Canadian National Railway Company · TSX:CNR
Canadian National Railway — Q2 2019 Earnings Presentation
23 slides from Canadian National Railway's earnings presentation, Jul 23, 2019
Slide 1: Second Quarter 2019 Financial Results
Second Quarter 2019 Financial Results July 23, 2019 TSX: CNR NYSE: CNI
Slide 2: Forward-looking statements
Forward-looking statements Certain statements included in this presentation constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws, including but not limited to, statements with respect to CN
Slide 3: JJ Ruest, President and Chief Executive Officer
JJ Ruest President and Chief Executive Officer
Slide 4: Q2 highlights
Q2 highlights Record diluted EPS (1) Operating ratio Record revenues (1) $1.88 57.5% $4.0B 6% 70 bps 9% Record adjusted diluted EPS (1) (2) Fuel productivity RTMs (GTMs per US gallon of fuel) $1.73 1,111 64.3B 15% 2% 2% (1) CN attained record second-quarter diluted EPS, as well as record
Slide 5: Rob Reilly, Executive VP and Chief Operating Officer
Rob Reilly Executive VP and Chief Operating Officer
Slide 6: James Cairns and Keith Reardon
James Cairns Senior VP, Rail Centric Supply Chain Keith Reardon Senior VP, Consumer Product Supply Chain
Slide 7: Market outlook constructive – Volatility in certain markets
Market outlook constructive – Volatility in certain markets Rail Centric Supply Chain Consumer Product Supply Chain • Crude by rail ramp-up tied to production curtailment, oil price • New business / renewals in the international intermodal differentials, Alberta government contract segment • New exp
Slide 8: Ghislain Houle, Executive VP and Chief Financial Officer
Ghislain Houle Executive VP and Chief Financial Officer
Slide 9: Q2 earnings – Record revenues and cost containment
Q2 earnings – Record revenues and cost containment Change Favorable In millions of Canadian dollars, except EPS data, unless otherwise indicated 2019) 2018) (Unfavorable) Revenues $ 3,959) $ 3,631) 9% Operating expenses 2,277) 2,112) Operating income 1,682) 1,519) 11% Interest expense (136) (124) Ot
Slide 10: Q2 operating expenses – Quickly right-sizing our resources
Q2 operating expenses – Quickly right-sizing our resources Change at constant Change currency (1) Favorable Favorable In millions of Canadian dollars, unless otherwise indicated 2019 2018 (Unfavorable) (Unfavorable) Labor and fringe benefits $ 681 $ 648 (5%) (4%) Purchased services and material 571
Slide 11: Free cash flow – Impacted by upfront delivery of locomotives
Free cash flow – Impacted by upfront delivery of locomotives In millions of Canadian dollars, unless otherwise indicated YTD 2019) Net income $ 2,148) Non-cash adjustments 998) Payments for income taxes (491) Working capital items and other 58) Net cash provided by operating activities 2,713) Proper
Slide 12: Reaffirming 2019 financial outlook
Reaffirming 2019 financial outlook • Expect to deliver adjusted diluted EPS growth in the low double-digit range versus 2018 adjusted diluted EPS of $5.50 based on (1) (2): • Volume growth assumed in the mid single-digit range in terms of RTMs • Overall pricing above rail inflation • Canadian to U.S
Slide 13: JJ Ruest, President and Chief Executive Officer
JJ Ruest President and Chief Executive Officer
Slide 14: CN 2019 Investor Day financial targets for 2020-2022
CN 2019 Investor Day financial targets for 2020-2022 Driving solid value for our shareholders Normalizing Low double- capital High 50s digit diluted intensity to OR EPS CAGR historical levels Dividend per FCF growing 15% to 17% share growth faster than ROIC in line with earnings earnings* Please see
Slide 15: Appendix
Appendix
Slide 16: Q2 operating metrics
Q2 operating metrics Production Workload 3% Car Velocity 9% Through Dwell 11% Total GTMs, billions vs Q2-18 Car miles per day vs Q2-18 Entire railroad, hours vs Q2-18 214 130.8 204 127.6 8.7 123.5 123.0 196 195 8.1 7.8 7.5 7.2 115.9 173 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q2-18 Q3-18 Q4-18 Q1-19 Q2-
Slide 17: Crude oil by rail
Crude oil by rail Crude oil shipments: carloads ~127,000 ~36,000 ~98,000 ~82,000 ~27,000 ~61,000 ~20,000 ~20,000 ~52,000 ~16,000 ~13,000 ~11,000 ~10,000 ~10,000 ~8,000 ~9,000 ~6,000 ~4,000 2014 2015 2016 2017 2018 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 A
Slide 18: Our strategic game plan
Our strategic game plan: Deliver long-term profitable growth and deploy advanced technologies to create shareholder value Driving shareholder value creation $ Implementing advanced technologies to modernize Scheduled Railroading Industry-leading profitable growth Right talent to win Scheduled Railro
Slide 19: Continuing to build our Consumer Product Supply Chain
Continuing to build our Consumer Product Supply Chain • Multiple gateways and 3-coast access to 15 port terminals Consumer Product International • Ability to deliver first/last mile trucking to customers Supply Chain Revenues Intermodal • Seamless border crossing/in-house customs expertise ($B Cdn)
Slide 20: Continuing to build our Rail Centric Supply Chain
Continuing to build our Rail Centric Supply Chain Rail Centric Supply • Opportunistic on crude oil Chain Revenues ($B Cdn) • Incremental gas/oil production driving growth opportunities for $9.3 Energy frac sand, NGLs, refined petroleum products and sulphur • New NGL export terminal capacity in Ruper
Slide 21: CN investor day top-line targets (2020-2022)
CN investor day top-line targets (2020-2022)(1) (2) Aiming to take full advantage of our unparalleled North American network Consumer Product Supply Chain Rail Centric Supply Chain Estimated Incremental Revenue Opportunities Estimated Incremental Revenue Opportunities Target Range Target Range Inter
Slide 22: Key technology projects being deployed
Key technology projects being deployed Autonomous Track Inspection Program Automated Inspection Portals Handheld technology for mechanics Handheld technology for train crews Enterprise Automation Smart Network (Digital Twin) 22
Slide 23: Information & Technology
Information & Technology Deploying advanced technologies to drive value 1 Targeting cumulative savings of $200–400M (1) (2) over 2020–2022 2 Implementing technology as a driver for safety, customer and shareholder value Using advanced information technology 3 to take Scheduled Railroading to the nex
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