Operator: Good afternoon. My name is Krista, and I will be your operator today. All participants are now in a listen-only mode. After the speakers’ 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 Stacy Alderson, CN’s Assistant Vice-President of Investor Relations. Ladies and gentlemen, Ms. Alderson.

Stacy Alderson: Thank you, Krista. Welcome, everyone. Thank you for joining us for CN’s first quarter financial and operating results conference call. Of note, we have forward-looking statements and non-GAAP definitions for your view on Page 2 of our presentation. These forward-looking statements include estimates, goals, and predictions about the future based on 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 the 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. 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; Remi Lalonde, our Chief Commercial Officer; and Ghislain Houle, our Chief Financial Officer.

It’s now my pleasure to turn the call over to CN’s President and Chief Executive Officer, Tracy Robinson.

Tracy Robinson: [Foreign Language] Thanks, everyone, for joining us on today’s call. We are very pleased today to be reporting strong first-quarter results. We delivered 8% earnings growth and a 20 basis-point improvement in the operating ratio. This gives us a good start on the year, particularly as we expect earnings growth to pick up in the second half as we lap last year’s labor-related disruption. The team delivered these results despite experiencing a more normalized Q1 weather pattern, which meant tougher comps versus last year, especially in February. The resiliency we saw is again proof that our operating model is the right one for this role. And we’re also pleased with the conclusion of the arbitration process involving our Canadian conductors and locomotive engineers.

It resulted in a three-year deal and annual wage increases of 3%, in line with our expectations. We continue to make progress on labor agreements in the US as well. We’ve now reached a ratified agreements with nine unions representing roughly half of our US workforce. Now, in terms of the outlook, when we spoke with you in January, we expected that there would be some uncertainties during the year around tariffs and trade-in particular, and certainly playing out that way. We’ve not seen a significant impact to our volumes thus far, but there’s no question that uncertainty has increased over the last few months, and we’re seeing a heightened risk of recession in both Canada and the US. Now, it’s difficult to say what will happen from here. While we remain optimistic that the US will ultimately reach trade agreements with Canada, China, and other countries, we don’t know what those deals will look like nor when they will happen.

What we do know is that CN is well-positioned to enable global trade regardless of potential changes in trade patterns. We have the right service and available capacity at all three coasts of North America to provide our customers with gateway options. So we’re ready. Now, for Prince Rupert specifically, we continue to believe that it will play a large role in our future growth. Rupert has an available capacity and its ability to expand intermodal and bulk shipments is unique in Canada. There’s a tremendous amount of ongoing investment in business development to diversify the commodities handled by the terminals in Rupert. It’s an increasingly important outlet for liquids and plastics from Western Canada that are in high demand in Asian markets, for example.

I know that some of you on the call will be joining Remy and the team in Rupert in June to see firsthand what we’re so excited about. Now, getting back to the quarter, Derek is going to take you through our Field Ops performance; Pat will provide an overview of our resource and labor productivity, and our progress on our mechanical and engineering efficiency. Our operating measures, although off from last year, are in the range of a more normal winter, and most importantly, we showed incremental margin improvement coming from tighter resourcing and cost management in addition to strong same-store pricing. All in, EPS grew by 8% on 1% RTM growth in the quarter. Now, as we look forward, we’re keeping a very close eye on the external environment and staying close to our customers to understand potential changes in traffic flows.

Remi will give some more color in a moment. And we continue to assume year-over-year volume growth driven by our CN-specific initiatives and lapping last year’s disruptions. We expect that this will translate into volume and margin growth acceleration to the last half of the year. So we have four months under our belt with performance in line with our plan. We continue to assume RTM growth in the low-to mid-single-digit range. We are intentionally keeping resources tight and driving efficiencies across the organization to deliver better margins, and we’re focused on running this railroad efficiently, serving our customers well, and driving value for our shareholders, our employees, and all stakeholders. Our full-year guidance of 10% to 15% EPS growth remains unchanged, and we do recognize that there’s an increasing risk of recession, and if the economy moves into a recession, this could impact our outlook.

But we expect to deliver within our guidance range as long as we see year-over-year volume growth. So I’ll now turn it over to the team to fill in the details. Derek, you’re up first.

Derek Taylor: Thanks, Tracy, and good afternoon, everyone. I’ll be speaking on Slide 6. We started the first quarter with strong operational performance in January, and car velocity was at 200 miles per day, a seasonally solid number. Winter conditions really hit hard in February, and not just in the West, where we’re used to seeing cold temperatures. We also had some extreme cold and record snowfall in the Eastern region, and saw considerable flooding in the southern region along our Chicago and New Orleans corridor. Tying it together, we had impacts across the entire network at the same time, which limited the ability for some parts of the network to assist other regions. For instance, Toronto wasn’t able to absorb the switching to help out Winnipeg.

The team continued to execute through 19 consecutive days of tier restrictions in February. Per perspective, there were only three days of tire restrictions last February. A reminder to everyone on the call that, for safety reasons, we implement three tiers of train length and speed restrictions at temperatures below 25 degrees Celsius, which has the impact of constraining car velocity and network fluidity. For example, we lose about 30% of train length capacity for intermodal and manifest train at Tier 2 temperatures. This compounding effect is very impactful to the network, the longer the restrictions are implemented. We were very careful to manage our resources and costs. For example, being disciplined about not injecting more equipment into the mix to maximize fluidity and throughput during February’s deep freeze.

When the weather broke in March, the network quickly rebounded, and a few stats tell the story. We moved nearly 1.4 billion daily GTMs, which is among our top performances for the month of March. Car velocity improved to nearly 200 miles per day, well improved to 7.5 hours, and we moved a record amount of Canadian grain. Importantly, we did all that with 2% lower average headcount. Coming to the second quarter, we continue to have pockets of weather as we pull out of winter. The network has remained resilient, and the team stayed on task. We’re seeing a lot of great things so far. We are driving improvements in the ground count and container dwell at the ports we service. Month-to-date car velocity is almost 215 miles per day. Month-to-date through dwell was 6.8 hours, and [LSC] (ph) is back up to 95% for servicing our customers.

Q1 was about controlling what we could control regardless of the weather. I would certainly say that the team did a great job operating this railroad in the first quarter and stayed focused, especially in the thick of the February deep freeze. This team knows the importance of sticking to the plan, which we have once again demonstrated with the speed in which we recover from the February weather conditions. I am proud to be operating shoulder-to-shoulder with these professionals out in the field and would like to thank them for their Q1 efforts. Now, I’ll pass it over to Pat.

Pat Whitehead: Thanks, Derek. Starting with safety. Our injury ratio remained flat year-over-year despite the sustained conditions that stress-tested teams in all areas of our operation. Shifting to resourcing. We’re seeing strong results from the actions we took in the second-half of last year to better align our workforce with demand. Overall, labor productivity improved by 2%, primarily driven by an 8% gain in train engine employee productivity. Additionally, we’ve expanded our internal engineering team compared to last year as we continually strive for the optimal balance between internal labor and external contractors. In-sourcing more of our core engineering work enables us to achieve greater productivity, quality, cost control, and, most importantly, accelerate the development of our in-house talent.

This strategic shift is not isolated. It’s part of our commitment to disciplined capital management and project execution. Although it’s still early in the work season, the initial results from our engineering team have been promising. We’ve seen nearly double-digit productivity improvements across rail grinding, welding, and tie installation. Our emphasis on schedule, adherence translated to a 12% reduction in train delays caused by engineering work blocks. This means we’re getting more out of every dollar spent and we’re effectively unlocking additional network capacity simply through better execution. Turning to locomotives. Our fleet availability stayed steady at 91% despite extreme conditions across the network in Q1. Our modernization program, which improves availability through reliability, drove an 11% reduction in locomotive failures compared to last year.

Our locomotive strategy is paying dividends when we need it most, with power consistently ready for launch. The team has also been fine-tuning our predictive maintenance analytics, allowing us to better forecast critical components nearing the end of their useful life. This resulted in a 5% reduction in locomotive parts inventory and ensures we have the right parts on hand when needed. This is all about reinforcing a culture of efficiency and sweeping the corners for all opportunities. Our investments in locomotive availability and the focus on engineering productivity help us sustain the operation, create capacity, and support fluidity. A great example of how it all comes together was in March when we moved the most average daily GTMs since April of 2022.

Looking ahead, we’re on track to bring on additional network capacity this year. Particularly in Western Canada, there are eight projects scheduled to come online in Q4. These include yard improvements, siding projects, and additional double tracks, specifically on our Edson sub between Edmonton and Jess. All of this boosts our throughput and improves fluidity, positioning us for growth. As we continue to improve in productivity, cost-efficiency, and capacity, we’re well-placed to meet the evolving demands of our customers. Our goal remains to maintain operational excellence and get the most out of our resources, all while ensuring we move our customers’ goods efficiently and, most importantly, safely. With that, I’ll pass it on to Remi.

Remi Lalonde: Thanks, Pat. Let’s flip to Slide 10. We realized revenue ton mile growth of about 1% in the quarter as underlying demand was strong across most segments, particularly grain and coal, which were partly offset by lower volumes of potash, as expected, and iron ore. Overall, revenues were up by 4%, which reflects a 3.5% tailwind from foreign exchange, offsetting a 3% fuel price headwind due to lower applicable OHD prices. The pricing environment remains mostly constructive, and we continue to deliver same-store price ahead of CN rail cost inflation. While RTMs increased by 1%, carloads fell by 2%, which is due mostly to the decrease in iron ore shipments, a good portion of which is short-haul. Let me jump right into the macro-environment in tariffs and what we’re hearing and seeing from customers.

Clearly, this is a very dynamic situation, and we’re staying very close to customers as we collectively navigate through the uncertainty. With most customers in wait-and-see mode, we did not observe a material shift in overall traffic flows in Q1, but we did see some sector-specific reactions, including a combination of paused shipments to avoid tariffs, reduced production or inventory building, and also some apparent pull-forward demand for finished vehicles, in particular. Let’s look at Q1 by sector on an exchange-adjusted basis. For petroleum and chemicals, revenue increased by 3%, reflecting mostly continued growth in export NGLs, mainly to Rupert, which were partly offset by lower refined petroleum volumes due to a production issue at a customer facility and lower southbound biodiesel shipments.

Metals and minerals revenues slipped by 6%, mostly because of a significant drop in iron ore shipments, with softer export demand and production issues at mines we serve in the iron range. Demand for frac sand remained strong, but volumes also fell with the train length restrictions due to the extreme cold, which affected shipments in Northeast BC. We saw strong orders across forest products with pull-forward demand ahead of potential tariffs, but we were not able to capitalize on the full opportunity given the operational restrictions. Coal exports jumped in both Western Canada and the US, driving revenue up by 9%. The average length of haul also rose by 11%, with a higher proportion of US exports shipping through the Gulf. We recorded a 7% increase in revenue for grain and fertilizers, reflecting higher exports from each of Canada and the US, and also strong pricing.

As we expected, the benefit was partly offset by lower long-haul potash exports to Eastern Canada due to a terminal outage. The stronger pricing and mix change had a favorable impact on revenue per RTM. Intermodal RTMs were flat, but revenue slipped by 3%, largely reflecting more Canadian cargo as we work to rebuild US destined business following the ’24 labor disruptions. We’re not quite where we wanted to be in Q1, but with the Chinese New Year behind us and especially as we welcome the Gemini alliance to Prince Rupert, we’ve got the pieces together to grow. Automotive RTMs rose by 11% against last year, with higher shipments of finished vehicles on pull-forward cross-border moves ahead of the application of tariffs in April. As we think about our outlook for the rest of the year, it goes without saying that there is uncertainty around global trade flows and macroeconomic conditions, particularly when it comes to the trade dispute between the US and China, the impact and duration of auto industry tariffs and the possibility of additional tariffs on commodities like lumber and metals.

We had not assumed particularly robust economic growth to support our guidance for the year, and indeed, it appears more and more that we are headed toward only slightly positive industrial production in 2025. Rather, our guidance was built on the expected benefit of lapping the 2024 labor, rail, and terminal disruptions, particularly for international intermodal and our line-of-sight growth initiatives like met coal export capacity, crush plants, and sand terminals. With our strength of service and the resilience of CN’s network, we still feel good about our position. For intermodal, we continue to expect year-over-year growth, both international and domestic, weighted to the second half, but in the near term, we will see a pullback due to the noticeable increase in blank sailings, creating a bit of an air pocket.

We’re cautious with our outlook for metals, forest products, and autos in the near-term and the full-year, given the macroeconomic uncertainty and the impact of existing and potential future US tariffs. We will also see a step-down in iron ore volumes for the rest of the year because of a mine idling in the iron range and expected lower export demand. We could see tariff-induced movement around grain and fertilizers, but we feel pretty good with the balance of risks and opportunities for the rest of the year, particularly with the strong demand in US grain and potash exports to the East, but I would remind us that we are up against a strong comp with a longer tail to last year’s Canadian crop. Petroleum and chemicals should have lower tariff exposure, so we’re expecting continued growth momentum for the year, weighted to the second half.

So, taking all this into account, we still expect the business to deliver RTM volume growth in the low-to mid-single-digit range with an acceleration in the second half of the year as well. Ghislain [Foreign Language]

Ghislain Houle: [Foreign Language] Turning to Slide 13. As you’ve already heard, we had a more normal winter this year versus the past couple of years, which required us to activate our winter operating plans and train line restrictions, particularly in the month of February. Throughout the quarter, the underlying demand was solid with minimal impacts related to the tariff situation. As the weather broke, we recovered in March and delivered a solid March. For the quarter, we reported EPS of $1.85, up 8% versus last year. The operating ratio improved by 20 basis points to 63.4%, and revenues were up 4% year-over-year. Moving to Slide 14, let me provide you more details on some of the operating expense categories in the quarter, which I’ll speak to on an exchange-adjusted basis.

Labor was essentially flat versus last year, mostly on account of lower average headcount offset by higher compensation per employee driven by general wage increases. Fuel expense decreased 5% versus the same period last year due to an 8% decrease in price per gallon, partly offset by 2% less fuel efficiency. The net impact of fuel prices was about $0.07 unfavorable to EPS and 50 basis points of the OR in the quarter. Other income was up over $20 million versus last year due to a net remeasurement gain of the fair market value related to our Iowa Northern acquisition. We generated over $600 million of free cash flow for the quarter, about $100 million more than last year, mainly due to higher net cash from operating activities and lower capital expenditures.

Moving to Slide 15, let me provide some visibility into 2025. We continue to believe the economy will be slightly better than last year, with slightly positive North American industrial production for 2025 versus the 1% growth previously expected. Having said that, we’re monitoring the tariff situation closely. With this in mind and along with our CN-specific growth initiatives, we continue to expect volumes in terms of RTMs to be in the range of low-to mid-single-digit. Leverage at the end of Q1 was 2.55 times, and we intend to start our share buyback in the second quarter, continuing to manage leverage to our 2.5 times adjusted debt to adjusted EBITDA target. We continue to assume foreign-exchange for the year of around $0.70. However, our view of WTI has been updated to $60 to $70 per barrel.

Our effective tax-rate continues to be in the range of 24% to 25%. We are maintaining our guidance of 10% to 15% EPS growth in 2025. We continue to monitor the economy and tariff situation and recognize that the risk of a recession has heightened since our last call. Having said that, we’re off to a strong start to the year, staying close to our customers and doing what we can to mitigate any negative impact. We’re also holding our 2024-2026 guidance of high single-digit EPS CAGR. In conclusion, let me reiterate a few points. The network has been operating very well since we pulled out a winner. We expect volume growth to pick up in the second half, driven by CN-specific initiatives, as Remi mentioned. We are tightly managing costs in this uncertain environment, controlling what we can control.

We are very pleased with our Q1 results, a solid start to the year, and the footing to deliver on our guidance. Let me pass it back to Tracy.

Tracy Robinson: Thanks, Ghislain. Krista, we’d be happy to take questions.

Operator: [Operator Instructions] And your first question comes from the line of Fadi Chamoun with BMO Capital Markets. Please go ahead.

Fadi Chamoun: So, good afternoon. So, Remi, I wanted to get some clarity on the intermodal, US intermodal, international intermodal that you handle through the Western ports to the US and what are you assuming in terms of that business going into the second half of the year given not only some of the blank sailings and kind of reduction in order seen right now, but also potentially if these tariff are sustained a little bit longer and affecting kind of that type of traffic? And kind of related to that, one of your peers talked yesterday about offsetting market opportunities that can mitigate some of the tariff impact on some sectors like, autos and intermodal, and it might be more specific to your network, I guess, will be different opportunities, but have you had any opportunities to kind of examine what potential supply chain solution you can provide in the context of these trade policies changes?

Remi Lalonde: Yeah, Faddy, thanks for your question. So, starting with the US, as we mentioned, one of the challenges we’ve had is that the recovery of US volume has been a little bit slower than we expected. When we spoke to you last quarter, we said that we had to get through the Chinese Lunar New Year and welcome the Gemini Alliance to Prince Rupert. With that behind us, US volumes picked up nicely, actually, as of April, and so we’ve got some good momentum heading into the rest of the year. I will tell you with what we see so far, Gemini and Rupert has been much stronger than we expected. Our overall US volumes to answer your question in Q1 on the West Coast were down about 30%, but our Canadian volumes were up 16%, and we’re about two-thirds Canada to one-third US, so that explains the mix a little bit.

In terms of the rest of the year, we have seen an increase in sailings. The impact for the ports that we serve is not nearly as severe as what we’ve heard of some of the other ports. And so we think the value proposition is still very, very strong. So we’re going to see a bit of an air pocket here looking out through the end-of-the-year, particularly on intermodal, and it’s going to be, especially in the second quarter, but for the second half, as I mentioned earlier, we do expect to see good growth there. On the second part of your question, in terms of market opportunities, for sure, these are highly uncertain times. Our job and what we’re trying to do is to help customers solve their problems, and we’re out there every day. This is trench work.

We’re talking to them every single day, everybody is out there. We’re pounding the pavement. We’re trying to stay very, very close to them. My sense is that necessity creates opportunity, and the market is going to find a way for some of these things that are challenged. Maybe a couple of things that we’ve been working on. We’ve got a new intermodal service starting short sea from Mexico into Gulfport, that’s the Crowley service that we’re very excited about. We’re going to build that out. We’re also developing our partnership with Ferromex for the CGR ferry between Mexico and the Gulf. There are potential opportunities in terms of intra-US and intra-Canada moves, for example, in refined for steel, scrap, and lumber. So we have to see how things develop, and that’s going to be a function also of the new Canadian administration’s target of setting a new intra-Canada trade deal before, I think it said, July 1.

So we’ll see how that shakes out, we’ll be there to help, and I talked about Gemini a little bit. So it’s going to be a little challenging as we go through the air pocket here in the second quarter, but we’ve got the service reliability that our customers need to deliver for the rest of the year.

Operator: Your next question comes from the line of Brian Ossenbeck with JPMorgan. Please go ahead.

Brian Ossenbeck: Hey, good afternoon. Thanks for taking the question. Maybe just one quick clarification on the exposure from Canada into the US, do you have a sense, Remi, in terms of just how much of your intermodal and I guess, total business is going into Canadian ports and then through the US, and, therefore, might be potentially impacted by some of this tariff uncertainty? And then maybe for Derek or Pat, I just wanted to ask a little bit how you’re feeling about headcount network flexibility. Obviously, weather was pretty tough here this quarter, but you’ve also had some challenges with some of the work rules in the recent past. So, just wanted to hear how you feel coming out of the quarter, and perhaps the ability to flex up and down during this upcoming air pocket? Thanks.

Remi Lalonde: Okay. Thanks for the question, Brian. So, to answer your question, when we look at the total international business, which is about 12%, 13% of our total book, one-third of that is US, and in anticipation of potentially another question, how much of that is China? It’s about half of that particular number. Pat? Derek?

Pat Whitehead: On the manpower, I would say this, and this is Pat. As we come out of the quarter, this quarter really was, January and March, the network was very fluid. We had the weather we’ve already discussed in February, not going to dwell on it. It was significantly impactful. What we see and what we’ve shown once again is a quick V recovery. The strength of our operating model, the scheduled model is that we recover very quickly, and thus far in the quarter, we have seen velocity and speed return to the network. Feel very good about where we are. As it relates to people, as we sit here today, we have 470 train and engine service furloughs and about 50 in mechanical. We feel very good about our ability to chase the upside of volume and further adjust if the volume falls off.

We will watch the health of network metrics to see how we’re trending, and, frankly watch the productivity metrics on the car fleet, the locomotives, as it relates to GTM for total horsepower, and the GTMs per employee and we have a lot of levers to pull quickly if we need to adjust.

Tracy Robinson: Brian, it’s Tracy. Let me give the guys a little bit of kudos. They are doing in this past quarter, and as we go into April, a lot more with a lot fewer resources, and that’s particularly the case with people. You heard Derek talk about the kinds of velocity that this railroad is operating at right now and consistency from a customer service perspective. You heard Pat talk about the labor productivity improvements year-over-year. You can see that sequentially as well. So they’re doing a great job and we do — they have maintained that ability to flex up or flex down depending on what is needed. The secret is going to be. None of us know exactly what’s going to happen from here, but the secret, of course, is going to be seeing it as quickly as possible, and so Remi staying really close to our customers on that and we’re ready for whatever comes.

Operator: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Please go ahead.

Chris Wetherbee: Yeah, hey, thanks. Good afternoon. So, maybe to follow-up on that question, as we’ve seen the operations of the business improve in March and now into April in the second quarter here. I guess, how do we think about sort of the operating ratio cadence as we go through the year? Maybe if you could offer some thoughts on maybe 2Q or full-year, kind of however you guys are thinking about it?

Tracy Robinson: We don’t really guide, as you know, Chris, on the operating ratio quarter-by-quarter or at all, really. I think what we’ve said if we look at next year and what the team managed through from a labor kind of unpredictability and what happened at the force last year. We see as we tally all of that up, we see a couple of hundred basis points that we can attribute to that, and so we’ve talked about that from this year’s perspective, and we keep our eye on that. What happens on any given quarter is going to depend on a couple of things. One is the volume because we know that there’s magic in volume, and you have — you throw volume at these guys, and it’s amazing how they handle it and how efficiently they handle it.

And the second thing is some — the third-party shops, whether it be weather, or we’ve had fires in the past, and it’s sad to have to have been there, but we’ve gotten very good at this, and so where we do have those third-party shops are the guys look really, really quickly and effectively. So those are the kinds of things to keep your eyes on.

Operator: Your next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead.

Walter Spracklin: Yeah, thanks very much, operator, and good afternoon, everyone. I want to come back to Gemini, and I know your competitors kind of signaled that that’s been a big game for them in Vancouver, but you’re also flagging that you’ve had some great inroads into that customer as well, and I’m just curious if you’re seeing some of these alliances now kind of consolidate in different areas. I know you’re going to have us, Rupert, and you flagged M&A up into Rupert. Do you see them directing some of your business that perhaps you would have taken in Vancouver up into Prince Rupert, and is that allowing you to operate more efficiently, given that you’re single-served into Prince Rupert? Just curious as to what explains kind of both of you highlighting Gemini here as a great opportunity for both?

Remi Lalonde: Yeah. Thanks, Walter. I think the reason that we’re highlighting it is because Gemini is kind of bringing a different approach with a service promise that is above what the industry has typically seen, and we think it plays very well into our hand, because the way that we sell Rupert is exactly on that basis because there isn’t a city sort of surrounding the port, if you will, we can service it very, very well, and so we sell that service reliability, that service consistency, to kind of build it out. So, we have pulled some volume into Rupert with the Gemini Alliance. As I said, it’s exceeding our expectations not only for US volume, but also seeing Canadian volumes as well. So, pretty satisfied with how that’s coming along.

Operator: Your next question comes from the line of Ken Hoexter with Bank of America. Please go ahead.

Ken Hoexter: Hey, great. Good afternoon. So it sounds like you got a great rebound out of the weather. But maybe if I could just follow up on the near-term, and I know, Tracy, you said you don’t give guidance, but I just want to understand maybe the rebound capacity here. So, one, on revenue per RTM, should we see sequential improvement on that, or down because of fuel and FX? And on the operating ratio, I know you don’t want to give guidance, but just if the weather was so bad in the first quarter, can you just like directionally, should it outperform normal seasonality, just given the weather rebound, or are the other factors you throw in there? And same for the RTMs, where we were flat in the first quarter, now it’s down 2% quarter-to-date. So a bit below kind of growth targets. Does that mean a bigger ramp you’re expecting in the back half? Thanks.

Tracy Robinson: Hey, Ken. Listen, the revenue per RTM is going to depend on what kind of volumes show up, right, because it — mix can really move revenue per RTM around, and so I would say that the uncertainty, as we think about the impacts of tariffs and those types of things is greater than it was before. So, really, how revenue per RTM shows up is going to be dependent on some of that. From an OR perspective, the guys did a great job. The OR in Q1 was roughly what you would expect in Q1 with the normal winter. As we go into Q2, you know, we’re expecting the toughest year-over-year volume comp in Q2 given how strong it was, right? And — but we intend — we expect to get kind of more efficient as the year progresses. Remi has been doing some strong pricing.

We’re probably a little bit ahead of plan. On pricing. The velocity of the network is very strong, and so we would expect, as you look towards the end of the year to see some really good margin improvement. And, do you want to make any comments?

Remi Lalonde: Maybe just — yeah, Tracy, thanks. Maybe just on fuel can, as I said in my opening remarks, fuel was negative on a year-over-year basis in the first quarter by $0.07 or 50 basis points to the OR. If the fuel prices OHD and WTI stays where it is today, we don’t expect any impact on a year-over-year basis in the second quarter.

Operator: Your next question comes from the line of Cherilyn Radbourne with TD Cowen. Please go ahead.

Cherilyn Radbourne: Thanks very much, and good afternoon. As you think about how trade flows may reconfigure into a new normal, can you talk about the kind of discussions that you’re having with your other rail partners about existing and potential new alliances, and do you think that there is potential that new terms of trade reopen a conversation about industry consolidation?

Tracy Robinson: Hi, Cherilyn, well, I can tell you that we continue to like the benefits of the partnerships. We’re working more closely across the industry together to provide our customers with the benefits of single-line type service, and we’ll continue to explore these. I think there’s lots more opportunities on that front, whether it’s with the Class 1s or whether it’s with others, and we think that’s the right thing to do. So if you think about the Falcon with the UP and FXC connecting Mexico to Canada on truck conversion. If you think about the Crowley service that Remi just mentioned, connecting CN to Mexico via barge, that’s focused more on container track traffic. If you think about you know links connecting Eastern US with Canada for truck conversion or the Ohio Valley access with both NS and CSX, there’s opportunities to gain a lot of benefits without the significant risk on either capital or kind of regulatory risk.

So, consolidation, it’s always a topic of conversation in this industry. It has been my entire career in the industry, and certainly in the context of the current US administration, there seems to be a little bit more chatter right now. But at the same time, the risks of these types of combinations are significant. The new rules that came in 2001 set a pretty high bar for the kind of Class 1 rail mergers that we may have seen in the past. So, certainly, for us, the focus is going to be on leveraging pretty significant benefits of our network and working with our partners where it makes sense to offer our customers, kind of, more of the benefits of a single-line type of service offering.

Operator: Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

Scott Group: Hey, thanks. Afternoon. So I think I heard you mention that the earnings growth is going to be a little bit more back-half weighted, I think some of the volume growth is more back-half weighted. I just want to understand, is that simply just a function of the comp, or is there some assumption that, hey, we’ve got an air pocket in Q2 and things improve in the back-half of the year? And then maybe just with that, just to understand some of the moving parts. Like, is there — did we change the FX assumptions? Is that a headwind to the guidance, or not really a change there?

Tracy Robinson: Scott, I’m going to start off, and then I’ll hand it to Remi for a little bit of color on the volume profile, and Ghis will take the FX question. So, in general, I think the short answer to your first part is it’s both. Without a doubt, if you look on a year-over-year basis on volumes that you know the strength of the year-over-year because of the volume impact of the labor uncertainty and then the port outages last year, that we’re not going to have that this year. So you’re going to get a lift from that, but we also, if we look at our book of business and what’s being driven, as Remi stated earlier, we’re not expecting a significant lift from the economy, but what we are expecting is what we have line-of-sight to in our CN-specific initiatives. So, Remi, do you want to add a little bit of color on that, and then Ghis, I’d ask you to take the FX one.

Remi Lalonde: Yeah, what I’d say, thanks for the question, Scott. So the tariffs are starting to bite, and so we’re seeing that in the intermodal business, we called it out, a bit of an air pocket with an increase in blank sailings, and we’re taking a bit more of a cautious approach to some of the other segments, the metals and mining, the autos in particular. And so there is part of a comp, part of structural there. But as we talked about, when we think about our growth over the course of the year, there are these line of sight projects that we’re excited about. When we look at US grain and the growth for ethanol to use that as an example, it’s encouraging and sand as well, and then we’ve got some new met coal opportunities, relatively new met coal opportunities that are growing in Western Canada as well.

So that’s the sort of sum total of how we ground our guidance. It wasn’t based on any sort of robust economic industrial production, and as we mentioned earlier, we’re sort of clearly indicating more tepid industrial production for the rest of the year.

Ghislain Houle: Yeah, Scott, on FX, as you know, we disclose our assumptions and our assumptions on FX for 2025 is $0.70 or approximately $0.70. If you look at the current spot rate and it’s been like this, mostly all Q1 is about $0.72. When you compare this with the average FX of last year, it was $0.73. And as you know, the rule of thumb is every penny of Canadian dollar depreciation versus US provides about $0.05 on an annualized basis of EPS. So, actually, if FX remains at $0.72 for the balance of the year, it will be a tailwind of about $0.05 of EPS.

Operator: Your next question comes from the line of David Vernon with Bernstein. Please go ahead

David Vernon: Hey, good afternoon, everyone, and thanks for taking the time. I wanted to maybe ask Tracy or Remi a longer-term question about the competitiveness of Rupert, right? If we think about a world where maybe trade barriers are up a little higher, there’s a little bit more cost, maybe there’s less absolute trade. How do you think Rupert would fare on the container share versus the US West Coast ports? Do you think it would be right to think that the volume that was still coming over, even if it was a smaller absolute amount, would be more oriented around Rupert or do you think it will be subject to also some share losses as a result of higher trade frictions?

Tracy Robinson: Well, I’ll say this, David, and then I’ll hand it over to Remi for the proof points. But I would say Rupert has got a competitive advantage in almost any situation. When we think about it from a container perspective, I’ll let Remi take you through that. But for many of you who may be going up there, with Remi shortly here, what you’ll see is that the growth in Rupert on the bulk and on the liquid side is also pretty stunning, and so we’re jazzed about kind of the future of Rupert and the competitive advantage that it offers on pretty much every commodity. Remi?

Remi Lalonde: I echo exactly what you said. We’re very bullish on Rupert. I think the value proposition there still holds. And customers are going to look at it on an end-to-end basis, and so when we think about it on the boxes side of the intermodal, it’s the fastest and flattest road to the Midwest. There’s no port or city congestion comparable to what you see in other terminals in the West. It’s very cost-competitive as well, and it allows us to give the service reliability that the Gemini lines is showing us, customers are looking for. But as Tracy said, it’s not just an intermodal product, they’re significant investments and I look-forward to welcoming as many of you as possible to Rupert later this summer so that they can show themselves off and the capital they’re putting on the ground to grow the gateway, which we’re very excited about.

Operator: Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.

Steve Hansen: Thanks guys. Appreciate the time. At the risk of perhaps being too granular in the weeds, I was just hoping you could maybe speak to the magnitude of blank sailings, you’re expecting through 2Q, and perhaps even just if you have any color on to what those blank sailings might look into Q3 at this point? There’s just a lot of debate about this within the broader, of course.

Remi Lalonde: Yeah. Look, Steve, there’s a lot of uncertainty about that. I don’t have bulletproof data on incoming port traffic. I think the ports have been pretty good about reporting on that. What I would tell you is that we think the impact of places like Rupert is not as significant as what we’ve heard from other of the Western terminals. So there’s going to be a bit of an air pocket. I only see maybe a month or two max out, but as I said, the impact on a place like Rupert and Vancouver is not nearly as severe.

Operator: Your next question comes from the line of Brandon Oglenski with Barclays. Please go ahead.

Brandon Oglenski: Hey, good evening and thanks for taking the question. Remi, and I think maybe Tracy spoke to this at a high-level, but there’s always unintended consequences of actions in the world. So with potential trade barriers going up with the US, have customers come out-of-the woodwork saying, hey, can we reshape the supply chain to maybe be more export-centric from Canada to other partners? Can you just give us some ideas of where maybe this is creating longer-term opportunities for you? Thank you.

Tracy Robinson: Thanks, Brandon. Listen, those conversations are going on, and I would say it’s happening at all levels. If you look in Canada, even through the election that’s taken place, a lot of the themes are, in what ways and how quickly can we diversify some of our markets. And those opportunities are going to be there. The US and Canada will always be a very important and very close trading partners, kind of in any scenario, but certainly those conversations have intensified. And so given the access we have to global markets at Rupert, Vancouver and Halifax and Montreal and St. John, and down the Gulf Coast, we’re an obvious partner for those types of conversations. So they’re taking place. I would say, as Remy said in his comments earlier, that our customers are kind of on a wait-and-see basis.

So lots of ideas, lots of thinking, I think some opportunities. They’re always going to go towards the best and most consistent and lowest risk net netback, right? So, there’s some stuff that remains up in the air around where these tariffs are going to take us, but I would say that there’s more-and-more optionality being considered as we think about kind of what could happen here. Remi, anything you want to stay-in specific on them? I think we’ve leave it at the high-level or what do you want to — what do you think?

Remi Lalonde: Yeah. I guess there’s a couple of things just to build on that, which is a great answer. I think there is as Canada is thinking about infrastructure investments, the Prime Minister has been very clear about how we as a nation diversify the economy and that means infrastructure, and so we think there’s going to have to be a conversation about opening opportunities, for example, to export crude from the West Coast and relaxing some of the rules around allowing tankers to access places like Prince Rupert. There’s discussions about investing in port and terminal infrastructure. For example, the Port of Montreal is excited about developing, to your point on the longer-term, developing the Port of Contrecourt, which is on the south shore of the St. Lawrence River, for which we would be a strategic partner, and so I think there’s a number of things.

Maybe use it as an opportunity, Tracy, to also talk about Milton. So what we’re seeing is Canada traffic is growing. We are excited about the project that we have in Milton because there is a lot of growth going into Toronto. So that’s a mid-’27 project for us, but this is all stuff that we can do to help densify the network and operate to the full potential.

Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Please go ahead.

Konark Gupta: Thanks. I just want to get back to the guidance to understand it more holistically, what’s going on here. So, like three months ago, you guys expected 10% to 15%. We are still seeing 10% to 15% for the full-year, but things have changed, obviously in the market in these three months, and obviously, a lot of people are concerned about the macro-environment clearly here, as well as the Korean dollar has moved up slightly. I mean, if conditions remain where they are right now from a macro perspective and from FX perspective, are you guys expecting to be heading towards midpoint of the range or are we heading more sort of towards the low end of the range, like I’m just saying like what are the key puts and takes for the high and the low-end?

Tracy Robinson: So, Konark, listen, we try and model this out too, but the degrees of — kind of the range of possibilities here is quite right. What I’d tell you is this: we’ve got a good first four months under our belt. We’re on plan, we’re where we wanted to be. We did expect uncertainty. It’s probably more — definitely more uncertain than we would have been in as we were putting the plan together in January. The probability of a recession, if you listen to those that upon these things, is greater than it was before, but as we advance through the year, the risk of the impact on the year diminishes. We have, as Remi is taking you through line-of-sight on certain initiatives and projects that we’re doing with our customers that are less reliant on the underlying economy, and, of course, we have a much easier compare in the second half of the year.

So all of those things combined, we think that that range, we can hit that range as long as the volume this year remains positive, which we expect it to hit. All kinds of different scenarios based on different tariff outcomes and timelines that could put you at different places in the range, and I think we’ll just leave it at we like the range we’re at.

Operator: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Ravi Shanker: Hi, great. Thanks. Good afternoon. Maybe just a follow-up with the previous question on like what’s happening with customers here? Just on the pipeline of business, you kind of reiterated your long-term guidance, but are those conversations on how to deal with tariffs long-term? Do you accelerate in-sourcing or do you push it out? Are those happening now, or are they getting pushed out as well? So I’m just asking from a perspective — from the pipeline perspective. Have any big projects in your pipeline got pushed out from your initial timeline?

Tracy Robinson: I would say there’s very few, if any. I would say more — it’s more of what Remi said earlier, Ravi, which is there’s a lot of wait-and-see. We do expect that if tariffs and the economy were to fall down, there may be some of that. There’s others that are coming up, and Remi, do you have anything you wanted to add to that?

Remi Lalonde: A few that come to mind, Tracy. One is there’s probably all saw that Dow announced that they were pausing their investment for their Path2Zero project in Fort Saskatchewan. We didn’t have any volume increases part of that until 2028. Our understanding is that, to your point, Ravi, that is sort of in light of the macroeconomic conditions, and that they’re still very keen on the project, but it’s going to take a bit of time for them to get some comfort. We’re still growing with them. We still serve them and there’s some debottlenecking that will pick up there. So that’s one. The second one is around EVs and auto plans. Obviously, the auto industry is rethinking their long-term strategy where they’re going to manufacture vehicles in North America. We have 11 origin franchises in — mainly in Michigan and in Ontario, and so we’re trying to stay very close to customers as they think their way through.

Tracy Robinson: And we’re seeing some strength in other areas. We just had this quarter the FID announcement on our — what is now running our third high-throughput frac sand facility up in Northeast BC, and so that is underpinned by both customer investment and customer commitment. So, as in any kind of opportunity pipeline, there’s some strength in some of them that have more question marks, but we’re pretty positive.

Remi Lalonde: And NGLs are still very promising for export markets. So we’re excited about that.

Operator: Your next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.

Stephanie Moore: Hi, good afternoon. Thank you. I wanted to maybe touch on the labor picture for you guys today, maybe just given all the uncertainty and the broad macro, and you certainly called out some expectations across verticals or end-markets. So, maybe if you could talk about what you’re doing from a resource and headcount perspective in terms of staffing for areas where you’re clearly seeing some incremental opportunities, but maybe some areas where it’s a little bit weaker and then how that all layers in with your expectations for kind of the second-half and a nice little volume lift there. So, thank you.

Derek Taylor: Yeah. Hey, good afternoon, Stephanie, it’s Derek here. As Pat mentioned earlier, right now on the T&E side, we still have 468 — roughly 470 people furloughed, and that’s obviously across three different regions. So what I’d tell you, if there is downside that happens, we’ll be decisive and make that decision when we see that. At the same side, we will chase it on the way up. When you look at it, as we said, some of this volume, we’re seeing line-of-sight in the second half, and with those people there, we can quickly bring them back because they have been working as recently as even in the last month, for example. So Pat and I are comfortable from the resource side with where we’re at, we’ll chase a bit of the upside if it’s there, but at the same time, the whole team has talked at length there will be decisive if we don’t see what we like and take action at that time. Thanks for the question.

Operator: Your next question comes from the line of Tom Wadewitz with UBS. Please go ahead.

Tom Wadewitz: Good afternoon. Just have a kind of short one for you, Ghislain, and then I guess another one for Remi. On purchase services, Ghislain, what — that was — the number in 1Q is a bit lower than we were expecting. Was there anything unusual in that, or is that kind of a good go-forward and then maybe for Remi, on the P&C, you’re expecting some growth. I just wonder if some of that projects are idiosyncratic or is that just more of a market view? Thank you.

Remi Lalonde: Yeah. Maybe just — thanks for the question. Maybe just on purchase services, very small variance. If you adjust for FX, I mean, the variance is $5 million, 1%, nothing unusual, slightly lower outsourced services actually explains that variance.

Derek Taylor: Yeah. And I guess from a P&C perspective, it’s economic backdrop, it’s market-share wins in some of our businesses, but this is also where we pick-up the tailwind from growing the NGL business that we were talking about and also our refined fuels franchise, for example, the large project that we have into Toronto, which is doing really, really well actually.

Operator: Your next question comes from the line of Benoit Poirier with Desjardins Capital Markets. Please go ahead.

Benoit Poirier: Yeah, good afternoon, everyone. Just to come back on the volume rebound, you expect the air pocket to last about one or two months and expect a strong volume recovery in the second half, but if the air pocket would last a bit longer and volume recovery less pronounced than expected, what would be kind of the potential levers or how fast could you adjust the cost structure and any specific matrix that you monitor to end all this situation?

Tracy Robinson: Okay, Benoit. So listen, the guys have talked about they’re on it as far as watching volumes pretty closely and we can make those decisions fairly quickly. What’s the lead time, Derek?

Derek Taylor: Well, furloughs, I mean, you can do those just in the out within a week. I think the most important thing though, is Remi, myself, and Pat, there is daily communication, in many cases, we have a formal weekly meeting every Friday amongst the three of us along with many of our reports to review what that forecast looks like versus what’s really coming in different things. So, it’s made us very nimble. So, we’ll be able to wrap very quickly there. Pat, do you want to add anything from the locomotive or.

Pat Whitehead: I would say that Derek talked about the daily conversations. Also, as we look forward at what’s coming in as far as the forecast, but what we watch very closely, I think to your question is our — and I mentioned this health of network metrics, how is the network train speed trending, how is the through dwell, how is the car velocity, and then it’s about what are the productivity metrics for each of those resources doing, what’s happening with the active cars online, what’s happening with the locomotive fleet as it relates to GTM per total horsepower, and how productive are our employees, and those are the productivity metrics we watch to then quickly make decisions to lay down cars, lay down locomotives, furlough people, whatever it may be, and we make those decisions quickly.

Tracy Robinson: And so we’re ready for that side, and as we’ve kind of modeled the various scenarios, what we do believe that as long as we see a positive volume growth on the year that will kind of hit that earnings target that the earnings range that we’ve targeted.

Operator: Your next question comes from the line of John Chappell with Evercore ISI. Please go ahead.

John Chappell: Thank you. Good afternoon. So, on the revenue per RTM, I know we’ve talked about currency quite a bit. If we step away from the pennies a little bit and just think about the progression from positive to potentially negative, and putting a magnitude on it, that per RTM was up 3% in 1Q. You have the currency, you conceptually had some mix headwinds associated with intermodal being a strong driver of the RTM growth, especially in the back-half of the year. Can revenue per RTM on a year-over-year basis stay positive, or does it shift to negative given some of those tailwinds shifting to headwinds?

Tracy Robinson: I think in most cases, in most scenarios, it stays positive without a doubt. As we model both the international intermodal growth, the domestic growth as well as what Remi has talked about on all of our bulk and merchandise traffic, it should end-up positive by year-end.

Operator: Your next question comes from the line of Daniel Imbro with Stephens. Please go ahead.

Daniel Imbro: Yeah. Hey, good evening, everybody. Thanks for taking our questions. Remi, I wanted to follow up on the growth conversation from earlier. You mentioned some intra-US opportunity, intra-Canada, maybe Mexico to the Gulf, but what about more specifically just from Canada to Mexico, and maybe those direct trading opportunities? Are those conversations you’re having? And just related, like how do you feel about your rail service down to Mexico with your partner versus your closest competitor when we think about the competitive dynamics, and maybe winning that business as it increases?

Remi Lalonde: So, I mean, for sure, Daniel, thanks for the question. We are actively engaging customers on all these types of opportunities, whether it’s NGLs to Mexico. We think we do have a good value proposition working with our interline partners to get to where we need to get, and I talked about some of the growth that we’re working on in Mexico, whether it’s the Crowley service or the rail ferry, but we’re also working on developing the Falcon business. So, we think we’ve got a good leg to stand on, and for sure, we’re engaging customers on any opportunity that we can pick up, whether it’s NGL or Ag.

Derek Taylor: And I’d say on the service side for your question, it’s been a seamless interchange in Chicago, both with the UP, with Falcon, and our partners with the FXC, and same with the Nord Folk Southern on the link service, we’ve maintain those transit times. That’s been very solid, and we look forward to continuing to grow that with them, and this new Gulf call services is something unique. I mean, that’s something that’s not been done on US Gulf Coast for many years. It’s going to run essentially a UPS schedule from the Gulfport into Chicago. So we’re very, very excited about the potential of that down the road.

Operator: Your next question comes from the line of Ari Rosa with Citigroup. Please go ahead.

Ari Rosa: Hi, good afternoon. So, it looks like labor and benefits expense took a bit of a step-up in first quarter. Just wanted to understand that. Hopefully, you could contextualize that, especially on a per-employee basis. It looks like it was a bit higher than what we were expecting. Just if you could give us some help on also how we should think about forecasting that? Thanks.

Derek Taylor: Yeah. Thanks for the question. When you look in Q1 on average comp per employee, you’re right, we’re up 5% on a year-over-year basis, 2% of that is related to FX, FX going from 74% last year to 70% this year, and then 3.5%, call it 3% is regular wage inflation. So, that explains your 5% increase average comp on a year-over-year basis.

Operator: Our final question comes from the line of Bascome Majors with Susquehanna. Please go ahead.

Bascome Majors: Thanks for taking my question. Can you talk a little bit about if any opportunities from Canada direct to Mexico have emerged from some of this volatility? Certainly, your competitor mentioned some of that and wanted to hear about long-haul opportunities in that respect. Thank you.

Tracy Robinson: I’ll start on that one, and then I’ll hand it over to Remi if he’s got anything to add. We are seeing a little bit of that. I’m not sure it’s as related to the tariff activity in particular, because it was things that we were working on prior to the recent quarter, or four, five months. And so it is in line with what we’re doing on the Falcon. We’re seeing opportunities rise on things like recreational vehicles that were once on truck, and so we are doing more and more of that type of business. So, Remi, is there anything you want to add-on that front, no? Okay. Thanks, Bascome.

Tracy Robinson: Listen, that’s the final question. Okay. Thanks, guys. We really appreciate your time today. We are — let me just say this as we close. We’re really pleased on the quarter. This railroad is running extremely well, and we’re running really tight from an efficiency perspective. Our volume growth as we are now four months in is on plan, and the strongest year-over-year growth is ahead of us through the second half, and Remi has pricing kind of at or ahead of a plan right now. And without a doubt, and while there remains some uncertainty as it relates to tariffs and economy, we continue to focus on what we can control, which is driving our plan every day we’re delivering to our customers, whether it’s partnering with them as they think about adjusting to new markets or chasing the next car load.

Our opportunity pipeline is strong, and it’s delivering. This team is performing really, really well, and I want to thank every one of our railroaders for their commitment to our customers and to our plan. And I want to thank all of you for your time today. We look forward to seeing you soon. Thanks so much.

Operator: This concludes today’s conference call. Thank you for your participation, and you may now disconnect.

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CANADIAN NATIONAL RAILWAY CO

Q1 2025

Earnings Transcript

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