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

All right. We're going to go ahead and get started with the second presentation on the transport track today. It's a busy one. So let's go jump right into it. We're very pleased to be joined by Canadian National this morning. We have Tracy Robinson, CEO of CN, And Ghislain is in here somewhere as well. Ghislain Houle, CFO. I can't see him with my glasses back there, as well as Paul Butcher. So thanks very much for joining us. Really appreciate it. So I'm going to turn it over to Tracy for a couple of opening remarks. We'll have plenty of time for Q&A as well. So certainly, just raise your hand and we can make sure we get your question asked. And obviously, I have a bunch of questions, too, as well. But thanks again for coming, and I'll turn it over to you.

Thanks, Chris, and very much appreciate the invite. It's nice to see you all here early in the year. I got to tell you, I think we're coming up in another week through my first year. Now we're concluding the first year with CN, and it has been a very special year and a really good year. And I can tell you how impressed I am with this team at CN and how they've come together. We've gone back to basics in railroading, and they're all pulling together and they've produced a great year in 2022. And that couldn't have happened if they hadn't all worked with the focus and effort that they have. So thanks to them, and I very much appreciate it. When we came -- when I came on last year this time, we had 3 goals for the year. The first was to get the railroad running. And when I say the railroad running, I don't just mean the operations, I mean the engine of CN working well again. The second was to assess the team, and the third was to lift our heads and think about where we can take the place, what kind of growth we can drive in CN over time. And so as we look at the year, we are exactly on track. We launched -- we leaned into scheduled railroading, and we're operating to that schedule. We have significantly improved our customer service. Our velocity is far better. And all of that produced a 25% EPS growth last year, after a pretty tough challenging start of the year. And it produced a return on invested capital, as you know, of 15.9%. We broke that 60% operating ratio. And we're set up for this year. As we turn the corner into 2023, we're operating at a velocity that is higher -- we're up about 38% in car velocity over last year. Now some pretty easy compares versus last year. We had a very, very difficult winter. But I think it's more than that. If you look back further, we're going back to look at when have we run this fast in the first quarter of the year. And we've come close a couple of times, but we're running pretty much faster than we have in the first quarter of any year as we go back, and that velocity means something. So we are at 13% more RTMs right now, with 15,000 less cars online. And so that is good business. That's the way you get this thing running. I'm pretty proud of the team and their ability to do that. And as we look forward to this year, we know that there's another level to hit on this. We're operating to the plan. There's another step-up in our compliance to plan both over the road and in local service, the service to our customers. And we think there's a little bit more velocity in there for us depending on what the volumes look like this year. So we're planning on that this year. The second priority last year was to assess the team at CN. I was new to the company. Hadn't been in the industry for 8 years. And we are running as well as we are right now because we have the right operating model. And because we're approaching our business in the right way, there is no person or function at CN that's more important than the next guy. And what's important is how we come together to produce the right results. And so when you work like that in an integrated way, then you can -- you move faster, you respond faster, you plan better. And I think it produces, over time, not only better results as it's showing, but also kind of starts to build that next-generation of railroad talent, which is what we want to do. As we go into this year, you're going to see us leaning into a lot more development and a lot more of what we call enterprise or cross-functional development so that we are -- in our DNA, we'll be operating on that integrated fashion. And the third priority, of course, was to lift our head and say, what kind of growth can we drive out of this railroad. And this company has a tremendous network. It's a very strong network with the optionality on the West Coast of Halifax -- of Rupert and Vancouver with Halifax, the strength of Halifax in the East, with the Chicago run by of the EJ&E with the Gulf Coast access. There's such opportunity to drive growth, and I'm excited about what that looks like. We have capacity available in the South. We've got capacity available in the East. We've got some great services out there. and we are willing to build for the right and there's some very interesting opportunities in the West as well. So this year, we know it could be a little bit softer. We'll see how it unfolds. We are planning on a mild recession as we go into this year, as you know, Chris. You will see what happens on that. We're positioning ourselves to be prepared for whatever happens. But I would tell you that with this network operating as we are and with the team that we have, the future is bright on growth. And we're looking forward. As you know, we have a Investor Day set up in May that we're going to lay out kind of what we think the future looks like. We're looking forward to having you all there.

Great. And looking forward to be there as well. So that should be fun.

So let's start with current events because I think that's important. So obviously, there's been a lot of news flow around the situation with Norfolk Southern and Ohio. And I don't really want to ask you specifically about that instance. I want to talk a little bit more about what you think about sort of the regulatory environment for the railroads in general, maybe more focused here in the U.S., obviously, only part of your network here in the U.S. But what do you think about whether it be the STB or pressure from the administration? How do you, ultimately, sort of feel like the playing field is building for you from a regulatory perspective?

Well, listen, the regulators are there for a reason, and they play a very important role. I think it's been, here in the U.S., pretty tense over the last year, maybe more. In the last year, has been focused mostly on customer service levels. And that's been, I think, an issue around -- more around hiring. Now we've been lucky at CN, both in Canada and United States and that we had the right -- more of the right kind of staffing levels. And so we avoided some of the worst of that. But I got to tell you that our obligation, and I think our role as railroads, is to drive the economic growth of the continent. And so we do need to have the capacity there when our customers need it. That our customers need to come to the table and the planning as well. And what's been unusual in the past number of years is the bounce back from COVID and the bounce up from the situation going on in Europe. Those things are difficult to anticipate. Railroads and I think supply chains pretty convinced they're capable of almost anything with the right notice. It is when you get shocks to the system that is difficult. But we do need -- we've got maybe more of a structural issue going on with labor and labor availability, not just for railroads with everyone, and we've got to figure that out. And the best way to come to our discussions with regulators and service properly is to do it from a really good customer service levels. When it comes to safety, and by the way, on the customer service, I think we're headed there. I think you were all seeing, as we come into a later part of last year and this year, that that's getting much better and they'll continue to get better. When it comes to more of the safety side, I would say that this is an industry that's focused significantly on improving safety over time. If you look at the record of the railroads, in safety, it's proved considerably. And that's been on the backs of technology. It's been on the predictive technology. It's been on the backs of process. It's been on the backs of continuous improvement. And the regulators have played a role there. I think these are important dialogues to have. We all want to be as safe as possible. And we know that there's no destination other than zero. And as an industry, we're not there yet. It's very much an outdoor sport with a lot of moving parts. I think that in order for the path forward from here to be effective, we need to come together and have the right discussions. The worst thing that can happen is the overlaying of solutions that don't necessarily relate to the real underlying problem because you then run the risk of not only not fixing what the core problem is, but you could have these inadvertent kind of unintended consequences of applying the wrong solution to a not well-understood problem. So what I hope that we can do is find a way to have a discussion over time around the core and where we really can and should lean into making the next level of improvements. There is no shortage of desire in this industry to be safer and safer. And if you look at the safety stats of most railroads, you'll see that. We're now almost at 800 days without a fatality at CN. And almost -- we're approaching almost 600 without a serious injury is the most important thing we do every day. And I would say that that's the case for the industry. No one is not taking this seriously.

Do you think the U.S. regulators are receptive to that type of message and are willing to be partners with the industry?

I hope so. I mean because it's the right path forward. I mean if you look at the case of dangerous goods, we move them because it is the safest way to move dangerous goods. If you look at the safety record of the rails versus the other modes, by far and away, the right place to have them is on the rails. And there are -- we have increasingly good equipment types. We have increasingly good technology like our ATIP car that can find. So for example, our rail breaks have decreased more than 90% in the last 20 years. And it's because of predictive technology where you can see these flaws developing before something happens. The application of technology is going to be a big part of the answer here. How soon can you see these things? And I think that's where the answer is, and that's about collaboration. It's not about kind of hard rules.

So let's switch gears a little bit and talk about sort of how things are going for you guys. As you noted, RTMs are up, I think, 13% here in the first quarter. So we're off to a fairly strong start. How do you think that picture evolves? Obviously, the grain comp is a little uneven as the year goes on. So that's the potential to maybe drive some tougher comps in the back half of the year. I know you sort of pegged volume relatively speaking, towards outperforming industrial production. So let's talk a little bit how you sort of feel that shape playing out because you did mention you expect a mild recession.

Yes. Yes, we're modeling right now. I would say this is our biggest question. So this railroad is operating really well. The big question as we go into this year is what is the economic growth going to look like? And how do we manage that? So as you said, Chris, we've got a great grain crop coming from last year. So we will have strong grain we had originally predicted through the first half. But because we're operating well right now and the weather is good, we're moving a lot of that forward, right? We have modeled for the purposes of our plan a more normal grain crop for next year. We'll see how that plays out. On the -- and I think bulk is more of the same. It will be strong for the first half. We'll see what happens on the second half. When you look at the more consumer kind of centric demand commodities, things aren't definitely softer. If you look at container demand is lightening up, both on the East Coast and the West Coast, Lumber prices are way down again, and the housing starts I think 20% off. Automotive for us is still strong. It'd say it's one that's moving in a funny way, but we think that there's still some replenishment of inventory. We have a question mark around what happens in the second half of the year. So overall, more certainty in the first half, less certainty in the second half, We're modeling that mild recession, but we'll position ourselves to be ready if something different happens. So I hope we're wrong, and I hope that there is more growth than that this year. We'll be ready for it if there is, but at this point in time, that's our best guess.

Got it. And the point about the grain is maybe that last year's crop has the potential to run out a bit earlier than, say, midyear because of the sort of speed and the fluidity of the network as it's gone through, what's been maybe a bit more favorable winter?

Very much so. And it's been a pretty good winter. We've -- but we've also capitalized on it.

Yes, absolutely. Okay. That's helpful. So I guess your general take of the U.S. economy, so you mentioned a mild recession, and I think that still is a big question mark. We've gone from hard landing to soft landing to maybe no landing in terms of people's perception of what the world is like. When you talk to your customers, particularly on the consumer side, is there still that sort of broad optimism about getting through inventories in the first half with maybe an improvement in the second half? Do you hear that from people? Or is that something that's maybe not on the conversation?

This is one that if you read enough and listen enough, you're going to hear everything, the full continuum of options here. But I think generally, there is more optimism coming around a soft landing. And it will kind of finish off towards the latter half of this year. There are people now who believe it will go into 2024. So I think the answer for us is to stay very close to our customers, make sure that we know as much as we can about what's company and be ready for it. What we don't want to do is find ourselves in a situation where we're struggling to respond when the turn back comes. And we won't be in that position. We're going to be there.

So and certainly, I want to get the audience involved. If you have questions, just raise your hand. We can certainly get them asked. I wanted to ask about pricing next and talk a little bit about that. So about -- I think about 1/3 of the book comes up for repricing every year. I think you've noted some need to catch up from prior years. So can you walk us through a little bit of what that catch-up looks like? What commodities and sort of maybe some degree of magnitude, if you could frame that for us?

So we had a little bit of -- as we adjusted our plan and we brought our book of business back into something that fit our network, that's all done, right? There was with a little bit of -- a few tweaks to do on that. And we started looking at when you have more demand in parts of your network than you do have capacity, then you start looking at price as one of the levers. So we fixed some low-hanging fruit last year without a doubt. And the 1/3 is a book that we've got to take a look at last year from a renewal perspective. We touch that up to make sure that it fit with where it should be. And in all cases, that it came in above rail inflation. Now that meant that 2/3 of the book last year didn't get touched. And so that's what we're going after this year. We may find some anomalies in there that are long-standing, but we've mostly taken care of those. This year, as we think about pricing, it's going to be that rail inflation plus as we go forward. And as we've seen the renewals come in at the beginning of this year, it's all consistent with that.

Okay. And rail inflation is running roughly...

Well, we kind of use, I think, our [indiscernible] less fuel. And I think that right now is about 5% to 6%. So that's kind of what we're looking at.

Okay. Okay. That's helpful. And then I wanted to ask you about the Intermodal pricing outlook because I think that's important as well. So there's been some discussion about dynamic pricing with Intermodal, maybe more in the U.S. than Canada. But what's your sort of approach on the Intermodal side? Is it basically the same as all of the other commodities in terms of getting your price?

Yes. Our Intermodal franchise like in Canada, it might be -- it is a little bit different than in the U.S., but our primary Intermodal franchise in Canada, it's got pretty long length. So we run about an average of 1,800 miles. So that's not a distance that we get a lot of truck competition, and that's kind of designed specifically for our customers. We also have a trucking fleet -- as you know. We're into retail delivery in our U.S. business, not in our -- sorry, in our Canadian business. And so we have a pretty good read on what the truck industry is doing and what that looks like. We don't think it's going to be a competitive factor for us. We're looking to provide a full end-to-end service for our customers.

Okay. So let's talk a little bit about the guidance. So I think that's one thing that I...

I knew you'll ask about the guidance risk.

Some of us had some questions coming off of the conference call. And so. Maybe you could help us a little bit. So low single-digit EPS growth, I think, was the number that some of us were wondering about. And I don't want to put words in your mouth about whether that's conservative or not, but maybe if you could kind of walk us through sort of the underpinnings of the low single-digit EPS growth and then we can kind of maybe think about some of those individual pieces?

Sure. Great network. The railroad is running really well. This is a question around volume. And so we've talked a little bit about that. We know what the bulk is going to do in the first half, not as good line of sight in the second half. So we've been kind of -- what we've modeled is kind of normal grain crop, and that applies across the bulk portfolio. We see softness in the consumer-centric demand. And so we've modeled industrial production plus. So we know our target is coming above that, and I think that we will. We're starting the year off probably a little better than we all expected to because of -- we didn't have this tough of winter. So we've got a good start on the year. And as we look out, you could call it conservative, but we thought it was prudent to kind of assume that kind of volume level. as we go forward. We are looking to continually improve our margins over the long term. We are not this year. In previous recessions, we've been pretty quick to furlough employees to manage cost. We've done our work on the economics of how these things work. And the best economic thing for our customers and for us is that we're there to respond when it comes back. So we need every employee that we have right now. We won't be furloughing kind of employees, and we're still building to get the right levels of employee base in some of the hard to hire locations. So we still will have those training costs. And so we think that this is prudent. It's kind of the right level. If we're wrong, and I hope we are. And the volumes are there, then we will be there with the capacity to move them, and you'll see some upside on that. But that's kind of where we decided to come in. There was some question, I know on the quarter about the share buyback. And if you modeled how much growth really did we have, the share buyback is important to understand how we are thinking about this. If we model that for this year, really, it's about obtaining the right leverage level, and we think our shares are at price that we should be buying them back right now, but the interest rates are higher. So as we borrow to buyback shares, it's not a big factor in the EPS growth this year. So we will drive earnings growth in that range in which we guided the low single digit.

Okay. So if I unpack that a little bit, it sounds like the volume story, I think -- industrial production, I think, is, give or take, 50 basis points, maybe 50 basis point negative, you think you can outperform that? I think your view is that volumes are positive for the full year?

It should be. If those assumptions pull through, then -- and we get the normal grain crop, yes, volume should be positive for that.

Okay. And so pricing is coming in.

Above inflation.

Above inflation. And then -- so it seems like another one of the variables is sort of maybe how the shape of volume plays out stronger in the first half, maybe a little bit weaker in the back half, that's where the operating leverage could maybe not be quite as good if you're holding on to folks. And I guess that maybe that's as we're thinking about the cadence of the year, thinking about from an OR standpoint, maybe the second half of the year has some maybe different incremental margins because of holding on to people in a softer volume environment?

Yes. But -- yes, it does. And I think the challenge for us is to be prepared for whatever growth shows up. We've got capacity in the East. We've got capacity in the South. We've got Doug and his commercial team out selling that. We're going to see some growth. The question is it this year or does it come into next year? We're getting ready for a stronger kind of bulk volume as we go forward. We'll be ready for that as we go. I think over time, you're going to see our margins improve. The real uncertainty is what happens in the latter half of this year. And we hope it's positive, but we'll update you guys in the first quarter. We'll have a better view -- an incrementally better view at that point in time. We'll be in front of you in May, and we should have a very good view at that point.

Okay. That's got it. That's very helpful. It's really helpful to kind of go around and think about that. One specific point that I wanted to think about on the cost side is the sick time flexibility and kind of how to think about that. I think roughly 100 million is the number that you guys threw out there. Is that a number that you think you can largely offset or with more efficient operations? Are there other pieces that can be net against that number?

We'll sure going to try. Now listen, this is about the regulations that have come in, in Canada, It's a Canadian operations around rest, work rest in the rules and around sick time or medical leave. And so this is the -- the numbers I think we -- that Ghislain laid out for you were worst-case scenario. But what this means is it's different levels of rest and mandatory rest. And it's going to mean that if in its worst case, we're going to need more people. That's where the cost comes from. A scheduled operations should improve that and should offset a good chunk of it, if we can. And Ed and his team are focused very hard on how -- and we're in discussion with our employees. At the end of the day, we want to be an organization that attracts the next generation. That means we want them all to have a life that they can build, a work-life balance and we want them to have the appropriate rest. We want them to be able to do the things in their lives they need to do. So we're very intent on having the right -- creating the right outcome for our employees. I do think that a scheduled operation will do the job in offsetting some of these concerns, and we just don't know how much of that yet. On the paid sick leave, this is a factor that's been brought in. Everyone got 3 days. I think it was 3 days at the end of last year and started in February this year. They accrue another day a month until they have 10 days. And so we would -- you would expect some or all of that sick time to be used. And so we're factoring that in as well. And that will -- depending on what part of the network it is, that will require extra employees as well. But it's important that they have the capability to do that. We just need to see how that manifests over time. So we want this to be a place where the next generation wants to come to work and to build a career. And we think that having some of these parameters is the right thing, but we are discussing with our employees now and including unionized ranks, how we do this in a way that allows us to be competitive, both cost-wise and from a service perspective. So there's got to be a certain amount of predictability about it. So I think we put in front of you kind of the worst-case scenario, and we're working to mitigate as much of that as possible.

Okay. And furloughs, there's been a lot of discussion about that. I know you guys have done some economic work around it. So what do you think, is it a matter of measuring the depth or the length of some potential economic or volume weakness is sort of the way? Is that the math that you do around thinking about furlough?

Yes, at the highest level, that's the math. And so we've looked back, we've come through these recessions many, many times. And so as we look back at the map that said, how deep did it go? And how long did it last? And how much did you miss when it comes back up? And the big variable in there is how many of the folks are going to be there when you call them, and they're going to want to come back to work? Or are you going into a 9 months to 1 year of attracting and training the next generation of employees. And depending on what you assume on that, I mean, our conclusion is that at the macro, if your recession is 10 months or less, that you're far better off, just economically for customers, for us, for employees, to keep those employees and not furlough. If it's longer than you get into a different question. If you get to the micro, we have areas in our network that are hard to hire and harder to keep at we're going to wrap our arms around those employees and keep them no matter what, right? We want those guys to be there for the long term. And depending on some areas, the volumes are stronger like the West, there's more recession risk in different parts of the network. So -- you look at the macro and then you look at it kind of -- in different areas and kind of geographic-specific situations.

If I were to pull the lens back a little bit and think about big picture and where CN is in its PSR journey, if that's even the right way to think about it. What's your perspective? I know you're going to talk more about this in May and kind of walk us through. Ed Harris is back at the network and you guys have talked about the opportunity to continue to improve from an operational perspective. Is CN running PSR right now? What is the sort of right strategy from focusing on margins versus growth and the balance of those for you over time?

So I'll admit to you, I have no idea anymore what folks mean when they say PSR. I think it's the most misused word around. So I don't know what that is. We're running a scheduled operation. What that means for us is that our trains depart on time and they arrive on time and we serve our customers on time. We believe that it's part of our job is to support the growth of the economy, which means we need to be very close to our customers, and we need to have capacity in place, and we need to be willing to invest and build and we are, and particularly in the right conditions. For us on this journey, we think it's impossible to separate the two, of growth and kind of efficiency. If we are to grow, we need to have a tight, efficient operation. It does 2 things: moves your assets very quickly, reveals your capacity that provides you better customer service levels, and that's the basis on which to grow. And as we think about our network, in particular, we've got this great network that's got the Halifax and then the eastern part of the continent that is we have capacity there. We have some tweaking to do around some bottlenecks, but we have capacity there. We have capacity in the South. And we've got a great -- we're the fastest around Chicago. We're positioned really well. We have capacity there. So those are areas that we can grow very efficiently, maybe some tweaks. In the West, we have some very unique and some really interesting growth opportunities. For those, we're going to have to invest. And what's going to be important to us is the discipline about how we invest so that we can grow but operate tightly and efficiently at the same time. And that's going to be a muscle that we're going to pay a lot of attention to as we go forward into this year. So all parts of the network are not alike, but we're looking to support the growth of the economy by making sure that we deliver well.

In terms of competition, in that context, it seems likely that the CP-KCS merger is going to be approved by the STB or we'll see if it will be approved by the STB in the relative near term. So can we talk a little bit about how you see CN's strategic position in respect to that combination? Does anything materially changed for you right off the bat? Or do you just see this as a broader evolution of the competitive environment? How do you think about your positioning? And if anything will change?

Well, I mean, the first position we always take in a competitive environment is we make sure that we are the best operator out there. And so when we're operating a railroad like this, I think we're going to be very hard to compete with, and that's our intention, is to be the best operator and the best provider of customer service, and that will form the basis of everything we do. If you think about that transaction in particular, it's not -- the idea has been around for a while now. So we have, from a defensive perspective, largely taking care of what we need to take care of. We didn't interline a lot with the KCS, that which we did. We've made other arrangements. So we don't see a big defensive risk. It's provided us an opportunity as well to the business differently to we're pretty serious about the relationships that we're building with the other lines, the other carriers. And it's given us an opportunity to think differently about how we come together and offer products and services with those characters -- with those carriers. You look at the EMP program, for example, -- it's a great opportunity for us to work with UP and the NS on that program. And we think there may be more of those, we think about Mexico, there's different options and partnerships of how we serve that market. And we bring -- as we operate as we are, we bring the ability for some of them to extend their network into the East, the Northeast and into Canada. So I think there's a side of this that creates opportunities. The third piece is the whole question, and this was certainly our focus when we looked at the KCS, was to pick up truck -- some of the truck volumes. That still exists, I think, for all of us. And I think there's an obligation for us to look at that as well from a safety and efficiency perspective back to our earlier conversation. So I think there's -- that we've taken care of a lot of the risk, and we're looking at the opportunities.

Okay. Do you think that the competitive landscape with other carriers, maybe are they more willing to do coproduction type arrangements or things like that?

I've been here for a year, so it's hard for me to kind of characterize what's been happening over the last number of years. But I can say that, we are in very productive discussions with a number of the other revs. I want us to be a railroad that's good to do business with as well. Because if you look at -- one of the things that's great about the railroad industry is you open a map in North America and you get pretty much anywhere you want to go. And it's because the railroads traditionally have worked well together. And that opportunity to take that to the next level exists as well. And there are certain ones that are just fit with our network really well. And those are the ones that we're talking to about areas where we can jointly provide a level of service and a service offering. -- that makes sense for customers and for growth and for the economy to grow.

Okay. A couple of cash and capital allocation questions here as we're getting closer to the end. And again, if anybody wants to ask a question, feel free to raise your hand. CapEx thoughts beyond this year, curious if you have an opinion on whether the industry has been spending the appropriate amount of money over the course of the last several years? Does it need to change materially or should, what we've seen over the course of the last few years, be a relatively good guide post for what to expect?

Yes. I think for us -- our first call on capital is always going to be our network, and technology that's going to enable our network. So safety is our first priority. So whether it is making sure that we're doing we're keeping our infrastructure up to the right levels or whether it's investing in the next level of technology, like we did the ATIP car that has reduced rail breaks and improve the safety of the operation and made it our track available for running trains more of the time or our locomotive is more available and more reliable. Those are the investments we want to make. And so that will always be the first call on our capital. So as we look forward, as I said, we've got capacity needs tweaking for bottlenecks and large parts south in the East. As we look at the West, there are going to be opportunities there, in particular, to invest in next level of capacity. And we need to do that as we -- as I talked about, in the right way, to make sure that we do it in a manner that is capital efficient and that we are operating at the -- while at the same time. So I think you'll see our capital numbers largely stay the same and grow a little bit over time as the network grows, you'll see us looking at investments in expanding capacity and making technology investments where we see the returns are there and very, very attractive. But this is a safety-sensitive outdoor sport with a tremendous amount of infrastructure. Our first focus will always be in keeping us safe.

You talked a little bit about -- actually, there's a question in the back there. I think it's Steve.

[indiscernible] can you give a little bit of a high level of view with respect to what your company is doing in terms of emission reductions, is this coming through the technology, maybe sustainable fuels, would just love to take a view on that?

I'll just repeat real quick for the webcast, if we could, just so it was about emissions reductions, some of the potential opportunities you see or things that you're doing to get there?

Yes. This is an exciting part of the business and one that we're all moving into because we need to. And so if you think about railroads, at least for us, 85% of our admissions come from locomotives. And so we're -- a big part of our efforts are focused there, and I would say it's the same for the rest of the industry, all kinds of efforts around the margin on the non-kind of locomotive or non-propulsion but that's the biggest place for us to focus. The first level is fuel efficiency. So to use less fuel for every GTM that you move. And so we have -- and part of that is train handling. Part of that is locomotive technology. And we're doing very well on that. We are now about 15% better than any other railroad in North America -- better than the average of any other railroad in North America. And there's still some room to move on that. The second level is the fuel that we're burning in the existing locomotives. So the blending of biodiesel or renewable diesels to make that fuel produce less emissions, and we're progressing on that. And part of that is we don't build locomotives. So a lot of this work is done in collaboration with those that do. And we're doing a lot of work on that. And those blending opportunities are increasing. How much you can blend in different parts of the network at different times of the year and different weather circumstances. So that's progressing. Ultimately, the big decision is going to be on what is the next level of propulsion. And the industry separately and together are doing all kinds of work to make sure that we understand what those options are. So there's work going on, on electric locomotives. We're doing that. There's work going on in hydrogen and some in blending the 2 of them. So that work is kind of progressing. What is not yet known is what is that -- the ultimate solution. And because the railroads operate the way that they do, when a road locomotive may move across a number of different railroads. It really is for road locomotive is one decision at the end of the day. And what we need to think about is not just the locomotive and the propulsion, but also the fueling apparatus and infrastructure across tens of thousands of kilometers of railroads across North America. So this is ahead of us. I'm excited about the possibilities. We're really focused on it. There's a technological focus. There's a process and behavior focus. There's a tremendous amount of collaboration on the next level of propulsion. And we're also starting to work together with our customers. For example, we're working with customers on what they're calling the Northern Green Corridor in Canada. So the road up to Prince Rupert are the ways that we can make that corridor greener. So it goes just beyond the locomotive and into the corridors. I think that there's -- you see more and more kind of excitement and collaboration and technology being brought to bear on this, and it's the right thing for us all to be doing.

Tracy, I think we only have a couple of minutes left. So I wanted to turn it over to you to see if you had anything you'd like to wrap up with?

Thanks, Chris. Listen, I think there is no better business to be in than in railroading. I must tell you, it's an opportunity to sit in the middle of and touch most of the industries on the continent in North America, but it also comes with this responsibility of being there for our customers and being a driver of the efficiency and the growth of the economy. So we're in the center of that. I think it's a great place to be, and we want to do that very well. And the first step of that I think we've taken care of last year, which is we need to run our operations very effectively, serve our customers well. There's a next level up in that for us. This team is getting their head around that, and I'm really excited about what we can drive from what is a fantastic network, a really good operation. The energy is coming back in this team around that, and the thought of where we see the growth for, not only our railroad, but for our partners and for our customers and for the economy. There is a really exciting future here. Thanks for the time.

Thank you very much for joining us. Really appreciate your time. Thank you.

Pleasure.

Thank you very much.