Canadian National Railway Co Virtual Fireside Chat Hosted by Scotiabank Research Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Yes. Yes. That was a great update on the overall, the business and intermodal, Keith. So maybe we can kick off with something that you touched upon, JJ, before we go into kind of in-depth Q&A. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 02, 2020 / 1:00PM, BNS.TO - Canadian National Railway Co Virtual Fireside Chat Hosted by Scotiabank Research So on the T&E employees that you are recalling, I just wanted to kind of understand better, with the peak season upon us here, how prepared are you for that with the recalls of these employees? And what else needs to be done to get -- to have supply and capacity in line with demand that you expect for the peak season?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Perfect. So maybe we can dig into the intermodal. You mentioned about the international and domestic trends there. If we were to think about the mix between domestic and international intermodal with respect to, let's say, revenue and margins, how does that compare to the prior years? And what have you learned in this pandemic about the cyclicality or resiliency of this segment based on the footprint you have?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Great. You mentioned, Keith, about TransX and H&R, obviously, and how they have sort of benefited you guys during this kind of time frame for high demand for consumer products. If you can help us understand, to what extent have you already seen the benefits of TransX and H&R that you were expecting? And is there room for further growth or margin expansion from here? Keith Donald Reardon - Canadian National Railway Company - Senior Vice-President of Consumer Product Supply Chain Growth Yes. Thank you very much for the question. The -- we had an investment thesis, and it was that we wanted to grow our rail business in intermodal, which we've been able to do. We've taken a lot of the truck business, the traditional truck business that TransX may have done and converted that to rail. We also said that we wanted to add talent value to CN. We've done that. Numerous people inside of TransX are participating in other parts of CN business, whether it's strategy or whether it's, interestingly enough, community affairs, those types of things. So the second piece of adding talent into CN has done very well for us, too. We also said that we wanted to take TransX and make it the best in the business from an operating ratio standpoint of its like businesses, whether it's a TFI or J.B. Hunt. At that point, we have done that as well. They are on par with those businesses that are like and similar in the products and services that they deliver. Is there room for improvement? Yes, there is. We have just begun to kind of integrate our fleet of assets between H&R, TransX and our traditional CN fleet, taking out empty miles as they move across the network. As we get better and better and better at that, we'll see margin improvement. But we're also going to see gains on the revenue side as we get deeper and deeper with the customers that they have and deeper and deeper with the blue-chip customers that we have at CN, who maybe we don't provide the level of service that they need. We will be -- we're giving the TransX and the H&R folks a lot of leeway to come in and provide those higher levels of more touch points, more white glove-type service with those customers so that we can get into the additional revenue streams that maybe we have not been able to.

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Great. That's great, JJ. And if I can follow up maybe with respect to the West Coast. So like we have seen congestion in Vancouver, obviously, in California as well, how has Prince Rupert fared during this time? Have you seen similar congestion issues at Rupert? Or have you seen any benefits there? And then if you can help us understand. Obviously, over time, Prince Rupert has gained a lot of market share from the West ports, Vancouver and others in the U.S. Do you expect to see more of that going forward as well?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : That makes sense. Yes. Maybe just to kind of touching on Rupert. I think, Keith, you mentioned about, obviously, the expansion that's underway for the next 2, 3 years here. If we can walk through your kind of agenda for that expansion. How do you want to kind of -- or what kind of steps are you taking to ensure that your network remains fluid when demand kind of continues this way or it returns to sort of more normal and the expansion is underway? Like we have seen in the past that there's been some issues when construction has been underway at Rupert. So how are you kind of preparing for the next expansion phase to make your network keeping fluid?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. Perfect. Well, that's great, JJ. And just lastly, maybe, on your East Coast strategy that we have kind of heard about quite a few times here. Maybe we can talk about quickly on what sort of progress has been made so far by you guys and by your partners to support your East Coast strategy. And then what is -- is it that you're expecting from the East Coast network, be it in terms of intermodal or any other commodities? And how should we think about the East Coast compared to the West Coast and Rupert that you have today?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Okay. Perfect. That's great. And then maybe just we can just conclude, I think we're running out of time here. If you have any kind of closing remarks and maybe as well you can touch upon the technology investments, JJ, that you have been making. So we heard about your CITO appointment, so maybe you can touch on that. And then what kind of cost benefits do you -- or cost-saving benefits do you anticipate from technology investment that you have been making over time? And where are you at this point?

Question: Konark Gupta - Scotiabank Global Banking and Markets, Research Division - Analyst : Perfect. On that note, thank you so much, again, JJ, Keith and Paul, for your time and everybody in the audience as well. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 02, 2020 / 1:00PM, BNS.TO - Canadian National Railway Co Virtual Fireside Chat Hosted by Scotiabank Research