Ken Hoexter: Nadeem, just a quick numbers question and a long term question. Just the CAD 51 million, is there a reason why you didn’t take that out [indiscernible] here and there and CAD 22 million numbers, just want to understand why that was left in if there was a historical thing. And then long term, it’s kind of a tale of two cities here. On the, I guess, prepared remarks, it was a bit more sanguine about the economy. And it was maybe even more negative than what we heard from your Canadian peer or the eastern rail that we just heard from. But now you’re talking about kind of mid-single digits and it just seems like a much more upbeat, I don’t know, Q&A. It’s just a very different position. I just want to understand the message that you’re trying to send here in terms of the outlook because, Nadeem, talking about sub 60 or into the upper 50s on the OR. Just maybe delve into the thoughts there.
Nadeem Velani: We answered them like we see them, Ken. You’ve known us for a long time. And that’s the visibility we have on near term and what we expect for 2024. So, that’s our honest and transparent answers of what we think we can deliver, and what we hold each other accountable for. So I’ll leave it at that. There is cause for concern with the macroenvironment. We’re not of the view that it’s a robust economy by any stretch. But we think that what we can control, we’re focused on controlling and we’ll deliver. And the visibility that we have on the top line, as John mentioned, in the near term over the RTM of, call it, 3% to 5%, so I think is genuine. Why we didn’t strip out the insurance, we had, I think, CAD 40 million increase in casualty made up of a bunch of one-time items through the year.
$20 million jury settlements and such. Same reason, I guess we didn’t strip out when we had about CAD 150 million impact from the flooding and costs associated in 2021. So we’re just being consistent with how we approach that would be how we thought about that insurance recovery.
Ken Hoexter: And if I could just squeeze in a follow-up, again, you were just talking about Mexico, you sent a team of 50 or 200 down there. I guess, Keith, is there any update on that? Have you changed any operations around?
Keith Creel: Yeah, of course. Of course, we have. We’ve tweaked and adjusted. But, yeah, we initially started, Ken, with 50, 52 officers that were down there around the clock. It was a group of every discipline within the company from engineering to operating to IT to customer service to kind of descramble the egg for the lack of a better term. We were locked up, we were congested. So we debottlenecked, we’ve now shifted from a response phase to an enhance and build phase. We made structural changes from a leadership standpoint. John Orr, who led the team, is now focused day to day. He’s responsible for all of the Mexican operations and actually left to Beaumont, which is the crew change point with the TexMex to take the train south through Houston.
That’s a natural break. And then, of course, Mark has everything north of there. So, structurally, we’ve got a very focused team. He’s continuing to develop talent. We’ve got the place running smoothly again. We’re making progress with labor, which is very encouraging. It’s not the kind of progress that creates monumental quantum change, like we’ve experienced in other parts of our network in our history. But I’ll tell you this, to make the change that we’re talking about relative to what’s been changed in the past is a testament to the understanding and commitment of the union leadership. I met personally with the president of the union and explained our journey, explained our opportunity and how we could uniquely partner with our employees, his members, and I can tell you, he and our members are excited and energized by it.
So there’s structural change, there’s progress that’s ongoing, and what I would say is expected to continue.
Operator: Our next question comes from Brian Ossenbeck, J.P. Morgan.
Brian Ossenbeck: So just wanted to ask, maybe John, about the closed loop automotive potential. It looks like you’ve been making some significant progress more recently. I don’t think we had an update on this call. But just if you can go back to that. Are you close to ordering the cars? What’s been the guarantee car supply? What’s been the uptake and the interest level from some of the OEMs? Obviously, some noise with UAW right now. But is that something we could see perhaps coming forward in 2024?
John Brooks: Brian, it’s been strong. Maybe as far as an update, we’ve got construction underway in the Dallas market for auto compound there. We expect to see that up and active and, frankly, sold out by mid next year. So quite excited about that. So the closed loop, we’ve got – currently receiving new buy levels right now. I think we’ll receive upwards of 1,200 or so over the coming months to really be targeted at that closed loop model. So, we’ve got some good early wins there. And I expect you to see that being fully deployed as we move into the start of 2024.
Operator: Our next question comes from Ben Nolan, Stifel.
Ben Nolan: John, I remember as it relates to potash or remember a couple years ago or last year, maybe you mentioned that there might be some opportunities, new potash to the Gulf Coast. Just given everything that’s gone on in Portland, is that something that’s materializing? Or is there an opportunity to maybe do that?
John Brooks: Ben, I think, right now, given everything that’s gone on, there’s a little bit of pause in terms of that. I don’t think anything’s changed in terms of what we believe the opportunity to create sort of what I would consider a true third outlet for export potash out of Canada. Whether it’s K+S, Canpotex, future BHP, I think we continue to see that as a long term opportunity. In terms of timing on that, it’s probably pushed out a little bit further than when we were thinking about it about a year ago when I spoke about it.
Operator: Our next question comes from Justin Long. Stephens.
Justin Long: I was wondering if you could provide an update around your expectations for the level of inflation that you’re seeing in the business this year, and how that compares to your early expectation for inflation as we move into 2024. And when you think about that kind of price versus cost gap, how you see that trending in the quarters ahead?
Nadeem Velani: We’ve seen all in inflation closer to that 7% level. And as you know, it’s been pretty apparent. A lot of that has been on the labor side, so the biggest cost buckets. We have seen also, up north, the impact of some of the work rest rule changes that have also impacted comp and benefits. So overall, inflation has been a challenge. It’s been a headwind much higher than we anticipated at the beginning of the year. And it’s partly the reason I think that margins have been where they are. I would say that we expect, in 2024, that to moderate. I think as some of the rate hikes and some of the action by the Fed and Bank of Canada kind of moderate, I think we should start seeing that settle. Maybe we should start seeing even some of the recent inflation numbers have moderated.
