Operator: Good afternoon. My name is Charlie and I will be your Operator today. Welcome to CN 's Third Quarter 2021 Financial and Operating Results Conference Call. All participants are now in a listen-only mode. After the speakers remarks, there will be a question-and-answer session.

I'd now like to turn the call over to Paul Butcher, Vice President Investor Relations. Ladies and gentlemen, Mr. Butcher. Paul Butcher : Well, thank you, Charlie. And good afternoon, everyone.

And thank you for joining us for CN 's Third Quarter 2021 Financial and Operating Results Conference Call. Before we begin, I'd like to draw your attention to the forward-looking statements and additional legal information available at the beginning of the presentation. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the U.S. and Canadian Securities law. These things are subject to risks and uncertainties that may cause actual results to differ materially, from those expressed or implied in these statements, and are more fully described in our cautionary statements regarding forward-looking statements in our presentation.

After the prepared remarks, we will conduct the Q&A session. I do want to remind you to please limit yourself to one question. The IR team will be available after the call for any follow-up questions. Joining us on the call today are JJ Ruest, our President and Chief Executive Officer, Ghislain Houle, our Executive Vice President and Chief Financial Officer, Rob Reilly, our Executive Vice President and Chief Operating Officer, James Cairns, our Senior Vice President, Rail Centric Supply Chain, Helen Quirke, our Senior Vice President and Chief Strategy Officer, and finally, Keith Reardon, our Senior Vice President, Consumer Product Supply Chain. It is now my pleasure to turn the call over to JJ Ruest.

JJ Ruest: Thank you, Paul. And good evening everyone. Today we will do our prepared statement in two-parts. Ghislain and I will cover the highlight of the third quarter, will keep that section tight, and then the team will cover the progress on our September 17 action plan. Well, let's first start with the highlights of Q3 and I'm on Page 5.

All in, on an adjusted basis, the base business produced an adjusted diluted EPS growth of 10% and adjusted operating ratio of 59.0%, and free cash flow for the first nine months of just over $2 billion. The operating ratio started high in July, resulting from the 2-week loss of our CN mainlines in the Port of Vancouver, but improved afterwards in August and September to an adjusted 59.0 OR as the average for the quarter. Regarding pricing trend, James Cairns will provide evidence of solid pricing at CN in the last couple of quarters. Regarding headcount of the 1050 that we mentioned in our September 17 conference call, about 70%-75% are completed. At CN, we have a long-term strategy and we railroad for all key stakeholders.

We make sure the railroad has enough infrastructure to support the economy. We railroad to reduce carbon emission. We railroad to support our customers so they succeed and grow in their market. We railroad to produce good return for our shareholders and we're railroad to create an engaging and safe workplace for our employees. I will now turn it over to Ghislain, who will walk us through the quarter.

Ghislain Houle: Well, thank you. JJ. My comments will start on Page 7 of the presentation, which will provide more visibility on our solid third quarter performance. Revenues for the quarter were up 5% to $3.6 billion despite volumes on an RTM basis being down 1% which were impacted by forest fires in July and supply chain constraints throughout the quarter. We delivered pricing well above rail inflation and continued to focus on yield management, optimizing CN's precious network.

Adjusted net income was a 1.080 billion, with adjusted diluted EPS of $1.52, both up 10% versus last year. Other income was down by around $30 million versus last year due to a mark-to-market loss on an equity investment in autonomous driving technology. Our adjusted results exclude various non-recurring items related to the KCS transaction costs, including the $700 million U.S., the break free from KCS. Our adjusted results also exclude a workforce reduction provision, as well as advisory costs related to shareholder matters. Turning to page 8, let me highlight a few of our key expense categories expressed on a constant currency basis.

Labor and fringe benefit expense was up 12% versus last year. This was mostly driven by increased wages due to a 5% higher average headcount and a workforce reduction provision, partly offset by higher capital credits from more capital work in the quarter. Excluding the workforce reduction provision, labor and fringe benefits was up only 6%, on a sequential basis, the end of quarter headcount was down 3% compared to the end of Q2. Fuel expense was up 40%, driven by a nearly 50% increase in price, partly offset by continued improvement in fuel efficiency. This quarter saw a significant improvement in equipment rents with a 31% decrease versus last year, driven by lower car hire expense, mostly due to improved online productivity and lower volumes.

Now, moving to cash on page 9, we generated free cash flow of over CAD$2 billion through the end of September, around CAD$50 million lower than 2020, mainly from lower net cash from operating activities, due to higher cash taxes. We have resumed our share buybacks and plan to complete our CAD$1.5 billion program by the end of January 2022. Moving on to page 10, we are reaffirming our full-year financial outlook and expect to deliver about 10% adjusted diluted EPS growth versus 2020. While we are now assuming volume growth in terms of RTMs to be in the low single-digit range for the year, we are executing on our strategic plan that has started delivering benefits in Q4. We still expect to deliver free cash flow in the range of $3 billion to $3.3 billion, which will drive further improvement in free cash flow conversion.

I will now turn the call back to you, JJ.

JJ Ruest: Oh, thank you Ghislain. And before I get into the progress of our September 17 action plan, as you already read from the press release, I am retiring effective as of the end of January 2022 or such later time as a successor has been appointed to ensure flawless transition. I am not going anywhere, and I will deliberate with the team here today around me on the fourth quarter results, and to be sure that we have a successful setup for the 2022 business plan. The Board has also, as you read in the press release, has appointed a search committee for a world-class CEO.

The detail on the Board committee that will do so is also in the press release. Back to the business, on September 17, we announced the next step in our strategy to redefine railroading for the next-generation. CN will execute on our plan, deliver high-quality service to customers, and generate enhanced and sustainable return for all shareholders. Our long-term goal remains to consistently deliver double-digit EPS growth. I would like to begin by recapping our 2022 objective.

We are targeting CAD$700 million of additional operating income for next year. We intend to use a balanced approach, including optimizing railroad productivities, and labor costs. We also expect to adjust our capital spend to 17% of revenue. We can do this without compromising our absolute commitment to safety and customer service because of the current good condition of our network and by putting to good use the technology investment we made in recent years. Another major component of our plan is lowering our operating ratio, starting with 57% in 2022.

Achieving 57% next year, will unlock significant near-term value while maintaining and balancing our commitment to customer service and safety. We will achieve it with operational excellence rationalizing our cost structure, price, and finally volume, when grain returns late next year. We are assessing opportunities to go lower beyond 2022, but responsibly, and we will -- -- say more to that in the new year. We are targeting EPS growth in the range of 20%, return on investment capital range of 15%, and about $4 billion of free cash flow for 2022. I am pleased with the quick progress thus far and the initial positive feedback received from shareholders and stakeholders, both.

I will now turn it back to the team who will provide an update on how we start to implement the key initiatives that will deliver result in Q4 and in 2022. Ghislain?

Ghislain Houle: Okay. On page 13, we have already made considerable progress on our total operating income improvement of $700 million for 2022. For the $250 million in labor, we have already completed around 75% of the reductions identified on our September 17th call. We will be substantially complete by the end of the year, which will provide a full-year impact of these reductions in 2022 for the $300 million in purchase services and material and other items, we have already secured around a $100 million of initiatives in the past month of which a few examples include the reduction of contractors through the entire Company, both in in the field and at headquarters.

A reduction of IT applications, aggressively storing and retiring older locomotives, which will reduce purchased services and material costs associated with their maintenance. Finally, we'll deliver a CAD$150 million in additional price initiatives as we continue to enhance our yield management strategy. I will now turn it over to Rob.

Rob Reilly: All right, thank you Ghislain. As stated on September 17th, operational excellence, our commitment to safety and service to our customers have been and will continue to be cornerstones in our strategy.

All of our core operating and safety metrics have improved over the past couple of years leading to greater efficiencies and improved customer service. We continue to build on our positive momentum through our strategic initiatives. A big part of our operational excellence is in operating the railroad sustainably. Our fuel efficiency for Q3 was an all-time record. Our position as the industry leader from a fuel efficiency perspective, underscores our commitment, and enhances our operating performance and profitability.

CN's industry leadership in sustainability and success in operational excellence, have been achieved through a continuous and concerted effort by the team. We are on track to deliver all-time best in productivity in our operations, fuel efficiency, and, most importantly, the safety of our employees. We are running a safe, efficient, and sustainable operation that consistently meets the needs of our customers. I'll now turn it over to Keith and James to outline CN's growth vision. Keith?

Keith Reardon: Thanks, Rob.

Current worldwide port congestion, especially on the U.S. West Coast, highlights the CN network Intermodal advantage. Three coasts, 13 proven uncongested port gateways, several that are meaningfully expanding their capacity. Single line, single-owner access from each coast to the U.S. Midwest links the efficient gateways to where the markets are and where they will be.

Our inland terminal network is well established, yet continually improving. State-of-the-art terminal and container asset technology-backed investments are creating capacity and efficiency, improving safety, and improving the customer experience. The Intermodal story for CN is strong with decades of opportunities ahead. James, I believe you also have some great long-term carload markets that are developing?

James Cairns: Yeah. Thanks, Keith.

I've never been more excited about our long-term carload growth potential than I am today. Our unique geographic reach and exclusive access to the Port of Prince Rupert will help us be a leader in carload growth over the next several years. Canadian grain recovery in Q4 2022 will be followed by emerging new renewable fuels and refined petroleum products projects that will propel our growth through 2023. What I am most enthusiastic about, our new green energy carloads, related to Alberta 's massive growth in hydrogen energy projects, evidenced by the slew of recent announcements around the Alberta's Industrial Heartland. Hydrogen-related carloads have the potential to be up the scale of crude-by-rail at its peak, but with long-term rate ability.

Our end-to-end supply chain model that helped us create new export capabilities for propane is easily replicated for blue ammonia, and other hydrogen drive energy carloads. We move to the next slide. We routinely get asked questions about revenue for RTM. Our view is that this measure is a better proxy for mix than it is for price. That said, since December 2018, when we started our customer - centric journey under JJ's leadership, CN has seen the fastest growth in revenue per RTM for all class 1s to the end of Q2 this year.

We believe a better proxy for price, is wealth price. As you've heard us say before, we consistently priced ahead of roadway cost inflation. In the last 5 years, our corporate same-store price has been on average nearly 2% greater than rail cost inflation. We have been preparing for accelerating railway cost inflation by sequentially increasing our price each quarter, since Q4, 2020, our various incremental capacity auction programs provide real insight into the market rate for our valuable capacity, allowing us to smartly price to meet the market, without undue volume risk. I'll turn it back to JJ.

JJ Ruest: Thank you. Thank you, James. Thank you, Keith. Thank you, Rob and Ghislain. Looking to 2023 and beyond, the CN team is focused on delivering solid results and see the opportunity to further improve our operating ratio.

As we continue to prioritize safety, railroading for customers, railroading to reduce carbon emission, a balanced approach. Our leadership team has a clear vision. We are focused to be a growth Company, and produce financial value over the short and long term. CN's future is bright. Our network is great.

Our ambition is to build a premium railway of the 21st Century, investing in technology, investing in capacity, delivering service that attract more customers to the rail network, improve safety, reduce carbon emission, create the essential capacity for the economy, and reduce our costs. Just as CN pioneered the industry, focused on efficiency, we are on our way -- well on our path to now be well-positioned to lead the industry to the next transformation of a modern digital scheduled railroad. To conclude, CN is taking a balanced approach. We are investing in the success of our customers, success of our workforce and communities, and as well as return for our shareholders. We will now turn it back to the question, Charlie?

Operator: Thank you.

We'll now begin with the question-and-answer session. [Operator Instructions] The first question comes from the line of Ken Hoexter with Bank of America. Please go ahead.

JJ Ruest: Good afternoon, Ken.

Ken Hoexter: Hey, good afternoon.

JJ, maybe I can start with 1 question. But I guess you're announcing your retirement, maybe your thoughts on the outlook here. You talked about decelerating growth and maybe talk about -- I know Keith and James talked about the leaders of that. But talk about your outlook on the economy here and then your thoughts as you step away.

JJ Ruest: Yes, so where we're at, I think it can.

Where we're at right now, I think we're in a world of increasing inflation, that's why we're driving price. We're in a world where volume is sort of -- it's positive in some places, not so positive in other places. Therefore, we have to adapt to that. And I think we're also in a world where it's time for us to be ready, setting for the future, that's why there's such a focus on the railroad of the future, we call that VSR. Leveraging technology, using talent, making sure we're relevant to our customers, all of them big and small, and creating value.

I think the rail industry has a huge opportunity is to be more relevant to the supply chain, working with ecosystem of the Port, making the best mousetrap to attract more vessel, it also an opportunity to attract more freight on the highway, [and culminating] [(ph) for the railroad. It doesn't come in at the same operating ratio. I think it's well understood by all, what is very much part of the long-term success of the rail industry is competing with other mode and doing so in a way that's relevant to customers whose freight is -- they are the one to decide where they spend their money. I think really the rail industry has a great future. It just needs to remind of the basic.

You got to have as many customers as you want to make these rail assets as valuable as possible. Thank you.

Operator: Your next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead.

Walter Spracklin: Thanks very much.

Good afternoon, everyone.

JJ Ruest: Good afternoon.

Walter Spracklin: So, I guess -- some big news here with the announcements, and when I look at what changes you're putting forward, obviously with your strategic plan, there's changes now at the Board level and management. It seems to be fairly, or closer aligned to what TCI is asking for. I guess my question is, is there room for an engagement here, now, following these announcements? Do you think that that's possible? Is that going to be something you're going to be looking for? Is this more of an independent approach that you plan on taking with regards to the CEO search and proceeding as planned with the March 22nd meeting?

JJ Ruest: Thank you, Walter.

And if I may say, I think it's maybe the other way around. It's maybe TCI is getting closer to what CN's long-term strategy is. I hear more comment about -- first of all, when they ran out the press release earlier this week, it was a bit of a vague presentation but no clear target. And the press release is not a plan in itself. But they were talking about the things like long term emission, where customers came out more balanced.

And I think regardless of -- but regarding further engagement with TCI, I won't specifically speculate for that. I'll let the Board engage with the activists. But the strategy that we have here is very clear. We want to balance for railroad, for all stakeholders. We want to be a growth Company, we want to be a safe Company.

We want to be a Company who has enough capacity, so that when demand surge or peak, and we've seen this in the past, we don't let the economy stranded. And then -- and that we create an environment where our industry is successful, not because it's a duopoly, or three duopoly within North America, but successful because, more and more customers want to do business with us, and more and more customers want to use our port by choice. And more and more customers want to leave the highway and enjoying our respective intermodal network. I think that's long-term. That's where the future is.

And we talked about technology often, it needs to happen. We need to have technology that makes the railroad safer, that's more about the maintenance side. Technology to create capacity without necessarily having to lay down more track. And technology also that makes the service to our customers who all buy supply chain. They don't buy a rail service, they buy a combination of transportation mode.

And therefore, having technology that makes it easier for them to track and trace, and maintain the inventory that they have. So, it's maybe a little more sophisticated than how low can you go on the operating ratio.

Walter Spracklin: I appreciate the color Thanks, JJ.

JJ Ruest: Thank you.

Ghislain Houle: Thank you, Walter.

Operator: Your next question comes from the line of Cherilyn Radbourne with TD Securities. Please go ahead.

Ghislain Houle: Hello, Cherilyn.

Cherilyn Radbourne: Thanks very much. Good afternoon.

In terms of the pricing environment, could you speak to what the spread versus inflation looks like as we sit today and how much of the book of business has been re-priced in this type rate environment. And how much is left to go through year-end and into early 2022?

JJ Ruest: Thank you. James will cover that. He is my pricing expert.

James Cairns: So, thanks for the question, Cherilyn.

Very interesting. We've been preparing for wrapping up of inflation here since Q4 of 2020. So, we've been very careful, a lot of our contract renewals not to go out too far because it was an uncertain environment. We've got a pretty big chunk of our business that's going to be available for re-pricing still Q4 this year and into next year. I don't know the exact number, but it's somewhere in the range of about 35% to 40% of our entire book of business, so we can re-price.

So, we were pretty excited about that, and we'll make sure that we're pricing well ahead of railway cost inflation. And to-date, this year, we've been just over 5% on our same-store price. So, it is varying out there. We're able to secure these price increases. Because the customers realize they need the capacity that we have.

Increasingly, as we move into 2022, that capacity is going to have more value, and creating that level of certainty for customers with a contract in hand with CN is worth something to our customers. We'll continue on that path, we'll be pricing ahead of Railway cost inflation. I think a good market somewhere between 1.5% and 2% ahead of railway cost inflation is where we think we are going to be, balance of this year and into 2022. Thanks for the question, Cherilyn.

JJ Ruest: Thank you.

Cherilyn Radbourne: Thank you.

Operator: Your next question comes from the line of David Vernon with Bernstein. Please go ahead.

JJ Ruest: Hello, David.

David Vernon: Good afternoon, guys.

Thanks for taking the time. Hey, Keith, could you maybe talk a little bit more about, what kind of tailwind we can expect on international Intermodal pricing given where steamship rates have headed over the last 12 to 18 months? And the timing for when some of your international Intermodal contracts may come up?

JJ Ruest: Go ahead, Keith.

Keith Reardon: Thanks. David. Price has a lot of different aspects to it.

I'll start off with our same-store price and then I will talk about some other things that we're doing. But the same-store pricing, you are right. We have had some contracts come up. We will continue to have contracts come up. It happens all the time.

In these last two contracts, they came up big ones. We had the opportunity to look at the book of business and actually upscale our business. There's some business that we did not think was compensatory to the workload that we put into it, so we jettisoned some of that business. And we didn't do it in an adverse or adversarial manner. We worked with our customers and we said, "You know what, we'd rather focus on these areas, and we provide those services to you.

" we will continue to do more of that. We started in our upscale -- in our upscaling, as James mentioned. But we also are looking at taking our latent capacity that's been created by some of these supply chain issues, and we're selling that at premium rates, working with our customers. So, we're taking every opportunity to talk to our customers to figure out what they want to accomplish. And then we're creating value for them, and we're usurping that value for CN as well.

Thank you, David.

JJ Ruest: Thanks, David.

David Vernon: Thanks for the color. JJ, if I could squeak one more in here. Is there a timeline for the Board's search process?

JJ Ruest: So, the Board will -- the Board is looking for the best of the best, and they want to take the time to make sure that we find and determine the best of the best for the next generation of CEO here at CN.

So, they are not on the clock, it doesn't mean that they will go slow. They'll want to be sure that -- it's a very important task. But at the same time, we're not going to put out a specific time by which this will be done. As I said in my opening comment, and I think it's also in the press release, I'm staying till the end of January, or whenever as required to do the smooth transition. And at this point, we're looking for the quality, and sometime quality takes a little time.

So, I would refer you to the back to some of what's said in the press release. It was worded very specifically.

David Vernon: Great. Thank you.

JJ Ruest: Thank you.

Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Please get ahead.

Konark Gupta: Good afternoon and thanks for taking my question. So, I just wanted to understand, given the global supply chain disruptions we are seeing right now, how the steam line shipping customers you have, they're thinking about the whole dynamics here. Are they looking to incrementally look to Canadian west coast ports, specially Prince Rupert throughput, or they are looking more east to de-congest away from Long Branch and LA, any thoughts there please?

JJ Ruest: So maybe, Konark, I can start and Keith can add a little color, that's his space.

But one of the comments I made earlier, not sure if it was understood that as some of the business we decided to renew some of delaying. That created capacity at Rupert. Capacity -- Rupert was sold out. That created the capacity at Rupert so now Keith and his team have been able to do some new vessel. You've heard about these pendulum vessel, smaller vessel that some of the retailers in North America are now going out and charter themselves.

They only pick up freight at a few ports in Asia, and they drop it off at 1 port in North America and they want to avoid at all cost, Ely Long Beach or any places where vessel are delayed. For us to be able to do this, and do this at a premium price, it has to be with other customers, when we we're not on the contract. And also do this at the Port Rupert, which now has some latent capacity because some of the business that we and the customer would not see eye-to-eye on the yield of it, we've actually let it go. Don't know if you wanted me to talk about the future, Keith. And how many more months or quarters this may last?

Keith Reardon: Yes.

And just to point out, the supply chain disruptions and what's happening to these vessel strings are what's causing some of this transitory volume issues that you've seen for Rupert and Vancouver down for us. That was the factor that got us taking a page out of our playbook to go back to some of these customers, as JJ pointed out. I will also say that year-over-year, we've seen the east coast ports that we service, as well as the gulf coast ports that we service, we're up 20% over last year, and that's a diversification approach by the customers, not only the steamship lines, but the people that are in the boxes. They're saying "I want another gateway. " And that's why the CN network is set up so great for that.

We've got 3 Coast, 3 different ways that they can get in, 13 different ports. So that's why we're so happy that we have this network, that's why we're so bullish on the future.

JJ Ruest: Thank you, Konark.

Konark Gupta: Thank you.

Operator: Your next question comes from the line of Jason Seidl with Cowen, please go ahead.

Jason Seidl: Thank you, Operator. I wanted to talk a little bit about the headcount reductions. You said you are about 75% through that. Did all those coming 4Q here early on? And what's the mi -- what's the mix sort of between the U.S. and Canada with those reductions?

JJ Ruest: So, to take -- [Indiscernible] will cover that.

Just to let you know, we're extremely focused on executing on that, Jason. And we actually track this daily to a great detail. So [Indiscernible]

Ghislain Houle: Yeah. Jason, I will give you a bit of color on the mix of headcount as we said. We have about 75% out of the 1050 that we announced on September 17th.

I would tell you close to 600 is the management, and close to 200, call it a 190 is Union. I would say the lion's share of it is in Canada. and that's what I would tell you between Canada and the U.S., but I'm giving you the color here on the management versus union.

JJ Ruest: Yeah, I know, Jason, that people are typically tracking headcount in the U.S. for class 1 railroad.

Most of what we've talked about, is actually in the Canadian side.

Jason Seidl: Yeah.

JJ Ruest: So, you'll see -- you won't see that in a headcount for U.S. network, because most of our management position is on the Canadian side, and most of the reduction that we we've done or are doing, you'll find them on the Canadian headcount and the U.S. headcount as well.

I don't know if that's helpful.

Jason Seidl: That helps -- I'm sorry, I might have missed it. Did you say they were -- most of that was done by the 17th?

JJ Ruest: Most of them -- well, they were done after the 17, right on the 17 amounted to 7. And then after that, we start to roll out and 70% to 75% of that is done as we speak.

Ghislain Houle: As we speak, this is as of today, give or take.

It's about 75% of the 10-50 that are done.

JJ Ruest: So that will impact for fourth-quarter results. Current -- current result.

Jason Seidl: Gentlemen, I appreciate the time and color, as always.

JJ Ruest: Thank you, Jason.

Operator: Your next question comes from the line of Brandon Oglenski with Barclays. Please go ahead.

Brandon Oglenski: Hey, good afternoon, everyone. And JJ, I just want to acknowledge, it's quite an extensive career at CN, so best of luck on the other end.

JJ Ruest: Thank you.

Brandon Oglenski: But I guess it would be great to get some perspective from you because obviously you were part of a team earlier when CN was viewed as really best-in-class. And I guess what are you looking for your, the person that takes over for you, what do you think they need to get right here, to get back into the driver's seat of being the best railroad, or at least the best viewed railroad in North America?

JJ Ruest: Well, thank you, Brandon. Yeah, I joined CN back in the month of May of 1996, which was about 6 months after CN got -- was privatized. I think the landmark of CN is to be innovative, to lead the industry, to take risks, and to do things that, with the early days, early years, are not understood or accepted by others. This is what scheduled railroading was all about.

Lot naysayers at the time, it was not going to work. The IPO is a big -- big thing that a lot of people at that time, especially Canadian investors, started, was not going to work. And then where we're at today, is we're looking to the future. Not the past. CN is not what it used be in 2025, what it was in 2010.

CN is looking to be what 20 -- what the future will look like. So, we're looking for be a growth Company. I think we want somebody who was focus on growth, somebody who was focusing on bringing technology into the Company. Somebody was focusing on having a work force that presents today society. So, bringing talent from where it is, different gender, diversity, inclusion, a workplace that is fit what the young people or the people [Indiscernible] career are attractive for, et cetera, et cetera.

So, I think the future is where you want to be. As Rusky said, you want to go with your heart -- the parks give you next, not where the park was in 2010 or 2015. So, I think that's really -- when you look for CEO in early 2022, you want to be -- you want to have some of the who can actually get the Company the way it needs to be in the 2025. I don't know if that helps.

Brandon Oglenski: It does, JJ.

Thank you.

Ghislain Houle: Thank you, Brandon.

Operator: Next question comes from the line of Jon Chappell with Evercore, please go ahead.

Jon Chappell: Thank you. Good afternoon.

[Indiscernible] we've talked about the cost initiatives and the pricing strategy as part of the broader 2022 strategic plan. No comments on the reviews of some of the non-core businesses and maybe the trucking units specifically, how are those reviews gone? And are you still on plan for the impact that those are expected to have on hitting the targets for next year?

Ghislain Houle: Jon, A - Helen Quirke is actually working those [Indiscernible] specific she will give you the color you need. Helen.

Helen Quirke: Thanks, Jon. On our non-rail assets review, we've commenced the sale versus for the great lakes fleet of vessels, and we have a number of interested buyers on that.

This is a profitable business, but we believe that we do not need to own the vessels to protect the rail revenues, and maintain a stable supply chain for our customers. With regards to Transics, it is accretive to EPS, and we've almost doubled the Intermodal business of Transics since the acquisition. The profitability of the core Transics business is in line with best-in-class for similar types of assets. And we're still working through the options to potentially reduce our ownership interest while maintaining and growing the rail revenues there. We will keep investors posted on this.

But our message remains that we are a great Company. You've heard it numerous times today, and we will continue to find ways through acquisitions and partnerships that will drive more business to our network over time. Thanks for the question, Jon.

Jon Chappell: Thank you.

JJ Ruest: Thank you, Jon.

Operator: Your next question comes from the line of Amit Mehrotra with Deutsche Bank. Please go ahead.

Amit Mehrotra: Thanks. Hey, JJ. Best wishes.

It's been a remarkable and successful career, so wish you the best whatever next you do. I wanted to follow up on Brandon's question, your commentary about the new CEO. There's obviously another world-class executive on the sideline, so to speak, that TCI is bringing forward. And I just want to make sure we're not reading the search. These search eses can be long.

They can be very expensive. Have you guys already considered this other candidate that TCI is bringing forward and you feel like that's not the right way of CSCM [Indiscernible] ago? What's the strategy around doing an expensive long search when you do have someone that's tried and tested, willing to take over the [Indiscernible]?

JJ Ruest: Yes. Thanks for the question, this is an important question. But the board will consider all candidate, inside the Company, outside the Company, male and female. And there is a surge, meaning that we will be very thorough and be sure that the next person who replace me is the person that can really carry the CN strategy on a go-forward basis.

That takes a little time, and that takes a very specific process. We're committed to the process. The board has set up a CEO search committee, which can be led by [Indiscernible] is our Chair of the governance committee. And with her we have Robert Philips who is a retired, Chief Executive Officer or Chairman of British of BCR. And then you also have Kevin Lynch and as well as Justin [Indiscernible] who joined the board from the Cascade.

So, this group will be doing -- reviewing what is the profile for CEO the future at CN. They will look for all candidate known and unknown. The search will remain confidential. We won't talk about candidate before the committee has a recommendation to make the deboarding the whole Board of CN eventually, as it did in the past, we'll weigh in in the final decision, so we know there is some candidate out there, at least one, but I think the world is bigger than that. And before the Board plan, you want to do with to be very thorough.

Amit Mehrotra: Okay. Okay. That makes sense. Thank you very much. Appreciate it.

JJ Ruest: Thank you. Thank you.

Operator: Your next question comes from the line of Brian Ossenbeck with JPMorgan. Please go ahead.

Brian Ossenbeck: Hey, good afternoon.

Thanks for taking the question. Wanted to come back to technology and what benefits you think you're going to get from that across the network and maybe some of the injury ratios, the safety, the fuel efficiency, capacity. We've heard about some of these initiatives for a number of years now, so I don't know if we're on the tipping point of them actually being able to generate some benefits along those lines? Maybe, perhaps, helping reduce the headcount. Just wanted to understand what type of benefits you're expecting in the plan for 2022 specifically, as it relates to some of these technology initiatives?

JJ Ruest: Yes. So, Rob is probably the closest to that.

Most of technology that would apply right now is in the space of operation mechanical. Rob, you want to talk about technology in your space?

Rob Reilly: Yes, absolutely. And thanks for the question. So probably the best example we have right now, is there a Thomas track inspection cars. We now have 10 of those that are running from coast to coast to coast covering our core main.

In some subdivisions, they're covering 15 to 20 times the previous inspection. That's really given us real-time information as we see it today. And that's allowing us to make better decisions really, when you look at our Capex for next year, a big part of that is based on using that technology, especially when it comes down to how we replaced ties in our undercutting that's a big part of our basic maintenance. So, we are seeing those results. When you talk about fuel efficiency, we continue to raise the bar.

We are the industry leader. Just in the last 2 years, just from our initiatives alone, we saved CAD$75 million just from those initiatives. That's excluding fuel price and consumption, so really good work. We're continuing to see if, James, I don't know if you want to mention anything regarding the actual dollars for next year, but we are seeing the benefits.

James Cairns: Now I think I think in terms of dollars as you remember, Brian, we were shooting for a range of CAD$200 million to CAD$400 million.

I think that we slowed down a little bit in 2020 because of COVID. As you can imagine. But if your account for 2022 and 2023, I think we will be in the high range of those benefits and we're continuing to track those very closely, so quite bullish about technology.

JJ Ruest: And maybe technology also has a big part of our future on the commercial side. I don't know if Helen or Keith wants to talk about some of the stuff that we do, technology wise.

That is where they aim to attract more business or make business stickier on the CN.

Keith Reardon: I'll start, Helen, but we're actually deploying some technologies now at our Intermodal terminals that are improving the efficiency of the terminal, the capacity of the terminal, and the safety of the terminal. And that's going very, very well. It's enabling us to do more business through the terminals. It's creating a better customer experience for our trucks.

They come in and out of the terminal, and we have many more of those initiatives that are underway. But Helen, you've got a few [Indiscernible] Okay. Brian, with that, we'll thank you.

JJ Ruest: Thank you, Brian.

Brian Ossenbeck: Okay, I appreciate that.

And best of luck to you, JJ.

JJ Ruest: Thank you.

Operator: Your next question comes from the line at Benoit Poirier with Desjardins Securities. Please go ahead.

JJ Ruest: Salut, Benoit.

Benoit Poirier: Yes. Good afternoon, everyone, and best wishes, JJ, on the next steps. With respect to the supply chain issues, could you maybe provide some color on the business segments that are impacted the most and whether, it should become a tailwind going into 2022 as this becomes better.

JJ Ruest: Maybe I can start, but definitely when you look at the port business, business is somewhat down because things on the ocean are not working the way they should. So, we're turning this into a positive that we keep described earlier.

So now that we have some capacity at Rupert that on paper, we were not going to be available. He can do, so now, to take some spot business, shuttle service, pendulum service, with only Rupert as the only port to call on the North American side. And on locomotive, I think everybody knows the story to hold it. So, more vendors to be struggling to get shipped, which mean that you and I are probably going to be deferring our car -- purchase of a new car to next year when we have more choice of brand and color. And that's going to be a story for 2022.

Do you want to add James to what's happening in little carloads?

James Cairns: I would say the weak out liner we have is Canadian grain. I think everybody knows that story. The first 10 weeks this current grain crop was down over 1.5 million tonnes, that's bad news. The good news is we're in a very unique position in that we have some strong tailwinds with coal. We got potential of two coal plants reopening on our network.

We got the full-year effect of the tech deal that's going to drive us through for at least the first half of 2022. All in, we expect that coal is going to make up almost half of that gap we have with Canadian grain crop. And then of course, the grain crop gets reset Q4 next year and we got some very high hopes. So, if you think about coming out of 2022, we've got strong momentum with a recovery in grain through end of 2022 and to 2023. And then we've got some significant carload growth projects related to new crush plants and new -- new activity around renewable fuels, carries us forward 2024 and beyond.

That's when we start seeing the significant growth in carloads related to the hydrogen economy all around Alberta. And I got to tell you, like I said on my prepared remarks, this could be big, this could be of the scale of crude-by-rail. But this is going to be long-term ratable carloads that move by rail. Not rail when it's convenient, but rail all the time, so it's a very exciting prospects for the future. So, thank you very much.

JJ Ruest: Carloads, from Alberta to the West Coast via Rupert of Vancouver. There is also a positive story on our iron ore export. CN is doing our iron ore exports from the Gulf and then we have a trial over Rupert. And our coaster at CN is all export, either via the U.S. Gulf or via the Port of Prince Rupert.

Thank you, Benoit.

Operator: Your next question comes from the line of Jordan Alliger with Goldman Sachs. Please go ahead.

JJ Ruest: Good afternoon, Jordan.

Jordan Alliger: Afternoon.

A lot of the focus always is on operating ratio, the 57% target next year. But thinking beyond that, not operating ratio, but given the customer centric, David, that you had done, what's the update and thoughts around the longer-term revenue projection for you guys, not necessarily next year, but beyond that as you -- maybe where at the optimal are, but how do you think about the revenue growth long-term?

JJ Ruest: Thank you for the question. It's also -- I find it's a refreshing way to look at railroading. Operating ratio is a key -- KPI, but it's a by-product of the business. So, we're focusing on growth.

So, CN is looking to bring more volume in the railroad. It makes the railroad more profitable, more viable when you have more freight on it, as close to the market freight. So, we're a growth Company. We want to railroad for customers, so we need to have a customer's [Indiscernible] mindset, and culture at CN to do that. [Indiscernible] is an area where you can attract rate on the railroad.

Port business is another area where we [Indiscernible] with other railroad network to bring business on the CN, and James mentioned on the carload side. Now for us to attract companies at G2E, for example, who announced recently two more grain elevators, on [Indiscernible] tracks on 50 cars being built on our railroad, because they like the way we railroad for them as much as we railroad for shareholders. So, all these things really are -- That's the way of the future, is to use a network for what it really, it's meant to be, to move a lot of freight, and to be an enabler of the economy and try to act people like G2E or Dow Chemical to make major investment on our line, or within our line with Canadian itch to switching as an example. I think these are the things that really are what VSR's all about, is use the network, because it's very fuel efficient, lower carbon emission, it's safer than stuff on the highway, and use it for all it has the potential to be is to be a big enabler of the economy and participate into what's good here in North American. Thank you.

Operator: Your next question comes from the line of Scott Group of Wolfe Research. Your line is now open.

Scott Group: Hi, thanks. Afternoon, guys. JJ, you made some comments at the beginning of the call about July versus September operating ratio, and maybe if you can just get some color there.

And then, longer-term, it sounds like maybe there's a little bit of a change in -- from the September call as the business grows past '22, there should be further margin improvement, maybe just a little color there and how you're thinking about operating leverage longer-term.

JJ Ruest: Okay. Thank you, Scott. So as I say in my comment, and that's important to clarify that, lowering the operating ratio starts with 57 in 2022, and we're not saying 57 is the end of it, but we say 57 in 2022 and we're confident what we could deliver against that is one way the rail road would balance is one way to make sure that we create something in it for all stakeholders, users, and shareholders long-term, short-term, and making sure we don't leave the economy behind if for whatever reason the demand for twice about flotation, especially in Canada is going to surge back at some point in the future, So it's not about how low we're capable to go and how fast we get to that, it's more about how low should we go and over what period of time. But starting with 57 in 2022, potentially some permanent improvement beyond that, let us go bac k to the trade here back in the -- early in the New Year.

And volume, obviously, is an important point. I mean, as much as the Canadian grain crop right now is a huge disappointment, because we are set up for it, we have the capacity to move it but it's not at the rendezvous, we are planning for an average crop for mid -- f or late next year. And therefore, growth revenue come out, growth will be back at CN. This year, I think if grain was to be normal, we would have -- James, how much GTM growth next year?

James Cairns: 6%.

JJ Ruest: 6%.

So, it's 6% over the time you put in grain, the fact the crop's not there. So definitely it's a growth story. And definitely 57 we believe, is where we should go next year. Not as low -- not as low as we are capable are going, but it's more about where we should go, and it starts with the 57 in 2022. And after that, we'll see more to come in the future earning call.

Thank you, Scott.

Scott Group: Thank you.

JJ Ruest: Amit, sorry. Yes. You had a question about August and July, so maybe I think on that point, Rob would be in better position to talk about the movement in our OR month-to-month and what happened here in July at CN.

Rob Reilly: Hey, Scott. Even though we don't talk about OR in terms of months, if you just -- if we look at June and where we're at headed into July, of course, we lost the bridge right at the beginning of July for 2 weeks. And then that was followed by a ministerial order. So, there's no doubt that July's performance impacted the quarter. But if you look at June to July, there's nearly a 10-point swing in OR and the same thing when you look at September to July.

So hopefully that gives you a little bit of color what we're looking at there.

JJ Ruest: Yeah, July was quite challenging from solid June. And then we had -- we lost the mainline and all that goes on with it.

Scott Group: Thank you.

Operator: Your next question comes from the line of Tom Wadewitz with UBS.

Please go ahead.

JJ Ruest: Hi, Tom.

Tom Wadewitz: Yes. Good afternoon. JJ, I had one that's a minor follow-up on a prior question and then another one if you will.

On timing, is the timing of your retirement at the end of January intended to coincide with when the board would be done with their decision? Is that why you said it accordingly or it seems almost implicit in that. And then the second question just would be your broader thoughts on supply chain, and we hear so much about labor constraints, but there's not a ton of visibility to that easing up. If you want to -- want to offer some broader thoughts about rail capacity improvement and volume growth broadly in '22, whether that's pretty visible or is labor a significant risk to how CN runs, or North American Railroads run. Thank you. JJRuest: Thank you.

On the first one, I'm not going anywhere. I've announced my retirement but at same time, my job and as my opening comment, the whole team here on the table, our job is to deliver a very solid result in the fourth quarter, to finish on a high and prove to our investors and our customers that our 2022 business plan is real and to be really setup to enter 2022 on a very solid footing. And I want to be here to deliver those results back to you guys and girls sometime in January. In terms of the timing, I know the board is not on a specific timeline. They will find and determine the best candidate when they are ready.

And therefore, my mandate for the board is to be -- no, my heart is to CN. I've been here for 25 years. I want to do what's right for the Company. And I will leave when the Board needs me to leave, that is when the board has the proper successor to be ready to step into jobs. So that's why the flexibility in the beauty of all this come together.

But they are very committed to the fourth quarter, committed to selling the Company's strong for whether the next CEO to have a great solid 2022 and committed to be here until to find that the board has announced to the person that will succeed me, whether it's a candidate from inside or outside, from anywhere around the world in North America, female, male or female. I'm here at the disposal of the board and our shareholders. And I've done this long enough. My heart is to make sure that we do the right thing for the next step of CN. And regarding the supply chain, I think maybe James and Keith may have a better view than me on that -- on that part of the question.

James Cairns: Yeah, I would say if you look at -- out of 2022, every single segment across the end is going to be growing in 2022, with the exception of our grain business. And grain, as we talked about is a big hit. I pivot back to say, we are -- we're so lucky to have coal as the back fill for grain as we go into 2022. And then again, just looking forward about all the growth prospects that start kicking in the second half of 202 in to 2023, it's something really, really to be excited about and it's going to really create some opportunities for us as we move forward here.

JJ Ruest: And Rob on labor.

Availability of labor to move the railroad. I know there's some question on some of the U.S. property around the U.S, but what about CN?

Rob Reilly: Yeah. So, we're in good shape from a labor standpoint. We do see the sporadic as we have over the last year-and-a-half with the pandemic.

We do see the sporadic outages that impact our labor, but really, it's short-lived, and we're in good position here to handle it from a labor standpoint.

Tom Wadewitz: Great. Thank you for the time. Thanks for the perspective. JJRuest: Thank you, Tom.

Operator: Your next question comes from the line of Chris Wetherbee with Citi, please go ahead.

JJ Ruest: Hi, Chris.

Chris Wetherbee: Hey, thanks and good afternoon. Certainly, best of luck, JJ, in the next endeavor for you. I wanted to maybe ask a little bit, go back to that comment about September being 10 points better than July.

And obviously, that's a function of both, probably, July not being particularly good and September being certainly better and gaining some momentum. But when you think about that, coupled with what you've already announced around headcount reductions, a CAD100 million of cost savings that you're capturing here in 2021. I'm curious how you guys think you're running, or will be exiting 2021, in terms of that run rate towards the 57th. It's always been our assumption that there are some benefits of removing, say, Great Lakes from the business in order to get to that 57, so mixing the OR down by the loss of some of those higher OR businesses. But I'm curious what maybe the underlying businesses running up today based on some of the progress you've been able to make so far.

JJ Ruest: Maybe just without getting into, no guidance by quarter or by month. And just we ma -- we said we have a target of operating this with 57 for 2022. And in any railroad, including Northern railroad, there's some seasonality in OR. December, January, February, March, our winter month, especially in Western Canada where 50% of our business is, so the operating ratio for these 4 months is higher than the other 8 months, you got to take that into account, number 1. Number 2, we have made progress during the course of the summer, as Rob mentioned recovering from the log effect that we have lost the mainline to Vancouver for two months -- for two weeks.

I'm sorry. And also, the work we've done here on labor and on the September 17th. So, we're making progress. And I said, we're really committed to enter 2022 on good footing to deliver against our commitment. And if you want to add some other things, just laying without getting into --

Ghislain Houle: Yes,

JJ Ruest: -- too deep in the guidance.

Ghislain Houle: Yes, I can add Chris, that. Based on what JJ is mentioning, we are very confident to deliver our earnings guidance of 10% EPS growth. So, I mean we have essentially 10 months behind our belt. So, we have two months left, so we're very confident of that. And the OR will come with that guidance on EPS.

It will be the result of that EPS growth.

JJ Ruest: Yeah. And also, the result of the -- as you know, you've been at this for a while. The last two weeks of December, sometime are kind of a crapshoot, meaning if we could have good weather, bad weather, or customers might decide that they shut down because they want to save on labor cost and sell the product they have in their warehouse. It all depends how they view the economy.

The last few weeks of the quarter and the fourth quarter, sometimes, our demand spike up, sometime demands spike down. It all depends how everybody is reading the economy and all the -- what they want to do with some of the closing the year-end book with lots of product on -hand, or will have nothing on -hand. But we're working hard to do what we said we would do. And I think that hopefully, you see that in our third quarter result, and you see that we've been able to bounce back since the challenge of the month of July, which was after a fairly solid month of June. Hopefully that helps.

Chris Wetherbee: caller.

JJ Ruest: Thank you.

Operator: Your next question comes from the line of Steve Hansen with Raymond James please go ahead.

Steve Hansen: Yes. Good afternoon.

Thanks for squeezing me in here. I'll just echo everyone else. JJ congrats on a fantastic career. But as it relates to my question, in the new focus in the '22 plan, I'm just curious whether the Board is contemplating any changes to the compensation structure of management to align around this new plan as we're looking forward, I guess, beyond even 2022? Thanks.

JJ Ruest: Yeah, it's a good question.

And it's a question that the Board ask s itself at all time s. Every year, there is a discussion around how -- what kind of compensation system should we have, and whether or not we make some change for the compensation systems so that stays current about who we are today and what we want to be tomorrow. And those discussions take place all the time, including in current times. So, I would say, it's just an ongoing discussion whether or not we have an activist or not, it's something that the boards always look ed at. And they always look at the discussions in terms of the long term.

And what is at the decline, the CN long-term strategy, and it needs to be aligned with that. We have nothing to say about what it might be the future. In any event that's enough for the management to do that. It's for the board and -- but it's an ongoing discussion -- but it's an ongoing discussion at all time, not just in current time. Thank you.

Steve Hansen: I appreciate the caller.

Operator: This concludes the question-and-answer session. I would like to turn the call over back to Mr. JJ Ruest.

JJ Ruest: Well, thank you.

Thank you, Charlie. And thank you for joining us today. We're into exciting time at CN at all time. We were very hard this summer on closing and transaction, which was very strategic to us and very much in part of the long-term strategy of growing our network. We convince d a lot of supporters, convinced a share of the board of PCS twice, could not get the regulators to be onside.

So now we're very focused on our current network and the great network that we have, and exploiting that the best that we can. And then to that effect, we also rolled out our 2022 business plan early back in September 17, and that's where we're very focusing on. As I said earlier, I'm not going anywhere. I'm here with the team to deliver a very solid fourth quarter result and make sure that we sign through 2022 with the year setup that we could be successful next year in producing the result that we talked about. And I think today we've also clarified some of those things that maybe are clearer to you at this point.

So, between now and then, stay safe and we'll see you in January. Thank you.

Operator: You're welcome. The conference call has now ended. Thank you for your participation.

You may now disconnect your lines at this time.