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Canadian Pacific Railway (CP)

Participants
Maeghan Albiston AVP, Investor Relations and Pension
Keith Creel President and CEO
Nadeem Velani Executive Vice President and CFO
John Brooks Senior Vice President and CMO
Tom Wadewitz UBS
Fadi Chamoun BMO Capital Markets
Chris Wetherbee Citi
Walter Spracklin RBC
Ken Hoexter Merrill Lynch
Steve Hansen Raymond James
Allison Landry Credit Suisse
Brandon Oglenski Barclays
Brian Ossenbeck J.P. Morgan
David Vernon Bernstein
Turan Quettawala Scotiabank
Scott Group Wolfe Research
Matt Reustle Goldman Sachs
Konark Gupta Macquarie
Justin Long Stephens
Bascome Majors Susquehanna
Seldon Clarke Deutsche Bank
Call transcript
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Operator

Good afternoon. My name is Sheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canadian Pacific’s Third Quarter 2018 Conference Call. The slides accompanying today’s call are available at www.cpr.ca. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After introduce now AVP, begin [Operator would to the Maeghan to Instructions] I Pension like Albiston, and Investor conference. Relations

Maeghan Albiston

us and you, you Thank afternoon, everyone, Good for Sheryl. joining today. thank

and be me Before we you here President presentation The Marketing results contain Officer. President may influence President risks, actual Vice and Chief to uncertainties, followed information the factors today questions differ Chief that our that limit and could The of to could introduce Financial this and forward-looking formal and may MD&A Executive if in U.S. Keith I now two begin, pleasure Chief Q&A your want John our in Vice and appreciate remind materially. This our I’d release and filed Officer; described Officer; other actual by my with non-GAAP Nadeem are Senior the Executive Canadian Keith With contains is outlined on the Creel. slide time, Velani, also remarks results interest are on you regulators. three. and to It’s presentation press two. which and in measures, slide Creel, Brooks, will

Keith Creel

creating real this as the million yesterday customers. to something the up discussion. proud buyback CP these hit TSX confidence in Certainly, as to Good outselling to that With that this well, Brooks productivity collective of thousand we at view industry entire but keep constructive $XX.X, The his compelling have efforts across especially press develop had not record, CP. the and to the family. the we was fuel world-class release am am impressive our as renewed value to call operating join correctly, Operationally results story you results gallons adjusted Originally, program. sure team my $XX.XX planned records advanced the all-time quarter, improved sold seen reflects well Maeghan. have service XX%, the a we saying improve have as it. the for in sales the we with make Board X% are time, applied to there and tension to at saw well, $XXX I We delivering I looking advance improved $X.XX. said, in sure it per time is standpoint, the as ratio overall hit that discussion, But, to experienced. we that from opportunity record the for see GTMs, setting to of. very marketing efforts shareholders XX%, for team, we additional the value company. Robert These very very we an I year-over-year XX% of very it his that market as strategies and the recent of CP. efficiency Thanks, for have am create compelling team CP and the proud for and this, operating so best. that asset John results, that’s all we the Mike the volatility December, Foran to a I finally, maximum would a to given We Johnson were pleased approved by income for market for you $X.X results. leverage but we EPS that that, our this Board Welcome billion. levels, very Revenue record with obviously record me say allow Operating afternoon. another will brief afternoon. can comments the of standpoint, continue which train weights only Certainly, Q&A.

our and X% applied the certainly conviction strong from our perspective manageable and amount going -- forward. time metric credit illustrates story is for itself going CP same buyback. This have at We the

that’s the rest and spend to provide Q&A. on some it, John color time on point, to Nadeem over we of to financials our fruitful hand will me then the the it to some market and let So, my original

John Brooks

Thank and everyone. right. good Keith, you, afternoon, All

of store expected as X% and X% to year, total revenues this were continued to XX% in continued said, a units. respectively. same $X.X And of the of to guided of XX%. and solidly one trend to across revenue quarter record growth to price with Keith FX our were pricing you range As up earlier renewal tailwinds middle this X% as business were up RTMs every our X%, and land to billion, north Fuel X%. I target

K+S quarter. gasoline, was was up excluding frankly, a Coby This Alberta. and harvest that So on of by of note Strong strong energy adding September third a performance both and QX performance large also quarter underway month shipment XX% this from service with would and XX%, weather to Bullard volumes. by export this growth XX,XXX team closer basis. out up oil, while carloads his I fuel ECP record now volumes some was as reflection led have and potash another crude, and that straight all over a now quarter train the this X% the Canpotex energy led The by Vancouver Revenues is adjusted currency was also fully chemical was strong in also being plastics revenue a will remain saw and the I taking asphalt, Canada, of very revenue marked record setting a for record. carloads and all-time expect to contributor crude quarter for moved portfolio as our potash. record of to with look Grain of got selling XX% in to at finishing LPG, we highlight up a challenges by growth was our we service.

expected, to leverage up Toronto continue as transload the As products capabilities. our XX% strength Vancouver, were also forest we Montreal and of

new XX% the compound remainder growth a our of automotive the a offering for in weak year. well had customers continue quarter of the up underway revenues opportunity best panel the great in CP. last business an spite Vancouver Automotive years. the new environment, market expect lumber on construction option and to another trend a auto Vancouver In for fact, in and is XX Further, our we impressive our were

Intermodal transcontinental the the side we our the low-margin about with than service this reflection were continued RTMs double-digit talking business, discontinuance a growth note, Expressway the were Of quarter, revenues domestic Finally, of experiencing short-haul of service. and our long-haul have of and carloads intermodal up international on significantly success more XX% again. both

disciplined many be the you of stable I of and heard environment I proud is areas think demand the frankly to in commodity positive, during and our team the overall, and Investor a So continues it am our healthy strategically marketplace. and in executing very Day

We right partners. our are picking

We transportation in total provide enhancing we this we are and are product providing our service marketplace. the pricing and for value

a is ahead we day, there is laser to will of the done, that, the focused said as on to course, yet of of Nadeem. pass that us. be With opportunities So, lifting I lot heavy but work team do, to

Nadeem Velani

Tremendous John. team. by Thanks, the results and you

demonstrate for to year-over-year, XXX XX% Keith rising XX% resulted by as low ability and XX.X%, and company. up XXX driven Board. John basis in significant across growth basis to on the record basis of ratio Keith RTM an FX points. operating impacted or negatively about ever This quarter points on improvement grow continue spite accruals quarter in the prices As incentive-based third of was an in the operating lowest cost. stock of compensation fuel mentioned, the a incremental was of at our by basis, noted, adjusted XX% which This Revenues volume were and this has ratio

performing incremental our illustrate, As margins. to grow have and the numbers as high well continue strong railway we we and at productivity drive is momentum

will primarily continue basis shown the the that be higher efficiency last column in from fourth confident labor by will and pension adjusted productivity. as margin comp, Taking higher the labor increases expense inflation. on Fuel $XX the incentive The to are million The items higher quarter. million is improvements slow volumes, expense closer and up is increase from side, in few year. versus look speaking we higher utilization exchange was enhanced a expense volumes. on results or of fuel This and result to partially far slide. fuel were by the which in higher offset Comp $XX expense on as improved well and benefits by XX% driven stock by right as increased of and partially offset prices up train at improvements driven volumes. see was We a a improvement XX% we consumption was of X%,

flat were offset and and productivity FX expenses in and land been was of costs wheel and partially locomotive Materials fuel million Intermodal about Keith Higher fourth car ever delivery by still and an or other Purchased has maintenance costs, repairs. As X% million, best material $XXX adjusted in of casualty We $XX higher million expect million this increased repairs. reduced increase $XX sales on the offset no on by efficiency was There an basis. year-to-date. sales land the expense locomotive was repair magnitude pickup mentioned, higher cost driven the quarter. higher by $X and services in efficiency.

million was risk quality line fact, interest one excluding FX. lower, our on below lower primarily that guidance the The it of is refinancing XXXX. anything, QX. the or updated And However, debt is some million it earnings. $X in savings into note, in driven $X there impact improves has from lies no expense and if reduction item This by to

on while free grew income the results. XX% So, improved adjusted net and outstanding on basis, the XX%, adjusted adjusted look FX next EPS Taking slide. at a cash an XX%

and flow in cash generate to capital from by cash increased operations continue increased spend. We increased of XX% Year-to-date, spite XX%, flow. strong free cash free

leverage continue free on to than for generation this a we in pause and billion year previously the months, within $X guided, billion our to with to at expect X.X cash last remain end. year track and we in debt-to-EBITDA. have taking levels times $X.X We at strong our well six targeted As buyback targeting these deliver CapEx are more times a lowered X cash our combined

a means program one as this already noted, we As redeploy filed Keith to have cash. NCIB X%

support as the our the program see significant we accelerated of increase Board With the in scale we this price. share and value

we believe created to advantage take get we TSX of So discipline for is prudent a has we sheet allocation. us approach once -- opportunity aggressive pullback this to it be plan very to with capital an our and balance

some first the resilient. model there year, challenges our the in half of remains operating were While

others record sustainable ability than to we into This reinforce our in it serve further team Keith. with And and will our grow only growth and drive profitable over results quarter’s in QX faster I hand in the XXXX. to industry that, to to confident back remain

Keith Creel

very very, again, marketplace compelling value I certainly precision the railroading, in hard the overall, the said, financial at our time of think, day that at work, outcome scheduled think, and for producing customers With same a marketplace. the end our in producing compelling Okay. for the shareholders I very

open So, it questions. let’s up that’s for it,

Operator

comes Thank from of go you. first ahead. of Instructions] line Tom [Operator UBS. Your Please question Wadewitz

Tom Wadewitz

Good afternoon.

already quarter. I congratulations are be think strong result, knew were nonetheless good we going but very there obviously to

Keith Creel

Tom. you, Thank

Tom Wadewitz

guess, wanted like to quarter on think they maybe the question. you the -- of the I quarters? what in think maybe side, few next or you do where I energy quarters terms the on XX,XXX looks But probably couple over sand, go kind how might frac crude? and And then sand how of ramp how in ask, of it’s much the a offset about next were frac Keith granular John the from kind

Keith Creel

Yeah.

mentioned, ago, winter of hundred QX, I get run move couple through guess, that crude to that on as rate sort into Tom, the into annual get now, So, ramp-up. we will thousand weeks I of we as a

to beyond opportunity you looks probably it but of I again into think get there once get XXXX. like that, QX more is QX,

frac here memory so a neighborhood landed think a all-time or recall. little by that drop in QX I of the but of was high it, bit, think in QX around I if and an in I sand going Just as in we from XX,XXX we little cars get

for as positive see a think, -- play has The that while. is is, right that further now. frankly We of lot going a talked deceleration We’d about. front in I there what, this sales QX. out been to we and little know probably space that dynamics our a marketing of quite You team in

sand train now crude developed for think, opportunity taking but it’s that opportunity delivering is, not thing CP. only that is replacing longer a also the in a -- have the three it’s It’s all remember that Bakken us line-haul. single terminals to It’s sand, got repurpose margin allows run great train. control to about And have trains. you facilities the We I that unit new

on as can lose in have that things up unit said we the other also, good landing other what that some got a our bottomline developing for story topline at I is And So look spots. those in few we actually markets pretty we a market. of us train further where sleeves

John Brooks

add we from originate to an would moves, car, income, remember, don’t standpoint, margin Tom. which locomotive fit per at want and standpoint when our It’s I I those a operating warehouse, sand standpoint the right know Yes. look those turn move asset important in contribution from to from so way you the terminate it. productivity

what the You not better at carloads have the own numbers to going We our a when replace profitable car only, are end you on as more day. of much sand the for all at side. down, it we look control always. car for benefit the seen It’s go of to destiny do our result to us bottomline, its, historically business as and

Tom Wadewitz

just helpful. if market actually by And could Bakken just there you that right of demand out are the topic, you some maybe would available something one That’s the if do cars the of you on are of out follow-up was be still rail Bakken, there there on that doing then is kind Okay. and that -- same condition? crude is the

John Brooks

Bakken? it’s We we Would crude right in currently got your type. yes. doing entertain Bakken. would of point to of out The crude are the the out not the answer car But be any be to

Tom Wadewitz

So types are those not? available car or

Keith Creel

think online. out Canada, part that Tom, out been we of right delays -- itself. cars bit model of timing the newer part little I the in to some delay there, in We of probably are are face frankly, the around ramp-up if lag a our also retrofit has presents if Bakken, cars -- the come the but is of There of the some coming this of of

John Brooks

based shipping Yeah. out carload our a the None of is data expectations crude of Bakken. on for

it are it obviously So will going not we not sense I we going make decision think be If CP that’s another it’s and critical doing. for to are point. we consider. good If a and not doesn’t to

Tom Wadewitz

Sure.

Okay. Great. Thank the for time. you

Keith Creel

Thanks, Tom.

Operator

of Fadi Markets. go The next Please from comes question BMO ahead. Capital Chamoun

is line open. Your

Fadi Chamoun

Thank you. Okay.

more under this… run volume kind about is the been XXX,XXX of rate tariff three on is or to are crude Just this years talked discussion, over contracted I follow-up timeframe think, to years, the talking you volume about, two have all there kind you moving

Keith Creel

NDCs, Yeah. All the volumes all Fadi, it is under contract. involves terms, It it. of involve

Fadi Chamoun

supply of chain, are a terminal crude crude in as evacuating and the the guess, I there it to cars up? back really ultimately bottleneck having it storage is question And Okay. this up are that seeing you Canada comes more of terms or in right romp

John Brooks

I done Yeah. railroad. our No. we have --

these item backup, sort have. more of that be equipment definitely of the on some experience haven’t was of We It Fadi. the pacing that opportunities would we

Fadi Chamoun

X% handle locomotive Okay. like, XXXX. do hiring positioning can My up overhaul you help about second into to see kind growth hiding question kind you need if next you have what us of to been of a handle we how would the order into bit is, understand and RTM the kind the in growing this what network a of little year, of headcount, I that is ramp to you think volume flavor guess up volume? kind

Keith Creel

And can and run when a obviously, so or those left lot based or So, the X% that is are more got not for on going to the X% be where any if one X% and we make to it locomotives, good more it X% we it I the our growth not to ‘XX on again, of sense and do with and it type, obviously, fitting it that far as comes prepared into anymore rate. trains business would but there a goes. mean, don’t available economics than to suggest RTM have it unit depends trains locomotives pull for to are unit be close we cover is as manifesting I demand. would retrofit the guesstimate X%, that to one, certainly intermodal, the we X%, that line synergies

John Brooks

the we where up to as the are stride that ramp at to add and out just we our we been and to hit hiring -- would as several get I training Fadi, calls, position up. ramping pointed volumes And the have to last the

railroad. us ramp-up don’t the will on be huge a the are what’s our think at So some I in -- ‘XX you been expect or see we to it’s resources demand to controlling from to coming and meet assets able of

So ago, plan we we to are taking on weeks kind we make team process and important we can go what described how on take new business and important having and handle. couple of sure in an a a is function how we through lockstep we

we So very a prudent fashion. are in taking on

Keith Creel

Yeah.

have the mean, the that to and I are trains, think, we trains, RTM of XX%, running shared double-digit we from all today. miles train third only of numbers fewer, I just the is that result up PSR got we you and we a to look longer the XX% a look at reported as some in growth model. which that’s of part heavier, less longer standpoint than quarter

Fadi Chamoun

Great. you. Thank

Keith Creel

Okay. Thank you, Fadi.

Operator

Your question Citi. Please Chris from go Wetherbee next ahead. comes of

Chris Wetherbee

maybe all Understanding Thanks. there competitive guys. Hey. it’s the were together I think, maybe opportunities, you time you stepping some since of few progress I two as back time and been particularly a bigger picture Good weeks going at afternoon, winning spent close the the to. toward we about the through some only were guess, contracts thinking that think awfully that business.

couple out ago. weeks lot You of a a of obviously put information

feel you those your ability that weeks curious of getting contracts. did the to better, in closing particularly close, of things couple on competitive in ago closer terms Do of deals. Just on a of stand kind you those about sort today in where same

Keith Creel

good, this say for better. good I’s we good the Men not would doing I that’s customer is if deals and feel and I and this, making sure CP. a crossing for the T’s in are way dotting are Chris,

Chris Wetherbee

That’s OR necessarily Okay. operating a puts and about RTM these growth target honing about in I more and helpful. than XXXX of think operate that And output the dipping of and a longer-term competitive still on that’s the the you back a model you for the of opportunity, know Just and I takes how keep you some if want OR again the and XX get ratio, you or toward, going a when contracts basis? little hurdles to think sub-XX What to business. bit are might thinking that toward that an -- the under to sense of maybe that some are potentially are full year hitting landscape from getting XXXX. back in about

Nadeem Velani

Stock-based a and Chris, up, from last face. I of see But hurdle would few say, of you kinds prices up material fuel the at just on comp only the OHD up, surcharge will take OR. XXX% an one OR would be headwinds hurdle. there. certainly on until what see fuel and was That’s weeks go goes we hurdle, taking we will we fuel point the talked we that occurs the view risks, don’t and of some many revenue about

we other be but of with point this a that easy difficult off half If that faced I for difficult that winter forward. lot issue part our we going winter. as disruptions in of create And kind to of coming winter, that say let OR certainly headwinds of will mentioned, very the us a had earlier labor from an and year, we a year, this and have case us first would think of year the view. we extremely anticipate hurt a hurt we don’t was are comp I potentially a that I we the very in

good be volumes we like OR best. there’s margin can’t feel a we very we that no very should improve, we see taking no, So, on reason to continue at incremental and high these about and said, why industry

Chris Wetherbee

the it. guys. appreciate Thanks Got I Okay. for it time.

Keith Creel

Thanks, Chris.

Operator

from of ahead. comes RBC. Spracklin Walter go Your Please next question

Walter Spracklin

everyone. much. afternoon, very Good Thanks

That’d some I snow come communicated discussions well weather the that, for forecasts of some balance Just your and onset notable think of Alberta wet carried what’s on certainly there potentially based mentioned that Saskatchewan. change the were if into you’d I overall of be early we and in you crop the and on crop parts you to experienced what customers, grain you that terms with Has the know what any is of when to as maybe us side. had forward size could with in the of seeing John, you terms in to and starting winter helpful. year? of we regards potential previously of are that negative size some in this

John Brooks

all or good, get they was has have out But Yeah. what after day. guys since weather then Yeah. if Walter. been that the in And stabilized northern We good wanted able show That’s get so, and you Alberta about railroading crop next to honestly, it. the are pretty after here. you to to that look week winter somewhat they going

that’s down think they in pretty some beaten a not of those are where I areas crops ground. canola long resilient the as So to lot are as

think, I but I as with this million they number. jumped metric I pretty still the in my above average. been metric where customers have them. puts certainly, still plus right at are us think a that bit plus And around which minus sort ton we a that am little carryout, crop is pegged ton XX discussions of it’s million or it’s bullish XX look you type still So,

strong first I of next half think fourth that and bodes well strong a quarter, year. frankly, for a here

Walter Spracklin

Okay.

John Brooks

at We friend, XXs was XXs left it are Day. and beautiful so the year in in expecting American you Analyst short since today, in fiscal the for guys

Walter Spracklin

word your it. I take for

Okay.

that hasn’t getting the sector On been Nadeem, know more half the and obviously, others your is leverage changed, to in little a buyback, two have I bit actually, there and a target two aggressive.

to downturns. It that railroad it I of profile cash the if a recession Your you am see resilience in wondering little looking in good. is showed past suggests avenue flow whether in to the start free on sector the bit aggressive two level bit that? buyback with getting to or rates your above of more leverage two little end how the be even a and the half, upper would toward indicated comfortable a being for you here in general

Nadeem Velani

mentioned, we our the several comfortable commitment of that the and of to last have within Yeah. days stay range. -- being are with end so as the range. We spent rating going the we being at to agencies It high time true I

X.XX at we are now, We fair. will level. the around beat That’s X.X

So we did talked ramp about X% to it doing program. We closer up. a

So a this X% point. to bit kind more being program us of reflects little your aggressive

our very visibility visibility free Our and on high into XXXX cash, is very positive.

So we will be within means. able to our our with free execute it, this program, utilize stay and stay cash

a opportunity next refinancing spring the year. have We in of

little refinancing will leverage onto that We add a bit of well. as

X% will still able we our and We within stay will think execute this below X.X be to on range I buyback.

that’s think and good so. good story, I So a time a

Walter Spracklin

very Thank Thanks, Walter. Okay. you much.

Operator

Hoexter Merrill Please go Your Lynch. Ken comes next from of question ahead.

Ken Hoexter

of noted looking then afternoon. that, sequentially? clarify year-over-year quarter better. Good And they be or bit margins, at sales that can Nadeem, Analyst on the to were Great. are the you the with comments when some Day. guess than a you you fourth land just Is thought said little going I you lighter

changed of ratio $XX you be? to comment million. would on Has million think said anything I what read the operating Just trying $XX your instead there?

Nadeem Velani

Sure. Yeah.

operating an the year-over-year. of to say it we improve given we improve expect ratio going just be That said, at sales, to So, shouldn’t would sequentially some to weather how improve with you ratio associated that land challenges if the Canada. to ex-land our sales I railroad without and it of seasonality being look you am in sequentially. expect will I say operating winter difficult

year-over-year. if So exclude I it. associated -- sales, with will it sales land there’s Why improve land some change lumpiness

from land Two maybe that are have then middle a could XXXX or there we are close, early them, just them be going to of is January. confidence could into kind pending. it it’s December were one be of pushed of of of three it and level it’s deals which So the sale XXXX high

tight So it’s that timing. of

So really a just else. nothing timing it’s issue,

Ken Hoexter

on over maybe the more and the last kind the of a of is I with your state state you of the for from view the market, you of the terms thought of follow-up, increasing more guess gyrations grain industrial, question discussions concern economy rapid maybe then, an their day. analyst I thought, given since industrial already But in And on on customers the in of on really terms demand? have John, gone know weeks I just crude few my side? it’s your your guess, so

John Brooks

we And look year across Board of I pricing than out, it seen bullish of had here our in call the space bit lumber there. No. But also it this pretty United weeks. the a year-over-year time. little stronger that are in at we States to and I If the couple last something the have ago market volatility a at demand in

going optimistic pretty are the we overall QX. in So

Ken Hoexter

Thanks Great. for time. the

Keith Creel

Ken. Thanks,

Nadeem Velani

Ken. Thanks,

Operator

Your next go question comes from Steve Hansen of Raymond James. Please ahead.

Steve Hansen

Yeah. Hey, guys.

Solid quarter.

point, starting a large to it are facilities it smaller like are contemplating manifest still any this three the time, terminal. unit pretty business sounds idle. are Just lot up the same to some curious degree, whether fill north sounds the like or on the the crude At loading at you entertaining here, in of terminals side the frame

seeing moment? are new options businesses if manifest really in to an curious bolt-on additional starts train through if any opportunity cards the without not that’s move you Just at or this

John Brooks

No.

We are.

got have We manifest the opportunities locations. at play some our transload in of

I this. does So manifest a play role think do in

but are, team the said, four been point in there very that working on. three haven’t this it, as I is at We heavy, opportunities or Steve,

Steve Hansen

terminals just few And undergoing a the I Great. that, of expansion. heart as follow-up a understand to Okay.

Investor that Day. at the you discussed think I

any starting have heard border investment Just into thus capital about statement, to as that’s a entertain you more more far? loading capacity

John Brooks

at out that me. nothing one, Outside of jumps

pretty way aware lot obviously, that are noise a and of spreads or I There’s a would think, bit out I mean, right specifically. of call nothing discussions there, are wide now. I we but imminent quite under of

Steve Hansen

good. Very Okay.

John Brooks

Alberta. will our Hopefully, finance further incent minister investments in some

Steve Hansen

some Thanks. comments color. I caught earlier, of the the appreciate I Yeah. so

Operator

question go next from Credit of ahead. Please comes Allison Suisse. Your Landry

Allison Landry

Thanks. Good afternoon.

turn Just out this resilient it that’s the will or made so early next to maybe that difficult you last in changes to end of winter a there’s or going back network pretty that year year? the the whether more does if weather the have year think theme, it make you

Keith Creel

surgically We conditions shut really we weather, lot do that’s west problems of compounded than of invest very the It an and not That’s coast our addition strategically had of literally several Last definitely we out a the derailment in continue to going weather, a exception a and catastrophic standalone, for so, in that circumstance. capacity to to to normal, are days. capacity obviously, better year, sucked to same really increase going tunnel same challenging had have that would we last year. this we down railroad.

and the which in certainly in there’s and plan versus bit and railway that, expect pray of given of a same again, resiliency experience circumstances. we don’t the hope year last absence I So the

Allison Landry

And change a That’s a Okay. previous miles earlier quarters. Could four up the help. the share train being with made three just year the Keith, quarter or up also you in you growth. regarding maybe train in lot comment on following in maybe versus then, VR us the less RTM third starts

PSR, just another of that’s metric think from so curious sense to I there. trends the am good a I get

Keith Creel

number. you get and have there I and to Maeghan and I don’t misheard. the get give back The that Yeah. I touch want train starts don’t you to exact will with are actually number.

Maeghan Albiston

will I Allison. you follow-up Yeah. with

Allison Landry

you. Thank Okay.

Operator

Brandon from comes Please question next Your Barclays. go of Oglenski ahead.

Brandon Oglenski

material rolled guess, thanks to a that trade kind incrementally ago. But do what tariff coming slowdown develops this, I markets in know here. Hey. closer we had and Asia? guys a I would US, I you talked threshold that’s for we XX% over concern to China Look, concerned way, it we out questions. my lot guess, mitigate to that weeks not be everyone, of business? that Are see equity of that about Good if And you but two on afternoon, a can volumes taking

John Brooks

Yeah.

So, Brandon that. few will make I a comments on

we So, look, talked type Asians is revenue day about business our our the but. number, XX% of that in that

Keith Creel

here… -- -- me me Let me John, step let in let

John Brooks

Yeah.

Keith Creel

Because clarify then talk -- the John, I geography. will stage want here, about let’s to this. you I let set

a CP. I to specific confusion in marketplace on is think of there’s Asia tremendous the amount

with So is let’s to what start Asia CP.

with not It’s railroad, is war. India, majority Asia Canadian-based our think a critical trade about revenue terminates CP Canada. China, predominately not a at is is China. and think, originates China. a Indonesia, in Korean, you Asia point of world at trade Canada-China Canada’s It’s just not another In Asia CP, when Not odds Asia of The is Asia cetera. relations, is I X% et I in is thirdly, we to we to of And specific I U.S. that revenue. entire specific, our for China, and speak to even the direct and XX% to if specific, China both that’s want is and revenue. important China get more more less want Canada And the US. think, our do, of U.S.A. when to network, than it’s CP we if get is Japan,

based. weighted So and in for to fact not advised is anyone suggest industry the heavily ill to China, railway weighted heavily this the railway Go John. is most ahead, to that China just

John Brooks

bit of to Brandon, little our is what a some in the Yeah. probably I would a ago. of was than of we, started on see little international on probably, this just have a see have different started business. comment to pull-forward and We volumes couple weeks

business. again, are out not that, China. But the percentage, of imports those some call the pretty is it’s as you right, specifically, I out to hard and it’s truly more it’s exporting the tariff? outside latter. to if to robust maybe forward of of in we Vancouver a or our directly maybe demand, of pull business, resilient to it as tell. X% really it look said, ahead numbers. and XX% And It’s little we It’s Keith to that States. a space, is total Now were But, X% is prolonged feel the at our our It’s U.S. is of giant that are peak United soybeans into kind like Midwest that starting grain impacted

Brandon Oglenski

called clarification, the be you I because most out Keith, RTM appreciate I that out contracts, of -- the But asking. Well, guess, should that or that lumpy and we numerous exposure called there, growth I pretty to on through or intermodal side especially just mid be half ‘XX the years? we period. you XXXX, XXXX? single-digit be three opportunities purporting later that opportunities years it’s thinking think toward two you come thinking should more throughout to we the those is weren’t guys time when have heavily up weighted and this back more comes the are in ratable it for going Is going that of next So bid guys or

John Brooks

No.

as is weighted half it it. into think the I XXXX bit about little toward a think second I

Nadeem Velani

international on we but it quite, those And our and we are -- China And clear Brandon are revenues certainly, reports, read that frankly, mid to call revenues on assumption not be achieve or weren’t implying these RTM growth. single-digit didn’t that, dependent in so that. your

Keith Creel

getting it’s it. When a the maybe just overemphasized that tossed destitute I China with the say best it’s bit think, a connection marketplace. overemphasized, bit this important are in say around I to that’s way being We understood,

to reason been with So rather to because be it’s and discussion opposed fact-based compelling been misunderstood so wanted it’s the a that’s we as speculation. misrepresented

Brandon Oglenski

you. not But by misrepresented

Keith Creel

Not at all.

Brandon Oglenski

guys. Thanks,

Nadeem Velani

you. Thank

Keith Creel

Thanks, Brandon.

Operator

J.P. Your Please next question go of Ossenbeck comes Morgan. ahead. from Brian

Brian Ossenbeck

afternoon. Thanks my question. taking Good Hey. for

to Have get additional you to year domestic domestic starting ahead be later freight the that? secure shippers in the lanes ELDs be coming wanted they Could for started by So, whenever to would much really as ahead do affected this Canada. the of to How come and country, was John to around just see you this as capacity U.S.? in certain in perhaps, it? look impactful back it think any online

John Brooks

go this of to of it a back opportunities year, more like build upside be number and XXXX said, of do learnings U.S. as don’t into it’s two and But see mandate. the as I sort XXXX. and that you much trends to relative get Well, we opportunity sort not. this a see closer real to -- think or coming approach any a result next there’s is no, what do we or gained quarters that, on the And through Brian, we probably that I being is more in think, the U.S. think, becomes of to is. peg going the going there sort will of and faced present hard the are the rail did themselves I momentum like I tightness have as but real, it certainly, road is yeah, as the half that in much to we it’s XXXX, the

Brian Ossenbeck

will like that three-year And upside Okay. target… be sounds to the it

John Brooks

Yeah.

Brian Ossenbeck

out? have … laid you for RTMs

John Brooks

Yeah.

we ago momentum to when continue in that on tailwind. this growth to some success space assuming and and those couple of a we a I layer we certainly there, continue Again, gain a in could yeah. lot there’s get space we upside XXXX rates weeks we had to domestic about be expect think some and that talked mandate we the then in have our

Brian Ossenbeck

John. Okay. Thanks,

one demand. said quick XXXX what follow-up earlier of the Just on we visibility into

capacity, has contracts You where areas strong has the onto environment. are stretch in little obviously and the Are a certain in move capacity committed freight by toward green controlling shippers? more out coming any trains what’s But see I a like network. to rail bit they been behavioral know but we group and that It’s there dedicated needed? to really changes it’s a think more there maybe they get willing been

John Brooks

longer service, revenue network think our we approach de-risking our about so, open say if partnership exposure I some spoke the And focus fits that it’s we for new on we for are providing and -- willing our partners as have couple is to are and it’s been and we with right I’d it to have you that and to do the our right opportunities Yeah. and of of we look we mind things. about. commitments. keep term lot the value some going relationship additional customers these One a our of a talked part

So of outlined rate value it’s days be you. service we provide, increases though. fair, got have we in got It’s the for the to that that capacity be X% passed. of a lot The and to for we

right we open fits right term deals. every not very the that that customers, opportunity opportunity, are those the it’s to So mold but certainly

Nadeem Velani

have just in well, put Brian, right terms we of a the investment pro as in volumes ensure and quid return. as well capital levels has to commitment where quo that get And we

Brian Ossenbeck

Right.

Thanks Okay. your for time. Appreciate it.

Keith Creel

Brian. Thanks,

Operator

is Please Vernon Your next go from of ahead. Bernstein. question David

David Vernon

the love the the to Is rail to tone guys. the afternoon, year networks. a grain Good that lot something Keith, to that there pushback worry of now was or obviously, radar? How’s of Canada, that government perspective concern, now discussions? is we those on about the trade terms Hey. regulatory don’t last of environment of kind and the right of a in I’d lot access still have is from on behind just your in us, it hear

Keith Creel

or mindful being of and something threat that have far pay it’s attention I being a degree as but and uncertainty. we got as always of think high to to a problematic, be respectful

levels are move think at good to pretty as well marketplace for especially I the doing product as team’s country, I we to from behind to is us solid, doing export and to as we that the continue job and what hearing. the me, I a To go the overall our long am ag think pretty are service job CP.

economics love that things the to regulation are are and communities be best-in-class our I that that able fact but There good for our cameras safer that that in going locomotives operate grain-ag are think equip and I got we some and we some now fact the are that the there create pacesetters have loved we trying X,XXX-foot in going program world-class, become will train things to to be like did. again, employees, as to workplace that well in industry, in some a across have to what we And are be invest a the and leaders the didn’t as going I space. to there I maintain through Canada I continue pretty space. things the to to I loved. in with enjoy

David Vernon

terms in become blowback anything your then of so success are own the in increasing way to And victims guide no like Okay. that? that you metrics risk or profit of any going

Keith Creel

Nothing ominous that I am no. aware of,

Nadeem Velani

election of there an the by if for be south No. the in changes tap up And government competitiveness some Canadian the border been reacts tax if by Canadian arguably has the us challenges coming to so the U.S. of on with anything, changes presented and pauses challenged could certainly, some

David Vernon

then, And maybe as quick Okay. a follow-up. just John,

a under maybe whether you did are the -- invest marketed commitments deals those stranded guys end to leverage companies seeing weaker some a going in that’s down if companies think I getting You weaker new some of past, assets been in sticky of inside to the network of auto a help the job we it’s to elevators. are great in of yards or going how grain economy bit invest How the articulating up on little do forward?

John Brooks

Fair.

talked As are that and compound Vancouver of we hand invest, opportunities. with to the us. in right sort going hand partners with automotive If we are have the other about we want some of

the come to there So and require that are value commitments to table doesn’t, those consequences. if it

there’s we are don’t don’t up facilities terminals provide and if described and consequences service we we the perform running as then accountability. and we Just balance get and there don’t the like

Keith Creel

partnerships. That’s They the way we all them. Yeah. win-win are strategic look at

David Vernon

much right. so All Thanks time guys. for the

John Brooks

Thanks, David.

Operator

ahead. Your next from question is go from Please Turan Scotiabank. Quettawala

Turan Quettawala

you guess, I on pretty side. job efficiency fuel a done good the have Keith, here

getting discussions talk little train room room can next some about you sort much here there considering same could is, of onto a give forth, starts your helpful. are that’d color if about incremental wondering the more us so how more be is volume Just but you maybe assuming that bit if year there

Keith Creel

those quantum you be longer room for the improvements. industry the challenge. on and Again, locomotives the them when pulling be best have in grain more going more are locomotives manifest to that a going to is Yeah. that trains, are trains you after are incremental longer without the successful always leaps there’s say incremental room team potash successful But I and have trains that John would additional more going improvements be. at those those running might the

synergies are peel and out definitely start X,XXX-foot trains There see again, that locomotives. these degree with additional grain and that. like next to the train running business opportunities are we once continues I to a onboard with So that definitely in cars runway year there, start

Turan Quettawala

reasonable? mean, don’t be I sort to want you So, maybe, guess, would I but number of digits maybe a low-single give

Keith Creel

Yeah. X%, X%. I mean,

Turan Quettawala

Yeah.

Nadeem Velani

next year, could point. X% this mean, I doing this at Turan. are we assumption fair do We X% year,

Turan Quettawala

the you. Thank year-to-date those quickly point you I handy for overall lag you the the just Nadeem, of sort were in the helpful. That’s also I if of just higher about due here to know and fuel? don’t basis think of impact XXX XXX have price the fuel, talked fuel versus And quarter. on much number how

Nadeem Velani

No.

more follow-up with It’s points and it’s Maeghan about surprise. basis impact of specifics. XXX year-to-date this with the But leg than probably kind quarter. not impactful Let been was you

Turan Quettawala

than much. Thank very More you surprise.

Thank you Okay. much. very

Nadeem Velani

right. Turna. All Thanks,

Operator

Your go next ahead. Wolfe of Scott question is Research. Please Group from

Scott Group

us Thanks. Afternoon too you, China Maeghan, Keith, thank and for guys, and helped on that. on the clarification

about I we about and got line mid how math that? updated. our thinking single-digit? So Is have with the And then wanted you ask quarter to the fourth think of the in guys be growth potash are that strength I maybe the RTM in about volatile. up historically about but potash can in do feel we hitting specifically you as How ramping records, know you K+S have potash now? sustainability of got right sort

Keith Creel

with I answer RTM will standpoint, that the From Scott.

digits mid-single a model. to as have number good We

John Brooks

guys sort Canpotex The looks momentum and potash domestic close stays with What, It place with and in quarter. the we program continue. stable we seems gotten still the of sold a those to to the want lot the in of out be haven’t K+S. upside think I obviously is mosaic well Yeah. to fourth across pretty in to

to group. yet that significant opportunity again think there’s go I with So

fourth we think, So strong, the in the strong frankly, and potash through quarter, looks think I XXXX. it looks

Scott Group

in coming of think that any to to above is the last much pricing X%, of suggest there sort way have locked Okay. in at Helpful. accelerate XXXX? how been this does of X% point couple sort will you at talking north and is for X% point that the some pricing quarters the John, of numbers on side, pricing so about X%, renewals pricing of

John Brooks

couple different Well, ways. let that a me pose of

As of same half of I consider I our what our store, that would about made bulk at look is business. up

lot That’s escalation. maybe type X% and a that’s more So to the that X.X% of longer-term of -- commitments.

frankly, I and health cases north actually where a plastics into maybe of the where those in I of So little that’s that domestic business merchandise, my the upward, What The I some that renewing same strength kind that’s area and get carloads, on the of zero the creates, if areas is pull store. if and energy chemical the the intermodal. of in business, really again X%. that has the anything, we sort drag seeing sort on expect X% been are gauge on

So spaces. balancing those that’s bolts sort of between the other the act and

again, foreseeable store I the X% As forward, continue the future. the and north domestics, business that range carload in run expect that key I those areas to X% stays X% for the we that in to of means look -- probably same

Scott Group

said starting your think those you just same material comp you a XQ, third quarter talked fourth And tailwinds the from you way. helpful. there real pretty take one quarter, quick from when Okay. just Nadeem, in seasonality can That’s on obviously, Does not into a headwinds, stock was to the about OR clarify really account? headwind I XQ commentary OR quick XQ thing,

Nadeem Velani

certainly stays and Yeah. would levels, I restored be stock the be not that space. will that to but. there OR. at I the I OR. they some will mean these further value be say a be the optimistic we are if current headwinds on factoring more benefit bullish will the market I the am will in short-term

stock, something to offer. think as we the occur ahead the we I to of naturally As can buy get value that’s expectation going that’s are that going that they we see our

this is what think irrespective noise, does, stock I my bottomline, So short-term hold. of the comments

Scott Group

guys. Thanks for All the right. time,

Keith Creel

Yeah.

Nadeem Velani

Scott. Thanks, Yeah.

John Brooks

Scott. Thanks,

Operator

of Sachs. from go question Please Goldman ahead. next Your is Matt Reustle

Matt Reustle

bit tap on getting that into you RTM there’s the be schedule sounds and projections? came a you type be other meet there’s on a that replace might in Thanks prudent have that harvest back business your business for still passing shadow of could now here to if It like if but of business you taking and didn’t to those meet flexibility questions. targets. It quite event below the are areas carloads projections, is do crop in the curious just your other what book opportunities with the the

John Brooks

and growth Yeah. coming that coming the we manifest chemical in business the are the lot the lot territory where of grain of a business crude is of lot talking from, side or of terms crop. that energy lot coming is the flip north also of in by is a a that’s about What, is potash there’s rail a up from. good challenge The sometimes from, is opportunity

and do grain we that handle but opportunities So from if that present from know a my customer I up crude other region? I would don’t assets bucket something think, the to of opportunity that. business. want give with we more look, this in our in redeploy to have So I expectations you Canpotex business, it certainly if certainly make faced hand had we were more there happened consider itself Can the got I potash carload with Can little if we then think us would business trades or territory?

Keith Creel

Yeah.

our short-term there’s and if That think capacity areas those long-term for had it a in to to grain were of that grain Especially year when I we are some day have not out, match to strength. of consider in grain, lot year will to and definitely customers grain’s because in up areas, origin short-term said, we there flex value give headwinds against and out. comes those move grain going capacity. might obviously we long-term away there be whatever going day and

Matt Reustle

improve of like on Right. quick of Understood. in the fuel, numbers. Is there you headline there procurement? it sourcing That’s terms in to peers unique helpful. than one able price does anything And were one very the some look better your

Nadeem Velani

XX rates. past the opportunities that has given months so in us deal better a instituted or have and We better

items. vis-à-vis the us U.S. peers, suspect, Canadian I’d rates rack of so helped our and that’s I Some to point also been two lower have those

Matt Reustle

you. Okay. Great. Thank

Keith Creel

Thanks, Matt.

Operator

from ahead. Your go is Konark next question Gupta of Please Macquarie.

Konark Gupta

my question. taking for Thanks

can mid-range Just is grain it would understand bit without have if on QX, had think think pricing, X% grain you it the of X% on been clarification the pricing to sounds a it’s help of I I us you because there. said a in What right?

Nadeem Velani

QX, X.X% we during of Actually, certainly a tricky grain, little -- grain little think regulated would in of as proved it the the QX, it as of present -- we little at out, headwind. pegged was in itself VRCPI a drag. about a bit was was itself and I be bit The as a a I thought kind talked

the You couple with that sort good hasn’t grain all. pricing in of very been environment at U.S.

the exports. Just on challenges sort with of

was know the So I same I but bit. it it off and drag on don’t it store list given a the think a would hand number have little that

Konark Gupta

where work like tailwind remember I Yeah. talking one are. pension Nadeem, pension Thanks. done yet how guys the looks about side, rates in Have And the terms be could any pension on a XXXX last for it in given on you of in guys the you potentially XXXX? you side

Nadeem Velani

until up I way we say feel on to discount know our show still ongoing it’s we an And be case. extremely rates early so like the No. the wouldn’t have to moved, just a the current that rates but feel given going January and we confident positive that’s level. interest that won’t rates can

Konark Gupta

Yeah. Thank you.

Nadeem Velani

Thanks.

Operator

Your at ahead. go Please Stephens. is from next question Justin Long

Justin Long

and Thanks afternoon. good

currently at on business an your wondering you to today. that of the pricing update So, looked you are of the maybe could provide book follow-up to was index the on if an number I start with contracts tied discussion, total if inflation

trying of are shift contracts. to from some you think away I those

percentage could you the that where case, of tied inflation So longer term? you contracts provide if color to that’s any on going see

Keith Creel

Yeah.

or to based get to escalators is our in my those a your we make just the maybe that think what but be tied up and agreements of might don’t terms index index it of them about head the roll-over have like of chunk flat book of again balance then root sort in percent up I I the this, that off some XX% might I book based. to of and know XX% to be So of hand multiyear frame question. annually you typically

to floors be not to and it’s for agreements, some fair. against but to enter is there have ceilings, index these are ultimately we that has we longer-term sure to yeah, it it got that make us price might to that think, into -- has opportunity fair. going be be year-over-year maybe wrong an measures maybe I If

not as we are in are got measure it, yeah, parameters that if and away right moving to right look right that long again, we with -- So, potentially, it. from are we it’s but the willing maybe index, principle approach, the it’s against the we adamantly as at

Justin Long

today wanted for Okay. fourth are And quarter and on update the do how about I us on you storage in expecting coming that next the Thanks. ask and of locomotives. you year, you locomotives quarters? secondly, RTMs the that in you what Could number see number trending to in have based

Keith Creel

wouldn’t it, Does all repurpose But that that look as that. of remanufacture, about locomotives number, storage that in no. I next The XXX rough as far number’s we the half that forward mean to of year number’s now. within probably

Justin Long

at Great. it that. Thanks will time. for leave the Okay. I

Keith Creel

Yeah, Jason.

Maeghan Albiston

Thanks.

Operator

comes Majors question the from Susquehanna. go last ahead. Your of of Bascome Please line

Bascome Majors

here. Yeah. the Thanks for time

to approach --how several CP that have the capacity they salespeople been marketplace about as through does into year capacity up at their should more point. the I approach respond? you investments making hearing what get next a working CP that competitor Your John, this competitive and fill have from are they the for last frontline expect considerable are to amount how they that actively quarters and your does

John Brooks

every couple be ago, right a not is Well, going as us. piece to we about what, talked weeks of for business

say So, first targeting we that And in might today, not and be be competitor’s may some that opportunities foremost, it frankly, that the best. are business other I cases frankly, our spaces. fit handling would in us

value Second, grounded going whatever just we carriers would drive opportunities I fit hope targeting fit as growth is of I we’re are think assuming will We earlier, our and of opportunities and and think we to and against and on plenty be frankly, the opportunities some to for Bottomline, be out we what opportunity out The selective there’s the that service they I commodities, most a the competition and to the and target. growth going continue price growth there’s parties. for both competition going that strong sort goes areas provide. our lot better of our pretty opportunities we property both our again, think people demand of those after of the there. said are sales after, that it’s

Keith Creel

Yeah.

railroad. critical think fundamental way forward, I precision other schedule the

and network. we don’t turn those those assets, the asset In franchise put our this be is turns. do stickiness can of the faster railway what turns, cars, business railroads, or and route, going job, business. without winning got franchise. we we I do about people, particular capacity asset that’s service turning then reliability, if job have the my sustain at what railway that’s with turning You all and this our has I superior capacity, offering, precision areas running cost. longer what protect key continually turn about the business am Competitive your We best at they and turning basis, That’s have turning handle, I growth than all lane to why a that’s assets. they day the creates That’s to are i.e. strengths sell we in their why locomotives, then and strength schedule more have should profitable shorter better those If to sell retains miles business my wins if of cost this. stress best where superior It’s to day, if on a we competitor team. assets, to a they the

and assume If we business. they their we you will. the win sell lose precision they superior, should our business our best network those the we railroad. If both day, And schedule If win should is day, superior, lose have to we their will, again, capacity, let’s that, network you strengths. best is

Bascome Majors

Keith. Thanks, John. Thanks,

Keith Creel

Thank you.

John Brooks

Yeah.

Operator

ahead. of go additional Clarke Deutsche Seldon from have You an question Bank. Please

Seldon Clarke

for I a crude just the Thanks question Canadian wanted question. about higher-level to Hey. rail. ask by

any of If like steel scenario similar contracts are you you just would contracts a to blue-sky over that there the out there color on years, and took how this think a size about or win, next helpful. back up still crude, frame couple in smaller would to of be are of bunch step the there for super

Keith Creel

of is but speak that can blue to of have I business let and and long-term to It’s if, predict of and make crude of John to railway it’s from pipelines going crude. I to blue and that that would is the when. level. when extensive I sky not matter business economics but level that will are and close the sky kind expensive we that of a sustain come. areas, out will level realize exactly way see we said don’t If only I and if runway. go and The were pursue for you this. can’t the this same very to understand I We we of those same specifics to the that don’t them this. do tell anywhere kind consider investments say I high always to see there tail will have

John Brooks

to I don’t add. have anything

Seldon Clarke

Okay.

Operator

closing I now are Keith further over time. for Creel turn would at call to questions There the to like remarks. this no

Keith Creel

we just we make economy afternoon. clearly Okay. Q&A, think that’s else a of subject Certainly more macro are But am understand hope the provided we some for this going just out me not day gave working to I Well, Certainly, as we being to we the to anyone some thank is. you this that I and your the oversensitive. color time diversify an provide strengths it’s more there. clarity. ourselves sure opportunity the apologize for franchise. like important clarity are that level, I that all every from in micro the forward future. to hard go

will railroad. a always bulk be We

We and executing expand we diversify quarter. service forward ourselves and Thank footprint capacity, that in for are to and confidence said, appreciate sharing ability in encouraging franchise January. merchandise this go the into business. we our forward to cost forward and our grow growing you. to With low very shareholders to reliable the as look look your we developing fourth results We

Operator

call. concludes conference This today’s

may disconnect. now You