Canadian National Railway Company (CNR) Earnings Call Transcript & Summary

Okay. Great. So on to the next here, we've got Canadian National. Ghislain Houle, CFO; and Paul Butcher from IR. I'm Brian Ossenbeck, I cover the transport. So we're happy to keep things rolling here in person. Again, thank you both very much for coming. I know there's quite a bit going on at this point -- in this point in the quarter. So I'm just going to turn it over to Ghislain to make a few introductory remarks to kind of set the stage for us, and then we'll go into Q&A. So Ghislain, please.

Well, Brian, thanks for having us. It's fun to be here in New York. I mean, the weather is beautiful. You can see that the spring is right at our doorstep. It's a bit different than Montreal, we still have quite a bit of snow. And it's fun to be able to be face-to-face and get a sense of normalcy. And I see a lot of people with no mask here in the U.S., a bit different than in Canada, so it's kind of nice to not have to wear a mask here as much. So yes, to your point, I'll make a couple of introductory comments and then we'll turn to your questions. So first of all, I'm extremely proud of the performance we delivered in 2021 with our 12% percent increase in EPS and that was despite a challenging volume environment of only RTMs up 1%. We generated about $3.3 billion of free cash flow, which was at the upper end of our guidance. This demonstrates CN's strong resilience. Our future is bright. We have a unique network of 3-coast access, and we have a balanced book of business with a strong diversification from both commodity and geographic perspective. We have a solid pipeline of sustainable, profitable growth opportunities that we expect will continue to deliver consistent top quartile total shareholder return. And there's no question, the demand is there. That said, for the first 2 months of the year, RTMs are down on a year-over-year basis by about 11%. Let me be clear, this is not indicative of the demand environment or pricing environment, which are strong. The fact is that it was a tougher winter than normal across parts of our network and that impacted operations not only for CN, but for all players in the supply chain. To put winter in perspective, 70% of the days between December and February were cold enough to warrant some form of either line or speed restrictions. This compares to less than 50% of the days on average of the last 10 winters. So while demand is good, operating costs are higher as we didn't move what we wanted to and it cost us more to move it. But the worst is over, and we are starting to get back on track. That doesn't happen overnight, though. The CN team is working hard to put the network where it should be and clear the backlog of traffic, but it will obviously spill into Q2. When you look at March, month-to-date volumes are down 7%, but if you remove grain, it's actually up 3%. Finally, on the quarter, as you know, fuel prices have ballooned quite rapidly with WTI hovering around $100 to $110. I think now it's lower than $100, but it was as up as $120, $125 a few weeks ago. So obviously, this will create an unfavorable fuel lag in the quarter, which could be in the range of $0.05 to $0.06 of EPS. However, when you look out to the balance of the year, the fuel lag impact should normalize. Let me reiterate because this is important: weaker volumes are not indicative of demand environment, which is strong, and that looks to continue. Pricing is also very strong, and we will continue to work on our pricing and our yield initiatives. In terms of demand, let me touch on a few segments, Brian. First, the housing market remains robust with lumber prices continuing to be at all-time high of $1,400 per thousand board feet. And also solid housing starts are forecasted for 2022. This bodes well for our franchise and to fully utilize our 11,000 centerbeam cars. Coal remains a bright spot with indices both for metallurgical and thermal coal remaining very high. And we have 2 mines, CST and Coal Valley in Western Canada, that reopened late last year with a combined capacity of about 3 million tonnes. Also in Q1, we will continue to get full year benefit of the Teck contract, which started in April of last year. So with fluidity on the network improving and supply chain challenges easing, we remain quite bullish on our intermodal segment. Prince Rupert with DP World will add 250,000 TEU capacity by the summer and another 200,000 TEU in late 2024 to reach 1.8 million TEU of capacity. On the East Coast, Halifax is also strong, and PSA, one of the best port operators in the world, is looking to further expand its terminal. And remember that our Eastern network is underutilized, and therefore, all of this business coming at us can be accommodated at very little or 0 CapEx. So there's lots of positives in front of us with strong demand, solid pricing environment and reasonable good snow this year in the Prairies, which is a good sign for more normal grain crop in Canada for the second half of this year. Let me close my remarks by saying that CN is focused on running a scheduled railroad which will drive solid improvements in key operating metrics and deliver consistent service to our customers while maintain an unwavering commitment to safety. But before we go to the questions, Brian, I'd like to address because I know that a lot of people have behind on their mind and I want to make a few comments on our new CEO, Tracy Robinson. So all of us at CN are very pleased and excited to be working with Tracy, and I think CN's future is very bright with her as our leader. She's been on the job now for about 2 weeks and she's clearly making operations her early priority. In this short time, Tracy has also begun to meet customers and shareholders and I know she intends to keep up this pace and getting to know and hear from our employees and from important external stakeholders. On this, I'll -- we'll take your questions.

Okay. All right. Thank you, Ghislain, so we look to speak with Tracy more on the first quarter earnings call. And thanks for setting the stage on fuel because obviously it's quite topical. But some of this near term, some of this long term, just to kind of finish out on that topic. The OR impact on fuel, obviously, it's 100% OR. It's just a pass-through. And clearly, you plan the year as everybody did with a much lower oil price for the year. So how do you think about just the OR guide in general with that sort of noise in there, knowing that it's probably going to even out, you said, from a financial impact but it still does move that metric we all look at quite a bit?

Yes. Well, the fuel surcharge mechanism works. I mean, it works, and to your point, it's a flow-through. It's a recovery mechanism. Create some noise when you have big ups and downs and fuel prices obviously create some noise in a quarter. But when you go out balance of year or in further out, then it typically stabilizes. To your point, because you're adding 100% of revenue versus expenses, then it is dilutive and has been dilutive to the OR typically in the past. In terms of our target and whether it has -- it brings our target of 57% OR for the year at risk, I would tell you that right now, it's very early on. I think that our plan is quite aggressive. I mean people have to recognize that 57% OR, we delivered 61.2% last year, so it's aggressive. And it's even more aggressive now that we're starting the year with a tough January, February behind us. But I would caution everybody to say that there's lots of years -- there's lots of the year ahead of us, I mean, we have 9.5 to 10 months ahead of us. Typically, as a Canadian railroad, we see a lot of noise in Q1. Winter brings some noise. Now we had a little bit more noise related to fuel surcharge. I would say that it's early on to say that the 57% is at risk, but I would tell you that our plan is aggressive. And with the tough 2 months, it's going to be even more aggressive. But as I said, I think the demand is there. I think the pricing environment is very favorable. The key will be, as well, is we're counting on a 3-year average Canadian grain crop in the second half of the year. As you know, grain, Canadian grain, has been a big headwind not only for us, for our Canadian competitor as well. Grain on a year-over-year basis is down by 30% to 40%. So it has -- it was a headwind in H1 -- H2 of last year, headwind in H1 of this year. We're hoping that in H2 of 2022, it will be a good tailwind and hoping to get a good grain crop. So as I said, there's snow in the prairies, looks good for moisture, but again, it's early on. But it's looking better than it looked last year at this time, let me say it that way. But early to call Canadian grain at this point.

Okay. Because I think it did come as a surprise, obviously, to see that big of a drop so that context does help on the Canadian grain side. And when we were relaunching, we looked at grain over the last 114 years because it's available for 114 years, so we looked at it and there's only like 9 instances where it's down 2 years in a row. So I guess you can play the numbers as it is.

Hopefully, the people that follow mathematics, we should be okay for 2022.

I would hope so. But at least thinking of -- come back to energy in a second here, but just staying on the grain and just network resources, you know that there is a big drop here and planning for a big recovery. So is that -- how challenging is that, rather, to really try to be rightsized for now, now for a huge recovery that could -- you don't want to just let go people or put them on furlough, especially perhaps in this environment. So how are you managing through that? Do you think it's a bit of a -- it's more of a risk than normal?

Yes, it's a good question, Brian. I think, listen, we are hiring as we speak for Q4, absolutely. And you know as well as I do and people here in the room that it's a tight labor market, and especially tight labor market in Western Canada. So we are hiring. I think I'm very comfortable with our resources for the second and third quarter. We are hiring now. As you know, it takes 6 to 9 months to train people. We have 2 state-of-the-art facilities that we're training as we speak, one in Winnepeg and one in Chicago. They're brand-new facilities. And when you look at the labor, you have to look at it at the -- on the location specific. So there are some locations that it's typically not that hard to hire. Even in Western Canada, I'd call it like Edmonton, for example, it's not typically been hard to hire in Edmonton. But specific locations like Jasper, Lac La Biche, Smithers, those are typically harder to hire because there's not a big population out there. In Jasper, for example, to find housing is a bit difficult. So we are all over this, to your point. I'm very comfortable with our network capacity because we have continued to invest in our network capacity even in 2020, when our volumes were significantly down because of COVID. So we've continued to put sidings and double track in Western Canada. We've done this. We've acquired locomotives, brand-new locomotives. We've received, I think, Paul, like in January something like 6 or 7, if I'm not mistaken. And we're looking to get some more locomotives either that are scheduled to be received early in 2023, but we might decide to advance those locomotives, we'll see. In terms of -- if you specifically now focus on growing the cars, as you know, we've invested a lot in new grain cars and we have another 500 of these cars coming online. So the crews are the ones that we really are focusing on and we want to have them available to move the business, so we're all over that.

Okay. And then when you look at just the operating performance coming out of last year, I think it was quite good. Then obviously, fires and floods were, in weather, were a bit of a challenge. But I think just to keep in mind like how things were before all the challenges came up, do you think that's -- the network's in good enough shape where you've got the resources in place to kind of pick up where you left off because it really was, I think, better than most of us had thought coming out of last year.

Yes. I think -- listen, I think we have a great network. We're blessed with a great network at CN. As I said, it's a 3-coast access. We've continuously invested in that network, whether on basic maintenance or on sidings and double track even in times that were ups and downs. So we do have a great network. We know what that network can produce. We know we've done it, and I'm very confident that as we get out of the winter weather, which we are out, I mean, now we're seeing spring and we're catching up on the backlog, I'm very confident that we will get back to that cadence that we were, Brian, as you're saying, before we started -- got hit by floods. Both railroads got hit by floods. We got hit maybe a little harder than our Canadian competitor. But we were humming, as you remember at that time, and I'm very confident. And now with Tracy's coming in and we're focused on and making operations a priority and working well with Rob and the operating team, I think we're quite in a good position to get back to that cadence once we get out -- once we clear the backlog and we get into, to your point, Q2 to Q3. Now things happen. Every year, things happen, right? I mean, we -- last year maybe was a little worse than previous. I mean we had forest fires in the summer, we had the floods. So things happen and I want to remind everybody that railroads is an outdoor sport. So to say that nothing will happen this year, I hope so, crossing my fingers. But we are an outdoor sport.

And just on the operating side, I think when we're relaunching and looking at some of the benchmarks and the operating metrics, a lot of things about CN are pretty much at the top or were at the top in terms of like fuel economy and train lengths and weights and things of that nature. But it does look like fluidity, or at least speed dwell, car velocity, car miles per day does seem to be the biggest area of improvement. So I guess it's encouraging here Tracy's focused on that. But what are some of the -- and this is even pre-weather, it was still lower than it had been in the past. So what can you do there? Like what's the plan to get things moving faster and with better fluidity?

Well, listen, we are focused on running a scheduled railroad. We're the pioneers of it. We've started running a scheduled railroad way before our peers and that's a key focus for us and to deliver -- and to operate a railroad with efficiency, productivity, but also offering great consistent customer service. To your point, when now you double down more on metrics like car velocity, yes, car velocity has deteriorated a little bit. If you remember, coming out of '17, we got into some capacity issues. We were growing very, very fast and we got a little bit congested so that obviously impacted the car velocity. We went up and running and invested quite a bit. As you remember, 25% of our revenue in '18 and '19. I think we are focused on car velocity. It's a key metric. We are focused on well as well and train speed. And when you look, I think this year, we're looking to improve our car velocity by about 8%. So last year, on average, we were doing 195 car miles per day. I think we're looking now, our target is to do 211 car miles per day, so 8% improvement. And we will continue to push on car velocity. This is a key metric, to your point, and a key foundational metric to running a scheduled railroad.

Okay. You mentioned that the plan obviously is -- you got some -- it was aggressive before and now, as you mentioned, there's a little bit more headwind when it comes to that. Are there any areas that -- I guess, I'm just trying to figure out how much of it depends on the volume recovery as opposed to anything else that you would call out maybe specific to CN? Because we talked about grain we expect to come back, that would be a pretty big swing factor. But anything else, I guess, you would kind of put in that maybe yellow zone, being something you'd be watching that could make or break that outlook?

I think, if you remember, when we issued our guidance, we had as an assumption that our volumes in terms of RPMs will be in the low single-digit range. I think that we've said that we're counting on an average Canadian grain crop -- a 3-year average Canadian grain crop in the second half of the year, so that obviously is a key point in my view. Maybe we'll be lucky and get a better grain crop than we think. Typically, in Q4, we run full out on grain. When you've got a great, great crop, then what it means is you run out of running grain later in the second quarter, like maybe you run grain until June instead of running out or running grain in May. So I think grain, I would tell you, Brian, is a key aspect, I think. When we look at the demand, the demand is strong. I think that intermodal is strong. Lumber prices, we have 11,000 centerbeams, so I think we're quite bullish on our lumber franchise. The other -- the coal will be good. I think potash is good, but it's a small piece of our business, only about 2% or 3% of our total book of business in terms of line-haul revenue. Frac sand is quite strong. We're moving a lot of frac sand from Wisconsin up to Northern Alberta. I think that, as I said, if you have a big downtime in terms of catastrophic event, and nobody wishes that, but one of your main lines, like the floods, for example, it took out our mainline going to Vancouver for 3 weeks. So you hope you're not going to have something similar. I think that we delivered a very, very good fourth quarter despite this, which demonstrates that, I mean, we are resilient. And we're hoping on good weather and we've got the assets. We're getting on crews all over it. And early on, as I would say, early on, it's an aggressive plan, I must say it is. Going from 61.2% OR to 57% and 20% EPS growth is -- we delivered 12% last year. So it's an aggressive plan, but it's early on. And I think the good news is the demand environment is strong, but also the key here is the pricing environment is strong, too. And as you know, Brian, we've done quite good work on our pricing and our yield initiatives last year, so -- and it demonstrates our EPS was up 12% while our RTMs last year were up only 1%.

Right. Okay. You mentioned potash and clearly the other side of the commodity spike that's affecting fuel would be something along the lines of metals and coal and potash and grain. So obviously, you're seeing screens pretty well from just exposure to those categories. But I guess the question is, is there capacity to move it on the network? And is there supply, I guess, from the shippers to actually meet that demand? So maybe how do you view this run-up in commodity prices in the context of maybe a short term? And will it be long-term sourcing change that could maybe make these -- some of these moves more interesting from your regions that you serve?

Yes. There's no doubt in my mind that the supply chains are moving. There will be some changes, short, medium, long term. I think, as I said, our network is well positioned to react and accommodate whatever need comes out of these situations. . I think that we've got a great -- to your point on commodity prices, we've got a great coal franchise, I think, both in Canada and the U.S. We're very pleased with our long-term partnership with Teck. I mean that, to us, will stay with us for many years. When you look at, as I said, potash is a small piece of our business, but we're working hard to grow it. I think that the crude by rail is one that remains a spot business. I think there's capacity on the pipelines as we speak and the economics are not very conducive for now for moving crude by rail. But we're on the lookout for spot moves. And of course, when we go after these spot moves, we're very, very cognizant of the precious capacity of our network and make sure that we get this business on our network at the right price, at the right margins. We are moving, and Paul, you can jump in here. We are moving quite a bit of heavy crude as well.

That's correct. Yes. So we've started shipping from a new unit train facility based in Saskatchewan that started in the fourth quarter, so we're starting to see some -- that ramp-up pretty good. So that's good business: long-term, sustainable, not really impacted by the differentials, right, because you're moving heavy crude, which competes very, very well with the pipelines.

I think the other -- you mentioned earlier that it sounds like there's a lot of demand that's still pent-up in Vancouver after all those issues. So just to confirm that. And then even more broadly, with West Coast port congestion in the U.S., how do you feel in the expansion in Rupert? Are there potential opportunities? Are you seeing them already to kind of get some of that traffic, especially if there's more concern about -- and getting it to stick, especially if there's more concern about labor issues coming up with the union negotiation sort of middle of this year and just seeing how big that bottleneck has been for a while?

Yes. So to your point, Brian, on your first question, there is pent-up demand. As you know, we lost our mainline late November, early December for 3 weeks. And then the coal hit right away in mid-December. And so we had to reduce the size of our train, as I said, and have some speed restrictions. So that created some pent-up demand. So we do have some backlog. It's out there. The team is working hard to move it. And we'll do as much as we can in March, but obviously, that will spill well over Q2. In terms of intermodal and Rupert and LA-Long Beach. Remember, first of all, Rupert is the gift that keeps on giving and we're very bullish on Rupert. Rupert has a current capacity of 1.35 million TEUs. And Rupert -- and we hit that, by the way, nameplate capacity, if you remember a few years ago. Now we're running at about 1 million, 1 million TEU annualized. But it's not demonstrative of the demand. It's because of our issues that we had coming out of the floods and the winter. Rupert is a play to take market share away from LA-Long Beach. But market share from LA-Long Beach for business that goes to Chicago. So for a business that goes to Chicago. So vessels continue and will always continue to go to LA-Long Beach essentially because of the big, big Californian local market. But we compete against them to go to Chicago. And very competitive, as you know. Rupert is 2 days sailing time closer to Asia than it is LA-Long Beach. So my view is we're very, very bullish on Rupert. Rupert is a long-term story. There's a reason why DP World is expanding, it's because they see the growth coming at us. We're keeping up with them in terms of putting investments on our line to make sure that, that business and that gateway remains fluid to be competitive from a transit standpoint to go to Chicago. So that's why year in/year out and in 2020, we continue to invest in capacity to make sure that was the case. On top of it, when you look at Rupert, the Prince Rupert Authority is currently doing a feasibility study to have another intermodal terminal that would have a 2 million TEU capacity. So Rupert is, as I said, the gift that keeps on giving, short term, medium term and long term, and I'm talking here just about intermodal. I'll let Paul talk about the other commodities that go to Rupert because, Rupert, we have a tendency to talk about intermodal because we get excited with it. But there's much more other commodities that go to Rupert than intermodal. And Paul, maybe you can jump in on some of the other stuff that goes there.

Yes, yes. And actually, before I jump in, I also want to reemphasize our 3-coast access, right? And really, what that does with all the supply chain challenges you've seen, it provides optionality to our customers, right? So you think about the West Coast, Rupert, Vancouver, but we also go to the Gulf Coast, Mobile, New Orleans. And you think of the East Coast, we have Montreal, Halifax, St. John. So really, that provides optionality and really that's where -- key for us as we go forward. So as Ghislain mentioned, Rupert is a significant gateway for many other products, right? So there's a grain terminal in Prince Rupert. The capacity there is 7 million tons and it's actually the big -- the largest grain terminal on the West Coast of Canada. There is a coal terminal, RTI, which was sold a few years ago. Used to be government-owned, now privately owned. It has capacity to handle 18.5 million tons. Thirdly, you have -- more recently, you've had 2 propane terminals that have actually opened up over the last few years. So there's the AltaGas facility that opened up in 2019. It actually has a capacity of 45,000 barrels per day. Then the second facility would be Pembina, which opened, I would say, Q1 of 2021 and that has a capacity of 25,000 barrels per day. And actually, both of them are pretty much running at that level right now. So a lot's happening in Rupert. And as Ghislain mentioned, the port is also looking to expand on the container side. And what some of the players are doing there is try to find ways to export commodities, right? If you can help the steamship lines to fill up the export backhaul, that creates a lot of momentum to bring in more business. So the port DP World and Ray-Mont Logistics are working on a logistics hub that will handle products like grain, lumber, pulp as well as plastic resins. So you see there's a lot happening up there in Rupert, and this is really good for us. And as you say said, the gift that keeps on giving here.

One more on the labor one. I guess, more timely, we're talking -- we're seeing the TCRC in negotiations or in mediation, I guess, now at this point. There's a strike -- the ability to strike, I guess, is now, I shouldn't say there's any notice that I'm aware of. But clearly, that you could probably have a couple of different impacts on the CN network if people are trying to move away from a potential disruption. And then would like to get an update in terms of where your negotiations are with similar unions? And will this set some sort of precedent that you'll just be able to follow or -- seems like it could be a couple of different ways this could impact CN.

Yes. Well, first of all, from our standpoint, I think, Paul, our conductors' collective agreement expires at the end of July?

Yes.

And then our locomotive engineers' collective agreement expires at the end of the year. So I think -- so that's coming due. There's no reason to believe that we will -- I mean, we will have a work stoppage, right, and we'll start talking to our unions when we need to and when we can to have a successful negotiation and agreement. In terms of your other question on impact of if our Canadian competitor goes on strike, the impact on CN, I think, is what you're asking. Well, first and foremost, we're there to service our customers. And right now, there is a pent-up demand so we will work on that. We will work on reducing the backlog and get to the backlog and provide good consistent service to our customers. So that's, to me -- so what happens to our Canadian competitor happens to our Canadian competitor. For us, right now, our focus is getting back on track in March, serving our customers with good customer service, consistent service and get to that pent-up demand and get to that backlog and get back on our feet as soon as possible.

One of the other areas from the strategic plan last year was just to focus more on non-head count cost saving programs, which encompass a bunch of different things, but it sounds like you're more or less on pace, on track to get to what I think is a $250 million run rate target. So any updates on how that's progressing and sort of what's been done and what's left?

Yes. It's progressing to your point, as you say. So the labor, we did it all. So it was $700 million of additional operating income, $250 million coming from labor. That's done, as you know. $250 million coming from lower purchased services and material. So as we said on the call in January, I think we have $150 million pretty much identified, secured. And those are a laundry list of not big home runs but singles and doubles. And some of it is reduction of consumption, both in engineering and mechanical. We're parking a lot of older Dash 8s, so we will have less material and less maintenance cost because we're rejuvenating our fleet. I think, as well, we are targeting contractors and consultants both on the field and in HQ. So I think we've identified $150 million, but we're continuing to move and advance and look at our costs. And the other $50 million was related to, we believe, we'll get lower accident costs in 2022 with the benefit of our automated track inspection car. And the better inspection of our track that we do now with technology, I think it allowed us to do 2 things: number one, it allowed us to bring our capital envelope from 20% typically of revenue to 17% because now we're more surgically being able to see where we're going to do our maintenance on our track. And remember that, that automated track inspection technology allows us to inspect up to 17x to 18x more the same piece of track that we would do when we did it on an annual basis. So that's key for us, so it's delivering on now making sure that we are comfortable with where -- we get a better data-driven technology to tell us where to do our maintenance, and therefore, we're able to reduce our capital envelope, as you know, the 17%. But the other thing is we should see, and we believe we'll see lower accident cost. And that's what we have baked in.

Okay. So we've seen a lot of documents and things filed on the CP-KC merger in the application process. One of the things that made a fair amount of headlines was the CN request for the Kansas City Springfield line. So wanted just to see if you could give us the rationale for -- behind that? And if the divestiture doesn't work or some sort of negotiation doesn't work, are there other options that you would consider on the other side of that?

I think that, first of all, most customers, most stakeholders are looking for more competition and they're looking not only to preserve competition, but to enhance competition. And I think that proposal from CN is -- answers directly this. I think it was clear in our Canadian competitor's application that they would focus on their own line from Kansas City to Chicago and would not look at this line all that much. So to us, this line allows us to bring more rail-to-rail competition, would allow us to take more trucks off of the road. And we've said publicly and in our application, we've noted that we would be ready to invest $250 million to upgrade that line. So we've made that application. We think this is, Paul, competitive. We think it's good for customers and stakeholders and that's what we've done.

Okay. So I think probably a few of the things you're mentioning earlier gets kind of encompassed in the whole digital scheduled railroading, kind of the next evolution of the operating model that you're pursuing. Anything that you didn't touch on earlier that you would say falls into that bucket, either from top line growth through operating efficiency or better visibility?

I think it's clear that technology for us is a strategic pillar for CN. I think for me, and I think Tracy is on that page, that the next level of productivity, efficiency improvement and focusing on safety has to be on technology. I think that the sector lags on technology. There's a lot of still manual things that are being done, so that's a big focus for us. And it will remain a strategic pillar for our company. I think when I talk about the automated track inspection as an example, if you're able in some time in the future to fully automate the inspection of whether the inspection of track or the inspection of train, you imagine the benefit. Let alone -- don't even worry about the economic benefit, but the safety benefits because now you've got a better inspection, better -- therefore, better maintenance. Better maintenance, therefore, lower accidents. And then you actually are able to reduce the risk related to reregulation because now you've got a better safety record. So I think technology for us is important, but it's not technology for the fun of technology. It's value creation technology. That's what it is. We make sure at CN that what we invest in has a return. It doesn't mean that we're always successful, but that's what we're focused on. We're tracking it. I think we're very pleased with some of the things that we've discussed publicly, whether it's the automated track inspection, the portals that we want to use ultimately one day to replace the certified car inspection that we have on trains that is very time consuming. And technology will add capacity because it will allow you to put more trains on the network. When you have a track supervisor with a pickup truck on a piece of track at 10 miles an hour, he or she takes up capacity, so it will help on capacity. So -- and to your point, improve the customer experience. I mean, when I look at -- and we've made public, and I think that was a question that you may have, Brian, a long-term partnership with Google. Partnership with Google, which is a one-off, we're the only railroad that has this type of partnership is twofold: number one, to modernize our technology infrastructure and to get away from servers; and now, to put our data and applications on Google's cloud. That will create significant savings for CN. But the other piece is innovation, all oriented towards customer experience. All oriented towards customer experience. Helping to provide more visibility to customers, making sure that we are easier to do business with. Making sure that we -- the information that we go -- we send to customers is the right information because when you have handoffs, for example, today, you can have handoffs, that's why we implemented the tablets for our conductors and our locomotive engineer because in the past people would write these things on a piece of paper, give it to somebody else who would put it in the computer and then you end up having some billing disputes because the information is not right. So reducing these irritants and providing customers visibility on where their freight is going, when is it coming, when are you coming, these are all something that we're focused on. And Google has got a big piece of that partnership related to customer experience.

Okay. Maybe just 1 quick question on pricing and then we'll turn it over back to you for some closing comments. But in everything we're talking about, it seems like capacity is tight. Availability is tight, demand is pretty strong. So any reason not to assume that the pricing for railroad stays pretty robust here in the future?

I think pricing should stay robust. I think it's a good time to be in the railroad business as we speak. I think we've demonstrated that we can get to good pricing last year. And it's not just pricing, but it's also yield initiatives because in intermodal, there's a lot of different initiatives that are not just pricing, but to make sure that, for example, your network is well balanced and the like that goes to the bottom line. So I think that we're quite bullish on the pricing environment as we speak. So maybe, I can see the time here, we're running out close -- out of time. Maybe a couple of points to leave the audience here is, number one, the demand environment, and we've just talked about the pricing environment, is strong. We've had 2 months of challenging operating conditions coming out of the floods and then the winter. But it's early on. We still have 9.5, 10 months left in front of us. I think that we have a great network. We've demonstrated last year and we're going to continue to demonstrate and we've demonstrated in the past that we know what that network can provide. We are focusing on running a scheduled railroad efficiently but also offering consistent, good customer service. Have to remember that the customers, we're there for them. So that's what's -- that's key. And I think that we have the team to deliver on it. I think I'm extremely excited personally that Tracy is on board. I'm extremely excited, and I know my colleagues are as well. And I think that we're going to focus. We need a good grain crop in the second half of the year, we're counting on it. And we're all over making sure that we've got the right crews and we've got the crews and the right location in Western Canada to be able to move that business in the second half of 2022.

Okay. Well, we definitely are out of time, but thank you, Ghislain and Paul, for stopping by. Thanks for the thoughts and the time today. I appreciate it. Thank you again.

Thanks for having us, Brian. Thank you.

Thanks, Brian. Thank you.

Thank you very much. Thank you.