Q2 2026 Canadian National Railway Co Earnings Call

Speaker #1: Good morning. My name is Krista, and I will be your conference operator today. I would like to welcome everyone to the Canadian National Railway Q2 2026 financial results conference call.

Speaker #1: 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. At this time, I would like to turn the call over to Jamie Lockwood, CN's Vice President of Investor Relations and Special Projects.

Speaker #1: Ladies and gentlemen, Mr. Lockwood.

Speaker #2: Thank you, Krista. Bonjour à tous et merci de vous joindre à notre appel conférence sur les résultats du deuxième trimestre 2026 du CN. Welcome, everyone.

Jamie Lockwood: Thank you, Krista. Bonjour à tous et merci de vous joindre à notre appel de conférence sur les résultats du Q2 2026 de CN. Welcome, everyone. Thank you for joining us for CN's Q2 2026 financial and operating results conference call. Joining us today on the call are Tracy Robinson, our President and CEO, Pat Whitehead, our Chief Operations Officer, Janet Drysdale, our Chief Commercial Officer, and Gilles Lellouche, 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. Actual results may differ from what we expect.

Speaker #2: Thank you for joining us for CN's Q2 2026 financial and operating results conference call. Joining us today on the call are Tracy Robinson, our President and CEO; Pat Whitehead, our Chief Operations Officer; Janet Drysdale, our Chief Commercial Officer; and, just so you know, our Chief Financial Officer.

Speaker #2: You can turn to page 2 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.

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.

Jamie Lockwood: As a reminder, forward-looking statements are not guarantees. Factors such as economic conditions, competition, fuel prices, and regulatory changes could impact actual outcomes. It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.

Speaker #2: It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.

Tracy Robinson: Merci, Jamie. Merci à tous et à toutes de participer à notre appel. Thanks, everyone, for joining our call. I'm pleased to walk you through our Q2 results and some recent developments. This team has delivered another quarter of strong performance. EPS growth of 12%, FX adjusted, on 5% volume growth. We're staying focused on what we control. This is driving results. We're running the railroad well using service to convert customer growth opportunities, driving cost and capital disciplines, and continuing to position CN for growth. With this momentum, we're raising our guidance to now expect earnings for the year of mid to high single digits on the back of low single-digit volumes. The engine's running well. We're executing against our strategy. We can see the results.

Speaker #3: Merci, Jamie. Et merci à toutes et à tous de participer à notre appel. Thanks, everyone, for joining our call. I'm pleased to walk you through our Q2 results and some recent developments.

Speaker #3: Now, this team has delivered another quarter of strong performance. EPS growth of 12%—that’s adjusted—on 5% volume growth. We're staying focused on what we control, and this is driving results.

Speaker #3: And we're running the railroad well, using service to convert customer growth opportunities, driving cost and capital discipline, and continuing to position CN for growth.

Speaker #3: With this momentum, we're raising our guidance and now expect earnings for the year to be up mid- to high-single digits, on the back of low-single-digit volumes.

Speaker #3: The engine is running well. We're executing against our strategy, and we can see the results. Our productivity continues to improve while we're supporting customer growth across our franchise and, at the same time, running a safe, fluid, efficient, and reliable railroad.

Tracy Robinson: Our productivity continues to improve while we're supporting a customer growth across our franchise and at the same time running a safe, fluid, efficient, and reliable railroad. We're seeing this in fuel efficiency, where we delivered record performance in H1. In labor productivity, we're moving more volumes with less people. In locomotive productivity, our team is always challenging itself to use the assets we already have more efficiently. On the commercial side, our teams are focused on winning business and converting opportunities into growth. Whether it's metals moving within Canada, energy-related traffic, domestic intermodal, or other areas across the portfolio, we are seeing benefits of stronger commercial intensity and a team that is focused on creating value for our customers. It's all about speed and agility. Simply put, when strong service, disciplined operations, and commercial intensity come together, results follow.

Speaker #3: Now, we're seeing this in fuel efficiency, where we delivered record performance in the first half of the year, and in labor productivity, where we're moving more volumes with fewer people.

Speaker #3: And in locomotive productivity, our team is always challenging itself to use the assets we already have more efficiently. On the commercial side, our teams are focused on winning business and converting opportunities into growth.

Speaker #3: Now, whether it's metals moving within Canada, energy-related traffic, domestic intermodal, or other areas across the portfolio, we're seeing the benefits of stronger commercial intensity and a team that is focused on creating value for our customers.

Speaker #3: It's all about speed and agility. Simply put, when strong service, disciplined operations, and commercial intensity come together, results follow. That's exactly what we've seen in the first half of the year.

Tracy Robinson: That's exactly what we've seen in H1. Before I turn the call over to the team to walk you through the quarter in more detail, I'd like to spend a moment on the two agreements with Union Pacific that we announced this past Wednesday. These were rigorous negotiations. Union Pacific runs a great railroad and they're good partners, and I'm happy where these discussions have landed for both of us. These agreements are strategic. They bring long-term benefits. For CN, they structurally enhance and extend our network by giving us direct and very competitive access to important markets in Kansas City and Mexico. They'll also increase the density in parts of our US network where we have capacity. The first is a commercial agreement that extends our reach into Mexico.

Speaker #3: Now, before I turn the call over to the team to walk you through the quarter in more detail, I'd like to spend a moment on the two agreements with Union Pacific that we announced this past Wednesday.

Speaker #3: Now, these were rigorous negotiations. But Union Pacific runs a great railroad, and they're good partners, and I'm happy with where these discussions have landed for both of us.

Speaker #3: These agreements are strategic, and they bring long-term benefits. Now, for CN, they structurally enhance and extend our network by giving us direct and very competitive access to important markets in Kansas City and Mexico.

Speaker #3: They'll also increase the density in parts of our U.S. network where we have capacity. Now, the first is a commercial agreement that extends our reach into Mexico.

Speaker #3: It grants CN new rights for volumes between Canada and Mexico via Memphis. This gives us a competitive advantage route and extends our length of haul from Chicago to Memphis, densifying our southern network.

Tracy Robinson: It grants CN new rights for volumes between Canada and Mexico via Memphis. This gives us a competitively advantaged route and extends our length of haul from Chicago to Memphis, densifying our southern network. In exchange for the Mexico route, we've granted UP rights to additional capacity over the EJ&E for US traffic. This monetizes available surplus capacity on the J while protecting the capacity that CN needs now and into the future. Any additional capacity required to accommodate UP volume will be funded by them. These provisions will be effective as soon as the definitive agreement is in place and are not contingent on the merger. The second is a settlement agreement, and it is contingent on the STB's approval and closing of the merger. It secures for us competitive access into Kansas City and the use of UP's Neff yards.

Speaker #3: Now, in exchange for the Mexico route, we've granted UP rights to additional capacity over the EJ&E for U.S. traffic. This monetizes available surplus capacity on the J, while protecting the capacity that CN needs now and into the future.

Speaker #3: Any additional capacity required to accommodate UP volumes will be funded by them. These provisions will be effective as soon as a definitive agreement is in place, and are not contingent on the merger.

Speaker #3: The second is a settlement agreement, and it is contingent on the STB's approval and closing of the merger. It secures for us competitive access into Kansas City and the use of UP's NEF yards.

Speaker #3: This positions us to compete for new business in an important rail market and provides the opportunity to lengthen our haul on traffic currently moving in this corridor.

Tracy Robinson: This positions us to compete on new business in an important rail market and provides the opportunity to lengthen our haul and traffic currently moving in this corridor. We've also secured remedy protections, allowing us to provide competitive options for the two to one and three to two customers, and agreements that provisions granted to others through the STB process will also be extended to us. Through this strategic agreement, we have largely addressed the risk of the proposed merger to CN, and we have created new opportunities for us to grow. We've agreed to not oppose the merger. Overall, the opportunities created through the new strategic commercial agreement with UP and the potential merger-related remedies improve the position of our railway and create new avenues for growth.

Speaker #3: We've also secured remedy production, allowing us to provide competitive options for the 2-to-1 and 3-to-2 customers, and agreements that provisions granted to others through the STB process will also be extended to us.

Speaker #3: Now, through this strategic agreement, we have largely addressed the risk of the proposed merger to CN, and we have created new opportunities for us to grow.

Speaker #3: And we've agreed not to oppose the merger. Overall, the opportunities created through the new strategic commercial agreement with UP and the potential merger-related remedy improve the position of our railway and create new avenues for growth.

Speaker #3: These agreements reflect how we operate—staying close to the opportunities in front of us and acting with discipline to create long-term value for our customers and shareholders.

Tracy Robinson: These agreements reflect how we operate, staying close to the opportunities in front of us and acting with discipline to create long-term value for our customers and shareholders. CN is very favorably positioned for the long term. We can see the impact of our actions in 2026, but what's more exciting to me is the opportunity that is unfolding across 2027 and beyond, supported by unique long-term tailwinds in our economic exposure and a team that is showing it can drive results through cycles. I want to thank our railroaders across the network for their commitment and execution this quarter. Their efforts continue to make the difference. Let me pass it to the team. They'll give you more details on the quarter. Pat, over to you.

Speaker #3: CN is very favorably positioned for the long term. We can see the impact of our actions in 2026, but what's more exciting to me is the opportunity that is unfolding across 2027 and beyond, supported by unique long-term tailwinds in our economic exposure and a team that has shown it can drive results through cycles.

Speaker #3: So, I want to thank our railroaders across the network for their commitment and execution this quarter. Their efforts continue to make the difference. Now, let me pass it to the team that will give you more details on the quarter.

Speaker #3: Pat, over to you.

Speaker #4: Thank you, Tracy. We entered the quarter with a clear plan centered on fluidity, reliability, and productivity. The team executed that plan, and the results are showing up throughout the network.

Pat Whitehead: Thank you, Tracy. We entered the quarter with a clear plan centered on fluidity, reliability, and productivity. The team executed that plan, and the results are showing up throughout the network. I am pleased with our performance, and I want to thank the entire CN team. As always, it starts with safety. Everything we accomplish starts with our people going home safely at the end of the day. Safety is foundational to our performance, our culture, and the way we operate this railroad. While we are encouraged by the progress we've made over the last few years, we are never satisfied, as we always look for continuous improvement. This year, we have seen a very active wildfire season in both Northern Ontario and British Columbia. The safety of our employees and of the communities we operate through is our first area of focus.

Speaker #4: I am pleased with our performance, and I want to thank the entire CN team. As always, it starts with safety. Everything we accomplish starts with our people going home safely at the end of the day.

Speaker #4: Safety is foundational to our performance, our culture, and the way we operate this railroad. While we are encouraged by the progress we've made over the last few years, we are never satisfied, as we always look for continuous improvement.

Speaker #4: This year, we have seen a very active wildfire season in both Northern Ontario and British Columbia. The safety of our employees and of the communities we operate through is our first area of focus.

Speaker #4: We are monitoring the wildfires closely, both for our own operations and for our customers' operations, and we continue to work closely with local authorities.

Pat Whitehead: We are monitoring the wildfires closely, both for our own operations and for our customers' operations, and we continue to work closely with local authorities. We have a comprehensive extreme weather fire risk mitigation plan to reduce risk and increase prevention, monitoring, and response to wildfires with our firefighting fleet deployed in strategic locations. Our main line through Northern Ontario is open at this point, and we currently do not expect a significant impact to our business. Now turning to operations. Productivity improvements continue to be strong. We moved 3% more gross ton miles using existing assets and capacity more efficiently. We improved crew utilization. We ran longer trains and reduced non-value added activities. Locomotive productivity improved approximately 6% in the quarter. Employee productivity improved approximately 9%. If you look only at train and engine employees, productivity improved approximately 13%, and our train length increased approximately 1%.

Speaker #4: We have a comprehensive extreme weather fire risk mitigation plan to reduce risk and increase prevention, monitoring, and response to wildfires, with our firefighting fleet deployed in strategic locations.

Speaker #4: Our main line through northern Ontario is open at this point, and we currently do not expect a significant impact to our business. Now, turning to operations, productivity improvements continue to be strong.

Speaker #4: We moved 3% more gross ton-miles by using existing assets and capacity more efficiently. We improved crew utilization, ran longer trains, and reduced non-value-added activities.

Speaker #4: Locomotive productivity improved approximately 6% in the quarter; employee productivity improved approximately 9%. If you look only at train and engine employees, productivity improved approximately 13%.

Speaker #4: And our train length increased approximately 1%. These are important proof points because productivity is not just an operating statistic. Those improvements translate directly into stronger financial results, and the gains we are delivering are structural and enduring, supporting value creation well beyond the quarter.

Pat Whitehead: These are important proof points because productivity is not just an operating statistic. Those improvements translate directly into stronger financial results, and the gains we are delivering are structural and enduring, supporting value creation well beyond the quarter. Another example is fuel efficiency, where CN is already leading the industry and continues to improve. We delivered the best Q2 and H1 fuel efficiency performance in our history, driving direct operating savings. The team continues to identify opportunities through train handling, locomotive utilization, and operating practices that reduce consumption while maintaining transit time performance. Now let me provide an update on Fast Track, our cross-functional effort focused on continuous improvement throughout the network. It is about challenging how we work, eliminating waste, improving terminal productivity, and making the railroad more efficient. We have essentially completed the review across the initial list of major terminals.

Speaker #4: Another example is fuel efficiency, where CN has already been leading the industry and continues to improve. We delivered the best Q2 and first-half fuel efficiency performance in our history, driving direct operating savings.

Speaker #4: The team continues to identify opportunities through train handling, locomotive utilization, and operating practices that reduce consumption while maintaining transit time performance. Now, let me provide an update on Fast Track, our cross-functional effort focused on continuous improvement throughout the network.

Speaker #4: It is about challenging how we work, eliminating waste, improving terminal productivity, and making the railroad more efficient. We have essentially completed the review across the initial list of major terminals.

Speaker #4: We continue to work across intermodal terminals and our network operations centers while performing our look-back process of the completed terminals. So far this year, we have close to $100 million in realized benefits.

Pat Whitehead: We continue to work across intermodal terminals and our network operation centers while performing a look back process of the completed terminals. So far this year, we have close to CAD 100 million in realized benefits. Importantly, these improvements have been achieved while maintaining strong service performance. Fast Track is a part of how we operate this railroad. The mindset is continuous improvement, and we believe there are additional opportunities ahead as the work continues. Turning to the next slide, the network is running well. Car velocity and network train speed were largely flat year over year, while handling stronger volumes and maintaining solid customer service. These metrics, as well as dwell, improved during the quarter after still being impacted by the tail end of winter in April.

Speaker #4: Importantly, these improvements have been achieved while maintaining strong service performance. Fast Track is a part of how we operate this railroad. The mindset is continuous improvement, and we believe there are additional opportunities ahead as the work continues.

Speaker #4: Turning to the next slide, the network is running well. Car velocity and network train speed were largely flat year over year, while handling stronger volumes and maintaining solid customer service.

Speaker #4: And these metrics, as well as dwell, improved during the quarter after still being impacted by the tail-end of winter in April. We are seeing strong first- and last-mile execution, and the type of operating performance that creates opportunities for Janet and her team to win additional business.

Pat Whitehead: We are seeing strong first and last mile execution and the type of operating performance that creates opportunities for Janet and her team to win additional business. Let me spend a moment on the Western region because it is a good proof point of what this network is capable of doing. The West handled record grain volumes during the quarter as well as higher year over year refined petroleum products, potash, NGLs, and other commodities. At the same time, car velocity, train speed, and dwell improved roughly 3%. That combination matters. It demonstrates that the capacity investments we have made, disciplined train planning, and strong execution are allowing us to absorb growth while improving overall fluidity, moving more freight with solid service and improving asset utilization. The team has done a solid job this quarter, and I'm proud of the progress we've made. The railroad is performing well.

Speaker #4: Let me spend a moment on the Western region, because it is a good proof point of what this network is capable of doing. The West handled record grain volume during the quarter, as well as higher year-over-year refined petroleum products, potash, NGLs, and other commodities.

Speaker #4: At the same time, car velocity, train speed, and dwell improved roughly 3%. That combination matters. It demonstrates that the capacity investments we have made, disciplined train planning, and strong execution are allowing us to absorb growth while improving overall fluidity.

Speaker #4: We're moving more freight with solid service and improving asset utilization. The team has done a solid job this quarter, and I'm proud of the progress we've made.

Speaker #4: The railroad is performing well. The productivity initiatives are gaining traction. The benefits from Fast Track are becoming increasingly visible. We're pleased with the progress and, just like with safety performance, we're never satisfied.

Pat Whitehead: The productivity initiatives are gaining traction. The benefits from Fast Track are becoming increasingly visible. We are pleased with the progress, and just like safety performance, we are never satisfied. Lastly, our team is excited around the new opportunities announced in the MOUs with Union Pacific. I am working closely with Eric and the Union Pacific team to operationalize the agreements. Together, we are hammering out details on the connections between our two railroads. With that, I will turn it over to Janet.

Speaker #4: Lastly, our team is excited about the new opportunities announced in the MOUs with Union Pacific. I'm working closely with Eric and the Union Pacific team to operationalize the agreements.

Speaker #4: Together, we are hammering out details on the connections between our two railroads. With that, I'll turn it over to Janet.

Speaker #3: Thanks, Pat. Good morning, everyone. As you’ve just heard, the railroad is running really well—and that’s translating into strong service for our customers. Revenues were up 11% year over year on 5% RTM growth.

Janet Drysdale: Thanks, Pat, and good morning, everyone. As you have just heard, the railroad is running really well, and that is translating into strong service for our customers. Revenues were up 11% year over year on 5% RTM growth. The close alignment between operations and sales and our strong service levels are driving success across the network. Underpinning that is how effectively we are working with our customers. Let me give you a few quick examples. Our metals volumes were up 11% in the Q2, despite the significant tariffs on steel and aluminum, as we worked with our customers to create new supply chains. We improved our commercial speed and agility to capitalize on market changes, converting spot opportunities in a number of segments, including butane and plastics. We continue to collaborate for longer term growth.

Speaker #3: The close alignment between Operations and Sales, and our strong service levels, are driving success across the network. Underpinning that is how effectively we are working with our customers.

Speaker #3: Let me give you a few quick examples. Our metals volumes were up 11% in the second quarter, despite the significant tariffs on steel and aluminum, as we worked with our customers to create new supply chains.

Speaker #3: We improved our commercial speed and agility to capitalize on market changes, converting spot opportunities in a number of segments including butane and plastics. And we continue to collaborate for longer-term growth.

Speaker #3: Our partnership with Kiera and AltaGas is a great example of how we're working strategically with our customers to efficiently get their products to global markets.

Janet Drysdale: Our partnership with Keyera and AltaGas is a great example of how we are working strategically with our customers to efficiently get their products to global markets. Our broad boots on the ground effort also continues, building on the momentum we established over the last few quarters and across a range of commodities. Same store pricing remains ahead of our rail cost inflation. However, in the quarter it was partly offset by mix. Let me walk you through the key Q2 highlights. We delivered another exceptional quarter in grain, continuing to set records for volumes of Western Canadian grain, and our US grain performance was strong across the board, corn, soybeans, and ethanol. We also delivered a record Q2 for potash shipments, with solid service enabling us to capitalize on strong demand, both domestic and export. Petroleum and chemicals RTMs were up 11%.

Speaker #3: Our broad, boots-on-the-ground effort also continues, building on the momentum we established over the last few quarters and across a range of commodities. Same-store pricing remains ahead of our rail cost inflation; however, in the quarter, it was partly offset by mix.

Speaker #3: Let me walk you through the key second-quarter highlights. We delivered another exceptional quarter in grain, continuing to set records for volumes of Western Canadian grain, and our U.S. grain performance was strong across the board—corn, soybeans, and ethanol.

Speaker #3: We also delivered a record second quarter for potash shipments, with solid service enabling us to capitalize on strong demand, both domestic and export. Petroleum and chemicals RTMs were up 11%.

Speaker #3: In refined products, we increased long-haul shipments from Western to Eastern Canada, and we continue to grow our volumes into the GTA fuel terminal, growing RTMs in this segment by nearly 30%.

Janet Drysdale: In refined products, we increased long-haul shipments from Western to Eastern Canada, and we continued to grow our volumes into the GTA fuel terminal, growing RTMs in this segment by nearly 30%. We grew NGL RTMs by over 15%, demonstrating the value of our Prince Rupert export supply chain, as well as the team's ability to convert on a number of spot butane opportunities. Domestic Intermodal outperformed with solid growth intra-Canada. In overseas Intermodal, volumes were up sequentially but lower year over year, reflecting tough comps due to last year's pull forward of volumes on tariff uncertainty. In Automotive, growth reflected share gains as well as a shift in traffic flows toward longer haul movements, driving a stronger RTM versus carload performance.

Speaker #3: We grew NGL RTMs by over 15%, demonstrating the value of our Prince Rupert export supply chain, as well as the team's ability to convert on a number of spot butane opportunities.

Speaker #3: Domestic intermodal outperformed with solid growth into Canada, and overseas intermodal volumes were up sequentially but lower year over year, reflecting tough comps due to last year's pull-forward of volumes on tariff uncertainty.

Speaker #3: In automotive, growth reflected share gains as well as a shift in traffic flows toward longer-haul movements, driving the stronger RTM versus carload performance.

Speaker #3: In Metals and Minerals, I have to say the team has done an outstanding job working with our customers to mitigate the impacts of tariffs, growing domestic and cross-border scrap shipments, and shifting steel towards longer-haul domestic Canadian lanes.

Janet Drysdale: In metals and minerals, I have to say the team has done an outstanding job working with our customers to mitigate the impacts of tariffs, growing domestic and cross-border scrap shipments, and shifting steel towards longer haul domestic Canadian lanes. We had a notable mix shift in frac sand, with less long-haul shipments into Alberta and an increase in shorter haul shipments within the US. In forest products, we increased our shipments of packaging products and helped our customers to diversify their export markets for wood pulp. Lumber shipments also increased this quarter, some of which is an easier year-over-year comp, and there is likely some pull forward there. Coal RTMs were flat for the quarter as increased US thermal coal exports were offset by production challenges affecting Canadian West Coast volumes. Moving now to slide 10 and turning to the H2 of the year.

Speaker #3: We had a notable mix shift in frac sand, with fewer long-haul shipments into Alberta and an increase in shorter-haul shipments within the U.S.

Speaker #3: In forest products, we increased our shipments of packaging products and helped our customers diversify their export markets for wood pulp. Lumber shipments also increased this quarter.

Speaker #3: Some of which is an easier year-over-year comp, and there is likely some pull-forward there. Coal RTMs were flat for the quarter, as increased U.S. thermal coal exports were offset by production challenges affecting Canadian West Coast volumes.

Speaker #3: Moving now to slide 10, and turning to the second half of the year, we expect strengthened grain to be the key driver of RTM growth in the third quarter.

Janet Drysdale: We expect strength in grain to be the key driver of our champ growth in Q3. Q4 year-over-year comparables for grain will be more challenging, though, as we lap the record crop and CN's record performance. Our energy franchise continues to be a real bright spot. We expect ongoing strength in refined products, new crude business, and additional fractionation capacity, supporting long-term growth in NGL exports via Prince Rupert. Domestic intermodal is expected to remain strong, reflecting sustained momentum from recent gains. Overseas intermodal is expected to be weak in the H2, in part related to the demarketing of certain low profitability shipments through the Port of Vancouver. In automotive, share gains and strong offshore imports into Canada are offsetting overall flat production.

Speaker #3: Q4 year-over-year comparables for grain will be more challenging, though, as we lapped a record crop and CN's record performance. Our energy franchise continues to be a real bright spot.

Speaker #3: We expect ongoing strength in refined products, new crude business, and additional fractionation capacity supporting long-term growth in NGL exports via Prince Rupert. Domestic intermodal is expected to remain strong, reflecting sustained momentum from recent gains.

Speaker #3: Overseas intermodal is expected to be weak in the second half, in part related to the demarketing of certain low-profitability shipments through the Port of Vancouver.

Speaker #3: In automotive, share gains and strong offshore imports into Canada are offsetting overall flat production. In metals and minerals, we see a steady run rate for steel and aluminum, and growth in frac sand shipments to Northeast B.C., partly offset by lower iron ore.

Janet Drysdale: In metals and minerals, we see a steady run rate for steel and aluminum and growth in frac sand shipments to Northeast BC, partly offset by lower iron ore. In forest products, well, no sign yet that housing starts will improve. With respect to coal, demand remains supportive for US exports. Canadian coal shipments will depend on mine level production and operational conditions. Now, quick word on the commercial agreements that we've reached with UP. The team is very excited about the opportunity to extend our length of haul, and we're even more excited that we've secured, for the long term, a shorter and faster route to Mexico and direct access to Ferromex. For sure, more to come on that. Putting all of that together, our strategy is delivering. We are growing volumes that we can service well and maintaining our pricing discipline.

Speaker #3: In forest products, well, there's no sign yet that housing starts will improve. With respect to coal, demand remains supportive for U.S. exports. Canadian coal shipments will depend on mine-level production and operational conditions.

Speaker #3: Now, a quick word on the commercial agreements that we've reached with UP. The team is very excited about the opportunity to extend our length of haul, and we're even more excited that we've secured, for the long-term, a shorter and faster route to Mexico and direct access to Ferramex.

Speaker #3: For sure, more to come on that. So, putting all of that together, our strategy is delivering. We are growing volumes that we can service well and maintaining our pricing discipline.

Speaker #3: And looking beyond the multi-year, multi-commodity growth prospects across our franchise—especially in energy and ag, and with our new connection to Mexico—I am confident in, and very proud of, the commercial team's continued commitment to find new opportunities and to capture the volumes that best fit our network.

Janet Drysdale: Looking beyond 2026, we remain excited about the multi-year, multi-commodity growth prospects across our franchise, especially in energy and ag, and with our new connection to Mexico. I am confident in and very proud of the commercial team's continued commitment to find new opportunities and to capture the volumes that best fit our network. They are staying close to our customers and moving with urgency and agility. We're also working closely with our short line partners who are driving Economy Plus growth, continuing to leverage our business and industrial development teams to attract new facilities onto rail and facilitate expansion. We're staying very close to the opportunities being created by Canada's trade diversification agenda. CN's network is uniquely situated to connect new sources of resource production with domestic and global markets.

Speaker #3: They are staying close to our customers and moving with urgency and agility. We're also working closely with our short-line partners, who are driving Economy Plus growth, continuing to leverage our Business and Industrial Development teams to attract new facilities onto rail and facilitate expansion.

Speaker #3: And we're staying very close to the opportunities being created by Canada's trade diversification agenda. CN's network is uniquely situated to connect new sources of resource production with domestic and global markets.

Speaker #3: And with the capacity and network investments already in place, CN is well positioned to deliver on that growth at low incremental cost. Justine, over to you.

Janet Drysdale: With the capacity and network investments already in place, CN is well positioned to deliver on that growth at low incremental cost. Gilles, over to you.

Speaker #1: Merci, Jeanette, et bon matin à tous. J'ai le plaisir de parler de nos résultats du deuxième trimestre. I'll begin with a review of our second quarter performance before turning to our updated outlook for the balance of the year.

Gilles Lellouche: Merci, Janet. I'll begin with the review of our Q2 performance before turning to our updated outlook for the balance of the year. Starting on slide 12, our results came in ahead of our initial expectations and reflect the strong operational and commercial execution highlighted by Pat and Janet. Q2 reported diluted EPS was CAD 2.06, up 10% from last year, while adjusted diluted EPS was CAD 2.08, up 11% from last year, or CAD 2.09, 12% higher on an exchange-adjusted basis. These results reflect an adjustment of CAD 17 million in advisor fees related to industry consolidation. As Tracy mentioned, the engine is running well. Our network is fluid, our service is reliable, and we're converting volume growth to the bottom line.

Speaker #1: Starting on slide 12, our results came in ahead of our initial expectations and reflect the strong operational and commercial execution highlighted by Pat and Janet.

Speaker #1: Second quarter reported diluted EPS was $2.06, up 10% from last year, while adjusted diluted EPS was $2.08, up 11% from last year, or $2.09, 12% higher on an exchange-adjusted basis.

Speaker #1: These results reflect an adjustment of $17 million in advisor fees related to industry consolidation. As Tracy mentioned, the engine is running well. Our network is fluid.

Speaker #1: Our service is reliable, and we're converting volume growth to the bottom line. The solid performance from Pat and the operating team allowed us to deliver an adjusted operating ratio of 62.2%, a 50 basis point increase versus last year's operating ratio of 61.7%. This was impacted by higher year-over-year fuel prices in the quarter, which had a dilutive impact on the operating ratio of 210 basis points.

Gilles Lellouche: The solid performance from Pat and the operating team allowed us to deliver an adjusted operating ratio of 62.2%, a 50 basis point increase versus last year's operating ratio of 61.7%, impacted by higher year-over-year fuel prices in the quarter, which have a diluted impact on the operating ratio of 210 basis points. Year-to-date, free cash flow is up approximately 20%, or roughly CAD 300 million, driven by stronger earnings, disciplined capital spending, and continued attention on working capital, partially offset by higher required tax payments. Leverage at the end of Q2 was 2.6 times and we will continue to be opportunistic on our current share buyback program. We continue to maintain a 2.7 times adjusted debt to adjusted EBITDA target for 2026. Turning to slide 13, let me walk you through a few key operating expense categories for the quarter on an exchange-adjusted basis.

Speaker #1: Year to date, free cash flow is up approximately 20%, or roughly $300 million, driven by stronger earnings, disciplined capital spending, and continued attention on working capital, partially offset by higher required tax payments.

Speaker #1: Leverage at the end of Q2 was 2.6 times, and we will continue to be opportunistic on our current share buyback program. We continue to maintain a 2.7 times adjusted debt to adjusted EBITDA target for 2026.

Speaker #1: Turning to slide 13, let me walk you through a few key operating expense categories for the quarter on an exchange-adjusted basis. Labor was 3% higher, driven by general wage increases and an approximately $40 million increase in year-over-year incentive compensation, which were partially offset by 5% lower average headcount and strong labor productivity.

Gilles Lellouche: Labor was 3% higher, driven by general wage increases and approximately CAD 40 million increase in year-over-year incentive compensation, which were partially offset by 5% lower average headcount and strong labor productivity. Fuel expense was about CAD 250 million higher than in the same period last year due to higher fuel prices, with the impact of higher volumes offset by record fuel efficiency. With the sharp increase in oil prices in March and the decrease in oil prices in June, fuel did not impact EPS in the quarter. However, as noted, it had a 210-basis point unfavorable impact to the operating ratio. Purchased services and material was up 11%, driven by advisory costs, higher trucking and vessel costs, mostly due to stronger volumes. Other expenses were largely flat year-over-year. Moving to slide 14, let me provide some visibility into 2026.

Speaker #1: Fuel expense was about $250 million higher than in the same period last year due to higher fuel prices, with the impact of higher volumes offset by record fuel efficiency.

Speaker #1: With a sharp increase in oil prices in March, and the decrease in oil prices in June, fuel did not impact EPS in the quarter; however, as noted, it had a 210-basis-point unfavorable impact to the operating ratio.

Speaker #1: Purchased services and material was up 11%, driven by advisory costs and higher trucking and vessel costs, mostly due to stronger volumes. Other expenses were largely flat year over year.

Speaker #1: Moving to slide 14, let me provide some visibility into 2026. The strong execution of our team, combined with stronger volume through the first half, gives us increased confidence in the year.

Gilles Lellouche: The strong execution of our team, combined with stronger volumes through the H1, gives us increased confidence in the year. As a result, we are raising our full-year outlook. As Tracy mentioned, we now assume low single-digit RTM growth for 2026 versus our original assumption of flattish volumes for the year. We now expect mid to high single-digit adjusted diluted EPS growth for the year. Our updated outlook assumes a constructive demand environment in the H2 of the year, with year-over-year comparisons becoming more challenging, particularly as we move into the Q4. We continue to see uncertainty related to fuel and foreign exchange, and broader macroeconomic volatility remains present, including potential changes in trade and policy discussions. We are encouraged by the momentum we have seen year-to-date and remain grounded in our assumptions for the balance of the year.

Speaker #1: As a result, we are raising our full-year outlook. As Tracy mentioned, we now assume low single-digit RTM growth for 2026, versus our original assumption of flattish volumes for the year.

Speaker #1: So we now expect mid- to high-single-digit adjusted diluted EPS growth for the year. Our updated outlook assumes a constructive demand environment in the second half of the year, with year-over-year comparisons becoming more challenging, particularly as we move into the fourth quarter.

Speaker #1: We continue to see uncertainty related to fuel and foreign exchange, and broader macroeconomic volatility remains present, including potential changes in trade and policy discussions.

Speaker #1: We are encouraged by the momentum we have seen year to date and remain grounded in our assumptions for the balance of the year. Accordingly, we continue to assume that WTI will be in the range of $80 to $110 per barrel.

Gilles Lellouche: Accordingly, we continue to assume that WTI will be in the range of $80 to $110 per barrel. However, we have updated our FX assumption from CAD 0.73 to the current spot rate of CAD 0.71 for the balance of the year. Our effective tax rate continues to be in the range of 25% to 26%. To wrap up, we are pleased with our performance in the quarter and H1. The team has executed well. Volumes have trended ahead of our expectations. Free cash flow remains strong, and the network is demonstrating the earnings leverage we've been working to build. Let me pass it back to Tracy.

Speaker #1: However, we have updated our FX assumption from $0.73 to the current spot rate of $0.71 for the balance of the year. Our effective tax rate continues to be in the range of 25 to 26 percent.

Speaker #1: To wrap up, we are pleased with our performance in the quarter and first half. The team has executed well. Volumes have trended ahead of our expectations.

Speaker #1: Free cash flow remains strong, and the network is demonstrating the earnings leverage we've been working to build. Let me pass it back to Tracy.

Speaker #2: Thanks, Sid. Thank you all. Now, as you can tell, we've got great momentum, and we're excited about the future. And with that, Christa, we're ready to take questions.

Tracy Robinson: Thanks, Yves. Thanks to all. Now, as you can tell, we've got great momentum, and we're excited about the future. With that, Krista, we're ready to take questions.

Speaker #3: Thank you. We will now begin the question and answer session. As previously mentioned, we ask that you kindly limit yourself to one question. Your first question comes from Walter Spracklin with RBC Capital Markets.

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. Your first question comes from Walter Spracklen with RBC Capital Markets. Please go ahead.

Speaker #3: Please go ahead.

Speaker #4: Yeah. Thanks very much, good morning everyone and congratulations on, on a good quarter here. I was wondering if you could go into the MOU, look at the and give us an indication of the total addressable market that you're that you're looking at in, in that on that route.

Walter Spracklin: Thanks very much. Good morning, everyone, and congratulations on a good quarter here. I was wondering if you could go into the MOU, give us an indication of the total addressable market that you're looking at on that route. In particular, what markets are you planning on focusing on? More importantly, how are you planning to assess, and how will you be communicating, the assessment of how well you're doing in terms of ramping up any new customer wins or volume that you're getting on that new route?

Speaker #4: in particular, what markets do you do you are you planning on focusing on, and, and more importantly, how can you how are you planning to assess and how will you be communicating, the assessment of how well you're doing in term in terms of ramping up any new customer wins or volume that you're getting on that, on those, on that new route?

Speaker #2: Good morning, Walter. Listen, thanks for the question. There are two agreements, as you know. The first agreement is the commercial one, and that will start as soon as we get the definitive agreement in place.

Tracy Robinson: Good morning, Walter. Thanks for the question. There are two agreements, as you know. The first agreement is a commercial one, that will start as soon as we get the definitive agreement in place. We will have immediate access directly to Ferromex in Mexico through the Memphis gateway. It does a couple of things for us. For volumes that are already moving, it extends our haul from what is essentially Chicago down to Memphis, which is a benefit. It also allows us to more directly market with FXE in Mexico for southbound volumes and northbound volumes. We will be going after all markets, including those that are moving on rail right now, as well as what we all know is a pretty expansive truck market between Mexico and Canada. I think it's in the area of CAD 3 billion.

Speaker #2: And so, we will have immediate access directly to Ferramex in Mexico through the Memphis gateway. That does a couple of things for us: for volumes that are already moving, it extends our haul from what is essentially Chicago down to Memphis, which is a benefit.

Speaker #2: But it also allows us to more directly market with FXC in Mexico for southbound volumes and northbound volumes. So we will be going after, you know, all markets.

Speaker #2: including those that are moving on rail right now, as well as what we all know is a pretty expansive truck market between Mexico and Canada.

Speaker #2: you know, I think it's in the area of 3 billion. So we'll get we're getting organized on what that push is going to look like, what this does is gives that market, you know, another, another competitive option.

Tracy Robinson: We're getting organized on what that push is going to look like. What this does is give that market another competitive option. We know those that have gone after the truck-to-rail conversion, most haven't met the targets that they put in place. This is tough, but we've got a great corridor here, an advantage corridor. We're going to put a shoulder into it. We're putting those plans in place right now. The other agreement, of course, gives us access into Kansas City, which is another great marketplace, but we don't get that, of course. That one is contingent upon the merger being successful and being put in place. That will be in the future. We don't have access to that market right now. Thanks for your question.

Speaker #2: We know those that have gone after the truck-to-rail conversion, you know, most haven't met their targets that they put in place.

Speaker #2: This is tough, but we're going to—we've got a great corridor here, an advantage corridor. We're going to put a shoulder into it, and we're putting those plans in place right now.

Speaker #2: The other agreement, of course, gives us access into Kansas City, which is another great marketplace. But we don't get that—of course, that one is contingent upon the merger.

Speaker #2: You know, being successful and being put in place, and so that will be in the future. We don't have access to that market right now.

Speaker #2: Thanks for your question.

Speaker #3: Your next question comes from the line of Sherilyn Radborn with TD Cowen. Please go ahead.

Operator: Your next question comes from the line of Cherilyn Radbourne with TD Cowen. Please go ahead.

Speaker #5: Thanks very much, and good morning. I wanted to use my one question to ask Janet if she could give some more color on the year-to-date growth of the energy business.

Cherilyn Radbourne: Thanks very much, and good morning. I wanted to use my one to ask Janet if she could give some more color on the year-to-date growth of the energy business. Anything we can share about expected growth next year and the extent to which visibility to 2027 and beyond has improved given the events over the last six months?

Speaker #5: Is there anything you can share about expected growth next year, and the extent to which visibility to 2027 and beyond has improved, given the events over the last six months?

Speaker #2: Good morning. Thanks, Sherilyn, appreciate the question. I think, you know, what we're seeing is a lot of strength in the refined products, so that's mainly gasoline and diesel.

Janet Drysdale: Good morning. Thanks, Cherilyn, appreciate the question. I think what we're seeing is a lot of strength in the refined products, so that's mainly gasoline and diesel, and of course, that's associated with our new GTA fuel terminal. We did start ramping up phase two of that terminal roughly in April of this year. Certainly, we are seeing those volumes continue to grow, and we'll have some full-year effect of that benefit as well in 2027. That's a really solid piece of the market, I think, that we've captured here in Ontario, and it's going to continue to grow, but maybe more slowly than the initial ramp-up phase.

Speaker #2: And of course, that's associated with our new GTA fuel terminal. We did start ramping up phase two of that terminal roughly in April of this year.

Speaker #2: So, certainly, we are seeing those volumes continue to grow, and we'll have some full-year effect of that benefit as well in 2027. But that's a really solid piece of the market I think that we've captured here.

Speaker #2: In Ontario, it's going to continue to grow, but maybe more slowly than the initial ramp-up phase. On the NGLs, of course, we have expansion continuing at the port of Prince Rupert, and we have the backup of the product that's being drilled and made available, including through the new fractionation capacity that I mentioned will be coming online in the second half here.

Janet Drysdale: On the NGLs, of course, we have expansion continuing at the Port of Prince Rupert, and we have the backup of the product that's being drilled and made available, including through the new fractionation capacity that I mentioned that will be coming online in the H2 here. I think when we think about the energy franchise, this is a multi-commodity within energy, multi-commodity as well as a multi-year opportunity. Of course, I continue to make reference to the agreement that we've struck

Speaker #2: So I think, you know, when we think about the energy franchise, this is a multi-commodity within energy, multi-commodity as well as a multi-year opportunity.

Speaker #2: And of course, you know, I continue to make reference to the agreement that we've struck in regard to the ACE terminals. So that's something that we're going to see, probably in the 2028-or-so time frame.

Tracy Robinson: In regards to the ACE terminal. That's something that we're going to see probably in the 2028 or so timeframe. A great growth story on energy. Thanks for the question.

Speaker #2: So, a great growth story on energy. Thanks for the question.

Speaker #3: Your next question comes from the line of Ken Hexter 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 #4: Hey, great. Good morning. So maybe just continuing on some yield thoughts, right? Up 6% in the quarter on revenue per RTM. Maybe just break down fuel, and thoughts on core underlying pricing, and thoughts into the second half.

Ken Hoexter: Hey, great. Good morning. Maybe just continue on some yield thoughts, right up 6% in the quarter on revenue per RTM. Maybe just break down fuel and thoughts on core underlying pricing and thoughts into the H2. I think I heard Pat toss in there's no impact to the wildfire to results. I just want to make sure I heard that. Then given you don't oppose the merger, do you see that as raising the odds of getting it past the finish line? Thanks.

Speaker #4: And I think I heard Pat toss in, there's no impact of the wildfire to results. I just want to make sure I heard that.

Speaker #4: And then, given you don't oppose the merger, do you see that as raising the odds of getting it past the finish line?

Speaker #4: Thanks.

Speaker #2: Oh, Ken, that's a lot of questions in one question. Let me see if I can start this. So, Janet, do you want to say a couple words on pricing, and then Jiz, on the fuel impact, if you could reiterate it.

Tracy Robinson: Oh, Ken, that's a lot of questions in one question. Let me see if I can start this. Janet, you want to say a couple words on pricing.

Janet Drysdale: Yeah, quickly on the.

Tracy Robinson: Jim, on the fuel impact, if you could reiterate it, then I think, Pat, you pretty much covered wildfires up close on it.

Speaker #2: And then, I think, Pat, you've pretty much covered wildfires, so I'll close on it.

Speaker #6: So Ken, I mean, in kind of simple terms, we continue to price ahead of our rail cost inflation. For sure, the fuel was a benefit to us, as it was to all of the industry in the quarter.

Janet Drysdale: Ken, kind of simple terms, we continue to price ahead of our rail cost inflation. For sure, the fuel was a benefit to us as it was to all of the industry in the quarter, bumping up the revenue per RTM, revenue per carload. We did have, by segment, some changes in haul that also would have factored into some of those changes. I expect that pattern to continue certainly into Q3. The underlying point I want to make is the pricing ahead of our rail cost inflation.

Speaker #6: Bumping up the, you know, revenue per RTM, revenue per carload. We did have, by segment, some changes in haul that also would have factored into some of those changes.

Speaker #6: I expect that pattern to continue, certainly into the third quarter. But the underlying point I want to make is, is the pricing ahead of our rail cost inflation.

Speaker #4: Okay. Maybe just, Ken, some visibility on fuel. As I said in my opening remarks, fuel in the second quarter did not have any impact on EPS, but did have a dilutive impact on OR by 210 basis points.

Gilles Lellouche: Okay. Maybe just, Ken, some visibility on fuel. As I said in my opening remarks, fuel in Q2 did not have any impact on EPS, but did have a dilutive impact on OR by 210 basis points. Fuel moves, as you know, a lot day in, day out. If fuel prices remain where they are and the correlation between OHG and WTI remains essentially where it is, we think that fuel in Q3 could be a tailwind by close to CAD 0.15 and a tailwind of about 100 basis points in Q3. In Q4 would be a little less, would be a tailwind of around CAD 0.10 and a tailwind on OR about 30 basis points.

Speaker #4: Fuel moves, as you know, a lot, day in and day out. If fuel prices remain where they are, and the correlation between OHD and WTI remains essentially where it is, then we think that fuel in the third quarter could be a tailwind by close to $0.15.

Speaker #4: And a tailwind of about 100 basis point in the in the third quarter. And then in the fourth quarter, would be a little less would be a tailwind of around 10 cents.

Speaker #4: And a tailwind on OR of about 30 basis points.

Tracy Robinson: Pat, wildfires?

Speaker #2: And Pat, wildfires?

Speaker #1: So, we are monitoring wildfires in Northern Ontario and in British Columbia. We are operational in both locations, and there has been minimal impact to the railroad as far as it relates to infrastructure.

Pat Whitehead: We are monitoring wildfires in Northern Ontario and in British Columbia. We are operational in both locations and minimal impact to the railroad as far as it relates to infrastructure. We did see some bunching clearly of traffic as we shut down in Northern Ontario and continue to work our way through that. Minimal impact.

Speaker #1: We did see some bunching, clearly, of traffic as we shut down in northern Ontario and continue to work our way through that. So, minimal impact.

Speaker #2: And as far as the, our agreement on, on the merger, the settlement agreement, can the, you know, as we thought about this, as you know, we've been pro-competition and we've been talking a lot about the need for a more competition.

Tracy Robinson: As far as our agreement on the merger, the settlement agreement, Ken, as we thought about this, as you know, we've been pro-competition, and we've been talking a lot about the need for more competition. We had some concerns around how the merger would impact our network, our business, our customers. As we've come to this agreement, we are satisfied that we've mitigated much of that concern. We've also created the opportunity that we've always said we wanted to do, which was extend our reach into broader markets. We've done that with the Kansas City expansion with the two to one and three to twos. This has largely taken care of what are our concerns. Now the merger is broader, and I know that it will go through what I expect will be a very thoughtful and rigorous process by the STB.

Speaker #2: And we had some concerns around how the merger would impact, you know, our network, our business, our customers. And so, as we've come to this agreement, we are satisfied that, you know, we've mitigated much of that concern.

Speaker #2: But we've also created the opportunity that we've always said we wanted to do, which was extend our reach into broader markets. And we've done that with the Kansas City extension, with the 2-to-1s and 3-to-2s.

Speaker #2: And so this is largely taken care of. What are our concerns? Now, the merger is broader, and I know that it will go through what I expect will be a very thoughtful and rigorous process.

Speaker #2: by the STB, they'll do a great job of that. and, you know, we'll, we'll watch that play out starting with what I, what I heard Jim say yesterday was the submission of the next level of materials, next week.

Tracy Robinson: They'll do a great job of that. We'll watch that play out, starting with what I heard Jim say yesterday was the submission of the next level of materials next week.

Speaker #3: Your next question comes from the line of Fatty Chowman 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: Yes, good morning. I want to circle back first, just to follow up on, on some of these questions on the MOUs. can you, talk about how many, two to one, three to two customers you're going to be have having access to provided this whole MOU kind of go through?

Fadi Chamoun: Yes, good morning. I want to circle back first just to follow up on some of these questions on the MOUs. Can you talk about how many two to ones, three to two customers you're going to be having access to, provided this whole MOU goes through? On the first agreement, in terms of getting that overhead rights to Eagle Pass, is this for Canadian originated cargo only? It just feels like some of the press releases were focused on this being covering only Canadian originated cargo. I just want to clarify that. My main question is maybe to Pat, how are you thinking about the network capacity as we start looking to 2027? I think you guys did a good job this year in improving cash flow conversion. I just want to understand whether we have a CapEx need as we go into 2027.

Speaker #5: And, on the on the first agreement, in terms of, getting, that overhead rights to, Eagle Pass, i is this for Canadian originated car load only?

Speaker #5: It just feels like some of the press releases were, were, were focused on this being kind of covering only Canadian-originated car load. I just want to clarify that.

Speaker #5: And my main question is maybe to Pat—how are you thinking about the network capacity as we start looking into 2027?

Speaker #5: I think you guys did a good job this year in improving cash flow conversion. I just want to understand whether we have a capex need as we go into 2027.

Speaker #5: How, how do you think about yeah, you know, the bottlenecks, the you know, the capacity to handle the volume as we go into next year?

Fadi Chamoun: How do you think about the bottlenecks, the capacity to handle the volume as we go into next year?

Speaker #6: Let me start with that, Fatty. Thanks. And I'll turn it over to Pat first on the capacity piece, but let me tell you what I've been impressed about—what he's been able to do.

Tracy Robinson: Let me start with that, Fadi. Thanks. I'll turn it over to Pat first on the capacity piece, but let me tell you what I've been impressed about what he's been able to do. We went through an investment cycle, as you know, where we got our locomotive fleet and our fleets in the right place, and we lifted our capacity in the essence up by 25%. We were prepared for all the volume, whether it was the grain or the energy products that have been strong in the Q2. What has impressed me so much is that we moved that grain largely without incremental fleet. We improved our cycle times on grain by 15%. These guys are not being idle.

Speaker #6: We went through an investment cycle, as you know, where we got our locomotive fleet and our fleets in the right place, and we lifted our capacity on the Edson Sub by 25%.

Speaker #6: And so we were prepared for all the volume, whether it was the grain or the, the energy products that have been strong in the second quarter.

Speaker #6: But what has impressed me so much is that we moved that grain largely without incremental fleet. So, we improved our cycle times on grain by 15%.

Speaker #6: So these guys are not being idle. They're pushing, you know, from an asset perspective. And from a people perspective, we're pushing pretty hard on what we get for every inch of asset base.

Tracy Robinson: They're pushing from an asset perspective and from a people perspective, we're pushing pretty hard on what we get for every inch of asset base. I would expect he's going to tell you that we've got the capacity to do a whole lot more, but Pat, over to you and I'll answer his other questions.

Speaker #6: I expect he's going to tell you that we've got the capacity to do a whole lot more. But Pat, over to you, and I'll answer his other questions.

Speaker #1: Okay, thanks, Tracy. Yeah, I would say that, from a network capacity perspective, I feel really good about where we are. I would say if you look back to the presentation and to my comments, what we demonstrated in the West is, with volume surging, the capacity that we spent over the last three investment cycles, as Tracy pointed out, we demonstrated that we can take on that volume and, in fact, we got faster, we got more fluid with that capacity.

Pat Whitehead: Okay, thanks, Tracy. Yeah, I would say that from a network capacity perspective, I feel really good about where we are. I would say if you look back to the presentation and to my comments, what we demonstrated in the West is with volume

Pat Whitehead: The capacity that we spent over the last three investment cycles, as Tracy pointed out, we demonstrated that we can take on that volume. In fact, we got faster, we got more fluid with that capacity. We said it before, we have additional capacity available both in the East and in the South. We continue to work towards growing into those. We think that this agreement with Union Pacific will help us fill up some of that capacity in the South while protecting our capacity. Any additional capacity for UP would be funded by UP.

Speaker #1: We said it before: we have additional capacity available both in the East and in the South, and we continue to work towards growing into those.

Speaker #1: We think that this expansion of this agreement with Union Pacific will help us fill up some of that capacity in the South while protecting our capacity, and any additional capacity for UP would be funded by UP.

Speaker #1: I will say, to the question of investments, we will continue to spend on basic capital to keep the railroad safe and fluid. I'll call out the two projects we continue to point to as far as larger capital projects, which are in northern and southern BC—both as an RD bridge, outside of Rupert.

Pat Whitehead: I will say to the question of investments, we will continue to spend on basic capital to keep the railroad safe and fluid. Call out the two projects we continue to point to as far as larger capital projects, which is in Northern and Southern BC, both the Zanardi Bridge outside of Rupert and outside of the Vancouver terminal, the Glen Valley and Abrahamson double track project. Those are the big call-outs on growth capacity.

Speaker #1: And outside of the Vancouver terminal, the Glen Valley and Abrahamson double track project—those are the big callouts on growth capacity.

Speaker #2: As to the settlement agreement, Fatty, you know, the two-to-ones, I think that we've identified five. UP has as well. There will be some more three-to-twos out there, and we'll see how that evolves.

Tracy Robinson: As to the settlement agreement, Fadi, the two to ones, I think that we've identified five. UP has as well. There will be some more three to twos out there. We'll see how that evolves. What this essentially does is it says that where we have operationally, we can get close to it, and commercially we're a feasible solution to that is that we would be the partner of choice for those. That's how that piece works. On Eagle Pass, on the kind of Memphis to Eagle Pass route. Yes, this is for traffic that can move the market between Canada and Mexico, southbound and northbound. It's a considerable marketplace. We've sized it out over time with Fernando and his team at the FXE. This gives us direct access to get at it over Memphis, which we can be very fast. We're really excited about that.

Speaker #2: But what this essentially does is it says that, where we can, operationally, we can get close to it. And, commercially, where feasible, kind of a solution to that is that we would be the partner of choice for those.

Speaker #2: So that's how that piece works. On Eagle Pass, on the kind of Memphis to Eagle Pass route, yes, this is for traffic that can move.

Speaker #2: The market between Canada and Mexico, southbound and northbound—it's a considerable marketplace. We've sized it out over time with Fernando and his team at the FXC.

Speaker #2: This gives us direct access to get at it over Memphis, which means we can be very fast. We're really excited about that. Also, on the EG&E deal with the Union Pacific, that applies only to U.S. business, origins, and destinations as well.

Tracy Robinson: On the EJ&E deal with Union Pacific, that applies only to US business origins and destinations as well. I hope that is helpful.

Speaker #2: I hope that is helpful.

Speaker #3: Your next question comes from the line of Brandon Oglensky with Barclays. Please go ahead.

Operator: Your next question comes from the line of Brandon Oglenski with Barclays. Please go ahead.

Speaker #5: Hey, good morning, and thanks for taking the question. Tracy, I guess you did address that you think this resolves the competitive issues you had with the deal, specifically, you know, within your network.

Brandon Oglenski: Hey, good morning, and thanks for taking the question. Tracy, I guess you did address that you think this resolves the competitive issues you had with the deal specifically within your network. More broadly, how do you think if this deal goes through, it's going to impact broader industry competition, especially longer term? Thank you.

Speaker #5: But more broadly, how do you think if this deal goes through, you know, it's going to impact broader industry competition, you know, especially longer term?

Speaker #5: Thank you.

Speaker #6: No, thanks, Brandon. I—listen, I think we've all been—we've all had a question about that. And, you know, CN, as we've talked about this, we've said, you know, we're not opposed to mergers.

Tracy Robinson: Thanks, Brandon. Listen, I think we've all had a question about that. CN, as we've talked about this, we've said we're not opposed to mergers. We are very favorable on competition. The big question on this on a broader basis on the merger is what it does to competition. We can't speak to the broader deal, we've spoken to what is the impact from our network perspective. We'll see. We're going to launch into a process that's going to be very thoughtful, and I know, knowing Patrick Fuchs and the board of the STB will be very thorough to ask and answer all of the very important questions as to this merger.

Speaker #6: We are we are very favorable on competition. So the big question on this on a broader basis on the merger is, is what it does to competition.

Speaker #6: We can't speak to the broader deal, but we've spoken to what is the impact from our network perspective. But we'll see; we're going to launch into a process—or we've already launched into a process—that's going to be very thoughtful.

Speaker #6: And I know, knowing Patrick Fuchs and the board at the FCB, will be very thorough to ask and answer all of the very important questions as to this merger.

Speaker #6: So that's all ahead of us. And what happens beyond that, I think we'll wait to see first, before we comment on what happens on this part of it.

Tracy Robinson: That's all ahead of us and what happens beyond that, I think we'll wait to see first before we comment on what happens on this part of it.

Speaker #3: Your next question comes from the line of Chris Wetherby 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: Yeah, hi. Thanks for the morning. I guess maybe I wanted to ask a little bit about the guidance. We've talked a lot about the merger, so I'm kind of curious about the guidance.

Chris Wetherbee: Yeah. Hi. Thanks. Good morning. I guess maybe wanted to ask a little bit on the guidance. We've talked a lot about the merger, kind of curious about the guidance. I think previously sort of flattish RTMs and EPS growth a little bit above that. The spread between RTM and EPS in the guide is a little wider. I was hoping you could kind of expand a bit on that. Obviously, just landing, I think you talked about fuel potentially being a good guide for you from an earnings perspective, at least in Q3. How do you think about sort of the operating leverage of the business now as we see RTMs kind of go through the rest of the year? Can we assume that sort of decent spread of operating leverage and performance to the bottom line can continue?

Speaker #5: I think previously sort of flattish RTMs and, EPS growth, a little bit above that, you're kind of the spread between RTM and EPS and the guide is a little wider.

Speaker #5: So I was hoping you could kind of expand a bit on that. Obviously, just laying I think you talked about fuel potentially being a good guy for you from an earnings perspective, at least in the third quarter.

Speaker #5: But how do you think about, sort of, the operating leverage of the business now, as we see RTMs kind of go through the rest of the year?

Speaker #5: Can we assume that that sort of decent spread of operating leverage and performance to the bottom line can continue? I just want to get a rough sense of what's changed from the earlier outlook relative to where we are now.

Chris Wetherbee: Just want to get a rough sense of sort of what's changed from the earlier outlook relative to where we are now.

Speaker #6: We've had a really strong first half. I'm really proud of what the team has done on it. The, you know, the operation has been very strong—fluid.

Tracy Robinson: We've had a really strong H1. I'm really proud of what the team has done on it. The operation has been very strong, fluid. You've heard Pat talk about the productivity that we've been able to drive. Janet's done a great job of being able to use that service to convert a whole bunch of opportunities, not only to take advantage of what's there, but to increase our share of market, and to be nimble with our customers. You've heard her talk about her boots on the ground program. We're out there with some intensity. All of that which we are in control of, it's gone very well. I would say overall volumes are much stronger than we anticipated at the beginning of the year that they will be this year. I'm not expecting that will change as we go.

Speaker #6: You've heard Pat talk about the productivity that we've been able to drive. Janet's done a great job of being able to use opportunities, not only to take advantage of what's there, but to increase our share of the market.

Speaker #6: ...and to be nimble with our customers. You've heard her talk about her boots-on-the-ground program, so we're out there with some intensity.

Speaker #6: so all of that, which we are in control of, you know, it's gone very well. I would say overall volumes are much stronger than we anticipated at the beginning of the year that they will be this year.

Speaker #6: I'm not expecting that will change as we go. You're seeing our volumes in the second quarter. We do have a pretty tough comp on Q4.

Tracy Robinson: You're seeing our volumes in the Q2. We do have a pretty tough comp on Q4. Last year in Q4, we hit a record in grain and operationally, we exceeded all of our own expectations, we'll have a tougher comp in Q4 as we look forward. I think the question marks as we look at the remainder of the year are more around those things that are moving around outside of this, more around kind of where fuel will go, the impact of that, maybe a little bit of currency. We have a little bit of tariff action that's moving around. We'll see where all that goes, but we think that we want to be disciplined as we think about guidance and we're comfortable with where we've put the peg at this point.

Speaker #6: Last year in Q4, we hit a record in grain and, operationally, we exceeded all of our own expectations. So, we'll have a tougher comp in Q4 as we look forward.

Speaker #6: I think the question marks as we look at the remainder of the year are more around those things that are moving around outside of this—more around where fuel will go, the impact of that, maybe a little bit of currency, and we have a little bit of tariff action that’s moving around.

Speaker #6: So we'll see where all that goes, but we think that, you know, we want to be disciplined as we think about guidance, and we're comfortable with where we've put the peg at this point.

Speaker #3: Your next question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.

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

Speaker #7: Great, thanks. Morning, everyone. Tracy, just wanted to follow up on your previous response. I think you've said in the past that you haven't had the confidence, even with a lot of promise on the volume side.

Ravi Shanker: Great. Thanks. Morning, everyone. Tracy, just wanted to follow up on your previous response. I think you've said in the past that you haven't had the confidence, even with a lot of promise on the volume side. Seems like that confidence is building. Can you share your conversations with your customers, particularly around again, we've had some kind of catalyst on USMCA paths. It looks like we know what the next

Speaker #7: It seems like that confidence is building. Can you share your conversations with your customers, particularly around, again, we've had some kind of catalyst on the USMCA passing—it looks like we now know what the next generation of tariffs will look like.

Ravi Shanker: generation of tariffs look like. Do you feel like there was any pull forward into H1 of the year? Do you feel like there's any pent-up demand past these catalysts? What are your customers telling you about their inventory restocking plans?

Speaker #7: Do you feel like there was any pull forward into the first half of the year? Do you feel like there's any pent-up demand past these catalysts or, or kind of what are your customers telling you about their, their, inventory restocking plans?

Tracy Robinson: I'll start with that. I'm going to turn it over to Janet to talk more specifically. We've watched this tariff, the global, the trade, the tariff, all the impacts from some of the geopolitical events, and the impact that has either on the volume that we move or the corridors that we move it in. I'm really proud of the work that Janet's team has done to be out there with customers and respond. You heard her say that our metals business, for example, despite the difficulties in the metals marketplace, our metals business has been able to mitigate most of that impact. Forest products is still feeling it. They could use housing starts to lift. As we look at tariffs from where we are now, certainly, we're all reading in the newspaper around what's happening on that front.

Speaker #6: I'll, I'll start with that, but then I'm going to turn it over to Janet to talk more in, in specifically. Like, we've watched this tariff that, you know, the global, the trade, the tariff, all the impacts from some of the geopolitical events, you know, and the impact that has either on the volume that we move or the corridors that we move it in.

Speaker #6: And I'm really proud of the work that Janet's team has done to be out there with customers and respond. You heard her say that our metals business, for example, despite the difficulties in the metals marketplace, our metals business has, you know, we've been able to mitigate most of that impact.

Speaker #6: Forest products is still feeling it. They could use housing starts to lift. as we look at tariffs, from where we are now, certainly, you know, we're all reading in the newspaper around what's happening on that front.

Speaker #6: We remain hopeful that we will come to a productive, constructive, positive agreement for all— all three countries. And what we've embedded in our guidance as we look forward is a tariff level that looks a lot like what it is right now, Janet.

Tracy Robinson: We remain hopeful that we will come to a productive, constructive, positive agreement for all three countries. What we've embedded in our guidance as we look forward is a tariff level that looks a lot like what it is right now. Janet?

Speaker #2: Yeah, I would say, Ravi, we might have had a little bit of pull forward. I think I referenced that on lumber. That probably has more to do with just kind of fuel surcharges and building up some inventories.

Janet Drysdale: Yeah, I would say, Ravi, we might have had a little bit of pull forward. I think I referenced that on lumber. That probably has more to do with just fuel surcharges and building up some inventories. We saw, in the US, some more significant pull forward in the context of intermodal, that wanted to come into the United States ahead of this tariff regime changeover, I'll call it. That was certainly less impactful from a CN perspective. Broadly speaking, no, I don't think we've had a whole lot of pull forward. I think to Tracy's point, our customers have become very adept at managing the situation, and we've been there to support them along the way as they've changed some of their supply chains. Thanks for the question.

Speaker #2: We saw, in the U.S., some more significant pull forward in the context of intermodal, that wanted to come into the United States ahead of this tariff regime changeover, I'll call it.

Speaker #2: That was certainly less impactful from a CN perspective. So, broadly speaking, no, I don't think we've had a whole lot of pull forward. And I think, to Tracy's point, our customers have become very adept at managing the situation.

Speaker #2: And we've, you know, been there to support them along the way as they've changed some of their supply chains. Thanks for the question.

Speaker #3: Your next question comes from the line of Connor Gupta with Scotiabank. Please go ahead.

Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Please go ahead.

Speaker #5: Thanks, Tracy. I understand you people will be responsible for any investments needed at the J to support their volume growth, if needed. But as you've firmed up the MOU with them, how are you tackling the risk mitigation around potential congestion issues that may arise in and around Chicago if UPNs are driving a lot of volumes through the J?

Konark Gupta: Thanks. Tracy, I understand UP will be responsible for any investments needed at the J to support their volume growth if needed. As you firm up the MOU with them, how are you tackling the risk mitigation around potential congestion issues that may arise in and around Chicago if UP ends up driving a lot of volumes through the J?

Speaker #6: Well, listen, we spent a lot of time and Pat has spent some time with Eric on how this whole thing will work. And we remain in control of the J.

Tracy Robinson: Listen, we've spent a lot of time, Pat has spent some time with Eric on how this whole thing will work, and we remain in control of the J. We've got surplus capacity right now on various parts. It's different on different parts of the J. We'll control how that volume comes on, and our agreement says that if we see any strain, so they will not get in the way of our traffic. If there is any constraint or any strain on volume, and the capacity needs to be expanded, that we will trigger that and they will fund the expansion. Of course, we may do the expansion, they will fund the expansion, and we're locked on that approach.

Speaker #6: We've got surplus capacity right now on various parts. You know, there's different, on different parts of the J. So, we'll control how that volume comes on, and our agreements say that if we see any strain, they will not get in the way of our traffic.

Speaker #6: If there is any constraint or any strain on volume, and the capacity needs to be expanded, that we will trigger that and, you know, they will fund the expansion.

Speaker #6: Of course, we may do the expansion. They will fund the expansion and we're locked on that approach.

Speaker #3: Your next question comes from the line of David Vernon with Bernstein. Please go ahead. David, your line is open. Your next question comes from the line of Scott Group with Wolfe Research.

Operator: Your next question comes from the line of David Vernon with AllianceBernstein. Please go ahead. David, your line is open. Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

Speaker #3: Please go ahead.

Speaker #8: Hey, thanks. Good morning. So, just two quick things. One, as the SDB process plays out going forward, just practically speaking, does this just mean that you don't participate—like, no more filings? If there are hearings, you don't participate?

Scott Group: Hey, thanks. Good morning. Just two quick things. One, as the STB process plays out going forward, just practically speaking, does this just mean that you don't participate? Like no more filings, if there's hearings, you don't participate. Is that how we should think about your role going forward here? Just laying on the fuel side, clearly going to help this year now. Anything you can do to protect yourself on the way down for fuel? I know a few years ago it was an issue. Is this just naturally how it's going to work, or is there anything that can be done to protect yourself? Thank you.

Speaker #8: Is that like how we should think about your role going forward here? And then just laying on the fuel side, like clearly going to help this year now, like anything you can do to like protect yourself on the way down for fuel, I know a few years ago it was an issue, is this just naturally how it's going to work or is there anything that could be done to, you know, protect yourself?

Speaker #8: Thank you.

Tracy Robinson: Scott, I'll start on the first one. We've agreed not to oppose. Yes, we won't have a large voice in the merger considerations as we go forward. However, if there are questions, we'll obviously be involved in anything related to the agreement that we have. Either explaining or defending or whatever the action may be. Yeah, largely, our considerations, our worries have been taken care of, so you won't hear as big a voice. Vijit?

Speaker #2: Scott, I'll start on, on the first one. I so we've agreed not to oppose. So yes, we won't have a large voice in the merger considerations as we go forward.

Speaker #2: However, if there are questions, we'll, we'll obviously be involved in anything related to the agreement that we have, you know, either explaining or defending or whatever the action may be.

Speaker #2: But yeah, largely that you know, our considerations are, our worries have been taken care of. So, you won't hear as big a voice. And Jiz?

Speaker #5: Yeah, on the fuel side, as you know, the fuel surcharge is a hedge. It’s working well, but because there’s a lag—because there’s a two-month lag—then on a short-term basis, it does create noise.

Gilles Lellouche: Yeah, Scott, on the fuel side, as you know, fuel surcharge is a hedge. It's working well, because there's a lag, because there's a 2-month lag, on the short-term basis, it does create noise. As you know, you've been around this business for quite a while, I've been around that business for quite a while as well, there's a lots of movements and volatility around fuel prices, especially with what's happening in the Middle East. It does create more noise, it's just what it is, you know the formula, we just live with it. We try to provide visibility on it every quarter and what's coming up. We'll see what it does. Now it looks like it's positive for the H2 of the year, that could turn very quickly. We'll see.

Speaker #5: And, and as you know, and, and you've been around this business for quite a while, I've been around this business for quite a while as well.

Speaker #5: There's a loss of movement and volatility around fuel prices, especially with what's happening in the Middle East. So it does create more noise, but, you know, I mean, it is just what it is.

Speaker #5: And, and, and you know the formula, and we just live with it. We try to provide visibility on it every quarter, and what's coming up.

Speaker #5: We'll see what it does. Now it looks like it's positive. For the second half of the year, but that could turn very quickly. So we'll see.

Speaker #5: But there's nothing much we can do on the downside. But as I said, it's a hedge, and it's working quite well to hedge ourselves against the ups and downs of fuel prices.

Janet Drysdale: There's nothing much we can do on the downside. As I said, it's a hedge, it's working quite well to hedge ourselves against ups and downs of fuel prices.

Speaker #3: Your next question is going to come from the line of David Vernon with Bernstein. Please go ahead.

Operator: Your next question is going to come from the line of David Vernon with AllianceBernstein. Please go ahead.

Speaker #8: Hey, thanks for coming back to me. so, coming back to the MOUs for a second, you know, I wanted to talk a little bit about magnitude.

Ravi Shanker: Hey, thanks for coming back to me. Coming back to the MOUs for a second. I wanted to talk a little bit about magnitude. As you think about the agreement on the E and then the access down to Eagle Pass

Speaker #8: You know, as you think about the, the, the, the, the agreement on the E and then the access down to Eagle Pass, you know, the, the, the amount of capacity that you have on haulage from the border is, is, is going to matter and obviously how much, how many trains are going to be running through there.

David Vernon: The amount of capacity that you have on haulage from the border is going to matter, and obviously how many trains are going to be running through there. Is there any way you can quantify commercially, Janet, is this going to start to impact numbers next year? Is it going to be noticeable? As you think about implementing the second part of the agreement, the contingent trackage rights to Kansas City, is there additional investments that you're going to need to make to operationalize that? I think when you guys were going after KCS as a business a long time ago, there was some discussion around it of investment in extending your line's capacity there. I'm just wondering if there's additional capital or operating resources you're going to need to put into operationalizing that Kansas City link. Thanks.

Speaker #8: Is there any way you can kind of quantify, commercially, Janet? Like, is this going to start to impact numbers next year? Is it going to be noticeable?

Speaker #8: And then, as you think about implementing the second part of the agreement—the contingent trackage rights to Kansas City—is there additional investment that you're going to need to make to operationalize that?

Speaker #8: I think, you know, when you guys were going after KCS as a business a long time ago, there was some, some, some discussion around it of investment in, in, in extending your line's capacity there.

Speaker #8: I'm just wondering if there's additional capital or operating resources you're going to need to put into operationalizing that Kansas City link. Thanks.

Speaker #2: So let's, let's, hey, David, I'm glad you're back. yeah, let me start on that. So as we think about it, as we've long looked at our network, like we really like the positioning of our network with where we sit across the natural resource base in North America, our access to ports, our ability to get down into the Gulf Coast.

Tracy Robinson: Hey, David, I'm glad you're back. Let me start on that. As we think about it, as we've long looked at our network, we really like the positioning of our network with where we sit across the natural resource base in North America, our access to ports, our ability to get down into the Gulf Coast. What we've always aspired is how do we extend our network, and these agreements do it in a meaningful way in getting it into Mexico and ultimately, contingent on the merger, into Kansas City. As we've talked with Jim and the Union Pacific about how this would work, we start, in the case of Mexico, at a haulage arrangement. As volumes grow, we can trigger trackage rights.

Speaker #2: What we've always aspired to is, how do we extend our network? And these agreements do it in a meaningful way, in getting it into Mexico, and ultimately—contingent on the merger—into Kansas City.

Speaker #2: And so, as we've talked with Jim and the Union Pacific about how this would work, we start, and when, in the case of Mexico, at a haulage arrangement.

Speaker #2: But as volumes grow, we can trigger trackage rights. And there's not a lot of concerns along that route right now on when we'd hit any capacity.

Tracy Robinson: There's not a lot of concerns along that route right now on when we'd hit any capacity, but if we do hit capacity constraints, similar to the reverse on the J, we would be funding whatever expansion would be required then. We don't anticipate that that's likely in the near term, and we have largely the capacity we need to make that work right now. You're going to see haulage start very quickly. I'll talk about the Kansas City side, and then Janet, I'll turn it over to you if Pat had any comments you want to add to it. On the Kansas City side, should the merger be approved, we come onto the line at Tuscola, but I'll let Pat comment. We do need to build a bit of a connection there that would be funded by us.

Speaker #2: But if we do hit capacity constraints, then, similar to the reverse on the J, then, you know, we would be funding whatever expansion would be required then.

Speaker #2: We don't anticipate that that's likely in the near term, and we have largely the capacity we need to make that work right now. So you're going to see haulage start very quickly.

Speaker #2: On the Kansas, I'll talk about the Kansas City side and then, Janet, I'll turn it over to you and Pat for any comments you want to add.

Speaker #2: On the Kansas City side, should the merger merger be approved? We come onto the line of Tuscola but and I'll let Pat comment. you know, we do need to build a bit of a connection there that would be funded by us.

Tracy Robinson: On the landing side, we have an agreement with Union Pacific to utilize their Neff Yard in Kansas City. We've got a landing spot for all of the commodities that we would move through that corridor. Do you want to talk about the connection to Tuscola, and then Janet, we'll go to you.

Speaker #2: And on the landing side, we've been having an agreement with Union Pacific to utilize their Neff Yard in Kansas City. So we've got a landing spot for all of the commodities that we would move through that corridor.

Speaker #2: Do you want to talk about the connection to Tuscola and then Janet will go to you?

Speaker #5: I do. Thank you. And I would say, you know, think about these, differently. So a different than the, the KCS application, some of the wording there.

Pat Whitehead: I do. Thank you. I would say, think about these differently. Different than the KCS application, some of the wording there, that was capacity that would need to be built to access Springfield, Illinois, where we have existing trackage rights with Union Pacific. That is not our core main line. Tuscola is off of our core main line between Chicago and Memphis. It is our fastest route to get south, and this will be a new connecting track, just a connecting track to connect to Union Pacific, where there's a diamond in Tuscola, and we'll access St. Louis, and eventually Kansas City via that connection. Very different than what we put in the application and you saw needed to be invested to get to Springfield. This will be one connection track, and then the Neff Yard discussions that will be ongoing.

Speaker #5: That was capacity that would need to be built to access Springfield, Illinois, where we have existing trackage rights with Union Pacific. That is not our core main line.

Speaker #5: Tuscola is off of our core main line between Chicago and Memphis. It is our fastest route to, to get south. And this will be a new connecting track, just a connecting track to, connect to Union Pacific where there's a diamond in Tuscola.

Speaker #5: And, we'll access St. Louis, in, in eventually Kansas City via that connection. So a very different than what we put in the application and you saw needed to be in-invested to get to Springfield.

Speaker #5: This will be one connection track, and then the net yard discussions that will be ongoing.

Speaker #2: Yeah. Good morning, David. Thanks for the question. From a revenue perspective, let me just give you a sense of sequencing. When we're, you know, the current movements that we have today from Canada into Mexico, the immediate benefit to us is going to be the extended length of haul as we move the interchange south into Memphis.

Janet Drysdale: Good morning, David. Thanks for the question. From a revenue perspective, let me just give you a sense of sequencing. The current movements that we have today from Canada into Mexico, the immediate benefit to us is going to be the extended length of haul as we move the interchange south into Memphis. That happens as soon as we get the definitive agreement in place, and we'll see some of that flowing in this year. The team is very focused on the addressable market and what we can do to provide a great service to the customers that want to move their goods between Mexico and Canada. More to come on that. Thanks for the question.

Speaker #2: So that, you know, that happens as soon as we kind of get the definitive agreement in place, and we'll see some of that flowing in this year.

Speaker #2: and then the team is very, very focused on, you know, the addressable market and what we can do to provide a great service to the customers that want to move their goods between Mexico and Canada.

Speaker #2: So, more to come on that. Thanks for the question.

Speaker #3: Your next question comes from the line of Brian Ossenbeck with JPMorgan. Please go ahead.

Operator: Your next question comes from the line of Brian Ossenbeck with J.P. Morgan. Please go ahead.

Speaker #6: Hey, good morning. Thanks for taking the question. one first quick follow-up just to make sure I heard correctly, but if there's any other decisions or concessions that are done through the merger review process, the agreements here seems like they don't exclude you from participating in those.

Brian Ossenbeck: Hey, good morning. Thanks for taking the question. One first quick follow-up just to make sure I heard correctly, if there's any other decisions or concessions that are done through the merger review process, the agreements here seems like they don't exclude you from participating in those. Just that's the first clarification. Then for Janet, maybe you can go into more details on some of the demarketing sounds like you're doing in Vancouver. Maybe the relative scope and size. I'm assuming that's international intermodal, but would like to hear a little bit more about that. Thanks.

Speaker #6: So just—that's the first clarification. And then for Janet, maybe you can go into more detail on some of the demarketing it sounds like you're doing in Vancouver.

Speaker #6: Maybe the relative scope and size. I'm assuming that's international intermodal, but I would like to hear a little bit more about that. Thanks.

Speaker #2: Hey, Brian. I'll start. So our agreement with Union Pacific is that we will not oppose. If there are interventions that we need to make in response to questions from the SEB, or to support the agreement that we have with Union Pacific, then we will participate in that.

Tracy Robinson: Hey, Brian, I'll start. Our agreement with Union Pacific is that we will not oppose. If there are interventions that we need to make in response to questions from the STB or to support the agreement that we have with the Union Pacific, we will participate in that. I hope that answers that portion of your question. Janet?

Speaker #2: Hope that answers that portion of your question, Janet.

Speaker #4: Yeah. So Brian, you know, our, our approach to pricing has been very, very consistent. baseline is we want to price ahead of real cost inflation.

Janet Drysdale: Yeah. Brian, our approach to pricing has been very consistent. Baseline is we want to price ahead of rail cost inflation. We also want to price to the value of our service. As you know well, our corridor between Vancouver and all the way into Chicago, Montreal, Toronto, has a lot of traffic and is an important piece of our network. Yes, the piece of business we demarketed is in the overseas intermodal, I think enough said on that one. Thanks for the question.

Speaker #4: We also want to price to the value of our service. And as you know well, you know, our corridor between Vancouver and, and all the way into Chicago, Montreal, Toronto, has a lot of traffic and it's an important piece of our network.

Speaker #4: So yes, the piece of business we demarketed is in the overseas intermodal, and I think enough said on that one. Thanks for the question.

Speaker #3: 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 #7: Yeah. Bon matin tout le monde. Félicitations congratulations for the result. co-could you talk maybe about the opportunities to convert trucks on the rails given the high spot rates we see these days and kind of what would you see in terms of discussion with some customers and what could evolve in terms of intermodal opportunities?

Benoit Poirier: Yeah. Congratulations for the results. Could you talk maybe about the opportunities to convert trucks on the rails given the high spot rates we see these days, and what you see in terms of discussion with some customers, and what could evolve in terms of intermodal opportunities? Thanks.

Speaker #7: Thanks.

Speaker #4: So we are seeing, Benoit, some truck-to-rail conversion. when we look at our own domestic intermodal franchise, so for CN, it is more skewed to Canada.

Janet Drysdale: We are seeing, Benoit, some truck to rail conversion. When we look at our own domestic intermodal franchise, though, for CN, it is more skewed to Canada, and our average length of haul is in the 1,700 to 1,800-mile range. We have a pretty high market share already, I would say, of the long-haul trucking business in Canada. I think the short answer is yes, there's some opportunities. Probably not as much as what we're seeing in the US. Truck capacity there is tightening more significantly than what we're seeing in Canada, but we're encouraged by what's happening so far, and of course, any tightening of capacity is also supported from a rate perspective. Thanks for your question.

Speaker #4: And our average length of haul is in the 1,700- to 1,800-mile range. So we have a pretty high market share already, I would say, of the long-haul trucking business in Canada.

Speaker #4: So I think the short answer is yes, there are some opportunities—probably not as much as what we're seeing in the US. Truck capacity there is tightening.

Speaker #4: more significantly than what we're seeing in Canada. But we're encouraged by what's happening so far. And of course, any tightening of capacity is also supportive from a rate perspective.

Speaker #4: Thanks for your question.

Speaker #3: Your next question comes from the line of Tom Waterwitz with UBS. Please go ahead.

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

Speaker #8: Yeah, good morning. I know you've gotten a lot, a lot on the UP agreements, but I want to ask you kind of two elements on that. And congratulations on the agreements.

Tom Wadewitz: Yeah, good morning. I know you've gotten a lot on the UP agreements, want to ask you kind of two elements on that, and congratulations on the agreements. They seem like really nice strategic moves. Let's see. On the Kansas City element, I think UP has implied two to one, three to two is something a little less than 40 shippers. Can you give us a little more color? Are there some large shippers there, or is it kind of relatively small carload shippers? Just a little more perspective so we can maybe think about sizing it. On the Canada to Mexico, is there any other information to contemplate the type of commodities you think would be opportunity? Is a lot of it auto and intermodal? Is a lot of it bulk?

Speaker #8: They seem like really nice strategic moves. So the let's see. On the on the Kansas City element, I guess is there a way because I think UP has implied two-to-one, three-to-two is something a little less than 40 shippers.

Speaker #8: Can you give us a little more color? Are there some large shippers there, or is it relatively small carload shippers? Just a little more perspective so we can, you know, maybe think about sizing it.

Speaker #8: and then on the Canada to Mexico, is there any other information to contemplate? You know, the type of commodities you, you think would be opportunity?

Speaker #8: Is a lot of it auto and intermodal? you know, is a lot of it bulk or just how you think about, you know, that, that market and where you would see the growth on that Canada to Mexico?

Tom Wadewitz: Just how you think about that market and where you would see the growth on that Canada to Mexico. Thank you.

Speaker #8: Thank you.

Speaker #2: Hey, Tom. thanks for the question. On the two-to-ones, I think we're all aligned that there's probably about five of those. Some of those are very meaningful accounts.

Tracy Robinson: Hey, Tom. Thanks for the question. On the two to ones, I think we're all aligned that there's probably about five of those. Some of those are very meaningful accounts. Some are smaller. Harder to say on the three to twos. That'll be a broader group, and I'm sure some of that will be contested. We'll see how that plays out as we go forward. We've quantified it. We don't think it's the biggest piece of this merger based on our broad estimates by any stretch. The bigger, the most impactful parts of this, of course, are the extension of our network into Kansas City with the settlement agreement. We're really excited about that. On the Canada, Mexico, let me start on this. This is all commodities, and we've been working. It's not just southbound, it's northbound as well.

Speaker #2: Some are smaller. Harder to say on the three-to-twos. That'll be a broader group and I'm sure some of that will be contested, so we'll see how that plays out as we go forward.

Speaker #2: We've quantified it. We don't think it's the biggest piece of this merger based on our broad estimates, by any stretch. The bigger, most impactful parts of this, of course, are the extension of our network into Kansas City with the settlement agreement.

Speaker #2: We're really excited about that. On Canada and Mexico—let me start on this. This is all commodities, and we've been working, and it's not just southbound.

Speaker #2: It's northbound as well. We've been working for some time on a three-railroad haul. On this, the two-railroad haul gives us a much better, much more direct kind of marketing campaign.

Tracy Robinson: We've been working for some time on a three-railroad haul on this. The two-railroad haul gives us a much more direct kind of marketing campaign, and we think a better route through Memphis, faster. It's all commodities. We've been working on all commodities. Jen, do you want to add a little further?

Speaker #2: And we think a better route through Memphis is faster. And—but it's all commodities. We've been working on all commodities. But I'm gonna let Janet give you a little fill. Janet, do you want to add a little further?

Speaker #4: Yeah, I can take it a little further. I think, for sure, Tracy's point is well said. It's northbound, it's southbound, it's all commodities.

Janet Drysdale: Yeah, I can take it a little further. I think for sure Tracy's point is well said. It's northbound, it's southbound, it's all commodities. When we think about the contour of the different business segments, for sure automotive is a heavy hitter. We're already been tackling the intermodal, and we continue to believe that there's really good opportunities for truck to rail conversion. Not easy, but you just heard me say that truck capacity is tightening in the US, and this is one area where it is quite supportive for us and for that product. Ag, energy, petroleum, and chemicals of all sorts. It is a broad-based opportunity that we see between Mexico and Canada. Thanks for the question.

Speaker #4: When we think about the contour of the different business segments, for sure, automotive is a heavy hitter. We've already been tackling the intermodal. We continue to believe that there are really good opportunities for truck-to-rail conversion.

Speaker #4: It's not easy, but you know, you just heard me say that truck capacity is tightening in the U.S., and this is one area where it is quite supportive for us and for that product.

Speaker #4: ag, energy, petroleum, and chemicals of all sorts. So it is a broad-based opportunity that we see between Mexico and Canada. Thanks for the question.

Speaker #3: We have time for one more question, and that question comes from the line of Jonathan Chappelle with Evercore ISI. Please go ahead.

Operator: We have time for one more question. That question comes from the line of Jonathan Chappell with Evercore ISI. Please go ahead.

Speaker #5: Thank you. Good morning. Pat, you gave us an update on the fast track. work that you've been doing and you're done with the review of most of the major terminals.

Jonathan Chappell: Thank you. Good morning. Pat, you gave us an update on the Fast Track work that you've been doing, and you're done with the review of most of the major terminals. You also highlighted CAD 100 million of cost savings that you've identified this year. Trying to understand if that CAD 100 million, have we seen any of that thus far in H1? If this is what you've identified thus far and you start to see that savings really start to shake out in H2 of the year. Also you mentioned still looking at some intermodal terminals and facilities. Is there a chance that that CAD 100 million becomes something greater as we think about run rate into 2027?

Speaker #5: You also highlighted $100 million of cost savings that you've identified this year. I'm trying to understand if that $100 million—have we seen any of that thus far in the first half, or is this what you've identified so far and you'll start to see those savings really start to shake out in the second half of the year?

Speaker #5: And then also, you mentioned still looking at some intermodal terminals and facilities. Is there a chance that that $100 million becomes something greater as we think about run rate into '27?

Speaker #6: Thank you for the question. And I'll say this: the $100 million—that is the savings we have realized. And let me say it this way.

Pat Whitehead: Thank you for the question. I will say this, the CAD 100 million, that is the savings we have realized. Let me say it this way, Fast Track is part of how we run this railroad now. I would say the work we're moving as we've looked at the major terminals, we've moved on to intermodal terminals, non-rail operations. We have had a thorough review of our rubber tire fleet. We will continue to double click into purchase services and facilities, we called that out as well. I will say this is a muscle we will continue to exercise. We feel good about the additional opportunities, and we're going to chase every dollar.

Speaker #6: Fast track is, is be is part of how we run this railroad now. And I would say we you know, the work we're moving as we've looked at the major terminals, we've moved on to intermodal terminals.

Speaker #6: For non-rail operations, we have had a thorough review of our rubber-tire fleet. We will continue to double-click into purchased services, and I would add facilities—we called that out as well.

Speaker #6: And I will say this is a muscle we will continue to exercise. We feel good about the additional opportunities, and we're gonna chase— we're gonna chase every dollar.

Speaker #2: Thank you all. Listen, we appreciate your time today. Let me just say this as we close: This team has always been excited about our prospects.

Tracy Robinson: Thank you all. Listen, we appreciate your time today. Let me just say this as we close. This team has always been excited about our prospects. We love our franchise. We've got great access to North American markets, great access to global markets. We've got investment in natural resources, and whether it be ag, it be energy, it be mining, that's continuing on. Our customers are investing. It's not often in a railroad career, though, that you get to meaningfully expand, extend the network, and so we're even more excited now about the prospects, what we can do with this network, how we can bring more to our customers and to the industries that we serve. Thank you for your interest in it, and we'll talk to you soon.

Speaker #2: We love our franchise. You know, we've got great access to North American markets, great access to global markets. We've got, you know, investment in natural resources, whether it be ag, energy, or mining, that's continuing on.

Speaker #2: Our customers are investing. There's not often in a railroad career, though, that you get to meaningfully expand and extend a network. And so we're really—even more excited now about the prospects; what we can do with this network, how we can bring more to our customers and to the industries that we serve.

Speaker #2: Thank you for your interest in this, and we'll talk to you soon.

Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.