Operator: Good afternoon. My name is Sara and I will be your operator today. Welcome to CN 's Fourth Quarter and Full Year 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: So good afternoon, everyone, and thank you for joining us today to discuss CN 's fourth quarter and 2021 and full year results as we continue to make progress on our strategic plan, re-defining railroading for the 21st century. We are joined today by Mr.

Robert Pace, Chair of the CN board who would like to kick things off this afternoon with a few words about our new CEO. Then, we will turn the call over to JJ Ruest, outgoing President and CEO; Rob Reilly, Executive Vice President and COO; Ghislain Houle, Executive Vice President and CFO; James Cairns, our Senior Vice President, Rail Centric Supply Chain; Keith Reardon, our Senior Vice President, Consumer Product Supply Chain and Helen Quirke, our Senior Vice President and Chief Strategy Officer. They will talk about the results in the fourth quarter and full year of 2021. We will then hold a questions and answer period and I would like to remind you to please limit yourself to one question. Now before we get started, we'd like to draw your attention to the forward-looking statements and additional legal information, which are available at the beginning of the presentation.

As a reminder, today's presentation contains certain projections and other forward-looking statements within the meaning of the US and Canadian Securities law. These statements 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. So, before we begin, board Chair Mr. Robert Pace would like to say a few words. Robert?

Robert Pace: Thank you, Paul.

Our board today is pleased to announce the appointment of Tracy Robinson as President and CEO of CN. Tracy brings 35 years of operational management, strategy development, and expertise which will help drive growth for CN, operational improvements and long-term shareholder and stakeholder returns, and ensure we continue to attract a world class workforce. She comes to us from TC Energy, where she holds the title of Executive Vice President and President of Canadian Natural Gas Pipelines, and President of Coastal GasLink. She's been there for approximately eight years. And prior to that she's had a career of 27 years at CP, where she held positions in operations, finance, and commercial.

Today, we are also pleased to welcome a new board member, Jean Charest as a member of our Board. Jean Charest has a distinguished public service career for over 30 years in Canada, including serving as the 29th premier of Quebec. Under his leadership, Quebec experienced a sustained period of economic prosperity and improved significantly major infrastructure. Our board will benefit from his knowledge of Canada and his global network. And finally, we're excited to announce that Shauneen Bruder, a Director of CN will become the Vice Chair of our board and I want to thank on behalf of all our board the outstanding job that she did as chairing the search committee for our new CEO, along with Justin Howell, Kevin Lynch and Bob Phillips.

And I know she'll have a distinguished career at CN in the future. And on that note, I’d just like to highlight the fact that Tracy will not be joining us on the call today, because we want to focus on the fourth quarter and year end results. So on that note, JJ, I'll turn the meeting over to you.

JJ Ruest: Thank you, Robert, and congratulations on all of these excellent news and good evening, everyone. Let's start with the fourth quarter highlights on page five, a quarter that demonstrated CN resiliency and profitability.

The strategic plan we introduced in September is already showing tangible results in Q4. All in, the business produced adjusted diluted EPS growth of 20% and adjusted operating ratio of 57.9% and free cash flow for the full year of $3.3 billion, at the upper end of the guidance. We also achieve a number of noteworthy all time record in 2021, including an all time best safety performance on personal injuries, an all time best performance on fuel efficiency, and an all time best OR for a fourth quarter at CN. The EPS growth came from both pricing and cost initiative. Incremental margin was solid, and labor costs and productivities were also very solid.

Volume was softer, mainly because of the BC line wash out and lower level of Canadian grain. As a reminder, the BC wash out took out our mainline to Vancouver for three weeks, from November 14 to December 4. This major segment of our rail network normally sees about 21% to 23% of our total revenue running over these tracks on any given day but in spite of this condition, the CN team performed. The ROIC for the year was 14.1% and sequentially improving towards our 2022 guidance of 15% return on investment capital. Ghislain will go into the detail later.

Regarding pricing and upscaling, James will provide evidence of the continued momentum on all aspects of how we price an upscale, that is priority segment premium, weekly auctions, same-store pricing, demurrage and storage. Regarding labor costs, we ended the quarter about 1800 fewer people than last year and sequentially about 1150 fewer than at the end of Q3 of this year. We call that we took action right after we announced the September 17 strategic plan, so we will benefit from these headcount reduction throughout 2022. Regarding the strategic review of non-rail business, the shutdown of the freight forwarding business is basically completed, we are in negotiations regarding the divestiture of the Great Lakes vessel, and strategic discussion around options for transacts ongoing. On regarding our ESG agenda, CN was recognized for leadership in corporate sustainability by CDP, securing a place on its prestigious A List for tackling climate change.

CN was also recognized for the 10th year in a row in the Dow Jones Sustainability World Index. The CN board secured a first place ranking in Canada for governance by The Globe and Mail. I am pleased to announce that the Board of Director approved today a 19% dividend increase for 2022, our 26 consecutive yearly dividend increase. The Board also approved a new share buyback program for an amount in the range of 5 billion dollars Canadian from February 1, 2022 to January 31, 2023. Together, these actions demonstrate CN's commitment to a balanced capital allocation program that puts a priority on returning excess capital to shareholders.

The strategy plan was released back in September, it's progressing very well. And we are confident in our ability to deliver industry-leading return for our shareholders over the long term. And with that, I will turn it over to Rob who will cover the operation. Rob?

Rob Reilly: Alright. Thank you, JJ.

In Q4, CN once again showed its resiliency by restoring our network and meeting the needs of our customers safely and efficiently after the catastrophic weather events in British Columbia. The credit and the thanks goes to the dedicated men and women of CN who worked around the clock to return our tracks to service in November and December, restoring over 50 outages caused by the significant rains. As JJ indicated, we've made considerable progress against the goals set out in our strategic plan on September 17. The results of those efforts began to take hold in Q4, giving us momentum heading into 2022 and the confidence in our ability to make gains and create additional shareholder value in 2022 and beyond. The sequential headcount reduction of 1150 exceeded the target we set in September and was completed in Q4.

Our other efforts in cost containment and purchasing service and materials showed significant reductions year-over-year. Moving to page eight, despite the weather impacts to our core operating metrics in the last half of the quarter, the CN team improved in every operating metric again in 2021 versus last year and 2019. The exception was train length, which was flat year-over-year and remains an opportunity for us going forward. From a safety standpoint, as JJ mentioned, CN employee performance improved nearly 20% in 2021 to an all-time best for fewest injuries, while the number of accidents improved as well reducing our cost by $40 million. Our leadership position in sustainability was further enhanced by our all-time record and industry best fuel efficiency.

Our efforts reducing carbon emissions in 2021 also saved us an additional $30 million. Our railroad is in great shape, and we are very well prepared to capitalize on future growth. On page nine, as announced on December 14, we signed a long-term strategic partnership with Google to transform CN supply chain as part of digital scheduled railroading, to deliver new customer experiences, and modernize our technology infrastructure in the cloud. The first part of the partnership is IT modernization. This will involve transition of key infrastructure and applications to the cloud, which will allow us to improve IT operating costs and better support the operations.

The second part of the partnership will drive our innovation agenda and will employ an intuitive digital platform powered by Google clouds’ AI and machine learning tools, which will ultimately give customers and supply chain partners more visibility. Our partnership with Google Cloud is central to our strategic plan and reinforces our industry leadership and commitment to digital scheduled railroading or DSR. With that, I'll pass it on to James and Keith to provide some insights on the efforts of our marketing team.

James Cairns: Thank you, Rob. Disciplined approach to pricing and railway cost inflation has been a core competence for the CN team for many years.

We've been an industry leader and consistently pricing ahead of railway cost inflation in terms of timing and scale. Our customers understand that in order for us to continue to invest in capacity to support their growth we need to maintain price discipline. Throughout 2021, we saw the real effects of many of our yield and pricing initiatives delivering an all time record same-store price of 5.4% for the year. This momentum is expected to continue through 2022. The mix of our business sequentially improved through the year with a balance of carload and intermodal coming more in line with pre-pandemic levels in Q4.

The CN sales, marketing, and operations team again delivered double-digit intermodal and automotive contribution margin improvement over Q4 2020 and sequentially versus Q3. Train density, velocity enhancements, single destination train packages, productivity improvements in our terminals and in our first mile service, all contributed greatly to the margin improvements. Capacity has value. We don't wait for annual renewals to test the market. We utilize key tools such as guaranteed equipment pricing, premium priority port trains and equipment auctions to allocate incremental capacity when demand exceeds supply.

This multifaceted approach allows for real price discovery and provides insight to the value of our capacity. Threshold pricing and seasonal pricing are additional tools that were used to price incremental capacity at the market rate when an existing contract is in place. We're always careful to match price to capacity. When a market is hot and more capacity is needed, we use price to allocate scarce capacity. The pricing and yield story for CN is strong, and we continue to focus on balanced profitable growth.

With that, I'll turn it to Keith to talk about the CN growth story. Keith?

Keith Reardon: Thank you, James. In Q4, we saw revenue growth in all carloads segments with the exception of Canadian grain. West Coast coal was up close to 50% in the quarter, while refined petroleum products and propane, on the back of new and growing export capacity in Prince Rupert, both continued to set new Q4 revenue records. Frac sand revenue was up 30% in the quarter and finished the year over 20% better than 2020.

While worldwide supply chain disruptions and the BC flooding adversely affected our Q4 intermodal and automotive volumes, we did experience 30% growth versus 2020 in our international intermodal business through the ports of Halifax, St. John, New York, New Jersey, Philadelphia, New Orleans and Mobile to set an all time record. Domestic revenues were up 12%. The transacts business, which just posted their best-ever quarter, along with our retail volumes, our Canadian wholesalers volumes and the port transload business were all solid before and after the BC flooding. We continue to see sequential improvements in our automotive segment, which positions us well for 2022.

Our carload franchise is unique, as we have a strong coal growth story on the back of tech volumes to Rupert and Neptune, as well as the restart of the CST in Coal Valley Mines in Western Canada. This is expected to offset the weak Canadian grain volumes expected for H1 2022. We're adding new transload capacity in the Greater Toronto Area for refined fuels that would have otherwise moved on the TN PL pipeline. We are further solidifying our position as the dominant carrier for undiluted heavy crude, with a start up late last year of a new undiluted bitumen unit training facility in Saskatchewan capable of handling volumes in the range of 40,000 barrels per day. The increasing demand for renewable fuels is expected to be as transformational to the grain business this decade as ethanol was in the early 2000s.

We have three new CN served renewable fuels facilities ramping up this year in the Gulf. Longer term, we see new carloads coming from the emerging hydrogen market. This market could be at the scale of crude by rail at its peak, but unlike crude this will be long-term ratable business. With regard to intermodal and automotive, we continue to drive business to our CN served ports, in line with our partner Ocean Terminal Operators bringing on import and export capacity over the next several years. On the East and Gulf Coast, we see the 2022 volumes continuing to remain strong, with new strings being introduced to the CN served ports as solutions to reach US Midwest markets.

CN’s auto franchise is well-positioned to drive growth for our customers as we continue to innovate and support their industry's evolution. The pricing, yield, and profitable growth story for CN is strong and well balanced. I'll now pass it on to Ghislain for the financial perspective.

Ghislain Houle: Yeah. Thank you, Keith.

My comments will start on page 14 of the presentation, which will provide more visibility on our outstanding fourth quarter performance. Revenues for the quarter were up 3% to $3.75 billion, despite volume on an RTM basis being down 11% due in large part to the washout in BC, lower Canadian grain volumes and the sustained cold snap during the second half of December. We delivered solid pricing above rail inflation and delivered on yield, optimizing CN’s precious network. Our adjusted results exclude advisory costs related to shareholder matters. We delivered a record Q4 adjusted operating ratio of 57.9%, which was 350 basis points lower than last year.

Q4 adjusted net income was slightly over $1.2 billion, with adjusted diluted EPS of $1.71, up 20% versus last year. Turning to page 15, let me highlight a few of our key expense categories expressed on a constant currency basis, many of which are driven by our initiatives under the strategic plan. Labor and fringe benefit expense was 10% lower versus last year. This was mostly driven by a lower average headcount and higher capital credits from more capital work in the quarter. Purchased services and material expense was down by 10% versus last year, mostly due to lower repairs and maintenance, trucking and transload material expense -- and material expense.

Fuel expense was up by over 40%, driven by a 62% increase in price, partly offset by lower volumes in terms of gross ton mile. This quarter, we also continued to see improvement in equipment rents, with a 13% decrease versus last year, driven by lower car higher expense. Turning to our full year results on page 16, I am very proud of our adjusted EPS growth of 12% versus last year, demonstrating a resiliency in capacity to adapt to quickly changing conditions. These great results were achieved despite the loss of our Vancouver main line for a total of over five weeks this year. Now moving to cash on page 17, we generated free cash flow of $3.3 billion for the year at the high end of our guidance.

Finally on to page 18, let me provide an update on our 2022 targets we introduced back on September 17. I'm pleased to report that with the solid progress we have made in Q4, we remain confident in delivering on our 2022 financial outlook of 20% EPS growth, around $4 billion of free cash flow, 15% ROIC resulting in a full year operating ratio of 57%. Our capital end growth for the year will be at 17% of revenues. Excluding the impact of the significantly weaker Canadian grain crop, the volume environment remains positive, as outlined by Keith. We are continuing to focus on yield management and cost efficiencies.

I will now turn the call back to you JJ for some closing remarks.

JJ Ruest: Thank you, Ghislain. And just to close it before we go to Q&A. As a reminder, on September 17, we announced the next step of our strategy to redefine railroading for the next generation. And as you saw during the Q3 and Q4 result, we are on track to deliver it on our strategic plan.

Entering 2022, supply chain continue to be disrupted and we expect volume growth will be mostly a second half of the year story with a return of Canadian grain at that time. As you saw in our result, we operate with nimbleness and our network is resilient. We already have the capacity to respond to demand when it materialize and their team is running a solid price and cost action plan. I'm very pleased with the solid progress we've made since last summer. The team also responded very decisively to the huge network disruption that we had back in July and more recently in November in British Columbia.

So kudos to all of our engineering and operating people out there who work very hard. CN has a bright future of leveraging technology combining with operational excellence, enabling us to build the premier railroads of the 21st century and delivering industry leading return for our shareholders over the long term. And now, operator, we will turn it back to you for the question.

Operator: The first question comes from the line of Cherilyn Radbourne from TD Securities. Please go ahead.

Cherilyn Radbourne: Thanks very much and good afternoon. And JJ, I want to start by wishing you our very best in your retirement.

JJ Ruest: Thank you.

Cherilyn Radbourne: It is almost hard to detect severe flooding in the results in Q4, so I was just wondering if there's any way you can help us frame the revenue and earnings impact of that weather incidents and how much of a traffic backlog there might be to move as we enter Q1?

JJ Ruest: So thanks for that the question, obviously, a very important question. Ghislain can help quantify it a bit and James can talk to us about, you know, what might be still around that business.

Ghislain Houle: Yeah, Cherilyn, thanks for the question. Listen, as JJ mentioned, we did lose our main line from middle of November to early December and this is the main line going to Vancouver, so we did quantify it. And I would tell you that it had an impact of around $120 million to $130 million of revenue that we could not move. We thought we were going to be able to catch some of that back up in December, however, we got hit by a cold snap mid December to the end of December, so we did not catch up any of this in December. And I'll let you James jump in, in terms of the business that's allowed there to move from that flooding.

James Cairns: Yeah, we're not going to get it all back of course, Cherilyn, but, there's a lot of business that's still there to move. We're going to have a very, very busy first quarter here once we get some good weather behind us. You think about the grain, you think about the coal, you think about the international imports, they're all there ready to move and Rob and his team are excited to get after here in the first quarter. Thanks for the question, Cherilyn.

JJ Ruest: Thank you.

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

Konark Gupta: Thanks. Thanks for taking my question and I got my best wishes for you, JJ. So my question is on the supply chain issues and the labor issues going on in the industry right now.

So in light of what's happening in the trucking market with the vaccine mandates, I'm curious as to what kind of hiring outlook you have for employees, now given you have these structures, a lot of employees here, the demand environment seems pretty strong this year. Do you see -- do you anticipate any kind of need for significant hiring at some point this year?

JJ Ruest: So on the CN part of how are we doing with labor, Rob is very well equipped to do that. And as it comes to the impact of supply chains for business, I think Keith will do that after that. Rob?

Rob Reilly: Yeah, Konark. In terms of our labor, we're right sized to the volumes that are out there right now.

Really, in terms of the virus itself, we did see a spike in terms of positive cases here over the holidays. In early January, we've seen that come down quite a bit. As you look out into the year, our second half is really where the growth is going to be as we look forward to a more robust Canadian harvest. So we will do some hiring here in the first half of the year in preparation for that but also for attrition, won't be on a one to one basis, because we'll have productivity in there as well. But we will do some hiring as this first half evolves.

JJ Ruest: And Keith, truck drivers disruption, how we leverage these supply disruptions?

Keith Reardon: Yeah, so the supply chain and our customers, they're actually pivoting away from just in time inventory program to more like just in case model. So, as supply chain disruption creates a stock out for a lot of customers. Just in time models rely more heavily on trucks than intermodal, so there is opportunities for intermodal as that model has changed. In addition to that, the driver shortages and the lack of truck capacity are in part reasons for the shifts of the customers for these supply chain shift, excuse me. I understand you couldn't hear me, we got the mic on now, apologize for that.

Our intermodal products are right in place for the truck drivers to be able to -- excuse me, get a little flustered because I was offline there sorry. The drivers’ shortages and lack of truck capacity are things that are boding well for us to pick up some volume. As JJ mentioned, vaccine mandates and the cross border demand has more recently developed with driver vaccines and overall driver shortage issues. Just this past week, we saw a big uptick in those discussions with our retail customers, our transit customers and our wholesale customers. So the opportunities are definitely there, just not sure how to quantify that but the opportunities are there and we're going to work with our customers to offer them the services.

We have the capacity on their trains and we're moving forward on that. I apologize for that.

Konark Gupta: That’s okay. Thank you so much.

JJ Ruest: Thank you, Konark.

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

Brian Ossenbeck: Yeah. Hi, good evening. Thanks for taking the question.

JJ, congrats on the retirement.

JJ Ruest: Thank you, Brian.

Brian Ossenbeck: it's not uncommon for the industry here but I know off to a slow start to begin the year for volume. So just want to see if you can pull them more color around the back half recovery. Clearly, Canadian grain is going to be a big part of that.

You walked through some of the other opportunities but once you can maybe drill down a bit on that and maybe put some pros and cons around what you have more confidence, more visibility in as you look into the back half and start prepare for that.

JJ Ruest: Okay. Thank you. It is a good question. And just maybe starting with the current environment, it has been still, you know, very challenging operation, especially in Western Canada, Canada with a quarter-to-date but the second half looks bright.

You know, James, you may want to talk about the bulk and merchandise actually has been the solid story all along and there is freight out there for us to move.

James Cairns: Yeah, I mean, it's been a tough start to the winter but you know, winter -- we're no strangers to tough winters here. We're very confident we're going to meet our full year guidance. The demand is there. I think about the early winter snowfall, we're having here in the prairies, it's creating tough operating conditions, but I'll tell you, we need that snowpack so we can have a good crop recovery here for next crop year and all indications are that's going to happen.

So if you think about the second half of this year, when grain comes back, that's significant. The grain, this poor crop is going to hit us in the first half of the tune of about $300 million, a fair crop, normal crop, we get all that back in the second half, so we're pretty excited about how we're going to finish out 2022. And like we said earlier, we still got a lot of demand there to move into first quarter, first half of this year, so we're going to be busy. Rob and his team are going to be real busy here.

JJ Ruest: To wrap this up, we have -- for the DC World will have an expansion coming this summer, I think it's around July, they're going to be of 1.8 million Tu that would be just in time for the fall peak at a time where Long Beach might be kind of in heavy negotiation with their long shore person.

So we will want to exploit these two things as well. Thanks for the question, Brian.

Brian Ossenbeck: Thanks, JJ.

Operator: Your next question comes from the line of Jason Seidl from Cowen, your line is open.

Jason Seidl: Thank you, operator.

JJ, let me join everyone in wishing you all the best. It's certainly been a pleasure.

JJ Ruest: Thank you.

Jason Seidl: I wanted to talk a little bit about the pricing side. You guys obviously call that out.

We've seen that with the other two rail operators that have reported. Given some of the ongoing supply chain constraints, especially in the cross border that might be developing with the vaccine mandate, do you think that that pricing environment is only getting better for you, as we are in ’22 here?

JJ Ruest: Well, James can talk to that. Definitely fourth quarter story was about price and costs. So James?

James Cairns: Yeah, when I look at my crystal ball, I really don't see it slowing down. I mean, we price for the market, and we do it very effectively.

And I think the market demand is out there, you know, there's value for capacity and capacity is something we have and as we continue to have ongoing discussions with our customers, everyone's kind of settled in and realize that there's going to be a higher price for rail service moving forward, as there's many good. So fully expect that strong pricing environment to continue through well into ‘22 and beyond, so. Thank you for your question.

Jason Seidl: Thank you guys.

JJ Ruest: Thank you, Jason.

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

David Vernon: Hey, good afternoon, everyone. I just actually had a question for the Chairman Pace, if he's on the line taking questions today.

JJ Ruest: I don't know if he's still on the line but you can ask the question.

David Vernon: Sure. The question really, JJ, I mean, the numbers are obviously very strong but the question was going to be, you know, rightly or wrongly, the market's perception is that the operational discipline focus around CN maybe has lapsed. Obviously, the numbers speak for themselves. But I was just wondering if the if the Chairman might have wanted to comment as to why a decision to maybe go outside the industry from someone who doesn't have maybe as much hands on experience with CSR is the right solution for CN for the next three to five, seven years, whatever it may be.

JJ Ruest: Well, thanks for the question.

And I think to your point, the numbers speak for themselves. We have a very solid operating ratio in Q4 and we were tracking it also from Q3 to Q4 and the ambition we have for this year in our view, a balance but they're also ambition. It doesn't mean that 57 is the end of what we could do but it's definitely a solid with a 20% EPS. As it relates to Tracy, many of us know Tracy, she's been a CT for a long time. I wouldn't define her as an outsider.

I think she'd be more like myself, but she has basically two career; one in her case, mostly in the rail and partly in the energy sector, heading TransCanada -- a portion of TransCanada PipeLines. She was on the board of Company. In other words, at CT she did a number of jobs in operation, customer service, treasury, and for time early days in my career, I was competing with her fiercely in some of the segments. So she knows the railroads, she knows the network, she knows the competition, she knows CN. She is passionate about railroading and I think you will find that her love is very much into -- passion is in the railroading.

So I think, in my view, she's a railroader and she's not ready from outside but she did work for a number of years, I think about six to about eight years in a network company and energy space. And by the way, just on that point, CN has a huge potential on the energy space. When you talk about the blue hydrogen and the prospect around Edmonton, and the petrochemical plant, which are promoted out there, which is to export products to Asia via are Rupert. I think that will be one of the things that she will grasp and understand it very quickly what is it that we need to do to exploit, you know, that bright future on the western part of the network.

David Vernon: All right, JJ.

Thanks for the commentary and congratulations and good luck in your next chapter.

JJ Ruest: Thank you, David.

Operator: Your next question comes from the line of Ravi Shanker from Morgan Stanley. Please go ahead.

Ravi Shanker: Thank you.

JJ, again, congrats and good luck for the next phase. I wanted to follow up on the pricing commentary. Again, just wanted to dig a little bit deeper in and I get a bit of color, but has something changed with your go to market strategy and pricing and also how do we think about that pricing level going forward? Is it going to be like mid-single digits, pushing high single digits on an absolute basis or are we still kind of pricing very much relative to inflation, so if inflation comes down, that pricing kind of comes down as well.

JJ Ruest: So we're using many, many different levers in our pricing that's why we call it total price. And, you know, James can expand on that.

And we are above rent inflation. Rent inflation has really picked up. What was the latest number, James?

James Cairns: I think latest was just shy of 7%.

JJ Ruest: And, you know, you want to talk about pricing going forward?

James Cairns: Yeah, you know, Ravi, I think the marketplace there is very favorable to increase pricing. When you say what kind of changed, if you look at what happened, as we developed 2021, demand really picked up and capacity really gained to have value and we're pretty smart at CN getting the right price for the capacity we have available in the marketplace.

So that's been very successful. If you think about just this December, we renewed almost in the range of 15% of our total book of business with an average rate of a 5.5% just in December. So you think about that carrying through all the way in 2022. First half of 2022, we got about another 25% of our book of businesses up for renewal. So, this is a big opportunity for us and I think the time is exactly right and we've got the capacity and the ability to move our customers’ freight and help them win in their end markets.

So, am very, very excited about prospects for 2022 in price, and not just same-store price, but total price. All these things we do to try and lean out a little bit more value for this capacity that we have to offer in the marketplace, so excited about that. Yeah.

Ravi Shanker: Thanks, James and well done, JJ.

JJ Ruest: Thanks, Ravi.

James Cairns: Thank you, Ravi.

Operator: Your next question comes from the line of Jon Chappell from Evercore ISI. Please go ahead.

Jon Chappell: Thank you. Good afternoon, everybody.

Just Ruest or Rob maybe, you pointed out on the cost side, the headcount is obvious and the fuel price is the higher price but offset by lower volumes. Are there any impact to maybe purchase services, equipment rents, anything else on the cost side is on the actual lack of volumes in 4Q because of the mainline washout, but as things start to accelerate in the first half of the year, maybe you need to add a few more head, as mentioned due to attrition, a little bit more equipment that we may be seen the trough of the cost side with volumes inflecting, you can see a little bit of cost push as well.

JJ Ruest: Rob, you want to stay on?

Rob Reilly: Yeah, so really none of the impact from the floods was in that PSM. Really where we saw the benefit was some of our older locomotives, we're able to light lay up some of our older, least reliable, very expensive to maintain. That was a big part of that.

We have seen the benefit of our capital investment with grain cars, that's allowed us to turn back some grain leased cars as well, that's also been a part of this -- that we saw here in Q4.

JJ Ruest: I could add to that as well is that if you remember at the end of Q3, when we were talking about our strategic plan on purchasing services and material, we said we had identified $100 million of cost saving initiatives that was already secured. I think right now we're still making good progress on this and I would tell you that we're about 150 million identified as we speak. So again, a lot of different things coming together in terms of reducing contractors, laying up all locomotives, as Rob just mentioned, consolidating facilities, and a ton of projects that we have very, very detailed accountability on and we're very confident that we will deliver on our target. If you remember on P&SM, in our strategic plan, we had to deliver $250 million, and we're continuing to progress on that.

So very, very proud of that progress. Thanks for the question.

Jon Chappell: Thank you, Ruest.

Rob Reilly: Thank you, Jon.

Operator: Next question comes from the line of Brandon Oglenski from Barclays.

Please go ahead. Brandon Oglenski : Hey, good afternoon. And JJ, it's been a pleasure.

JJ Ruest: Thank you. Brandon Oglenski : Congrats on getting the deal done tonight.

So I guess you know, in light of that, can you just talk a little bit about maybe what happened last years? Did you guys just get maybe a little bit complacent on costs are maybe not enough focus on the non rail businesses. And maybe more importantly, from your perspective, as you exit CN, what's the biggest opportunity that you see going forward, as you leave the company? Thank you.

JJ Ruest: Thank you. Thank you for the question, Brandon. No CN -- complacency is not part of the CN culture.

We worked very hard last year on, you know, potentially doing a transaction with the folks in Kansas City. During that time we were already working on how we would integrate, which signal code for how we would potentially streamline workforce. When the transaction cannot come together, we didn't -- actually the plan to accelerate, how we would become more efficient on the labor side. And the sales team has been very focused on price since beginning of the year, you see the result. And you also saw the traction that that Rob is driving on the operating matrix.

You also have to put in perspective, we lost the main line to Vancouver twice last here. We lost it for two weeks back in July, when we lost the bridge for fire and we had to rebuild it, that has an impact that it's real, it's a major line for us. It'd be like a Western Railroad losing their access to Port of Long Beach. Vancouver is key to us. And then we lost it again in November.

But putting that aside, every year there's different things. Last year was kind of a special thing from that point of view but the theme is set, we look forward, we don’t look backward and the plan that we have for this year for the theme, with Tracy coming on board is a solid plan. We're entering the year with solid labor cost, solid pricing. As soon as the weather allows us to operate at regular train speed, regular train weights, meaning temperature warmer than minus 25, which hasn't been quite the case so far this year on the Canadian network, we will be able to produce GTM. So I'm very confident all these things will come together and this team is energized to deliver this year and the years to come.

Thank you.

Operator: Your next question comes from the line of Chris Wetherbee from Citigroup. Please go ahead.

Chris Wetherbee: Thanks. Good afternoon.

And best of luck, JJ.

JJ Ruest: Thank you, Chris.

Chris Wetherbee: I guess maybe a couple questions here. Just when I think about the 57 OR for 2022, can you just remind us sort of where you are with the asset sale sort of discussion and process? And what sort of in the number versus what maybe not be in the number. And I guess I'm curious to see if Tracy wants to weigh in on some of those bigger picture strategic decisions when she arrives here next month.

And then I guess – and then also may be as asset sales pertain to capital allocation, explain maybe some thoughts on the buyback? And how much if all of that can you get done in ’22, maybe what the cadence of that might be?

JJ Ruest: So we have three things baked in our assumption. Those are freight forwarding to be shut down this year, which it is done. And then we have a vessel sale that we are looking to do in the spring, and then things on Transics. So I think Helen has got this in hand, she can provide you with some more color but these are the three items. Helen?

Helen Quirke: Yeah.

Thanks very much for the question, Chris. Regarding the Great Lakes fleet of vessels sale, a potential vessel sale process is progressing with an active bidders. And as you'll recall, this fleet of vessels is accretive to earnings but diluted to operating ratio. And so we're working through the finer details of a potential sale, but any transaction needs to be at a favorable value to us. Therefore, we are willing to continue to operate the vessels should a deal not be concluded at a favorable value to us.

With regards to Transics, just a reminder, we are not actively selling Transics, we are exploring models to change the ownership structure of potentially with a strategic partner. Again, Transics is accretive to earnings yet dilutive to the operating ratio. As Keith highlighted, Transics has done a great job of helping to grow our business, and we are continuing to improve the performance of it. In fact, rail miles generated through Transics are up nearly 10% year-on-year on improved margins. So therefore we're continuing to explore models to reduce our ownership interest but retain the ability to drive road to rail conversion, which is good fit for CN, good for customers, and good to the environment.

And I'm sure Tracy will have a view on that, as she comes into the role, so stay tuned for further update.

JJ Ruest: Ghislain, you want to add to main capital?

Ghislain Houle: Well, maybe yeah, so as JJ mentioned, we did announce a $5 billion share buyback, Chris, that's exactly in line with what we signaled to the market on September 17. So, you know, we plan on deploying this actually, as you know, share buyback is the residual use of our capital, the first use of CapEx will always be towards the business but we have announced it and with the plan that we have in front of us delivering 20% EPS growth 57 OR with the share buyback of $5 billion, we plan on finishing our leverage ratio, which is adjusted debt to adjusted EBITDA to about two times. And if you look at this year, in 2021, because I'm still this year because I’m not close to books yet. This year we finish at 1.82, so that's what we're planning on doing.

JJ Ruest: Yeah, we are moving forward with the share buyback of 5 billion dollars.

Ghislain Houle: That's right.

JJ Ruest: That will start February 1.

Chris Wetherbee: Okay. Thank you.

JJ Ruest: Good question, Chris. Thank you, Chris.

Operator: Your next question comes from the line of Justin Long from Stephens. Please go ahead.

Justin Long: Thanks and good afternoon.

I know Tracy isn't on the call today but is there anything from a high level that you could speak to about her initial vision for the company, things that she could potentially tweak relative to the strategic plan that you've laid out and you're executing on today? And at what point do you feel like we'll get to hear more details around her plan and how she sees the business going forward?

JJ Ruest: So that will come soon, Justin. In the April earning results, she'll be with the team, leading the team and she will be participating financial conference definitely from March 1 and beyond. I think the board has also been fairly clear, since fairly early beginning as to what is the strategy for CN and what they're looking for and I'm sure Tracy will add in her color based on the scale and her own view. But I think I would defer that question to when Tracy can actually do that herself in a couple of weeks, so keep being so patient.

Justin Long: Understood.

Thank you.

JJ Ruest: Thank you.

Operator: Next question comes from the line of Amit Mehrotra from Deutsche Bank, please go ahead.

Amit Mehrotra: Thanks, operator. Hi, JJ.

Congrats on a great career. Wish you the best. I wanted to follow up on that comment that you just mentioned. You said the board has been clear as to the strategy. And that may be the case, but I'm still a little bit uncertain about it.

Because I think back in September, something got lost in translation with this discussion about growth versus profitability. And we didn't need to get beyond 57 because we want to grow. And so can you just refresh us like has there been an evolution in that philosophy around growth versus margin expansion. And when the board is picking a new CEO, was that like -- talk about the strategy in terms of growth versus margin, especially because I think that was the biggest issue that people were confused about back in September.

JJ Ruest: Yeah, thanks for the question.

Yeah, back into September, some of the comment we got back was is 57 the endpoint and I just want to clarify 60 to 57 is a very important milestone and that milestone is for 2022 and I think we're tracking well to that. Is that the endpoint? No, that's not the endpoint. Just don't want to speculate at this point as to know what we did the endpoint that Tracy and the board will want to do but definitely we have to, you know, get into 57, generate really good EPS growth this year, generate good free cash flow and improving the ROIC because right now the Canadian crop is down. Remember, in September, it was difficult to talk about solid RTM growth because supply chain disrupted. And on the Canadian side, there's no crop this year, the crop is 35% a little less here and it's a huge part of our business.

So we have to do everything on price and costs. But CN is a growth story and CN is a story also about ESG, about balance, about rewarding shareholders, but also customers and making sure that we're there for the economy. And if you are there for the economy, that means you grow. Rob right now has the capacity to move more freight than what we do today because we were basically set up late last -- early last summer for solid crop that never showed up. So he's got capacity for when the crop coming into fall.

And you know, and you often hear Keith talk about Rupert, the expansion in Rupert, the TriCo strategy, the work we're doing in Mobile and Halifax and New Orleans. And James got great stories long term about blue ammonia petrochemical in Edmonton, about biodiesel, and short-term Canadian coal at CN for the next six months is going to be solid because we’ve got two mine reopening and we have this new contract with tech, which started -- that is still happening year-over-year, so it's a growth story, but it's not there short term because the grain crop hasn't materialized this time and supply chain all disrupted. But we want to use really the two lever and in the meantime, we really worked hard to lever of costs, labor costs. We're less of us at CN unfortunately, for those that I have to ask, you know, to leave the company about 1000 of them back -- early in the fall. And the sales team has got one specific mandate when you move freight, you need to be paid for it, you need to be paid at market price and market price today is up from where it was, not just at CN but across the board and transportation industry.

So that's -- we never meant that 57 is the end point but 57 is the goal for this year and after that, I think the team will decide to how far it can go using all these levers and growth will be a lever again, you know, second half of this year of ’22 and beyond.

Amit Mehrotra: Okay, thank you very much.

JJ Ruest: Thank you, Amit.

Operator: Your next question comes from the line of Scott Group from Wolfe Research. Please go ahead.

Scott Group: Hey, thanks. Good afternoon and best of luck, JJ. So you guys did a 58 OR in Q4 with weak volumes, and you're talking about bad weather and the pricing environment, there's still more pricing to go. Why isn't there upside to the 57 OR this year? I would think that there could be some. And then JJ, also just want to follow up on one of your comments, you had a comment about Tracy saying that she is a railroader.

And, rightly or wrongly, I think people are going to look and say, well, she was at CP during some of the tough years at CP. So maybe just curious to just a follow up to that why you think she's the right railroader?

JJ Ruest: So Ghislain, you want to talk about the OR and what the potential for OR and then I'll talk about Tracy after that.

Ghislain Houle: Yeah. So thanks, Scott, listen. Yeah, we are very proud of our OR for Q4, 57.9 is actually a record.

I mean, the lowest we've ever done on OR in Q4 was 58 and I think that was back in 2015. So listen, the plan is there. I mean, remember, for the full year, we finished at 61.2, so it's quite a drop going from 61.2 to 57 and you need to get to 57 to eventually go to 56 and 55, so our plan is there. I think we've got all the backup to deliver it, we're confident we're going to deliver it. There's going to be ups and downs during the year, as you know, we're an outside sport, and things happen, and I hope investors can see our resiliency and our ability to adapt in quickly changing conditions when JJ mentioned we lost our main line to go to Vancouver for five weeks overall.

So, we're resilient, I think we're a good team, and 57 is the goal, and stay tuned. And hopefully, if we do ever better, great, but the 57 is the goal and I think it's quite a drop going from 61.2 to 57.

JJ Ruest: Yeah, it's a good goal. That's a goal of this result. It doesn't mean 57 is the end, but 57 is definitely the goal for 2022 and we are only in the third week of the year, so give us some time to see whether or not we can improve on the guidance, so regarding to the guidance.

Going back to the question about Tracy, now you will have the chance to meet her very shortly. I think she will impress you. She is a very solid leader. She has a very solid followership. I think to be a CEO of the company you want people who want to work for this leader.

She has solid vision, she has railroading into the blood. She has to -- she did a number of different position at CP, so as part of the team, but was not the only player on that team. And I think what she brings to CN is what we need for the future. I mean, it's -- sometime, I think it in the rail industry, and it's becoming almost a bit of a -- you got to ask yourself whether it's right or wrong, that we want to go back to the past, and that they can sack where you want you want to skate to where the pucks are going to go next. So what will make a company like CN and as a tree close network, huge potential for growth, the leader in fuel efficiency, making huge amount of effort on inclusion, diversity, ESG and technology, things that weren't necessarily prevalent five, ten years ago.

So we want to go back to where we were five, ten years ago, what we want to use what we had five, ten years ago, and have the solid operating skill that Rob and his team are and enhance that with technology, with ESG, with a focus on growth, with a focus on customers’ business development, and ability to really lever all the lever that we have and not just the precision schedule railroading lever. Not that PSR is unimportant, obviously it’s very important, we're all operating companies, but I think we reached a point in our industry and I think, Scott, you're here that also from the railroad, we need to find a way to grow, we need to find a way to relate more to customers so they want to use more of a business because we have such low costs versus other mode of transportation. There has to be a way for us to attract more business and remain a cost leader. 57 is fairly solid; if you bring more business at 57, definitely you produce an ROIC, you have EPS growth, but there has to be a leadership that put all these things together and not depend only on the one thing and I think that's really where the industry's future is all about. But when you have the chance to meet Tracy, you'll get to know her, discover her and I think you'll find that the there's a lot there.

Scott Group: I think that's fair that we'll all get to meet her soon enough, and we should be open-minded. Thank you guys. Appreciate it.

JJ Ruest: Thank you, Scott. Thank you.

Operator: Your next question comes from the line of Tom Wadewitz from UBS. Please go ahead.

JJ Ruest: Hello, Tom.

Tom Wadewitz: Yeah. Hi, JJ.

I also want to say I really appreciate working with you over the years and appreciate your great insights on the markets and customers and so it's wish you the best.

JJ Ruest: Thank you.

Tom Wadewitz: Wanted to -- you talked a little bit about this prior question on kind of the board criteria and focus and kind of growth versus margin. I don't know if you can offer a little more on just kind of how you think about that growth focus and going forward and what the board was looking for. And then I guess, you know, I think CN over, you know, I guess if I go back to when Creel took over, he said, we're going to pivot to volume growth and you guys had a great run for volume.

Do you think CN kind of goes back to that, that, like, can you grow RTMs like you did for that period of time or how do we think about the level of growth potential, if we look at the way the Board is viewing things, and kind of the strategy? Thank you.

JJ Ruest: Thank you. Well, again, Tracy will have to, you know, share with you very soon some of her vision, but, going back to when Creel became CEO, at that time, I became Chief Marketing Officer and at that time, we had made enough progress on the operation that we had find a way to make better use of the network and we grew with the RTM and the volume very solidly. And this is where Rupert went from a fishing port of not known by anybody to becoming a place where we do business for both bulk and container. I think, the future of CN is really diverse.

At this point, we really want to leverage technology to reduce – to make our railroad safer, as you saw in progress we've done so far. And we want to use technology to make the railroad lower operating costs. We also want to use the technology to improve our customers relationship, make the business more sticky, and attract more freight and that's what the agreement with Google is all about, is to go deeper into the supply chain. Today, some – the customers want something more than just the raw rail service. They want this thing to be friendly.

And then operating margin will always be key. We're in an industry which is very capital intensive, and operating ratio is very key. We're very focused on that. You've heard a lot about operating ratio in the third quarter and the quarter-to-date. So I think there's a combination of these different things that says, between growth, between good costs, between technology, between making sure that we are relevant to society, on ESG, emission, and also, you know, attracting the right talent and keeping the right talent, all these things are part of the CN long-term strategy.

And on the – do you remember, I think the first time I met you, I was handling the chemical and you asked me a question about Dow Chemical and whatnot. Well, guess what, 25 years later, there's still huge potential -- lot of potential in Edmonton, Calgary, there's another wave of capital investment, not refinery or oil sand this time, but they're more about petrochemical plants that will be export and that's part of the CN’s future again, is how does these landlocked facility like coal mine like, potash mine, like petrochemical mine, like big, vast, growing area for industries and prairies, how do they access the world market and is only one good way to do that, it's with rail, and CN is a fantastic network to make that happen with the TriCo and especially Rupert and Vancouver. So I think there's a lot out there for CN to be successful. I'm actually the biggest shareholder of CN, as on the management team. And I intend to remain a shareholder and I'm voting strong for the team and for Tracy.

Thank you for the question, Tom.

Tom Wadewitz: Great. Thank you, JJ.

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

Steve Hansen: Good afternoon, everyone. Congrats on these pretty outstanding results in the face of some tough conditions. Just looking at the buckets of traffic here that can plug the green gap, so to speak, I think you've referenced there already, but I just wanted to get some degree of color or cadence around the coal ramp that you described with the new coal mines. Just curious if you have any visibility around the ramp of those two mines. I think in the past you had suggested that coal could plug about half of the gap but just trying to understand how that cadence might play out here through the first half until we get some green volume.

Thanks.

JJ Ruest: Definitely, we will do that. James, will pick that one.

James Cairns: Yeah, thanks for the question, Steve. I've been itching to give that answer all call here.

I'm extremely excited about our prospects for coal, particularly in H1, but first quarter as well. We get the full year effect of that tech deal and that's big, but also two mines restarting with significant tonnage available to us. So if you think about just from a carload basis, not a revenue base, but a carload basis, we are going to more than replace the last carloads of grain with new carloads of coal and it's a big deal. And of course, it's coming right and when we have that available capacity to us, because we're not moving that grain, so the timing is perfect. You look at the pricing for met coal and thermal coal, they're close to record highs.

I mean, the market is there, the demand is there and we're going to be able to move that -- be there to move that coal, whether it's going to Vancouver or Prince Rupert. We've got the capacity desire and I got to tell you, I'm very, very excited about what's going to happen in the first half year even though, we're lapping on the grain side and all time record in 2021. Tough, tough comps get into the second quarter, that tough comp goes away and we still have this solid, solid coal story to lean on. Also has some significant growth on the frac sand side of our business. I mean, as you think about the future and how things are going to ramp up in Western Canada, the leading indicator is drilling activity, leading indicator for railroads is the frac sand volume that's going to be a big part of that.

Also a great story as JJ talked about around our renewable fuel, three new facility starting up in the US Gulf coast on CN to produce renewable fuels. We're in talks with several parties about how we can position new crush plants on CN, both in Canada and the US. As a matter of fact, we just concluded a new deal on a soybean crash plant with our friends at platinum crush, more of those coming. So when I look at the drumbeat and the opportunities in front of us, we're sowing the seeds in 2022 for the next five years to be just incredible, incredible growth story for CN and 2022 boy oh boy, hold on, the second half is going to be real exciting. And I know Rob and his team just can't wait to get in there and move those carloads for our customers, so.

JJ Ruest: I think you also have the undiluted crew facility that's ramping up right now.

James Cairns: Yeah, thank you. About the same size is kind of a Hardesty facility. It's a new, heavy, undiluted. That's the safe product moving down to the Gulf Coast.

It started up late Q4 of last year but there's 40,000 barrels a day of potential coming out of that facility and we expect it to be full. For a long time, we've been the leader when it comes to moving heavy crews, and we're still going to be the leader moving heavy crews. I fully expect our run rate for crude is going to be in the range of 95,000 to 100,000 barrels a day going into 2022. We haven't seen numbers like that for a long time. We finished in Q4 about 75,000 barrels a day for crude.

And remember at CN, we're very, very weighted towards that heavy crude, about 65% to 75% of our carloads are heavy safe, undiluted crude, so exciting times.

JJ Ruest: And that facility is located in Saskatchewan.

James Cairns: In Saskatchewan. Yes, JJ, yeah.

JJ Ruest: Thank you, Steve.

Steve Hansen: Thanks, guys.

Operator: Our last question comes from the line of Jeffrey Kauffman from Vertical Research. Please go ahead.

Jeffrey Kauffman: Thank you very much. And JJ, congratulations and best of luck in your new endeavors.

A lot of my questions have been answered, so I'm going to focus on CapEx. You’re going to be spending about 17% of revenue as you advertised, so that's a reduction of a couple of hundred million. Yet you have a number of new projects coming on. So I was just wondering, what's not in the capital budget that has been in the last year or two? And how are we kind of reshaping capital allocation in lieu of the new program?

JJ Ruest: Rob, you want to talk about how are we going to allocate capital this year?

Rob Reilly: Jeff, the big difference in terms of year-over-year really is around basic cap and that is a credit to technology. The use of the autonomous track inspection cards, we have 10 of those now running from coast to coast to coast across our network.

It’s giving us real time information in terms of the condition of our network. And what we do know is our network is in really, really good shape. So when it comes to the ties and the undercutting and the ballasts that we plan each year, we can be much more prescriptive with that real time information. That's really where we're seeing the benefit. We think that's a sustainable model going forward, but we'll check it, as the year evolves, and make sure we're doing the right thing.

That's really the biggest difference. We are investing in capacity as we go forward. We'll extend four sidings between Winnipeg and Edmonton, which will help during this year to help enhance running longer trains. And we'll also break ground on a new intermodal facility in the Toronto area. So we're continuing to invest in the future and I think you'll see that going forward as the business is there, we'll invest and be ready to handle it.

Appreciate your question Jeff.

Jeffrey Kauffman: Thank you. I guess the dividend of DSR, are you implying them that this is a sustainable level with some of the advances in technology, for example, the autonomous inspection?

Rob Reilly: Yeah, that's what I tried to say. We do believe that's sustainable but we're going to review it each year and make sure we're making the right decisions. We know the railroad is in really good shape and we aren’t going to sacrifice safety as we go forward, so we'll make those decisions on a on an annual basis, but we're certainly reaping the benefits of technology.

Jeffrey Kauffman: Okay, thank you for your answer.

JJ Ruest: Thank you, Jeff.

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

JJ Ruest: Thank you and thank you for joining us here. It's kind of bittersweet for me. It's been a privilege to lead this incredible company over the past four years, very proud of what we've been able to accomplish for the last 26 years, and honored to have the serve alongside over 20,000 of the finest people in the industry. But to all of you, the sell side analysts with whom I have interacted over these quarterly calls since 2010, a special thank to you and special thanks to your keen interest in CN as a great company and you're keen interest in the rail industry. I'm confident our new CEO Tracy Robinson is the right leader, with the right vision at the right time and I'm very confident this team, which is around me around this table here will pose solid results in 2022 and beyond.

So, on that note, . Thank you.

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

You may now disconnect your line at this time.