Canadian National Railway Company (NYSE:CNI) Q4 2022 Earnings Call Transcript

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Operator: The next question is from Walter Spracklin from RBC Capital Markets.

Walter Spracklin: It’s great to have you back on the call. And just on that, Ed, you mentioned grooming the next generation of railroaders and certainly creating a — or recreating a culture of precision scheduled railroading is not easy. It takes some time. Curious how you’re going to approach that? How long do you think it will take? Are you going to — is it all going to be homegrown or are you going to look to outside talent? Just curious to hear your overall strategy in terms of that task of groom in the next-generation railroaders.

Edmond Harris: Well, thanks for the question. We’ve already started. We’ve got 3 or 4 candidates that we’re looking at very closely. We’re changing duties for each of the candidates as the year goes on to get them prepared to handle more than what the responsibilities are today. I don’t think — we’re going to look to the outside unless Tracy’s got plans I’m not aware of, but I like this team. I like everything I’ve seen about it since I came back full time and very confident in the level of expertise and operational knowledge that’s out there. So no, I’m not looking on the outside. And yes, we already got candidates we’re considering right now.

Walter Spracklin: That’s great. Looking forward to hearing more about it at Investor Day. Thanks very much, Ed.

Operator: The next question is from Amit Mehrotra from Deutsche Bank.

Amit Mehrotra: I wanted to follow up on that fuel question and discussion. One of the things we’ve noticed, obviously, is when you look at fuel surcharge revenue over the last several quarters and the coverage of that revenue relative to the expense is just much higher than it has been really at any time in the past. And I want to understand kind of, has there been a change in like the fuel mechanism or something that allows that fuel surcharge revenue to kind of well more than cover the expense? And can that unwind and could that be a source of kind of profit headwind just really based on like how that ratio has trended today versus how it trends over the last many years?

Ghislain Houle: Amit, when you look at fuel, last year, you’re right. I mean it had a lot of noise on a quarter-to-quarter basis due to the fuel lag. I mean if you look at last — Q1 last year, I mean, our fuel lag was negative by $0.13 on a year-over-year basis in terms of EPS. So you’ve had a lot of noise on fuel lag. And also, if you look at it, as you know, the fuel surcharge is really based on OHD and whereas our fuel expense is based on fuel spot prices, and there was a certain disconnect last year between the OHD and WTI that created some of that noise. But I would leave it at that. That’s pretty much it.

Operator: The next question is from Jon Chappell from Evercore ISI.

Jonathan Chappell: Thank you. Good afternoon. Doug, I wanted to ask you about capacity. I mean you’re dealing with a lot of moving parts here, really strong grain, kind of uncertainty in international intermodal, weak industrial. At the same time, you’re implementing somewhat of a new operating plan. How are you managing your capacity across the entire network with so many moving parts to ensure that you don’t have an elevated cost basis, but also to ensure you still have the capacity if growth does pick up before you expect it to?

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