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Canadian Pacific Railway (CP)

Participants
Maeghan Albiston Vice President of Capital Markets
Keith Creel President & Chief Executive Officer
John Brooks Executive Vice President & Chief Marketing Officer
Nadeem Velani Executive Vice President & Chief Financial Officer
Mike Upchurch Chief Financial Officer, Kansas City Southern
Jon Chappell Evercore ISI
Fadi Chamoun BMO
Chris Wetherbee Citi
Walter Spracklin RBC Capital Markets
Tom Wadewitz UBS
Ken Hoexter Bank of America
Scott Group Wolfe Research
Konark Gupta Scotiabank
Brandon Oglenski Barclays
Jason Seidl Cowen
Benoit Poirier Desjardins Bank
Brian Ossenbeck JPMorgan
Steve Hansen Raymond James
Call transcript
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Operator

Good afternoon. My name is Leo and I'll be your conference operator today. At this time, I would like to welcome everyone to Canadian Pacific's First Quarter 2022 Conference Call. The slides accompanying today's call are available at investor.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 Vice the [Operator would to conference. Maeghan begin Instructions] I to like Albiston, Markets, President, Capital

Maeghan Albiston

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

Executive filed in begin, which in actual forward-looking and Canadian With risks, results also me on Marketing Officer. President attending contains Chief Vice with Mike uncertainties and Velani, are we Pat and our this X. materially. President factors our Also Executive will behalf other CFO, on X any and call may information, I you CEO, non-GAAP described actual today remind Upchurch, contains Before Brooks, questions regulators. that here are happy the President to our U.S. that and and presentation Creel, who on Officer; of This be and Vice differ MD&A our Slide results outlined Officer; regarding press release answer The KCS. want and Ottensmeyer; could Financial KCS, Slide Nadeem Keith influence Chief presentation measures, Executive Chief today is John to and

are now by through approval beneficially voting KCS CP CP control aware, by trust, owned pending STB. As a the investors is

own of the and trust period Board operate its and is is approving During own KCS this of overseen its Directors. prior STB officers CP business control by managed and to by KCS, CP's independently KCS' and

you their Ashley package today's aren't results. followed website. and introduce now IR investor has would to KCS' that Daniel should KCS truly if Creel. Q&A. CEO, answer be to on regarding time, highlight by period, limit trust today pleasure in information team And and be will addressed call, questions have your to best any your President And posted to this is I an questions. their my and also Keith we'd about one. to the appreciate in It's The you questions During could performance of questions formal the remarks position their interest KCS' pleased performance management answer Mr. on that would

Keith Creel

on Thanks, welcome, Maeghan. Good first joining and quarter call. our everyone, earnings afternoon, us

be not a It's for been that quarter. CP start family the remiss thanking Let's not quite the challenging ages. strong one endured XX,XXX to

the spite the very customers to each challenges, that work of and short was had In that that to to fact, challenge spiked uncontrollable all all weather, our the of a meet commitment then obviously, never COVID the during huge those to and other those impact had network Omicron of was challenges. service challenges obviously team, in tenacity had spike, which relative for challenge. to the face of a and up, unfortunate step stoppage. exceed adverse the that into we had up to Omicron we and grid XXX stakeholders the an serve an we this untapped all provide velocity employees our But company out, and our have of about to this moved which And this quarter, to finally opportunity

of let about $X.XX. and talk quarter me first delivered ratio operating a quarter results XX.X% of core revenues $X.X So the EPS and The bit. of billion

by we accident accident in our train are that another we reportable encouraged front, quarter. On train reduced frequency the the XX%

first that slippage quarter. I'm largely to journey. it's injuries, this to not the more can and outlook sure of not it challenging which it a safely team the team the a reminder to tough out comes is a a making there year, we XX% a every remains did to our the personal company that home We always On those make QX. front, last lose challenges, when safety sight any the on so We of unchanged. was knew today. Despite of is year go destination, family never our versus in certainly have of safety, member importance at here half, it the going would bit excuses not be that every it's day; myself,

to macro environment. RTM deliver the grow very supportive We ultimately continue half RTMs the double-digit strong a still see and to in We year. and back in expect growth

So the tale halves be going earlier we point year made expected. was playing that that of as a is two to out this of

to to the our front, product This ship integration X in We're excited hit is companies deramped transaction, congested product day hit the the planning product works these a in was it's was around X-day meaningful X more CP-KCS be West congested. works our versus for We've connect with the creating product American enjoy during North XX to interline in are X to side the that Lazaro quarter more will of CP-KC important, is It serve the increasingly as It's uncongested. to great network bring test port the contribute, look American that North for an low payment marketplace. undeniable North to very time Canada this ports and Chicago uniquely a we companies the resource-rich which we ensure X and service an those first you to that the forward announce the world. marketplace. about from countries to to preparation ahead demand. want ports we demonstration customers alternative to opportunities a Coast pretty the an the carbon ultimately on of our significant ports. for Chicago for compelling the additional to our I that from unlocks nations, to To a like-minded obviously, say, chain, got days, that docks merger is market. of from would is This extremely I outlets it's compelling for tidewater highways opportunity that, Also X becoming the opportunity, supply between fact, that obviously, excited, increasing future bring the a that a when a to and to and we early get in our of America, take to potential On even Mexico. understatement us. trucks we're resources off the products continues. fuel and when suggest able tell first truck will our a to container to transit these rail represents our execute the March launched to efficiency time excited Cardenas the successfully to time leverage of the the

the ruling not that, the the process single the consider combination. needs forward. from data. We data, that you anticipate Mexico by to early of to I'll I'll for clarify take some a there's facts the closely. And will do know service We are the certainly as and the you through procedural remind the time well paused Obviously, forward following which this of path we forward the Board delaying things has many know restarted latest all XXXX. we overall looking well, I as We're this right Canada, see now we're and the the to been and done. been say are I optimistic customers point, Our to us great all materially room STB to schedule folks on and tell be as soon. looking prospect excited for asked of line that we've to schedule the still have in it

elaborating for So John up questions, will Nadeem let before hand to color that, open close some me over the we with it numbers. on to bring to markets and the

John Brooks

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

the its experienced, challenges. we hand, building demand I momentum the folks the of the we So April. March, that in in of team now of as the Keith quarter franchise. are happened you as CP at had But work through however, as what out It certainly the we tell seeing would mentioned, strong was and And to very quarter I we a any on really the rhythm consider environment. sales are focused at come build operating value our task the to folks definite the first end move and stoppage stayed despite tough momentum can selling

the strong. were contributed driven our strike in Grain the tailwind down environment the RTMs be continues Fuel sales X% So with teams' about the FX discipline I'm to RTM combined in decline pleased at X%. X% up by with RTMs. contributing our creating very in marketing product. in of was the another decline marketplace QX, looking the that X% value and and and revenues X% to cents per quarter. and XX% the pricing a in specifically about the quarter, for be Overall,

quarter, a volumes where to currency-adjusted our closer quarter first were revenue XX% Now were in down the a results I'll XX%. take the down at Grain basis. on performance. I'll revenues speak look

half compared grain U.S. to Canada, posted carloads the to XX,XXX proud crop the We farmers this franchise, the provided with to deliver which -- In hopefully second year's I'm see the impact we their a a Canada XXX feeding which year. offset XX% in challenging crop. nimble of our actions again grain same in more of and period help the record market operating will last we of cattle. get last of in resulted a as into to in fewer QX, are continue Canadian sales headwind create Canadian team quarter. fall. to the was be crop than The continued and it smaller marketing U.S. before this normal moved team back to continuing by and the the very we execute year drought in strength a consecutive partially in with That and

the are that crop this to outlook returning crop in we we a get cautiously by for early time the days normal to still be more new we the optimistic While harvest. size will the of fall,

believe in the of down those are On year. recoverable quarter, the X% the front, and reflects through potash were volumes the The work stoppage, decrease while volumes volume our were up in all we X%. revenues impact

XX%, Russia, ahead, Looking to highs. potash product XX%. close us potash well Belarus markets. world deliver and Canadian the demand double-digit positions and in And with global driven were record down disruption strong to of were out down in production to I combined full and have bulk the partnership expect in volumes while K+S Canpotex to prices growth potash. record ag coal business, year revenues the volumes with potash CP's demand,

shift back through expect move QX, year. begin half will as we I business. move lapping to we of upside in routing the coal Teck's we in As And the the

saw merchandise. energy, plastics portfolio was crude revenue to XX%. volume the down the rail and the start Most a on while of in Moving year. decline decrease The result of challenging to XX%, by chemicals, a the were of volumes

You cents the of contracts associated driven by the will was damages. per notice RTM, which a in crude slight and liquidated expiry decline our

by driven products, half through new with volumes and Moving distribution Independent network of ECP year develop and expect the business forward, continue I up to renewables ramping both to biofuels. refined initiatives for second Energy the strengthening in IPL, our and our

flat, for revenues by while second activity Forest were pricing revenues and products continued product say XX%, sand drilling demand revenues moving X%, were were up space. volumes consecutive the frac and higher increased volumes prices. I'm up our Automotive are strong with MMC, were in in record XX% driven quarter. we while seeing quarter were in XX%, was line volumes proud X%. In the forest down it down WTI as to higher

the continues chain we QX across business that are in of a is we emerging performance support year. in new announced opportunities shortage GM of back and number challenges, the cycle and will through the equipment network. growth expecting about are well, the sector further we that improved our in moving supply new The and automotive While excited QX are half chip to see

on to XX%, quarterly revenue flat, moving the volumes up a of second quarterly business, finally, record. Now the was were consecutive side intermodal while

to grow markets exclusively be call drive U.S. As CP we will John about continue East weekly and new through across excited advantage. from volumes said DP are Atlantic The World, pleased The the Saint from Port our to of when what would at to service CMQ. partners continue we to will intermodal Canada do with very we will and and product NBSR. purchased our Hapag network We've we port access port and our John service this announced leveraged our customers. This This use we at exactly service the advantages, our We're Lloyd using a Canada capacity taken Coast with we're the route significant opportunity our Northern superior on Europe leverage on created to that property, we've the as that Saint grow they product, Monday, another adding from we've is

record side quarter. our of sixth this domestic shift the straight the to was If you business,

We restock on Canada. cylinders, store an shelves also clicking to are working all our the not perspective, operating across but with from only customers

the in the are our to We're closely in some demand expect our will China. shutdowns domestic our the continue playbook the demand further strong, watching recent this truck be We Despite volumes changing course, with I market. our uncertainty, initiatives. COVID-related intermodal consumers watching of most and demand of through levels supported and

So built see April, me the the certainly moved by quarter and and have tough I'm revenue our let we close starting we first sledding, demand the reflect through but now saying to momentum as volume environment. was

and be and As here as of exactly excluding over annualized we year, said was tale are We I play up quarter-to-date, that's I the of to start today, have coming the Keith halves, volumes initiatives months. of million new that said, going over two starting expect to at out. sit grain, $XXX it the mid-single Canadian what digits up the

into grain RTM in the in and year expect half XXXX. to growth double-digit headwind While we Canadian the will of deliver grow QX, back still the persist RTMs

me is energized, to customers the Let and saying the adapting our by we're environment ahead. close as close move are we team staying we to

over pass it Nadeem. So to with that, I'll

Nadeem Velani

John. Good afternoon. Great. Thanks,

difficult knew operating the our by Going a we ongoing fluid grain, into impact disruption the proved of and crew be anticipated. did in due more And -- a That grain, Canadian to demand John encouraged of but given environment. we I combination late Canadian winter is quarter conditions labor as availability, February. we This the COVID finally, moved highlighted weakness had than well being QX mentioned, we've we strong operating as in largely weakness to as a March. challenging April, the impacts said, course, are had year, January in of in the and would in the as more even the definitely severe that we the

investors These and added core impact to accounting. that non-GAAP KCS underlying figures and results operating X provide our additional evaluate You'll our core notice meaningful additional to EPS have transparency metrics, in added of give income we've effort been metrics. adjusted metrics the adjusted in The purchase remove performance. comparative

which the key core OR, Going will up. on publish will Post-merger, core EPS forward, will be we from income. step any our core and depreciation remove focus noise

quarter The the Now added this strike adjusted OR at of almost increased CP fuel operating ratio year-over-year. added on drivers prices on looking up added basis points was points. points in basis overall, Clearly, decline the main QX, quarter XX.X%. standard. which estimated the isn't the The XXX the to were basis XXX volume, the XXX and

rents as increase Tollway on an Equipment services when were related base. Depreciation the asset $XX QX is $X $XX a in increase main Now cost sorry, up transaction, $XXX Materials as increase as largely of the inflation, in items fuel. fuel the primarily winter the XX%, XX% driver a $X and as expense work or result or gain acquisition X XX% higher the prices, of taking at to X, $XX stoppage few comp up expense of a and million of of for up costs. XXXX. up million which closer $X The result higher was $X -- weather result last was million the or look or on quarter. was million, a Fuel The adjusted were higher increase million or primary a it side. Purchased a was expense expense of versus million non-locomotive X% million the a was was of in million year. an Chicago on Comp stock-based was up result driver the lapping which drag efficiency. million, increased expense $XXX X% creating quarter. of a X% benefits

to debt the compared expense periodic equity to QX Moving below when pickup was $XXX and expense million $X or load accounting. net Other decreased from tax benefit $XX in components XXXX. the for line. interest Income million rates $XXX recovery higher related million Net a a reflecting higher purchase KCS million, acquisition-related of result up costs discount is KCS XXXX. XX%. increased acquisition The adjusted as KCS' of

XX.XX% the was items, quarter. effective core tax rate out in $X.XX the EPS statement, KCS-related the quarter. adjusted the income Running Excluding was on

we starting significantly we'll April. dividend utilize expect continue The and and of repaid continue to leverage, stronger the cash challenges as a revisit term a along to strategy. to return strike. was flow, the with leases certainly from We point as We'll a faced over first challenge, generate our but cash performance finance well from our capital million balance X.Xx sheet this few during network QX. free The the we debt has strong in targeted recovered $XXX KCS to at which our months allocation deliver quarter our

a fully growth mentioned, forward to a volumes As Keith with and path to turn the performance stronger growth year. continue it me and margin the EPS we John I volume for in back revenue go to year, a With much for see expect let path that, core to Q&A. over see and into improvement and

Keith Creel

and Yes. to line Nadeem. open up Thanks, John questions. the Operator, let's

Operator

[Operator of from question Evercore Instructions] ISI. Jon first take Chappell our We'll

JonChappell

kind you over. least completely Omicron of or impact way up, weather want you're you're other of any run it out your date. mainline relates at you on you to there help to issues whether online, kind the mid-single-digit post to to related network of the where no just give volumes to around washout. other is John, whether The Is laid is April the strike that, as cars us or that velocity, in it's understand completely it's There's metrics can the improvement running the there?

Keith Creel

to the going can It If I And we Let and to really same had go operating your X tell I'm were overall at the of that that happened one. John year temperatures. the back essentially, assets, on the me Omicron extremely are revenue. first locomotives shorter up. Level actually, go safely, cold you all focus X means challenging weeks means we let in that what to with shape. railroad, cruise run X, Level we that January, means net is the for is take your run trains going costs time network to increase good to is which needs going surging.

the you, then So into came were and we can gain of of broke. out weather that, we March, February bit when tell of I starting to out a coming rhythm

for good in had shape We look it year. then restored really We we you CP-like our our And now. customers. numbers when up are as Train above strike. since say down. at and because it numbers was that, can I what at above was Train face is weight we the network last at to overall online quick. a service bounced metrics back length last year. We're what or Cars at are or our

In fact, were metrics both those above.

a Our basis, we last crew place GTM favorable a cost to measure, versus per on back year. which

is demand and normalized. engine everything So should all this expect well, is that point the running It you says under the network.

have have numbers. performance and normalized assets you're and the have to see and CP to team going more improving the resources, we we the We execute,

John Brooks

CP-owned through. and fleet best customers had I center services, know, at particular, I seeing revenues. CP we that's add, on went pick in turning just we've our and beams look say, maximize and own, And more was you utilization shine to those that weeks, velocity really period. of of XX and might starting in the one revenue time of want mill to generate areas that assets, successful those and revenue that we last at are that week, how performing to if to done, weeks I those it that's asset look our you we've at of over I our our may as versus, our types up, our to what guns back guys assets we those working And create able that's and loads sort front,

Operator

Your next of Chamoun question BMO. comes from Fadi

Fadi Chamoun

you process of the on their filings to about other forward. Is this you've addressing can the in finding engaging merger some some railroads update that Keith, They've some with highlighted move in share common an with there maybe and those us terms in of of talked concern. the perhaps conversations? past ground

Keith Creel

keeping obviously. reasonable line CN's always Well, of of mind we're said I'll positions, make arguments, with a Fadi. an tell reasonable you, couple that's position with folks, open We've reasonable open agreements the argument. to not an and reasonable we're There's willing a communication,

come just matter. that facts but to divest hope to see position don't I able to not And day, They not We'll disagree. any intend customer. to matter certainly So think end of the meeting of the we going that the the with We at be to railroad, any to railroad. to to minds. those agree that grow

STB on We're using in I was into gain that, But says, believe this discussion. got will, negotiate regulator. think that commitment, they'll NS application didn't going have comes relationship approves entered they back -- to to something interested that it and matter venture commercially commercial a to XXXX, considering. not assuming NS, but honor the When KCS and honor A commercial is deal, will we're but a regulator to you to a we're will. something what rule in inherit contract merger the was to try established. that. that the going to to that the the going joint obviously, we've and we we the that We're

there are believe those properly, agreements those reasonable now, So rights the and area be to obviously, again, around synergies, that level track to to position. those with in to very our should allow that bring. in investment We we should to for the our had. need that if When used infrastructure adequate of Houston mechanisms more concerns be UP UP, for happens and will that's their synergies exceed in BNSF than take, to is agreements it the made specifically, be within position partnership maintain business infrastructure. we of a cooperation think and some That we and we're investments BNSF, comes going said, believe that

to very don't think see with overall, in discussions. we're it I progress I I again, we're other and comes is making So I a and progressive When the position believe that reasonable changing. continuing have CSX. our to we're place, some CSX, very reasonable, think

Operator

comes question Citi. next Your from Chris of Wetherbee

Chris Wetherbee

us maybe bit mentioned you a was core forgive more going was about ratio think if me And in specifically on then we little core the you know strike give can I CP the what up, on And how back earnings clarity year-over-year quarter? hoping business I the the operating this about I towards missed it year? basis? it. a for How do moving maybe quickly parity can start

Nadeem Velani

Chris. Sure. Thanks,

to I mean, the isn't purchase So accounting impact going OR.

So we just have our adjusted OR, not a core one.

I QX. think partway the have volumes of we're seeing to probably We'll the of still going out negative drought. seeding May. in the quarter into impact We're through go still run in grain and

expect And a challenge. so said, That being all a be by sub mean, do means. OR in I QX that's going XX% I to

and very a about the of of As and additional to time, and share market some a environment, that of Canadian John of more back gains operating the in we highlighted, the year with back and half grain the the good but we we've return assuming volumes. normal year had had the feel of leverage significant opportunities the half a that comes same it some the normal the that crop, self-help, some some at of just

how cost. bringing key a the to the think incremental we're I on going OR that's volume improve to the at is low

us. the of mid-XXs OR in you've more kind expect that the from year, kind of a expect that should half I'd of come you back So to say

cadence see OR. the that of kind the we that's So

EPS to our core year-over-year. as expect I have earnings, far As growth yes, us

up for of XXXX. lines how So it that's kind

demand in have. dug network a we and revenues that how a hole especially to we in huge operating how back confidence, significant but and recovered are given and amount have of So April, has here the network coming that volumes the the QX, I the environment we're

bullish for months. next pretty I'm X So

Operator

Your next of question Spracklin RBC Capital Markets. comes from Walter

Walter Noel Spracklin

to Lazaro wanted Keith, just pretty I compelling. come Cardenas. back days, to X

to of disruption to Just Beach and some how Do patterns that due volume about you to know go And disruption shift the kind that normal this diversion was above some think do Canadian to you labor history to Would XX% it service? going see when sticky few able and a past saw that ports years of there's you of Long a that as the hold for on whether a curious in would date -- here back pass? July in if toward ago, of I volume some diversion. you lift in to new be to that opportunity you L.A. does see come as that? there's your

Keith Creel

great a border would say get make it service you I ironed and that processes, And established an with you make I absolutely, obviously, processes, That's Walter. the out, have Yes. you And that reliable yes. question, processes once investment. customs that you be to see through opportunity it reliable. crossing then follow

process, the but of set supply occur take dependent that, and of unlock that chain [indiscernible] it be the Beach, compelling on going diversify the because very processes hard with West And it business test line very create business there Beach with to product you so in again, to would the and it's not up you from investment. and Long upon them complement reliable, you the and Coast. challenges book create stay I to to flows be I in So reliable think able compete with. so application the efficient establish We're a think and in their customers steamship will once Long fashion away that never ebbs merger the the that, for make L.A. can L.A. to investing It's our and railway stands and reliable capacity all to time. of take will a me, market a it

Operator

comes of next Wadewitz Your question UBS. Tom from

Tom Wadewitz

call opportunity frame serve different on potential however I Where when it? we step-up want you it you But Which it wanted trying a customers could ways? markets at to looking volume some customers? do of to those opportunity a a the commodity see for those the in if expand? to markets. that think prices for about about you want And you across could thoughts to maybe offer you think little Just the have some customers you thoughts think expansion number on maybe think geopolitical, of if that, timing greatest do the Russia-Ukraine, big where that?

John Brooks

Tom. Yes,

So that perfect teed me on you one. up

supplying New network can spent exactly of in a Canada's you in from Canada, America future And through I and world's in now, of can the Rouge Baton last the of I lays sort Canadian markets, our territory of a out growing compelling Canpotex, service CP-KC products being to service diversification, service other think -- touring it And Sea able and Coast only and potash week future, grain tremendous to K+S, compelling tell world's Gulf again, So Canada I but a with off that of future. XX% business, crude page. production. in maybe is controlling about what Russian the our of to diversification Houston world's becomes, potash Lazaro opportunity. potentially opportunities East Belarus and port, from to there the again, backfill franchise. future just mind. what essentially terms what of production. in and that our ability but think BHP perspective, see the XX-plus you but the for to But Coast those opportunities to I exports think versus single-line Canada, Black on the this not Orleans to I even as I Keith by those export I in and crude about, a for diversification XX% said described enabling in our that franchise, Russia brings story do -- right And the you, up Think the is today all it's for itself of haul just story to our West get table potash, South described roughly not being able tidewater, Gulf percent not of service or lineup the Mexico opportunity come exactly out of huge to jumps potash region the with DRU tell products, U.S. growth grain the to only again, the bulk combined the just only the safe for and a Ukraine means, that

Keith Creel

shorter that look this that to this at at potash a feed at little are just snapshot, to obviously a mines my the you to would taking give it Saskatchewan, in took We interest, I'll get potash a top on market in Tom. talking advantage. originate minimum Canadian XXX way, look One what way. trip. line depending haul you're Gulf East versus Coast, miles to the up one the Texas about, That's Do alternative. round that XXX-mile mine water on a

the If that's turning in needle to capacity line those accountable, created with that's railroad single Tom. loop, car service opportunity, destination, assets a a owner, origin you're hire from X closed a mover, that

Tom Wadewitz

well the crude that -- sounds we certainly Is opportunity It not side? rail on by of that should anything or there Would as think as way. so much?

Keith Creel

running. for normal crude, this And and name I that's we're point, now, it not I this Port movements, it's color. pipeline came to to capacity spread going there handle at normal spreads toured of by niche the [indiscernible] look comes back at as takeaway. can Arthur. and the outside crew pipeline We bit exceeded DRU. add little well. the demand that scalable, were at comes with all production very facility capacity Right down it. strong said, position Well, but it Obviously, point, and of much market increases, production last said from what That delta about expandable, And where We the in do. the much took us from. it's week. happen. how to and it's John the John it think will a some up created DRUs we've It's it's This a doing how takeaway locations production a has crude a at puts the online the ready as and driven

infrastructure a to ground the work footprint. little of bit the to get in just double it's So

I opportunity that's again, Texas a So value very a out going Hardisty Gulf. of we the that compelling serve for think niche to market coming uniquely

Operator

Your from of question America. comes Hoexter Ken Bank of next

Ken Hoexter

ECP it's attack in growing the kind The of in still to terms ways PSR companies once mean whether your going of growing that I you to trouble John, I I different like on had seems just having in run last right Keith, like, see guess, volumes my lot it of that contracts post-strike, seems that going is of of is still are any the your it, crude a of just expire ways different off? running versus if there left it or is implemented mainline But drop now to -- anything anything further under other just they've legacy Keith? to guess. guess network one. to bigger trouble way are it to just that barrel Is U.S., left there up anything the of terms clean follow I to out rebounded Is experience, have ops question fires.

in on So there something bigger operationally, not we Maybe back the you get point your track? do that. thoughts -- hire Or just on to anything this is Or need to U.S. that's you left what same more? at the see of

Keith Creel

I good Well, what bad to clearly not PSR. you've high a is. times level, name PSR and Ken. got in the execute in alone. times, at It's the is think it To understand not PSR

is don't and a I'm plan, you it the identifying, process customer, what provide making And accomplishing what not don't be. determining the So It's it should you're anything. to you service a say plan go you call all shelf this it. get a service to by off because about do going if

you to to a don't my go days, back I going to able trains. CN the assets important, have don't railroad need, last service infrastructure be the service say go it's to critically plan based it's it. days, you the whether my XX,XXX-foot got to create be to it's cars. just the defined plan locomotives, on piece And -- run whether -- I'm CP then whether You I that's people, the defines you've back I'll care PSR to execute

on turn you based invest able being it to in to takes it's If infrastructure, don't all the assets. the execute because it

the the be them means in good and you be going moving, up, get cost, not service. can't of If is move them low row, that line to backs line keep outcome the going it get not over train, assembly a the to it's up it clogs terminal, your

is. It's you with has ensure has and to and fashion, managed. formula to be your lock done you've what that step have that be it's got a a assets with So to demand not your It going to disciplined manage itself.

So your you're to railroad. what on putting got understand you've

You can't oversubscribe your railroad.

the so much. assets do can ask only can't physical You

and plan plant physical what it's to measuring and to it got it. the capable discipline your it the -- it's done. and do service it do You've said But execute it, again, requires around requires you easier than build handling, requires to of that; investment design and is that's how

figure airlines, goes lines, the if back you're And service. going not shipping capacity, other they you're the sustain understand to the that can't to and different all have forms doing, train that not assets can overnight. and are but happen in roads customers I going win to you at so to I'm doesn't it this a to And to I'm implementation. suggest effectively telling the allow a the formula works at. create You again, cost can't what lines, The of assets to. business. using in that to service it any move because and right out to the way it sustain produce low your marketplace. you, at to investment is service, you succeed apply customer values business the you any done It's best PSR run the the And want consistent the

company. my that. we beyond get a do we're as We're execution, to to I happen. if So We or to the great And again, result focus understand oversubscribe be going sustainable going it's We're concerns. and this to invest assets come to you in to. We're trying the this. that not and cost, they're It's to handle. this, balance to low going ask to implement shown our product executing and customers' We're then you're do this, takes equipped just I'm to going be not day it's continue It -- naturally to of it and network able we've and than to that, And customer. position out. be what understand going more to stay disciplined committed it the what network. you not day doesn't you that, And grow. for to that's out allows with going that in a

Ken Hoexter

detailed left That's John, to out And on compared obviously thoughts to the there. ECP. on just, those thoughts. just cut then informative out? of appreciate the seeing and I we're Anything what difference there

John Brooks

I'd for think of I stable carloads in ECP, I projection crude sort those terms year. think settled Ken, state terms we've of my the say rail the sort of of within in terms -- volumes. we've a XX,XXX, space into XX,XXX in by in pretty of crude the is

actually the similar About And a to QX. sort saw that liquidated is to that's run that, think of in a half I is in little -- of this see the should out play half to balance the you I So damages DRU. that over expect or relative year. we trend through volume rate think pretty of what

to right, they put all in for As protect place those our contracts our served us protect capacity. the reasons investment, were right

see year. then into its guess, continue run a we'll be, that as balance we of course, out so And we'll little it this And headwind clear will XXXX. free move I through bit and of the

Operator

Scott Group from comes Wolfe question next Your of Research.

Scott Group

revenue I the just want things a side. to focus couple of on on

headwind energy reform better just get guys And John, the then are that year Is if LD that were about? X% the of any goes the you bunches. down just Any X%. the the on all? talking as business update on, price/mix/other plus was So was that It signs Does bottoming KCS business? on. at

John Brooks

Yes.

that that Scott, headwind there. reflective of was So

what, you level I be that obviously, know fuel you're of I the surcharge the out year. to level a You bit, strong. pricing very to going as move expect, continue through sort little to see out expect tailwind

out hitting slightly I've have balance the these the of LD of maybe against that out to are some renewals sort and year. balance headwinds remain look way to expectations negative spoken And to. my mix Our definitely I that We're as X% that plus. going

Mike Upchurch

Scott, this is Mike product. question on Upchurch. take refined I'll that

rest took environment actions government XX% of that advantage that knows, everybody the take of really for pull think, you that to challenging some pay can shippers we business. incremental not and when Mexico us back the to available, I some increased had midyear were into XXXX having mislabeling product And the across it's were of in solid think, results some in quarter, a inspections shipping permits been see I excise decline business. to delivered, Still accordingly, as since an the taxes. almost on

seeing permits their to a for the are encouragement that down, back here with facilities beginning capabilities. government some We been transload little shut get have from that are

down is that seen So what where of isn't changed the marine. moving now lot by a be for It XX% Mexico. the terminals truck demand us. a that's is and happens The with past environment really into shut roughly in from to we've rail good sign just macro still

And been reopening rest just pretty facilities well. So we're we'll our of here. of the But incredibly performed of how our business. some forecasting particular in the conservative that by that segments encouraged see We've have rebounds. to

Scott Group

year on you're growth, on, high-level improvement you the revenue since any that margin for thoughts just Mike, can share?

Mike Upchurch

what good by customers. I we encouraged our that improvement expect taking Overall, now admin haven't provided hear Well, But got Scott, in place we to guidance. would from revenue, environment we're XX%; we're quarter, macro a We that you with consumer seeing the OR year-over-year We've it's XX%; intermodal say up business into there. if we continue. on predict see official basis, but a our a whether do would first any across up quarterly challenging pretty won't industrial and business, would up energy XX%; I issues. what it's right the up details all demand to XX%; go providing in we But pretty look solid expect automotive XX%. our up and service.

Operator

Konark next of comes question from Scotiabank. Gupta Your

Konark Gupta

necessary investments go synergy back the would to I or either approval So KCS incremental I you think the eat you, in wanted to demands cushion of targets? get you Is by wanted to the require STB's might to to anything you Keith, some Class just that have there for process that ask is and approval make that STB was made transaction. in

Keith Creel

that I'm of, no. None aware

Operator

comes Oglenski question of Brandon from next Your Barclays.

Brandon Oglenski

can Nadeem, comments. to back earlier come I your

like be correct? give high quite cost but items? right this said in level think specific the purchased maybe back you more I think getting a XX% of just OR question, was to to on year, services can what's some forward? back know to the some your half I response us that these And thinking quarter, going of the is another I you guidance

Nadeem Velani

a confident services, And It's Yes. that. as No, $XXX costs. it's transaction run mid-XXs a quarter, kind of we're about in looking QX, to rate. far Purchased correct, level as good kind excluding $XXX probably million in million KCS that QX of and

of that, from credit So the of was services. like the to sale we $XX I some had part year-over-year Tollway of land acquisition purchase Chicago a said, million land that impact the or

lot So of drag the services come consideration a is kind other year-over-year, that's through. kind what's the big Purchased But expense is there. of the where inflationary of costs

So million run that's $XXX $XXX rate. I'd is good million say to a why

Operator

next Your from comes question Seidl Jason of Cowen.

Jason Seidl

sort from envision do X days? for bit type days at if Wanted to Lazaro since little X Chicago. could U.S.? demand Southeast the fastest-growing The the And in Lazaro, consistent of it the you this guys what also a of get run Mexico population of the Meridian in keep do giving moves to of sort you of you One, it sort it to sort back into can Speedway product trains think you over the that mentioned you that

John Brooks

Yes.

will going Jason. our regular this It point. we'll there. that this we're similar to actually. can't start steamship to a going ran. volume now got can you, at we That's at that trains is and bellwether I And So movement this that we week today, the I We've another opportunity. testing look, very tell upon building name there. product sort to opportunity a major east-west That be train tell a Canada, look can line I name our that's an to ongoing itself, see with build from you, that I spoke of Keith run across -- And and

spoke I these So can us, solidifying and a NS. I've this the we're a to railroad, to access. talking we think, Meridian could we intended not -- bit be in did that excited I'm the that about over the the that. as confident I a the we more there. all and product. really but fact auto that West successful. a it's together that to STB Coast both about approvals, it replace on confident Eastern market, not it's Mexico. diversification. And am prove I can makes again, others with and put product, an little with interline the it Speedway It's that And you, great gaining supply of directions to It's hit linking And It's I complement Keith and and about shippers traction around chains. some to tell in only international that and potential basis domestic U.S. been increasingly only and frankly, route

routes of think, are terms opportunity, tell have fanfare it that to intermodal the should. more These I space, options of So gets competition this a but lot in going to it shippers you, the relative KC-CP are add, that unparalleled and can today. than I

Keith Creel

kind of we I railroad. Literally into environment, not the and of see down NS railway KCS to the I put highway. service I Meridian those up and taking away, and about be that great Dallas. to that Jason, eye that railroad, the South. I back there, the down on are Yes, think not say about more just opening Think Speedway on took Dallas. on me got grew To me, it's was running that's really on And out has and that about it's trip a trucks and about going seeing to I-XX, occurred, excited in created that think growth across far the trucks our that capacity that them interstate the

to railroad to. a will a this and that provide opportunity that nation it's solution be think I uniquely compelling needs able this

Jason Seidl

think Lazaro average How should the we the yield? maybe on Chicago that to yield intermodal to on compared about

John Brooks

I'm the tell. But it's you principles and early our to to can capacity in Obviously, to little going rest of customers doing -- I a marketplace. movement. sort I approach not Jason, assure and back how practice, be on ask would only you It's that. an it our sell interline our seeing of I We're we half think for

Keith Creel

these and a to Yes. uniquely and reliable We it need able compelling the at to a cost the shipper not invest comes Jason, to to compelling. and unlock so very capital, of going when create. value not low infrastructure to earn-in nation. and we railway just be is We're in that cost product that defeated create will can the It's competition, that product countries it's X see a to this continue again, great the going a to easily to obviously service, but be the combination

Jason Seidl

be to Lazaro what going interesting original created. It's see of can wasn't you sort the of if unlock dreams guys to one of

time So as always. I appreciate the

Keith Creel

to certainly that. intend We do

Operator

next Benoit Your comes Bank. from question of Poirier Desjardins

Benoit Poirier

I to back your add from it more just in contract single-line Just up service recent Hapag about? represent to curious in about $X with Lazaro more their to ability synergies of that is Chicago, was Cardenas top announced your on how come much on does you've billion talked also Saint John the that learn vessel And to included of or Lloyd. you

John Brooks

Yes.

to to sight Hapag our tell wholesale line just exceed intermodal in railroad and you, I as a will you Lloyd steamship million could short comfortable And a we the $XX only and million now point brought think tagged drill period. what exceed and going product. I'm in of that I basis the our that couple in had we Lazaro side opportunity. not of ability $XXX up product. Benoit, relative Saint to X-year So intermodal that I've I'm the and glad achieve the not It's to Chicago. hundred basis to quite again, to specifics community, lines, I dollars tremendous build a the a to John see time I revenue proof down to enthusiasm But the of million from want seen retailers, say

cost Canada. with partners We to you and John it power it, you neat and the does And train park say moves does average in it to business going to that the on more combination XXX-mile Montreal. and have if tell against for the can team the I quite our of that thing is powerful the to is out way between operating, entry to John better route that sales frankly, a that Saint our becomes the in and of about margin advantage line density what alone marketing that unit, per into that competitive what hit our acquisition us the that lack that our have makes double of already think Atlantic a Saint it begin we have, competitor pair our on and lane lane. that of size and a and only about with in

Canada Hapag can't another our say United partnership Eastern with of So to is enough only the States. It a producers deal. it's this upper I service European but for Midwest not And opportunity, big just Lloyd. strengthens way the

Operator

next question Ossenbeck comes Your from Brian of JPMorgan.

Brian Ossenbeck

maybe think you a expand annualized some revenue the on you can of year? in John, little million that bit I coal there. you of $XXX mentioned this up have back upside there's So starting also in potential half

they So terms data is announced some on when one. would the helpful. for answer updated it don't But now. in details I more And an that resubmitting this you acquisition, the then, if know STB May can just expect of be XX schedule

So talking were just line track you for earlier? big you time about still kind on picture, keep of does that the

Keith Creel

Yes.

revenue. within to an the certainly John let no the We the color XX. me to take STB and see than is on that, time regulatory Let decision ability yes. get a later by the I'll frame The provide still February answer

John Brooks

Yes.

easier on as moving to sort XXXX. I up. going the in some part one, an of XXXX at going how think well, versus we're very of also for begin I for route very, roughly to of But lap Teck Brian, additional demand is our And builds coal here's coal comps. the with I We're last -- competitor. think we're all, looking on revenue, it to tons that to is begin first potential guess, lap opportunity, the I X we strong. it So the switched number as saw, million

just on we're going year-over-year you there. of potash million, X.X even than and with opportunity to metric the that, certainly tell terms I X Canpotex of staying our that in So million upside And share bulk opportunity. can certainly, get tons bigger big K+S. is

of for like about refined If new this, million, you starting fuels. simply IPL the Independent about XX% with maybe into is is it think $XXX market and Toronto and up that that that think business Energy

opportunities, business. centers And bulk being ECP speak to then the the it's joining be to excited business. intermodal in of the other some going spoke I are about business that opportunity to we that that you but So really can't yet, we're CP. on pretty Hapag-Lloyd and And

Operator

next Your Steve question comes from of Hansen James. Raymond

Steve Hansen

and augmented Mosaic, to The move described. already really production a as just are announced backfill the some loss trying Has restrictions I But the looking there you've supply. what haven't potash have sort of weather, up guess, have volumes that cadence weekly John, the been been of understand question curtailments markets restrictions cadence. seen thus acutely beyond Nutrient, the the much and quick QX at tight all on you at cadence. we to far. the how some any yet. had? that just COVID there ramps potash of in I'm I'm

John Brooks

on little frustrating It's of And call I Canpotex now. bit fully here we It's seen ramp been been a for improvement also. have on a bit the tell last that tell now in up of that And good you expect of off-roads us out, a can Steve. couple it's I frustrating. weeks. a struggling right cycles. little we movement think some That's back Portland held I just can struggling bit corridor. the we're our you, with in little

tell few But certainly you, I we tons Canpotex from lack can desire over perspective. X hundred the fully there's that certainly So moved a thousand in K+S' or had that expected. I of no think last weeks corridor haven't

fill with are position, year. be I there's handle you to those work equipment those through CP, by we the to ongoing move to both shippers tell the think be able able made -- I us and can to demand And and in being investment we great as that volume.

Operator

like I now our allotted Creel. Mr. We answer. and back have to turn over time question to reached call the for would Keith

Keith Creel

Thanks, everyone, us Okay. for joining this afternoon.

look of an me hopefully, the unique sense by saying, at take opportunities Let We're results great of We're the about, lie evolving We about with forward excited industry us this close ahead I possibilities more condition well undeniable we the as ahead forward momentum them our continue confident is would there much optimism. you different opportunities on call company. and future Have towards again. to away that of this moving demand to organization. a future grow our ahead. line sharing the a network, next call looks the looking this given on as operating unique the our CP-KC exciting to network a of certainly CP going when the for promise and and transformational very outcome talk sight and the bright, stand-alone excited together We're that for with safe chapters day. our combined of

Operator

This call. concludes conference today's

now may You disconnect.