Canadian National Railway Company · TSX:CNR
Canadian National Railway — Investor Presentation (March 2015)
27 slides from Canadian National Railway's investor presentation, March 2015
Slide 1: Canadian National Railway Company
Canadian National Railway Company March 2015 TSX: CNR NYSE: CNI
Slide 2: Forward-Looking Statements
Forward-Looking Statements The financial results in this presentation were determined on the basis of U.S. GAAP. Important risk factors that could affect the forward-looking statements include, but Please refer to the website www.cn.ca/nonGAAP for the reconciliation of certain non- are not limited t
Slide 3: The CN Journey
The CN Journey 1990’s: Fundamental Turnaround - 1995 IPO 2000’s: Precision Railroading Today: Becoming a True Supply Chain Enabler Maintaining industry leading efficiency Balancing Operational and Service Excellence Growing faster than the economy Strategic, disciplined capital deployment Driving co
Slide 4: A Great Franchise
A Great Franchise Global West 24% Prince Rupert Edmonton Domestic Canada 19% Global East 3% Moncton Calgary Saskatoon Vancouver Winnipeg Montreal Halifax Transborder 33% Detroit Toronto Well Diversified Portfolio 25,000 engaged employees Intermodal 23% Chicago Petroleum and Chemicals 19% 20,000 rout
Slide 5: What We Stand For
What We Stand For Delivering Operational and Service Excellence Creating Creating Value for Value for Shareholders Maintaining Customers Our Industry Leading Position Playing our Delivering Role as a Safely and Backbone of Responsibly the Economy TSX: CNR NYSE: CNI 5
Slide 6: Industry Leading Efficiency
Industry Leading Efficiency (2014 data) Operating Ratio Gross Ton Miles (GTMs) (1) (expenses / revenues) (% change vs prior year) 71.5% 12% 69.2% 67.1% 63.5% 64.7% 61.9% 7% 8% 7% 6% 2% CN UP CP KCS NS CSX CN UP CP KCS NS CSX AAR Train Speed AAR Terminal Dwell in Major Yards (miles per hour) (hours)
Slide 7: Operational Excellence
Operational Excellence • Starts with an unwavering commitment to safety • Fosters enhanced employee engagement • Targets continuous productivity improvement • Anchored on data, fact-based dialogue • A culture of execution Train Productivity Yard Productivity Locomotive Utilization Car Velocity (GTMs
Slide 8: Service Excellence
Service Excellence • Customer centric metrics • Weekly car order fulfillment – measures performance in meeting total merchandise customer demand for railcars within the normal order cycle • Short lead time order – measures performance in meeting total merchandise customer demand for railcars outside
Slide 9: Leveraging Our Chicago Advantage
Leveraging Our Chicago Advantage 2009 Today • No direct routing to get across Chicago • New streamlined interchange points with other carriers • Inefficient connections with other railroads in the Chicago area • Better control of CN trains and routes • Could take a freight train more than 24 • Impro
Slide 10: Delivering on Our Growth Agenda
Delivering on Our Growth Agenda CN Volumes vs Economy and Industry (Index - 2009=100) 150 CN RTMs Outpacing the 2014 Volume Growth 145 economy and the CN Carloads 140 Carloads RTMs (1) industry 135 CN 8% 10% 130 Industry Peers (2) 5% 7% Industry Peers - 125 Carloads (2) 120 N.A. Industrial Productio
Slide 11: 2015 Market Outlook
2015 Market Outlook Intermodal Bulk Merchandise • International – volume growth • Lapping record Canadian grain • Aiming for growth of around moderates to economy-plus crop – expect negative comps 75,000 carloads in energy following significant share gains in Q2/Q3 (crude and frac sand) in the last
Slide 12: A Competitive Intermodal Service
A Competitive Intermodal Service Supply chain partnerships and shared operating metrics driving reliability up and supply chain costs down Unique end-to-end service: Exclusive access to Prince Rupert – North America’s closest port to Asia • Door-to-door domestic retail • Ramp-to-ramp domestic wholes
Slide 13: Growing Against And With Truck
Growing Against And With Truck Differentiating Our Service Offering Developing Innovative Products • Network strength, speed, reliability • Reefer (refrigerated) service for long haul cold supply chain • Dedicated customer service • Protected temperature service in super • The only rail LTL cross bo
Slide 14: A Growing Energy Business
A Growing Energy Business CN FRAC SAND • Serving the heart of Alberta’s oil sands Major LNG export FRANCHISE terminal projects (Kitimat, BC / • Three-coast access provides export options Prince Rupert, BC) Horn River shale • Exclusive access to B.C. shale and LNG export potential Alberta oil sands •
Slide 15: Leveraging the U.S. Housing Recovery
Leveraging the U.S. Housing Recovery CN lumber / panel volumes to the U.S. (thousands of carloads) 187 Panels Lumber Largest carrier of forest products U.S. Housing 1,801 among Class I Railroads Starts (000s) 111 104 90 Strong Western Canadian franchise 79 83 74 with diverse customer base 1,004 930
Slide 16: Strong Grain Volumes
D E L I V E R I N G R E S U LT S Strong Grain Volumes Canadian Grain Production U.S. Corn and Soybean Production CN Draw Territory (IL, IA, MI, WI) 76 61 64 57 6.8 6.8 metric tonnes 6.0 6.1 Millions of Billions of bushels 5-year 13/14 14/15 F * 15/16 F * 5-year 13/14 14/15 F * 15/16 F * average Reco
Slide 17: Negotiating Value for Our Service and Our Capacity
D E L I V E R I N G R E S U LT S Negotiating Value for Our Service and Our Capacity Value Pricing 2014 3% Same Store Price 2013 3.5% • Consistent measure of all past renewals 2012 4% • Targeting 3-4% in 2015 2011 4% • Expecting a negative impact from Canadian regulated grain (Aug 1) 2010 3% 2009 5%
Slide 18: Effective Resource Planning
Effective Resource Planning Crews Locomotives Cars Plant Staying ahead of attrition Mindful of new 2015 U.S. Mix of ownership and leases Plant safety and integrity, first emissions regulations mitigates risk to changing and foremost Onboarding and training market conditions programs engaging the nex
Slide 19: Delivering Responsibly
D E L I V E R I N G R E S U LT S Delivering Responsibly FRA Train Accident Ratio (1) (accidents per million train miles) • On-going investments in infrastructure, rigorous train and track inspections, 2.73 continued focus on safety culture and 2.25 employee training 2.10 2.11 • Challenging 2014 - -
Slide 20: Delivering Results
D E L I V E R I N G R E S U LT S Delivering Results Revenues Adjusted Diluted EPS (1) Operating Ratio (in millions $ Cdn) (per share $ Cdn) (OR = Expenses/Revenues) $3.76 $12,134 $3.06 $10,575 $2.81 Up 23% 63.6% 63.5% $9,920 63.4% Up 15% $9,028 $2.41 62.9% $8,297 $2.10 61.9% Improved 1.5 bps 2010 20
Slide 21: Generating Solid Cash Flow
Generating Solid Cash Flow Free Cash Flow (1) (in millions $ Cdn) 2,220* 1,746 1,616 1,661 1,623 2010 2011 2012 2013 2014 * Including $173M from the sale of non-core assets Strong profitability driving steady cash generation (1) Please see website, www.cn.ca/nonGAAP, for an explanation and/or reconc
Slide 22: Reinvesting in the Business
Reinvesting in the Business Capital Investments (2014-2015) (in millions $ Cdn) 2,600 2,297 Growth and Productivity IT Rolling Stock Reinvesting close to 20% of revenues annually Basic Capital Other 2014 2015 • Unwavering focus on safety and plant integrity • Supporting growth and productivity • Inv
Slide 23: Maintaining a Strong Balance Sheet
Maintaining a Strong Balance Sheet Adjusted debt-to-total capitalization ratio (1) Adjusted debt-to-adjusted EBITDA (1) (2) (%) (times) 2.18 40.0% 40.4% 40.1% 1.69 1.69 1.72 39.4% 1.61 1.58 38.5% 36.8% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Prudent financial management (1) Debt
Slide 24: Rewarding Shareholders
Rewarding Shareholders Total Shareholder Distribution (in millions $ Cdn) $80.02 Share Repurchases Dividends $60.56 Share price - end of period ($ Cdn per share) $45.17 ~75% of net $40.08 $33.18 income returned to $28.67 shareholders $22.39 1,505 annually 1,400 1,400 1,420 1,021 913 652 724 818 436
Slide 25: Solid Track Record
Solid Track Record CNI vs S&P 500 Market Cap ~US$56B CNR vs TSX Market Cap ~C$70B 2003-2015 2003-2015 CNR 1,200 800 CNI 700 1,000 600 800 500 600 400 300 400 TSX S&P 500 200 200 100 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Slide 26: 2015 Financial Outlook
2015 Financial Outlook Aiming for double-digit earnings growth over 2014 adjusted diluted EPS of $3.76 (1) • With carload growth in the range of 3-4% and pricing above inflation Reinvesting in the business for safety, growth and productivity • Capital envelope of approximately $2.6B, up $300M from l
Slide 27: Investor Relations Contacts
Investor Relations Contacts Janet Drysdale Paul Butcher Vice President, Investor Relations Manager, Investor Relations Janet.Drysdale@cn.ca Paul.Butcher@cn.ca 514-399-0052 514-399-4654 TSX: CNR NYSE: CNI 27
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