B a n k o f A m e r i c a M e r r i l l Ly n c h. May 16, 2013 Boston, MA. J i m Ve n a Executive Vice-President & Chief Operating Officer

Transcription

1 B a n k o f A m e r i c a M e r r i l l Ly n c h G lobal Tr ansportation Conference May 16, 2013 Boston, MA J i m Ve n a Executive Vice-President & Chief Operating Officer

2 FORWARD-LOOKING STATEMENTS The financial results in this presentation were determined on the basis of U.S. GAAP. Please refer to the website for the reconciliation of certain non- GAAP measures to comparable GAAP measures. To the extent we have provided guidance which are non-gaap financial measures, we may not be able to provide a reconciliation to the GAAP measures, due to unknown variables and uncertainty related to future results. Certain information included in this presentation constitutes forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws. CN cautions that, by their nature, these forward-looking statements involve risks, uncertainties and assumptions. The Company cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company or the rail industry to be materially different from the outlook or any future results or performance implied by such statements. Key assumptions used in determining forward-looking information are set forth below. Current assumptions CN is maintaining the 2013 financial outlook it issued on Jan. 22, 2013, except for its revised plan to invest approximately C$2 billion in capital programs in 2013, compared with the previous plan to invest C$1.9 billion. Approximately C$1.1 billion of the total expenditure will be targeted on track infrastructure to maintain a safe and fluid railway network. In addition, the Company will invest in projects to support a number of productivity and growth initiatives. Important risk factors that could affect the forward-looking statements include, but are not limited to, the effects of general economic and business conditions, industry competition, inflation, currency and interest rate fluctuations, changes in fuel prices, legislative and/or regulatory developments, compliance with environmental laws and regulations, actions by regulators, various events which could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes, labor negotiations and disruptions, environmental claims, uncertainties of investigations, proceedings or other types of claims and litigation, risks and liabilities arising from derailments, and other risks detailed from time to time in reports filed by CN with securities regulators in Canada and the United States. Reference should be made to Management s Discussion and Analysis in CN s annual and interim reports, Annual Information Form and Form 40-F filed with Canadian and U.S. securities regulators, available on CN s website, for a summary of major risk factors. CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable Canadian securities laws. In the event CN does update any forward-looking statement, no inference should be made that CN will make additional updates with respect to that statement, related matters, or any other forward-looking statement. CN has made a number of economic and market assumptions in preparing its 2013 outlook. The Company is forecasting that North American industrial production for the year will increase by about two per cent. CN also expects U.S. housing starts to be in the range of 950,000 units and U.S. motor vehicles sales to be approximately 15 million units. In addition, CN is assuming that 2013/2014 grain crop production in both Canada and the U.S. will be in-line with their respective five-year averages. With respect to the 2012/2013 crop, production in Canada was slightly above the five-year average while production in the U.S. was below the five-year average. With these assumptions, CN assumes carload growth of three to four per cent, along with continued pricing improvement above inflation. CN also assumes the Canadian-U.S. exchange rate to be around parity for 2013 and that the price of crude oil (West Texas Intermediate) for the year to be in the range of US$90-$100 per barrel. 2

3 A G R E AT F R A N C H I S E Global Asia 26% Eastern Region Domestic Canada 22% Western Region Transborder 29% Global Europe 3% Balanced Portfolio Intermodal 20% Petroleum and Chemicals 17% Grain and Fertilizers 16% Forest Products 13% Metals and Minerals 11% Other Revenues 10% Coal 7% Automotive 6% Domestic U.S. 17% Southern Region Based on 2012 revenues Global South 3% 3

4 S O L I D T E A M O F R A I L R O A D E R S Jim Vena Executive Vice-President & Chief Operating Officer Michael Cory Senior Vice-President Western Region Jim Danielwicz Vice-President Mechanical Jeff Liepelt Senior Vice-President Southern Region David Ferryman Vice-President Engineering John Orr Vice-President Eastern Region Michael Farkouh Vice-President Safety & Sustainability Mack Barker Vice-President Network Transportation Gerry Weber Vice-President Supply Management A scrum approach to challenges and opportunities 4

5 R E L E N T L E S S F O C U S O N P R O D U C T I V I T Y Train Productivity (GTMs per train mile) Yard Throughput (cars per yard switching hour) Terminal Dwell (entire railroad, hours) 8,199 8,324 8,407 8, % Better 1% Better 6% Better 10% Better 5% Better Down 3% Q2-12* Q2-13* Q2-12* Q2-13* Q2-12* Q2-13* Locomotive Utilization (trailing GTMs per total horsepower) Car Velocity (car miles per day) Train Velocity (miles per hour) % Better Flat 4% Better 3% Better Flat Flat Q2-12* Q2-13* Q2-12* Q2-13* Q2-12* Q2-13* * Up to May 13 5

6 I N V E S T I N G TO M A I N TA I N A N D E N H A N C E T H E N E T W O R K New detour route on Prairie North Line (PNL) Main Line Prairie North Line Addressing Q1 operational challenges by advancing capital work New sections of doubletrack improving network resilience Increasing Symington Yard capacity Investing smartly to improve network resilience and drive productivity Additional long sidings increasing capacity Unwavering focus on safety and plant integrity Leveraging growth opportunities across the franchise Continuing to drive productivity Increasing 2013 capital envelope by $100M to $2B 6

7 B A L A N C I N G O P E R AT I O N A L A N D S E R V I C E E X C E L L E N C E Industry leading operating ratio Targeting incremental terminal and train efficiencies Driving improved productivity in engineering and mechanical Level of Service Agreements CustomerFIRST initiatives First mile / Last mile focus iadvise - Improving customer communication 7

8 O U R E N D - TO- E N D S U P P LY C H A I N A P P R O A C H 8

9 O U T PA C I N G T H E E C O N O M Y CN Carloads and RTMs vs US GDP and US Industrial Production (Index =100) RTMs Carloads US GDP US IP Volume Growth Carloads RTMs CN 4% 7% Industry (1) 0% (3%) (1) Includes CP, NSC, CSX, UNP, KSU 9

10 S O L I D G R O W T H P I P E L I N E Resource exports to Asia Expanding crude by rail Penetrating domestic truck market with new products Gaining share of Asian trade with end-to-end service and new markets U.S. housing recovery driving growth in lumber, panels, overseas containers Capitalizing on North America s energy renaissance Leveraging our Gulf Coast access (crude, grain, coal, Panama Canal exports) 10

11 R E S O U R C E P L A N N I N G Crews Locomotives Cars Plant Advance hiring Onboarding Training Opportunistic purchases over the last several years Targeting incremental productivity Regular fleet stress testing Mix of ownership and staggered leases Particular emphasis on the Western Region given projected growth Ensuring the right resources, at the right place, at the right time 11

12 D E L I V E R I N G R E S P O N S I B LY FRA Train Accident Ratio (accidents per million train miles) FRA Personal Injury Ratio (injuries per 200,000 person hours ) Fuel Efficiency (GTMs per US gallon ) ~ 1.5% T T T Unwavering commitment to safety Emissions and energy efficiency Waste management Environmental stewardship 12

13 F I N A N C I A L O U T L O O K Modest economic growth in North America 3-4% carload growth, with stronger RTM growth Aiming for high single-digit growth in 2013 diluted EPS over adjusted diluted EPS of C$5.61 in 2012 (1) Despite headwind of approximately C$150M related to increased pension expense and the impact of depreciation studies Targeting free cash flow in the range of C$800M to C$900M, including a normalized, higher level of cash taxes (1) (1) Please see website, for an explanation and/or reconciliation of these non-gaap measures. Please see Forward-Looking Statements at the beginning of the presentation for a summary of key assumptions and important risk factors underlying CN s 2013 financial outlook. 13

14 B a n k o f A m e r i c a M e r r i l l Ly n c h Global Tr ansportation Conference T S E : C N R N Y S E : C N I