Canadian National Railway Q4 2025 Canadian National Railway Co Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Canadian National Railway Co Earnings Call
Speaker #1: All participants are now in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. During which we ask that you kindly limit yourself to one question.
Speaker #1: At this time, I would like to turn the call over to Stacy Alderson. Senior CN's Assistant Vice President of Investor Relations, ladies and gentlemen, Ms.
Speaker #1: Alderson. Thank you,
Stacy Alderson: Thank you, Krista. Welcome, everyone. Thank you for joining us for CN's Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. Joining us on the call today are Tracy Robinson, our President and CEO, Pat Whitehead, our Chief Operations Officer, Janet Drysdale, our Chief Commercial Officer, and Ghislain Houle, our Chief Financial Officer. You can turn to page two of the presentation, which includes our forward-looking statements and non-GAAP definitions for your reference. These forward-looking statements reflect our current information and educated assumptions and include estimates, goals, and expectations about the future. These involve risks and uncertainties, and actual results may differ from what we expect. As a reminder, forward-looking statements are not guarantees, and factors such as economic conditions, competition, fuel prices, and regulatory changes could impact actual outcomes.
Stacy Alderson: Thank you, Krista. Welcome, everyone. Thank you for joining us for CN's Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. Joining us on the call today are Tracy Robinson, our President and CEO, Pat Whitehead, our Chief Operations Officer, Janet Drysdale, our Chief Commercial Officer, and Ghislain Houle, our Chief Financial Officer. You can turn to page two of the presentation, which includes our forward-looking statements and non-GAAP definitions for your reference. These forward-looking statements reflect our current information and educated assumptions and include estimates, goals, and expectations about the future. These involve risks and uncertainties, and actual results may differ from what we expect. As a reminder, forward-looking statements are not guarantees, and factors such as economic conditions, competition, fuel prices, and regulatory changes could impact actual outcomes.
Speaker #2: Krista: Welcome, everyone. Thank you for joining us for CN's fourth quarter and full year 2025 financial and operating results conference call. Joining us on the call today are Tracy Robinson, our President and CEO; Pat Whitehead, our Chief Operations Officer; Janet Drysdale, our Chief Commercial Officer; and Ghislain Houle, our Chief Financial Officer.
Speaker #2: You can turn to page two of the presentation, which includes our forward-looking statements and long-gap definitions for your reference. These forward-looking statements reflect our current information and educated assumptions and include estimates, goals, and expectations about the future.
Q4 2025 Canadian National Railway Co Earnings Call
Speaker #2: These involve risks and uncertainties, and actual results may differ from what we expect. As a reminder, forward-looking statements are not guarantees, and factors such as economic conditions, competition, fuel prices, and regulatory changes could impact actual outcomes.
Speaker #2: It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.
Stacy Alderson: It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.
It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.
Speaker #3: Thanks, Stacy. And thank you all for joining us today. I'm pleased this morning to share our Q4 and full year results. 2025 was a year in which CN delivered strong performance against a backdrop of significant volatility and a challenging macro.
Tracy Robinson: Thanks, Stacy, and thank you all for joining us today. I'm pleased this morning to share our Q4 and full year results. 2025 was a year in which this team delivered strong performance against the backdrop of significant volatility and a challenging macro. The actions we took over the past year were proactive and exactly what the environment demanded. We've been disciplined. We've completed an important investment cycle. We've maintained a relentless focus on productivity improvement and increasingly on commercial intensity. And these actions drove our 2025 results. They helped us navigate a tough year and have set us up well for when volumes start to grow across the industry again. Now, on our last call, we made three commitments to ensure we deliver the type of returns we know CN is capable of. First was on performance.
Tracy Robinson: Thanks, Stacy, and thank you all for joining us today. I'm pleased this morning to share our Q4 and full year results. 2025 was a year in which this team delivered strong performance against the backdrop of significant volatility and a challenging macro. The actions we took over the past year were proactive and exactly what the environment demanded. We've been disciplined. We've completed an important investment cycle. We've maintained a relentless focus on productivity improvement and increasingly on commercial intensity. And these actions drove our 2025 results. They helped us navigate a tough year and have set us up well for when volumes start to grow across the industry again. Now, on our last call, we made three commitments to ensure we deliver the type of returns we know CN is capable of. First was on performance.
Speaker #3: The actions we took over the past year were proactive and exactly what the environment demanded. We've been disciplined. We've completed an important investment cycle.
Speaker #3: We've maintained a relentless focus on productivity improvement and increasingly on commercial intensity. And these actions drove our 2025 results. They helped us navigate a tough year and have set us up well for when volumes start to grow across the industry again.
Speaker #3: Now, when our last call, we made three commitments to ensure we deliver the type of returns we know CN is capable of. The first was on performance.
Tracy Robinson: As Q4 demonstrates, we continue to intensify our commercial execution while maintaining strong, disciplined network performance. Our focus is simple: concentrate on areas we can control and deliver through execution, regardless of the macro backdrop. Our results today reflect this focus with improvement across all key operating measures. Second, on financial discipline. We reset our capital programs to reflect today's environment with concrete actions to reduce costs and improve productivity. These actions are strengthening free cash flow, and we remain committed to returning excess capital to shareholders while maintaining a strong balance sheet. Third, on guidance. Now, given the elevated level of macro and policy uncertainty and limited visibility, we think it's appropriate to provide directional guidance tied closely to volume trends, rather than precise targets that can change quickly or become outdated. Let's turn to the fourth quarter.
As Q4 demonstrates, we continue to intensify our commercial execution while maintaining strong, disciplined network performance. Our focus is simple: concentrate on areas we can control and deliver through execution, regardless of the macro backdrop. Our results today reflect this focus with improvement across all key operating measures. Second, on financial discipline. We reset our capital programs to reflect today's environment with concrete actions to reduce costs and improve productivity. These actions are strengthening free cash flow, and we remain committed to returning excess capital to shareholders while maintaining a strong balance sheet. Third, on guidance. Now, given the elevated level of macro and policy uncertainty and limited visibility, we think it's appropriate to provide directional guidance tied closely to volume trends, rather than precise targets that can change quickly or become outdated. Let's turn to the fourth quarter.
Speaker #3: As Q4 demonstrates, we continue to intensify our commercial execution while maintaining strong, disciplined network performance. Our focus is simple: concentrate on areas we can control and deliver through execution.
Speaker #3: Regardless of the macro backdrop, our results today reflect this focus, with improvement across all key operating measures. Second, on financial discipline, we reset our capital programs to reflect today's environment, with concrete actions to reduce costs and improve productivity.
Speaker #3: free cash flow. And we remain These actions are strengthening committed to returning excess capital to shareholders, while maintaining a strong balance sheet. And third, on guidance.
Speaker #3: Now, given the elevated level of macro and policy uncertainty and limited visibility, we think it's appropriate to provide directional guidance tied closely to volume trends, rather than precise targets that can change quickly or become outdated.
Speaker #3: So let's turn to the fourth quarter. We closed the year with solid momentum, reflecting strong execution, reliable service, and continued discipline on costs and assets.
Tracy Robinson: We closed the year with solid momentum, reflecting strong execution, reliable service, and continued discipline on costs and assets. In the fourth quarter, we delivered 14% EPS growth and 7% for the full year, in line with our mid to high single-digit guidance. I'm also pleased with our efficiency. In Q4, our operating ratio came in at 60.1%, our best quarterly operating ratio of the year, and a 250 basis point improvement over last year. For the full year, we posted a 61.7% operating ratio, improving 120 basis points versus 2024. On cash flow, we generated CAD 3.3 billion, up 8%, driven by cash from operations, and we remain disciplined on capital spending, continuing to tighten throughout the year.
We closed the year with solid momentum, reflecting strong execution, reliable service, and continued discipline on costs and assets. In the fourth quarter, we delivered 14% EPS growth and 7% for the full year, in line with our mid to high single-digit guidance. I'm also pleased with our efficiency. In Q4, our operating ratio came in at 60.1%, our best quarterly operating ratio of the year, and a 250 basis point improvement over last year. For the full year, we posted a 61.7% operating ratio, improving 120 basis points versus 2024. On cash flow, we generated CAD 3.3 billion, up 8%, driven by cash from operations, and we remain disciplined on capital spending, continuing to tighten throughout the year.
Speaker #3: In the fourth quarter, we delivered 14% EPS growth and 7% for the full year, in line with our mid to high single-digit guidance. I'm also pleased with our efficiency.
Speaker #3: In Q4, our operating ratio came in at 60.1%. Our best quarterly operating ratio of the year. And a $250 basis point improvement over last year.
Speaker #3: For the full year, we posted a 61.7% operating ratio, improving 120 basis points, versus 2024. On cash flow, we generated $3.3 billion. Up 8%, driven by cash from operations.
Speaker #3: And we remain disciplined on capital spending, continuing to tighten throughout the year. Cash flow remains a top priority, and the actions we've taken continue to support a strong trajectory.
Tracy Robinson: Cash flow remains a top priority, and the actions we've taken continue to support a strong trajectory. Now, volumes held up well through year-end, led by grain and intermodal. We set a number of records on grain, and on intermodal we benefited from an easier comparison as we lapped the ILWU strike in 2024. We saw notable strength in segments where our service and commercial execution have helped us drive share gains. Janet will walk you through the key revenue puts and takes in just a few minutes. Across the network, we continue to make meaningful progress on operating performance and efficiency. In Q4, we saw improvement across all of our key operating measures. Car velocity improved, terminal dwell reduced, train and locomotive productivity increased, labor productivity strengthened materially, and we achieved a Q4 record in fuel efficiency.
Cash flow remains a top priority, and the actions we've taken continue to support a strong trajectory. Now, volumes held up well through year-end, led by grain and intermodal. We set a number of records on grain, and on intermodal we benefited from an easier comparison as we lapped the ILWU strike in 2024. We saw notable strength in segments where our service and commercial execution have helped us drive share gains. Janet will walk you through the key revenue puts and takes in just a few minutes. Across the network, we continue to make meaningful progress on operating performance and efficiency. In Q4, we saw improvement across all of our key operating measures. Car velocity improved, terminal dwell reduced, train and locomotive productivity increased, labor productivity strengthened materially, and we achieved a Q4 record in fuel efficiency.
Speaker #3: Now, volumes held up well through year-end, led by grain and intermodal. We set a number of records on grain, and on intermodal, we benefited from an easier comparison as we lapped the ILWU strike in 2024.
Speaker #3: We saw notable strength in segments where our service and commercial execution have helped us drive share gains. Janet will walk you through the key revenue puts and takes in just a few minutes.
Speaker #3: Across the network, we continue to make meaningful progress in operating performance and efficiency. In the fourth quarter, we saw improvement across all of our key operating measures.
Speaker #3: Car velocity improved, terminal dwell reduced, train and locomotive productivity increased, labor productivity strengthened materially, and we achieved a fourth quarter record in fuel efficiency.
Speaker #3: Now, these gains reinforce my confidence in our ability to perform consistently, even in a challenging demand environment. Pat will take you through the initiatives he and his team are driving to build on this momentum.
Tracy Robinson: Now, these gains reinforce my confidence in our ability to perform consistently, even in a challenging demand environment. Pat will take you through the initiatives he and his team are driving to build on this momentum. So to sum it up, despite tariff pressures that intensified in the second half of the year and ongoing trade uncertainty, we executed, we stayed disciplined, and we delivered. Now, looking to 2026, our focus will continue to be on disciplined execution. We'll prioritize the levers we control, stay close to our customers, and stay grounded amid a volatile macro environment. As we look ahead, uncertainty remains high and visibility limited. Economic growth looks muted, and it's hard to call where the tariff situation will land or what it means for trade flows.
Now, these gains reinforce my confidence in our ability to perform consistently, even in a challenging demand environment. Pat will take you through the initiatives he and his team are driving to build on this momentum. So to sum it up, despite tariff pressures that intensified in the second half of the year and ongoing trade uncertainty, we executed, we stayed disciplined, and we delivered. Now, looking to 2026, our focus will continue to be on disciplined execution. We'll prioritize the levers we control, stay close to our customers, and stay grounded amid a volatile macro environment. As we look ahead, uncertainty remains high and visibility limited. Economic growth looks muted, and it's hard to call where the tariff situation will land or what it means for trade flows.
Speaker #3: So, to sum it up, despite tariff pressures that intensified in the second half of the year and ongoing trade uncertainty, we executed, we stayed disciplined, and we delivered.
Speaker #3: Now, looking to 2026, our focus will continue to be on disciplined execution. We'll prioritize the levers we control, stay close to our customers, and stay grounded amid a volatile macro environment.
Speaker #3: As we look ahead, uncertainty remains high, visibility is limited, economic growth looks muted, and it's hard to call where the tariff situation will land or what it means for trade flows.
Speaker #3: The outcome of the USMCA review could influence trade and freight demand in ways that are tough to size up today. So against that backdrop, we believe a more directional framework for guidance, tied to volume trends, makes sense.
Tracy Robinson: The outcome of the USMCA review could influence trade and freight demand in ways that are tough to size up today. So against that backdrop, we believe a more directional framework for guidance tied to volume trends makes sense. Given what we see today, our base case expectation is that volumes will be flattish with 2025. It's important to note that at this time, the most reasonable approach is to assume that current tariff levels stay where they are. So our base case expectations do not build in any upside or downside from further tariff action. As the year unfolds and hopefully visibility improves, we'll keep updating our view. And we're gonna continue to pull every lever on productivity across the organization, and we will see incremental gains, although not as significant as those we achieved in 2025.
The outcome of the USMCA review could influence trade and freight demand in ways that are tough to size up today. So against that backdrop, we believe a more directional framework for guidance tied to volume trends makes sense. Given what we see today, our base case expectation is that volumes will be flattish with 2025. It's important to note that at this time, the most reasonable approach is to assume that current tariff levels stay where they are. So our base case expectations do not build in any upside or downside from further tariff action. As the year unfolds and hopefully visibility improves, we'll keep updating our view. And we're gonna continue to pull every lever on productivity across the organization, and we will see incremental gains, although not as significant as those we achieved in 2025.
Speaker #3: Given what we see today, our base case expectation is that volumes will be flattish with 2025. It's important to note that, at this time, the most reasonable approach is to assume that current tariff levels stay where they are.
Speaker #3: So our base case expectations do not build in any upside or downside from further tariff action. And as the year unfolds, and hopefully visibility improves, we'll keep updating our view.
Speaker #3: And we're going to continue to pull every lever on productivity across the organization. And we will see incremental gains, although not as significant as those we achieved in 2025.
Speaker #3: We have some headwinds to work through in 2026 on mix, and in some expense categories, such as land, we'll take you through. So on relatively flat volumes, we expect EPS growth to slightly exceed volume growth.
Tracy Robinson: We have some headwinds to work through in 2026 on mix and in some expense categories that Joanne will take you through. So on relatively flat volumes, we expect EPS growth to slightly exceed volume growth. Free cash flow will continue to grow in 2026, and we remain firmly committed to returning that cash back to our shareholders. We're also taking a deliberate, temporary step up in leverage to drive share repurchases, reflecting our confidence in the underlying earnings power of this business when volumes return. And as a team, we're staying locked in on delivering for shareholders in any environment. Now, we're building an engine with strong operating leverage, strong cash generation, with resilience and with flexibility, one that will accelerate earnings and margins as volumes improve, whether through a better economic backdrop, clarity on a reasonable tariff arrangement, or continued progress on Canadian trade diversification.
We have some headwinds to work through in 2026 on mix and in some expense categories that Joanne will take you through. So on relatively flat volumes, we expect EPS growth to slightly exceed volume growth. Free cash flow will continue to grow in 2026, and we remain firmly committed to returning that cash back to our shareholders. We're also taking a deliberate, temporary step up in leverage to drive share repurchases, reflecting our confidence in the underlying earnings power of this business when volumes return. And as a team, we're staying locked in on delivering for shareholders in any environment. Now, we're building an engine with strong operating leverage, strong cash generation, with resilience and with flexibility, one that will accelerate earnings and margins as volumes improve, whether through a better economic backdrop, clarity on a reasonable tariff arrangement, or continued progress on Canadian trade diversification.
Speaker #3: Free cash flow will continue to grow in 2026, and we remain firmly committed to returning that cash back to our shareholders. We're also taking a deliberate temporary step up in leverage to drive share repurchases, reflecting our confidence in the underlying earnings power of this business when volumes return.
Speaker #3: And as a team, we're staying locked in on delivering for shareholders in any environment. Now, we're building an engine with strong operating leverage, strong cash generation, with resilience and with flexibility—one that will accelerate earnings and margins as volumes improve, whether through a better economic backdrop, clarity on a reasonable tariff arrangement, or continued progress on Canadian trade diversification.
Speaker #3: And importantly, the muscles we have activated over the last 18 months around costs and productivity are now firing across CN. That gives us meaningful leverage as volumes return without requiring a significant step up in capital.
Tracy Robinson: Importantly, the muscles we have activated over the last 18 months around cost and productivity are now firing across CN. That gives us meaningful leverage as volumes return without requiring a significant step-up in capital, and our teams will continue to push hard for efficiency. Now, just a few words on the proposed industry consolidation. We know this is top of mind for many of you, and it's certainly kept us busy as we work through the details. UP and NS filed their application, and the STB, as we expected, deemed the filing incomplete. The industry still has a long road ahead in evaluating this transaction. It is not at all clear that the transaction, as proposed, addresses many of the questions around the negative impact on competition, as well as the bigger issue of increasing rail competition. The concessions required to achieve this will be significant.
Importantly, the muscles we have activated over the last 18 months around cost and productivity are now firing across CN. That gives us meaningful leverage as volumes return without requiring a significant step-up in capital, and our teams will continue to push hard for efficiency. Now, just a few words on the proposed industry consolidation. We know this is top of mind for many of you, and it's certainly kept us busy as we work through the details. UP and NS filed their application, and the STB, as we expected, deemed the filing incomplete. The industry still has a long road ahead in evaluating this transaction. It is not at all clear that the transaction, as proposed, addresses many of the questions around the negative impact on competition, as well as the bigger issue of increasing rail competition. The concessions required to achieve this will be significant.
Speaker #3: And our teams will continue to push hard for efficiency. Now, just a few words on the proposed industry consolidation. We know this is top of mind for many of you, and it certainly kept us busy as we worked through the details.
Speaker #3: UP and NS filed their application, and the STB, as we expected, deemed the filing incomplete. The industry still has a long road ahead in evaluating this transaction.
Speaker #3: It is not at all clear that the transaction, as proposed, addresses many of the questions around the negative impact on competition, as well as the bigger issue of increasing rail competition.
Speaker #3: The concessions required to achieve this will be significant. This should be the focus as UP and NS prepare their refiling. And we're eager to see how they'll address these issues in their revised application.
Tracy Robinson: This should be the focus as UP and NS prepare their refiling, and we're eager to see how they'll address these issues in their revised application. I'd say they've got a long way to go. Now, while this process plays out, the majority of our team remains focused exactly where they should be, on running our business and driving value to our shareholders. The team is fully aligned on executing day-to-day, winning every carload, delivering safe and reliable service for our customers, and continuing to convert strong execution into growing free cash flow. I am impressed with how decisively our team has stepped up, and you'll see this continue. Longer term, our opportunity set as the railroad of the north is compelling.
This should be the focus as UP and NS prepare their refiling, and we're eager to see how they'll address these issues in their revised application. I'd say they've got a long way to go. Now, while this process plays out, the majority of our team remains focused exactly where they should be, on running our business and driving value to our shareholders. The team is fully aligned on executing day-to-day, winning every carload, delivering safe and reliable service for our customers, and continuing to convert strong execution into growing free cash flow. I am impressed with how decisively our team has stepped up, and you'll see this continue. Longer term, our opportunity set as the railroad of the north is compelling.
Speaker #3: I'd say they've got a long way to go. Now, will this process play out? The majority of our team remains focused exactly where they should be, on running our business and driving value to our shareholders.
Speaker #3: The team is fully aligned on executing day-to-day, winning service for our customers, and continuing to convert strong execution into growing free cash flow. I am impressed with how decisively our team has stepped up, and you'll see this continue.
Speaker #3: Longer term, our opportunity set as the railroad of the north is compelling. We sit atop an incredible natural resource base with enviable access to North American markets and an unparalleled port network that provides a path to every global market.
Tracy Robinson: We sit atop an incredible natural resource base with enviable access to North American markets and an unparalleled port network that provides a path to every global market. This uniquely positions us to support customers in both our current markets and as trade flows evolve. And we're seeing the start this play out in some sectors now. Decisions we've made over the last 12 to 18 months, we will continue to refine, positions us with strong operating and earnings leverage as these volumes lift. And throughout, we'll stay disciplined on capital and focused on execution, and free cash flow. Pat, you're up.
We sit atop an incredible natural resource base with enviable access to North American markets and an unparalleled port network that provides a path to every global market. This uniquely positions us to support customers in both our current markets and as trade flows evolve. And we're seeing the start this play out in some sectors now. Decisions we've made over the last 12 to 18 months, we will continue to refine, positions us with strong operating and earnings leverage as these volumes lift. And throughout, we'll stay disciplined on capital and focused on execution, and free cash flow. Pat, you're up.
Speaker #3: This uniquely positions us to support customers in both our current markets and as trade flows evolve. And we're seeing to start this playout in some sectors now.
Speaker #3: The decisions we've made over the last 12 to 18 months, we will continue to refine. It positions us with strong operating and earnings leverage as these volumes lift.
Speaker #3: And throughout, we'll stay disciplined on capital and focus on execution and free cash flow. Pat, you're up.
Speaker #2: Thanks, Tracy. I'll be speaking to slide six first. The team delivered a strong fourth quarter, and I'm pleased that the three areas we are laser-focused on are paying off.
Patrick Whitehead: Thanks, Tracy. I'll be speaking to slide 6 first. The team delivered a strong fourth quarter, and I'm pleased that the 3 areas we are laser focused on are paying off. These are 1, ensure our people are at their safest and most productive. 2, delivering our promise to our customers. And 3, to maximize margin by controlling unit costs and asset utilization. It starts where it always does for us, safety on the ground. In Q4 and for the full year, we achieved the best injury frequency ratio in our history. That reflects consistent execution and is core to our performance this quarter and going forward. I want to first recognize our frontline teams who approach their craft as true professional railroaders. While this record is meaningful, our focus remains on every one of our CN family members going home safely every day.
Pat Whitehead: Thanks, Tracy. I'll be speaking to slide 6 first. The team delivered a strong fourth quarter, and I'm pleased that the 3 areas we are laser focused on are paying off. These are 1, ensure our people are at their safest and most productive. 2, delivering our promise to our customers. And 3, to maximize margin by controlling unit costs and asset utilization. It starts where it always does for us, safety on the ground. In Q4 and for the full year, we achieved the best injury frequency ratio in our history. That reflects consistent execution and is core to our performance this quarter and going forward. I want to first recognize our frontline teams who approach their craft as true professional railroaders. While this record is meaningful, our focus remains on every one of our CN family members going home safely every day.
Speaker #2: These are: one, ensure our people are at their safest and most productive; two, delivering our promise to our customers; and three, to maximize margin by controlling unit costs and asset utilization.
Speaker #2: It starts where it always does for us: safety on the ground. In Q4 and for the full year, we achieved the best injury frequency ratio in our history.
Speaker #2: That reflects consistent execution and is core to our performance this quarter and going forward. I want to first recognize our frontline teams who approach their craft as true professional railroaders.
Speaker #2: While this record is meaningful, our focus remains on every one of our CN family members going home safely every day. We want this for the families and the communities to count on us.
Patrick Whitehead: We want this for the families and the communities that count on us. That foundation allowed us to take on more work and deliver for our customers. Our workload increased 5% year-over-year, above, partly supported by our grain customers. We carried record-setting grain tonnage from Western Canada for 4 consecutive months while maintaining reliable service to our merchandise customers, with local service commitment performance well above 90%. From a network standpoint, Q4 tested resilience, particularly in December, when winter operating conditions required shorter train lengths for the entire month. Despite this, car velocity improved 2% and dwell declined 1% year-over-year in the quarter. That tells us we're not trading service or velocity to manage disruptions, we're improving both. The takeaway from the quarter is straightforward: We handled more volume with discipline, even under a full month of winter constraints.
We want this for the families and the communities that count on us. That foundation allowed us to take on more work and deliver for our customers. Our workload increased 5% year-over-year, above, partly supported by our grain customers. We carried record-setting grain tonnage from Western Canada for 4 consecutive months while maintaining reliable service to our merchandise customers, with local service commitment performance well above 90%. From a network standpoint, Q4 tested resilience, particularly in December, when winter operating conditions required shorter train lengths for the entire month. Despite this, car velocity improved 2% and dwell declined 1% year-over-year in the quarter. That tells us we're not trading service or velocity to manage disruptions, we're improving both. The takeaway from the quarter is straightforward: We handled more volume with discipline, even under a full month of winter constraints.
Speaker #2: That foundation allowed us to take on more work and deliver for our customers. Our workload increased 5% year over year, a bump partly supported by our grain customers.
Speaker #2: We carried record-setting grain tonnage for Western Canada for four consecutive months, while maintaining reliable service to our merchandise customers, with local service commitment performance well above 90%.
Speaker #2: From a network standpoint, Q4 tested resilience. Particularly in December, when winter operating conditions required shorter train links for the entire month. Despite this, car velocity improved 2% and dwell declined 1% year over year in the quarter.
Speaker #2: That tells us we're not trading service or velocity to manage disruptions. We're improving both. The takeaway from the quarter is straightforward. We handled more volume with discipline, even under a full month of winter constraints.
Speaker #2: Turning to the next slide, this is where the operating model shows up in the bottom line. On labor, CNE E productivity improved 14% versus Q4 last year.
Patrick Whitehead: Turning to the next slide, this is where the operating model shows up in the bottom line. On labor, T&E productivity improved 14% versus Q4 last year. We entered the quarter with approximately 800 furloughs and exited with about 650, selectively adding resources to support the grain program and winter readiness. On a full year basis, we improved our T&E labor cost per GTM by 6%, with GTMs up by 1%. That's more output with a smaller cost base. That same rigor shows up in how we managed our assets. On locomotives, productivity improved 5% year-over-year in the quarter, with roughly 10% of the fleet stored on average…
Turning to the next slide, this is where the operating model shows up in the bottom line. On labor, T&E productivity improved 14% versus Q4 last year. We entered the quarter with approximately 800 furloughs and exited with about 650, selectively adding resources to support the grain program and winter readiness. On a full year basis, we improved our T&E labor cost per GTM by 6%, with GTMs up by 1%. That's more output with a smaller cost base. That same rigor shows up in how we managed our assets. On locomotives, productivity improved 5% year-over-year in the quarter, with roughly 10% of the fleet stored on average…
Speaker #2: We entered the quarter with approximately 800 furloughs and exited with about 650. Selectively adding resources to support the grain program and winter readiness. On a full-year basis, we improved our TNE labor cost per GTM by 6% with GTMs up by 1%.
Speaker #2: That's more output with a smaller cost base. That same rigor shows up in how we managed our assets. On locomotives, productivity improved 5% year over year in the quarter, with average.
Speaker #2: Looking under the roughly 10% of the fleet stored on hood, locomotive availability reached an all-time high, nudging up 1% over 2024 to 92.5%, creating a knock-on effect that cleans up our balance sheet.
Patrick Whitehead: Looking under the hood, locomotive availability reached an all-time high, nudging up 1% over 2024 to 92.5%, creating a knock-on effect that cleans up our balance sheet. The result was a CAD 20 million reduction in our mechanical inventory, or 14% full year over year. We also achieved a record level of fuel efficiency in Q4, improving nearly 1% year over year, with full year results just shy of our best performance on record. On infrastructure, we completed all eight capacity projects we committed to at the start of 2025 on time. Our engineering team maintained its tight control over installation costs, totaling nearly CAD 40 million of productivity gains from 2024, while materially reducing reliance on contractors.
Looking under the hood, locomotive availability reached an all-time high, nudging up 1% over 2024 to 92.5%, creating a knock-on effect that cleans up our balance sheet. The result was a CAD 20 million reduction in our mechanical inventory, or 14% full year over year. We also achieved a record level of fuel efficiency in Q4, improving nearly 1% year over year, with full year results just shy of our best performance on record. On infrastructure, we completed all eight capacity projects we committed to at the start of 2025 on time. Our engineering team maintained its tight control over installation costs, totaling nearly CAD 40 million of productivity gains from 2024, while materially reducing reliance on contractors.
Speaker #2: The result was a $20 million reduction in our mechanical inventory, or 14% full year over year. We also achieved a record level of fuel efficiency in Q4.
Speaker #2: Improving nearly 1% year over year, with full-year results just shy of our best performance on record. On infrastructure, we completed all eight capacity projects we committed to at the start of 2025 on time.
Speaker #2: Our engineering team maintained its tight control over installation costs, totaling nearly $40 million of productivity gains from 2024, while materially reducing reliance on contractors.
Speaker #2: Where conditions allowed, including an earlier onset of winter in some regions, we advanced productive capital work deeper into the season rather than defer it, improving asset readiness while reducing contractor spend significantly.
Patrick Whitehead: Where conditions allowed, including an earlier onset of winter in some regions, we advanced productive capital work deeper into the season rather than defer it, improving asset readiness while reducing contractor spend significantly. As we look to 2026, we're well positioned. The network, locomotive fleet, and car fleet are in good shape, and we're not satisfied stopping there. To move from good to great, our focus is on precision. That means reducing yard dwell, eliminating non-value-added costs, and ensuring cars spend less time waiting and more time earning. Yards are the anchors to the whole network. Three-quarters of our traffic hit our major terminals, and more than half of our staff work in these locations. In engineering, we're continuing to strengthen in-house capabilities, control unit costs, and remove engineering-related delays. Reducing yard dwell only matters if cars move over the road without disruption.
Where conditions allowed, including an earlier onset of winter in some regions, we advanced productive capital work deeper into the season rather than defer it, improving asset readiness while reducing contractor spend significantly. As we look to 2026, we're well positioned. The network, locomotive fleet, and car fleet are in good shape, and we're not satisfied stopping there. To move from good to great, our focus is on precision. That means reducing yard dwell, eliminating non-value-added costs, and ensuring cars spend less time waiting and more time earning. Yards are the anchors to the whole network. Three-quarters of our traffic hit our major terminals, and more than half of our staff work in these locations. In engineering, we're continuing to strengthen in-house capabilities, control unit costs, and remove engineering-related delays. Reducing yard dwell only matters if cars move over the road without disruption.
Speaker #2: As we look to 2026, we're well positioned. The network, locomotive fleet, and car fleet are in good shape, and we're not satisfied stopping there.
Speaker #2: To move from good to great, our focus is on precision. That means reducing yard dwell, eliminating non-value-added cost, and ensuring cars spend less time waiting and more time earning.
Speaker #2: Yards are the anchors to the whole network. Three-quarters of our traffic hit our major terminals, and more than half of our staff work in these locations.
Speaker #2: In engineering, we're continuing to strengthen in-house capabilities, control unit costs, and remove engineering-related
Speaker #1: Delays reducing yard dwell only matters if cars move over the road without disruption . Together , these levers expand . Expand margins . Strengthen flow , and allow the railroad to perform through any cycle .
Patrick Whitehead: Together, these levers expand margins, strengthen cash flow, and allow the railroad to perform through any cycle. We see an opportunity to lower our operating expense in 2026 through our cross-functional terminal reviews and continued operating discipline, with additional margin upside as volume grow. With that, I'll turn it over to Janet.
Together, these levers expand margins, strengthen cash flow, and allow the railroad to perform through any cycle. We see an opportunity to lower our operating expense in 2026 through our cross-functional terminal reviews and continued operating discipline, with additional margin upside as volume grow. With that, I'll turn it over to Janet.
Speaker #1: We see an opportunity to lower our operating expense in 2026 through our cross functional terminal reviews , and continued operating discipline with additional margin upside as volume growth .
Speaker #1: With that, I'll turn it over to Janet.
Janet Drysdale: Thanks, Pat, and good morning, everyone. Happy Friday! I am really pleased with the way the Q4 came together. We delivered 4% more RTMs and 3% more carloads. Performance that reflects how hard the commercial team has been pushing on every opportunity, delivering 2% revenue growth in what remains a challenging market. What stands out for me this quarter is not just the growth itself, but how we achieved it. The team has been out in the market every day, winning share, capturing singles and doubles, and staying relentlessly focused on what it takes for our customers to win. And while we did benefit from a relatively easier year-over-year comp, that tailwind was partly offset by continued softness in key markets like forest products and metals, which remain pressured by weak fundamentals and tariffs.
Janet Drysdale: Thanks, Pat, and good morning, everyone. Happy Friday! I am really pleased with the way the Q4 came together. We delivered 4% more RTMs and 3% more carloads. Performance that reflects how hard the commercial team has been pushing on every opportunity, delivering 2% revenue growth in what remains a challenging market. What stands out for me this quarter is not just the growth itself, but how we achieved it. The team has been out in the market every day, winning share, capturing singles and doubles, and staying relentlessly focused on what it takes for our customers to win. And while we did benefit from a relatively easier year-over-year comp, that tailwind was partly offset by continued softness in key markets like forest products and metals, which remain pressured by weak fundamentals and tariffs.
Speaker #2: Thanks , Pat , and good morning , everyone . Happy Friday . I am really pleased with the way the fourth quarter came together .
Speaker #2: We delivered 4% more Rtms and 3% more carloads . Performance . That reflects how hard the commercial team has been pushing on every opportunity , delivering 2% revenue growth in what remains a challenging market for me .
Speaker #2: quarter is the growth this not just stands out What itself , but how we achieved it . The team has been out in the market every day , winning share , capturing singles and doubles and staying relentlessly focused on what it takes for our customers to win .
Speaker #2: And while we did benefit from a relatively easier year over year comp , that tailwind was partly offset by continued softness in key markets like forest products and metals , which remain pressured by weak fundamentals and tariffs .
Janet Drysdale: So yes, we expected to outperform last year, but we also had real gaps to backfill. I'm really proud of the results the team has delivered. Turning to slide 9, I'll provide a few highlights on the quarter before moving to the 2026 outlook. Within intermodal, both international and domestic revenues were up 13% and 6%, respectively. International was notably strong at Vancouver and Rupert, aided by a favorable comparison against last year's port labor disruptions. Prince Rupert also benefited from gains related to the new Gemini service. On the domestic side, we continue to realize service-related gains. Turning to grain, we had very strong demand in the quarter, and our operating team did a great job in getting the grain from the elevators to the terminals.
So yes, we expected to outperform last year, but we also had real gaps to backfill. I'm really proud of the results the team has delivered. Turning to slide 9, I'll provide a few highlights on the quarter before moving to the 2026 outlook. Within intermodal, both international and domestic revenues were up 13% and 6%, respectively. International was notably strong at Vancouver and Rupert, aided by a favorable comparison against last year's port labor disruptions. Prince Rupert also benefited from gains related to the new Gemini service. On the domestic side, we continue to realize service-related gains. Turning to grain, we had very strong demand in the quarter, and our operating team did a great job in getting the grain from the elevators to the terminals.
Speaker #2: So yes , we expected to outperform last year , but we also had real gaps to backfill . I'm really proud of the results the team has delivered .
Speaker #2: Turning to slide nine . I'll provide a few highlights on the quarter before moving to the 2026 outlook . Within intermodal , both international and domestic revenues were up 13 respectively and 6% , .
Speaker #2: International was notably strong at Vancouver and Rupert, aided by a favorable comparison against last year's port labour disruptions. Prince Rupert also benefited from gains related to the new Gemini service.
Speaker #2: On domestic side , we the continue to realize service related gains . Turning to grain . We had very strong demand in the quarter and our operating a great team did job in getting the grain from the elevators to the terminals .
Janet Drysdale: So not only did we set an all-time annual record in 2025 for Western Canadian grain shipments, we had monthly records in October, November, and December. Within petroleum and chemicals, we saw growth in all segments, led by a 9% increase in natural gas liquids volumes, driven by strong domestic demand and continued export strength through Prince Rupert. Forest products remained under pressure due to weak demand and increased tariffs and duties. Within metals and minerals, we saw lower iron ore shipments, driven by weak fundamentals, the mine closure in late Q1 of last year, and some unplanned outages. With persistently high natural gas inventories in Canada, we also had a slowdown in drilling, which impacted frac sand. We continued to generate same-store price ahead of our rail cost inflation.
So not only did we set an all-time annual record in 2025 for Western Canadian grain shipments, we had monthly records in October, November, and December. Within petroleum and chemicals, we saw growth in all segments, led by a 9% increase in natural gas liquids volumes, driven by strong domestic demand and continued export strength through Prince Rupert. Forest products remained under pressure due to weak demand and increased tariffs and duties. Within metals and minerals, we saw lower iron ore shipments, driven by weak fundamentals, the mine closure in late Q1 of last year, and some unplanned outages. With persistently high natural gas inventories in Canada, we also had a slowdown in drilling, which impacted frac sand. We continued to generate same-store price ahead of our rail cost inflation.
Speaker #2: So not only did we set an all time annual record in 2025 for Western Canadian grain we had shipments , monthly records in October , November , and December .
Speaker #2: Within petroleum and chemicals, we saw growth in all segments led by a 9% increase in natural gas liquids volumes, driven by strong domestic demand and continued export strength through Prince Rupert. Forest products remained under pressure due to weak demand and increased tariffs and duties within metals and minerals.
Speaker #2: We saw lower iron ore shipments driven by weak fundamentals. The mine closure in late Q1 of last year and some unplanned outages, along with persistently high natural gas inventories in Canada.
Speaker #2: We also had a slowdown in drilling , which impacted frac sand . We continue to generate same store price ahead of our rail cost .
Speaker #2: We also had a slowdown in drilling , which impacted frac sand . We continue to generate same store price ahead of our rail cost . inflation However , our overall results reflected negative mix and a roughly 70 million headwind related to the repeal of the Canadian carbon tax .
Janet Drysdale: However, our overall results reflected negative mix and a roughly CAD 70 million headwind related to the repeal of the Canadian carbon tax. We had a fuel tailwind and an FX headwind that combined were a net impact of less than 1%. Tariffs, trade uncertainty, and volatility impacted our full year 2025 revenues by over CAD 350 million. Turning to the 2026 outlook on slide 10. In terms of the macro environment, it doesn't look like it's going to be any better than last year. And recall that 2025's growth was helped by a favorable year-over-year comp. So we know we've got real work ahead of us, but we are leaning in hard. So starting with petroleum and chemicals, we expect to see positive momentum continue across multiple segments.
However, our overall results reflected negative mix and a roughly CAD 70 million headwind related to the repeal of the Canadian carbon tax. We had a fuel tailwind and an FX headwind that combined were a net impact of less than 1%. Tariffs, trade uncertainty, and volatility impacted our full year 2025 revenues by over CAD 350 million. Turning to the 2026 outlook on slide 10. In terms of the macro environment, it doesn't look like it's going to be any better than last year. And recall that 2025's growth was helped by a favorable year-over-year comp. So we know we've got real work ahead of us, but we are leaning in hard. So starting with petroleum and chemicals, we expect to see positive momentum continue across multiple segments.
Speaker #2: We had a fuel and tailwind in FX headwind that combined were a net impact of less than 1%. Tariffs, trade uncertainty, and volatility impacted our full-year 2025 revenues by over $350 million.
Speaker #2: Turning to the 2026 outlook on In terms of the macro environment , it doesn't look like it's going to be last that than recall And any better year .
Speaker #2: 2025 growth was helped by a favorable year over year comp . So we know we've got real work ahead of us , but we are leaning in hard .
Speaker #2: So starting with petroleum and chemicals , we expect to see positive momentum continue across multiple segments . We will benefit from a number of CN specific projects , including phase two of the Greater Toronto Area Fuel Terminal , New Fractionators and crude oil expansion projects .
Janet Drysdale: We will benefit from a number of CN-specific projects, including phase two of the Greater Toronto Area Fuel Terminal, new fractionators, and crude oil expansion projects. Additionally, we expect a year-over-year comp benefit, given last year's extended refinery turnarounds, which we don't expect to reoccur. We anticipate Canadian-US grain to remain strong, particularly with the record Canadian crop, as well as the recently announced improving trade conditions for Canadian canola. In terms of potash, we expect some pressure in the domestic market as farmers balance input costs against lower grain prices. With respect to export markets, we handled some spot moves in Q2 and Q3 last year, which we generally don't expect to be reoccurring, so we have a bit of a tougher comp there. Turning to intermodal and domestic, we're continuing to leverage our strong service to drive growth.
We will benefit from a number of CN-specific projects, including phase two of the Greater Toronto Area Fuel Terminal, new fractionators, and crude oil expansion projects. Additionally, we expect a year-over-year comp benefit, given last year's extended refinery turnarounds, which we don't expect to reoccur. We anticipate Canadian-US grain to remain strong, particularly with the record Canadian crop, as well as the recently announced improving trade conditions for Canadian canola. In terms of potash, we expect some pressure in the domestic market as farmers balance input costs against lower grain prices. With respect to export markets, we handled some spot moves in Q2 and Q3 last year, which we generally don't expect to be reoccurring, so we have a bit of a tougher comp there. Turning to intermodal and domestic, we're continuing to leverage our strong service to drive growth.
Speaker #2: Additionally , we expect a year over year comp benefit . Given last year's refinery extended turnarounds , which we don't expect to reoccur , we anticipate Canadian US grains remain strong , particularly with the record Canadian crop as well as the recently announced improving trade conditions for Canadian canola .
Speaker #2: In terms of potash , we expect some pressure in the domestic market as farmers balance input costs against lower grain prices . With respect to export markets , we handled some spot moves in Q2 and Q3 last year , which we generally don't expect to be reoccurring , so we have a bit of a tougher comp there .
Speaker #2: Turning to intermodal in domestic , we're continuing to leverage our strong service to drive growth for international . It's pretty slow right now , and we expect that to continue into the second quarter .
Janet Drysdale: For international, it's pretty slow right now, and we expect that to continue into Q2. We continue to be very pleased with the growth in volumes related to the Gemini service through Prince Rupert. Within metals and minerals, we have some pluses and minuses. Weak fundamentals for iron ore are expected to continue, and we're still dealing with the tariffs on steel and aluminum. On steel, we are continuing to hustle hard on mitigating the transporter headwinds with opportunities intra-Canada. Frac sand demand is unusually weak so far in Q1, but we have new terminals coming online, and capacity for NGL exports is increasing, so we do expect improvement as the year progresses. The auto segment is expected to be flat.
For international, it's pretty slow right now, and we expect that to continue into Q2. We continue to be very pleased with the growth in volumes related to the Gemini service through Prince Rupert. Within metals and minerals, we have some pluses and minuses. Weak fundamentals for iron ore are expected to continue, and we're still dealing with the tariffs on steel and aluminum. On steel, we are continuing to hustle hard on mitigating the transporter headwinds with opportunities intra-Canada. Frac sand demand is unusually weak so far in Q1, but we have new terminals coming online, and capacity for NGL exports is increasing, so we do expect improvement as the year progresses. The auto segment is expected to be flat.
Speaker #2: We continue to be very pleased with the growth in volumes related to the Gemini service through Prince Rupert . Within metals and minerals , we have some pluses and minuses .
Speaker #2: Weak fundamentals for iron ore are expected to, we're still dealing with the continue. And tariffs on steel and aluminum. On steel, we are continuing to hustle hard, mitigating the on-transporter headwinds with opportunities into Canada.
Speaker #2: demand is Frac sand unusually weak so far in Q1 , but we have new coming terminals online and capacity for NGL is exports increasing .
Speaker #2: So we do expect improvement as the year progresses . The segment is auto expected to be flat . Forest products will continue to be challenged as US housing starts are forecast to be flat and Canadian producers manage with the full year impact of the higher tariffs and duties that were applied in August and October of 2025 .
Janet Drysdale: Forest products will continue to be challenged as US housing starts are forecast to be flat, and Canadian producers manage with the full year impact of the higher tariffs and duties that were applied in August and October of 2025. We expect persistent weak demand for US exports of thermal coal. For Canadian coal, positive metallurgical coal prices are driving increased production. All in, we expect 2026 volumes to be more or less flat versus last year. Q1 will be the toughest quarter on a year-over-year comparable, and you're seeing that in our January volumes. We continue to price ahead of our rail cost inflation. Unfortunately, we do expect those mixed headwinds to persist, driven by the ongoing weakness in forest products and metals. So let me wrap up.
Forest products will continue to be challenged as US housing starts are forecast to be flat, and Canadian producers manage with the full year impact of the higher tariffs and duties that were applied in August and October of 2025. We expect persistent weak demand for US exports of thermal coal. For Canadian coal, positive metallurgical coal prices are driving increased production. All in, we expect 2026 volumes to be more or less flat versus last year. Q1 will be the toughest quarter on a year-over-year comparable, and you're seeing that in our January volumes. We continue to price ahead of our rail cost inflation. Unfortunately, we do expect those mixed headwinds to persist, driven by the ongoing weakness in forest products and metals. So let me wrap up.
Speaker #2: We expect persistent weak demand for US exports of thermal coal for Canadian coal positive metallurgical coal prices are driving increased production . All in , we expect 2026 volumes to be more or less flat versus last year .
Speaker #2: Q1 will be the toughest quarter on a year over year comparable , and you're seeing that in our January volumes . We continue to price ahead of our rail cost inflation .
Speaker #2: Unfortunately, we do expect those mixed headwinds to persist, driven by the ongoing weakness in forest products and metals. So let me wrap up.
Janet Drysdale: We are open-eyed about the difficult environment in which we're operating, but we have a commercial team that is highly energized and moving with urgency and agility. We have available capacity, and most importantly, we're providing the service that our customers need to win. Ghislain, over to you.
We are open-eyed about the difficult environment in which we're operating, but we have a commercial team that is highly energized and moving with urgency and agility. We have available capacity, and most importantly, we're providing the service that our customers need to win. Ghislain, over to you.
Speaker #2: We are open-eyed about the difficult environment in which we're operating, but we have a commercial team that is highly energized and moving with urgency and agility.
Speaker #2: We have available capacity and most importantly , we're providing the service that our customers need to win . Jocelyn , over to you .
Ghislain Houle: Merci beaucoup, Janet. Bon matin à tous. J'ai le plaisir de parler de nos résultats du quatrième trimestre. Starting on slide 12, we closed the year on a strong note. Thanks to the dedication of our commercial and operations team, we delivered solid performance across the board. Our financial results were further boosted by our continued focus on managing costs and driving productivity, and we remained active on share buybacks as part of our commitment to creating shareholder value, especially since we see our shares as undervalued relative to intrinsic value and an efficient way to return capital to shareholders. During the quarter, reported diluted EPS grew 12% year-over-year, while adjusted EPS was up 14%.
Ghislain Houle: Merci beaucoup, Janet. Bon matin à tous. J'ai le plaisir de parler de nos résultats du quatrième trimestre. Starting on slide 12, we closed the year on a strong note. Thanks to the dedication of our commercial and operations team, we delivered solid performance across the board. Our financial results were further boosted by our continued focus on managing costs and driving productivity, and we remained active on share buybacks as part of our commitment to creating shareholder value, especially since we see our shares as undervalued relative to intrinsic value and an efficient way to return capital to shareholders. During the quarter, reported diluted EPS grew 12% year-over-year, while adjusted EPS was up 14%.
Speaker #3: Merci beaucoup . Janet . Bon . Starting on slide 12 , we closed the year on a strong note . Thanks to the dedication of our commercial and operations team , we delivered solid performance across the board .
Speaker #3: Our financial results were further boosted by our continued focus on managing costs and driving productivity. And we remained active on share buybacks as part of our commitment to creating shareholder value, especially since we see our shares as undervalued relative to intrinsic value and an efficient way to return capital to shareholders.
Speaker #3: During the quarter , reported diluted EPs grew 12% year over year , while adjusted EPs was up 14% . These results reflect two notable a $34 million pre-tax charge tied to the workforce reduction program .
Ghislain Houle: These results reflect two notable adjustments: a CAD 34 million pre-tax charge tied to the workforce reduction program we discussed on our Q3 call, and a CAD 15 million in advisor fees related to industry consolidation. We're very proud of the progress on efficiency this quarter. Operating ratio improved by 140 basis points to 61.2%, and on an adjusted basis, it even was stronger at 60.1%, a 250 basis point improvement. This reflects the hard work and discipline across the organization in managing expenses and driving productivity. Revenues were up 2% year-over-year, adding to the solid finish for the year. On slide 13, let me walk you through a few key operating expense categories for the quarter on an exchange-adjusted basis.
These results reflect two notable adjustments: a CAD 34 million pre-tax charge tied to the workforce reduction program we discussed on our Q3 call, and a CAD 15 million in advisor fees related to industry consolidation. We're very proud of the progress on efficiency this quarter. Operating ratio improved by 140 basis points to 61.2%, and on an adjusted basis, it even was stronger at 60.1%, a 250 basis point improvement. This reflects the hard work and discipline across the organization in managing expenses and driving productivity. Revenues were up 2% year-over-year, adding to the solid finish for the year. On slide 13, let me walk you through a few key operating expense categories for the quarter on an exchange-adjusted basis.
Speaker #3: discussed We on our Q3 , and call a $15 million in advisory fees related to industry consolidation . We're very proud of the progress on efficiency this quarter .
Speaker #3: Operating ratio improved by 140 basis points to 61.2% , and an adjusted basis of even was stronger at 60.1% . A 250 basis point improvement .
Speaker #3: This reflects the hard work and discipline across the organization in managing expenses and driving productivity. Revenues were up 2% year over year, adding to the solid finish for the year.
Speaker #3: On slide 13 , let me walk you through a few key operating expense categories for the quarter on an exchange adjusted basis , labor costs were up 4% versus last year due to the workforce reduction charge and wage inflation , partly offset by 4% lower average headcount and higher capital credits from an extended construction season .
Ghislain Houle: Labor costs were up 4% versus last year due to the workforce reduction charge, and wage inflation, partially offset by 4% lower average headcount, and higher capital credits from an extended construction season. Fuel expense was down 9% compared to last year, driven by two factors: the removal of the Canadian federal carbon tax, and a 1% improvement in fuel efficiency. Overall, the impact of fuel prices on Q4 earnings and operating ratio was negligible, essentially flat for earnings, and 20 basis points unfavorable to OR. Depreciation was down 7%, mainly due to two items: the benefit of a favorable depreciation study, which we do on a regular basis, and the impact from certain assets recognized through purchase price allocations that became fully depreciated during the year.
Labor costs were up 4% versus last year due to the workforce reduction charge, and wage inflation, partially offset by 4% lower average headcount, and higher capital credits from an extended construction season. Fuel expense was down 9% compared to last year, driven by two factors: the removal of the Canadian federal carbon tax, and a 1% improvement in fuel efficiency. Overall, the impact of fuel prices on Q4 earnings and operating ratio was negligible, essentially flat for earnings, and 20 basis points unfavorable to OR. Depreciation was down 7%, mainly due to two items: the benefit of a favorable depreciation study, which we do on a regular basis, and the impact from certain assets recognized through purchase price allocations that became fully depreciated during the year.
Speaker #3: Fuel expense was down 9% compared to last year , two factors by the removal of the Canadian federal carbon tax and a 1% improvement in fuel efficiency .
Speaker #3: the Overall , impact of fuel prices on Q4 earnings and operating ratio was negligible , essentially flat per earnings and 20 basis points unfavorable to or .
Speaker #3: Depreciation was down 7%, mainly due to two items: the benefit of a favorable depreciation study, which we do on a regular basis, and the impact from certain assets recognized through purchase price allocations that became fully depreciated during the year.
Ghislain Houle: Other expenses rose 27%, mainly due to higher legal provisions, including a non-recurring CAD 34 million accrual related to an unfavorable court ruling in Q4 2025, which we are in the process of appealing. The increase in legal provision is essentially offset by a CAD 36 million gain on the sale of a portion of a branch line reported below the line in other income. The effective tax rate for the quarter was around 25%. Turning to slide 14, given the strong close to the year, with earnings supported by strong cost management across the business, we delivered full-year adjusted diluted EPS of CAD 7.63, up 7% from 2024, and at the high end of our guidance range.
Other expenses rose 27%, mainly due to higher legal provisions, including a non-recurring CAD 34 million accrual related to an unfavorable court ruling in Q4 2025, which we are in the process of appealing. The increase in legal provision is essentially offset by a CAD 36 million gain on the sale of a portion of a branch line reported below the line in other income. The effective tax rate for the quarter was around 25%. Turning to slide 14, given the strong close to the year, with earnings supported by strong cost management across the business, we delivered full-year adjusted diluted EPS of CAD 7.63, up 7% from 2024, and at the high end of our guidance range.
Speaker #3: Other expenses rose 27%, mainly due to higher legal provisions, including a non-recurring $34 million accrual related to an unfavorable court ruling in the fourth quarter of 2025, which we are in the process of appealing.
Speaker #3: The increase in legal provision is essentially offset by a $36 million gain on the sale of a portion of a branch line reported below the line in other income , the effective tax rate for the was quarter around 25% .
Speaker #3: Turning to slide 14 . Given the strong close to the year with earnings supported by strong cost management across the business , we delivered full year adjusted diluted EPs of $7.63 , up 7% from 2024 , and at the high end of our guidance range , our adjusted operating ratio came in at 61.7% , an improvement of 120 basis points compared to last year .
Ghislain Houle: Our adjusted operating ratio came in at 61.7%, an improvement of 120 basis points compared to last year, a clear reflection of disciplined execution across the business. Finally, we remain focused on free cash flow generation, ending the year at over CAD 3.3 billion, up 8% from last year. We also finished the year CAD 50 million below our Q3 capital projection, thanks to stronger capital discipline and real efficiency gains in engineering. We continued to lean into our share buyback program in Q4, repurchasing nearly 15 million shares in 2025 for around CAD 2 billion, reinforcing our commitment to creating long-term shareholder value.
Our adjusted operating ratio came in at 61.7%, an improvement of 120 basis points compared to last year, a clear reflection of disciplined execution across the business. Finally, we remain focused on free cash flow generation, ending the year at over CAD 3.3 billion, up 8% from last year. We also finished the year CAD 50 million below our Q3 capital projection, thanks to stronger capital discipline and real efficiency gains in engineering. We continued to lean into our share buyback program in Q4, repurchasing nearly 15 million shares in 2025 for around CAD 2 billion, reinforcing our commitment to creating long-term shareholder value.
Speaker #3: A clear reflection of disciplined execution across the business . Finally , we remain focused on free cash flow generation , ending the year at over $3.3 billion , up 8% from last year .
Speaker #3: We also finished the year $50 million below our Q3 capital projection, thanks to stronger capital discipline and real efficiency gains in engineering.
Speaker #3: We continue to lean into our share buyback program in Q4, repurchasing nearly 15 million shares in 2025 for around $2 billion, reinforcing our commitment to creating long-term shareholder value.
Ghislain Houle: I'm also pleased to report our board of directors has approved a 3% increase in CN's dividend, marking the 30th consecutive year of dividend growth, an important milestone and a reflection of our confidence in the durability of our cash generation profile. In addition, the board has authorized a new share buyback program, allowing the repurchase of up to 24 million common shares from 4 February 2026 to 3 February 2027. Looking ahead, we expect our debt leverage to increase temporarily to roughly 2.7 times and then come back to 2.5 times in 2027, as we take advantage of what we view as an attractive share price. The modest increase is intentional and fully aligned with our disciplined balance sheet strategy. Now, let me turn to our 2026 financial outlook on slide 15.
I'm also pleased to report our board of directors has approved a 3% increase in CN's dividend, marking the 30th consecutive year of dividend growth, an important milestone and a reflection of our confidence in the durability of our cash generation profile. In addition, the board has authorized a new share buyback program, allowing the repurchase of up to 24 million common shares from 4 February 2026 to 3 February 2027. Looking ahead, we expect our debt leverage to increase temporarily to roughly 2.7 times and then come back to 2.5 times in 2027, as we take advantage of what we view as an attractive share price. The modest increase is intentional and fully aligned with our disciplined balance sheet strategy. Now, let me turn to our 2026 financial outlook on slide 15.
Speaker #3: I'm also pleased to report our Board of Directors has approved a 3% increase in CNS dividend , marking the 30th consecutive year of dividend growth .
Speaker #3: An important milestone in a reflection of our confidence in the durability cash of our generation profile . In addition , the board has authorized a new share buyback program , allowing the repurchase of up to 24 million common shares from February 4th , 2026 to February 3rd , Looking 2027 .
Speaker #3: ahead , we expect our debt leverage to increase temporarily to roughly 2.7 times and then come back to 2.5 times in 2027 as we take advantage of what we view as an attractive share price .
Speaker #3: The modest increase is intentional and fully aligned with our disciplined balance sheet strategy . Now , let me turn to our 2026 financial outlook on slide 15 .
Ghislain Houle: As Tracy mentioned, given the uncertainty in the environment, we think a more directional approach is the right way to frame the year. For planning purposes, we're assuming revenue ton miles will be flattish with 2025, and importantly, that tariffs stay at their current levels throughout the year. On that basis, we expect EPS to grow at a rate slightly ahead of volumes. Pricing should continue to outpace rail cost inflation, and we're carrying a good momentum on the productivity side, recognizing that much of the heavy lifting on efficiency was done in 2025. That said, we do have some notable headwinds this year, which will weigh on margins.
As Tracy mentioned, given the uncertainty in the environment, we think a more directional approach is the right way to frame the year. For planning purposes, we're assuming revenue ton miles will be flattish with 2025, and importantly, that tariffs stay at their current levels throughout the year. On that basis, we expect EPS to grow at a rate slightly ahead of volumes. Pricing should continue to outpace rail cost inflation, and we're carrying a good momentum on the productivity side, recognizing that much of the heavy lifting on efficiency was done in 2025. That said, we do have some notable headwinds this year, which will weigh on margins.
Speaker #3: As Tracy mentioned, given the uncertainty in the environment, we think a more directional approach is the right way to frame the year for planning purposes.
Speaker #3: assuming revenue We're miles ton will be flattish with 2025 . And importantly , that tariffs stay at their current levels throughout the year .
Speaker #3: On that basis , we expect EPs to grow at a rate slightly ahead of volumes . Pricing should continue to outpace rail cost inflation , and we're carrying a good momentum on the productivity side , recognizing that much of the heavy lifting on efficiency was done in 2025 .
Speaker #3: That do have said , we some notable headwinds this year , which will weigh on margins . The continued unfavorable mix with less forest products and metals traffic , lower capital credits related to fixed overhead costs as a result of smaller capital program , a higher effective tax rate in the range of 25 to 26% , and the fact that we're lapping last year's other income gains .
Ghislain Houle: A continued unfavorable mix with less forest products and metals traffic, lower capital credits related to fixed overhead costs as a result of smaller capital program, a higher effective tax rate in the range of 25 to 26%, and the fact that we're lacking last year's other income gains. In our modeling and guidance, we've neutralized foreign exchange, assuming the 2025 average rate of 71.5 cents. Our effect sensitivity is unchanged at roughly $0.05 of EPS for every penny move. At current spot levels, that would represent about a $0.10 EPS headwind. With CapEx set at $2.8 billion for 2026, a $500 million reduction versus last year, we expect to see continued improvement in our cash conversion rate. In conclusion, let me reiterate a few points.
A continued unfavorable mix with less forest products and metals traffic, lower capital credits related to fixed overhead costs as a result of smaller capital program, a higher effective tax rate in the range of 25 to 26%, and the fact that we're lacking last year's other income gains. In our modeling and guidance, we've neutralized foreign exchange, assuming the 2025 average rate of 71.5 cents. Our effect sensitivity is unchanged at roughly $0.05 of EPS for every penny move. At current spot levels, that would represent about a $0.10 EPS headwind. With CapEx set at $2.8 billion for 2026, a $500 million reduction versus last year, we expect to see continued improvement in our cash conversion rate. In conclusion, let me reiterate a few points.
Speaker #3: In our modeling and guidance , we've neutralized foreign exchange . Assuming the 2025 average rate of 71.5 cents . Our FX at roughly sensitivity is $0.05 of EPs for every penny move .
Speaker #3: At current spot levels . That would represent about a $0.10 EPs headwind with CapEx set at $2.8 billion for 2026 , a $500 million reduction versus last year .
Speaker #3: We expect to see continued improvement in our cash conversion rate . In conclusion , let me reiterate a few points . We're very pleased with our Q4 and full year 2025 results .
Ghislain Houle: We're very pleased with our Q4 and full year 2025 results, having delivered on our EPS guidance and built strong momentum heading into 2026. While the demand environment remains uncertain, our guidance approach is grounded in discipline and realism. At the same time, the fundamentals of our business remain solid. Our focus on pricing discipline, productivity, and cost control, combined with the inherent operating leverage in our model, positions us well to generate attractive returns when volumes return. As conditions evolve, the framework gives investors greater transparency into the sensitivity of earnings, while underscoring our confidence and the durability of our cash generation and long-term value creation. With that, let me turn it back to Tracy.
We're very pleased with our Q4 and full year 2025 results, having delivered on our EPS guidance and built strong momentum heading into 2026. While the demand environment remains uncertain, our guidance approach is grounded in discipline and realism. At the same time, the fundamentals of our business remain solid. Our focus on pricing discipline, productivity, and cost control, combined with the inherent operating leverage in our model, positions us well to generate attractive returns when volumes return. As conditions evolve, the framework gives investors greater transparency into the sensitivity of earnings, while underscoring our confidence and the durability of our cash generation and long-term value creation. With that, let me turn it back to Tracy.
Speaker #3: Having delivered on our EPs guidance and build strong momentum heading into 2026 . While the demand environment remains uncertain , our guidance approach is grounded in discipline and realism .
Speaker #3: At the same time , the fundamentals of our business remain solid . Our focus on pricing , discipline , productivity and cost combined control , with the inherent operating leverage in our model , positions us well to generate attractive returns when volumes return as conditions evolve , the framework gives investors greater transparency into the sensitivity of durability in the confidence underscoring our generation earnings while and long cash term of our value creation .
Speaker #3: With that, let me turn it back to Tracy.
Rachel Smith: Thanks, Gis. Krista, we'll go to questions.
Tracy Robinson: Thanks, Gis. Krista, we'll go to questions.
Speaker #4: Thanks . Krista . We'll go to questions .
Operator: Thank you. We will now begin the question-and-answer session. As previously mentioned, we ask that you kindly limit yourself to one question. The first question comes from Cherilyn Radbourne with TD Cowen. Please go ahead.
Operator: Thank you. We will now begin the question-and-answer session. As previously mentioned, we ask that you kindly limit yourself to one question. The first question comes from Cherilyn Radbourne with TD Cowen. Please go ahead.
Speaker #5: Thank you . We will now begin the question and answer session . As previously mentioned , we ask that you kindly limit yourself to one question .
Speaker #5: The first question comes from Sherilyn Radbourne with TD Cowen . Please go ahead .
Cherilyn Radbourne: Thanks very much, and good morning. Janet, I wanted to turn to you, to just ask you if you could give some additional color on where your team is beating the bushes, and whether there's any update on the incremental revenue target that was given in Q3. I think you generated CAD 35 million in Q3, and, we're approaching CAD 100 million in Q4.
Cherilyn Radbourne: Thanks very much, and good morning. Janet, I wanted to turn to you, to just ask you if you could give some additional color on where your team is beating the bushes, and whether there's any update on the incremental revenue target that was given in Q3. I think you generated CAD 35 million in Q3, and, we're approaching CAD 100 million in Q4.
Speaker #6: Thanks very much, and good morning. Janet, I wanted to turn to you to just ask you if you could give some additional color on where your team is beating the bushes and whether there's any update on the incremental revenue target that was given in Q3.
Speaker #6: I think you generated $35 million in Q3, and we're approaching Q4 with $100 million in.
Janet Drysdale: Yeah, for sure. Thanks, Cherilyn, for the question. So we did kind of close with CAD 100 million. Of course, that pipeline continues to develop, and we probably have another CAD 100 million so far, kind of in our, our scorecard that we're keeping track of in January. What I will say is that this is what's helping us to close the gap in some of the weaker markets. So we do, you know, have seen forest products continue to deteriorate even since last quarter, with some additional mill closures or curtailments, and we see the continued weakness in the metals and minerals side. So we are out there beating the bushes everywhere, I would say, across the board, and even in the markets that are a little bit more pressured by the tariffs.
Janet Drysdale: Yeah, for sure. Thanks, Cherilyn, for the question. So we did kind of close with CAD 100 million. Of course, that pipeline continues to develop, and we probably have another CAD 100 million so far, kind of in our, our scorecard that we're keeping track of in January. What I will say is that this is what's helping us to close the gap in some of the weaker markets. So we do, you know, have seen forest products continue to deteriorate even since last quarter, with some additional mill closures or curtailments, and we see the continued weakness in the metals and minerals side. So we are out there beating the bushes everywhere, I would say, across the board, and even in the markets that are a little bit more pressured by the tariffs.
Speaker #2: Yeah , for sure . Thanks , Sherilyn , for the question . So we did kind of close with 100 million . Of continues to course , that pipeline develop , and we probably have another 100 million so far .
Speaker #2: Kind of in our scorecard that we're keeping track of in January. What I will say is that this is what's helping us to close the gaps in some of the weaker markets.
Speaker #2: So we do, you know, have seen forest products continue to deteriorate even since last quarter, with some additional mill closures and curtailments.
Speaker #2: And we see the continued weakness in the metals and So we are beating the bushes everywhere . I would say across the board and even in the markets that are a little bit more pressured by the tariffs , for example , we are finding some stickiness and some new moves to ship metals from central Canada to western Canada .
Janet Drysdale: For example, we are finding, some stickiness and some new moves to ship metals, from, you know, central Canada to Western Canada. We actually have some optimism more recently around aluminum and the potential to move some of that, back into the US now that inventories are depleted. That's helping us there. I would say the service is an important one I wanna call out, that's been helping us win on the domestic intermodal side. And we're leveraging the strength of our franchise in Western Canada around the NGLs and the frack sand. Little weak right now, but we do see that coming back. So hopefully that answers your question.
For example, we are finding, some stickiness and some new moves to ship metals, from, you know, central Canada to Western Canada. We actually have some optimism more recently around aluminum and the potential to move some of that, back into the US now that inventories are depleted. That's helping us there. I would say the service is an important one I wanna call out, that's been helping us win on the domestic intermodal side. And we're leveraging the strength of our franchise in Western Canada around the NGLs and the frack sand. Little weak right now, but we do see that coming back. So hopefully that answers your question.
Speaker #2: We actually have some optimism more recently around aluminum and the potential to move some of that back into the Now that depleted US .
Speaker #2: Inventories are, that's helping us there. I would say the service is an important one. I want to call out that's been helping us win on the domestic intermodal side.
Speaker #2: And we're leveraging the strength of our franchise in Western Canada around the NGLs and the frac sand. A little weak right now, but we do see that coming back.
Speaker #2: So, hopefully that answers your question.
Operator: Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.
Operator: Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.
Speaker #5: Your next question comes from the line of Scott Group with Wolfe Research . Please go ahead .
Ghislain Houle: Please go ahead.
Ghislain Houle: Please go ahead.
Speaker #7: Please go ahead .
Rachel Smith: Hey, thanks. Good morning. Ghislain, can you just clarify first if the depreciation is a one-time thing or if that's the new run rate? And then, Tracy, I just have a bigger picture question. You know, if I think over a long period of time, the beauty of rails was the ability for earnings to decouple from volume, and, right, rails could grow earnings even with negative volume, right? Because they had pricing and productivity and buyback. And I'm guessing you'd say you still have pricing and productivity and buyback, but I'm guessing I'm hearing a message of, like, volumes aren't growing, so earnings aren't really growing. Like, is the historical sort of algorithm sort of broken, or is this sort of we've got some unique headwinds? I just wanna sort of really understand, like, the big picture message here. Thank you.
Scott Group: Hey, thanks. Good morning. Ghislain, can you just clarify first if the depreciation is a one-time thing or if that's the new run rate? And then, Tracy, I just have a bigger picture question. You know, if I think over a long period of time, the beauty of rails was the ability for earnings to decouple from volume, and, right, rails could grow earnings even with negative volume, right? Because they had pricing and productivity and buyback. And I'm guessing you'd say you still have pricing and productivity and buyback, but I'm guessing I'm hearing a message of, like, volumes aren't growing, so earnings aren't really growing. Like, is the historical sort of algorithm sort of broken, or is this sort of we've got some unique headwinds? I just wanna sort of really understand, like, the big picture message here. Thank you.
Speaker #8: Hey , Good thanks . . Can you just clarify first , if the depreciation is a one time thing or if that's the new run rate , and then Tracy , I just have a bigger picture question .
Speaker #8: You know , if I think over a long period of time , the beauty of rails ability the was for earnings to decouple from volume .
Speaker #8: And rails could grow earnings even with negative volume . Right , because they had pricing and productivity and buyback . And I'm guessing you'd say you still and have pricing productivity and buyback , but I'm guessing I'm hearing a message of like volumes aren't growing .
Speaker #8: earnings So growing . aren't really Like is the is the historical sort of algorithm sort of broken or is this sort of we've unique got some headwinds .
Speaker #8: I just want to sort of really understand, like, the big picture message here. Thank you.
Remi Lalonde: Yeah. Thanks, Scott, for the question. Let me answer the depreciation question first, and then we'll turn it over to Tracy. So when you look at the total variance of depreciation, it's composed of two things. One, the favorable result of depreciation study, and as you know, we do these on a regular basis, and we try to push the use of our assets and the life of our assets as far as we can. So that is about a quarter of the variance, and then three-quarters of it is, in fact, we over-depreciated the purchase price allocation of some of the acquisitions that we've done in the past, and we discovered this in Q4, and we corrected it. That's about three-quarters of the variance. Maybe to you, Tracy, on the second piece?
Remi Lalonde: Yeah. Thanks, Scott, for the question. Let me answer the depreciation question first, and then we'll turn it over to Tracy. So when you look at the total variance of depreciation, it's composed of two things. One, the favorable result of depreciation study, and as you know, we do these on a regular basis, and we try to push the use of our assets and the life of our assets as far as we can. So that is about a quarter of the variance, and then three-quarters of it is, in fact, we over-depreciated the purchase price allocation of some of the acquisitions that we've done in the past, and we discovered this in Q4, and we corrected it. That's about three-quarters of the variance. Maybe to you, Tracy, on the second piece?
Speaker #3: Yeah . Thanks , Scott , for the question . Let me answer the depreciation question first , and then we'll turn it over to Tracy .
Speaker #3: So when you look at the total variance of depreciation , it's composed of two things . One , the favorable result of depreciation study .
Speaker #3: And as you know, we do these on a regular basis. And we try to push the use of our assets, and the life of our assets, as much as we can.
Speaker #3: So that is about a quarter of the variance . And then three quarters of it is in fact , we over depreciated the purchase price allocation of some of the acquisitions that we've done in the past .
Speaker #3: And we discovered this in Q4 , and we corrected That's about variance , maybe to you , Tracy , on the second piece .
Speaker #3: And we discovered this in Q4 , and we corrected That's about variance , maybe to you , Tracy , on the second piece .
Tracy Robinson: Good morning, Scott. So, interesting question. So I would say that, you know, it, it's not decoupling. There's some unique things that are going on right now. If you think about the unusual impact of the tariff situation, particularly the tariff situation between Canada and the United States, and the outsized impact that's had on a couple of our sectors. Janet's gone through them on forest products and on metals. That could correct itself over, over time, but right now we're looking at pretty significant mix headwinds, which wouldn't be normally something you'd see. The other thing is, as we look at how the economies are moving, we're getting, some extraordinary movements in things like FX and the, the underlying assumptions. So that's something that we deal with, of course, more than most of our peers. And so those are moving around.
Tracy Robinson: Good morning, Scott. So, interesting question. So I would say that, you know, it, it's not decoupling. There's some unique things that are going on right now. If you think about the unusual impact of the tariff situation, particularly the tariff situation between Canada and the United States, and the outsized impact that's had on a couple of our sectors. Janet's gone through them on forest products and on metals. That could correct itself over, over time, but right now we're looking at pretty significant mix headwinds, which wouldn't be normally something you'd see. The other thing is, as we look at how the economies are moving, we're getting, some extraordinary movements in things like FX and the, the underlying assumptions. So that's something that we deal with, of course, more than most of our peers. And so those are moving around.
Speaker #4: So Scott . Good morning question . So I would say that no , it's not decoupling . There's some unique things that are going on right now .
Speaker #4: If you think about the unusual impact of the tariff situation , particularly the tariff situation Canada and between the United States and the outsized impact that's had couple of other sectors , Janet's gone through them and forest products and on metals that could correct itself over , over time .
Speaker #4: But right now we're looking at pretty significant mix headwinds , which wouldn't be normally something see . you'd The other thing is , is we look at how the economies are moving .
Speaker #4: We're getting some extraordinary movements and things like FX and the underlying assumptions . So that's something that we deal with . Of course , more than most of our peers .
Speaker #4: so those And are moving around . So here's what we are doing . We're using this time of a of a quieter macro .
Tracy Robinson: So here's what we are doing. We're using this time of a quieter macro, and while the tariff situation gets worked out, to get, you know, pretty fit. We're getting leaner, we're focusing on structural cost reduction. This creates that operating leverage that you're talking about, and it'll be considerable, but it'll be, you know, operating leverage on and earnings leverage. And so as I look at our network and our opportunities going forward, you know, it's pretty compelling. We sit on top, as I said, of a pretty strong natural resource base, continuing to develop. It's across ag, it's across mining, it's across the energy sectors, and across, you know, some of the industrial sector, and these are commodities that the world needs.
So here's what we are doing. We're using this time of a quieter macro, and while the tariff situation gets worked out, to get, you know, pretty fit. We're getting leaner, we're focusing on structural cost reduction. This creates that operating leverage that you're talking about, and it'll be considerable, but it'll be, you know, operating leverage on and earnings leverage. And so as I look at our network and our opportunities going forward, you know, it's pretty compelling. We sit on top, as I said, of a pretty strong natural resource base, continuing to develop. It's across ag, it's across mining, it's across the energy sectors, and across, you know, some of the industrial sector, and these are commodities that the world needs.
Speaker #4: And will the tariff situation gets worked out to get , you know , pretty fit . getting leaner . We're focusing on structural cost reduction .
Speaker #4: This creates that operating leverage that you're talking considerable it'll be . about . But be And it'll operating leverage on and earnings leverage .
Speaker #4: And so as I at look our network and our opportunities going forward , you know , it's pretty compelling . We sit on top , as I said , of a pretty strong natural resource base , continuing to develop .
Speaker #4: across AG . Its It's across mining . It's across the energy sectors and you know , some of the industrial sector . And these are the commodities that the world needs .
Tracy Robinson: You know, we've got a pretty privileged position in the routes into the North American markets. We've got, you know, an unparalleled path to the ports that access all of the global markets, and, you know, so we're positioned pretty well, whether it's, you know, at the exports or whether it's the import of consumer goods to North America. So these opportunities, we've seen them start, and we expect them to continue to accelerate. We've got capacity, we've done the investments in our network, so we're getting really fit. We've got considerable leverage, and, as you see the tariff situation normalize, hopefully, that'll happen this year, we'll see, you're gonna see that leverage start to manifest, so we're pretty excited about that.
You know, we've got a pretty privileged position in the routes into the North American markets. We've got, you know, an unparalleled path to the ports that access all of the global markets, and, you know, so we're positioned pretty well, whether it's, you know, at the exports or whether it's the import of consumer goods to North America. So these opportunities, we've seen them start, and we expect them to continue to accelerate. We've got capacity, we've done the investments in our network, so we're getting really fit. We've got considerable leverage, and, as you see the tariff situation normalize, hopefully, that'll happen this year, we'll see, you're gonna see that leverage start to manifest, so we're pretty excited about that.
Speaker #4: You know , we've got a pretty privileged , privileged position in the routes into the North American markets . We've got , you know , an unparalleled path to reports that access all global markets .
Speaker #4: And , you know , so we're positioned pretty well , whether it's , you know , the exports or whether it's the import of of consumer goods to North America .
Speaker #4: So these opportunities , we've seen them start and we expect them to continue to accelerate . We've got capacity . We've done the investments in our network .
Speaker #4: So we're getting really fit . We've got considerable leverage . And tariff the see as you situation normalize , hopefully that'll happen this year .
Speaker #4: see We'll . You're going to see us . You're going to see that leverage start to manifest . So we're pretty excited about that .
Rachel Smith: Your next question comes from the line of Fadi Chamoun with BMO Capital Markets. Please go ahead.
Operator: Your next question comes from the line of Fadi Chamoun with BMO Capital Markets. Please go ahead.
Speaker #5: Your next question comes from the Fadi Chamoun with BMO Capital Markets . Please go ahead .
Fadi Chamoun: Okay, thank you. Good morning. So, Janet, is mix in 26 kind of flat versus last year, worse or slightly better? I just want some clarification on that. The question I have is: so when you look at the outlook, over the next, whatever, year or two or even three, where do you see CN having differentiated opportunities to grow volume, to grow the business? What segment or what market do you feel that you have an opportunity to be differentiated versus the economy and kind of compared to the market?
Fadi Chamoun: Okay, thank you. Good morning. So, Janet, is mix in 26 kind of flat versus last year, worse or slightly better? I just want some clarification on that. The question I have is: so when you look at the outlook, over the next, whatever, year or two or even three, where do you see CN having differentiated opportunities to grow volume, to grow the business? What segment or what market do you feel that you have an opportunity to be differentiated versus the economy and kind of compared to the market?
Speaker #9: Thank you . Good morning . So Janet is mixed in 26 kind of flat versus last year . Worse or slightly better . I just want some clarification on that .
Speaker #9: And the question I have is so when you look the outlook over the next , whatever year , two or even three , where do you see CN having differentiated opportunities to grow , volume to grow , to grow the business ?
Speaker #9: What segment or what market do you feel that you have an opportunity and economy to differentiate versus being kind of compared to the market?
Janet Drysdale: Thanks, Fadi, for the question. So let me start with mix, and I wanna take a minute to remind everyone there's kind of two aspects to mix. There's the enterprise level, where, you know, you see volumes move around, let's say, between forest products, intermodal, metals, and minerals, but there's also mix within each segment. So, for example, if we look at forest products and we think about lumber, even within that segment, you know, we may be skewing more to shorter-haul moves than longer-haul moves, just as some of the geography changes occur related to the tariff impact. So in terms of thinking about, you know, the 26 versus 25 and 25 versus 24, right now, it's looking to be about the same level of impact. I think that's how I would quantify it.
Janet Drysdale: Thanks, Fadi, for the question. So let me start with mix, and I wanna take a minute to remind everyone there's kind of two aspects to mix. There's the enterprise level, where, you know, you see volumes move around, let's say, between forest products, intermodal, metals, and minerals, but there's also mix within each segment. So, for example, if we look at forest products and we think about lumber, even within that segment, you know, we may be skewing more to shorter-haul moves than longer-haul moves, just as some of the geography changes occur related to the tariff impact. So in terms of thinking about, you know, the 26 versus 25 and 25 versus 24, right now, it's looking to be about the same level of impact. I think that's how I would quantify it.
Speaker #2: Thanks for the question. So let me start with mix, and I want to take a minute to remind everyone there's kind of two aspects to mix.
Speaker #2: There's the enterprise level where you see volumes move around . Let's say between forest products , intermodal metals and minerals . But there's also mix within each segment .
Speaker #2: So for example , if we look at forest products and we think about lumber , even within that segment , you know , we may be skewing more to shorter haul moves than longer haul moves , just as some of the geography changes occur related to the tariff impacts .
Speaker #2: So in terms of thinking about , you know , the 26 versus 25 and 25 versus 24 , right now , it's looking to be about the same level of impact .
Speaker #2: I think that's how I would quantify it . But again , we're kind of forecasting on a forecast and added more detailed level .
Janet Drysdale: But again, we're kind of forecasting on a forecast and not a more detailed level. So, you know, you're gonna see some of that come through as you follow the weekly volumes and where they show up. In terms of where I think we have a great opportunity to differentiate ourselves going forward is really the northern nature of our franchise, the exposure that we have to Canada's natural resource base, and the, you know, overall Canadian focus on diversifying trade and getting our products to new markets. I would call out, in particular, the BC North, which is just a tremendous region for us, including the Montney Shale, which has one of the largest unconventional reserves. So that's great for us from two perspectives. It's a natural gas liquids exports, and it's the frack sand as an input.
But again, we're kind of forecasting on a forecast and not a more detailed level. So, you know, you're gonna see some of that come through as you follow the weekly volumes and where they show up. In terms of where I think we have a great opportunity to differentiate ourselves going forward is really the northern nature of our franchise, the exposure that we have to Canada's natural resource base, and the, you know, overall Canadian focus on diversifying trade and getting our products to new markets. I would call out, in particular, the BC North, which is just a tremendous region for us, including the Montney Shale, which has one of the largest unconventional reserves. So that's great for us from two perspectives. It's a natural gas liquids exports, and it's the frack sand as an input.
Speaker #2: So, you know, you're going to see some of that come through as you follow the—they show weekly up—and where volumes, in terms of where I think we have a great opportunity to differentiate ourselves going forward, is really the northern nature of our franchise.
Speaker #2: The exposure that we have to Canada's natural resource base and the , you know , overall Canadian focus on diversifying trade and getting our products to new markets .
Speaker #2: I would call out in particular the BC North , which is just a tremendous region for us , including the Montney Shale , which has one of the largest unconventional reserves .
Speaker #2: So that's great for us from two perspectives . It's the natural gas liquids exports , and it's the frac sand as an input .
Janet Drysdale: I would call out, you know, on a longer-term trend, our exposure to Canadian grain and the yields that we're seeing improve there and the canola crushers, and I would particularly do that now in the context of some of the trade resolutions that we've seen with China. You know, as we think about 2027, I like our exposure as well to potash. And I would say, you know, the just natural resources as these progress, things like critical minerals, I think that Canada has a lot of, and just finding new markets. So there's a lot to be optimistic, Fadi, I would say, as we start to think about how we get into 2027 and beyond. Thanks for the question.
I would call out, you know, on a longer-term trend, our exposure to Canadian grain and the yields that we're seeing improve there and the canola crushers, and I would particularly do that now in the context of some of the trade resolutions that we've seen with China. You know, as we think about 2027, I like our exposure as well to potash. And I would say, you know, the just natural resources as these progress, things like critical minerals, I think that Canada has a lot of, and just finding new markets. So there's a lot to be optimistic, Fadi, I would say, as we start to think about how we get into 2027 and beyond. Thanks for the question.
Speaker #2: I would call out , you know , on a longer term trend , our exposure to Canadian grain and the yields that we're seeing improve there in the canola crushers .
Speaker #2: And I would particularly do that now in the context of some of the trade resolutions that we've seen with China . You know , as we think about 2027 , I'd like our exposure as well to would .
Speaker #2: potash you say , And I know , the just natural resources as , as these progress things like critical minerals , I think that Canada has a lot of and just finding new markets .
Speaker #2: So there's a lot to be optimistic . Fatty I would say as we start to think about how we get into . Thanks for the question .
Operator: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Please go ahead.
Operator: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Please go ahead.
Speaker #5: Your next question comes from the line of Chris Wetherbee with Wells Fargo . Please go ahead .
Chris Wetherbee: Yeah, hey, thanks. Good morning, guys. You know, maybe a question on the guidance. As we sort of understand, it seems like volumes may be a little bit more back-half weighted. Seems like FX is maybe a little bit more of a headwind in the first half. So it's kind of the way to think about it, maybe down earnings in the first half, potentially higher earnings in the second half, kind of gets you that little bit of a premium. I guess maybe the buyback could be something that we need to consider in there, too, but just maybe a little bit of help with the shape of 2026.
Chris Wetherbee: Yeah, hey, thanks. Good morning, guys. You know, maybe a question on the guidance. As we sort of understand, it seems like volumes may be a little bit more back-half weighted. Seems like FX is maybe a little bit more of a headwind in the first half. So it's kind of the way to think about it, maybe down earnings in the first half, potentially higher earnings in the second half, kind of gets you that little bit of a premium. I guess maybe the buyback could be something that we need to consider in there, too, but just maybe a little bit of help with the shape of 2026.
Speaker #10: Hey , hey , thanks . Good morning guys . Maybe a question on the guidance as we sort of understand , it seems like volumes , maybe a little bit more back half weighted .
Speaker #10: Seems like FX is maybe a little bit more of a headwind in the first half . So it's kind of the way to think about it .
Speaker #10: Maybe down earnings in the first half , potentially higher earnings in the second half kind of gets you that little bit of a premium .
Speaker #10: I guess maybe the buyback could be something that we need to consider in there too . But maybe a little bit of help with the shape of 2026 .
Tracy Robinson: Chris, I think you've got the contour of the year pretty, pretty good. It will be a softer front end, given the compare last year and what we're seeing, what Janet went over in some of the volumes. We did have some one-time benefits from our cost reduction efforts last year in Q1, so you're gonna see that lighter, and it'll continue to improve over the course of the year. Ghislain, anything to add?
Tracy Robinson: Chris, I think you've got the contour of the year pretty, pretty good. It will be a softer front end, given the compare last year and what we're seeing, what Janet went over in some of the volumes. We did have some one-time benefits from our cost reduction efforts last year in Q1, so you're gonna see that lighter, and it'll continue to improve over the course of the year. Ghislain, anything to add?
Speaker #4: Chris , I think you've got the the contour of the year . Pretty , pretty good . It will be a softer front end given the compare last year we're seeing , and what what Janet went over in some of the volumes we did have some one time benefits from our cost reduction efforts last year .
Speaker #4: In the first quarter . So you're going to see that lighter and it'll continue to improve over the course of the year . Guys , anything to add ?
Remi Lalonde: Yeah, on buyback, Chris, absolutely. As you know, we temporarily going to increase our leverage from 2.5 times to 2.7 times. We wanna take advantage of the cheap share price. We're gonna try to frontload that as much as we can. And then we plan on going back to 2.5 times leverage in 2027. Thanks for the question.
Remi Lalonde: Yeah, on buyback, Chris, absolutely. As you know, we temporarily going to increase our leverage from 2.5 times to 2.7 times. We wanna take advantage of the cheap share price. We're gonna try to frontload that as much as we can. And then we plan on going back to 2.5 times leverage in 2027. Thanks for the question.
Speaker #3: Yeah . On buyback Kris . Absolutely . As you know we . Were temporarily going to increase our leverage from 2.5 times to 2.7 times .
Speaker #3: We want to take advantage of of the cheap share price . We're going to try to load that as much as we can , and then and then we plan on going back to 2.5 times leverage in 2027 .
Speaker #3: Thanks for the question .
Operator: Your next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead.
Operator: Your next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead.
Speaker #5: Next, your question comes from the line of Walter Spracklin with RBC Markets. Please go ahead.
Walter Spracklin: Yeah, thanks very much, operator. Good morning, everyone. Back to you, Janet, on volume. When I look at your 2026 outlook slide, I'm seeing, you know, petroleum and chemicals up. You've got US grain up, you've got Canadian grain up, you've got domestic intermodal up. Those are big segments. The ones you have down is just forestry and fertilizers, so not, not quite as big. So when I eyeball that slide, it feels like 2026 volumes are more up-ish rather than flat-ish. So I'm just curious if you could. You know, is there something I'm missing there? And maybe flag some of your strongest upside, downside declines. And you could also, is Prince Rupert, would you say that's still...
Walter Spracklin: Yeah, thanks very much, operator. Good morning, everyone. Back to you, Janet, on volume. When I look at your 2026 outlook slide, I'm seeing, you know, petroleum and chemicals up. You've got US grain up, you've got Canadian grain up, you've got domestic intermodal up. Those are big segments. The ones you have down is just forestry and fertilizers, so not, not quite as big. So when I eyeball that slide, it feels like 2026 volumes are more up-ish rather than flat-ish. So I'm just curious if you could. You know, is there something I'm missing there? And maybe flag some of your strongest upside, downside declines. And you could also, is Prince Rupert, would you say that's still...
Speaker #11: Yeah . Thanks very much . Operator . Good morning , everyone . Back to you , Janet , on volume . When I look at your 2026 outlook slide , I'm seeing , you know , petroleum and chemicals up .
Speaker #11: You've got us grain up . You've got Canadian grain up . You've got domestic intermodal up . Those are big segments . The ones you have down is just forestry and fertilizer .
Speaker #11: So not as quite big. So when I eyeball that slide, it feels like 2026 volumes are more up-ish rather than flattish.
Speaker #11: So just curious if you could , you know , is is there something I'm missing there ? And maybe flag some of your strongest upside downside declines .
Speaker #11: If you could . Also is Prince Rupert , would you say that still is that running at the 10% run rate that you that you were you were hoping for there when you had us up here last time ?
Walter Spracklin: Is that running at the 10% run rate that you were hoping for there, when you had us up there last time?
Is that running at the 10% run rate that you were hoping for there, when you had us up there last time?
Janet Drysdale: Okay. So I mean, there's some art involved in the slide, obviously, Walter, but appreciate your question. We see the greatest strength in ag and energy. So these are the two that I would call out, and on the energy side, it's really the petroleum and chemicals. And going, you know, kind of one level deeper, it's the NGLs, the refined petroleum products, and hopefully towards the end of the year, we see some incremental crude come on as well. Now, some of that growth depends, of course, on our customers, and some of them are ramping up. And so, you know, you always wanna be a little bit careful about how aggressively you forecast somebody else's ramp up. So I would say that about the business.
Janet Drysdale: Okay. So I mean, there's some art involved in the slide, obviously, Walter, but appreciate your question. We see the greatest strength in ag and energy. So these are the two that I would call out, and on the energy side, it's really the petroleum and chemicals. And going, you know, kind of one level deeper, it's the NGLs, the refined petroleum products, and hopefully towards the end of the year, we see some incremental crude come on as well. Now, some of that growth depends, of course, on our customers, and some of them are ramping up. And so, you know, you always wanna be a little bit careful about how aggressively you forecast somebody else's ramp up. So I would say that about the business.
Speaker #2: Okay . So I mean , there's some art involved in the slide , obviously , Walter , but appreciate your question . We see the greatest strength in ag and energy .
Speaker #2: So these are the two that I would call out . And on the energy side it's really the petroleum and chemicals and going you know , kind of one level deeper .
Speaker #2: It's the NGLs the refined petroleum products . And hopefully towards the end of the year we see some incremental crude come on as well .
Speaker #2: Now , some of that growth depends of course , on our customers and some of them are up . ramping And so , you know , you always want to be a little bit careful about how aggressively you forecast somebody else's ramp up .
Speaker #2: So I would say that about the business in terms of , you know , where are things expected to be weaker , I'm going to still call out the forest products as well as the metals and intermodal .
Janet Drysdale: In terms of, you know, where things are expected to be weaker, I'm gonna still call out the forest products as well as the metals, and intermodal. I think, you know, this one's a bit tough to call right now, and it really depends on the health of the consumer. I am pleased with the resiliency of the consumer, particularly on the US side that we've seen so far, but the tariff situation has made that segment a little hard to predict, and we've kind of gone through these boom and bust cycles. So, I've got some question marks around that. Really pleased with Prince Rupert, and really pleased with the growth that we're seeing there in terms of the Gemini volumes, in terms of the overall performance. And I'm really excited as well.
In terms of, you know, where things are expected to be weaker, I'm gonna still call out the forest products as well as the metals, and intermodal. I think, you know, this one's a bit tough to call right now, and it really depends on the health of the consumer. I am pleased with the resiliency of the consumer, particularly on the US side that we've seen so far, but the tariff situation has made that segment a little hard to predict, and we've kind of gone through these boom and bust cycles. So, I've got some question marks around that. Really pleased with Prince Rupert, and really pleased with the growth that we're seeing there in terms of the Gemini volumes, in terms of the overall performance. And I'm really excited as well.
Speaker #2: I think , you know , this one's a bit tough to call right now , and it really depends on the health of the consumer .
Speaker #2: I am pleased with the resiliency of the consumer, particularly on the U.S. side, that we've seen so far. But the tariff situation has made that segment a little hard to predict.
Speaker #2: And we've kind of gone through these boom and bust cycles . So I've got some question marks around that . Really pleased with Prince Rupert and really pleased with the growth that we're seeing there in terms of the Gemini volumes , in terms of the overall performance .
Speaker #2: And I'm really excited as well. Now that I have the mic, I'll take a few more minutes just to talk about a few other things that we see on the horizon, especially for those that had the chance to visit last Prince Rupert year.
Janet Drysdale: Now that I have the mic, I'll take a few more minutes just to talk about a few other things that we see on the horizon, especially for those that had the chance to visit Prince Rupert last year. The CANXPORT facility is continuing to ramp up, so you'll remember that that's really an innovative, large-scale export transloading facility, where we have the opportunity to do different types of commodities, be it grain, be it plastics, and that expansion is really expected to take hold late this year, maybe a little bit into 2027. We didn't get time to spend while we were up at Rupert around Intermodex, but I wanna call that one out as well. So that's really import transloading, and that gives shippers the ability to consolidate and mix ocean containers into 53-foot domestic units.
Now that I have the mic, I'll take a few more minutes just to talk about a few other things that we see on the horizon, especially for those that had the chance to visit Prince Rupert last year. The CANXPORT facility is continuing to ramp up, so you'll remember that that's really an innovative, large-scale export transloading facility, where we have the opportunity to do different types of commodities, be it grain, be it plastics, and that expansion is really expected to take hold late this year, maybe a little bit into 2027. We didn't get time to spend while we were up at Rupert around Intermodex, but I wanna call that one out as well. So that's really import transloading, and that gives shippers the ability to consolidate and mix ocean containers into 53-foot domestic units.
Speaker #2: The can export facility is continuing to ramp up , so you'll remember that that's really an innovative , large scale export transloading facility where we have the opportunity to do different types of commodities , be it grain , be it plastics , and that expansion is really expected to take hold late this year , maybe a little bit into 2027 .
Speaker #2: We didn't get time to spend while we were up at Rupert around intermodal . But I want to call that one out as well .
Speaker #2: So that's really important . Transloading and that gives shippers the ability to consolidate and mix ocean containers into 53 foot domestic units . So both of these are examples of how we're continuing to invest in the end to end supply chain .
Janet Drysdale: So both of these are examples of how we're continuing to invest in the end-to-end supply chain and our intermodal ecosystem at Prince Rupert. So again, I see a lot of optimism on the horizon around that if we can get past some of the near-term macro issues. Thanks, Walter.
So both of these are examples of how we're continuing to invest in the end-to-end supply chain and our intermodal ecosystem at Prince Rupert. So again, I see a lot of optimism on the horizon around that if we can get past some of the near-term macro issues. Thanks, Walter.
Speaker #2: And our intermodal ecosystem at Prince Rupert . So again , I of optimism on the horizon around that . If we can get past some of the near term macro issues .
Speaker #2: Thanks , Walter .
Operator: Your next question comes from the line of Brian Ossenbeck with JP Morgan. Please go ahead.
Operator: Your next question comes from the line of Brian Ossenbeck with JP Morgan. Please go ahead.
Speaker #5: question comes Your next from the line of Brian Ossenbeck with J.P. Morgan . Please go ahead .
Brian Ossenbeck: Hey, good morning. Thanks for taking the question. So maybe, Tracy, in terms of looking at the last couple of years, you highlighted a bunch of the headwinds that the business has experienced, but, you know, we've still gone from double-digit earnings growth to mid-single, now flat-ish, clearly excluding the headwind on FX, which will be volatile. So just wanted to understand maybe a little bit more in terms of, you know, what you think has changed or maybe not changed from the underlying earnings power in the business. And I'm also wondering, is this a time where you need to spend a little bit more on CapEx through the cycle? I know it's coming down this year, but I think most of that's on equipment and other things like that.
Brian Ossenbeck: Hey, good morning. Thanks for taking the question. So maybe, Tracy, in terms of looking at the last couple of years, you highlighted a bunch of the headwinds that the business has experienced, but, you know, we've still gone from double-digit earnings growth to mid-single, now flat-ish, clearly excluding the headwind on FX, which will be volatile. So just wanted to understand maybe a little bit more in terms of, you know, what you think has changed or maybe not changed from the underlying earnings power in the business. And I'm also wondering, is this a time where you need to spend a little bit more on CapEx through the cycle? I know it's coming down this year, but I think most of that's on equipment and other things like that.
Speaker #12: Good morning . taking the Hey . question . So maybe , Tracey , in terms at the of looking last years , you highlighted a bunch of headwinds that the business has experienced , but we've still gone from double digit growth to mid-single now flattish excluding the headwind on FX , which will be volatile .
Speaker #12: So, just wanted to understand maybe a little bit more in terms of what you think has changed or maybe not changed from the underlying earnings power in the business.
Speaker #12: And and also wondering is this time you need to spend a little bit more on CapEx through the cycle ? I know it's coming down but I think this year , most of that's on equipment and other things like that .
Brian Ossenbeck: So maybe just some comments on the earnings power and the underlying investment you think you need to, to be there. Thank you.
So maybe just some comments on the earnings power and the underlying investment you think you need to, to be there. Thank you.
Speaker #12: So maybe just some comments on the earnings power and the underlying investment you think you need to be there . Thank you .
Tracy Robinson: ...Thanks for the question. So as we look at, you know, what we've been doing over the last year and the last couple of years, you've seen us invest in the network. We had some really kind of important pinch points. If we think about what our, portfolio base, what our commodity base is gonna look like going forward, we've got the Edson Subdivision, now 63% double track. We've added considerable capacity to the Vancouver corridor. We've got work going on up at Prince Rupert. We did a very high return project around the EJ&E. So we've got our network, set up now for the, what we see happening and what Janet has laid out over time. That's been an important part of us getting set up for the future.
Tracy Robinson: ...Thanks for the question. So as we look at, you know, what we've been doing over the last year and the last couple of years, you've seen us invest in the network. We had some really kind of important pinch points. If we think about what our, portfolio base, what our commodity base is gonna look like going forward, we've got the Edson Subdivision, now 63% double track. We've added considerable capacity to the Vancouver corridor. We've got work going on up at Prince Rupert. We did a very high return project around the EJ&E. So we've got our network, set up now for the, what we see happening and what Janet has laid out over time. That's been an important part of us getting set up for the future.
Speaker #4: Thanks for the question . So as we look at , you know , what we've been doing over the last the last year in of couple years , you've seen us invest in the network .
Speaker #4: We had some pinch really kind of important points . If we think about what our portfolio base , what our commodity base is going to look like going forward , we've got the essence of now 63% double track .
Speaker #4: We've added considerable capacity to the Vancouver corridor . We've got work going on up at Prince Rupert . We did a very high return project around the edge , so we've got our network set up now what for the we see happening and what Janet has laid out over time .
Speaker #4: That's been an important part of us getting set up for the future. And as you mentioned, you know, we've done a lot of work on the locomotive fleet.
Tracy Robinson: As you've mentioned, you know, we've done a lot of work on the locomotive fleet. We've gone from the oldest locomotive fleet in the industry to middle of the pack, and, you know, continue to work a little bit on that over the time, and we've got most of our railcar fleets where we need them, so we're poised. Part two of that has been really taking a look at structural costs. Over the past 18 months, we have run really hard at structural cost reduction, and we've found along the way one-offs and just in-year cost reduction. We're always looking for those as well. So the engine, our underlying margin engine is healthier this year than it was last year, and it's gonna be healthier next year.
As you've mentioned, you know, we've done a lot of work on the locomotive fleet. We've gone from the oldest locomotive fleet in the industry to middle of the pack, and, you know, continue to work a little bit on that over the time, and we've got most of our railcar fleets where we need them, so we're poised. Part two of that has been really taking a look at structural costs. Over the past 18 months, we have run really hard at structural cost reduction, and we've found along the way one-offs and just in-year cost reduction. We're always looking for those as well. So the engine, our underlying margin engine is healthier this year than it was last year, and it's gonna be healthier next year.
Speaker #4: We've gone from the oldest locomotive fleet in the industry to middle of the pack pad . And , you know , we'll continue to work a little bit on that over the time .
Speaker #4: And we've got most of our railcar fleets where we need them. So we're poised. Part two of that, then, has really been taking a look at structural cost.
Speaker #4: And over the past 18 months, we have run really hard at structural cost reduction. And we've got the one-offs out of the way and found, along with just in-year cost reduction, we'll see those as well as looking forward.
Speaker #4: And so the engine , our underlying margin engine is healthier this year than it was last year . And it's going to be healthier next year .
Tracy Robinson: So we are right now under the weight of a pretty substantial mix impact and the tariff impacts, which I'm hoping will normalize a little bit as we get through the USMCA review over the course of, well, what I hope will be the next year. So I think we're poised. We're exactly where we wanna be. We have a Western network that is very attractive from the perspective of exports in the global markets and imports out of Asia. We've got an ag sector that's incredibly strong and growing. The mining that Janet talked about is set to continue to grow as we go forward. So I like where we are. We sit atop an incredible resource base that's gonna continue to develop. Thanks for your question.
So we are right now under the weight of a pretty substantial mix impact and the tariff impacts, which I'm hoping will normalize a little bit as we get through the USMCA review over the course of, well, what I hope will be the next year. So I think we're poised. We're exactly where we wanna be. We have a Western network that is very attractive from the perspective of exports in the global markets and imports out of Asia. We've got an ag sector that's incredibly strong and growing. The mining that Janet talked about is set to continue to grow as we go forward. So I like where we are. We sit atop an incredible resource base that's gonna continue to develop. Thanks for your question.
Speaker #4: So we are right now under the weight of a pretty substantial mix impact . And the and the tariff , the tariff impacts , which I'm hoping will normalize a little bit as we get through the Usmca review over the course of what I hope will be the next year .
Speaker #4: So I think we're poised . We're exactly where we want to be . We have a Western network that is very attractive from the perspective of exports into global markets and imports .
Speaker #4: Out of Asia . We've got an ag sector that's incredibly strong and growing . The mining that Janet talked about to is set set to continue to grow as we go forward .
Speaker #4: So I like where we are . We sit atop an incredible resource base that's going to continue to to develop . Thanks for question .
Speaker #4: your
Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Please go ahead.
Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Please go ahead.
Speaker #5: Your next question comes line of from the Connor with Scotiabank ahead .
Konark Gupta: Thanks, Jim. Just a quick clarification before I ask my question. On the EPS, I, I don't think you guys touched upon the pension, if there's any nuance there, and just are you expecting the buybacks to be net accretive to EPS or not? And my question on free cash, actually, you talked about conversion being higher. If you look at 2025, I think the conversion on net income was about 70%, and if you just add on the CAD 500 CapEx reduction, that gets you to 80%. Is there anything else we should be thinking about on free cash conversion in 2026?
Konark Gupta: Thanks, Jim. Just a quick clarification before I ask my question. On the EPS, I, I don't think you guys touched upon the pension, if there's any nuance there, and just are you expecting the buybacks to be net accretive to EPS or not? And my question on free cash, actually, you talked about conversion being higher. If you look at 2025, I think the conversion on net income was about 70%, and if you just add on the CAD 500 CapEx reduction, that gets you to 80%. Is there anything else we should be thinking about on free cash conversion in 2026?
Speaker #13: Thanks . Just a quick clarification before I ask my question on the EPs . I don't guys think you touched upon the pension .
Speaker #13: If there's any nuance there, and just, are you expecting the buybacks to be accretive to, or EPS not? And my question on free cash, actually, you talked about conversion being higher.
Speaker #13: If you look at the 25, I think the conversion on net income was about, if you, 70%. And just add on the $500 CapEx reduction, that gets you to 80%.
Speaker #13: Is there anything else we should be thinking about on free cash conversion in 26 ?
Remi Lalonde: So, thanks, Konark. On pension, just, in 2025, pension was, versus 2024, was a tailwind of about CAD 60 million. If discount rates and interest rates remain where they are, pension will be a tailwind of CAD 40 million in 2026 versus 2025. On share buyback, if you look at it versus after financing costs and where interest rates are, it's very slightly accretive to earnings, not a whole lot. On the free cash flow conversion, we expect it, with the reduction of capital, obviously, to improve. If you look at free cash flow conversion in 2025, it was 70%, so we'll improve on that.
Remi Lalonde: So, thanks, Konark. On pension, just, in 2025, pension was, versus 2024, was a tailwind of about CAD 60 million. If discount rates and interest rates remain where they are, pension will be a tailwind of CAD 40 million in 2026 versus 2025. On share buyback, if you look at it versus after financing costs and where interest rates are, it's very slightly accretive to earnings, not a whole lot. On the free cash flow conversion, we expect it, with the reduction of capital, obviously, to improve. If you look at free cash flow conversion in 2025, it was 70%, so we'll improve on that.
Speaker #3: So , so thanks , Konark . On pension this in 2025 pension was versus 2024 was a tailwind of about $60 million . If discount rate and interest rates remain where they are , pension will be a tailwind in 2026 of $40 million versus 2025 on share buyback .
Speaker #3: If you look at it versus after financing costs and where interest rates are , it's very slightly accretive to earnings , not a whole lot on on the free cash flow conversion .
Speaker #3: We expected with the reduction of capital , obviously , to improve , if you look at free cash flow conversion in in 2025 , it was 70% .
Speaker #3: So we'll improve on that . You've got to take into consideration when you look at cash that we have a sizable cash tax payment on a year over year basis in 26 versus 2025 , because and this is the reason why our effective tax rate is actually increasing is because in our modeling , we expect more more profits to be taxed in Canada at a slightly higher tax rate than it is in the US .
Remi Lalonde: You've got to take into consideration when you look at cash, that we have a sizable cash tax payment on a year-over-year basis in 2026 versus 2025, because... And this is the reason why our effective tax rate is actually increasing, is because in our modeling, we expect more profits to be taxed in Canada at a slightly higher tax rate than it is in the US. So when you put all of this together, it reconciles to the numbers that you're coming up with. Thanks for the question.
You've got to take into consideration when you look at cash, that we have a sizable cash tax payment on a year-over-year basis in 2026 versus 2025, because... And this is the reason why our effective tax rate is actually increasing, is because in our modeling, we expect more profits to be taxed in Canada at a slightly higher tax rate than it is in the US. So when you put all of this together, it reconciles to the numbers that you're coming up with. Thanks for the question.
Speaker #3: when you So put all of this together , it reconciles to the numbers that that you're coming up with . Thanks for the question .
Operator: Your next question comes from the line of Ken Hoexter with Bank of America. Please go ahead.
Operator: Your next question comes from the line of Ken Hoexter with Bank of America. Please go ahead.
Speaker #5: Your next question comes from the line with Bank Hoexter Ken America . of Please go of ahead .
Tracy Robinson: Hey, great. Good morning. Great job on the OR for the quarter, looking, looking for more next year. I guess, you know, Tracy, let me get you back on your soapbox on the, on the, the merger, right? You mentioned you're spending CAD millions into the process. You target significant concessions, you said. Can you talk about what that means? Like, is that protecting sustained access? Is it, is it a, a dollar amount? I just wanna understand, when you say significant, what, what does that mean? And then same thing for USMCA, you know, just big picture. If you're gonna go in negotiations, what, what is the risk here, or what is the benefits that, that you seek to come out of this? Or is the base case that it's, it's just renewed and, and things stay the same? Thanks. Thanks, Ken.
Ken Hoexter: Hey, great. Good morning. Great job on the OR for the quarter, looking, looking for more next year. I guess, you know, Tracy, let me get you back on your soapbox on the, on the, the merger, right? You mentioned you're spending CAD millions into the process. You target significant concessions, you said. Can you talk about what that means? Like, is that protecting sustained access? Is it, is it a, a dollar amount? I just wanna understand, when you say significant, what, what does that mean? And then same thing for USMCA, you know, just big picture. If you're gonna go in negotiations, what, what is the risk here, or what is the benefits that, that you seek to come out of this? Or is the base case that it's, it's just renewed and, and things stay the same? Thanks.
Speaker #14: Hey , great . morning . Good Great job on the Or for the quarter . Looking looking for more next year I guess .
Speaker #14: know , Tracy , let You me get you back on your soapbox on the on the merger . Right . You mentioned you're spending millions into the process .
Speaker #14: You target significant concessions . You said , can you talk about what that Like , means ? is that protecting sustained access ? Is it is it a dollar amount ?
Speaker #14: I just want to understand when you say significant , what does that mean ? And then same thing for Usmca . You know , just big picture .
Speaker #14: If you're going to go in negotiations, what is the risk here, or what are the benefits that you see come out of this?
Speaker #14: Or is the base case that it's just renewed and things stay the same? Thanks.
Tracy Robinson: Thanks, Ken.
Speaker #4: Thanks , Ken . That's a couple of big questions . So first , on the merger . Listen , you know , we are a very strong proponent of competition .
Tracy Robinson: That's a couple big questions. So, you know, first on the merger, listen, you know, we are a very strong proponent of competition, and as we look at this application, we have great concerns and a lot of questions around how it does what it's supposed to do, including when it comes to the standard of increasing rail competition, which is a pretty big bar. And it, you know, in our view, falls considerably short of that. It portrays the merger as a complete end-to-end, in spite of some pretty obvious areas of overlap, that, you know, they didn't use all the full data, they didn't, you know, they didn't give us the projected market share of the new entity, and therefore, how big it would be and the potential harm that would come from market power.
That's a couple big questions. So, you know, first on the merger, listen, you know, we are a very strong proponent of competition, and as we look at this application, we have great concerns and a lot of questions around how it does what it's supposed to do, including when it comes to the standard of increasing rail competition, which is a pretty big bar. And it, you know, in our view, falls considerably short of that. It portrays the merger as a complete end-to-end, in spite of some pretty obvious areas of overlap, that, you know, they didn't use all the full data, they didn't, you know, they didn't give us the projected market share of the new entity, and therefore, how big it would be and the potential harm that would come from market power.
Speaker #4: And as as we look application , we at this have great concerns and a lot of questions around how it does what it's supposed to do , including when it comes to the standard of increasing rail competition , which is a pretty big bar .
Speaker #4: And , you know , view , falls in our considerably short of that . It portrays the merger as a complete end to end , in spite of some pretty obvious areas of overlap that , you know , they didn't use all the full data , they didn't , you know , they didn't give us the projected market share of the new entity and therefore how big it would be .
Speaker #4: And the potential harm that would come from market power. So, these are only examples, but they suggest big gaps in the assessments of harm.
Tracy Robinson: So these are only examples, but they suggest big gaps in the assessments of harm. And as importantly, I think, it failed to propose conditions that would, you know, adequately preserve competition, and it said nothing, I think, on how it was gonna enhance competition, save an open gateway model that I think has been proven not to work, and a gateway commitment that applies to, by our assessment, just a very small fraction of the impacted traffic and not at all the Canadian railways... and it expires with an emerged entity, and of course, its impacts are permanent. So, you know, should this proceed, I think there needs to be a lot more data and information. There's a lot more we all need to know. And that'll lead us to more information on the impact to the shippers across the network.
So these are only examples, but they suggest big gaps in the assessments of harm. And as importantly, I think, it failed to propose conditions that would, you know, adequately preserve competition, and it said nothing, I think, on how it was gonna enhance competition, save an open gateway model that I think has been proven not to work, and a gateway commitment that applies to, by our assessment, just a very small fraction of the impacted traffic and not at all the Canadian railways... and it expires with an emerged entity, and of course, its impacts are permanent. So, you know, should this proceed, I think there needs to be a lot more data and information. There's a lot more we all need to know. And that'll lead us to more information on the impact to the shippers across the network.
Speaker #4: And as importantly , I think it failed to propose conditions that would , you know , adequately preserve competition . And it said nothing , I think , on how it was going to enhance competition , save an open gateway model that I think has been proven not to work , and a gateway commitment that applies to by our assessment , just a very small fraction of the impacted traffic and the Canadian not at all .
Speaker #4: expires And it when the merged entity . And of its course , impacts , our permanent . So , you know , should this proceed .
Speaker #4: I think there needs to be a lot more data and information. There's a lot more we all need to know. And that'll lead us to more information on the impact to the shippers across the network, and what I believe is a much more substantive portfolio of concessions to mitigate those impacts.
Tracy Robinson: And what I believe is a much more substantive portfolio of concessions to mitigate those impacts if we are held to the STB new rules. So as we look at it from a CN perspective, you know, and we've run a number of scenarios, as you would expect, and based on the information that we have and what we think their intent is, which, you know, we need a lot more on that, you know, there will be an impact to competitive access for our customers and for our business. Now, our assessment would suggest that the impact on CN will be less than that of the other roads, but it won't be zero. And so if this merger is to proceed, we intend to rigorously pursue concessions that will protect and improve competition.
And what I believe is a much more substantive portfolio of concessions to mitigate those impacts if we are held to the STB new rules. So as we look at it from a CN perspective, you know, and we've run a number of scenarios, as you would expect, and based on the information that we have and what we think their intent is, which, you know, we need a lot more on that, you know, there will be an impact to competitive access for our customers and for our business. Now, our assessment would suggest that the impact on CN will be less than that of the other roads, but it won't be zero. And so if this merger is to proceed, we intend to rigorously pursue concessions that will protect and improve competition.
Speaker #4: If we are held to the STB , new rules . So as we look at it from a CN perspective , you know , and we've run a number of scenarios , as you would expect , and based on the information that we have and what we think their intent is , which , you know , we need a lot more on that .
Speaker #4: You know , there will be an impact to competitive access for our customers and for our business . Now , our assessment would suggest that the impact on CN will be less than that of the other roads , but it won't be zero .
Speaker #4: And so if this merger is to proceed, we intend to rigorously pursue concessions that will improve, protect, and enhance competition. That means—
Tracy Robinson: And that, you know, means protecting the interests, you know, of our customers and our network and the competitive integrity of our network as we think about it. And we believe that there's opportunities, if this is done properly, for us, for our network, for our operations to play a bigger role, an extended role in providing options to our customers in the regions that, you know, are gonna have that negative, negatively impacted by the merger. So, you know, we think our network can be very helpful there. So they've got a lot of work to do. I'm interested in seeing what they come forward with and how they will step into this question of how they will not only offset the competitive impact, but also increase competition. It's gonna be really interesting. We're ready.
And that, you know, means protecting the interests, you know, of our customers and our network and the competitive integrity of our network as we think about it. And we believe that there's opportunities, if this is done properly, for us, for our network, for our operations to play a bigger role, an extended role in providing options to our customers in the regions that, you know, are gonna have that negative, negatively impacted by the merger. So, you know, we think our network can be very helpful there. So they've got a lot of work to do. I'm interested in seeing what they come forward with and how they will step into this question of how they will not only offset the competitive impact, but also increase competition. It's gonna be really interesting. We're ready.
Speaker #4: protecting And the interests of our customers and our network and our the competitive integrity of our network . As we think about it .
Speaker #4: And we believe that there's opportunities if this is done properly for us , for our network , for operations , to play a bigger role in extended role in providing options to our customers in the regions that you know are going to have that negative negative , be impacted by the merger .
Speaker #4: So , you know , we think our network can can be very helpful there . So they've got a lot of work to do .
Speaker #4: I'm interested in seeing what they come forward with and how they will step into this question of how they will not only offset the competitive impact , but also increase competition .
Speaker #4: It's going to be really interesting. We're ready. Our response will be informed by their next reveal, which I understand we will expect before too very long.
Tracy Robinson: Our response will be informed by their next reveal, and which I understand we will expect before too very long, but we're not getting ahead of them. In the meantime, the rest of the organization is focused on running the day-to-day business, which is equally important. The second question around the USMCA, you know, this is right now, as you know, we've seen the impact. There's certain sectors that have been impacted, and some of them, like forest products, quite significantly impacted. We're continue to work-- Janet and team are working very closely with all of our customers in those sectors to try to, to get their goods into alternative markets. We've had some success on that. As we look forward, it's very difficult to say.
Our response will be informed by their next reveal, and which I understand we will expect before too very long, but we're not getting ahead of them. In the meantime, the rest of the organization is focused on running the day-to-day business, which is equally important. The second question around the USMCA, you know, this is right now, as you know, we've seen the impact. There's certain sectors that have been impacted, and some of them, like forest products, quite significantly impacted. We're continue to work-- Janet and team are working very closely with all of our customers in those sectors to try to, to get their goods into alternative markets. We've had some success on that. As we look forward, it's very difficult to say.
Speaker #4: But we're not getting ahead of them . In the meantime , the rest of the organization is is focused to day on running the day business , which is equally important .
Speaker #4: The second question around the Usmca , you know , this is right now , as you know , we've impact . seen the There are certain sectors that have been impacted .
Speaker #4: And some of them , like forest products , quite significantly impacted . And we're continue to work . Janet and team are working very closely with all of our customers in those sectors to try to to get their goods into alternative markets .
Speaker #4: We've had some success on that . As we look it's forward , very difficult to say . Maybe you have a better view , but it's very difficult to say how this will work out .
Tracy Robinson: Maybe you have a better view, but it's very difficult to say how this will work out. As I read the papers every day, I expect it's gonna be bumpy. There is a prescribed timeline. July is an important month on the review of the USMCA. At the end of the day, as saner heads kind of prevail, we know I think we all understand the importance of the relationship between these two countries and how much we depend upon each other, and I'm hopeful for a productive agreement. Now, what that means is, I mean, the biggest risk around the USMCA is uncertainty. There's investment that's sitting on the sidelines, and our customers included, wondering under what rules they'll be investing in the future and whether they should do that.
Maybe you have a better view, but it's very difficult to say how this will work out. As I read the papers every day, I expect it's gonna be bumpy. There is a prescribed timeline. July is an important month on the review of the USMCA. At the end of the day, as saner heads kind of prevail, we know I think we all understand the importance of the relationship between these two countries and how much we depend upon each other, and I'm hopeful for a productive agreement. Now, what that means is, I mean, the biggest risk around the USMCA is uncertainty. There's investment that's sitting on the sidelines, and our customers included, wondering under what rules they'll be investing in the future and whether they should do that.
Speaker #4: As I read the papers every day , I expect it's going to be bumpy and there is a prescribed timeline . July is an important month on the review of the Usmca .
Speaker #4: The end of the day , as heads kind of saner prevailed . We know the I think we all understand the importance of the relationship between these three countries and how much we depend upon each other .
Speaker #4: And I'm hopeful for a productive agreement . And now what that means is , I mean , the most important , the biggest risk around the Usmca is uncertainty .
Speaker #4: There's investment that's sitting on the sidelines in our customers, included, wondering under what rules they'll be investing in the future and whether they should do that.
Tracy Robinson: I think that as we get an agreement, if it brings the kind of uncertainty that we all need, then that is an important first step. There is an opportunity for some mitigation on those sectors, so a reduction of impact on those sectors that have been impacted, forest products, steel, and others. And then, of course, there's always the risk that there are certain other sectors that will have to deal with the level of tariffs. And depending on what those levels are and which sectors they are, we are working with all of our industries, all of our customers, to understand the range of options that they could look at. And so it's gonna be a busy year from that perspective. I'm not equipped to tell you what to expect on where it will land.
Speaker #4: And I think that as we get an agreement, if it brings a kind of uncertainty that we all need, then that is an important first step.
I think that as we get an agreement, if it brings the kind of uncertainty that we all need, then that is an important first step. There is an opportunity for some mitigation on those sectors, so a reduction of impact on those sectors that have been impacted, forest products, steel, and others. And then, of course, there's always the risk that there are certain other sectors that will have to deal with the level of tariffs. And depending on what those levels are and which sectors they are, we are working with all of our industries, all of our customers, to understand the range of options that they could look at. And so it's gonna be a busy year from that perspective. I'm not equipped to tell you what to expect on where it will land.
Speaker #4: There is an opportunity for some mitigation on those sectors . So a reduction of impact on those that have sectors been impacted . Forest products , steel and others .
Speaker #4: course , there's always the risk And then of that there's certain other sectors that will have to deal with the level of tariffs .
Speaker #4: And depending on what those levels are, and which sectors they are, we are working with all of our industries, all of our customers, to understand the range of options that they could look at.
Speaker #4: And so it's going to be a busy year from that perspective . I'm not equipped to tell you what to expect on where it will land .
Tracy Robinson: I think the good news is that we'll have folks at the table this year and hopefully come out with an agreement. Thanks for your question.
I think the good news is that we'll have folks at the table this year and hopefully come out with an agreement. Thanks for your question.
Speaker #4: I think the good news is , is that we'll have folks at the table this year and hopefully come out with an agreement .
Speaker #4: your question Thanks for .
Operator: Your next question comes from the line of David Vernon with Bernstein. Please go ahead.
Operator: Your next question comes from the line of David Vernon with Bernstein. Please go ahead.
Speaker #5: next Your question comes from the line of David Vernon with Bernstein . Please go ahead .
Tracy Robinson: Hey, good morning, and thanks for taking the question. So, Janet, maybe I wonder if you can help us kinda think about how big of an impact this tariff stuff has had on overall RTS. It sounds like the Western Canadian stuff has been growing. It's just been offset by the tariff losses. I'm just trying to figure out, like, if you were to look at 2024 to the end of your year plan at 2026, like, how much of your business has kind of come off purely because of tariffs? I think it'd be helpful to just understand kind of what the relative weight of the changes in the trade regime has had on your business.
David Vernon: Hey, good morning, and thanks for taking the question. So, Janet, maybe I wonder if you can help us kinda think about how big of an impact this tariff stuff has had on overall RTS. It sounds like the Western Canadian stuff has been growing. It's just been offset by the tariff losses. I'm just trying to figure out, like, if you were to look at 2024 to the end of your year plan at 2026, like, how much of your business has kind of come off purely because of tariffs? I think it'd be helpful to just understand kind of what the relative weight of the changes in the trade regime has had on your business.
Speaker #15: Hey , good morning and thanks for taking the question . So , Janet , maybe I wonder if you can help us kind of think about how big of an impact this this tariff stuff has had on on overall Rtms , it sounds like the Western Canadian stuff has been growing .
Speaker #15: It's just been offset by , by by the tariff losses . I'm just trying to figure out , like if you were to look at 24 to , to to the end of your year plan at 26 , how much of your business is kind of come off purely because of tariffs ?
Speaker #15: I think it would be helpful to just understand kind of what the what the what the relative weight of the , the , the changes in the trade regime have had on , on your business .
Janet Drysdale: Thanks, David, for the question. So I don't, I don't have the volume numbers at my fingertips, but what I did say in the remarks is that for 2025, the tariff impact was, you know, in excess of CAD 350 million. And, and the IR team can kinda help you with that after the quarter, just to kinda translate that back to volumes. Obviously, it's been most impactful, as we said, in forest products and metals and minerals. Feeling very popular today with the questions. I think the next question should go to Pat, for anyone who's listening out there. Do you say anything, Pat?
Janet Drysdale: Thanks, David, for the question. So I don't, I don't have the volume numbers at my fingertips, but what I did say in the remarks is that for 2025, the tariff impact was, you know, in excess of CAD 350 million. And, and the IR team can kinda help you with that after the quarter, just to kinda translate that back to volumes. Obviously, it's been most impactful, as we said, in forest products and metals and minerals. Feeling very popular today with the questions. I think the next question should go to Pat, for anyone who's listening out there. Do you say anything, Pat?
Speaker #2: Thanks , David , for the question . So I don't I don't have the volume numbers at my fingertips , but what I did say in the remarks that is for 2025 , the tariff impact was in excess of 350 million , and the IR team can kind of help you with that .
Speaker #2: After the quarter , just to kind of translate that back to volumes . Obviously , it's been most impactful , as we've said , in forest products and metals and minerals feeling very popular today with the questions .
Speaker #2: I think the next question should go to Pat, for anyone who's listening out there. David...
Ghislain Houle: Hopefully, it's gonna be a tough one.
Ghislain Houle: Hopefully, it's gonna be a tough one.
Speaker #3: And hopefully it's going to be a tough one .
Janet Drysdale: Yeah.
Janet Drysdale: Yeah.
Speaker #2: Yeah .
Operator: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.
Operator: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.
Speaker #5: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.
Tracy Robinson: Good morning, everyone. Maybe this is for Janet or just Len. I know you've changed your guiding philosophy, like you said last quarter. But when you look at the delta between your guide and your peers, particularly your direct peer, based on what you can see so far, kind of is that all down to your new approach to guiding, or is there something idiosyncratically different with your end market approach or your comps relative to others this year? I'm gonna start off with that, Ravi. Listen, we did a lot of thinking around guidance, and we've seen over the last number of years in what is a very volatile kind of environment, a number of peers, and including us, that have had to change guidance, withdraw guidance, or just miss guidance.
Ravi Shanker: Good morning, everyone. Maybe this is for Janet or just Len. I know you've changed your guiding philosophy, like you said last quarter. But when you look at the delta between your guide and your peers, particularly your direct peer, based on what you can see so far, kind of is that all down to your new approach to guiding, or is there something idiosyncratically different with your end market approach or your comps relative to othersthis year?
Speaker #16: Good morning everyone . Maybe this is for just . I Janet or know you've changed your guiding philosophy . Like you said quarter last , but when you look at the delta between your guide and your peers , particularly your direct peer , based on what you can see so far , kind of .
Speaker #16: Is that all down to your approach to new guiding , or is there something or your with your end idiosyncratic , different approach comps relative to others ?
Speaker #16: This year .
Janet Drysdale: I'm gonna start off with that, Ravi. Listen, we did a lot of thinking around guidance, and we've seen over the last number of years in what is a very volatile kind of environment, a number of peers, and including us, that have had to change guidance, withdraw guidance, or just miss guidance.
Speaker #4: to start , I'm going off with that . Ravi . Listen , we did a lot of thinking around guidance , and we've seen over the last number of years and what is a very volatile kind of environment , a number of peers and including us had to that have change guidance , withdraw guidance or just misguidance .
Tracy Robinson: And so that's not a very productive way to engage with you guys or way to engage in with our business. So we think that this is the right model for right now with this level of uncertainty. Next year is, if we're in a different position, we'll, we will look at maybe something more precise. But as we look forward, we think that this is, given the unique volatility that we're facing around the tariffs, the tariff impact that Janet's gone through, you know, the currency and how it's moving this year, in particular, we think this is the right way to go.
And so that's not a very productive way to engage with you guys or way to engage in with our business. So we think that this is the right model for right now with this level of uncertainty. Next year is, if we're in a different position, we'll, we will look at maybe something more precise. But as we look forward, we think that this is, given the unique volatility that we're facing around the tariffs, the tariff impact that Janet's gone through, you know, the currency and how it's moving this year, in particular, we think this is the right way to go.
Speaker #4: And so that's not a very productive way to engage with you guys or a way to engage with our business. So we think that this is the right model for right now, with this level of uncertainty. Next year, if we're in a different position, we'll—
Speaker #4: We will look at maybe something more precise. But as we look forward, we think that this is, given the unique volatility that we're facing around the tariffs, the tariff impact that Janet's gone through.
Speaker #4: You know the currency and how it's moving this year in particular . We think this is the right the right way to look if you're talking about us in our Canadian peer I would say that over time as our networks and our business have evolved , have more we would exposure to Canada than than I expect they would .
Tracy Robinson: If you're talking about us and our Canadian peer, I would say that over time, as our networks and our business have evolved, we would have more exposure to Canada than I expect they would. They'll suffer, I'm sure, as we have, and I think they mentioned it on their call as well, the impact on tariffs. Ghislain, do you have anything to add?
If you're talking about us and our Canadian peer, I would say that over time, as our networks and our business have evolved, we would have more exposure to Canada than I expect they would. They'll suffer, I'm sure, as we have, and I think they mentioned it on their call as well, the impact on tariffs. Ghislain, do you have anything to add?
Speaker #4: They'll suffer , I'm sure , as we have . And I think they they mentioned it on their call as well . The impact on tariffs .
Speaker #4: Do you have anything to add ?
Remi Lalonde: Yeah, maybe give a little bit of visibility on some of the one-timers that I talked about in my prepared remarks. So obviously, having a smaller capital envelope, it impacts capital credits, and it's sizable. I would quantify it to be in the range of about CAD 100 million. That will be mostly in labor and fringe benefits and a little bit in PNSM as well. When you look at other income, we have about close to CAD 100 million in 2025. Now, we always have some other income, but we don't believe that it'll be probably as high in 2026 as it is in 2025. And as I said, our effective tax rate is increasing. We finish in 2025 at 24.7. We're giving a range of 25 to 26%.
Remi Lalonde: Yeah, maybe give a little bit of visibility on some of the one-timers that I talked about in my prepared remarks. So obviously, having a smaller capital envelope, it impacts capital credits, and it's sizable. I would quantify it to be in the range of about CAD 100 million. That will be mostly in labor and fringe benefits and a little bit in PNSM as well. When you look at other income, we have about close to CAD 100 million in 2025. Now, we always have some other income, but we don't believe that it'll be probably as high in 2026 as it is in 2025. And as I said, our effective tax rate is increasing. We finish in 2025 at 24.7. We're giving a range of 25 to 26%.
Speaker #3: Maybe give Yeah . a little bit of visibility on some of the one timers that I talked about in in my prepared remarks .
Speaker #3: So obviously having a smaller capital envelope , it impacts capital credits . And I would it's sizable . I would I would quantify it to be in of the range about 100 million .
Speaker #3: That will be mostly in labor and fringe benefits, and a little bit in, well, NZM as well. When you look at other income, we have about close to $100 million in 2025.
Speaker #3: Now . We always have some other income , but we don't believe that it will be probably as high in 2026 as it is in 2025 , and as I said , our effective tax rate is increasing .
Speaker #3: We finish in 2025 at 24.7 . We're giving a range of 25 to 26% to quantify this , I think it's close to $100 million .
Remi Lalonde: To quantify this, I think it's close to CAD 100 million. These are sizable headwinds that we have to work to try to offset as much as possible in being more productive and being more efficient, which we have been tremendously in 2025. We did a heavy load over there, and we're still gonna turn all the rocks in 2026 to try to offset as much of these headwinds that we have in 2026. Thanks, Ravi, for the question.
To quantify this, I think it's close to CAD 100 million. These are sizable headwinds that we have to work to try to offset as much as possible in being more productive and being more efficient, which we have been tremendously in 2025. We did a heavy load over there, and we're still gonna turn all the rocks in 2026 to try to offset as much of these headwinds that we have in 2026. Thanks, Ravi, for the question.
Speaker #3: So these are sizable headwinds that we to have work to try to offset as much as possible . And being more productive and being more efficient , which we have been tremendously in 2025 , we did the heavy load over there , and we're still going to be we're to turn still going all the rocks in 2026 to try to offset as much of these headwinds that we have in 2026 .
Speaker #3: Thanks for Ravi the for the question .
Operator: Your next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.
Operator: Your next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.
Speaker #5: Your next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.
Operator: Hi, good morning. Thank you. I wanted to maybe go back to the consolidation in the space. You did mention about CAD 15 million in advisory fees associated with the industry consolidation. Can you provide a bit more color on maybe what drove the decision to bring in external advisors and what areas they're helping you to evaluate, including, you know, the evaluation of potential further consolidation options? Thanks.
Stephanie Moore: Hi, good morning. Thank you. I wanted to maybe go back to the consolidation in the space. You did mention about CAD 15 million in advisory fees associated with the industry consolidation. Can you provide a bit more color on maybe what drove the decision to bring in external advisors and what areas they're helping you to evaluate, including, you know, the evaluation of potential further consolidation options? Thanks.
Speaker #17: Hi . Good morning . Thank you . I wanted to maybe go back to the consolidation and the space . You did mention about 15 million in advisory fees with the associated industry provide a consolidation .
Speaker #17: A bit more—can you elaborate on what drove the decision to bring in external advisors, and what areas they're helping you evaluate, including the evaluation of potential further consolidation options?
Speaker #17: Thanks .
Tracy Robinson: Listen, yeah, thank you for that question. Listen, this is a big deal. It's an industry-changing deal, and it's, I think, incumbent upon all of us who are gonna participate, that we understand the detail, and there is a great level of detail that we're gonna be looking at, on how this is gonna impact the industry. So I think where I would expect most or all of us to bring in experts, to make sure that we do that, and we do that in a way that isn't disrupting how we run the day-to-day business, right? Most, if not, nearly all of this organization, needs to be focused on delivering for our customers every day. On Pat, there you go, delivering the next level of cost reduction, Janet, on growth.
Tracy Robinson: Listen, yeah, thank you for that question. Listen, this is a big deal. It's an industry-changing deal, and it's, I think, incumbent upon all of us who are gonna participate, that we understand the detail, and there is a great level of detail that we're gonna be looking at, on how this is gonna impact the industry. So I think where I would expect most or all of us to bring in experts, to make sure that we do that, and we do that in a way that isn't disrupting how we run the day-to-day business, right? Most, if not, nearly all of this organization, needs to be focused on delivering for our customers every day. On Pat, there you go, delivering the next level of cost reduction, Janet, on growth.
Speaker #4: Listen , yeah . Thank you for that question . Listen , is this deal . It's a industry changing deal . And I think an inherent upon all of us are going to participate that we understand the detail .
Speaker #4: And there there is a of detail that we're great level going to be looking on how at this is going to impact the industry .
Speaker #4: So I think where I would expect most or all of us are bringing in experts to make sure that we do that , and we do that in a way that isn't disrupting how we run day business .
Speaker #4: Right? The day to, if not nearly all, of this organization, most focused on, needs to be delivering for our customers every day on Pat.
Speaker #4: There you go . Delivering the next level of cost reduction . Janet , on growth . And so we have important and trusted advisors that we bring to bear on this .
Tracy Robinson: And so, we have important and trusted advisors that we bring to bear on this.
And so, we have important and trusted advisors that we bring to bear on this.
Remi Lalonde: I would say, I would say that this is clearly non-recurring, and it's not reflective of our, of our operating performance, and this is why we have non-GAAP, the amount. We're being very, conservative on this stuff and, very intentional, and, this is the reason why, we have non-GAAP it. Thanks for the question.
Remi Lalonde: I would say, I would say that this is clearly non-recurring, and it's not reflective of our, of our operating performance, and this is why we have non-GAAP, the amount. We're being very, conservative on this stuff and, very intentional, and, this is the reason why, we have non-GAAP it. Thanks for the question.
Speaker #3: And I would say I would say that this is clearly nonrecurring and it's not reflective of our of our operating performance . And this is why we have non-GAAP the amount we're being very conservative on this stuff .
Speaker #3: And very intentional, and this is the reason why we have non-GAAP. Thanks for the question.
Operator: Your next question comes from the line of Benoit Poirier with Desjardins. Please go ahead.
Operator: Your next question comes from the line of Benoit Poirier with Desjardins. Please go ahead.
Speaker #5: Your next question comes from the line of Benoit Poirier with Desjardins. Please go ahead.
Benoit Poirier: Yes, thank you very much, and thanks for taking my question. I understand 2026 will be impacted by mix, tax, other income and in tax. And Ghislain, you provided the great granularity for 2026. But looking beyond 2026, let's say 2027, under a normal environment with stabilized mix, FX environment, what kind of volume growth would you need in order to generate double-digit EPS growth? And I, I'm sure you already ran lots of scenario, but I would be curious to see what kind of volume growth you need in order to generate double-digit EPS growth under a more stabilized environment. Thank you.
Benoit Poirier: Yes, thank you very much, and thanks for taking my question. I understand 2026 will be impacted by mix, tax, other income and in tax. And Ghislain, you provided the great granularity for 2026. But looking beyond 2026, let's say 2027, under a normal environment with stabilized mix, FX environment, what kind of volume growth would you need in order to generate double-digit EPS growth? And I, I'm sure you already ran lots of scenario, but I would be curious to see what kind of volume growth you need in order to generate double-digit EPS growth under a more stabilized environment. Thank you.
Speaker #18: very much . Thank you And thanks for taking my question . I understand 2026 will be impacted by mix tax . Other income and FX .
Speaker #18: As you provided the great granularity for 2026 . But looking beyond 2026 , let's say 2027 under normal environment with stabilized mix effects environment , what kind of volume growth would you need in order to generate double digit growth ?
Speaker #18: And I'm sure you already ran a lot of scenarios , but I would be curious what to see kind of volume growth you generate .
Speaker #18: You need in order to generate double digit EPs growth under a more stabilized environment . Thank you .
Tracy Robinson: Bonjour, Benoit. Listen, here's maybe the way to think about it. We are continuing to build a more efficient and lean engine, which is very good. That gives us great operating leverage. As we go forward, you know, the real catalyst for realizing that leverage is volume growth, as you know. Now it always depends on which volume growth and where in the network it is, but in general, I would suggest that if you think about mid-single digit volume growth, with the cost structure that we've built and are continuing to build, you can see us generate double-digit EPS.
Tracy Robinson: Bonjour, Benoit. Listen, here's maybe the way to think about it. We are continuing to build a more efficient and lean engine, which is very good. That gives us great operating leverage. As we go forward, you know, the real catalyst for realizing that leverage is volume growth, as you know. Now it always depends on which volume growth and where in the network it is, but in general, I would suggest that if you think about mid-single digit volume growth, with the cost structure that we've built and are continuing to build, you can see us generate double-digit EPS.
Speaker #4: Bonjour , Benoit . Listen , here's maybe it the way to think about . We are continuing to build a more efficient and lean engine , which is very good .
Speaker #4: That gives us great operating leverage. And as we go forward, you know, the real catalyst for realizing that leverage is volume growth.
Speaker #4: is know As you , and it always depends on which growth and where volume in the network it is . But in general , I would suggest that if you think about mid-single digit volume growth with the cost structure that we've built and are continuing to build , you can see us generate digit double EPs .
Operator: Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.
Operator: Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.
Speaker #5: Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.
Steve Hansen: Yeah, good morning, guys. Thanks for the time. I just wanna come back to the contour aspect of your guidance, if I might. Is it possible that the belly of the year might not be stronger than the back half, specifically? I'm just cognizant of the fact that I think pet chem, coal, met min, all got beat up last year through Q2, Q3 on some one-time issues, either at the customer or the mine site level. And then we've got a record grain harvest carryover here that should benefit those same quarters.
Steve Hansen: Yeah, good morning, guys. Thanks for the time. I just wanna come back to the contour aspect of your guidance, if I might. Is it possible that the belly of the year might not be stronger than the back half, specifically? I'm just cognizant of the fact that I think pet chem, coal, met min, all got beat up last year through Q2, Q3 on some one-time issues, either at the customer or the mine site level. And then we've got a record grain harvest carryover here that should benefit those same quarters.
Speaker #14: Yeah . Good morning guys . Thanks for the I just want to come time . back to the contour aspect of your guidance .
Speaker #14: If I might , is it possible that the belly of the year might not be stronger than the back half ? Specifically , I'm just cognizant of the fact that I think Petcam coal met min all got beat up last year through two Q3 Q on issues , customer some one time either at the or the mine site level .
Speaker #14: And then we've got a record grain carryover here carrier harvest that should benefit those same quarters . All while we're looking at a comp on Q4 .
Jonathan Chappell: ... all while we're looking at a comp on Q4, that's a record grain moves, I think you articulated in your comments. I'm just trying to understand that counter side a little bit better and whether or not we have a better opportunity in the middle part of the year. Thanks.
Jonathan Chappell: ... all while we're looking at a comp on Q4, that's a record grain moves, I think you articulated in your comments. I'm just trying to understand that counter side a little bit better and whether or not we have a better opportunity in the middle part of the year. Thanks.
Speaker #14: That's a record grain move, as I think you articulated in your comments. I'm just trying to understand that contour side a little bit better.
Speaker #14: not we And whether or have better opportunity in the middle part of the year . Thanks .
Tracy Robinson: Yeah, I think you're probably, that's probably a great way to think about it. There's two pieces of it, of course. One is how the volume showed up last year, and I think you've got that, you've got that right. We did also have, you know, the refinery shut, shutdowns in what was it? Q2, Q3, Janet?
Tracy Robinson: Yeah, I think you're probably, that's probably a great way to think about it. There's two pieces of it, of course. One is how the volume showed up last year, and I think you've got that, you've got that right. We did also have, you know, the refinery shut, shutdowns in what was it? Q2, Q3, Janet?
Speaker #4: Yeah , I think you're probably that's probably a great way to think about it . There's two pieces of it , of course .
Speaker #4: One is how the up last volume showed year . And you've I think got that . You've got that right . We also did have , you know , the refinery shut a shutdowns in .
Speaker #4: What was it ? Q2 Q3 Janet .
Janet Drysdale: Yep, exactly.
Janet Drysdale: Yep, exactly.
Speaker #2: Yep .
Speaker #4: Exactly . The other the other side of it , of course , is the costs in our efforts on costs . And when some of those the course appeared over year , and that is a little lumpier , although a bunch of that was early on in the year .
Tracy Robinson: The other, the other side of it, of course, is the cost and our efforts on cost and when some of those appeared over the course of the year, and that is a little lumpier, although a bunch of that was early on in the year. So I would say that the way you've constructed that is pretty good. So we'll go with that.
Tracy Robinson: The other, the other side of it, of course, is the cost and our efforts on cost and when some of those appeared over the course of the year, and that is a little lumpier, although a bunch of that was early on in the year. So I would say that the way you've constructed that is pretty good. So we'll go with that.
Speaker #4: So I would say that the way you've constructed that is pretty good . So we'll go with that .
Operator: Okay. Your next question comes from the line of Kevin Chiang with CIBC. Please go ahead.
Operator: Okay. Your next question comes from the line of Kevin Chiang with CIBC. Please go ahead.
Speaker #5: Okay. Your next question comes from the line of Kevin Chang with CIBC. Please go ahead.
Kevin Chiang: Thanks for taking my question. Maybe I will throw this one to Pat there. You know, Janet laid out some of these unique opportunities. You know, we talked about these Canadian nation-building projects. It seems like a lot of it hits your Western network. And when I think back to the investor day, a few years ago, it felt like a focus was creating a more balanced network, but this growth pipeline might actually exacerbate that imbalance. Just wondering how you think about the long-term capacity investments you might need to make on that part of your network, or do you feel you have excess capacity now to absorb this growth?
Kevin Chiang: Thanks for taking my question. Maybe I will throw this one to Pat there. You know, Janet laid out some of these unique opportunities. You know, we talked about these Canadian nation-building projects. It seems like a lot of it hits your Western network. And when I think back to the investor day, a few years ago, it felt like a focus was creating a more balanced network, but this growth pipeline might actually exacerbate that imbalance. Just wondering how you think about the long-term capacity investments you might need to make on that part of your network, or do you feel you have excess capacity now to absorb this growth?
Speaker #19: Thanks for taking my Maybe I question . will throw this one to Pat there . You know , John laid out some of these unique opportunities .
Speaker #19: You know , we talked about these Canadian nation building projects . It seems like a lot of it hits your your Western network .
Speaker #19: And when I think back to the Investor Day a few years ago, it felt like the focus was creating a more balanced network.
Speaker #19: But this growth pipeline might, might actually exacerbate that imbalance. Just wondering how you think about the long-term capacity investments you might need to make on that part of your network?
Speaker #19: Or do you feel you have excess capacity now to absorb this growth?
Patrick Whitehead: Yeah, Kevin, I think, Janet coerced you into the question my way. Great question. Thank you for that. I would say-
Pat Whitehead: Yeah, Kevin, I think, Janet coerced you into the question my way. Great question. Thank you for that. I would say-
Speaker #1: Kevin , I Yeah , think Janet coerced you into the question my way with great question . Thank you for that . I would say I would say this the investments that we in made 2025 , in the West .
Janet Drysdale: Sure.
Janet Drysdale: Sure.
Patrick Whitehead: I would say this, the investments that we made in 2025 in the West, particularly as Tracy pointed out, the essence of being now 63% double track, previously at, you know, around 40%, has created about, we would call it 6 trains of capacity in that corridor. So we have plenty of room to grow. We have locomotives that are stored. We have, you know, today, we're almost at 800 furloughed employees, so we have levers to pull as volume shows up. I would say that as it relates to balancing, we do a lot of work around balancing each of the corridors. So I feel good about our ability to grow. The capacity is there.
Pat Whitehead: I would say this, the investments that we made in 2025 in the West, particularly as Tracy pointed out, the essence of being now 63% double track, previously at, you know, around 40%, has created about, we would call it 6 trains of capacity in that corridor. So we have plenty of room to grow. We have locomotives that are stored. We have, you know, today, we're almost at 800 furloughed employees, so we have levers to pull as volume shows up. I would say that as it relates to balancing, we do a lot of work around balancing each of the corridors. So I feel good about our ability to grow. The capacity is there.
Speaker #1: Particularly, as Tracy pointed out, the Edson sub being now 63% double track, previously at around 40%, has—we've created about, would call it, six trains of capacity in that corridor.
Speaker #1: So we have plenty of grow . room to We have locomotives that are stored . We have know you today we're almost at 800 furloughed employees .
Speaker #1: So we have levers to pull as volume shows up . And I would say that as it relates to balancing , we do a lot of work around balancing each of the corridors .
Speaker #1: So I feel good about our ability to grow the capacity is there . The locomotive fleet is more reliable than ever , and , you know , we feel very we feel very good about our ability to grow in that corridor .
Patrick Whitehead: The locomotive fleet is more reliable than ever, and, you know, we, we feel very, we feel very good about our ability to grow in that corridor.
The locomotive fleet is more reliable than ever, and, you know, we, we feel very, we feel very good about our ability to grow in that corridor.
Janet Drysdale: And I would just add, you know, we're gonna take the growth where it comes, and we're gonna figure out how to handle it. I think, you know, you have to appreciate as well that some of the weakness in forest products will actually help create some capacity in the western region for other commodities as well. So, Pat and I stay very closely connected on thinking about, you know, where the volumes are gonna come online and how we're gonna handle them.
Janet Drysdale: And I would just add, you know, we're gonna take the growth where it comes, and we're gonna figure out how to handle it. I think, you know, you have to appreciate as well that some of the weakness in forest products will actually help create some capacity in the western region for other commodities as well. So, Pat and I stay very closely connected on thinking about, you know, where the volumes are gonna come online and how we're gonna handle them.
Speaker #2: And I would just add , you know , we're going to take the growth where it comes and to figure we're going out how to handle it .
Speaker #2: I think , you know , you have to appreciate as well some of the weakness in forest products will actually help create some capacity in the western region for other commodities as well .
Speaker #2: So Pat and I stay very closely connected on thinking about , you know , where the volumes are going to come online and how we're going to handle them .
Operator: Your final question today comes from the line of Jonathan Chappell with Evercore ISI. Please go ahead.
Operator: Your final question today comes from the line of Jonathan Chappell with Evercore ISI. Please go ahead.
Speaker #5: Your final question today comes from the line of Jonathan Chappell with Evercore ISI. Please go ahead.
Jonathan Chappell: Thank you. Good morning. Ghislain, to further to Scott's question, you gave a good explanation to what happened to DNA in the fourth quarter. But as we think about that going forward, if we could-- took the fourth quarter run rate, annualize that, put 4% inflation on it, you'd be looking at a DNA number that's down CAD 40 million year over year. So I wanna make sure we're thinking about that from the right starting point. And then also just overall inflation. You mentioned that CAD 100 million, potentially in the comp and bend line with some in purchase services. What's the comp per employee look like under that scenario?
Jonathan Chappell: Thank you. Good morning. Ghislain, to further to Scott's question, you gave a good explanation to what happened to DNA in the fourth quarter. But as we think about that going forward, if we could-- took the fourth quarter run rate, annualize that, put 4% inflation on it, you'd be looking at a DNA number that's down CAD 40 million year over year. So I wanna make sure we're thinking about that from the right starting point. And then also just overall inflation. You mentioned that CAD 100 million, potentially in the comp and bend line with some in purchase services. What's the comp per employee look like under that scenario?
Speaker #20: Thank you. Good morning. Just further to Scott's question, you gave a good explanation of what happened to DNA in the fourth quarter.
Speaker #20: But as we about think that going forward , if we took the fourth quarter run rate annualized , that put 4% inflation on it , you'd be looking at a DNA number that's down 40 million So I want to year year .
Speaker #20: Make sure we're thinking about that from the right starting point. And then also just overall inflation. You mentioned that $100 million potentially in the comp and ben line.
Speaker #20: Would someone purchase services? What's the employee look like under that scenario?
Remi Lalonde: Okay. Well, the depreciation, Jonathan, depreciation on a year-over-year basis, if you look in the past, had always been about a headwind of about CAD 100 million. It's still gonna be a headwind between 2026 and 2025, but it's gonna be smaller, call it half of it going forward, because we'll have the full year effect of the depreciation study impacting 2026. So that's gonna help a little bit. That's your first piece of the question. In terms of inflation, when you put the all-in rail inflation, I think that it's smaller, lower, slightly lower than 3%. And then comp per employee is, when you look at comp per employee in Q4, it was about 7%, and it's gonna be in the mid-single-digit range for 2026.
Remi Lalonde: Okay. Well, the depreciation, Jonathan, depreciation on a year-over-year basis, if you look in the past, had always been about a headwind of about CAD 100 million. It's still gonna be a headwind between 2026 and 2025, but it's gonna be smaller, call it half of it going forward, because we'll have the full year effect of the depreciation study impacting 2026. So that's gonna help a little bit. That's your first piece of the question. In terms of inflation, when you put the all-in rail inflation, I think that it's smaller, lower, slightly lower than 3%. And then comp per employee is, when you look at comp per employee in Q4, it was about 7%, and it's gonna be in the mid-single-digit range for 2026.
Speaker #3: Okay . Well depreciation Jonathan depreciation a year over year basis . If you look in the past it's always been about a headwind of about 100 million .
Speaker #3: It's still going to be a headwind between 2026 and 2025 . But it's going to be smaller . Call it half of it going forward because we'll have the full year effect of the study impacting 2026 .
Speaker #3: So that's help a little going to bit . That's your first piece of the question in terms of inflation . When you put the all in rail inflation , I think that it's smaller .
Speaker #3: It lower slightly lower than 3% . And then comp per employee is is when you look at comp employee in Q4 , was it about 7% .
Speaker #3: And it's going to be in the mid single digit range for 2026 . I hope that answers your question .
Remi Lalonde: I hope that answers your question.
I hope that answers your question.
Operator: This concludes the question and answer session. I would now like to turn the call back over to Tracy Robinson.
Operator: This concludes the question and answer session. I would now like to turn the call back over to Tracy Robinson.
Speaker #5: This concludes the question and answer session . I would now like to turn the call back over to Tracy Robinson .
Tracy Robinson: Thanks, Krista. Now, just before we conclude today, I've got one more piece of important news. Today was the last call for our Head of Investor Relations, Stacy Alderson. Stacy's elected to retire on 1 May. So as you all know her, she's had an exceptional 30-year career here at CN, defined by leadership, integrity, and lasting impact, and she's touched many parts of our business over those years: strategic planning, acquisitions, network development, financial planning. She's done it all, Stacy, and, of course, our relationships with all of you. We see your fingerprints on this organization everywhere. Stacy, we're gonna miss you, but we're very happy for you-
Tracy Robinson: Thanks, Krista. Now, just before we conclude today, I've got one more piece of important news. Today was the last call for our Head of Investor Relations, Stacy Alderson. Stacy's elected to retire on 1 May. So as you all know her, she's had an exceptional 30-year career here at CN, defined by leadership, integrity, and lasting impact, and she's touched many parts of our business over those years: strategic planning, acquisitions, network development, financial planning. She's done it all, Stacy, and, of course, our relationships with all of you. We see your fingerprints on this organization everywhere. Stacy, we're gonna miss you, but we're very happy for you-
Speaker #4: Thanks , Kristen . Now , just before we conclude today , I've got one more piece of important news . Today was the last call for our Head of Investor Relations , Stacy Alderson .
Speaker #4: Stacy's elected to retire on May 1st , so as you all know her , she's had an exceptional 30 year career here at CNN , defined by leadership , integrity and she's touched impact .
Speaker #4: Stacy's elected to retire on May 1st , so as you all know her , she's had an exceptional 30 year career here at CNN , defined by leadership , integrity and she's touched lasting many parts of our business over those years .
Speaker #4: Strategic planning , acquisitions , network development , financial planning . She's done it all . Stacy . And of course , our relationships with all of you .
Speaker #4: We see your fingerprints on this organization everywhere. Stacy, we're going to miss you. But we're very happy for you, and we're happy for your family.
Janet Drysdale: Thank you.
Janet Drysdale: Thank you.
Tracy Robinson: And we're happy for your family on the next chapter.
Tracy Robinson: And we're happy for your family on the next chapter.
Speaker #4: On the next chapter . Thank you . So we're not leaving the job open . I'm pleased to announce the appointment of Jamie Lockwood as vice president , Investor and Special Projects .
Janet Drysdale: Thank you.
Janet Drysdale: Thank you.
Tracy Robinson: So we're not leaving the job open. I'm pleased to announce the appointment of Jamie Lockwood as Vice President, Investor Relations and Special Projects. Now, Jamie is back in Montreal. He brings about 18 years of deep railroad experience. He's got a strong perspective. He's spanned finance, internal audit, supply chain, and most recently, a big kind of job in engineering, where with Pat, he's been leading the transformation of our engineering strategy and execution. Jamie, we're happy to have you back here in Montreal, and I know all of you will enjoy working with him. So Stacy and Jamie will work closely together over the next month or so to just ensure a smooth transition. I know you'll join me in congratulating both of them.
Tracy Robinson: So we're not leaving the job open. I'm pleased to announce the appointment of Jamie Lockwood as Vice President, Investor Relations and Special Projects. Now, Jamie is back in Montreal. He brings about 18 years of deep railroad experience. He's got a strong perspective. He's spanned finance, internal audit, supply chain, and most recently, a big kind of job in engineering, where with Pat, he's been leading the transformation of our engineering strategy and execution. Jamie, we're happy to have you back here in Montreal, and I know all of you will enjoy working with him. So Stacy and Jamie will work closely together over the next month or so to just ensure a smooth transition. I know you'll join me in congratulating both of them.
Speaker #4: Now, Jamie is back in Montreal. He brings about 18 years of deeper railroad experience. He's got a strong perspective that spans finance.
Speaker #4: internal audit , He's supply chain and most recently a big kind of job . And in engineering , where it Patty's been leading the transformation of our engineering strategy and execution .
Speaker #4: Jamie , we're happy to have you Montreal . And I know all of you enjoy working will with them . So Stacy and Jamie will work closely the next month or together over so to ensure a just to transition .
Speaker #4: I know you'll join me in both of them congratulating finally , I then just want to take the and opportunity to thank the entire CN team for all of your focus , your resilience all over the last year and in the year coming .
Tracy Robinson: And then, just finally, I want to take the opportunity to thank the entire CN team for all of your contributions, your focus, your resilience, all over the last year and in the year coming. Railroading isn't an easy business, but you all do it so very well, and it's an honor to work alongside all of you. Thank you for joining us today, and we'll talk to you soon.
And then, just finally, I want to take the opportunity to thank the entire CN team for all of your contributions, your focus, your resilience, all over the last year and in the year coming. Railroading isn't an easy business, but you all do it so very well, and it's an honor to work alongside all of you. Thank you for joining us today, and we'll talk to you soon.
Speaker #4: Railroading isn't an easy business, but you all do it so very well, and it's an honor to work alongside all of you. Thank you for you.
Speaker #4: Joining us today, and soon to you.
Operator: Ladies and gentlemen, the conference call has now ended. Thank you for your participation, and you may disconnect your lines.
Operator: Ladies and gentlemen, the conference call has now ended. Thank you for your participation, and you may disconnect your lines.
