Canadian National Railway Company

Good afternoon. My name is Julianne and I will be your operator today. Welcome to CN's third quarter 2023 financial and operating results conference call. All participants are now in a listen-only mode. After the speaker's remarks, there will be a question and answer session, during which we ask that you kindly limit yourself to one question. I would now like to turn the call over to Stacey Alderson, Assistant Vice President, Investor Relations. Ladies and gentlemen, Ms. Alderson.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us for CN's third quarter 2023 Financial Results Conference Call. Before we begin, I'd like to draw your attention to the forward-looking statements and additional legal information available at the beginning of the presentations. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the US and Canadian securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. They are more fully described in our cautionary statement regarding forward-looking statements in our presentation. After the prepared remarks, we will conduct a Q&A session. I do want to remind you to please limit yourself to one question. As usual, the IR team will be available after the call for any follow-up questions. Joining us on the call today are Tracy Robinson, our President and CEO, Doug McDonald, our Chief Marketing Officer, Jocelyn Poole, our Chief Financial Officer, and Ed Harris, our Chief Operating Officer. It is now my pleasure to turn the call over to CM's President and Chief Executive Officer, Tracy Robinson.

Thank you, Stacy, and welcome everyone. I want to start today by saying a few words about the evolution of our operations structure. We were very pleased last week to announce the appointment of Derek Taylor to Executive Vice President and Chief Field Operating Officer, and Pat Whitehead to Executive Vice President and Chief Network Operating Officer. Now, you've all met both Pat and Derek. They are both accomplished and experienced operating officers and they will both play prominent roles in CN's future and our success. Now, this isn't splitting Ed's role into two. We're making this bigger and we'll be focusing on work that we haven't done before. Now, the structure we're creating will strengthen the competencies that are core to our future of driving profitable growth. It recognizes the equal importance and the distinct nature of competencies around building the plan and running the plan. Now Derek and his field team will focus on continuing to improve the daily execution of our scheduled operating plan across our three operating regions and our intermodal terminals. They will drive on-time performance along with continued improvement in dwell and in first-mile, last-mile delivery to our customers. Pat and his network team own the plan. And their focus will be on two things, continuing to refine the plan to optimize to our volumes and to improve velocity, and to drive a more focused, longer-term plan, including resourcing and the development and execution of the capital plan to both maintain our network on a lower cost-per-unit basis and expand it for growth where necessary in a more cost-effective manner. Now, this structure... splits the critical day-to-day focus of running the operation from the very specific work we need to do to ensure that we continue to operate well while we grow. And I'm looking forward to working with Pat and Derek as we continue to refine this model. I'm excited about the performance and the innovation that they will deliver in this next chapter. Now, they're both in the room with us today. They don't have speaking roles and they're not mic'd up, but they are here with us. It's said who, of course, will carry the operations dialogue on this call. And he's here and he's mic'd up and ready to go. You'll be hearing from him shortly. But before he gets to speak, let me just say how much, Ed, I have appreciated your willingness to step back in. I've appreciated your partnership in creating our path forward and your leadership in ensuring that we've got the right winning conditions in place with our operations team for this transition. You've made a real difference. And I know that's exactly what you wanted to do. Now, before I hand it over to you, though, I have some comments on the business and on the quarter. Our railroad continues to run very well. It is the test of our operating plan that we can maintain our fluidity, our velocity, and our customer service levels through different and challenging conditions. We've demonstrated that over these past few quarters. Now, through the forest fire season this spring and summer, which was the worst in Canada's history, the flood conditions in the east and west, and the west coast port strikes, our operational performance remained strong and consistent, and we've demonstrated the ability to recover quickly. Our on-train performance and our velocity have remained steady. Now, this is exactly what we're looking for. And our last-mile service has improved. We've been consistently over 90% for the last two quarters versus about 80% last year. This is the performance and the resiliency that we're looking for as the foundation of our growth plan moving forward. Now, in volumes, we have a tale of different market segments. You'll hear from Doug a little more on this. Our bulk business, so think grain, coal, potash, fraxen, it's been strong all year. Our merchandise business is continuing to firm up. For instance, we've seen an inflection in chemicals and plastics starting in August. Our consumer-related business, particularly the intermodal business, continues to be murky. Our domestic intermodal volumes are holding up relatively well thanks to initiatives like the EMP and the Falcon Service. However, the international intermodal has been affected by two things. Destocking lower overall consumer consumption which has impacted port volumes across the continent for everyone, and then the West Coast port strike. Now, coming out of the port strike, our Canadian destined volumes have returned. Our U.S. destined volumes moved to U.S. ports during the strike and have not come back fully as yet. Now, this is a temporary situation. We're confident in the value proposition that the Canadian ports offer. in both service and cost, and we continue to work to get those volumes back through the Northern Gateways. Now, I believe we've seen the bottom one volume. We've started a controlled ramp-up of the operation to support growth. The growth plan we laid out earlier this year is continuing to progress. It's a mix of growth tied to economic strength and growth tied to specific customer initiatives. Now, the volume growth tied to the economy will come as the economy lifts. The benefits of our customer-specific initiatives are unfolding pretty much on plan. In both cases, we will see considerable margin leverage as volumes increase. I'm a big believer in the resiliency of the North American economy. This team has managed extremely well through the softer volumes, and what we can control continues to go very well, faster and better than planned, in fact. and we're ready as the volumes turn up. I've got a lot of confidence in this team, in this network, and in this plan. Now, turning to our third quarter results, I'll keep it to just a few highlights. Our third quarter EPS was 21% lower than last year, and our operating ratio at 62% was higher than last year, but remains at or near best in the industry. I am extremely proud that our customer service and operational efficiency have been top tier for six quarters now. The team will take you through the details in the quarter. I'll turn it over to them now, starting with Ed. Now, Ed, I said a few nice things earlier, but I need now to mention that this is your last quarterly call with CN. Thank you, and let's make it a good one.