Canadian National Railway Company

Canadian National
Railway Company
SEPTEMBER 2016
TSX: CNR
NYSE: CNI
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. By their nature, 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. Key assumptions
used in determining forward-looking statements are set forth below. Forward-looking statements may be identified by the use of terminology such as “believes,” “expects,”
anticipates,” “assumes,” “outlook,” “plans,” “targets,” or other similar words.
2016 key assumptions
CN has made a number of economic and market assumptions in preparing its 2016 outlook. The Company now assumes that North American industrial production for the year
will be slightly negative (compared with its April 25, 2016, assumption that North American industrial production would increase by less than one per cent) and assumes U.S.
housing starts in the range of 1.2 million units and U.S. motor vehicle sales of approximately 17.5 million units. For the 2015/2016 crop year, the Canadian grain crop was in line
with the five-year average and the U.S. grain crop was above the five-year average. The Company now assumes 2016/2017 grain crops in both Canada and the U.S. will be
above their respective five-year averages (compared with its April 25, 2016, assumption that both the Canadian and U.S. 2016/2017 grain crops would be in line with their
respective five-year averages). With these assumptions, CN now expects total carloads for 2016 will decrease in the mid-single-digit range (compared with its April 25, 2016,
assumption that total carloadings for the year would decline four to five per cent versus 2015). CN expects continued pricing improvement above inflation. CN assumes that in
2016 the value of the Canadian dollar in U.S. currency will be in the range of $0.75 to $0.80, and that the average price of crude oil (West Texas Intermediate) will be in the range
of US$35 to US$45 per barrel. CN plans to invest approximately C$2.75 billion in its capital program, of which C$1.5 billion is targeted toward track infrastructure.
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 to be materially different from the outlook or any future results or performance implied by such statements. Accordingly, readers are advised not
to place undue reliance on forward-looking statements. 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; security threats; reliance on technology; transportation of hazardous materials; various events which
could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes; effects of climate change; 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 the “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 and available on CN’s website, for a description of major
risk factors.
Forward-looking statements reflect information as of the date on which they are made. 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 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.
Non-GAAP Measures
The financial results in this presentation were determined on the basis of U.S. GAAP. This presentation includes non-GAAP measures that do not have any standardized meaning
prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies. These non-GAAP measures should not be considered in isolation
or as a substitute for financial measures prepared in accordance with GAAP. For further details of these non-GAAP measures, including a reconciliation to the most directly
comparable GAAP financial measures, refer to the Company’s website, Second Quarter Results at www.cn.ca/nonGAAP. To the extent that CN has provided non-GAAP financial
measures in its outlook, the Company may not be able to provide a reconciliation to the GAAP measures, due to unknown variables and uncertainty related to future results.
2
Company Highlights
• Second largest publicly traded North American
railway with a market capitalization of approximately
C$60 billion
• CN trades on Toronto (CNR) and New York (CNI)
stock exchanges with average daily volume of close
to 3 million shares
• Unique network of approximately 20,000 route miles
(32,000 km) spanning Canada and mid-America,
connecting North America to global markets on three
coasts, with product, geographic and customer
diversity
• Diversified franchise with a mix of natural resources
and manufacturing reaching key industrial markets
and approximately 75% of North American
consumers
• Solid financial policy framework to maintain a strong
balance sheet and investment grade credit ratings
A solid track record and a strong commitment to
creating value for customers and shareholders
TSX: CNR
NYSE: CNI
3
Financial Highlights
2010
2011
2012
2013
2014
Total revenues ($ millions)
8,297
9,028
9,920
10,575
12,134
12,611
9
Operating income ($ millions)
3,024
3,296
3,685
3,873
4,624
5,266
12
2.10
2.41
2.81
3.06
3.76
4.44
16
1,618
1,746
1,661
1,623
2,220
2,373
8
63.6
63.5
62.9
63.4
61.9
58.2
_
Capital investments ($ millions)
1,718
1,712
1,825
2,017
2,297
2,706
10
Share repurchases ($ millions)
913
1,420
1,400
1,400
1,505
1,750
14
Dividends per share ($)
0.54
0.65
0.75
0.86
1.00
1.25
18
Adjusted debt-to-adjusted EBITDA multiple (times) (1) (2) (3)
1.68
1.68
1.60
1.72
1.57
1.71
_
Adjusted diluted earnings per share ($) (1)
Free cash flow ($ millions)
(1)
Operating ratio (%)
2015 CAGR (%)
For 2016, CN aims to deliver earnings in line with 2015 adjusted diluted EPS of C$4.44
(1)
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of these non-GAAP measures.
(2) As a result of the retrospective adoption of a new accounting standard in the fourth quarter of 2015, the prior year debt balances have been adjusted and the
related financial ratio has been restated. See Note 2 - Recent accounting pronouncements to the Company's 2015 Consolidated Financial Statements for
additional information.
(3) Debt is adjusted to include the present value of operating lease commitments. EBITDA is defined as earnings before interest, income taxes, depreciation and
amortization, and is adjusted to exclude Other income and the deemed interest on operating leases.
TSX: CNR
NYSE: CNI
4
CN Leadership Team
Luc Jobin, President & CEO
Mr. Jobin became President and CEO of CN
in July 2016. He joined CN as Executive VP
and CFO in June 2009, with responsibilities
including financial management, strategic
planning, information technology and
corporate development. From 2005 to 2009,
Mr. Jobin was an Executive VP of Power
Corporation of Canada and was President
and CEO of Imperial Tobacco in 2005.
Kim Madigan, VP Human Resources
Ms. Madigan was appointed VP, Human
Resources in January 2010. In her role, she
is responsible for managing the Human
Resources and Labor Relations groups
across the Company. Prior to that, she had
been VP, People, since June 2009. Ms.
Madigan joined CN in 1999 as VP, Human
Resources, U.S. Operations.
Ghislain Houle, Executive VP & CFO
Mr. Houle was appointed Executive VP and
CFO in July 2016. His responsibilities include
financial management and strategic planning.
He was VP and Corporate Comptroller since
March 2016, and VP – Financial Planning
since 2007. Mr. Houle joined CN in 1997 as
Chief of Internal Audit. He became VP and
Treasurer in 2001 and started managing the
Business Development Group in 2002.
Sean Finn, Executive VP Corporate
Services & Chief Legal Officer
Mr. Finn was appointed in December 2008.
He is responsible for a wide array of legal,
government, regulatory, public affairs, risk
mitigation and security matters. Mr. Finn
joined CN in January 1994 and led the
Company's corporate tax function while being
involved extensively in CN's privatization in
November 1995.
Mike Cory, Executive VP & COO
Mr. Cory, who was appointed in July 2016,
started with CN in 1981. He held various
operational positions as well as worked in
Customer Service & Marketing. In 2007, Mr.
Cory became VP of Operations for the
Eastern Region, until his promotion to Senior
VP, Eastern Region, in 2008. He was named
Senior VP, Western Region in April 2009.
Janet Drysdale, VP Corporate Development
Since March 2016, Ms. Drysdale has been
responsible for leading CN's strategic initiatives
in the areas of business development, alliances,
acquisitions, and network restructuring. Prior to
that, Ms. Drysdale was VP, Investor Relations
since 2012 and Director Economics and Strategy
since 2009. Ms. Drysdale joined CN in 1996 and
held positions in Sales & Marketing, Investor
Relations and Financial Planning.
Jean-Jacques Ruest, Executive VP & CMO
Mr. Ruest was appointed in January 2010,
with responsibility for providing the strategic
direction and leadership for CN's Sales and
Marketing group. Mr. Ruest joined CN in
1996 as VP, Petroleum and Chemicals. He
was appointed VP Industrial Products in
2003, VP, Marketing in 2004, and Senior VP,
Marketing in June 2006.
Serge Leduc, VP and CIO
Mr. Leduc was appointed in December 1, 2013.
He joined CN’s IT team in April 2013 after more
than 25 years of experience in IT. Mr. Leduc has
held various senior positions for Canadian and
international organizations with strong experience
in sales, supply chain, manufacturing and retail.
Prior to joining CN, he was head of IT Eastern
Europe as well as head of IT for Global
Operations for British American Tobacco.
55
The CN Journey
1990’s – Fundamental Turnaround – 1995 IPO
• Largest IPO in Canadian history – proving that good assets are more
valuable in hands of the private sector.
• New integrated back-office systems to drive productivity, cost control.
2000’s – Precision Railroading
• $8B of acquisitions: IC, WC, GLT, BC Rail to become a true North American
Railway.
• Precision Railroading model positions CN as the industry’s efficiency leader.
2010 to Today – Becoming a True Supply Chain Enabler
• Balancing Operational and Service Excellence.
• Playing our role as a true backbone of the economy.
TSX: CNR
NYSE: CNI
6
A Great Franchise
Global West 24%
Prince
Rupert
Edmonton
Vancouver
Calgary
Global East 4%
Domestic Canada 18%
Saskatoon
Montreal
Winnipeg
Halifax
Transborder 35%
Detroit
Chicago
Well Diversified Portfolio
Intermodal
24%
Petroleum and Chemicals
18%
Grain and Fertilizers
17%
Forest Products
16%
Metals and Minerals
10%
Automotive
7%
Coal
3%
Other Revenues
5%
Based on H1 2016 revenues
Domestic U.S. 17%
Toronto
Unique three-coast access
Originating carrier for ~85% of
traffic moving on CN’s network
Memphis
Global South 2%
Jackson
Mobile
New Orleans
Close to 70% of traffic originating
and terminating on CN’s network
Well diversified: economic
exposure; products; geography;
customers
TSX: CNR
NYSE: CNI
7
Our Strategic Agenda
TSX: CNR
NYSE: CNI
8
Operational Excellence
• Starts with an unwavering commitment to safety
• Fosters enhanced employee engagement
• Targets continuous productivity improvement
• Anchored on data, fact-based dialogue and a culture of execution
Train Productivity
Yard Productivity
(GTMs per train mile)
(Cars per yard switching hour)
9,239
8,625
8,739
49
48
8,600
46
44
7%
7%
2014
2015
H1 15
H1 16
2014
2015
H1 15
Locomotive Utilization
Car Velocity
(Trailing GTMs per total horsepower)
(Car miles per day)
235
224
219
212
H1 16
224
216
214
199
10%
4%
2014
2015
TSX: CNRNYSE:
NYSE:
CNI
TSX: CNR
CNI
H1 15
H1 16
2014
2015
H1 15
H1 16
9
Service Excellence
•
Customer-centric metrics
•
Level of service agreements
with ports and terminal
operators
•
CustomerFIRST initiatives
including a greater focus on
first-mile/last-mile service
•
Visibility tools and enhanced
communication channels
Becoming a true supply chain enabler -driving end-to-end efficiency and profitable growth
TSX: CNR
NYSE: CNI
10
Leveraging our Chicago Advantage
2009
Today
Munger
connection
(2016)
• No direct routing to get across Chicago
• Inefficient connections with other
railroads in the Chicago area
• Could take a freight train more than 24
hours to travel from the north to the
south of Chicago about 30 miles (48 km)
• New streamlined interchange points with
other carriers
• Better control of CN trains and routes
• Improved service offering to customers
• More efficient operations
More than doubled train speed through Chicago since EJ&E acquisition -roughly 25% of CN’s revenues originate, terminate or pass through Chicago
TSX: CNR
NYSE: CNI
11
Delivering on Our Growth Agenda…
at Low Incremental Cost
CN Volumes vs
Economy and Industry
Industry Operating Ratios (%)
(Index - 2009=100)
(Expenses / Revenues)
150
145
CN RTMs
140
73.1
CN Carloads
71.0
135
69.5
68.5
65.1
64.4
130
N.A. Industrial
Production (1)
Industry Peers Carloads (2)
125
120
61.0
62.1
60.4
69.4
63.9
H1 2015
H1 2016
56.8
115
110
105
100
2009
2010
2011
2012
2013
2014
2015
CN
(1) Source for Industrial Production: U.S. Federal Reserve, Statistics Canada
(2) Includes CP, NS, CSX, UP, KCS
CP
UP
KCS
CSX
NS
CN Operating Ratio (%)
2010
2011
2012
2013
2014
2015
63.6
63.5
62.9
63.4
61.9
58.2
Outpacing the economy and the industry
TSX: CNR
NYSE: CNI
12
Market Outlook
Intermodal
Merchandise
Bulk
• International
− Volumes remain challenging in H2
− Sequential improvements at Rupert
− Capacity constraints during expansion
project at Deltaport / Vancouver
− First volumes to Mobile from expanded
Panama Canal
• U.S. housing starts driving growth in
lumber and other housing-related goods
• Positive outlook for Canadian grain
− Bumper crop ahead, shipments may
start a month early
• Domestic
− Relative strength in CNTL door-to-door
service in Canada
− Expanding our cold supply chain
versus long haul over the road
• Steel and iron ore seem set to improve
by year end
• Strong automotive franchise
− Automotive sales steady, focus on
network and Autoport fluidity to
outperform the market
• Crude and frac sand volumes looking to
be at bottom since mid Q2
• Coal markets remain in secular
decline
− Coal revenues at about 3% of
CN’s book of business – the
lowest exposure of all Class 1s
• Improving outlook for U.S. grain
volumes
• Building for 2017
− Pre-selling port expansions on the
West Coast and Gulf Coast
− Canadian ports benefit from weaker
currency to compete in Mid Continent
24%
• Stronger H2 potash exports amid
bottoming global prices
51%
20%
H1 2016 revenue breakdown – Other revenues represent the remaining 5%
Supply chain / customer centric approach uniquely positions CN within market place
Please see Forward-Looking Statements at the beginning of the presentation for a summary of key assumptions and important risk factors underlying CN’s 2016 financial outlook.
TSX: CNR
NYSE: CNI
13
13
International Intermodal –
Unparallel Market Reach
PRINCE RUPERT
• Exclusively served by CN
• Closest port to Asia
• Capacity: 850k TEUs
(+500k TEUs by mid 2017)
MONTREAL
• Capacity: 1,700k TEUs
(+350k TEUs by late 2016/ early 2017)
VANCOUVER
• Capacity: 3,500k TEUs
(+650k TEUs by mid 2017)
Seattle / Tacoma
HALIFAX
• Capacity: 1,400k TEUs
• New vessel calls added late 2015
Arcadia
New York / New Jersey
Import Discharge - West Coast
(TEUs)
To U.S.
Savannah / Brunswick
To Canada
49%
32%
33%
2010
2011
43%
2012
42%
42%
2013
CAGR 13%
TEU: Twenty-foot equivalent unit
2014
2015
48%
50%
H1 15
H1 16
Mobile
CN terminal investments
GULF COAST
• Panama Canal expansion mid 2016
• Port of Mobile
• Near-dock rail service spring 2016 and
new vessel call from Asia
• Capacity: 350k TEUs (+125k in 2016)
• Port of New Orleans
• On-dock rail expansion completed
• Capacity: 800k TEUs (+100k in 2016)
CN and partners coordinating terminal / port expansions
TSX: CNR
NYSE: CNI
14
Growing Against and with Truck
Differentiating Our Service Offering
• CN has the fastest and only single line doublestack
service running between Chicago and Toronto
• Improved 3rd morning transcontinental service from
Toronto to Calgary
• Improved 4th morning transcontinental service from
Toronto to Vancouver
• Dedicated customer service desk
• Only rail LTL cross border domestic container service
• Only overseas cross border repositioning program
• Most fuel-efficient Class I railroad
Developing Innovative Products
• Refrigerated service for long haul cold supply chain
• Protected temperature service in super insulated
ecotherm containers for beverages
• Container sleds for steel to compete with flatbed trucks
• Only steelwheel service running between Canada, U.S.
and Mexico
• New Canada to U.S. continental service in collaboration
with the best in class Intermodal leaders (JB Hunt &
Schneider)
• Transloading imports at Vancouver into domestic
equipment for furtherance to U.S. destinations
Rail and Truck Freight Flows
Domestic Intermodal Containers
(Units)
U.S. (1)
Canada (2)
28%
2010
31%
2011
33%
2012
34%
2013
36%
2014
33%
2015
35%
28%
H1 15
H1 16
CAGR 4%
(1) Domestic
(2) Domestic
U.S. and transborder
Canada
Domestic intermodal: 37% of total intermodal revenues;
Average length of haul 1,600 miles (~2,500 km)
TSX: CNR
NYSE: CNI
CN Rail Network
Truck Freight
Flows*
*Source: Ohio Department of
Transportation Office of Urban
& Corridor Planning
15
Leveraging the U.S. Housing Market
CN Lumber / Panel Volumes to the U.S.
(thousands of carloads)
• Largest carrier of forest products
among Class I railroads
200,000
187
180,000
1,801
Panels
Lumber
U.S. Housing2,000
Starts (000s) 1,800
160,000
1,600
• Strong Western Canadian lumber and140,000
120,000
panel franchise
107
100,000
• Over 10% of CN revenues tied to
housing
78
80,000
95
84
88
587
609
928
115
1,400
121
1,102
1,000
1,001
784
60,000
554
1,200
1,200*
57
65
800
600
40,000
400
20,000
200
• Softwood Lumber Agreement expired in
October 2015
-
0
2006
2009
2010
2011
2012
2013
2014
2015
2016F
H1 15
H1 16
CAGR 8%
CN volumes include Canadian and U.S. origins
*CN assumption
TSX: CNR
NYSE: CNI
16
Well Positioned to Handle Automotive Growth
Domestic Canada
IMPORTS
Asia
Transborder
• CN handles over 60% of cars produced
in Canada
IMPORTS
Europe
• Origin strength: access 16 vehicle
assembly plants in Ontario, Michigan and
Mississippi
• Destination strength: extensive network of
17 automotive distribution facilities
• Only rail-direct service from west coast to
Detroit to handle imported vehicle parts in
containers
• Well leveraged to strong U.S. sales of
SUV’s and light trucks
TSX: CNR
NYSE: CNI
Domestic
U.S.
IMPORTS
Mexico
17
Prospects for Increased Grain Production
Canadian Grain Production*
U.S. Corn and Soybean Production
CN Draw Territory (IL, IA, MI, WI)
77
6.8
63
61
5-year
average
13/14
Record
Crop
14/15
63
15/16
• First look at 2016/17 crop; potential for
bumper crop given early planting,
favourable precipitation this spring
Billions of
bushels
Millions of
metric tonnes
6.6
6.0
5-year
average
6.1
13/14
14/15
15/16
• First look at 2016/17 crop; earlier than
normal, good growing conditions, suggest
potential strong corn and soybean crops
*6 major grains (wheat, barley, canola, oats, flax, rye)
+ lentils and peas
CN grain revenues: 66% originates from Canada and 34% from U.S.
TSX: CNR
NYSE: CNI
18
Managing through an Evolving Energy Business
•
Leveraging low prices of crude and
natural gas
• Benefitting key manufacturing sectors
(refining, petrochemical, LPG and plastics)
Greater Edmonton Plastics /
Petrochemicals
• Supported by CN’s unique private fleet
management service
Southern Ontario
Plastics / Petrochemicals
•
Serving the heart of Alberta’s oil sands
•
Unique Wisconsin frac sand franchise with
single-line service to Western Canada
shale gas
Crude Oil Shipments
(Carloads)
~128,000
~98,000
~73,000
~53,000
~34,000
~24,000
216 ~5,000
2010 2011 2012 2013 2014 2015
H1 15 H1 16
Frac Sand Shipments
(Carloads)
~89,000
~77,000
New Orleans – Baton Rouge
Plastics / Petrochemicals
~58,000
~41,000
~41,000
~33,000
~26,000
TSX: CNR
NYSE: CNI
2010
2011
2012
~25,000
2013
2014
2015
H1 15 H1 16
19
Limited Exposure to Coal
H1 2016 Rail Industry Coal Revenues
(% of total revenues)
CN
3%
Industry Peers (1)
12%
(1) Includes CP, NS, CSX, UP, KCS
H1 2016 CN Coal Revenue Breakdown
TSX:
TSX: CNRNYSE:
NYSE:
CNI
CNR
CNI
Thermal
Metallurgical
Total
Canadian coal
Export
13%
13%
26%
U.S. coal
Export
Domestic
26%
29%
-
26%
29%
Coal
81%
Pet Coke
19%
20
Negotiating Value for Our
Service and Our Capacity
Value Pricing
H1 16
Same Store Price
2.3%
• Consistent measure of all past renewals
2015
3%
2014
3%
2013
• Targeting around 2.5% in 2016
• Negative impact from Canadian regulated grain for 2015/16
crop year and index-based pricing due to lower fuel prices
3.5%
2012
4%
2011
4%
2010
• Canadian regulated grain reverting to ~5% price increase
for 2016/17 crop year
3%
2009
5%
2008
5%
2007
4%
2006
5%
2005
• Unit revenue to cost ratio: customer provided cars
• Unit contribution per car day: CN provided cars
3%
2004
More Sophisticated Yield Management Tools
3.5%
• Unit round trip revenue to cost ratio: Intermodal
Same Store Pricing excludes foreign exchange
changes and fuel surcharges. Measures year-overyear price changes on same store traffic (origin,
destination, commodity, car type, customer).
~ 75% of CN’s revenues are same store.
Targeting inflation plus pricing and
taking a disciplined approach to yield management
TSX: CNR
NYSE: CNI
21
Effective Resource Planning
Crews
Locomotives
Cars
Plant
Onboarding and training
programs engaging the next
generation of railroaders
90 new AC locomotives in
2016 – Cascading out less
efficient units in favour of
newer high horsepower
locomotives
Regular stress testing of fleet
sizes
Plant safety and integrity,
first and foremost
Continuing to drive
productivity
CN car fleet is a mix of owned
cars (2/3) and leased cars (1/3)
mitigating risk to changing
market conditions
Adjusting resources to low
volume environment
Approximately half of the
railcars on CN’s network are
customer owned/leased
Leveraging lower traffic
volumes and cheaper
commodity prices to
maximize capital dollar
efficiency
Strong discipline in realigning resources
TSX: CNR
NYSE: CNI
22
Sustainability Commitment
CN’s commitment to sustainability is a long term strategic priority, extending to all aspects of the business, from the field
to the boardroom, to customer interactions. Our vision guides how we conduct our business every day and defines our
contribution to building a more sustainable future. Five key areas of focus anchor our sustainability commitment:
ENVIRONMENT
SAFETY
PEOPLE
COMMUNITY
Conduct our operations
with minimal
environmental impact,
while providing cleaner,
more sustainable
transportation services to
our customers.
Be the safest railroad in
North America by
establishing an
uncompromising safety
culture and implementing
a management system
designed to minimize risk
and drive continuous
improvement.
Provide a safe, supportive
and diverse work
environment where our
employees can grow to
their full potential and be
recognized for their
contributions to our
success.
Build safer, stronger
communities by investing
in community
development, creating
positive socio-economic
benefits and ensuring
open lines of
communication.
TSX: CNR
NYSE: CNI
GOVERNANCE
Continuously improve
our culture of integrity
and ethical business,
building trust and
confidence with all our
stakeholders.
23
Delivering Responsibly
FRA Train Accident Ratio (1)
Strengthening Safety
(accidents per million train miles)
2.73
2.25
2.10
2.11
2.48
2.06
•
Building on our strong 2015 performance
•
On-going investments in infrastructure,
rigorous train and track inspections,
continued focus on safety culture and
employee training
•
Unwavering commitment to safety
1.33
2011 2012 2013 2014 2015
H1 15 H1 16
(1) U.S. Federal Railroad Administration
Reducing Carbon Emissions
Fuel Efficiency
(GTMs per US gallon )
1,040
1,019
973
987
994
2011 2012 2013 2014 2015
TSX: CNR
NYSE: CNI
•
Rail emits up to 4 times less greenhouse
gas emissions than heavy trucks
•
~ 20% improvement in fuel productivity
over the last 10 years
•
~ 15% better than the industry average
•
Targeting an incremental 1.5% in 2016
1,031
1,008
H1 15 H1 16
24
D E L I V E R I N G R E S U LT S
Delivering Results
Revenues
Net Income
Adjusted Diluted EPS (1)
(in millions $ Cdn)
(in millions $ Cdn)
(per share $ Cdn)
$10,575
$9,920
$9,028
$8,297
$3,167
$3.76
$2,680
$2,612
$2,457
Down 7%
$3.06
$2.81
Up 4%
$2,104
Up 5%
$2.41
$1,650
$1,590
$6,223
$5,806
CAGR 9%
$4.44
$3,538
$12,611
$12,134
CAGR 11%
$2.01 $2.11
$2.10
CAGR 16%
Protecting our profitability despite a tougher environment
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this non-GAAP measure.
TSX: CNR
NYSE: CNI
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Generating Solid Cash Flow
Free Cash Flow (1)
(in millions $ Cdn)
2,373
2,220
1,618
1,746
1,661
1,623
1,051
2010
2011
2012
2013
2014
2015
H1 15
1,169
H1 16
Steady cash flow generation
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this
non-GAAP measure.
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NYSE: CNI
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Reinvesting in the Business
Capital Investments
(in millions $ Cdn)
2,700
2,750
Positive Train Control (PTC)
Equipment, including
90 AC locomotives
Productivity initiatives, including IT
Core network investments
2015
2016F
• Strong capital program driving safety, fluidity and
productivity
• Leveraging lower traffic volumes and cheaper
commodity prices to maximize capital dollar efficiency
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Maintaining a Strong Balance Sheet
Adjusted Debt-to-Adjusted EBITDA Multiple
(1) (2) (3)
(times)
1.72
1.68
1.71
1.68
1.66
1.63
• Within adjusted debt / EBITDA guideline
of 2.25x
1.60
1.57
• Committed to maintaining investment
grade credit ratings
• Continuous, low cost access to financing
2010
2011
2012
2013
2014
2015
H1 15 H1 16
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this non-GAAP measure.
(2) Debt is adjusted to include the present value of operating lease commitments.
(3) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, and is adjusted to exclude Other income and the deemed interest on operating
leases. The Adjusted debt-to-adjusted EBITDA multiple is based on the EBITDA for the twelve months ended June 30, 2016
TSX: CNR
NYSE: CNI
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Rewarding Shareholders
Total Shareholder Distribution
(in millions $ Cdn)
3000
Share Repurchases
90
$80.02
Dividends
2500
$77.35
Share price - end of period ($ Cdn per share)
$76.29
$72.06
70
$60.56
2000
60
1,750
$45.17
$40.08
1500
1,400
$33.18
$28.67
1000
$22.39
500
1,021
913
1,400
50
1,505
40
1,053
1,420
833
30
20
996
474
503
585
652
724
818
436
2008
2009
2010
2011
2012
2013
2014
2015
25%
31%
26%
27%
27%
28%
26%
28%
502
584
H1 15
H1 16
0
Dividend
Payout Ratio
80
10
0
• 20% increase in dividend in 2016 vs 2015
• Dividends increased every year since 1995 IPO
- CAGR of 17% over 20 years
• Gradually moving towards a 35% payout ratio
• Current share repurchase program from
October 30, 2015 to October 29, 2016
– Budgeting approximately C$2 billion
• Over C$15B of share repurchases since 2000
78% of net income returned to shareholders in 2015
TSX: CNR
NYSE: CNI
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Solid
TrackRecord
Record
Solid
Track
Record
Solid
Track
Market Cap ~C$60B
CNR, CNI vs TSX, S&P 500
2010-2016
350
CNR
300
250
CNI
200
S&P 500
150
TSX
100
CAD/USD $
50
0
2010
2011
2012
2013
2014
2015
2016
Jan 2010 = 100
Up to August 30, 2016
TSX: CNR
NYSE: CNI
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2016 Financial Outlook
CN aims to deliver earnings in line with 2015 adjusted diluted
EPS of C$4.44 (1)
− Carloads expected to be lower than last year in the mid-singledigit range, with pricing staying above inflation
Continuing to reinvest in the business for safety and efficiency
− Capital envelope of C$2.75B
Delivering sustainable value for our shareholders
− Protecting our profitability despite a tougher environment
− Rewarding our investors with consistent dividend and share
buyback returns
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this non-GAAP measure.
Please see Forward-Looking Statements at the beginning of the presentation for a summary of key assumptions
and important risk factors underlying CN’s 2016 financial outlook.
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NYSE: CNI
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Investor Relations Contacts
TSX: CNR
Paul Butcher
Stacy Alderson
Vice President, Investor Relations
Senior Manager, Investor Relations
[email protected]
[email protected]
514-399-0052
514-399-4654
NYSE: CNI
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