what drove the increase in the number of unplanned workloads during the second quarter and where are you performing the planned workloads now?

Speaker Change: I'll take that. So there were unplanned work blocks both in the DRZ and just adjacent to the DRZ and the way we planned the work is

Patrick Timothy Whitehead: The DRZ and the way we plan the work is, I mentioned we have this finite window of time where as the weather breaks, we typically start in Western Canada where the weather breaks first, we move our way east across the network, and we distribute the material, and we align the engineering gangs' work schedules around that progression. As we've made that progression, we continue east, and our plan is, we're now east of Edmonton, with one return Corridor before the fall rush and the grain harvest.

Speaker Change: I mentioned we have this finite window of time where, as the weather breaks, we typically start in Western Canada, where the weather breaks first, we move our way east across the network, and we distribute the material, and we align the engineering gang's work schedules around that progression.

Derek Taylor: As we've made that progression, we continue east, and our plan is we're now east of Edmonton with one return cycle to the west, and we have to make, and our plan is to get off of that corridor before the fall rush and the grain harvest. We want to be off of the core route in Western Canada. That's the way that that's the way we plan it. We had some real issues, as I said before. We had to deal with on our sub just adjacent to the DRZ. We had some unplanned workloads in the DRZ as well.

Speaker Change: As we've made that progression, we continue east, and our plan is we're now east of Edmonton with one return cycle to the west that we have to make.

Speaker Change: And our plan is to get off of that corridor before the fall rush and the grain harvest. We want to be off of the core route in western Canada. That's the way that we plan it.

Patrick Timothy Whitehead: We want to be off of the core route in Western Canada. That's the way. That's the way that we planned it. We had rail issues, as I said before, we had to deal with on our sub just adjacent to the DRZ.

Speaker Change: Rail issues, as I said before, we had to deal with on our sub just adjacent to the DRZ, and we had some unplanned work blocks in the DRZ as well.

Patrick Timothy Whitehead: We had some unplanned work blocks in the DRZ. Thanks. And just a quick clarification question.

Cristina Circelli: Thanks and just quick clarification question. What are you assuming just for wage inflation related to the pending DCRC deal in the new guidance.

Tracy A. Robinson: What are you assuming just for wage inflation related to the pending TCRC deal in the new guidance? Listen, we're in the middle of, as you know, negotiations and a process there. So it's probably inappropriate for us to comment directly.

Speaker Change: Okay, thanks. And just a quick clarification question. What are you assuming just for wage inflation related to the pending TCRC deal and the new guidance?

David Vernon: Oh listen, we're in the middle of, as you know, negotiations and a process there, so probably inappropriate for us to comment directly. But I, you know, we have settled a number of agreements in Canada this year, and I think you're looking at a pattern that looks somewhere in the, you know, three percent range. So, you know, that wouldn't be a bad number to expect here. Thanks, thanks for the question. Thank you. Our next question comes from David Vernon from Bernstein. Please go ahead; your wine is open.

Speaker Change: Listen, we're in the middle of, as you know, negotiations in a process there, so probably inappropriate for us to comment directly, but I

Tracy A. Robinson: But I, you know, we have settled a number of agreements in Canada this year. And I think you're looking at a pattern that looks somewhere in the, you know, 3% range. So, you know, that wouldn't be a bad number either.

Speaker Change: We have settled a number of agreements in Canada this year, and I think you're looking at a pattern that looks somewhere in the 3% range, so that wouldn't be a bad number to expect here. Thanks for the question, Conor. Thank you.

David Scott Vernon: Thanks for the question. Thank you. Our next question comes from David Vernon from Bernstein. Please go ahead, and rewind.

Speaker Change: Our next question comes from David Vernon from Bernstein. Please go ahead, your line is open.

David Vernon: Hey, good afternoon team. Thanks for taking the question. So, you know, I just wanted to press on the issue of the three-year guide, kind of keeping the target at 10 to 15 compound. That seems like you got to be kind of toward the higher end for two years in a row to get to the midpoint of that range. You know what's the thing behind kind of keeping the bar that high and maybe as a follow up to that like how much of the how much of the you have you quantified the exact dollar cost of some of the the main it's delays and some of the book around stuff just trying to figure out like how much of 25 jump up is just getting past what we've had in in bad guys in 24 just trying to get my head around the cadence for that three year guide holding up the 10 to 15 compound thanks.

Tracy A. Robinson: Hey, good afternoon, team. Thanks for taking the question. So, um, you know, I just wanted to press on that issue of the three-year guide kind of keeping the target at 10 to 15 compound. That seems like you have to be kind of toward the higher end for two years in a row to get to the midpoint of that range.

David Scott Vernon: Hey, good afternoon, team. Thanks for taking the question. So, you know, I just wanted to press on the issue of the three-year guide, kind of keeping the target at 10 to 15 compound. That seems like you've got to be kind of toward the higher end for two years in a row to get to the midpoint of that range. You know, what's the thinking behind kind of keeping the bar that high? And maybe as a follow-up to that, like, how much of the

Tracy A. Robinson: You know, what's the thinking behind keeping the bar that high? And maybe as a follow-up to that, like, how much of the how much of the have you quantified the exact dollar cost of some of the maintenance delays and some of the bookkeeping stuff? Just trying to figure out, like, how much of a 25 jump up is just getting past what we've had in bad guys in 24, just trying to get my head around the cadence for that three-year guide and holding up the 10 to 15 compound. Thanks. Thanks, David.

Speaker Change: How much of the, have you quantified the exact dollar cost of some of the maintenance delays and some of the book around stuff? Just trying to figure out like how much of 25 jump up is just getting past what we've had in bad guys in 24.

Speaker Change: Just trying to get my head around the cadence for that three-year guide holding up the 10 to 15 compound. Thanks.

David Vernon: Thanks, David, so our three-year plan remains in place and I, you know, what I'm really happy about is how the growth plan is coming in, particularly, you know, that see an initiative that Remy went through that are progressing very well and I know that he and his team are continuing to fill that pipeline. The economic recovery you remember that we said that it was you know the growth was 50% you know organic the underlying economy and 50% and see in specific initiatives. The economic recovery is, you know, advancing a little bit more slowly. We're seeing that in a few of the sections that Remy spoke about, but it's going to come.

Tracy A. Robinson: So our three-year plan remains in place, and I'm really happy about how the growth plan is coming along, particularly the CN initiatives that Remy went through that are progressing very well. And I know that he and his team are continuing to fill that pipeline. The economic recovery, you'll remember that we said that it was, you know, the growth was 50% organic, the underlying economy, and 50% on CN specific initiatives. The economic recovery is, you know, advancing a little bit more slowly. We're seeing that in a few of the areas that Remy spoke about, but it's going to come.

Speaker Change: Thanks, David. So our three-year plan remains in place. And I, you know, what I'm really happy about

Speaker Change: is how the growth plan is coming in, particularly.

Speaker Change: The CN initiatives that Remy went through that are progressing very well, and I know that he and his team are continuing to fill that pipeline.

Speaker Change: The economic recovery, you'll remember that we said that it was, you know, the growth was 50%

Speaker Change: Organic, the Underlying Economy and 50% and the CN specific initiatives. The economic recovery is advancing a little bit more slowly. We're seeing that in a few of the sections that Remy spoke about, but it's going to come.

Tracy A. Robinson: And once we get through this labor issue, you'll see the full impact of the growth plan. And beyond that, the railroad's running really well. What happened with the workbox in Vancouver aside, Pat and Derek are working on the next level of efforts on network operations, on transportation, on engineering productivity, and they're going to continue to advance the performance on this. We do have, so as we look forward, the plan is coming, it's working, it's looking good. The one structural issue that we have is this, you know, the duty and rest period rules and the redundancies that we have there.

Tracy Robinson: And once we get through this labor issue, you'll see the full impact of the growth plan. And beyond that, the railroads running really well. What happened with the work box and Vancouver aside, Pat and Derek are working on the next level of efforts on network costs, on transportation, on engineering productivity, and they're going to continue to advance the performance on this. We do have, so we look forward. The plan is coming, it's working, it's looking good. The one structural issue that we have is this, you know, the duty and respiratory rules and the redundancies that we have in there. And so, you know, we are dealing with that this year, and as we look at the correct agreements, that's through some of the self-help that I talked about. So we're remaining pretty comfortable with the plan.

Speaker Change: And once we get through this labor issue, you'll see the full impact of the growth plan. Beyond that, the railroad's running really well. What happened with the work blocks in Vancouver aside, and Pat and Derek are working on the next level of efforts on network ops.

Speaker Change: on Transportation, on Engineering Productivity, and they're gonna continue to advance the performance on this. We do have, so as we look forward, the plan is coming, it's working, it's looking good. The one structural issue that we have is this.

Tracy A. Robinson: And so, you know, we are dealing with that this year. And as we look at the two, the collective agreements or through some of the self-help that I talked about, we're remaining pretty comfortable with the plan. Do you have anything to add?

Speaker Change: The duty and rest period rules and the redundancies that we have in there.

Speaker Change: We are dealing with that this year as we look at either through the collective agreements or through some of the self-help that I talked about. So we're remaining pretty comfortable with the plan. Do you have anything to add to that? No, you've covered it well. Okay. Thanks, David.

Cristina Circelli: Did you have anything to add?

Cristina Circelli: Okay, thanks, David. Just just just just quick follow up like we just think about that the duty and rest stuff like that'll be in the base for next year but how much of the incremental leverage did it absorb this? here. Well, you know, as we, as we've wanted to find, if you remember, when it came in, we said that this could be an impact as much as $100 million on their yearly basis. I would tell you that in reality, it's probably a little higher than that. And as Tracy mentioned, the team is working very hard to, you know, alleviate some of this.

Tracy A. Robinson: Okay, thanks, David. Just a quick follow up. I mean, just think about that, the duty and rest stuff, like, that'll be in the base for next year, but how much of the incremental leverage did it absorb this year? Well, you know, as we quantified it, if you remember when it came in, we said that this could have an impact as much as $100 million on their yearly basis. I would tell you that, in reality, it's probably a little higher than that.

Speaker Change: Just a quick follow up, think about the duty and rest stuff, that will be in the base for next year, but how much of the incremental leverage did it absorb this year?

Speaker Change: Well, you know, as we as we've quantified, if you remember when, when it came in, we said that this could be an impact as much as $100 million on a yearly basis.

Ghislain Houle: And as Tracy mentioned, the team is working very hard to, you know, alleviate some of this. And this is really about crew availability. That's really, that's really what we're trying to do, and we're trying to work with our, All right. Thank you for that, Edicola.

Speaker Change: I would tell you that in reality it's probably a little higher than that.

Speaker Change: And as Tracy mentioned, the team is working very hard to, you know, alleviate some of this and this is really about crew availability. That's really what we're trying to work and we're trying to work with our unions to do exactly that.

Cristina Circelli: And this is really about crew availability. That's really, that's really what we're trying to work. And we're trying to work with our unions to do exactly that.

Cristina Circelli: All right, thank you for that. Thank you.

Fadi Chamoun: Our next question comes from Sadi Chamoun from Bebo Capital Market. Please go ahead. Your line is open. Thank you. Good afternoon.

Speaker Change: All right, thank you for that, Erika. Thank you.

Fadi Chamoun: Thank you. Our next question comes from Fadi Chamoun from Bebo Capital Markets. Please go ahead.

Tracy A. Robinson: Your line is open. Thank you. Good afternoon.

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

Fadi Chamoun: I just want to go back to this issue on the Western Corridor. I mean, you have the volume opportunity that I think is the envy of most of your peers. And again, this quarter, on 185 million of revenue, we saw 36 million drop in operating income.

Sadi Chamoun: I just want to go back to this issue on the Western Corridor. I mean, you have the volume opportunity that I think are the envy of most of your peers. And again, this quarter on a hundred and wherever 85 million of revenue, we saw 36 million drop to operating income. And it sounds like the Vancouver-Edmonton corridor was your biggest headwind this quarter, but kind of if you think about this over the next three years, if there is kind of structural bottleneck in that corridor is there. Because it feels like every cycle, we get into some problem in that corridor.

Fadi Chamoun: Thank you. Good afternoon. I just want to go back to this issue on the Western Corridor. I mean, you have the

Speaker Change: volume opportunity that I think are the envy of most of your peers.

Speaker Change: And again, this quarter, on 185 million of revenue, we saw 36 million drop to operating income.

Tracy A. Robinson: And it sounds like the Vancouver-Edmonton corridor was your biggest headwind this quarter, but, Unknown Speaker, if you think about this over the next three years, is there a kind of structural bottleneck in that corridor? Is there, because it feels like every cycle we get into some problem in that corridor, and ultimately, you get into these issues. Is there a kind of more durable solution that is required to allow that corridor to perform better in terms of expansion in capacity, maybe, maybe a different way of how you block the traffic with customers?

Speaker Change: And it sounds like the Vancouver Edmonton Corridor was your biggest headwind this quarter,

Speaker Change: If you think about this over the next three years, is there a kind of structural bottleneck in that corridor? Is there, because it feels like every cycle we get into some problem in that corridor and ultimately you get into these issues.

Sadi Chamoun: And ultimately, you get into these issues. Is there a kind of more durable solution that is required to allow that corridor to perform better expansion and capacity, maybe, maybe a different way of how you blocked the traffic with customer. I'm just wondering. Is this kind of really just an isolated Q2 issue volumes, you know, usually, you know, sometimes they come as planned, but most of the time, they don't come as planned. Like, how are you going to solve for that over the medium term?

Speaker Change #100: Is there a kind of more durable solution that is required to

Speaker Change #100: Allow that corridor to perform better, expansion in capacity, maybe a different way of how

Tracy A. Robinson: I'm just wondering, is this kind of really just an isolated Q2 issue volume? Volumes usually, you know, sometimes they come as planned, but most of the time, they don't come as planned. Like, how are you gonna solve for that over the medium?

Speaker Change #101: I'm just wondering, is this kind of really just an isolated Q2 issue? Volumes, you know, usually, you know, sometimes they come as planned, but most of the time, they don't come as planned.

Speaker Change #101: They don't come as plans, but how are you going to solve for that over the medium term?

Tracy Robinson: Thanks, Sadi, for the question. I think there's there's two ways to think about this. One is that, you know, we continue part of our program; our capital program this year is focused on. You know, this this corridor, we continue to put money into this corridor to make sure that where we can improve capacity and capability that we do, and both railroads are working very well together to make sure that we can make the most by cooperating at the next level capacity.

Tracy A. Robinson: Thanks, Fadi, for the question. I think there are two ways to think about this. One is that, you know, part of our program, our capital program this year is focused on this, this corridor. We continue to put money into this corridor to make sure that where we can improve capacity and capability, we do, and both railroads are working very well together to make sure that we can make the most by cooperating, getting them to get the next level of capacity. I know you've been in the Vancouver area, and you understand some of that.

Speaker Change #101: Thanks, Fadi, for the question. I think there's two ways to think about this.

Speaker Change #102: One is that, you know, we continue, part of our program, our capital program this year is focused on, you know, this corridor. We continue to put money into this corridor to make sure that where we can improve capacity and capability that we do, and both railroads.

Speaker Change #102: are working very well together to make sure that we can make the most by cooperating and get the next level of capacity. I know you've been in.

Tracy Robinson: I know you've been in the Vancouver area, and you understand some of that. The other piece of this is that they are practically limitations on how much more that corridor and Vancouver can grow. And so the benefit that we have is a very open, a blueprint corridor that can handle not overgrain, not only grain, but a lot of the other commodities, and we've got a lot of our growth focused in that area. If it comes to grain, we talked about, you know, and you would well know the various corridors that that can can travel into Thunder Bay and Eastern Canada as well.

Tracy A. Robinson: The other piece of this is that there are practically limitations on how much more that corridor in Vancouver can grow. And so the benefit that we have is a very open plan corridor that can handle not only grain but a lot of other commodities. And we've got a lot of our growth focused in that area. If it comes to grain, we talked about, you know, and you would well know the various corridors that that could travel into Thunder Bay and Eastern Canada as well.

Speaker Change #102: The Vancouver area and you understand some of that.

Speaker Change #102: The other piece of this is that there are practically...

Speaker Change #102: There are no limitations on how much more that corridor in Vancouver can grow. And so the benefit that we have is a very open, uh, uh, rupert corridor that can handle not over grain, not only grain, but a lot of the other commodities. And we've got a lot of our growth.

Speaker Change #102: , and others. We're focused in that area. If it comes to grain, we talked about, you know, and you would well know the various corridors that can travel into Thunder Bay and Eastern Canada, as well. So I think we'll continue to make...

Tracy Robinson: So I think we'll continue to make Vancouver is very important. We're going to continue to work on the productivity in that. We will not oversell our capacity in that corridor, and we have options for where we grow. We're very fortunate. and that regard.

Tracy A. Robinson: So I think we're going to continue to make Vancouver very important. We're going to continue to work on productivity so that we will not oversell our capacity in that corridor, and we have options for where we grow. We're very fortunate in that.

Speaker Change #102: Vancouver is very important. We're going to continue to work on the productivity in that. We will not oversell our capacity in that corridor, and we have options for where we grow. We're very fortunate in that regard.

Tracy A. Robinson: And just a quick follow-up, I mean, given what you've just described, the supply and demand situation in that corridor, is there a pricing lever that you can lean on a little bit more going forward? I would say that Remy and his team are all over that.

Tracy Robinson: Thanks for the question.

Remi Lalonde: Just a quick follow-up. I mean, given what you just described and just apply the demand situation in that corridor, is that a pricing lever that you can lean on a little bit more going forward? I would say that Remi and his team are all over that. You know, we are being very thoughtful around how we sell our capacity to all of our customers.

Speaker Change #103: Just a quick follow-up. Given what you just described and the supply-demand situation in that corridor, is there a pricing lever that you can lean on a little bit more going forward?

Tracy A. Robinson: You know, we're being very thoughtful about how we sell our capacity to all of us. Thanks for that. Sorry.

Speaker Change #103: I would say that Remy and his team are all over that, you know, we're being very thoughtful around how we sell our capacity to all of our customers.

Remi Lalonde: Thanks, Frank.

Brian Ossenbeck: I'm sorry, thanks for saying. Our next question comes from Brian Ossenbeck from JP Morgan. Please go ahead.

Brian Patrick Ossenbeck: Thanks. Our next question comes from Brian Ossenbeck from J.P. Morgan. Please go ahead.

Speaker Change #103: Thanks, Fannie. Oh, sorry. Thanks, Fannie.

Remi G. Lalonde: Your line is open. Yeah, thanks. Good afternoon.

Brian Ossenbeck: Your line is open. Yeah, thanks.

Speaker Change #104: Our next question comes from Brian Ossenbeck from J.P. Morgan. Please go ahead, your line is open.

Tracy A. Robinson: Just wanted to maybe ask a follow-up on the western part of the network. Maybe it's for Remy, but you certainly need to invest to keep up with the growth there. But in the east and maybe in the south, you need to invest to sort of attract growth. So anything that you would highlight is being up and coming. Transcripts provided by Transcription Outsourcing, LLC. Self Help.

Brian Ossenbeck: Good afternoon. Just wanted to maybe ask a follow-up on the Western part of the network. Maybe it's for Remi, but you certainly need to invest to keep up with the growth there. But in the east and maybe in the south, need to invest to sort of attract the growth. So anything that you would highlight is being up and coming or something. It's a little more exciting. Everything on the east and the south, and it's been an area. The company's been trying to grow for some time in the volume and go where it will go.

Brian Patrick Ossenbeck: Yeah, thanks. Good afternoon. I just wanted to maybe ask a follow-up on the Western...

Speaker Change #106: Part of the network, maybe it's for...

Speaker Change #107: Remy, but you certainly need to invest to keep up with the growth there, but in the east and maybe in the south need to.

Speaker Change #107: invest to sort of attract the growth. So anything that you would highlight as being up and coming.

Speaker Change #107: or something a little more exciting on the east and the south. I know it's been an area the company's been trying to grow for some time and the volume will only go

Tracy Robinson: And this is a quick follow-up made it for Tracy. Can you give us a sense as to whether or not you get that same structural relief for the work rest rules if it's negotiated or if it's self-help?

Remi G. Lalonde: Thank you. Remy, do you want to make some comments first and then I'll come in behind? Thanks. Maybe I'll just start.

Tracy Robinson: Thank you.

Remi Lalonde: Remi, do you want to make some comment personally? I'll come in behind. Thanks.

Remi G. Lalonde: So a couple of things that I think are interesting. The Gulf option for us is a good one for the intermodal business. So I think that there's headroom there. The corridor from Chicago to the Gulf is very efficient the way that my operating colleagues run it.

Remi Lalonde: Maybe I'll just start. So a couple of things that I think are interesting. The golf option for us is a good one for the intermonal business. So I think that there's headroom there. The core to where Chicago to the golf is very efficient the way that my operating colleagues run it. We also are in the process of integrating the INR to extend our reach and bring more volume on our rail. So I think there's a there's upside to chase there as well.

Tracy A. Robinson: We also are in the process of integrating the INR to extend our reach and bring more volume on our rails, so I think there's upside to chase there as well. Yeah, thanks, Remy.

Tracy Robinson: Yeah, thanks very much. I would also say that we are hopeful and expecting this week that we will get some good news on the I-1 Northern acquisition. And so, you know, that also is going to add to our Southern quarter efforts. You know, Remi talked about the golf. We've got some good chemical business down there. We've got the silicon business that we're continuing to grow. So lots of effort on the cells, really the impact in this quarter. We would normally be moving grain and coal. And we had resources to move grain and coal. And that's kind of the gap; nonetheless, building the density in the South remains one of our key strategic initiatives.

Tracy A. Robinson: I would also say that we are hopeful and expecting this week that we will get some good news on the Iowa Northern acquisition. And, so you know, that is also going to add to our southern corridor efforts. You know, Remy talked about the Gulf, we've got some good chemical business down there, we've got the Falcon business that we're continuing to grow. So lots of effort in the South, really the impact this quarter. We would normally be moving grain and coal, and we had a resource to move grain and coal.

Tracy Robinson: As far as the duty-rest period rules, you know, all of what we are contemplating, whether it is within the collective bargaining, whether it's the efforts that we can take outside of that, we would keep us fully compliant with both the spirit and the rules that the federal government put up when it comes to rest and safety and everything else. What we've experienced is all of this has happened is a high level of redundancy in the stacking of our collective agreements with the local agreements with the duty and with the new rules issued by the federal government last year.

Tracy A. Robinson: And that's kind of the gap between them. Nonetheless, building the density in the south remains one of our key strategic objectives. As far as the duty of rest period rules are concerned, all of what we are contemplating, whether it is within the collective bargaining, whether it's some efforts that we can take outside of that, would keep us fully compliant with both the spirit and the rules that the federal government put out when it comes to rest and safety and everything else.

Speaker Change #108: New rules issued by the federal government last year, and so we need to make this simpler and theres things that we can do to reduce that redundancy, but as I said in all cases, we'll stay compliant with the federal regulations and there are scenarios that we can do this.

Tracy Robinson: And so we need to make this simpler. And there's things that we can do to reduce that redundancy. But, as I said, in all cases, we'll stay compliant with the federal regulations. And there are scenarios that we can do this through the collective bargaining at the table. And that's what we would like to do. We are hopeful and are still our base plan that we would get a negotiated outcome and a negotiated agreement. That is the best way for us and for the union to kind of deal with the issues that each one of us wants to deal with.

Tracy A. Robinson: And there are scenarios that we can do this through collective bargaining at the table. And that's what we would like to do. We are hopeful and it is still our base plan that we would get a negotiated outcome, a negotiated agreement. That is the best way for us and for the union to kind of deal with the issues that each one of us wants to deal with.

Speaker Change #109: Through the collective bargaining at the table and Thats, what we would like to do.

Speaker Change #109: We are hopeful and that's still our base plan that we would get a negotiated outcome a negotiated agreement at that is the best way for us and for the union to kind of deal with the issues that that each one of us wants to deal with so we're ready for those discussions when they are ready to start up again. Thanks for your question.

Tracy Robinson: So we're ready for those discussions when they're ready to start out. again.

Tracy Robinson: Thanks for your question. Thanks, Tracy.

Speaker Change #109: Thanks, Tracy our next question.

Walter Spracklin: Our next question, our next question comes from Walter Spracklin from RBC Capital Market. Please go ahead; your line is open. Yeah, thanks very much. I wanted to come back to a prior question that I don't know if it was, was, was answered directly because, and that relates to your decision to maintain your, your three year Kager of 10 to 15%, but obviously with the 2024 decline to mid to high, it puts a, it puts up quite significantly the 2025 and 26 Kager.

Tracy A. Robinson: So we're ready for those discussions when they're ready to start up. Thanks for your questions.... Thanks, Tracy. Our next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead. Your line is open.

Speaker Change #110: Our next question comes from Walter <unk> from RBC Capital markets. Please go ahead. Your line is open.

Walter Noel Spracklin: I wanted to come back to a prior question that I don't know if it was was answered directly because and that relates to your decision to maintain your three-year CAGR of 10 to 15%. But obviously, with the 2024 decline amid the high, it puts it puts up quite significantly the 2025 and 26, Kager. And as we know, as we set our 25 and 26 estimates, I just wanna make sure you're comfortable with.,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Because that's just mathematically what that implies.

Speaker Change #112: Thanks, very much operator, so I wanted to come back to a prior question that I don't know if it was.

Speaker Change #111: Answer directly.

Speaker Change #113: And that relates to your decision to maintain.

Your three year CAGR of 10% to 15%, but obviously with the 2024 declined to mid to high it puts it puts up quite significantly the 2025 and 26 CAGR and as we as.

Walter Spracklin: And as we know, as we set our 25 and 26 estimates, let's just want to make sure you're comfortable with, you know, kind of growth that's going to be in that 12, 13, 14, 15% range to, to just catch, you know, get back into that 10 to 15 Kager over a three year period. Are you comfortable with that kind of growth in, in 25 and 26, because that's just mathematically what that implies, right? So let me, let me share with you how we're thinking about it. What's going very well and exactly on plan is the growth that we're driving through the CN specific initiatives, and the fuel recall. We said this was 50%, and this was efforts that were less or not related at all to the underlying strength of the economy and the economic growth.

Speaker Change #114: As we said our 25% in 2006 estimates I just want to make sure you're comfortable with.

Speaker Change #115: What kind of growth that's going to be in that 12, 13, 14, and 15% range to to just catch.

Speaker Change #115: Get back into that 10 to 15 CAGR over a three year period is.

Are you comfortable with that kind of growth in.

Speaker Change #116: <unk> 25, and 26, because thats just mathematically what that implies right.

Tracy A. Robinson: So let me share with you how we're thinking about it. What's going very well and exactly on plan is the growth that we're driving through the CN specific initiatives. And if you'll recall, we said this was 50%, and this was an effort that was less or not related at all to the underlying strength of the economy and economic growth. What is much slower than the assumptions that we laid out when we did investor day last year.

Speaker Change #116: So let me let me share with you how we're thinking about it.

Speaker Change #117: It's going very well in exactly on plan is the growth that we're driving through the <unk> specific initiatives and if you'll recall. We said this was 50% and this was efforts that were less or not related at all to the underlying strength of the economy and the economic growth.

Tracy Robinson: What is much slower than the assumptions that we laid out in when we invested it last year is the pace of economic growth. And so that, without a doubt, is slower, and we are feeling, feeling that as we look at our growth plan, we do believe that that will come back.

Speaker Change #117: What is much slower than the assumptions that we laid out and when we at Investor Day last year is the pace of economic growth and so that without a doubt is slower and we are feeling feeling.

Tracy A. Robinson: And so that, without a doubt, is slower, and we are feeling that as we look at our growth plan. But we do believe that it will come back. And so if we're wrong about that, then yes, this could be a little bit slower. So the top line kind of story goes like this. From an operations perspective, the way that you drive efficiency into a railroad operation is with velocity.

Speaker Change #117: Ceiling that is as we look at our growth plan, we do believe that that will come back and so if we're wrong on that then yes, it could be a little bit slower. So the top line kind of story goes like that from an operations perspective, the way that you drive efficiency into our railroad operation is with velocity and so im.

Tracy Robinson: And so if we're wrong on that, then yes, this could be a little bit slower. So the top line kind of story goes like that: from an operations perspective, the way that you drive efficiency into a railroad operation is with velocity. And so I'm really happy with the way that our plan is coming together as running and the kind of velocities that the guys are running through it, because, you know, we build a plan and run myself this. And if, if the volume shows up as we expected, this is a highly efficient operation. So as we look forward, no pending some assumptions, you know, the jizz is laid out, then we're pretty comfortable that we can reach those numbers.

Tracy A. Robinson: So I'm really happy with the way that our plan is coming together and is running, and the kind of velocity that the guys are running through it. It's because, you know, we build a plan, and Remy sells it, and if the volume shows up as we expected, this is a highly efficient operation. So as we look forward, you know, pending some assumptions, you know, the jizz is laid out, then we're pretty comfortable that we can... Thank you very much.

Speaker Change #117: Really happy with the way that our plan is coming together is running and the kind of philosophy that the guys are reinsured is because.

Speaker Change #117: We build a plant of Remy shelf and if the volume shows up as we expected. This is a highly efficient operation.

Speaker Change #117: As we look forward no pending some assumptions.

This is as laid out then we're pretty comfortable that we can reach those numbers. Okay. Thank you very much.

Walter Spracklin: Okay, thank you very much.

Walter Spracklin: Thanks for the question.

Tracy A. Robinson: Thanks for the question. Our last question will come from Ravi Shanker from Morgan Stanley.

Speaker Change #118: Thanks for the question.

Ravi Shanker: Our last question will come from Robbie Shanker from Morgan Stanley. Please go ahead and line this open. Thanks for the persuasion in here. Just a couple of follow-ups. One is in your conversations, your customers, are you seeing them pull forward peak season demand into basically now? And is there a risk that you may be potentially missing out on volumes? I mean, just when you kind of resolve the labor things, kind of later the summer early fog, and if that drop off and back up there. And also, I'm all these if I missed this, but do you quantify the raw impact of the network blockages into Q?

Speaker Change #119: Our last question will come from <unk>.

Ravi Shanker: Please go ahead. Your line is open. Thanks for taking me in here.

Speaker Change #119: Ravi Shanker from Morgan Stanley. Please go ahead your line is open.

Tracy A. Robinson: Just a couple of follow-ups. One is, in your conversations with your customers, are you seeing them pull forward peak season demand into basically now? And is there a risk that you may be potentially missing out on volumes?

Speaker Change #119: Thanks.

Speaker Change #120: Excuse me in Europe.

Ravi Shanker: Follow ups one is in your conversations with your customers are you seeing them pull forward peak season demand.

Ravi Shanker: Basically now and is there a risk that you maybe potentially missing out on volumes I mean, just when you kind of resolve the labor things later.

Tracy A. Robinson: I mean, just when you kind of resolve the labor things kind of later this summer, early fall, kind of does that drop off and back off the air? And also, apologies if I missed this, but did you quantify the OR impact of the network blockages in Tokyo? Maybe I'll start on the pull forward.

Speaker Change #122: Later this summer early fall going up does that drop off in the back of the arm.

Speaker Change #123: And also.

Speaker Change #124: If I missed this but did you quantify the impact of the network blockages in Tokyo.

Ravi Shanker: Maybe I'll start on the poll forward. Thanks for your question. So, yeah, for sure, we do see part of that. There's obviously the biggest impact of the labor situation is on interval. And the international business because our customers are planning vessel, they have to plan them quite a bit further out on the domestic side. We think customers have largely proved out their truck contingencies and then more rapidly came back to the rails, but on the vessel side, it's a little trickier. So, so we think there has been a bit of a poll forward of that volume.

Tracy A. Robinson: Thanks for your question. So, yeah, for sure, we do see part of that there. Obviously, the biggest impact of the labor situation is on intermodal and the international business because our customers are planning vessels, and they have to plan them quite a bit further out. On the domestic side, we think customers have largely proofed out their truck contingencies and then more rapidly come back to the rails. But on the vessel side, it's a little trickier.

Speaker Change #125: Maybe I'll start on the pull forward. Thanks for your question. So for sure. We do see part of that there is obviously the biggest impact of the labor situation is on intermodal.

And the international business, because our customers are planning vessels, they have to plan them quite a bit further out on the domestic side. We think customers have largely proved out their truck contingencies and then more rapidly came back to to the rails, but on the vessel side, it's a little trickier. So so we think there has been.

Tracy A. Robinson: So we think there has been a bit of a pull-forward of that volume. What we're sort of focused on, though, is how quickly once we put this behind us, we can recover it. And we think that ports in the US on the West Coast are more congested than they were last year when we had the ILWU strike. So ideally, that volume will come back more quickly.

Speaker Change #125: A bit of pull forward of that volume, what we're sort of focused on though is how quickly once we've put this behind us we can recover it.

Ravi Shanker: What we're sort of focused on, though, is how quickly, once we put this behind us, we can recover it. And we're thinking that ports in the US on the West Coast are more congested than they were last year when we had the ILW used, right? So ideally, that volume will come back more quickly. And indications are, as I said on the domestic market, that we'll be able to bring the volume back to our rails quicker also.

Speaker Change #125: And we're thinking that ports in the U S. On the West coast are more congested than they were last year. When we had the IOW use strike. So ideally that volume will come back more quickly.

And indications are as I said on the domestic market that we'll be able to bring the volume back to our our rails quicker also I just wanted to add to an earlier question on the Iowa Northern acquisition that both Tracy and I talked about obviously that is pending STB approval.

Tracy A. Robinson: And indications are, as I said, on the domestic market that we'll be able to bring the volume back to our rails quicker. Also, I just want to add to an earlier question on the Iowa Northern acquisition that both Tracy and I talked about. Obviously, that is pending STB approval. So we're hoping that comes through in the next couple weeks here. But that is an important caveat.

Remi Lalonde: Do you want to add to an earlier question on the Iowa Northern acquisition that both Tracy and I talked about. Obviously, that is pending STB approval. So we're hoping that comes through in the next couple of weeks here, but that is an important caveat.

Speaker Change #125: And we're hoping that comes through in the next couple of weeks here, but that is an important caveat.

Cristina Circelli: And maybe Ravi on your second piece of the question in terms of if we quantified the impact of the network Vancouver corridor issues on OR. We did not, but I did give some specific examples of of of of a re crew costs or dead head costs and hell away costs that was much higher than than than what we've seen in the past. like in the range of 130% on the first one, like I said, close to 40% on Deadhead and about 75%, 74% on the last one. So that's what we did.

Remi G. Lalonde: Maybe, Ravi, on your second piece of the question in terms of whether we quantified the impact of the network Vancouver corridor issues on OR, we did not, but I did give some specific examples of recruit costs or deadhead costs and held-away costs that were much higher than what we've seen in the past. The range of 130% on the first one, like I said, close to 40% on Deadhead, and about 75%, 74% on the second one, and the last. That's what we did. Thanks for the question, Ravi. Thank you. This concludes the question and answer session. I would like to turn the call back over to Tracy Robinson.

Revenue on your second your second piece of the question in terms of if we can quantify the impact of the network Vancouver corridor issues on or we did not but I did give some specific examples.

Speaker Change #125: Yes.

Speaker Change #126: <unk> costs or debt head costs, and how the way cost that was much higher than what we've seen in the past.

Speaker Change #126: And the range of 130% on the first one like I said close to 40% on that had about.

Speaker Change #126: About 75%, 74% on the last one.

Speaker Change #126: That's what we that's what we did thanks for the question Ravi.

Ravi Shanker: Thanks for the question, Ravi. Thank you.

Speaker Change #126: Yes.

Unknown Executive: This includes the question and answer session.

Speaker Change #126: This concludes the question and answer session I would like to turn the call back over to Tracy Robinson.

Tracy Robinson: I would like to turn the call back over to Tracy Robinson. Thanks so much.

Tracy A. Robinson: Thanks so much. So we will wrap it up here. This has been a challenging quarter for us, but we understand the issues and we're working through them. In the immediate term, we're working through the uncertainty of labor here in Canada, which we hope to resolve in the coming weeks. The railroad's running well, and I'm excited about the future, particularly the efforts and the successes that we've had in driving new business to the railroad and advancing our customer initiatives, and Remy is all over this. The team is doing exactly what they need to do, and we're continuing to deliver to our customers, and this model is working.

Tracy Robinson: So we will wrap it up here. This has been a challenging quarter for us. But we understand the issues, and we're on them. In the media term, we're working through the uncertainty on labor here in Canada, which we hope to resolve in the coming weeks. The reverence running well, and I'm excited about the future, particularly the efforts and the success and the successes that we've had in driving new business. The railroad and advancing our customer initiatives, and Remi is all over this. The team is doing exactly what they need to do. And we're continuing to deliver to our customers.

Tracy A. Robinson: Thanks, so much well, we will wrap it up here and this has been a challenging quarter for us.

Speaker Change #127: But we understand the issues and we're on them in the <unk>.

Speaker Change #128: Medium term, we're working through the uncertainty on labor here in Canada, which we hope to resolve in the coming week, the reference running well and I'm excited about the future, particularly the efforts and the success and the successes that we've had in driving new business to the railroad and advancing our customer initiatives and Remy is all.

Speaker Change #128: Over this the team is doing exactly what they need to do and we're continuing to deliver to our customers.

Tracy Robinson: This model is working.

This model is working thanks, so much for your time today.

Tracy Robinson: Thanks so much for your time today.

Operator: The conference call has now ended. Thank you for your participation.

Tracy A. Robinson: Thanks so much for your time. My conference call has now ended. Thank you for your participation. You may now disconnect your line. Co. Co.

Speaker Change #129: The conference call has now ended thank you for your participation you may now disconnect your lines.

Operator: You may not disconnect your line.

Speaker Change #129: Okay.

Speaker Change #129: Yes.

Speaker Change #129: Sure.

Speaker Change #129: Yes.