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Canadian Pacific Railway (CP)

Participants
Maeghan Albiston IR
Keith Creel President and CEO
Nadeem Velani EVP and CFO
John Brooks SVP and CMO
Ken Hoexter Merrill Lynch
Chris Wetherbee Citigroup
Steve Hansen Raymond James
Walter Spracklin RBC
Tom Wadewitz UBS
Brian Ossenbeck J.P. Morgan
David Vernon Bernstein
Matt Reustle Goldman Sachs
Fadi Chamoun BMO
Ravi Shanker Morgan Stanley
Allison Landry Credit Suisse
Seldon Clarke Deutsche Bank
Scott Group Wolfe Research
Bascome Majors Susquehanna
Call transcript
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Operator

Good afternoon. My name is Jesse, and I will be your conference operator today. At this time, I would like to welcome everyone to the Canadian Pacific’s Fourth 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 Pensions like Albiston, and Investor conference. Relations

Maeghan Albiston

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

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

Keith Creel

Okay. Thanks, Maeghan and welcome today. to the call

has this and team our CP shareholders family strong investors leadership today. by honored that with XX,XXX I the it’s thanking me produced results let our think that start appropriate, to with have our been discuss

basis has both financial measure, the a see literally, can every been on as every record yearly as this from basis. you a As well year, measure, the quarter by financial release,

on record up record and the were equally CP. revenues, Adjusted impressive. had grew the quarterly GTMs, CP From the while We RTMs a quarter ’XX. XX% XX%. network EPS time results safety this an fourth our of quarter for billion, $X operating ratio, XX.X% to record perspective, importantly, [indiscernible] an is were our X%, we Specifically, driving for train efficiency across XX% operational fees versus we fuel above up all fourth quarter, record, X%, all by improvement most metrics, versus train’s best. improvement accident the which XX% else, injury fourth quarter all continue of safely, down executed And X%, improvements personal XXXX. drive and an industry key of operating improved

at on a was said, that consecutive the our FR year for XXth as train accident well reported with XXXX ratio lowest CP industry. year year So in [ph] the best the basis, CP full and frequency personal ever as injuries has

of sustainability meaningful Now immediate XXXX beyond strength organization the financial was also standpoint. the from the across a very fourth quarter, year a

grew of our highlighted I one. Day, As proofpoint profitable capacity in constructs story, XXXX at it's and a truly the compelling the who service, CP got the of Investor for XXXX grow these those record to undeniable The in committed. stable line and bringing performance was and operating back with new absolute customers, results way. [indiscernible] ability to deserve our that We and record provide to example what the model produce. incremental we of ones levels service they can our by top while grew an cost. we compromising on existing deliver our an understand stage. The We've a without our capacity the was facts

get first do, to aware team be economy. ratio for to the a comfortable committed continues confidence railroad who team and it of we what CP a We’ve what it correct that together, the model. based. to XXXX class of the and other status sustainability got a This our the our this a story not fact takes two happen allowed and right our What from Rest do again in way, earnings. is byproduct precision in quo. complacent. inspired it execute railroaders know again the is team my is motivated elements point natural American operating key in these to With each is And record best fuel ever the challenge and how assured, make to North we we get had continues to that stronger, and They shareholders, as are talent. takes customers in beyond,

our change specifically, trades the The term has build a grow of customers was successful support not but our and the earlier deal while to our I'm front, pleased our year, and not growth provide we year with before XXXX concluding right, we CP the relationships to strategy, the only gotten on have signed long very its We been in driven over certainty to it in running a strong December ratification in several mutually next that but beneficial we continue easy. deepen continue make. the and year that the not progress The will with with employees it terms Unifor years. it a all with provide execute and the the we bill XX,XXX with and we've busy family, need X ratifying expired. labor TCR to most We continue CP, stability certainly deal

contract on meaningful a Canada due focus until more us to at think gives even quiet as our relationships which company. also I deepening significant period ourselves a continue remind important our it's doesn't note, next mega XXXX, to in side major come

Speaking record to tremendous we the momentum. we’re with guidance, setting poised another year. Rest enter for assured, XXXX

franchise, we’re double ability again ’XX of excited we’re meet growth mid next we our about deliver, never team’s we’ll confident you more did potential third story. review as the in release, for exceed to this year. ’XX, the EPS I’ve expectations. digit we’re confident those targeting write this for to never As growth, RTM success single of consecutive in in did digit CP the continue that our we been more in We press and or chapters XXXX,

on Nadeem bring to over John. John the of our before and some and Over balance So to time for numbers Q&A. the meaningful to color we with save elaborates the hand going to markets, I'm to some robust and that up said, it you wraps

John Brooks

revenues Fuel and dropped afternoon, to, The every the everyone. XX% were said, to Keith the record X%. X% business freight total quarter right. range. Thank FX environment X X% X% line respectively our second were tailwinds to a of targeted same and end across and straight quarter. expected, this growth good healthy. RTM of strong, continues X% at you, record price as of pricing Keith for All to store The with continues billion remain as up finishing and be upper

us and CP’s and solutions our creative at Day, Vancouver, strategy Investor St. sustainable, energy and compound a it enable auto our at CP, deliver executed to our happen profitable and for such centers was strengths industry backs XXXX year our the Minneapolis And by expanded plan, at we look, as and Vancouver Heartland Wolverton. In customers, outlined our major transload picked Hamilton Paul to Alberta partners unique train our create growth. precision stated, with Keith service, As tremendous new offer had our disciplined marketplace. holdings October, land we from to our the on didn't facilities a new best as we in Vancouver, the we accident we executed that to including of to leveraging and

results and line our XX% up total speak myself billion revenues in here, revenues basis. for risk frankly on business up executing the Full playbooks, full principles the are record are a were themselves. of We every of again utilizing strategic at X.X year to a PSR the repeating year and of

with in as US, the slide. to quarter the US enter and record fourth volumes a XX%. up look K+S down global of our in offset XX%, stories. first to year, revenue and both expect through uncertainty although at let's currency Canadian P&W. next were grain half a expected, solid regulated all saw grain of pricing as in portfolio a was in remains two strong. we demand by fourth decent Strong results opportunity, record energy on off last see as continued Canpotex Starting XXXX, sort volumes quarter year So is and portfolio we off, US as a revenue I’ll pretty strong This XX%. levels. we for continued January Canadian basis. ongoing markets. where marked revenue result finishing time results largely were in and we export our surpassing grain of of was X%, We expect Look, to record The inventories XXXX, grain plastic these the the as had we take an decreased weakness chemical potash year's potash, consecutive speak setting up into the of start, growth in partially crop the tale from a strength adjusted shipments move volumes given

XX,XXX LPG’s approximately and with growth ECP growth saw crude, would quarter, a to contributor large moved a revenue was biofuels that fuels. crude highlight the certainly XX%, excluding of While in driven by ECP carloads strong refined I

our we multi-year expanding freed into Southern capacity Also As agreement we a service Ontario service, this into to we refined Suncor, deliver of leverages agreement the in ECP on export continues space, marketplace. We've entered the market. head of in of closure expect energy into continued momentum into create with our customer up entered with a new recently fuels XXXX, to This new business. our their to line from Vancouver operations. business opportunities strength with the Based area train a in multi-year terminal. the the new the Expressway providing Edmonton

Greater the with As to is access the many strategically spoke will Investor this, area. and terminal Day our of where you direct highway we about Expressway recall from distribution located Toronto

we unit were year. of environment for on area and in the Vancouver, of So quarter, up XXXX, start were capabilities. products the this this XX% an X% up Montreal was moving transload continue headwinds that highlighted as our the potential business automotive as The on, demand I forest weaker in to expected, spite leverage At revenues space. Toronto

of network. compound, service as existing So business our tenant, we utilizing Ford completed on new our be track This continue Vancouver into finished facility brought market. growth on new report our attract anchor by XX% landholdings market. in the automotive on provides has with to focused and our our Heading Construction in the on we new in year, leveraging up I'm strategic strong which this in a auto team partnerships customers as option pleased share our is this total to new grow Vancouver our our QX. XXXX, to sector, see to to customer revenues as

strong XX%. a both full So basis, extremely were the intermodal finally, revenues intermodal. on the On and I’m pleased side, international up with in growth had we've year domestic

business. On year onboard already newest our on a domestic into over top of I front, a record XXXX. our to we had expect we customer, as year intermodal continued record -- will strong and move the growth, we QX, domestic of retail In very book Dollarama

I on you, focused team, capacity our demand create existing to management tell this is valuable can to Additionally, tools our train laser starts. new leverage of continuing on

our the We that drive more to are confident over road this trains. intermodal will conversion

On existing our in customers the the largest to our have also And the on side, extended projecting capacity as of growth and grow XXXX intermodal announce new with our recently Hapag we we're service our pleased by both transportation that international and also GCT Deltaport Vancouver. to I'm we with Lloyd. at brought customer, at Port leveraged agreement

this So delivering energy I'm see The as XXXX executing extremely that, now, Keith it to see maturing. in and to with healthy into ahead. we, and momentum pass marketplace. in we the With playbooks and our We're pricing environment, have accomplished how opportunities extremely strategically and in and let results demand I things team the I wrap it, we encouraged coming I'll by me continues am XXXX Nadeem. a we up commented, as the pleased lot is be

Nadeem Velani

report. improvement in These proud quarter. evidenced our by the John. at Thanks, an of of outstanding to coming year-over-year. revenues up by X% XX% quarter operating growth an XX% for revenues points Total adjusted I'm FX RTM record on basis, incremental are XX.X%, XXX an quarter. or fourth a high It’s basis results of were as on announce margins, driven the ratio

I’ll that XX% to strong the exchange few momentum extremely to slide. number, up million illustrate As have of margins. be we right support wage inflation closer increase. A numbers few basis, the and to behind right expense and results is and continue speaking items benefit year. performing and the usual, were Comp shown at column was high drive Taking far versus adjusted in -- along drivers benefits volumes XX Keith at behind last as headcount incremental productivity are the the well and expense side, grow on highlighted, with increased look from on which our railways higher the an a specifics we as a

as was item was result up reduction consumption, QX quarter, stock were share of of term from up volume. outlook. the increased volume. higher record utilization a GTMs. from compensation gallons partially Fuel key improved primarily driven declined compensation gallons X.XXX only of X.XXX result fuel train for a $X X% of the the was efficiency accruals fuel per long and of as during offset expense XXXX based a future levels, efficiency XXXX Although by record by and performance fuel This note, annual in prices fuel a and was although as improvements a XXXX This GTMs higher per million price higher XX%, booked of strong

of services increase and principles X%. railroading locomotive of was in precision drivers scheduled the million, Purchased record behind $XXX to investment commitment our an numbers. other were Our modernization the and

we closed million. a QX As had sale in gain of land $XX for highlighted, previously a

by However, the contingent million quarter. partially in $XX claim this land sale offset a was

the X XXXX. just The below to XX% million we've perspective, that savings To driven $X come. far year transformation, full lower greater EPS net lower income overall, that XXXX, expense from about Adjusted XX% in grew think excluding how pretty is interest million by put prior is improved refinancings reduction to $X.XX. Moving was EPS primarily line, QX in in CP’s than our to EPS of while or debt incredible figure adjusted the FX.

CP. year full quarter plan working. performance out clearly this the to a year record record on is on for Moving rounds fourth slide, next results The

and grew XX% X% income revenue adjusted and operating XXXX. to in XX% For growth operating compared income revenues X% grew year, the the adjusted

share at Our full the our and led of cost. XX.X%, which EPS low demonstrating operating XXX a repurchase achieve is us income This XX%. XX%, year was adjusted growth helped share point our of volume incremental lower over from benefits adjusted to to improvement ratio XXXX, a basis grow ability of program count growth

by things XXXX we in to as remain XX% from XX% cash buyback, cash on in up, increased that’s increased ops Moving free are Shareholders to advantage all free the by rewarded billion. X.X to cash equity flow wrap market. taking opportunistic and sold nearly share our of being

announced we buyback we in have where of completed XX% around at the trading. currently We program October are prices below

Additionally, a increase XX.X% dividend raised. marked year was dividend the third the May straight in

and capital Our finished our approach to for capital growth, currency with our remains in opportunities of disciplined. line In headwinds expectations. spend spite

for of When have out we our the level XXXX. capital and on detail in guidance investment press mentioned we As spend, process. in planning release, we assured, capital give plan same rest thought we a internal well

negative expect not us. from should You surprises

than Nowhere just more return in perspective, shy our is on adjusted our in we put when capital XX%. that To this was ROIC, discipline figure adjusted XX.X%. XXXX, journey that evident in a started of record invested

at it’s Now best. industry

back while by industry performance, excited of we half separated ahead Investor scheduled momentum from on a and Day team for we're focused profitable deliver. As ourselves at the best the railroad sustainable, it in I the back I’m told at of returns to in in when in with CP deal you what’s with growth, shareholders, pass generating pack our the that, great with driven to a October, quality over our pleased particularly I’ll There's controlling of strategy our can precision Keith. demonstrated extremely XXXX. costs. XXXX are we and extremely And what

Keith Creel

thank color. Nadeem you, and John Okay. you, Thank for that

to just robust open discussion. think up of to save I the the and we’ll balance time Q&A

the So operator. over to

Operator

[Operator Hoexter first Merrill question comes Instructions] Your Ken with from Lynch.

Ken Hoexter

expiring, about just maybe little the congrats at into that a But in negotiations, built the can you and the Analyst maybe about talked and or you phenomenal bit the on Day, Keith, and potential results into the things on you've great growth contracts as ahead RTM based you can afternoon delve that Good in turnaround. into talk X.X% progress committed were year for XXXX. John

John Brooks

Well, you a I too you can Investor Ken, I you those it, into Day. but units of got tell at details them tell too can to we're into Every one many I we early about part of at and and need the where as those. probably thing opportunities guidance get on across spoke you think opportunity business us it's that lot deep remember of XXXX all, beyond, a at expect look our be. to -- for of up XXXX that those revenue set included and lot we is that -- so the to aren’t

So consider, a lot upside. that, of would I a sort future of

Keith Creel

renewed, closed revenue meaningful But more are CP. Lloyd draw and back renewed, confidence then, Canadian we store, those specifically, Loblaws and XXXX, really Tire and in pretty in and closed attention Ken, Dollarama store proofpoints four the I’ll renewed, see to couldn't closed of what Hapag our renewed, in closed

Ken Hoexter

those Are about wins new that from that renewed competitive? those are not you talked all had or ones

Keith Creel

Dollarama Tire Loblaws, obviously the renewed, Canadian Hapag, is on time. all during new. closed Revenue process were and in negotiating which that and

Ken Hoexter

my And with terms can terms of government out at in in kind performance then of out that your looking port a follow and you maybe, and what up, you bit Port just Keith, statements investigation? follow the drove kind what progress, of as was where of came Vancouver up the of is into out you the some kind of think little harsh

Keith Creel

constrained point franchise, protect obviously. to that’s our corridor the some challenges health the beginning back in to January. of levels I’ll bit Okay. company based think [indiscernible] that to corridor. working went the and this a created hard little pointed, fact it’s key measures but through into a think I’ll employees I take us of maybe that at fourth whole We really the had in be to capacity refer for and at I a capacity We corridor record try quarter, in overall service our

CP. we've corridor. only the lot a carload we've have the we've a grain, potash, it's got the side, the where to chemicals, We’ll capacity coal, serving tied location. for see corridor got days, a constrained not business to of of their got plans are so the in We get destination got customers that certain with a for We’ve equipment get number a key we up that point waiting

responsibility customers we capacity to corridor, sure to agreements, do in be that the only that actions, we not to we a competitor of again, of curtail mitigate things some have into immediate entered our took because together. surgical corridor, some make to we appropriate have for we that can quicker damage ourselves take We recover competitors but to actions that greatest create all and within the pressure, that our also help

one succeeds that's our shareholders, into not we both do, for but succeeds, only thing that when businesses think So the Vancouver. right only and of comes and all for corridor, the for to overall not out the goes

So things episodic well quite something for we event. and it I process. your answer have that an is Outside, long responded go to I recovered going railroads. think the we're think to question, nicely, both It's through to

the think a I bit factored CTA prematurely.

true, and facts better be out for go to CP we’ve in good or it comes going we’ll speak what than results. that the will ever driving to I've it's a and think what been, shape is that corridor, everything facts I be been our lowest I lot said, service I of that the think is proved all that these the and in ever it not has themselves said,

will on rhetoric their will fact stand and the on away, the out again, CP is So own. going to and get in table well bode fade the facts

Operator

Wetherbee with Citigroup. from comes Your next Chris question

Chris Wetherbee

RTM could little just maybe little of sense about circle degree, higher you've growth, where there a little out. past. presumably Can ratio, give about digit obviously side, about help about I you is trying sense, of Wanted to shake convention the like to talk that parts to top sort where a given bit here EPS when the -- that moving might on some get that than digit operating in line a of the seems pricing potentially which a us double better know guidance, the us in you've additive a single the you so as of EPS a XX%, think sense sort bit used square to digit the double but of a the the talk to bit a sort stack and mid be,

Nadeem Velani

That what certainly I'd the in fuel Well, unknowns, confidence Chris, prices, happens say be have a see volatile, which which that most Currency, income operating part. a surcharge. XXXX. of be have with the said, our we’ve outlook, from an been fuel pretty headwind guidance, being we given strong on pretty consistent point view it's the could you non-event would we'll volume with of some for

$X.XX, months potentially, so X as current upside, assuming through a well. last a of volatile but is been there So bit that’s the at little very X, comes at that levels,

terms So, very the spoke very in RTM, sense we've been results extremely renewal were John supportive. evidenced for and positive environment that strong the to QX of our our RTM very where outlook pricing and and by [ph] is pricing being that

out So, with additive there, surcharges of to fuel pointed everything the be exception I revenue perhaps could growth.

our schedule our on margins. model and We’re railroading performing growth has well precision approach incremental our profitable with helped sustainable toward

expect plan the and improve. best on of of ratios far our industry XXXX, that if in in operating above best we lowering the Certainly and we and weren't a to half back continually to industry should in of the there. We're it disappointment, would be we ratio. were terms You that back believe staying the off going the we operating not approach

we say, macro it's and at that of all or to are environment, guide where read, think January, growth. So the depending XX% you in double be prudent on every which guidance of we we it of following digit headline this this could can to in the provide and point -- some the EPS terms then provided negatives, now

The point. two in confident outperform we able Yes. that feel to to we've Do visibility last than we want you been not give at number? I’d do more that? say years, So, other accordingly. numbers we'll rather achieve and our be saying that the we'd out not what going put conservative rather we're and that update I'm that's than but guidance do, around. way to this

in guidance. going not more terms to than what of give to So we I’m all did that you say, our color

Chris Wetherbee

wanted up, make I the follow or sense, color. a the impact pay, on understand rail business is so? want the have crude sits just CBR, Most to in on differentials month to that RTM appreciate seeing I One what where based believe helpful. sure super last get that quick by any outlook. of just been I That’s or take over Okay. I are you

John Brooks

I unintended very in consequences, the watching slowing, fourth volume run Chris, – to potentially seen, the closely unit and say, sort new volume expectations and uncertainties of is, here Overall, think taking obviously but there the some goes we the My have in in that’s hang the it's rate created held taken We've some we’re the we know, upside don't head then around forward. have here some, constant of started if business certainly do some Alberta with dialog actions year quarter. the in have something place very this we're base XXX,XXX got marketplace. in that would additional QX as we I on. it's we've most some there, stayed seriously, come has recently lower province. in I

Nadeem Velani

on conservative reflects guidance crude our volumes. Chris, And view

Operator

next comes James. question with Raymond Your from Steve Hansen

Steve Hansen

count been about growth feel as quickly modeling early the that the and hiring the QX we very front, and strong employee this QX, labor on for think process, how the year, parts front Just leverage? you operating about even in about into think you how how of for margins our year should you do and feeling incremental about traffic are quite through has the obviously

Nadeem Velani

Yeah.

still incremental RTM digit based single of thing productivity on growth. mid think is this improvements I a

digit to increase in headcount single overall. it's assume ball. fair low There's think I crystal

Steve Hansen

And the some just to that, the we trying run Okay. to expect rate should volumes cadence follow of crude the improve, into of shorter the through Very like slightly spread sounds as contracted. then, term happened balance to the but commentary on sense of the contracted I’m look purely upside the helpful. up or the you have of a improve the closures some year, might that for Thanks. that mitigate through get what's just year, balance to it

John Brooks

Yeah.

push of make annual back run move then we the think, expectation a be upside of we the into I into we presents. towards of what Steve, see as XXX,XXX year, QX, we would that a my push rate sort will So half sort and

of I our to level well place, we’ve ourselves CP, sort the marketplace taken that up right to make of There's at partners. with playing we've got with only think a lot not of can by is, that field rail sure so We and the worked to crude until providing out cautious we're benefits thing interest their own right confident reap curtailment whole again, drive, I'm efforts government set have that, the date. our certainly And is in key we a seeing the I'm the all between the just investments want and but now, service. but here the partners.

Keith Creel

X model projected and don't capacity. we If for unintended for and there's it need a deserve a or the the I we're or assets we Now, to as case, how to impeded but thing, industry, if whole the of in the intentions, what province, anything a think other the yet, wait critically customers have hold that that some know think either result they capital, in just part committed plan to got important need important based to the the piece do redeploy in they think in we've those maybe but from happened second, out, we and money which spend into think have of how months of of how committed the think business want curtailed, wake invested consequences, that got don't little going on not they do reality, I areas think best that instance, think hurting government how you and play. locomotives, opportunity the to they or going their customers capacity, multi know these unintended that do growth, money, been we think and yourself locomotives, commitment, if you're I just we've gets contracts, shoes come truly say, those about responsibility I actions, of understood has capacity spend a and consequence to unintended going to I where bit capacity, all got that’s those railroad you're do that in is shoes, in by people the you demand then you railroad hurting do we locomotives, plan, of yourself here, players to all but to and understand. up our I well, Put I'm considered what company’s and a further they resources, I hurt that we spaces that’s to don't our service not market what, we don't maintain consequences now

Operator

next with question from Walter comes Spracklin RBC. Your

Walter Spracklin

everyone. afternoon, Good

ask On a the to capacity, want on capacity. question I

had mid growth alluded in you single digit your guidance. You or indicated volume

than see your current If some you at much could handle see do would you upper do capacity growth expected, as say you capacity, what reach you and point your more costs how to of higher start limitations? volume you what is creep

Keith Creel

I of think all it terms. lot on a depends

look have, As in RTM the we it's growth can it you handle I we've if if -- the had could I said to. mean mean, past, that at certainly double we we we we capacity, can conservative.

that huge stacked manage constrained, double handle not want case, quarter it’s one or can you no out pitch There's creates RTM one I the not best it, that and So up all be guess worst the we to we concern. case point in double is put growth capacity business. and however way our spread

Walter Spracklin

what pricing, anything moving rates that but that wasn't said X% just could could environment in a impact truck sure range. the XXXX? was I want core? is upper I to And perhaps on there any make you're you that competitive end think I heard seeing of given between great. pressure, coming That's or at X% to going prevailing lead the delineate price right, to over forward, you the to that down from

John Brooks

Yes.

we top of at yeah, basis. are that So same right the end on a store

start off QX, we're Our a contracts type pushed little look part, type renewals actually were sort into similar that of a If than numbers. X.X say, Those X.X, to in I’d better QX. most strong the with for I numbers.

give the a We’re good obviously our markets. that to customers wholesale seeing read close trucking us on

that environment And demand in back a back the think of and customers XXXX and into pricing what stands ELDs sort potential long, as that on tighter get seeing believe of it continued effect if mandate does We’re in terms then to continues. what robust environment. you think their introduce of with of XXXX, sort all staying start they're capacity, and we right and close our pricing now, I opportunity is play, then of which and into a I I bring early what to half coming support

Operator

Tom Wadewitz question next from Your UBS. with comes

Tom Wadewitz

the comment lay on you strong what to might results. of think Alberta. out it, get curtailment fees the wanted mean, today, in right and government the play out, path way implying, the view the XXX,XXX I the what up given Yeah. on John also and there? to Good you it, the, that the you see rate. to are know things if you actions your really Is is you're Is on maybe change afternoon what that the think takes on some with you run could what puts way likely given might and congratulations I guess I curtailments

John Brooks

area ultimate $X free today, tough. work, spread where between it in what think at I the I Guessing saw guess ongoing Look, is now, to of You've pressure. the Tom. there's output put is going stays markets and and the $XX, be if me an governments,

revisit of monthly basis. what February, they're I think requirement curtailment sort on is. January as I the going a believe, same the government to is has said

I the most demand we sorted January. for In that ongoing get we're the sort had going bullish I shippers little close expect in February. profile think it. going this part, itself to are number that though bit So crude terminal to of pressure we're going would here I into is I our leading type to we moved, this, of through the to do think now, right out all and trends back that continue heavy a of by similar and last midst we month think crude to say get to XX in the rail

in expect of there. run that additional from we’ll coming QX, continue we've got we'll -- go rate sort opportunities as So, to and I then on some

Tom Wadewitz

comment that your a spread? or up $XX on at to spread the barrel even that if you $X widens happen does does stay that to going So, XXX,XXX, out QX assumes

John Brooks

the to XX, it's some structured for is have stays there some challenges. right contracts at if purposely Look, We’ve this us, the to probably so business going against that X be backstops up, is is terms right planning in those contracts our come have there like start those start if now to -- QX. not resource nothing don't but expectation we of as up

to be Now, build on ramp the all April X. going going ourselves that up QX run a in just to overnight rate. aren’t through other to thing There up period is, those to click is

I of activity deep seen unintended we've the it, some actually in assessing that interesting backstop delayed we’ll relates is a bit to as team of that know, could an at is it to of, and of business, my other of sort look again The approach, those a take and or actually a upside very handle right don't locomotive uptick result further sort capital opportunities coming into a disciplined the Alberta. present need to now, quite people any either that but Bakken energy or is but if a potentially or somewhat way as a at out out consequence this

Operator

question next Brian Morgan. with Ossenbeck Your J.P. comes from

Brian Ossenbeck

putting sand John, capacity October, I take left you pretty the off were from the spreads as significantly to we just some on but capacity does pivoting Obviously, market you you've where come around, down follow that Bakken. up you been left when just since up if know that frac dried that into have in that crude in region mentioned? some back by some way pick to the to ground, that rail limit the turning up, back up any

John Brooks

No.

it comment capacity area can pretty area. it's and we've that strong Keith I think on got that in an a

our significantly grain it, out at tariffs soybeans certainly right China flow look and has limited our You of region. been the the off, have US of that

that void Certainly, So, well. the frac has some as successful. area with fill of honing heck actually of in sand. done that area have really frac resource but that frankly it’s out team our Bakken the Permian, little fit bit for if backfill job we crude, and an we our a And sand been can we see in a XXXX quite a planning might some continues to basin that sand in headwinds

our had frac close moving I into moving of a Bakken sand into XX% and now. our Bakken the frac year we’re about of we ago to the think, XX%

a it's successful us. been So for pretty story

Brian Ossenbeck

of on Clearly, of Maybe basis the XXXX. just a going leverage quick margins, looking back one looking point that on RTM you're year-over-year are specifics from to targeting help is what and me, you're at excuse at improvement volumes, the operating of gains, there some to productivity though Investor better XXX good Day, operating we're side some what improvement? some the that through growth, drive

Nadeem Velani

in not here to Calgary. the example, of very of something investment fourth that some in that of operating kind we’re of up is to quarter and investments very benefiting facility, this the XXXX some but We've leverage blocking volume and $XX will describing for [indiscernible] spent optimize, in of be million, of where going made Alberta that’s area only kind we’ve work Calgary the million in here in Well, certainly supportive. that be recently, environment, some Northern from strategic Edmonton probably capital in $XX

effectively train improve going help overall improve that's well. labor So, our us train the productivity and yards and move our as our us our to improve more through to ability to length speed, much allow overall

point a doesn't irrespective that. XX about headwind a improve view, sales, basis going But point guidance of that helpful. of a OR. headwind be there's to yeah, to OR, type The so one to assume items of of expect headwind, that's the above from point number the So, are land these $XX out XX, any thing we I’d certainly million our

things modernization, So, the pipeline so some of rest cetera, we're automation, benefits the are still productivity assured, of our of of opportunities plentiful. we from locomotive about other in et terms talked process the some – robotic investment in

Operator

next Your Bernstein. David comes question with Vernon from

David Vernon

similar outlook well the relates for Can to the Nadeem, for fell Investor what bit incremental would I pretty expectation but quarter kind things you go short margin as how an would kind sounds on XX% that like the think about gave little Day, but liked what at incremental have you maybe of been. a laying talk and question, guidance a you like you margin out well, have worked fall? were and incremental of of last something in the you kind didn't that as it

Nadeem Velani

something well Maeghan lie see a margins calculation, and and comments, compare to things higher was accrued and say there within my was contingent where maybe out where we the of call, had in That's of seeing that accruals notes to that incremental in also $XX certainly that stock I've I services was know, purchase of to pointed and Well, in can example, your based probably and we the some We wouldn't for calculation didn't as work that for maybe I'd that there's you quarter. liability some the in $XX $XX. after well comp differences point maybe, quickly. our XX% between million tune of you're you negatives one-time had that the but excess terms

David Vernon

sale land the I’ve as taken so? out well,

Nadeem Velani

Right.

we So, I as think those out are depreciation that back probably the something key figures well. is and

I XX%. we're for don't in margins in and be I there to any apologize would of our so made, excess anything there confident or very that think And is thesis incremental

David Vernon

that was would so tailwind? be excluding Okay. depreciation the – But excluding that

Nadeem Velani

Right.

David Vernon

as all what from any sort obviously just a if with hearing from on maybe the North about hearing export the about for outlook demand tech America. Coast metallurgical on you're then off And concerns anything the slowdown, great, coal coal would global follow commentary West you're quick of customers up, be wondering

John Brooks

existing pretty they've strong don’t they are stable XXXX. It’s pretty standing what is expect got with pretty, a projections No. We is long recently guidance our Things updated our pipeline expectations a right line and see with for know efficient word, just if look actually but book in customers an and XXXX. of the strong. our I and them, bullish

Operator

Sachs. with Reustle Your Goldman next question from comes Matt

Matt Reustle

Nadeem, sub as rate Just you stop back that side, cost the headwinds you've the any sales, the you run land other this that achieving had XX year. a cost mentioned from OR to of for second half there are

Nadeem Velani

Fuel surcharge unknowns. Right. those always is of one

some based stock to. that XXX% of comp, with plan and headwinds That’s on year the point over course up So seen to. OR, point we’ve when A kind our since will go and and can fuel our affect couple comp the create to Stock continue things out that we go something year end and increase this surcharge expectation will this stock is expect it up, all to of benefits. comes the up on the come that of at XX%, I’d math. of

Matt Reustle

your versus Okay. you markets were besides, were mentioned then you guys Day, customers end you you around seeing just just or in of any tone at compare change couple back if crude, any around today the and step seeing where slowdown are the Understood. ago. months we from but Keith, uncertainty in where that, the environment shift And to Analyst you demand besides are

Keith Creel

spending of the No not that’s of degree consumer negative. confidence environment certainly what is that found and [indiscernible] I no US. this will as outside uncertainty was couple may or and rhetoric customers take impact point, the material see there the that, but So and as that’s have of bottom. for strength We no see the to Outside what may robust and on reports we does down. second well. from going very but we the greatest happen remains optimism consumer in grand concern there happens don’t our uncertainty. we really the US them, of we’re big underlying By some so pessimism But think a this, yet. doing us, in optimistic in see the the I a macro see hit year, it. demand those, XXXX in this half of telling and Obviously, really at about piece, things

Operator

comes question Chamoun from with BMO. next Fadi Your

Fadi Chamoun

of couple a clarifications. Just

to fixed year. move is how mentioned do you the -- just uneconomical, backstop move volume. trying in moving we the Do to the moving you carloads a the the recover if that you volume, or what to -- relative up you quarter like backstop, we this take assuming pay John, I'm relative and in XXX,XXX understand should a you of like about prefer remaining kind to -- spread cost, do think contract. crude your So if backstop by rail end but the I'm

John Brooks

Yeah.

Fadi. I You’re wouldn't right, characterize it take pay. or as

get a, our make liquidated of damage associated given contract sort call we’ve with what has a we that ask with we typical a volume have, minimum the to also commitment be As have them to we commitment, it.

and the part but made prefer to full as always the we contracts don't, that's the traffic designed revenue, we liquidated if whatever of that So have contract. liquidated and towards would certainly we’ve investments damage to we’ve are and earn what damages would these the as the halt particular and backstop, underpin support

Fadi Chamoun

is no on that what that. or ways in volume it would you half more the range there to of number or recovering that But have that you kind Okay. for than of of of us kind made, about terms think moving can hang the any

John Brooks

assured support be got being with that contract, a investments. to out whatever it on contract, leave business that and origins I that at brought capital other is That and it’s the on be, kind contract financially, to and have would from of have support moved guidance destinations I made of my customer we amount they of we’ve guess of a locomotive tough the part if not sure to that. to the contract, it depending relative the we little and varies bit it. of the issue only is certainly

Fadi Chamoun

year. One on XXXXX Is of goes to year as other clarification, needed context in is think the RTM think little guidance. kind the as handle resources so this well it the a bit looked you number half workforce goes X% like should I that a of under up of you we bit of the or think the up headcount XXXX, the ramp back quite is exiting just that kind

Nadeem Velani

Sure.

see as to as we're thing digit keep single RTM digit low mentioned, cetera. a et So, mid but train, kind one doing might hire a know increase, it's time headcount you long of, growth, small mind, Keith single in to growth, lead usually very and maybe you

up ramping very lot labor training we there's an of unproductive that So had first and the a we're difficult last winter. with the workforce, instruction stops some half and year, of starts year, a

to year. terms And certainly, would won’t X% of of the very noise small X% there of unproductive I in So type workforce. that an was right point, in see half dynamic Fadi. XXXX, a level the now first the you of number, this the hiring some in expect, same at

you been So and some pocket attrition resourcing all there of whether an asset in and we're around plans we visibility as about point is your to so but to know, you always able replenish, forecast I feel set. always these, think from over not done there. volumes we've you've support so it's to see not have the of point and the a get back to people good is job the hire that going resourcing always from we we're and and something resourcing to of a or attrition view you need enough long good being It's what through the support view caught, we’re hiring,

Operator

next Ravi comes from Your Shanker with question Stanley. Morgan

Ravi Shanker

business XXXX nervousness building in ordering The you of overhang a give you’ve already of terms can XXXX. intermodal could you of international us the in in see sense decline headlines what lead an terms seen of that And you that people the first to may potentially question, trade any in do a in see impact in impact in or guys of and tariff internationally. any in inventory up sign XXXX

Nadeem Velani

this, as me say seen tariffs. to can we I the expected a down you Ravi. a where slightly did at volume bit a I that international But number stronger. Yes, or in all. bit I be, volumes of February and numbers result January I late little happen we guess my take to haven't we and The continues would think team see little convinced surge of QX my tell

thing of have pick the for you partner that space operating the depends of we're I that at the point you think area. and this the day, in with on secure that part end I'd in performance, out in associate the and is, business to

contracts continues us. for the to up no have with renewal, Lloyd. renewed we performer, business major O&E just a strong grow Hapag been very coming We They've

base, is and move in as that the growing XXXX So that some we along earlier a ahead we I back rhetoric for look of opportunities noise some expect us to despite into this tailwind to as of and continue then there XXXX. and questions, goes and to

Ravi Shanker

is additional Do the you Thanks months just ago. detail chart for have follow where the time, a on And XX%. that your XX and can was XX of what a thanks slides sense for on number this slide chemical breakdown energy up, have you you color. if pie the ask merchandise I the on

Maeghan Albiston

I don't number that with can I think it’s moved this but Ravi, follow materially, after call. up

Operator

from comes with Suisse. Allison Credit question next Landry Your

Allison Landry

to handle a And questions and Xx your back Nadeem, take earlier maybe comments just in in capacity ago about is going a expected, network, to being we of Should to there unwind in maybe first of the right able rightsize latent sooner it the – of the if bit in your than resources RTM you a couple take think to some mean Keith, comment terms mentioned little macro issue sizing being this growth. will does resources the or that terms non opinion? I longer

Keith Creel

this anyone [indiscernible] down signing the we were down. keep other than blood round If market industry, make our within that else would a need That in will routinely of conviction and this well our It's happen I’m non-issue. to any to this saying a the firm on industry. we these be it That's and case the a up with going in opportunities process, daily. round figure going that this It's better of DNA. were and part and on

Allison Landry

in risk CapEx be? industry this rails does are adequate fact a that you and the how notion bit past, insights the Committee, years Okay. layer PSR’s the we cost maybe regulatory should change potential along add to and I any and cutting US, in are worried follow seen have or you market versus years the then the maybe ask you the of thoughts that more US do about up, think of the and and specifically revenue as Infrastructure about if a wanted PSR environment the that on in that of my regulatory And a that the number misunderstood and worried strategy implications Congress how reduction the little standpoint from given with Transportation hasn't regulatory

Nadeem Velani

a have Well, by we to There's think manage that with you as be have I educating the manage I regulators to the cognizant. and facts. always customers that. And as think well we the risk

run engine engine, our like at in this we I in PSR we're You a started can Allison, transformation engine. machine XXXX. not sewing case look and journey it's now, a We point, the growth a mean, of we’re fix

we've think go we're the not continue to continue of the of sort the change I the helped we resisted and to happy have in that's day, have we So customers marketplace. to onset. partnered because created win but Those those evolve, capacity may that obviously, with by through the today our cycle, at customers precious that end large, allowing are customers improve, perfect in us the

infrastructure, rhetoric it's to record, you at look You of of some and more the about better. some look never invested we've never the money, our investment safety in been concern

day, based PSR case some there. railroads study for change end they get created would CEOs the voice asking I is and you STB talk learn, with created understand is advocate if out act, overall, pains, action is and to that out those and the itself it The other customers said, to for and for again, respect have the and questions, CXS if the I they they've if they the case that I of also think prove what implemented nuances. see know of So a executed think at trying themselves, you anyone, there's it's these those necessary on by but I STB works, their That and the is reality then obviously want properly, proves prudent never capacity, that to they'll is that fact, they doing. CSX support believe educated I with PSR, and service advocate growing means don't that results I a they're of trying but easy there's large, statements.

there the based experience, fact outweigh fact balance the and to some of and to going that's try it's and out risk. of curtail that’s rhetoric I the if and to educate we again, speak of points to rhetoric offset So and points think and

Operator

comes question Seldon next Clarke with Bank. Deutsche Your from

Seldon Clarke

slowdown. for opportunities different laid Just a out volume year you in this mid the digit macro sustained resilient guidance single do growth, and regards you’ve is to in your volume growth how for just next think year more

Nadeem Velani

resilient? How

Seldon Clarke

some like sensitive insulated from, Yeah. that that different context you mean I we some see are opportunities if give like, you around just around us could more of X% like GDP the continue hovering that like I'm opportunities less class versus growth. what that, but macro the typical industrial carloads production Xs like are about or not anything move? just are a maybe recession the talking that

John Brooks

big a marketplace. in fall our part part, for business our most in record the bulk certainly, our although remains a -- all business and I had that Well, in signals record grain think that very remain year would the expect we of strong franchise category, I potash, set

I already Tech most spoke expecting a about, is think I part, for the strong As pretty XXXX.

then the of is proven that go. we’ve on, crude double growing X ultimately now digits. The and pretty that completely to sort list of I years that going the about new of Dollarama, been going we've part international certainly I about layer some I got think any and tailwind already I our that member the you now growth a with a pretty So there. in the stable to affect and That’s significant expect that downturn profile X got achieve to us be Then look customers. We've growth business able we we're unless a think expect I sky that year in insulate Really, could strong existing we falls, layer for book. to O&E going nice our opportunities the go could and provide we're domestic spoken the which around guidance. by at rail good, domestic. spoke that and pretty on tailwinds, in much from be will half to retail to close first record to our feel pretty and to base, track we've in down last area, I where still

Seldon Clarke

year? me, And then this flow target one just a for last cash free for have you do

Nadeem Velani

of achieved in see should -- that we We have the landfills we some don't XXXX.

see overall was It around in free improvement kind billion in So, XXXX. marginal X.X you cash. should of

that see in kind should increase a of low digits. modest You single

Seldon Clarke

with, Even little a you bit Okay. I have from CapEx. a guess, of headwind

Nadeem Velani

mean I Yeah. modest.

Seldon Clarke

it are a all like the sales, out that were gross guide or Okay. Was was and land CapEx guess, sales between number the that anything or the difference is it there is investments difference? the there land you then as is pushed any -- to, I any delayed obviously or net that just strictly makes

Nadeem Velani

really Yeah. It's sales. the land

Operator

next Research. with Scott question Wolfe from Your comes Group

Scott Group

or way size are -- we XXXX, of core being conservative? to course is domestic any on just then the and just real sales in intermodal the quantify some I'm contract no estate our have So there sort we of in run land

Keith Creel

John first. let speak I’ll

John Brooks

Yeah.

doubling, carries the you near million phase and So years. itself some is $XX get development opportunity the growing domestic get XXXX, serve XXXX and opportunity in into $XX fruit XX it a The really million Dollarama as bear will out as into Suncor million maximum intermodal will probably opportunity. that with opportunity dollar to we term, a with through plus

Nadeem Velani

seen some land in to the and you're difficult government it are predict be to difficult sometimes, very be we've can sometimes they're these lumpy doing along, and councils as still past. with sales, that the what, move Scott, can on And

opportunity the of divestiture, pieces, we – might that our a as larger highlighted railroad create some key sales, item an the key one target one area of predict is to land for had far that for as smaller as could part ops, going difficult So good that kind we utilize internal strategy term the growth of of longer forward. tailwind kind to originally

we’ve that see So, what with makes of today business business. and visited growth that profile sense what strategy makes of sense to and current book our

opportunities longer on That's categories are on front, but they're how that So, we still term. see that. forecast

Scott Group

ask just on last just quick crude. if And one John, one could then I

what I or run rate level volume damages off of material kick at? and get the level more it, would on in? just shortfall XX,XXX need we damages meaning run what that we to kick are drop rate XX,XXX we liquidated run is see really a liquidated something at do So wanted in, liquidated damages like before XXX,XXX at to go rate, protected they

John Brooks

by Scott, contract contract. it's

really it company built that, to to to to supporting sort So of has of be other wrong, resources acquire sort the premise number be would of for well, really, probably support but guide we it. than say on difficult would the confidentially any you again, it one, had that these

So, fronts. and be but on would backstopped not that, on dependent we it’s those

Scott Group

those are above But levels those today? running contracts

Nadeem Velani

haven’t contracts in those even kicked of some right. mean, yet, I

difficulty the well. that’s as in So answering it

Operator

Majors The that today last with comes time from have Susquehanna. for we question Bascome

Bascome Majors

to Can led Keith, color give been whole for in to related Clearly, kind about the on terms terms who about carrying of at agreement the the what recent the and as that updated has and of us a business little long of compensation negotiated some month commitments looks how XXXX. you firm revisiting to to into employment any forward are employment the the a you board. of since just wasn't the really ago, investors and you with you're be to performance some worried going filed, have great made that CP, of agreement?

Keith Creel

one, committed leading is this how Yeah. changed. committed and deal CP having a company. I'm I This the we've long first this something my team simple terms, I'm number to guess not has with you with time. great I'm right now quarter on I'm of opportunity, material in terms created of relative this telling the contract that XXXX. magical through to current

for that, just market is of keep This the and company the five, the that to be performance protect us, currently the management growing between the making differently to make some recognition recognize of compensation, the it that I what effort wise, across the anything happen. any of this light concern all So if to as in taking teams, record to team took wise fairly sure the it pretty of criteria of as railroad, make management no only the to it’s in as out one well level we're the I of intention entire but it's is as board. there well think myself steps obviously mid-level as closing well steps or do this are going a performer with I gap have only is the my senior that's so to talent my we just wasn't best to relative and shareholders’ that collective fair market, we're this I market relative probably compensated I'm

Keith Creel

call can. guess care. Certainly with strong team, and as We have thank I this our the that, time you results, have share everything and these results as you'll well quarter believe opportunity a to Take detail With will they'll out be we're afternoon. for I Maeghan we what their wrap that provide digest up said, obviously very first going an reach to to see confidence, afternoon. when her as they in be up. productive time to think to little I safe to everyone want the a And look forward happy more comes. revealing and tuned

Operator

This call. concludes today’s conference

You may now disconnect.