Canadian National Railway Company

Good afternoon. My name is Krista and I will be your conference operator today. All lines have been placed on mute to prevent any background noise and all participants are now in the 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. 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, Krista. Welcome, everyone. Thank you for joining us for CN's fourth quarter financial and operating results conference call. As of note, we have forward-looking statements and non-GAAP definitions for your review on page two of our presentation. These forward-looking statements include estimates, goals, and predictions about the future and based on our current information and educated assumptions. These come with risks and uncertainties, and with that, there is always the possibility that the outcomes may differ from expectations. That being said, forward-looking statements aren't guarantees, and factors like economic conditions, competition, fuel prices, and regulatory changes could affect actual results. Now, joining us on the call today are Tracy Robinson, our President and CEO, Derek Taylor, our Chief Field Operations Officer, Pat Whitehead, our Chief Network Operations Officer, Remy Lalonde, our Chief Commercial Officer, and Ghislaine Houlle, our Chief Financial Officer. It is now my pleasure to turn the call over to CM's President and Chief Executive Officer, Tracey Robinson.

Thank you, Stacey, and bienvenue à tous. Thanks, everyone, for joining our call. Today I'll spend a few minutes on 2024 and then turn to our plans for 2025. Now 2024 was clearly not what we expected and certainly not what we planned. We are happy to have it behind us. We experienced a number of one-off challenges that had some outsized impacts on our results, including an unprecedented referral to the Canadian Industrial Relations Board by the Canadian government of what was otherwise a normal labor dispute. caused three months of uncertainty and the diversion of container volumes for a longer period of time. And that was followed by a rail shutdown and then strikes at the ports of Prince Rupert, Vancouver, and Montreal. Long story short, we were resourced for more volumes than we handled, and we didn't deliver growth to the bottom line. We're not happy with that. Now, there were a number of things that I am pleased with. The team's agility in managing through the year with solid execution was very strong. Our operation recovered from each shock quickly and effectively. Car velocity for the year was solid at almost 210 miles per day, despite the challenges. And through Dwell, an indicator of yard fluidity is on par with 2023 at seven hours. Now, this wouldn't have been the case a few years ago, and I'm proud of the discipline of this team and their adherence to our operating model. We also delivered on our CN-specific initiative and grew volumes by more than 1%. We moved record amounts of Canadian grain. We had solid same store pricing above real cost inflation. Our customer service remained top tier. And we had the second best accident and injury performances in the company's history. So we have a strong foundation. From a financial perspective, we delivered Q4 adjusted EPS of $1.82 and an operating ratio of 62.6%. For the full year, Our adjusted EPS was $7.10, and the OR landed at 62.9%. I'm going to ask the team to give some more color on the quarter's performance in a few minutes. Turning to 2025, it's a new year, the labor issues are behind us, and I feel really good about our setup for this year. I'll start with the good news from the SDB, who approved our Iowa Northern transaction. I want to extend a warm welcome to our new colleagues. This transaction extends our network reach into the Iowa grain belt and provides extended single-line access for customers to new markets. Now, a side benefit of the deal is that we're bringing on a team with a strong entrepreneurial spirit, and that's something that we want to lean into as an organization. We'll start the integration in a few weeks, and I expect to realize operational and commercial synergies in the coming months. Now, in the operations, We're well into winter and the network has been fluid despite the cold. As we've rounded into January, we've had shorter bouts of severe cold, which has allowed us to pick up velocity. Months to date, car velocity is nearly 200 miles per day, right in that sweet spot for winter operations. This railroad continues to run well. Now, a tight operation is table stakes for both customer service and margin expansion. And over the past number of quarters, we've taken actions to realign resources, both people and assets, and this will flow through in our results moving forward. And we'll continue to refine the operating plan and resourcing as necessary. We're also continuing to focus on our productivity initiatives, including in engineering and mechanical. It will help us mitigate the impact of inflation and support operating leverage. On the labor front, we're in a stable position this year. We reached a tentative agreement with the IBEW this week. This is the union representing our signals and communications employees. Positive progress for both parties. We're also pleased that we reached a four-year agreement with Unifor in December. Unifor represents our employees that work in mechanical, clerical, and the intermodal functions. With respect to the Teamsters union, which represents our conductors and locomotive engineers, the arbitration process is proceeding as expected and on track to be wrapped up by the end of the second quarter. These unions represent the bulk of our Canadian unionized workforce. We're also progressing well with negotiations in the U.S. And ports on the West Coast and in Montreal are proceeding with their own arbitration process. So we're in good shape on labor stability across the supply chain in 2025. Now, finally, when we think of the broader economy, the most significant driver could be what happens with tariffs initiated by the new U.S. administration. We all want growth in the North American economy, and we want consumers to be strong. And we're hopeful that the conditions that will support this will be in place. Now, clearly, we can't predict how this will unfold, but we can control how we respond and how we partner with customers to adjust. And we've considered a full range of options and have a plan for various scenarios. The key for us will be to be nimble and adjust quickly as the situation unfolds. Turning to our 2025 outlook, We've provided an earnings guidance which accounts for multiple scenarios related to volume, to energy prices, and to currency. Significantly, our underlying assumption, as it relates to tariffs and the potential retaliatory measures, is that while there may be some impact, it won't be so significant or prolonged as to cause a recession in Canada or significant inflationary impacts in the U.S. With this in mind, we expect to deliver 10% to 15% EPS growth for 2025, and we're reaffirming our 2024 to 26 outlook for compound annual high single-digit EPS growth. While the business environment has evolved from our investor day timeframe, the investment thesis we presented has not. We remain in growth mode, and we're executing our strategy this year, including year-over-year margin improvement. So we're aiming for growth in volume, as well as earnings and margins. And to give you a sense of the margin improvement quantum, all together, The 2024 one-offs, including fuel, impacted operating ratio by roughly 200 basis points. Raymond will give you more details on the volume outlook, which all in assumes low to mid single-digit RTM growth. More than 50% of it is expected to come from CM-specific initiatives. About a third is related to the recovery of volumes lost from last year's labor disruption. And the remaining assumes a bit of a lift in the economy. We do expect the shape of the volume growth through the year, to be more backhand-weighted as we lap last year's disruption. We're guiding for a CapEx program of $3.4 billion for 2025 to ensure a safe and efficient operation, as well as to support growth. As Pat will discuss, we're doing the work to improve the efficiency with which we manage our engineering program, and we're very focused on locomotive availability and reliability. The year's off to a positive start, as we expected. We have the momentum we need to demonstrate the strength of this network and franchise. And Derek, you're up first on the condition of the operation.