Q2 2025 Canadian National Railway Co Earnings Call

Operator: and I will be your operator today. All participants are now in the listen-only mode.

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

Good afternoon, my name is Krista and I will be your operator today. All participants are now in the listen, only mode.

Stacy Alderson: 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. Thank you, Krista.

You kindly limit yourself to 1 question.

Speaker Change: At this time, I would like to turn the call over to Stacey Alderson CNS assistant vice president of investor relations, ladies and gentlemen, Miss Alderson.

Stacy Alderson: Welcome, everybody, and thank you for joining us for CN's second quarter 2025 Financial and Operating Results Conference Call.

Stacy Alderson: Joining us on the call today are Tracy Robinson, our President and CEO, Derek Taylor, our Chief Field Operations Officer, Pat Whitehead, our Chief Network Operations Officer, Janet Drysdale, our Interim Chief Commercial Officer, and Ghislain Houle, our Chief Financial Officer. As note, we have forward looking statements and non gap definitions for your reference on page two of our presentation. These forward-looking statements include estimates, goals, and predictions about the future based on our current information and educated assumptions. These come with risks and uncertainties, and with that, there is always the possibility that the outcomes may differ from the expectations.

Thank you, Krista, welcome everybody. And thank you for joining us for cn's second quarter, 20 2025 financial and operating results conference. Call. Joining us on the call today are Tracy Robinson, our president and CEO Derek Taylor. Our chief field operations officer pat Whitehead, our chief network operations, officer Janet, Dale. Our interim Chief commercial officer, and Justa our Chief Financial Officer.

Speaker Change: As note, we have, forward-looking statements and non-gaap definitions for your reference on page 2 of our presentation.

Speaker Change: These 4 looking statements, include estimates goals and predictions about the future, based on our current information and educated assumptions.

Stacy Alderson: That being said, board-looking statements aren't guarantees, and factors like economic conditions, competition, fuel prices, and regulatory changes could affect actual results.

Tracy Robinson: It is now my pleasure to turn over the call to CM's President and Chief Executive Officer, Tracy Robinson. Thanks, Stacy. And thanks, everyone, for joining us on today's call.

These come with risks and uncertainties and with that, there is always the possibility that the outcomes May differ from the expectations that being said, or looking statements, aren't guarantees and factors like economic conditions, competitions fuel prices and Regulatory changes could affect actual results.

Tracy Robinson: Now, as you no doubt saw in yesterday's press release, Janet Drysdale, who most of you know, is stepping in as Interim Chief Commercial Officer following Remi's departure. Now, I want to welcome Janet to the role. She knows our company well, she knows our markets, she's a long standing leader within our company and our sector. And Janet is here in the room with us today. And she'll take us through the commercial performance and the market trends in just a few minutes.

Tracy Robinson: So we're going to start with a quarter today and then we'll move on to the outlook for the remainder of the year. We delivered 2% adjusted EPS growth this quarter on flat year-over-year car loads and a 1% reduction in RTMs. Now, we knew heading into the year that Q2 would be a tough compare from a volume perspective, but it held up well against a positive Q2 last year, when we had some pull-forward demand ahead of a potential labour decision. bulk volumes were very strong through the quarter. Now, this is great business, and it reflects our advantage network for the ag sector and the strength of our share.

Speaker Change: It is now my pleasure to turn over the call to CNS, president, and chief executive officer. Tracy Robinson. Thanks Stacy. And thanks everyone for joining us. Uh, on today's call. Now, as you no doubt saw on, yesterday's press release. Janet Del who most of, you know, is stepping in is in term, Chief commercial officer, following Remy's departure. Now, I want to welcome Janet to the role. She knows our company. Well, she knows our markets. She's a long-standing leader within our company and our sector and Janet is here in the room with us today and she'll take us through the commercial performance and the market trends in just a few minutes.

Speaker Change: So we're going to start with a quarter today and then we'll move on to the outlook for the remainder of the year.

Speaker Change: We delivered 2% adjusted, EPS growth, this quarter on flat year-over-year carloads in a 1% reduction in rtms. Now, we knew heading into the year that Q2 would be a tough compared from the volume perspective, but it held up well against a positive. Q2 last year, when we had some pull forward demand ahead of a potential Labour disruption.

Tracy Robinson: In the merchandise and intermodal segment, we started in Q2 to see the impact of tariffs and a weaker industrial economy. Now this shift in traffic mix with less merchandise created a drag on our revenues and margins, despite continued same store pricing ahead of inflation. I will get into the details on the volumes and the revenues with Janet in just a few minutes. Our network is running very well. Our operating metrics, velocity, dwell, customer service, they're all in the right spot. And it's important that as our volumes are makeshift, that we respond quickly. And this team has proactively and progressively adjusted the operating plan and resources throughout the quarter, maintaining good tension between cost and network fluidity and performance.

Bulk volumes were very strong through the quarter. Now this is great business and it reflects our advantage Network for the egg sector and the strength of our share.

In the merchandise and in the model segments, we started in Q2 to see the impact of tariffs and weaker industrial economy. Now this shift in traffic mix with less merchandise, created a drag on our revenues and margins despite continued same store, pricing ahead of inflation. We'll get into the details on the volumes and the revenues with Janet and in just a few minutes.

Tracy Robinson: And this helped us drive 50 basis points year over year improvement in margin, and 150 basis points betterment over Q1. Now, everyone across this organization is focused on containing costs as volumes adjust. This team is aligned, we're focused, and we're disciplined.

Tracy Robinson: Now, as we look forward to the next six months, we need to consider the current environment. A few months ago, the trade deal seemed imminent, and instead, there is an increasing uncertainty around the tariff and trade environment, particularly in Canada, and some concerns over weakening macroeconomic environments. And we are seeing impacts in our force products, our metals, and our auto business. And there is a question on what happens to the international volumes for the last half as the tariff discussions continue. And we know that these questions will be resolved with time, and we'll have greater certainty on the traditional and perhaps the newly emerging trade.

Speaker Change: Our network is running very well, our operating metrics, velocity, dwell customer service, they're all in the right spot. Uh, and it's important that as our volumes are mixed shift that we respond quickly and this team has proactively and progressively adjusted. The operating plan and resources throughout the quarter, maintaining good. Tension between costs and network fluidity and performance and this helped us drive 50 basis points. Year-over-year Improvement in margin and 150 basis points. Betterment over q1. Now, everyone across this organization is focused on containing costs as volumes adjust. This team is aligned, we're focused and we're disciplined.

Speaker Change: Now, as we look forward to the next 6 months, we need to consider the current environment.

Speaker Change: A few months ago, the trade deals seemed imminent. And instead there is an increase in uncertainty around the Tariff and trade environment, particularly in Canada and some concerns over weakening. Macroeconomic environments.

Speaker Change: And we are seeing impacts in our Force products, a metal and our auto business.

Speaker Change: And there is a question on what happens to the international volume to the last half of the Tariff discussions. Continue.

Tracy Robinson: Now, in the immediate term, the uncertainty makes calling the merchandise and intermodal volumes for the second half more of a challenge. The range of outcomes is broader, and it seems more likely that the current softness in certain sectors will persist in the near term. We're watching all of this closely as it unfolds across our business lines, and we're controlling what we can control in an uncertain environment.

Speaker Change: And we know that these questions will be resolved with time, and we'll have greater certainty on the traditional and perhaps some newly emerging trade flows. Now, in the immediate term, the uncertainty makes calling the merchandise and Inter motor volumes for the second half more of a challenge. The range of outcomes is broader and it seems more likely that the current softness in certain sectors will persist in the near term.

Tracy Robinson: And here's what we're doing. We have efforts underway with our customers to further leverage the benefits of the strengths in our diversified book. We have a very strong bulk in energy franchises, for example, these businesses will continue to grow and there's work underway in Canada. Develop better access to global markets particularly in the energy space and these may provide further opportunity In the areas that are impacted by tariffs, we're working closely with our customers on getting them to other markets. So in metals, for example, following the escalation of U.S. tariffs on Canadian made steel and aluminum, which rose to 50% in June, we worked with our customers on intra-Canada and intra-U.S.

Speaker Change: And we're watching all of this closely as it unfolds across our business lines and we're controlling what we can control in an uncertain environment.

Speaker Change: And here's what we're doing.

Speaker Change: We have efforts underway with our customers to further leverage, the benefits of the strengths in our Diversified book.

Access to global markets, particularly in the energy space. And these May provide further opportunity,

Tracy Robinson: moves, and we were able to mitigate some of the loss of the southbound flows. Now, we believe there is more opportunity. We are doubling down on leveraging our service performance to increase volumes. We've had some wins, for example, in domestic intermodal based on our ability to deliver for our customers. And we're managing our cost structure in response to shifts in both mix and volumes to protect our margins, and we make good progress on this in Q2, and there's more to come. We're all over that. Now we delivered a solid Q2 in this environment.

Speaker Change: In the areas that are impacted by tariffs, we're working closely with our customers on getting them to other markets. So in medals, for example, following the escalation of us, tariffs on canadian-made steel and aluminum, which wrote to 50% in June, we worked with our customers on intra Canada and intra us moves and we were able to mitigate some of the loss of the southbound flows. Now, we believe there is more opportunity here

Speaker Change: We are doubling down on leveraging, our service performance to increase volumes. We've had some wins for example, in domestic and Immortal based on our ability to deliver for our customers.

And we're managing our cost structure in response to shifts in both mix and volumes to protect our margins. And we make good progress on this in Q2, and there's more to come. We are all over that.

Tracy Robinson: But there is ongoing uncertainty as we look forward. As a result, we believe it is appropriate to soften our expectations for the remainder of the year. And we're adjusting to low single digit RTM growth. Now make no mistake about it. This is a great network. It has tri-coastal access. It serves the resource and energy rich regions of northern Canada. It uniquely bypasses Chicago congestion and has a well diversified book of business. And remember, we also originate over 85% of our book and originate and terminate more than 65% of our business more than any class one.

Speaker Change: And we delivered a solid Q2 in this environment.

Speaker Change: But there is ongoing uncertainty as we look forward. As a result, we believe it is appropriate to soften our expectations for the remainder of the year. And we're adjusting to low single digit. RTM growth.

Speaker Change: Now make no mistake about it.

Speaker Change: This is a great Network. It has Tri Coastal, access it serves the resource and energy-rich regions of Northern Canada.

Speaker Change: Uniquely bypasses, Chicago congestion and and has a well Diversified book of business.

Tracy Robinson: And this means we control more of the service at origin and destination and a strong partnership with our customers that we can build on.

Derek Taylor: I'm going to turn it over to the team to get more to give you more detail on the quarter and how we're thinking about the balance of the year. Derek, I'll turn it to you. Thanks, Tracy. And good afternoon, everyone.

Derek Taylor: I'll be speaking on slide six. I'm pleased with our operation performance. The operating team has maintained a very fluid and very healthy network throughout the second quarter. Now, I said on our Q1 call that we would take decisive action to tightly manage cost as demand evolves, and that's just what we've done this quarter. We are acting quickly and decisively and will continue to do so as we balance operational and service requirements in this dynamic environment. In the second quarter, we cut 8% of our mainline manifest train starts versus last year in response to a 7% decrease in merchandise workloads.

Speaker Change: And remember we also originated over 85% of our book and originated and terminate more than 65% of our business more than any class 1. And this means we control more of the service at origin and destination and of strong partnership with our customers that we can build on. I'm going to turn it over to the team to get more uh to give you more detail on the quarter and how we're thinking about the balance of the Year Derek. I'll turn it to you first. Yeah, thanks Tracy. And good afternoon everyone.

I'll be speaking in a slide 6.

Derek: I'm pleased with our operation for performance. This is the operating team has been maintained a very fluid and very healthy Network throughout the second quarter.

Derek: Now I said on our q1 call that we would take decisive action to tightly manage costs as demand evolves and that's just what we've done this quarter.

Derek: We are acting quickly and decisively and will continue to do. So, as we balance, operational and service requirements in this Dynamic environment,

Derek Taylor: Volt workloads were up 9% and we handled that with only 4% more volt train starts. At the end of the quarter, we had 560 train and engine employees on furlough across the network and we are continuing to actively manage resourcing as we keep an eye on volume. This is all about striking the right balance between service, cost, and network health. We know speed has a cost, but we also know that we can keep this railroad fluid with car velocity above 200 miles per day. Our focus is on pulling cost levers while still maintaining solid operating metrics that ensure network fluidity.

Derek: In the second quarter, we cut 8% of our Mainline manifest train starts versus last year. In response to a 7% decrease in merchandise workload,

Bulk workloads, were up 9%, and we handle that with only 4%, more bulk train starts.

Derek: At the end of the quarter, we had 560 training engine employees, on Furlow across the network, and we are continuing to actively manage resourcing as we keep an eye on volumes.

Derek: This is all about striking, the right balance between service costs and Network Health.

Derek: We know speed has a cost, but we also know that we can keep this railroad fluid with car velocity of 200 m per day.

Derek Taylor: With that in mind, car velocity was 213 miles per day, driven in large part by a faster network train speed that increased 3% over last year. Our yard stayed fluid and through-dwell improved 1%. Lastly, we continue to deliver for our customers with a local service commitment performance of 95%.

Derek: Our focus is on pulling cost levers while still maintaining solid operating metrics that ensure Network fluidity.

Derek: With that, in mind Carvalho city was 213 m per day driven in large part by a faster Network train speed, that increase 3% over last year.

Derek: Our yard stayed fluid and through dwell improved 1%.

Derek Taylor: So, all in all, really solid operating metrics were delivered. Wildfire season started early this year, but fortunately so far, we have had very little impact on the main line. There have, however, been several branch line outages. Our firefighting trains and tank cars are deployed and staged across the western region to protect the network and to support local communities where we can. I can proudly say they have been very effective. Now coming into July, we've had a couple of incidents in the south, which has put pressure on velocity in that region. Meanwhile, the West and the East continue to perform well.

Derek: Lastly, we continue to deliver for our customers with a local service commitment performance of 95%.

Derek: so, all in all really solid operating metrics were delivered,

Derek: Wildfire Seasons started early this year, but fortunately so far, we have had very little impact on the main line.

Derek: there have however, been several Branch line outages

Our firefighting trains and tank cars are deployed and staged across the western region to protect the network and to support local communities where we can.

Derek: I can proudly say they have been very effective.

now, coming into July, we've had a couple of in incidents in the south

Which has put pressure on velocity in that region.

Derek Taylor: Overall, month-to-date car velocity is nearly 210 car miles a day, and we expect to build on that for the rest of the quarter. We've been doing what we have to do in this dynamic operating environment. We will continue to act with urgency to keep the tension tight between cost and the operating and service metrics. I know I can count on the team to pull on every lever and deliver the outcome that is required.

Derek: Meanwhile, the west and the East continue to perform well.

Derek: Overall month today, car velocity is nearly 210 car miles a day and we expect to build on that for the rest of the quarter.

Derek: We've been doing what we have to do in this Dynamic operating environment.

Derek: We will continue to act with urgency to keep the tension tight between cost and the operating and service metrics.

Patrick Whitehead: I'll now pass it over to Pat. Thanks, Derek. Let's start with safety. This quarter, I want to call out our injury ratio, which improved by 16%. This is not by chance. It is a direct result of our teams proactively engaging in the field. Identifying at-risk behaviors before they turn into Our conviction is simple. Everyone goes home safely every day and that standard is not negotiated.

Derek: I know I can count on the team to pull on every lever and deliver the outcome that is required.

I'll now pass it over to Pat.

Pat: Thanks Derek. Let's start with safety.

Pat: This quarter, I want to call out our injury ratio, which improved by 16%.

Pat: Identifying at risk behaviors, before they turn into incidents.

Pat: Our conviction is simple.

Patrick Whitehead: On the resourcing side, we're tightly managing our cost base staying lean and nimble. Our T&E labor productivity improved 11% year over year, mostly through targeted furloughs that we acted on early to realign to demand. We're hiring only for the hardest-to-fill locations. And we are timing every training class in close partnership with what the commercial team is seeing in terms of the volume. On the assets side, we're also reacting quickly, preserving optionality and protecting margins as volumes shift. We ended the quarter with 8,000 system cars in storage, twice as many as at the end of the first quarter, and 200 high-horsepower locomotives, or roughly 12% of the.

Pat: Everyone goes home safely every day and that standard is not negotiable.

Pat: On the resourcing side, we're tightly managing our cost base staying lean and Nimble our tene labor productivity improved, 11% year-over-year.

That we acted on early to realign to demand.

For higher only, for the hardest to fill locations. And we are timing every training class in close partnership with what the commercial team is seeing in terms of the volume Outlook.

On the assets on the asset side were also reacting quickly, preserving, optionality, and protecting margins, as volume shift.

Patrick Whitehead: These moves, combined with careful train planning, shield us from the unnecessary expenses and lifted both our gross ton-miles per horsepower and our fuel efficiency by 1%. Sticking with locomotives, we're seeing real traction on our reliability, which means we're doing more with less. Locomotive availability hit 92.5% with failures down 3% year-over-year, driven by rooting out systemic failures and enhancing our predictive maintenance capabilities. The result, an 8% reduction in locomotive unit cost year-over-year. Now that's control and efficiency delivery.

We ended the quarter with 8,000 system cars and storage twice as many as at the end of the first quarter and 200 High horsepower locomotives or roughly 12% of the fleet.

Pat: These moves combined with careful trained planning Shield us from the unnecessary expenses and lifted both, our gross ton miles per horsepower and our fuel efficiency by 1%.

Pat: Sticking with locomotives. We're seeing real traction on our reliability which means we're doing more with less.

Locomotive availability hit 92.5% with failures down, 3% year-over-year.

Patrick Whitehead: In engineering, our lowest overtime in a decade indicates we're executing to plan and not playing catch. Tie gangs are 7% more productive with 5% lower unit Work block delays are down across the network. By moving more work in-house, we're gaining greater control and driving efficiency, delivering more with the resources we have.

Pat: By rooting out systemic failures and enhancing our predictive maintenance capabilities. The result an 8% reduction in locomotive unit cost year-over-year now that's control and efficiency delivery delivered.

Pat: In engineering, our lowest overtime. In a decade indicates. We're executing the plan and not playing catch-up.

Pat: Tie gangs are 7% more productive with 5% lower unit cost.

Work block delays are down across the network.

Patrick Whitehead: This shift is helping us to stay on schedule, improve quality, and manage As we look to the second half of the year, we're maintaining our proactive approach and taking decisive action when and where necessary. Early moves on safety, cost and asset management means we're set up to respond quickly, safeguard the bottom line and capitalize on opportunity as market The railroad is running very well, and we're going to keep it that way, no matter how markets evolve.

Pat: by moving more work, in-house or gaining greater quality control and driving efficiency, delivering more with the resources we have

Pat: This shift is helping us to stay on, schedule improve quality and manage our costs.

Pat: As we look to the second half of the Year, we're maintaining our proactive approach and taking decisive action. When and where necessary

Pat: Early moves on safety cost and asset management means. We're set up to respond quickly, Safeguard the bottom line and capitalize on opportunity as markets rebound.

Patrick Whitehead: With that, I'll pass it on. Thanks, Pat.

Janet Drysdale: Good afternoon, everyone. It's great to be here. I really appreciate the opportunity to step in as Interim Chief Commercial Officer. So today I'm going to do my best to give you some color on a quarter as well as what we're seeing at this point in terms of the outlook for the second half. As you've just heard, the railroad is operating very well, and that translates directly into solid service for our country. That's foundational in terms of our focus on driving growth, no matter what type of external challenges we face. Revenues in the quarter fell 1% on 1% lower RTMs and flat car loads, reflecting weaker market fundamentals amid ongoing U.S.

Pat: The railroad is running very well, and we're going to keep it that way, no matter how markets evolve with that, I'll pass it on to Janet.

Janet Del: Thanks Pat. Good afternoon, everyone. It's great to be here.

Speaker Change: I really appreciate the opportunity to step in as interim, Chief commercial officer.

Speaker Change: So today I'm going to do my best to give you some color on the quarter as well as what we're seeing at this point in terms of the outlook for the second half.

Speaker Change: As you've just heard, the railroad is operating very well, and that translates directly into solid service for our customers.

That's foundational. In terms of our focus on driving growth, no matter what, type of external challenges we face.

Janet Drysdale: trade and tariff actions and uncertainty. We also had an unfavorable mixed impact. More details on that in a minute. Lower applicable OHG prices versus last year were a headwind of about 2%. In addition, the Canadian carbon tax surcharge was repealed on April 1st, which impacted revenues by about $70 million and a quarter. This is a pass-through to customers, and so it will be a headwind of roughly the same amount for the next three quarters. Foreign exchange was a slight tailwind to revenue of less than 1%. Same store pricing continues to come in ahead of our rail cost inflation, but revenue for RTM was flat as a result of mixed Year over year we move less merchandise business with the key mix impact being driven by forest products, refined petroleum products, chemicals and metals.

Speaker Change: Revenue news in the quarter fell 1% on 1% lower rtms and Flat Car Los reflecting weaker Market, fundamentals amid ongoing us trade and tariff actions and uncertainty.

We also had an unfavorable mix impact more details on that in a minute.

Speaker Change: Lower applicable. Oh, HD prices versus last year. Were a headwind of about 2%.

Speaker Change: In addition, the Canadian carbon tax sir charge was repealed on April 1st, which impacted revenues by about 70 million and a quarter. This is a pass through to customers and so it will be a headwind of roughly, the same amount for the next 3 quarters.

Speaker Change: Foreign exchange was a slight Tailwind to revenue of less than 1%.

Speaker Change: Same store pricing continues to come in ahead of our rail cost inflation. But revenue for RTM was flat as a result of mixed.

Janet Drysdale: I'm going to provide you a few key highlights on the quarter before moving to the outlook. You have the numbers in front of you, so I'm not going to repeat them. Petroleum and chemicals were impacted by lower volumes of refined products due to extended turnarounds at about 50% of the Western Canadian refineries that we serve, which is really unprecedented to have that many refineries down at the same time. Now, we did partly backfill some of those moves from the U.S. and Eastern Canada, but those were much shorter haul. We have lower shipments for renewables, mainly the result of policy changes in the U.S.

Speaker Change: Year-over-year, we moved less merchandise business with the chi. Mix impact, being driven by Forest Products. Refined petroleum products, chemicals, and metals,

Speaker Change: So I'm going to provide you a few key highlights on the quarter before, moving to the Outlook, you have the numbers in front of you. So I'm not going to repeat them.

Speaker Change: Petroleum and chemicals were impacted by lower volumes of refined products. Due to Extended turnarounds at about 50% of the Western Canadian refineries that we serve, which is really unprecedented to have that many refineries down at the same time.

Now, we did partly backfill some of those moves from the US and Eastern Canada, but those were much shorter Hall.

Janet Drysdale: and Canada. Those policy changes drove producers to source from inside Canada versus Iowa and Louisiana. So that's also part of the mix issue. Within metals and minerals, iron ore shipments were impacted by weaker demand fundamentals, including a mine closure on our line. We also saw lower sand volumes due to a bridge fire that was on the branch line that Derek referred to. That paused shipments early in the quarter, and as we exited the quarter, lower gas prices drove less drilling activity. Steel and aluminum shipments came under pressure from tariffs, but as Tracy mentioned, we did have some compensating moves intra-Canada and intra-US.

Speaker Change: We had lower shipments for Renewables, mainly the result of policy changes in the US and Canada.

Speaker Change: Changes drove producers to Source from inside Canada versus Iowa and Louisiana. So that's also part of the mix issue.

Speaker Change: Within metals and minerals iron ore shipments, were impacted by weaker demand fundamentals. Including a mine closure on our line.

Speaker Change: We also saw lower sand volumes due to a bridge fire that was on the branch line that Derek referred to that paused shipments early in the quarter. And as we exited the quarter, lower gas prices, drove less drilling activity.

Janet Drysdale: Challenging market fundamentals are continuing to unfavorably impact forest products volume. Turning to coal, Canadian METCOL exports were up due to the Quintet mine restart last fall, while U.S. coal volumes were impacted by back-to-back longwall moves at two of our Illinois Basin thermal coal mines.

Speaker Change: Steel and aluminum shipments, came under pressure from terrorists. But as Tracy mentioned, we did have some compensating moves intra Canada, and intra us.

Challenging Market fundamentals or continuing to unfavorably impact Forest Products volumes.

Janet Drysdale: Now the real bright spot for the quarter was grain and fertilizers with a 12% increase in revenue. We saw stronger grain shipments on both sides of the border, with grain volumes up 6% in Canada, and U.S. volumes up almost 30%. That was due to the higher U.S. corn exports, new ethanol projects, as well as the Iowa Northern Acquisition-related volume. Potash RTMs were up almost 30% driven by strong exports to the Port of St. John.

Speaker Change: Turning to Coal Canadian met coal exports were up due to the quintet. Mine, restart last fall. While us coal volumes were impacted by back-to-back long wall moves at 2 of our Illinois, Basin thermal coal mines,

Speaker Change: Now, the real bright spot for the quarter was grain and fertilizer with a 12% increase in revenues.

Speaker Change: We saw stronger grain shipments on both sides of the border with grain volumes up 6%, in Canada and US volumes up almost 30% that was due to the higher us corn, exports new ethanol projects, as well. As the Iowa Northern acquisition related volumes,

Janet Drysdale: Now, in terms of intermodal, we expected increased blank sailings, and that's what we got. primarily impacted units through Vancouver, which were down 4% Prince Rupert units, however, rose 14% led by new Gemini volumes. In domestic, wholesale volumes were up, particularly in the Trans-Con and Eastern Canada. and Automotive. Both finished vehicles and parts were below last year's levels, and we certainly saw some shift in flows with auto manufacturers moving around production. Mexico to Canada was up, and as you'd expect, volumes between Canada and the U.S. were down.

Speaker Change: Paudash rtms were up almost 30% driven by strong exports to the port of St. John

Speaker Change: now, in terms of Intermodal, we expected, increased blank sailings and that's what we got.

And primarily impacted units through Vancouver, which were down 4%.

Speaker Change: Prince Rupert units? However, Rose 14% led by new Gemini volumes.

In domestic wholesale volumes were up, particularly in the transcon, in Eastern Canada Lanes.

An automotive, both finished vehicles and parts were below last year's levels and we certainly saw some shift and flows with auto manufacturers moving around production.

Janet Drysdale: Turning now to The Outlook. The on-again, off-again tariffs are forcing customers to rethink their supply chain. Based on what we saw in Q2 and what we're hearing from customers, we have reduced our volume outlook for the back half of the year and consequently updated our full-year volume assumption to low single-digit RTM growth versus 2024.

Speaker Change: Mexico to Canada was up and as you'd expect volumes between Canada and the US were down.

Speaker Change: Turning now to the Outlook.

Speaker Change: The on-again off-again tariffs are forcing customers to rethink their supply chains.

Janet Drysdale: I would say our perspective has changed most notably for international intermodal and forest products. In intramodal, we still expect to see solid year-over-year growth in the back half of the year as we lap last year's labour-related disruption. But our view has been tempered by the tariff situation and the recent pull forward of inventory. Within merchandise, we see continued risk exposure in lumber with higher softwood duties for Canadian imports coming in August.

Speaker Change: Based on what we saw in Q2 and what we're hearing from customers, we have reduced our volume outlook, for the back, half of the year. And consequently, updated, our full year, volume assumption to low single-digit. RTM growth versus 2024

Speaker Change: I would say our perspective has changed most notably for international Intermodal and Forest Products.

An intermodal. We still expect to see solid year-over-year growth in the back half of the year as we lap last year's labor related. Disruptions

Speaker Change: But our view has been tempered by the Tariff situation, and the recent pull forward of inventory.

Janet Drysdale: The lingering threat of the U.S. Section 232 Lumber Investigation, as well as the slower-than-expected housing recovery. Lumber mill curtailments also have a direct impact on other forest products, including wood pulp. Petroleum and Chemicals will have some continued pressure from turnarounds within the refined segment into Q3, but those are expected to be resolved by Q4. And we're expecting a ramp-up in volumes into the fuel distribution facility in Toronto with Phase 2 coming online. And for those of you that were able to join us in Prince Rupert in June, you'll recall we also expect continued growth in export propane through the AltaGas facility.

Speaker Change: Within merchandise, we see continued risk exposure and lumber with higher softwood duties for Canadian Imports coming in August.

The lingering threat of the US section. 232 Lumber investigation as well as the slower than expected housing recovery.

Speaker Change: Lumber mill. Curtailment also have a direct impact on other Forest. Products, including wood, pelp wood pulp

Speaker Change: And petroleum and chemicals, will have some continued pressure from turnarounds within the refined segment into Q3. But those are expected to be resolved by Q4.

And we're expecting a ramp up in volumes into the fuel distribution facility in Toronto with Phase 2 coming online.

Janet Drysdale: Overall, we're projecting growth in PNC for the balance of the year. For other trade-sensitive commodities, metals, minerals, automotive, we're navigating ongoing market shifts by staying close to our customers and adapting to changing supply chains. In bulk, it's still a little bit too early to call the Canadian grain crop size, and we probably need a bit of help from Mother Nature. Nonetheless, we expect to see the normal seasonal uptick as we get into September. I do want to note that with just two weeks left in the current year crop, we have already set an all-time record for the most bulk grain and processed grain product shipped ever in Western Canada.

Speaker Change: And for those of you that were able to join us in Prince Rupert in June, you'll recall, we also expect continued growth in export propane, through the altar, gas facility overall, we're projecting growth in PNC for the balance of the year.

Speaker Change: For other trade sensitive Commodities Metals minerals. Automotive we're navigating ongoing Market shifts by staying close to our customers and adapting to changing Supply chains.

Janet Drysdale: We're forecasting a smaller domestic potash fill program in Q3, followed by higher export shipments to St. John in Q4, as we lap last year's terminal ownage. Coal is going to continue to benefit from the new production in Northeast BC.

Speaker Change: In bulk. It's still a little bit too early to call the Canadian grain crop size and we probably need a bit of help from other nature. Nonetheless, we expect to see the normal seasonal, uptick, as we get into September. I do want to note that with Just 2 weeks left in the current year crop. We have already set an all-time record for the most bulk grain and processed grain product shipped ever in western Canada.

We're forecasting a smaller domestic pod. Ash go program in Q3 followed by higher export shipments to St. John and Q4 as we lap last year's terminal outage.

Janet Drysdale: So the broader market hasn't developed in our favor, but we're actively driving our CN growth initiatives and are committed to continuing to build our growth pipeline.

Speaker Change: Cole's going to continue to benefit from the new production in Northeast BC.

Janet Drysdale: Let me wrap up. The railroad is running exceptionally well, and we are delivering for our customers. Controlling what we can, including the intensity with which we drive our growth agenda, especially our stand-specific growth opportunities.

Speaker Change: So the broader Market hasn't developed in our favor, but we're actively driving our CN growth initiatives and are committed to continuing to build our growth pipeline.

Speaker Change: Let me wrap up.

Ghislain Houle: Over to you. Merci beaucoup, Janet. Bon après-midi à tous. C'est plaisir de parler de nos résultats de l'hygiène... Turning to slide 13 for the quarter, we're reported EPS of $1.87, up 2% versus last year's adjusted EPS of $1.84. Revenues were down 1% year-over-year on 1% lower R2. The operating team took swift action to adjust the train package to a revolving volume mix, which allowed us to deliver an operating ratio of 61.7 percent, a 50 basis point improvement versus last year's adjusted operating ratio of 62.2. Moving to slide 14, let me break down the earnings drivers for the quarter.

Speaker Change: or controlling, what we can including the intensity, with which we drive our growth agenda, especially our scan specific growth opportunities,

Speaker Change: Just like over to you.

Speaker Change: Turning to slide 13 for the quarter, we reported EPS of a 187 up 2% versus last year's adjusted, EPS of a 184.

Speaker Change: Revenues were down 1% year-over-year on 1% lower rtms.

Speaker Change: The operating team took Swift action to adjust the train package to our evolving volume mix, which allowed us to deliver an operating ratio of 61.7%. A 50 basis, point Improvement, versus last year's adjusted operating ratio of 62.2%

Ghislain Houle: volumes were lower due to macro and tariff over We also had Unfavorable Mixed Shift and a Fuel Price Headwind of $0.04. On the plus side, we're very pleased with our solid cost takeout and same store pricing above rail inflation. Finally, we had a two cent tailwind on FX year over year. However, the average FX was $0.72 in Q2 versus the $0.70 assumed in our plan, so a headwind of $0.02. I will remind everyone that every penny of appreciation of the Canadian dollar to the U.S. dollar represents a headwind of five cents of EPS on an annualized basis.

Speaker Change: moving to slide 14. Let me break down the earnings drivers for the quarter.

Speaker Change: volumes were lowered due to macro and tariff overhang

Speaker Change: We also had on favorable mixed shift and the fuel price headwind of 4 cents.

Speaker Change: On the plus side, we're very pleased with our solid cost takeout and same store pricing above rail inflation.

Finally, we had a 2 cent Tailwind of FX year-over-year.

Speaker Change: Average FX was 72 cents in Q2 versus the 70 cents assumed in our plan. So a headwind of 2 cents.

Speaker Change: I will remind everyone that every penny of appreciation of the Canadian dollar to the US dollar, represents a headwind of 5 cents of eps on an annualized basis,

Ghislain Houle: On slide 15, let me provide you with more details on some of the operating expense categories in the quarter, which I'll speak to on an exchange-adjusted basis. Labour was essentially flat versus last year with general wage increases, mostly offset by lower average headcount resulting in increased productivity. Purchase services and material was also flat versus last year with higher maintenance and repair costs offset by lower outsourced services. Fuel expense decreased 25% versus the same period last year due to the elimination of the carbon tax in Canada and a 23% decrease in price per gallon. Other costs were up about $40 million or 25% versus last year, mostly driven by higher incident costs and higher software and support costs as we continue to transition our legacy technology infrastructure to the cloud.

Speaker Change: On slide, 15. Let me provide you with more details on some of the operating expense categories on the quarter, which I'll speak to on an exchange adjusted basis.

Speaker Change: Labor was essentially flat versus last year with General wage increases.

Speaker Change: Mostly offset by lower average. Headcount resulting in increased productivity.

Speaker Change: Purchase services and material was also flat versus last year with higher maintenance and repair costs offset by lower outsourced services.

Speaker Change: Fuel expense decreased 25% versus the same period last year, due to the elimination of the carbon tax in Canada, and the 23% decrease in price per gallon.

Speaker Change: Other costs were up about $40 million or 25% versus last year. Mostly driven by higher incident costs and higher software and support costs. As we continue to transition our Legacy technology infrastructure to the cloud.

Ghislain Houle: We generated over $1.5 billion of free cash flow through the end of June, up 5% versus the same period last year, mostly driven by lower capital expenditures. Leverage at the end of Q2 was 2.5 times and we will continue to execute on our current share buyback program which runs through February 3rd of next year. We continue to maintain a 2.5 times adjusted debt to adjusted debit dot target.

Speaker Change: We generated over 1.5 billion dollars of free cash flow through the end of June up, 5% versus the same period last year, mostly driven by lower Capital expenditures.

Speaker Change: Leverage at the end of Q2 was 2.5 times and we will continue to execute on our current share buyback program. Which runs through February 3rd of next year.

Speaker Change: We continue to maintain a 2.5 times. Adjusted debt to adjust the debit dot Target.

Ghislain Houle: Moving to slide 16, let me provide some visibility to 2025. The current macroeconomic environment is becoming increasingly volatile with ever-changing tariff rates and policy. The uncertainty and the direct tariff impact on our customers is putting pressure on volume. Even as we deliver on our CN-specific growth initiatives, we are revising our volume growth assumption in terms of RTMs to now be in the low single-digit range. We continue to assume WTI to be in the range of $0.60 to $0.70 per barrel, and now assume foreign exchange for the balance of year to be between $0.75 and $0.70 versus approximately $0.70 per year.

Speaker Change: Moving to slide 16, let me provide some visibility to 2025.

Speaker Change: The current macroeconomic environment is becoming increasingly, volatile with ever-changing tariff rates and policies.

The uncertainty and the direct RF impact on our customers is putting pressure on volumes.

Speaker Change: Even as we deliver on our CN specific growth initiatives. We are revising our volume growth assumption in terms of rtms to now be in the low single digit range.

Speaker Change: We continue to assume WTI to be in the range of 60 to 70 US dollar per barrel and now assume foreign exchange for the balance of year to be between 75 and 767577.

Ghislain Houle: Our effective tax rate continues to be in the range of $24,000 to $25,000. With a revised volume assumption and corresponding mixed impact, as well as a higher Canadian dollar assumption for the balance of year, we are revising our guidance to mid to high single digit EPS growth in 2025. We're also looking at reducing our capex envelope for the year by about $50 million and we continue to look for opportunities to further tighten capex for this year and next.

Speaker Change: Our effective tax rate continues to be in the range of 24 to 25%.

With a revised volume, assumption and corresponding mixed impact, as well as a higher Canadian dollar assumption for the balance of year. We are revising, our guidance to mid to high single-digit, EPS growth in 2025,

Ghislain Houle: At the same time, we are removing our 2024 to 2026 multi-year guidance, giving the short runway remainder. Tariff policies have had a meaningful impact on tariff on traffic volumes and mix. We are staying close to our customers and continue to manage our costs and resources tightly.

We're also looking at reducing our capex and low for the Year by about $50 million and we continue to look for opportunities to further, tighten capex for this year. And next year,

Speaker Change: At the same time, we're moving our 2024 to 2026 multi-year guidance. Giving the short Runway remaining,

Speaker Change: Tariff policies have had a meaningful impact on tariff on traffic, volumes and mix.

Ghislain Houle: In conclusion, let me reiterate a few points. The network continues to operate very well with strong operating and service management. We expect to have volume growth in the second half of the year, as we left labor disruptions from last year. We are tightly managing costs in this uncertain environment, controlling what we can control. We are pleased with our Q2 results and are well positioned to deliver on a revised guidance.

Speaker Change: We are staying close to our customers and continue to manage our costs and resources tightly.

In conclusion, let me reiterate a few points.

Speaker Change: The network continues to operate very well with strong operating and service metrics.

We expect to have volume growth in the second half of the year as we left labor disruptions from last year.

Speaker Change: We are tightly managing costs in this uncertain environment, controlling, what we can control.

Tracy Robinson: Let me pass it back to Tracy. Thanks, Ghislain.

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

Crystal: And um, Crystal we'll go to questions now.

Operator: As previously mentioned, we ask that you kindly limit yourselves to one question.

Cherilyn Radbourne: The first question comes from Cherilyn Radbourne with T.D. Cowan. Please go ahead. Thanks very much and good afternoon.

Speaker Change: Thank you. We will now begin the question and answer session as previously mentioned. We ask that you kindly limit yourselves to 1 question.

The first question comes from Cheryl Lynn radborne. With TD Cowen, please go ahead

Tracy Robinson: I wonder if you could comment on what progress has been made for covering US bound international intermodal traffic through Prince Rupert versus last year. And given that mergers seem to be the topic du jour, could you comment on whether you think two hypothetical transcontinental mergers would impact Prince Rupert's ability to attract that traffic in the future? Thanks, Cherilyn. Listen, I'm going to turn the first part of that question over, Janet, and Janet, I'll take the second So, Cherilyn, I would just remind everyone that in terms of overseas intermodal value candidate to the US, that actually represents less than 5% of our total revenue.

Thanks very much and good afternoon. Um, I wonder if you could comment on what progress has been made recovering us bound International Intermodal, traffic through Prince Rupert versus last year and, um, given that mergers seem to be the topic dour, uh, could you comment on whether you think, 2?

Speaker Change: Thanks Cheryl and listen, I'm going to turn the first part of that question over Janet and then Janet, I'll take the second half. Yeah.

So Cheryl.

Speaker Change: when I would just

Janet Drysdale: I would also say that when you look at our business from the West Coast, it's really destined to mainly Chicago, Memphis, and Detroit on CN. So it's not being interchanged further, so I think those are important mitigating considerations. In the context of how we're doing in getting that U.S. traffic back, I think we've seen good progress at Prince Rupert, a little bit tougher at Vancouver, and of course we have this stopwatch clicking around the tariff deadline of the Chinese tariffs on August 12th, and so there is some interest, I would say, of the overseas companies to make sure that they can get their products landed on U.S.

Speaker Change: In terms of overseas Intermodal via Canada to the US that actually represents less than 5% of our total revenues.

Tracy Robinson: soil before that deadline. So it's been a bit tougher, I would say, on the Vancouver side.

Tracy Robinson: And the merger question, I'll hand over to you, Tracy. Thanks, Janet. Listen, let me just say this, Sherilyn, you know, we recognize on the merger front that the chatter is out there, and we're obviously paying attention to that. You know, it would make no sense for us to speculate on the potential of mergers or even what, you know, other Class I intentions are. But I'll say this, you know, our view remains that, you know, there are similar benefits to be gained from commercial arrangements without the pretty disruptive effects of a major merger. And the hurdles, you know, to a merger, they're not insignificant.

Speaker Change: Um, I would also say that when you look at our business, um, from the West Coast, uh, it's really destined to mainly Chicago, Memphis and Detroit, um, on CN, so it's not being interchanged further. So I think those are, uh, important mitigating considerations in the context of how we're doing and getting that us traffic back. I think we've seen good progress at Prince Rupert. Um, a little bit tougher at Vancouver and of course, we have this, um, you know, stopwatch clicking around the, uh, tariff deadline of of, the Chinese tariffs in August 12th. And so there is some interest. I would say of the overseas companies to make sure that they can get their, uh, products landed on us soil, before that deadline. So, it's, it's been a bit tougher. I would say on the Vancouver side and the merger question, I'll hand over to you, Tracy. Thanks Janet. Uh, listen, let me just say this cherylyn, you know, we recognize on the merger front that the chatter is out there and and we're obviously paying attention.

Speaker Change: To that.

Tracy Robinson: You know, it would make no sense for us to speculate on the potential of mergers or even what, you know, other class 1 intentions are. But I'll say this, you know, our, our view remains that.

Tracy Robinson: The regulatory barriers are high and untested. But whether it is, you know, Rupert or other parts of our network, I mean, we would expect that any transaction would protect at least or enhance the competitive options that we would have, and we would certainly participate in that to the fullest extent. When it comes to our business and our network in that scenario, it's important to know, as I said in my comments, we've got a really strong origination network, more than 85 percent of our volume originates on our lines. And when it comes to destination, the majority of our freight moves, more than 65 percent of it, in fact, from an origin on CN to a destination on CN.

Speaker Change: You know, there are similar benefits to be gained from commercial Arrangements without the pretty disruptive effects of a major merger and the hurdles, you know, to emerge and they're not insignificant. The regulatory barriers are are high in untested, uh, but whether it is, um, you know, Rupert or other parts of our Network, I mean it it we would expect that any transaction would

Speaker Change: Protect at least or enhance the competitive options that we would have. And we would certainly participate in that, to the fullest extent, when it comes to our business, and our Network in that scenario,

Tracy Robinson: So this makes our business pretty resilient, and as Janet said, in the case of Rupert, the Rupert advantage would persist. That volume goes largely to Chicago, to the Midwest, and to other points on our line, and so the Rupert advantage would remain intact. So we're watching all this very closely, but I must say that our focus is on driving execution to our strategy on what we think is a pretty advantaged network. Thank you.

Speaker Change: It's important to know. As I said in my comments, we've got a really strong origination Network more than 85% of our volume originates on our, on our lines. And when it comes to destination, the majority of our freight, um, moves more than 65% of it, in fact, uh, from An Origin on CN to a destination on CN. So this makes our business pretty resilient and as Janet said in the case of Rupert, the Rupert Advantage would persist that volume goes largely to Chicago to the Midwest and to other points in our line and so the Rupert Advantage would would remain intact. So we're watching all this very closely but I'm going to say that our focus is on driving execution to our strategy on what we think is a pretty Advantage Network.

Walter Spracklin: Your next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead. Thanks very much, Operator. Good afternoon, everyone.

Speaker Change: Thank you. Thank you.

Your next question comes from the line of Walter. Spracklin with RBC Capital markets, please go ahead.

Tracy Robinson: So my question is on on the company specific volume growth initiatives that you outlined at Investor Day in 2023. Obviously, they were, they were quite significant. Now the reason for your guidance reduction, you pointed to, to tariff and trade. However, you did make them make the change with in your executive rank.

Tracy Robinson: Just wondering, is there any, has there been any challenges or any changes in your optimism around your company specific, your company specific initiatives as you look out the next few years? Not at all, Walter. I mean, I would tell you that those CN specific initiatives were all based on the advantages of our network, whether it is the intermodal volume, using Rupert, Vancouver, you know, Halifax, and, you know, a stronger and stronger Montreal, whether it is the energy, you know, how we're positioned in the northern part of Alberta, British Columbia, Saskatchewan on the energy front and the growing demand for that energy in global markets, whether it is the sand that is driven into that market in order to support the gas drilling, whether it is some of the canola crush, that has increased the yields and the production of canola.

Speaker Change: Thanks very much, operator. Good afternoon everyone. So, so my question is on, on the company specific, uh, volume growth initiatives that you outlined that, uh, investor day in, in 2023, they were, uh, they, they were quite significant. Now, the reason for your guidance reduction, you pointed to to tariffs and trade, however, you did make them make the change with, uh, in your executive rank. Just wondering. Is there any has there been any challenges or any changes in your optimism around your company specific? Uh your company specific initiatives as you look out the next few years.

Tracy Robinson: And that creates multiple moves into the crush facilities. And then with the meal going offshore, you know, whether it is some of what we're doing in the southern part of our network, to integrate the Iowa Northern, and to make sure that the crush facilities down there are as productive as they intend to be. So all of this remains intact. What's happening right now is, you know, the environment, given the tariff situation, is pretty uncertain, and it's pretty volatile. And so we are seeing the direct impact in some lines, some sectors, some of our lines of business.

Tracy Robinson: But the fundamentals of the growth, given where our network is, and what's happening, remained intact. This is just going to be a timing issue. We know that, you know, the tariff deals will ultimately done, or at least we believe that that'll be the case, and that we'll see more of the normal kind of flows emerging, as we said, maybe even some new ones. Certainly in Canada, there's lots of effort around kind of new trade flows. And we think that that could be a great opportunity for us as well. So it's all intact. And we're ready.

Speaker Change: The sand that is driven into that market in order to support the gas drilling, whether it is, uh, some of the, uh, canola Crush that has increased, the yields and the production of canola, uh, and that creates multiple moves into the crush facilities and then with the meal going offshore, uh, you know, whether it is, uh, some of what we're doing in the southern part of our Network, to integrate the Iowa, and Northern, uh, and, uh, to make sure that the crush facilities down there are as productive as they intend to be. Uh, so all of this remains intact, what's happening right now is uh, you know, the environment. Given the Tariff situation is pretty uncertain, and it's pretty volatile. And so we are seeing the direct impact in some lines, some sectors, some of our lines of business but the fundamentals of the growth given where our network is, and what's happening uh remained intact. This is just going to be a timing issue. We know that, you know the the Tariff deals will ultimately done. Or at least we believe that that'll be the case and that we'll see more of

Tracy Robinson: Thank you.

The normal kind of flows emergent as we said maybe even some new ones. Certainly in Canada, there's lots of effort around uh kind of new uh trade flows. And uh we think that that's could be a great opportunity for us as well. So it's all intact uh and we're ready.

Chris Wetherbee: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Please go ahead. Hey, thanks. Good afternoon. I wanted to ask about the RTM guide, particularly for the second half of the year. So it looks like 3Q's off to, you know, start this a little bit slower with volume down, kind of mid-high single digits on the RTM side. So I get the easier comps here, but what do we need to see change in the next few weeks to sort of get that moving in the right direction? And does it make sense to leave a little bit more cushion, I guess, as you think about the RTM outcome relative to the EPS outcome, if you're sort of towards the flatter end, is that what we're assuming sort of the mid-single digit earnings growth could come in?

Tracy Robinson: Thank you, Tracy.

Speaker Change: Your next question comes from the line of Chris Weatherbee with Wells. Fargo. Please go ahead.

Chris Wetherbee: Just want to get a sense of how to think about that RTM versus EPS relationship.

Derek Taylor: Yeah, why don't you take that one? Yeah, thanks for the question, Chris. So I would say in the context of petroleum and chemicals in particular, we've got some of those lingering refinery outages. Now, those are going to start to come back. So we do expect the volumes to accelerate as we move through the quarter. We've seen good strength in domestic intermodal on the overseas side, a little bit of weakness, but we will see this improve. And certainly the grain crop is going to come in the September timeframe. So, yeah, we will see the volumes increase.

Chris: Yeah. Hey thanks. Good afternoon. Um, wanted to ask about the RTM guide particularly for the second half of the year. So looks like, um, 3 cues off to, you know, start this a little bit slower with volume down kind of mid High single digits on the RTM side. So I get the easier comps here. But what do we need to see change in the next few weeks to sort of get that moving in the right direction and you know, does it make sense to leave a little bit more cushion? And I guess as you think about the RTM outcome relative to the EPS outcome. If you're sort of towards the flatter end, is that what we're assuming sort of the the mid single digit earnings growth could come in, just want to get a sense of how to think about that. RTM versus EPS relationship John, why don't you take that 1? Yeah. Uh thanks for the question, Chris. So I would say, um, in the context of petroleum and chemicals in particular, um, we've got some of those lingering Refinery outages. Now those are going to start to come back. So, uh, we do expect the volumes to accelerate. As we move through the quarter, we've seen good strength and domestic Intermodal, um, on the overseas side,

Tracy Robinson: And I would add to that as well, if you think about, you know, as you transition that over to the earnings outlook, right, we're not standing still in the midst of changes in volumes and in mix as well. So we have a very kind of, as I called it, a progressive and proactive effort underway to make sure that our costs are adjusted as our volumes and our mix adjust. And we've had, we've got great traction on that, 50 basis points, improvement in margins, despite some of the headwinds in Q2. And, you know, we are intensifying that as we go.

Tracy Robinson: So that's an important part of this equation.

Speaker Change: A little bit of weakness. Um, but but we will see this Improvement. Certainly, the grain crop is going to come, uh, you know, in the September time frame. Um, so yeah, we we will, we will see the volumes increase and I would add to that as well. If you think about, um, you know, as you transition that, uh, over to the the, um, the earnings Outlook, right? We're not standing still in the midst of changes in volumes and in mix as well. So we have a very kind of, as I called it a progressive, uh, and proactive effort underway to make sure that our costs are adjusted, uh, as our volumes and our mix adjusts. And we've had, um, we've got great traction on that 50 basis points, uh, Improvement in margins, despite some of the headwinds in Q2. And, uh, you know, we are intensifying that as we go. So, that's an important part of this equation.

Brian Ossenbeck: Your next question comes from the line of Brian Ossenbeck with JP Morgan. Please go ahead. Yeah, hey, good afternoon.

Speaker Change: Your next question comes from the line of Brian. Austin Beck with JP Morgan. Please go ahead.

Tracy Robinson: Maybe Tracy, if you can elaborate a little bit more on those proactive changes with NICS, because I think as I understand Janet's comments correctly, so the forest products, refined products, renewables, like those things don't seem like they're going to reverse all that quickly. So, you know, how far along are you on this path? What are sort of the leverage you can pull? Is it all labor? Maybe you can elaborate a little bit more on that. Thank you.

Tracy Robinson: Yeah, I'll start on that. And then I'm going to turn it over to Pat to talk about the resourcing. But what happened in Q2 was, you know, as you heard today, we had a great bulk program. Our bulk volumes were very, very strong, and that's very good business. We love that business. And, you know, our network is built well for that business. Our share is continuing to increase, which is very good. That what we had, what we saw on the offset is a reduction in forest products, given where, particularly in lumber. Whereas we saw the housing starts kind of continue to go down, there are some tariff actions that have been long standing in lumber, but we're seeing that intensify as well.

Speaker Change: Yeah. Hey, good afternoon. Um, maybe Tracy, if you can, elaborate a little bit more on those proactive changes with mix because I think as if I understand Janet's comments correctly, uh, some of the force products, refined products Renewables, like those things don't seem like they're going to reverse all that quickly. So, you know, how far along are you on this path. What are sort of the leverage you can pull as at all Labor? Uh, maybe you can elaborate a little bit more on that. Thank you. Yeah. I'll I'll start on that and then I'm going to turn it over to Pat to talk about the resourcing. Um but what happened?

Tracy Robinson: We saw the impact on other merchandise sections, like the steel and the aluminum, some of the metals we did, we were able to mitigate some of that in the case of those two sectors. That's likely to continue until we see some sort of an agreement. It's difficult to know where that's going to go. We thought we were on a good track. We had 25% tariffs on steel and aluminum. Instead of going down, those went up to 50%. That's when we saw the impact. I don't know where these tariffs are going to go, but we are anticipating that that's not going to be, you know, it's not going to be resolved immediately.

Tracy Robinson: The relative weakness.

Patrick Whitehead: So, Pat, can I ask you to spend a few minutes on how we're responding to that? So I would say, first off, we've been very successful with the cost takeout initiatives, and we'll continue to manage resources very tightly. As I look at how we snap back, we are in a great position to meet a quick rebound in volumes. We have 740 T&E employees furloughed. We have mechanical employees furloughed. And I've talked about the storage efforts of locomotive. The fleet is running better than it ever has. We have locomotives stored that we can quickly put back in service.

Speaker Change: I don't know where these tariffs are going to go, but we are anticipating, uh, that that's not going to be, you know, it's not going to be resolved immediately. Uh, and we think about what Janet said on more the energy sector, the petroleum and chemicals. Those were more 1-time issues, uh, you know, the Tariff impact, we're not seeing it on those. That's going to come back through the third quarter, and we expect it to be strong in the fourth. So, the mix equation is not going to be the same. It'll, it'll mitigate it. Um, as we move into the, the tail end of the year a little bit. Um, but we are going to have the weakness that we expect until there's some arrangements or deals made in the forest products, uh, and steel and aluminum the relative weakness. So, Pat, can I ask you to spend a few minutes on how we're responding to that?

Pat: So I would say, first of first off, we've been very successful with the cost takeout initiatives, and we'll continue to manage resources, very tightly as I look at how we snap back now, we are in a great position. Uh, to meet a quick Rebound in volumes. We have 740, uh, tnd employees. Furled, we have mechanical employees, furled. And I've talked about the storage efforts of locomotive. The fleet is running better than it ever has.

Patrick Whitehead: So, as I look at it, as volume would ramp up, these folks that we recall, they only take a few weeks for refresher training versus someone that we would hire taking nine months. Transcripts provided by Transcription Outsourcing, LLC. And what you heard Derek say as well around how we've responded in train starts relative to volumes, which has been very impressive in what these guys have done.

Pat: And we have locomotives uh store that we can quickly put back in service. So as I look at it as as volume would ramp up, uh, these folks that we recall, they only take a few weeks for refresher training versus someone that we would hire taking 9 months to, to be fully trained. So we are, we are well positioned to reactive volumes.

Patrick Whitehead: So I think, you know, our job is, there's lots going on out there that we can't control. Our job is to manage what we can control. And I'm really pleased with the way this team is doing that.

Speaker Change: Uh, turned down as we have. We're also, uh, positioned. Well to make a quick rebound, and once you heard Derek say as well, around how we've responded in train starts relative to volumes, which is been um, very impressive in in what these guys have done. So I think, you know, our job is um there's lots of outgoing on out there that we can't control. Our job is to manage what we can control and I'm really pleased with the way this team is doing that.

Fadi Chamoun: Your next question comes from the line of Fadi Chamoun with BMO Capital Markets. Please go ahead. Thank you.

Speaker Change: Your next question comes from the line of fatty chaman with BMO Capital markets, please go ahead.

Tracy Robinson: I want to follow up on an earlier question about the Transcon merger potentially here, and I have a question on CapEx, but Is it fair to assume CN is an observer in this kind of framework that we're kind of potentially looking at, and ultimately you will look to defend your competitive access in an STD process if mergers were to be announced in the future? Is that kind of a fair framework to think about?

fatty chaman: Thank you. Um,

Speaker Change: I want to follow up on earlier, question about the transcon merger potentially here and and I have a question on capex, but if it's fair to assume CN,

Ghislain Houle: And really, my question is on, I mean, volume have been relatively flat for the last five, six years and. Your gross CapEx envelope have remained relatively elevated and we've seen kind of degradation and cash conversion obviously as a result of that. Is this Is this kind of more longer term thinking on your part? You're investing still at a very high level. Is there an opportunity here for tightening, you know, that, that, that spend and, you know, ultimately, you know, given just the growth environment is a little bit more muted.

Speaker Change: Uh, is an observer in this uh, kind of framework that will kind of potentially looking at. And ultimately, you will look to defend your competitive, access in a stb process, if Marchers were to be announced in the future. Is that kind of the fair?

Speaker Change: Framework to think about. And and really my question is on

I mean, volume have been a lot of leave flat for the last 5, 6 years and

Your gross capex envelope have remained relatively elevated and we've seen kind of degradation and cash conversion. Obviously, as a result of that, is this,

Speaker Change: Is this uh kind of more longer term thinking on your part. You're investing uh still at a very high level. Is there an opportunity here for

Ghislain Houle: So, Fadi, let me say this, you heard Jez say that we're pulling $50 million out of a budget that was $100 million less than it was last year. So, we are watching CAPEX pretty closely. A couple of levers on that. Pat and his team are doing a lot of work to make sure that the maintenance CAPEX that we put into this system, well, all CAPEX that we put into this system is done at higher levels of productivity as every month goes on, and we're seeing the traction in that. So, that's going to be a benefit for us.

Speaker Change: Tightening, you know, that, that, uh, that spend and, and, you know, ultimately, uh, you know, given just the growth environment is a little bit more muted.

Tracy Robinson: We'll continue to invest for growth as we have line of sight and certainty on that growth. And so, we are doing some of that in the Western Corridor where we've got line of sight to the energy exports and to the frac sand improvements and to some of the other specific growth. Most of our growth capital right now is focused on that Western part of the network. And so, we look at this constantly. We will always keep our network up to the level that we need to to make sure that it runs safely and it operates efficiently.

Speaker Change: So very let me, let me say this. Uh you heard just say that um we're pointing 50 million uh out of a budget that was a hundred million dollars less than it was last year. So we are watching capex, Pretty closely couple of levers on that. Uh Pat and his team are doing a lot of work to make sure that the maintenance capex, that we put into this system or all capex. That we put into this system is done, uh, at higher levels of productivity, is every month goes on, and we're seeing the traction in that. So that's going to be a benefit for us. We'll continue to invest for growth as we have line of sight, uh, and certainty on that growth. And so, we are doing some of that in the western quarter where we've got line of sight to the energy exports and to into um, uh, the fra and improvements and to some of the other specific growth, most of our growth Capital right now is focused on

Tracy Robinson: We will build for growth only as we have line of sight. And in all cases, to the first part of your question, we will rigorously defend our competitive access, whether it's related to mergers or anything else. And I hope I covered all that you asked for there, Fadi.

Speaker Change: Uh that western part of the network and so we we're look at this constantly. We um will always keep our Network up to the level that we need to to make sure that it runs safely and it operates efficiently. Uh we will build for growth only as we have line of sight and in all cases to the first part of your question. We will rigorously defend our competitive assess whether it's related to mergers or anything else uh and um I hope I covered all that you asked for their fatty

David Vernon: Your next question comes from the line of David Vernon with Bernstein. Please go ahead. Hey, good afternoon, and thanks for taking the question. So I guess, Tracy and Tim, as you're looking out from 25, baking in some more tariff headwinds in the back half of the year, I'm assuming those are probably going to bake into the first half of the year.

Speaker Change: Yeah, next question comes from the line of David Vernon with Bernstein. Please go ahead.

Tracy Robinson: I'm just wondering, from a timing perspective, as you go across the CN initiatives that you've got out there, like how confident are you that you can get some some volume growth back into the business in 26? Or do we think we're still going to be kind of slugging through this very uncertain environment again next year?

Tracy Robinson: Thanks.

Tracy Robinson: I was hoping maybe you could tell me when the tariffs were going to be settled in the trade deals will be done. I you know, we don't know what we've learned is that I'm surprised that where we I'm surprised at where we are now. And I can't I'm not the first someone who can predict exactly what this what is going to happen here. What I can tell you that we are staying very close to our customers. And there are cases where we can help them, you know, get into different markets and mitigate the impact. There are some cases where customers are very proactively looking at diversifying into other markets, and we think that we can be helpful on that.

Tracy Robinson: But as long as we are in the kind of uncertainty in the tariff environment that we are, I think that you're going to see enough uncertainty in the marketplace, you know, that we may see an impact on that.

Tracy Robinson: The fundamentals of the growth strategy on this network remained intact and are very strong. And if you think about, you know, some of what we've talked about on ag and energy and some of the others, those persist in any regard. Okay, I am.

Perspective, as you go across the CN initiatives that you've got out there. Like, how, how confident are you that, that you can get some, some volume growth back into the business in 26, or do we think we're still going to be kind of slugging through this very uncertain environment again. Next year? Thanks. I, I was hoping, maybe you could tell me, uh, when the tariffs were going to be settled in the trade deals will be done. I you know, we don't know what we've learned is that um I'm surprised at where we I'm surprised at where we are now and I can't, I'm not the the first someone who can prove it exactly what this, what it's going to happen here. What I can tell you that we are staying very close to our customers. And there are cases where we can help them, you know, get into different markets and mitigate the impact. There are some cases where, customers are very proactively, looking at diversifying into other markets and we think that we can be helpful on that. But as long as we are in the kind of uncertainty in the Tariff environment, uh, that we are. I think that you're going to see, uh, enough uncertainty in the marketplace, uh, you know, that we may see an impact on that.

Speaker Change: the fundamentals of the growth strategy on this network remained intact in a very strong and if you think about, you know, some of what we've talked about on an egg and energy and some of the others, uh, those persist in any regard,

Kenneth Hoexter: Your next question comes from the line of Ken Hoexter with Bank of America. Please go ahead.

Speaker Change: okay, I

your next question comes from the line of Ken hexter with Bank of America. Please go ahead.

Ghislain Houle: Yeah, you know, normally, Ken, at this time of the year, we'd be narrowing our guidance, but there are a number of factors at play here. You know, whether it's mix, it's volume, it's currency, it's fuel. So all of those play a role in what would move us through that guidance range. And we thought through, you know, the volatility in some of those, but just do you want to make some comments on that? Yeah, some.

Ghislain Houle: Yeah, thanks, Tracy. Yeah, some of these factors are very volatile, Ken, as you know. So we started the year thinking that FX, for example, was at 70 cents, and it's now at 73. And as I said, in my remarks, every one penny of appreciation of Canadian dollar to US is five cents on EPS on an annualized basis. So I mean, we've assumed now the range would be 70 to 75 cents FX for the balance of year. We'll see. But as you know, if the Canadian dollar continues to appreciate, then that's going to be a headwind.

Ken: Hey, uh, great. Good afternoon. Um, thoughts on the range of of the mid, uh, to Upper single digit in, in terms of eps growth, but maybe talk about what gets you to top or bottom end. I know Janet ran over a few of the, the revenues that can snap back, but is it purely revenue? Is it cost? Do we see more margin gains and within that your your volumes are down slightly in the first half down. As you mentioned 6% 3 Q to date the guides low single digit growth. Maybe just talk about the confidence of that relative to that EPS growth target range. Yeah, you know, normally can at this time of the year, we'd be narrowing our guidance. But there are a number of factors that play here. Uh, you know, whether it's mixed, its volume, it's currency, uh, its fuel. So, all of those play a role in in what would move us through that guidance range? And we thought through, you know, the volatility in some of those, which is do you want to make some comments on, um, on that? Yeah. Some yeah.

Ken: Tracy. Yeah. Some some of these factors are very volatile and as you know so we started the year thinking that FX for example was a 70 cents and it's now at 73. And as I said in my remarks, every 1 Penny of appreciation of Canadian dollar to US is 5 cents on EPS on an annualized basis. So I mean we've assumed now the the range would be 70 to 75 cents uh FX for the balance.

Ghislain Houle: And if it depreciates, then it's going to be a tailwind. A little bit of the same on fuel, OHD and WTI. We're assuming right now that OHD and WTI will stay for the balance of year about at the current spot rates, because we don't know. And that's very volatile.

Ghislain Houle: So and then, of course, the mix is something that hit us quite a bit this year, as Janet mentioned. And those are all the things that we can't control. But what we can control is how we respond to it. And that is our key focus as we go through a period of uncertainty like this.

Konark Gupta: Thank you.

Of year, we'll see. But as you know if if the Canadian dollar continues to appreciate then that's going to be a headwind. Um and and if it depreciates, then it's going to be a Tailwind, a little bit of the same on fuel. Uh, oh, HD and and WTI. Uh, we're assuming right now that OG and WTI will stay for the balance of year about at the current spot rates because we don't know. Um, and that's very volatile. So, and then, of course, the mix is something that hit us, uh, quite a bit this year, uh, as Janet mentioned and those are all the things that we can't control, but what we can control is how we respond to it and and uh that is our key Focus as we go through a period of uncertainty like this.

Konark Gupta: Your next question comes from a line of Konark Gupta with Scotiabank. Please go ahead. Thanks. Good afternoon. Just on the domestic and demodal side, I think you guys talked about the market share gains there. It seems like volumes are running pretty good. Can you talk about where the gains are coming from and what's driving it?

Thank you. Thank you.

Speaker Change: Your next question comes from the line of Conor Gupta with Scotia Bank. Please go ahead.

Janet Drysdale: And just a quick clarification question on the carbon tax elimination, just the Q2 operating ratio, did it benefit from the elimination or was it So I can start off with the first question on the domestic intermodal. The answer is pretty straightforward, Konark. It's a really good service. And so we've been able to, with the help of the operating team, just really demonstrate to customers that we have a fluid network, a fast network when it needs to be for the case of domestic intermodal. And we've gained some share there.

Thanks, good afternoon. Um, just on the domestic and the modal side. I think you guys talked about the market share gains there. It seems like volumes are running pretty good. Can you talk about where the gains are coming from? And what's driving it and just a quick clarification question on the carbon tax elimination just uh the Q2 operating ratio did it benefit from the elimination or or was it neutral?

Ghislain Houle: On the other piece, Ghislain, I'll pass it to you. Yeah, Konark, on the carbon tax elimination, it is a complete flow through to customers, as Janet pointed out. Now, maybe it's tough to put your finger on it because it's a bit masked by the other factors that that you saw in the earnings drivers that we demonstrated in Q2, including the mix. So it's a bit masked by those factors. OK, thank you.

Speaker Change: So I can, uh, start off with the first question on the domestic Intermodal. The answer is, uh, pretty straightforward. Conor, it's a really good service. And so we've been able to, with the the help of the operating team, uh, just really demonstrate to customers that we have a fluid Network, a fast Network when it needs to be for the case of domestic Intermodal and we've gained some share their on the other piece just lamp pass it to you. Yeah. Conac. On the carbon tax elimination.

Speaker Change: Um, it is a complete flow through to customers as Janet pointed out. Now, maybe it's stuff to put your finger on it because it's a bit masked by the other factors that that you saw in the earnings um drivers that we demonstrated in Q2 including the mix. So it's the bit it's a bit masked by by, by those factors.

Speaker Change: Okay, thank you.

Ravi Shanker: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead. Great. Thanks, everyone. Janet, great to have you back on the call. You said in your prepared remarks that the customers you're talking to say that they're rethinking their supply chain.

Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Janet Drysdale: Can you talk about what changes they're talking about, both in the short term as well as the medium to long term? Yes, certainly, I think the metals and minerals segment is a good example of how they've been able to adapt in the short term. And, you know, you may recall about a third of our business is trans-border, two-thirds going south, one-third coming north. That's the segment most impacted, I would say, by the trade and tariff situation. And so, we have a strong franchise independently in both Canada and the US. And so, in the case of some of that metals and minerals, we've been able to do alternative supply chains intra-Canada intra-US.

Speaker Change: Your prepared remarks that your customers are talking to uh, see that they're rethinking their supply chain. Can you talk about what changes? They're talking about both in the short term, as well as the medium long term.

Janet Drysdale: We've been able to capitalize on some different automotive lanes. These are the short term things.

Speaker Change: Yeah, certainly I think the medals and minerals segment is a good example of how they've been able to adapt in the short term and you know, you may recall about a third of our businesses, transborder 2/3, going, south 1/3 coming north. Um, that's the, the segment most impacted I would say by the trade and tariff situation. And so we have a strong franchise independently in both Canada and the US. And so, in the case of some of that metals and minerals, we've been able to do alternative Supply chains intra Canada intra us. We've been able to capitalize on some different, um, Automotive Lanes.

Janet Drysdale: What the customers are starting to talk to us about now is what can we do on a longer term basis to reduce their exposure to the US market and to think about how to get more goods offshore. So, that's something that we're certainly focused on. I would say, frankly, both with our supply chain.

Speaker Change: Um, these are the short term things. Uh, with the customers are starting to talk to us about. Now, is what can we do on a longer term basis to reduce, um, their exposure to the US market and to think about how to get more Goods offshore. So, that's something that we're certain focused on. Um, I would say, frankly, both with our customers, as well as with, uh, uh, with the Canadian government and uh, and other stakeholders along the supply chain.

Scott Group: Your next question comes from the line of Scott Group with Wolf Research. Please go ahead. Hey, thanks. Afternoon. Nice to hear you on the call, Janet. I'm not sure if this is for you or Tracy. I know a few people have already asked about volume, but just big picture, like volume RTM are down in Q2, down to start Q3. Every other rail is positive. I just don't know that I recall many other times with one rail as an outlier without there being some sort of like operational issue. And that's obviously not the case right now.

Speaker Change: Your next question comes from the line of Scott, group with wolf research, please go ahead.

Tracy Robinson: So, I don't know, do you have just an explanation? For the relative volume trend versus others?

Tracy Robinson: And then maybe just separately, Tracy, I know last quarter you were talking about a path to 200 base points of margin improvement for the year. What's embedded in the guide now, if you can? Thank you. Thanks, Scott.

Tracy Robinson: I can start off a little bit on the volume side, and it's always very hard to compare, I think, across the rails, and we've got different books of business, and we also have different year-over-year comparables. So sometimes, you know, somebody who's up this year is because they had a weaker year last year. I would say the two segments on the U.S. side that have been particularly strong is intramodal, as well as the thermal coal, and I think that's kind of why you see some of their volumes coming through. I would say what was a little bit unusual for us in the quarter was the amount of impacts that we had in that petroleum and chemicals segment, and really most of those are kind of transient issues, so they're going to resolve themselves as we kind of work our way through Q3.

Speaker Change: Hey thanks. Uh afternoon, nice to hear you on the call Janet. Um, I'm not sure if this is for you or or Tracy. I know a few people have already asked about volume but just big picture like volume, RTM, or down in, Q2 down to start Q3 every other rails, positive, I just don't know that. I recall many other times with 1, rail is an outlier without their being. Some sort of like operational issue and that's obviously not the case right now. So I don't know. Do you have a just an explanation for the relative volume Trend versus others? And then maybe just separately Trace in last quarter, you were talking about a path to 200 base points of margin Improvement for the year. What what's embedded in the guide? Now, if you can thank you,

Um, thanks Scott. I I can start off a little bit on the volume side and it, it's always very hard to compare. I think across the rails, and we've got different books of business, and we also have different year-over-year, comparables. So, sometimes, uh, you know, somebody who's up this year is because they had a weaker year last year. I would say the 2 segments on the US side that have been particularly strong as intramodal, uh, as well as a thermal coal. And I think that's kind of why, you see some of their volumes coming through. I would say what was a little bit unusual for us in the quarter, was the amount of impacts that we had in that petroleum and chemical segment. Um, and really most

Tracy Robinson: Now, as you've seen, it's not, you know, in the first couple weeks of Q3, it's going to take a little bit of time, but we do feel those are going to come back.

Speaker Change: Of those are um, kind of transient issues. So they're going to resolve themselves as we kind of work our way through Q3. Now do you as you've seen it's not you know in the first couple weeks of Q3, it's going to take a little bit of time but uh we we do feel. Those are going to come back.

Tracy Robinson: And as it relates to your question on, you know, the operating margin improvement of the year, you know, we are going to expect, we do expect margin improvement in 2025. This hasn't changed. You've seen some improvement in Q1 and Q2. The easier compares, as you know, are Q3 and Q4. We've outlined the headwinds, you know, particularly the traffic mix. So hitting 200 basis points may be a little bit more of a challenge than it was before, but it's not completely off the table. As always, it depends on volume and mix. But what is going to support is the velocity with which we are kind of responding as we see changes in mix and volume out on the property and the extent to which we can make sure that our resources match kind of what we're trying to move.

Speaker Change: And um, as it relates to your question on, uh, you know, the operating margin Improvement of the year. Uh you know we are going to expect. We do expect margin Improvement in 2025. This hasn't changed. Uh, you've seen some improvement in q1 and Q2 the easier Compares. As you know, our Q3 and Q4 uh We've outlined the headwinds you know, particularly the traffic mix, so hitting 200 basis points. May be a little bit more of a challenge than it was before, but it's not completely off the table. As always, it depends on volume and mix but what is going to support it is, um, the velocity with which we are kind of responding as we see changes in in mixing, volume out in the property and, uh, the extent to which we can make sure that our resources match kind of what we're trying to move.

David Zazula: Your next question comes from the line of David Zazula with Barclays. Please go ahead. Hey, thanks for squeezing me in.

Speaker Change: Your next question comes from the line of David zazula with Barkley's. Please go ahead.

Tracy Robinson: Janet, as you're coming in for the intro, I guess, what are your kind of priorities? What do you Yeah, I think David, I think the key focus is to really try and get a little more agility built into the commercial side of the business. It's a brave new market out there in terms of the way things are moving. We do see more opportunities on the spot market as supply chains kind of evolve in relation to trade and tariffs. So I think the focus is really around the intensity of execution around those spot markets, our ability to drive that growth pipeline that's more specific to CN, and to be able to adapt as these markets evolve potentially, including to offshore.

David Zazula: Hey, thanks for squeezing me in here.

Speaker Change: Janet is you're coming in, uh, for the interim. I guess. What are your kind of priorities? What do you see as key opportunities for your time in the state regionally or by product Focus?

Janet Drysdale: So intensity of execution, I guess, is the way I would frame it up.

Yeah, I think David, I think the key focus is to really try and get a little more agility uh built into uh the commercial side of the business. It's it's a brave New Market out there in terms of the way things are moving. We do see more opportunities on the spot Market as Supply chains, kind of evolved in relation to trade and tariffs. So I think the focus, uh, is really around. Um, you know, the intensity of execution uh, around those spot markets, our ability to, uh, you know, drive that growth pipeline, that's more specific to CN. Um, and to be able to adapt as these markets evolve potentially, uh, including to Offshore. So intensity of execution, I guess is the way I would Frame It Up.

Steven Hansen: Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.

Speaker Change: Your next question comes from the line of Steve Hansen with Raymond James, please go ahead.

Tracy Robinson: Listen, you know, I won't comment on any specific change, but what I will say is that it's my job to make sure that we've got the right team across commercial across the organization to execute on our strategy. And I take that very, very seriously. And I very much appreciate Janet stepping into this position. So let me just leave it there. We've got the right team and we're moving forward.

Yeah. Good afternoon everyone. Thanks for the time. Uh, Tracy. I think this question is for you. Can you maybe just perhaps speak to the recent change in the, the 2 commercial officer position. Certainly applaud Janet for stepping in here, I'm pretty sure notice but it's hard not to observe, uh, I'd say the lack of continuity in the sea Suite, over the last 5 years, do you think you're getting closer to the team that you need? Do you think that a continuity is an issue? Just trying to get a sense for, you know, why the change uh, in the current environment next?

So listen um you know I won't comment on any specific change. Uh see but what I will say is that it's my job to make sure that we've got the right team across commercial across the organization uh to execute on our strategy. And I take that very very seriously and um, I very much appreciate Jen at stepping into this position. So let me just leave it there. Um, got the right team and we're moving forward.

Stephanie Moore: Your next question comes from the line of Stephanie Moore with Jeffreys. Please go ahead. Hi, good afternoon. Thank you. You know, maybe following up on a previous question in terms of the margin improvement or OR improvement for the year, could you talk a little bit about just cadence as we think about the back half of that OR? I think there's a lot of moving pieces here, admittedly, so I'd love to get your thoughts on how we should think about cadence in the back half in conjunction with your outlook for still see improvement for 2025. Thank you.

Speaker Change: Your next question comes from the line of Stephanie Moore with Jeffrey. Please go ahead.

Tracy Robinson: I think the cadence is difficult to say, and it's going to match kind of the volume. And, you know, the thing is, you heard Derek talk about and Pat, the fact that we can, we're positioning ourselves to move as quickly as possible as we see changes in mix and volume on the downside. You know, they've demonstrated, you know, a level of acuity around getting that done quickly. It is impossible to match it on the downside dollar for dollar, given the timelines of, you know, getting locomotives out of the system or getting, you know, kind of furloughs in place.

Tracy Robinson: But what they also have an eye on, and which we need to be equally nimble at, is responding on the upside. And so we're staying very close to the folks that have been furloughed. We want them to be able to come back quickly. Pat is making sure that the locomotive fleet is ready to go. So it's really going to depend on how and when the volumes show up and where they show up from a mixed perspective. I don't think we could put a cadence on kind of the margin improvement over the second half.

Hi, good afternoon, thank you. You know, maybe following up on a, a previous question in terms of the, the margin Improvement or, oh, Improvement for the year, could you talk a little bit about just Cadence as we think about the back half of that? Oh, and there's a lot of moving pieces here. Admittedly. So we would love to get your thoughts on how we should think about Cadence in the back half. Um, in conjunction with your, your outlook for to still see Improvement for 2025, thank you. Yeah, I think the Cadence of difficult to say and it's going to match kind of the volume. And, you know, the thing is, you heard Derek talk about and Pat the fact that we can, we're positioning ourselves to move as quickly as possible as we see changes in mixing volume on the downside. Uh, you know, they've demonstrated, uh, you know, a level of Acuity around getting that done quickly. Uh, it is impossible to match it on the downside dollar for dollar, uh, given the timelines of of, you know, getting locomotives, uh, out of the system or getting, um, you know, kind of Furs in place. Uh, but what they also have an eye on and, which we need to be equally Nimble at

Speaker Change: Is responding on the upside. And so, we're staying very close to the folks that have been furloughed. We want them to be able to come back quickly. Pat is making sure that the locomotive Fleet is ready to go. So it's really going to depend on how, and when the volume show up and, and where they show up from a, a mixed perspective, I don't think we could put a Cadence on, uh, kind of the margin improvement over the the second half.

Tom Waterwitz: Your next question comes from the line of Tom Waterwitz with UBS. Please go ahead. Uh, yeah, good afternoon.

Tom wits: Your next question comes from the line of Tom wits with UBS. Please go ahead.

Tracy Robinson: Um, I guess Listen, I'm not going to make many comments on, on, you know, the team issue. Our, you know, concerns and what the headwinds are in this environment right now are related to tariffs, and related to the impact of those tariffs on certain sectors and the impact of all of that on kind of the questions around the macroeconomic. This is not new. The economy will recover. We've been here before, we will get, I think, ultimately certainty in the tariff and trade deal front. And as we see that, then, you know, our strategy is the right one for our network and, and our diversified book of business.

Tom wits: Uh, yeah, good afternoon. Um, I I guess.

Going back to the executive change, I know, uh, Tracy didn't want to offer too much perspective on that. But was there something related to that? Where you'd say like, you know, there was kind of execution of the strategy that wasn't right, or maybe we didn't quite have the strategy, right? Or is it just not related to that. And and then, I guess, uh, on the inner modal topic is is that it doesn't sound like it's Tara related in terms of softening and second half, is that more kind of just demand and macro related? So anyways, any thoughts on those 2? Appreciate it. Thank you.

Tracy Robinson: We strongly believe in it, we need to move urgently to execute it, as Janet has said. And when I look at the construct of this team at every part of the organization, it's with a long term view, with how we're building the capabilities and the muscle to be able to do this, not just now, but into the future. And from an intermodal volume perspective, you know, I'll let Janet kind of chime in on this. But it is tariff related. Some of what we've got, we've constructed a great portfolio of international intermodal customers, we like it a lot.

Speaker Change: Listen, I'm not going to make many comments on on, uh, you know, the, the team issue, our uh, you know, concerns and what the headwinds are in this environment right now or related to tariffs and related to the impact of those tariffs on certain sectors and the impact of all of that on kind of, um, the questions around the macroeconomic. This is not new. Uh, the economy will recover, we've been here before we will get, I think ultimately certainty in the in the Tariff and trade deal front. And as we see that, then you know, our strategy is the right 1 for our Network and and uh, our Diversified book of business. Uh, we strongly believe in it, we need to move urgently to execute it as Janet has said. And when I look at the

Janet Drysdale: You know, they're driving volume through Rupert, even at a time when most of the shipping lines are racing to get onto US soil as quickly as possible because of timeline around tariffs. And so this is a tariff related issue. Underneath it, what we can't see for sure, is really the strength of consumer sentiment and consumer demand. And I think that will unfold over time.

Janet Drysdale: Janet, did you have anything else? of the goods that we're moving. It's not just China. It's also Korea. It's also Japan. There are meaningful tariffs on those countries as well. And they're on higher value goods that may be sensitive as well to, you know, Nintendo PlayStation, for example, you put a 25% on that, it's perhaps meaningful in the context of the consumer. So I think we're holding our share really well. And I think that's a testament to the service that we're providing. But I think it is a tougher marketplace. And you guys have good visibility on that when you look at, you know, how trans-Pacific rates are falling when you look at how capacity is being pulled under those lanes.

Postco, um, that fall Intermodal Peak has become a pretty elusive concept. I think what we're seeing right now across the marketplace and this is not specific to CN. Is that there's been some inventory front end loading. It's quite possible that July may have been the peak season. Um it's going to depend on how consumer sentiment is. Tracy mentioned plays out from here. Um, I would add as well that, you know,

Jonathan Chappell: So we're going to wait and see, but we're going to protect our share and we're going to see what we can do to leverage our service to drive more. Your next question comes from the line of Jonathan Chappell with Evercore ISI. Please go ahead. Thank you. Good afternoon. Going back to some of the recent headlines as it relates to some of the new services you've created with the players in that speculation. Is there anything as far as out clauses or, you know, how long some of the agreements are that we should be focused on? You know, Southern Premier, and things from there.

Of the goods that we're moving. It's not just China. It's also Korea. It's also Japan. There are meaningful tariffs on those countries as well and they're, and they're on higher value Goods. Uh, that may be sensitive as well to, uh, you know, Nintendo PlayStation. For example, you put a 25% on that is perhaps, uh, meaningful than the context of the consumer. So, um, I think we're holding, uh, our share really well and uh, I think that's a testament to the service that we're providing, but I think it is a tougher Marketplace and you guys have good visibility on that. When you look at, you know how um trans-pacific rates are falling when you look at how capacity is being pulled out of those Lanes. So we're going to wait and see, but we're going to protect our share and we're going to see what we can do to uh leverage our service to drive more.

Jonathan Chappelle: Your next question comes from the line of Jonathan Chappelle with evercore isi, please go ahead.

Jonathan Chappelle: Thank you. Good afternoon. Um going back to some of the recent headlines, as it relates to some of the new Services you've created with the players. Um in that speculation is there anything uh as far as out Clauses or

Jonathan Chappelle: How long some of the Agreements are that we should be focused on? Um, you know, specifically I'm thinking about Falcon premium,

Thanks for mixing the US.

Tracy Robinson: You kind of cut out on us there, John, at the last little bit, I'm not clear what your question is. Could you repeat it? Yeah, well, I'll just be more direct about it. As it relates to the, you know, the merger headlines, you have the Falcon Premium service with Union Pacific. So are there any out clauses associated with that? Do we know how long that agreement's for? Anything we should be worried about? If there's any change in ownership or, you know, collaboration with the East Coast Rail? Look, no, I would just remind everybody that that service is really Mexico to Canada, North-South is the other important part of that piece.

You kind of cut out on us there. John, at the last little bit. I'm not clear what your question is. Could you repeat it?

Speaker Change: Yeah, well, I'll just be more direct about it is, is it relates to the, you know, the merger. Uh, headlines you have the Falcon premium service, um, with Union Pacific. So, are there any out Clauses associated with that? Do we know how long that agreement's for anything? We should be worried about, uh, if there's any change in in ownership or, um, you know, collaboration with the East Coast rail? Look, no. I I would just um,

Speaker Change: remind everybody, that that service is really Mexico to Canada um north south

Tracy Robinson: So we're going to continue driving that volume. Thank you. Your next question comes from the line of Ari Rosa with Citigroup. Please go ahead. Hi, good afternoon. I wanted to follow up just on the CapEx point. I was hoping you could break down for us or remind us at least what share of your CapEx is maintenance versus growth. And, you know, it's been some time, if we go back and look at the history, it's been some time since we've seen meaningful growth in RTMs. I'm just wondering how you get confidence that you're seeing the appropriate ROIs from that elevated level of CapEx spent.

Speaker Change: Does the other important part of that piece? So, um, we're going to continue driving that volume.

Thank you.

Speaker Change: Your next question comes from the line of Ari. Rosa with Citi group, please go ahead.

Ghislain Houle: Thanks. Yeah, Ari, I can I can talk about it. And Tracy, if you want to jump in, you're welcome to do it. But really, a good portion of our CAPEX envelope is maintenance, like like all of the other rails. When we do invest in capacity, a lot of it is in Western Canada, like Pat mentioned, we do invest with the thought of capital efficiency, i.e. we want to make sure that about 100% of our investment goes in the ground. And then with the growth CAPEX related to customers, you know, we look at the the internal rate of return, and we want to make sure that the internal rate of return is above our threshold internally.

Ari Rosa: Hi, good afternoon. Um, I I wanted to follow up just on the capex point. Uh, I was hoping you could break down for us, uh, or remind us at least what share of your capex is maintenance versus growth. Uh, and you know, it's been some time if we go back. Uh, and look at kind of the history, it's been some time since we've seen meaningful uh, growth in rtms. I'm just wondering how you get confidence that you're seeing the appropriate rois from that elevated level of capex. Uh, spent thanks

Ghislain Houle: And we've got detailed business cases on this to make sure that we we have the benefits coming in, and we go and track those after these investments are done. I mean, I'd say that that's basically and Tracy, I think you made the point is when we look at our maintenance CAPEX, the key here is to do it more efficiently. And we're very happy with the changes we've done in engineering lately, where we can see some of this productivity and efficiency coming in. And allowing us to invest more at a lower cost. And let me just add a little bit to that.

Yeah, our I can I can talk about it and Tracy, if you want to jump in you're welcome to to do it. But uh, really a a good portion of our capex envelope is maintenance like like all of the other rails when we do invest in capacity, a lot of it is in western Canada like that mentioned. We do uh invest with a thought of capital efficiency, IE. We want to make sure that about 100% of our investment goes in the ground. Um, and then with the growth capex related to customers, um, you know, we look at the the, uh, the internal rate of return. And we want to make sure that the internal rate of return, uh, is above our threshold internally and we've got detailed business cases on this to make sure that we, uh, we have the benefits coming in and we go and track those after these Investments are done.

Tracy Robinson: I mean, I say that that's basically and and Tracy, I think you made the point is when we look at our maintenance capex, the key here is to do it more efficiently and we're very happy with the changes. We've done in engineering lately where we can see some of these productivity and efficiency coming in. Uh and allowing us to invest more uh, at the at a lower cost.

Tracy Robinson: So our CapEx, I don't think we give the breakdown in CapEx between maintenance CapEx and growth, but it also includes IT, the IT capital that we spend. And if you look at, we watch very closely the returns on the growth CapEx. And as Gilles has said, a lot of it is in a very specific to some of the growth, primarily, not completely, but primarily in the western part of the network. And it's tied to volume through usually commercial contracts that protect the return on that. And so that volume is showing up. We have had the volume declines in other parts of the network that create for us capacity.

Tracy Robinson: And the magic will happen, as Derek was speaking earlier, if we can fill trains and fill corridors, you know, where we have capacity more related to the south and the eastern parts of our network. The last question comes from the line of Bascome Majors with Susquehanna. Please go ahead. Thanks for taking my questions. You know, looking back four years, CN was drawn into a merger situation, but faced resistance from regulators and shareholders. And that ultimately led to some changes in management and both the board If the Class 1 rails did consolidate into two transcon networks in the U.S., what is the biggest competitive concern that you would have?

Tracy Robinson: Will happen is Derek was speaking earlier. If we can fill trains and Phil corridors, uh, you know, where we have capacity more related to the south in the Eastern parts of our Network.

Tracy Robinson: The last question comes from the line of basa Majors with cesca Hannah. Please go ahead.

Yeah, thanks for taking my questions, you know, looking back for your CN was drawn into a merger situation. But faced resistance from regulators and shareholders and that ultimately led to some changes in management and both the board, um,

Tracy Robinson: If the class 1 rails, did consolidate to 2. Transcon networks in the US.

Bascome Majors: And does CN's experience from 2021 and 22 keep you on the sidelines from what may transpire over the next 12 to 18 months? Or are there scenarios where you'd actually want to be an active participant from a defensive situation? Thank you. Listen, we're not going to speculate on the whole merger question, and we are focused right now on driving execution to our plan on our network. And we think that that's the right thing for us to be focused on. In any scenario, we would very rigorously defend our competitive access and our growth prospects. And I'm going to leave it at that.

Speaker Change: What is the biggest competitive s concern that you would have and does CNS experience from 2021 and 22? Keep you on the sidelines. From what may transpire over the next 12 to 18 months or are there scenarios, where you'd actually want to be an active participant from a defensive situation? Thank you.

Tracy Robinson: Thank you. That concludes the question and answer session.

Speaker Change: Listen. Uh, we're not going to speculate on the whole merger question. And um, we are focused right now on driving execution, to our plan and our Network. And we think that that's the right thing, uh, for us to be focused on in any scenario, we would very rigorously defend, uh, our competitive access and, uh, our growth prospects. Uh, and I'm going to leave it at that. Thank you.

Operator: I would like to turn the call back over to Tracy Robinson. The conference call has now ended. Thank you for your participation and you may disconnect your lines. [music]

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

Tracy Robinson: Thank you Krista. Well thank you all for joining us today. We are indeed in uncertain times uh and while we can't predict exactly where tariff and trade and the economy will go, we are very intensely focused on doing the things uh, that we can do both with our customers and in the controlling our cost to make sure that we protect our margins and are well positioned, uh, to execute our growth strategy as we go forward. Uh, thank you for your time today and we look forward to talking soon.

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