Canadian National Railway Company

Good afternoon. My name is Julianne, and I will be your operator today. All participants are now in a listen-only mode. At this time, I would like to turn the call over to Stacey Alderson, CN's Assistant Vice President of Investor Relations. Ladies and gentlemen, Ms. Alderson.

Thank you, Julianne. Bonjour à tous et merci de vous joindre à notre conférence sur les résultats du deuxième trimestre 2024 du CN. Good afternoon, everyone, and thank you for joining us for CN's second quarter 2024 financial and operating 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 presentation. 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 the forward-looking statements section of the presentation. After the prepared remarks, we will conduct a Q&A session with our analysts. As usual, we would ask that you please limit yourselves to one question. Joining us on the call today are Tracy Robinson, our President and CEO, Derek Taylor, our Chief Field Operations Officer, Patrick Whitehead, our Chief Network Operations Officer, Remy Lalonde, our Chief Commercial Officer, and Ghislain Oul, our Chief Financial Officer. It is now my pleasure to turn the call over to CM's President and Chief Executive Officer, Tracy Robinson.

Merci, Ceci, and bienvenue à tous. Thanks, everyone, for joining our call today. I'll turn to the quarter in just a moment, but first I'll make a few comments on the broader landscape. Now, at the macro level, the economy is shaping up to be in line with what we expected when we developed our plan, with North American industrial production trending slightly positive, some mixed signals in consumer areas that are mostly timing issues related to interest rates, and continued strength in the bulk portfolios. So at a high level, pretty much what we expected. Outside of the macro, I remain very encouraged with the progress we're making with our CN-specific growth initiatives, which are coming online very nicely. We are building the portfolio of business that works for us, fits our network, and enables us to efficiently provide strong customer service. The recent strength in our petroleum and fuels business, the growth of our sand franchise, the rebuild of our international portfolio are all part of this. Now, I know you're looking forward to hearing from Remy today, and he'll give you more insight in a few minutes on both the base business and our more specific customer efforts, which will continue to be a key driver of our growth. And on operations, the scheduled model continues to serve us well. The East and South regions this year are posting velocity and on-time numbers that are better than last year. The West has had some issues in Q2, which we will discuss today, but have lifted out of that in Q3. And customer service levels continue to be very strong across the entire network. The fundamentals of our business are good. The question in this quarter is, is leveraged, and for the remainder of the year, it's more about the labor situation in Canada. And we'll get into both of these in our comments today. So first on labor and the status of our TCRC situation in Canada. Now, as you know, the CIRB has now advised that they will release the decision on or about August 9th on the question of the essential service designation. Now, there cannot be a work stoppage until they render a decision. And subject to any direction they provide on the cooling off period, The parties are then required to give a 72-hour notice of a strike or a lockout. Now, the prolonged nature of this process, which prior to the CRRB referral was to conclude in May, is impacting our customers, and it's impacting our business, particularly in the international and intermodal, where customers have taken actions to reroute vessels away from Canadian ports until the labor question has been resolved. Now, our intent with the TCRC has not changed. We prefer a negotiated agreement that would do two things. Create a structure on work scheduling that would be positive to current employees and our ability to attract the next generation. And improve crew availability, which has been significantly impacted by the Canadian duty and rest period rules issued by the federal government last year. We need better availability provisions so that we're able to move our customers volume safely, cost efficiently, and on time. The offers that we've made to the TCRC have been consistent with it. So now in the quarter, overall volumes came in on plan, but not exactly in the way that we expected. And we were tracking well ahead of plan overall up until the third week in May, driven by a growth in international, as well as frac sand, petroleum and chemicals, and a late rush on Canadian grain to Vancouver. Starting late May, we saw sharp reductions. primarily in our international volumes, on concerns of a work stoppage. Now, this is volume destined to the U.S. that shifted to U.S. ports. So we had lighter volumes in the Rupert Corridor than expected. And at the same time, the heavy grain flows made us much busier in the Vancouver Corridor. In fact, we moved record volumes in this corridor during a period of a very heavy work block program on our system and in the directional running zone in which both the Canadian rails operated. The team got it done, but it wasn't efficient. We saw this in our velocity metrics in the West and in labor productivity. Now, it's important to note that the velocity issue has been temporary, and the operation in the West has returned to normal levels as the work blocks have moved to other parts of the network. So on the quarter, we delivered on the overall volume level, but we lost traction on leverage. Now, Derek and Pat will take you through the details and how we're responding. Here's where it is at a high level. The mix of business was different than what we planned, with more bulk and intermodal and less manifest traffic where we had the most leverage opportunities. We had more demand in the west than expected and less demand than planned in the south and the east. And as a result, we had more unproductive labor, particularly in the south, given lower grain and coal volumes through the quarter. And we had lower labor productivity in the Vancouver corridor as we managed record volumes through a heavy work block period. We also had a headwind on fuel in the corner of about 10 cents, which Jiz will take you through. So as we move through July, the velocity in the west is back to normal levels, and we're taking actions on unproductive labor. We continue to monitor the international volumes to ensure that we are positioned well for their return once we have labor stability. So with Q2 in mind, and with the anticipated continued rerouting of international volumes for a period, We are revising our full year guidance to mid to high single-digit EPS growth. This assumes no labor disruptions on the rails or at the ports, and it assumes the current traffic diversions do not increase. And while there's no doubt that 2024 has and will continue to have its fair share of challenges, our longer-term outlook and growth agenda remain intact, and we remain confident that our operating model will drive leverage as our volumes normalize post-labor uncertainty. So I'll hand it over to the team to provide more details, and you're up first, Derek.