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

With us, we have Ghislain Houle and Jamie Lockwood. Ghislain is the CFO. Jamie is newly appointed IR, so congrats on the new seat. And I'll turn it over to Ghislain who has some opening comments.

Well, thanks, Ari, and thanks for the ones being here in the room taking interest in our great company and people on webcast listening in. It's always nice, Ari, to come to Florida at this time of year, especially when you come to Montreal. I think the weather has been quite nice. And it's -- I think you've got a great conference, and we've participated almost every year for the last 10 years, for myself at least. Let me introduce Jamie. So Jamie is our new VP of IR. For those of you who know Stacy Alderson, Stacy just is retiring as of May 1. I want to thank Stacy for all the good work and good contribution that she's done at CN. She's been a longtimer at CN, and well-deserved retirement. Jamie, I picked him up from accounting. He's an accountant, believe it or not, and don't hold this against him. About 10 years ago, I took him out of accounting. We brought him into internal audit, trying to make a businessperson out of him, stayed there for a few years. Then he went to strategy for about a year. Then became VP Finance. So we worked together, Jamie in finance for 2 years, I think. And then believe it or not, we pushed him to Edmonton to lead the engineering group. The engineering group at CN is about 6,000 employees. It's synonymous to about a $3 billion construction company. Jamie has led the group for the last 2 years. He's done very well and now is replacing Stacy as VP of IR and Special Projects. So Jamie, congratulations on your new role. It's one thing to get it. It's another thing to keep it. So let me give a few introductory remarks to set the stage, and then we'll turn it over to your questions. So when you look at 2025, we're quite pleased with our performance. When you look at Q4, we had great performance in Q4. We had -- our EPS growth was up 14%, the best of the industry. And our OR improved by 250 basis points. We did this on the back of solid cost management, and if you look at our RTMs in Q4, they were up slightly 3%. But really, it's solid cost management that we did deliver a solid Q4. When you look at the entire year, we delivered EPS growth of 7% despite the fact that our volume growth was only 1%. Again, solid cost management across the board. We turned all the rocks that we needed to turn and the OR improved by 120 basis points. And the 7% EPS growth is at the high end of our guidance, as you know. So when you look at 2026, I mean the environment is still very murky. Macroeconomic environment is weak. Industrial production is slightly positive to flattish. We don't know what's going to happen with the tariffs. So we're assuming, as you heard on the earnings call, that the tariffs would remain the same for 2026, because nobody knows. So we're not assuming they will improve. We're not assuming they will deteriorate. And on this -- in this type of environment, and we don't know what's going to happen with the USMCA. So this type of environment, we believe that guidance being more directional makes more sense. So we believe that, first of all, our assumptions on volumes will be about flattish in terms of revenue ton miles. And we think that EPS will slightly exceed our volume growth. We do -- we did highlight a couple of headwinds, significant headwinds in 2026 that we have to deal with, namely, mix continues to be a headwind, especially with forest products and metals and minerals. Forest products, 45% tariffs. Metals and minerals, aluminum and steel at 50% tariffs. So that will continue to be a headwind. Our capital envelope has reduced significantly by about $500 million, which creates a headwind on capital credits, which really is our fixed overhead costs that prevents us from capitalizing more of that because the capital envelope is smaller. As you know, our effective tax rate last year was 24.7%. We guided tax rate -- next year effective tax rate to be 25% to 26%. So that will create a headwind of about $100 million. And the capital credits is -- I quantified this to be about $100 million as well. And then on other income, if you look last year, we had about $100 million, call it, $88 million to be exact. We're going to push to get as much other income as possible, but there is a high probability that we won't get as much of other income in 2026 as in 2025. So what are we doing to try to offset some of these headwinds? You've heard Pat Whitehead talk about fast tracking, which is really double clicking on all of our terminals and yard, look at processes with a blank sheet of paper to make sure that we try to be as efficient and as productive as possible. We're looking to automate as well. We haven't significantly automated in the accounting department. As you know, last year, we've looked at the span of control, and we decided to consolidate both treasury and accounting. And I think that this will deliver some synergies, not only from an earnings standpoint, but also from a free cash flow standpoint. So looking forward to that. When you look at FX, FX is a headwind as well. I mean we called it -- if FX stays at the current spot rate, FX could be a headwind of about $0.10 for the entire year. I want to remind everyone the rule of thumb is that every $0.01 of appreciation of Canadian dollar to U.S. dollar is unfavorable to EPS for CN for about $0.05 on an annualized basis. FX for Q1 will be a headwind or could be a headwind of $0.02 to $0.03. So far, the year is starting pretty good. Q1 is always noisy because of the winter and operating conditions. Our volumes, Jamie, I think, are up quarter-to-date, 2.5%.

2.5%, yes.

January was down 3%. February is up 15%. We have better winter operating conditions in February than last year. Last year, we had like 19 days, Jamie?

Yes, 19 days of Tier 2 in the whole month, at least Tier 1.

So far -- and February has been pretty good, but you were saying to Ari this morning that in Edmonton right now is what, minus 30?

Minus 30, yes.

So I think it's not done, winter in Canada is not done yet. And then I want to remind everyone that from a seasonality standpoint, March is a big month. Like the biggest 2 months in terms of volume for CN is March and October. So the quarter is not over. We're starting pretty much as per plan, but it's not over. And I want to call out again the FX headwind that's in front of us for the quarter. That's about it. Did I miss...

I think you captured it all.

Okay. Thank you. We're going to work well together, I think, Jamie, if you keep that up.

Just keep saying yes.

Just keep saying yes. Exactly.

Thank you for that introduction, Ghislain. And Jamie, congratulations once again on the new seat. So as you mentioned, Ghislain, it's been a confusing demand environment. I think we've gotten a lot of mixed signals. Certainly in the U.S., I think a lot of people got excited about the ISM, and a lot of industrial investors, in particular, got excited about what that could mean in terms of housing and other more construction, industrial focused end markets. How are you thinking about the prospects for the year to possibly play out a little bit better than expected on the demand side? And give us some insight into the nature of customer conversations that you're having?

It's very tough to call. I mean when you look at -- I mean look at the sectors that are going pretty well. The energy sector is doing pretty well. We believe that it will continue to do well. I think -- and Jamie, you can jump in, I think agriculture, like we have a great record Canadian grain crop. I think that's going to bode well. I think that we're going to move grain. I mean we moved grain all out from September to December. And I think that January was the second best ever of moving Canadian grain. And when you have a big crop like this, what happens is, you move grain longer into Q2 and possibly even a little bit in Q3. So grain is good. I think domestic intermodal, domestic continues to be good. I think our service is great. But again, the sectors that are hurting is forest products. I don't think that forest products will turn around, especially housing starts is weak. And these tariffs of 45% is really hurting. And just to give you an order of magnitude as a CFO, I need to throw some numbers out there. So like in the good years on forest products, the car orders, which are for centerbeams, which is kind of the sailboat cars that you put bundles of lumber, on a weekly would be anywhere between 2,300 to 2,500 car orders per week. Lately, we've seen car orders to be 1,300 to 1,500 car orders, so half. So lumber is hurting and lumber is one of the segments that is one of the most profitable for CN. So that is causing a mixed issue. I think the metals and minerals is weak. I don't see this changing. Aluminum continues to be shipped in the U.S., believe it or not, even with tariffs at 50%. Metals is -- not metals, but steel is a little bit challenged. And then the tariffs have some type of impact on intermodal international to give you an idea. I think intermodal international in Rupert is coming back, that's the good news with the Gemini service. I'm pleased with that, but it's not where it needs to be. If you look at the peak of Rupert was 1.2 million, 1.3 million TEU annualized. Last year, we did about [ 900 ]. And when we had labor disruptions, if you remember in 2023, 2024, it was as low as [ 700 ]. So it's coming back but it's not where it needs to be. Rupert has a nameplate capacity of 1.6 million. So we have room to grow there. And as I said, what else -- what other sectors do you want to talk about?

Yes. I think the muted housing starts also has knock on impact to other businesses because as new houses get built, you need to fill them up with furniture and everything else, the light goods that come in with some of the manufactured product spend. Automotive sales are a bit muted this year, at least what we see in automotive sales, but other than that you captured everything, Ghis.

The strong Canadian grain crop, obviously, that's a really nice thing. It seems to be supporting a lot of the volumes. I'm wondering how reliable is that as kind of a growth driver? One of the things that I worry about, I mean, again, it's obviously great that it's supporting volumes in Q1, Q2. Is there any downside to that? Do you worry about network balance? Do you worry about overreliance on grain?

No. I mean at the end of the day, the beauty with CN's franchise is we're very well diversified not only from a geographic standpoint, but from a commodity standpoint. When you look at our segments, I would say our biggest segment is intermodal at around 25% and everything else is lower, and grain is lower than 20%. I think it's 18% of our book of business. The beauty with grain is it's not dependent on the economy. People need to eat. And when you look at year in, year out and crops change, sometimes you've got record crops. Sometimes you've got the lowest crops. But like when you look at it over the last 10 years, the yield because of advancement in fertilizer and the way they agriculture the grain, the yields have increased anywhere between 2% to 3% per year. So grain is a great thing. And I'm not worried about it. We have capacity. We have capacity in Western Canada. And we've invested -- I will finish on this. We've invested in grain cars, like we bought close to 4,500 grain cars. And the beauty on grains is it is the only commodity that we're paid by the ton. And on grain, these grain cars are more bulky, so you can put 10% more grain in a car. And because they're shorter, you can put 8% more car on a train. So it's good and it's good for the Canadian farmers. It's good for the regulator. Canadian farmers typically have a voice in Ottawa. So when you do well on grain, it's good for the country and it's good for CN.

Helpful One of the things you mentioned is the uncertainty around tariffs and the impact that that's had on the business and clearly, it's been substantial. Maybe you could talk about the magnitude of the headwind that, that's represented? And then also, what can CN do, if anything? And I understand, obviously, the geopolitical situation, a little beyond our pay grade. But what can CN do to kind of counter some of those headwinds? Or is there anything that -- whether it's discussing with customers, planning differently, going out and pursuing different types of business, how can we counter that headwind?

Yes. Well, you heard on the earnings call, Janet called out tariffs that had an impact of about $350 million, north of $350 million. And we were able to fill that back up. So we are pushing. We are talking to our customers. Steel is a good example where with tariffs of 50%, it's not going to the U.S., but now we're making inter-Canada moves on steel. So that's one thing we're doing. I'm very pleased by the way with Janet as her nomination as our Chief Marketing Officer. Boots on the ground, she's bringing, and I hope investors can see a higher level of energy and really knocking on doors to try to get as much of any carloads possible on the railroad. So I'm pleased. I've known Janet for many years. I think it's a good addition to our team. I'm pleased with that. I think we continuously, Jamie, to make customers to see different ways of how we can get more volume, get more carloads, maybe you can talk a little bit about some of the initiatives we have on the BC Northeast with NGLs and frac sand and maybe the fuel distribution facility that we have in Toronto and some of the self-help that we're doing that's not 100% tied to the economy, but that brings volume to CN.

Yes. I think at the base, Janet and her team, what they're really focused on is helping our customers win in their markets. So as their markets shift, if there's less going south, CN has an unparalleled port access, going off all 3 coasts. So if their markets shift and there's less oil going south, can we help them explore off the east and the west. The BC Northeast is a great story for us. We have 4 new unit train frac sand facilities. That business really grew from nothing 10 years ago. And we just can remember, there was trees going through some of the tracks there, and he was actually instrumental in part of that deal. That's all long-haul business going up with supporting the natural gas play in the Northeast BC. CN sits on top of the Montney Shale, which is one of the biggest unconventional gas deposits that's coming out, a lot of natural gas liquids coming there, propane, butanes. We move the sand up. We move a lot of natural gas liquids. The gas itself moves pipeline, but we move a lot of the byproducts through there. We have a new fuel facility in Toronto. We had some surplus land right in downtown Toronto with refined fuels coming into that facility. So there's a number of these different self-help initiatives that are beyond the geopolitical space that we're quite bullish on.

So we've seen the network running fairly well, I think it's fair to say. And that's true across kind of the North American rail network. Pricing seems like it's been a little bit challenged or at least yields have not really grown substantially if we look at cents per RTM over the last couple of years. Give us some context to that. Ghislain, you mentioned the kind of mix headwind. How substantial has that been? And what's the prospect that we could start to see that move higher?

So when you look at cents per RTM, and we've cautioned investors on this. If you try to get the pricing and looking at cents per RTM, there's a lot of noise in there. There's the carbon tax, the removal of the carbon tax, and we still have this over the next quarter at $70 million. There is FX. There is fuel surcharge. I want to reassure everyone that we continue to price above rail inflation. So -- and our -- and if you were to ask me, Ari, what's your rail inflation. Our rail inflation is slightly below 3%. So we continue to price above rail inflation. Now in some cases, and we look at this on a customer-by-customer basis, on a lane-by-lane basis, on a train-by-train basis. In some cases, when the train -- when I can put an additional 50 cars on that train, and that train has to move anyway, I can be quite aggressive on pricing, especially if it's just a spot move. But overall, the book of business, we're pricing above rail inflation.

So I did like how you -- you did preempt my next question, which is on cost inflation. Talk about the areas where it's most acute and what you're doing from kind of an efficiency standpoint to offset some of that?

So -- and again, Jamie can jump in here. When you look at labor is our biggest cost. So inflation on labor and we've signed contracts that are in the range of about 3%. In the U.S., it's more like 4%. And then, of course, we're pushing on purchase services and material and our suppliers to, again, have the best prices possible. And when you put that all in -- and then labor productivity, Jamie, last year, labor productivity, in terms of labor cost per GTM was improved by 6%.

Yes. And year-to-date, we're trending with 7%. So Pat and his team, I was part of that 2 weeks ago. Pat and his team are distinctly focused on how we drive labor productivity through the entire network.

The other -- so we're pushing on productivity as much as possible. As you know, we did some downsizing last year, looking at span of control. And therefore, we just didn't take a layer of lower management and let them go. I mean some of this stuff was -- like I said, we consolidated accounting and treasury. And we quoted that number to be about $75 million, 2/3 of which will be favorable for 2026. We're continuing to look at this. We think that looking at span of control is just good hygiene when you do that every couple of years. We're going to push on productivity. Do you want to talk a little bit about the productivity you generated or your team generated in engineering?

Yes. So we took a holistic approach to engineering, looking at what we've in-sourced versus outsourced over the last number of years, asset utilization. And through last year, we were able to reduce our unit costs through the removal of contractors, bringing a little bit more work. We took out about $100 million worth of contractors. We had a little bit of labor, $20 million to $25 million of labor to draw that down, but it was really about how do we get the lowest unit cost for every piece of capital that goes into the ground.

So in October, CN consolidated the COO role under Pat Whitehead, you guys referenced Pat just a moment ago. That ended a period in which the COO role was effectively split between 2 people. Talk about that decision, what drove the change? And what do you expect Mr. Whitehead to be able to achieve as COO that he wasn't able to achieve previously or that was more difficult under that kind of split COO role?

So I can start, and then you can give your opinion. I mean you reported to Pat for 2 years. So the dual COO, we knew that it had a time-bound on it. And typically, the reason why it made a lot of sense is typically in rail, COOs, what they like to do is, they like to look at the network early in the morning and then they look for fires. And then when there's a fire, they put it out. They're the best of doing this, and it's exception management at a king, okay? But they don't spend a lot of time on the long-term stuff. They don't spend a lot of time on the long-term network capabilities. They don't spend a lot of time on engineering and mechanical. So the dual COO, we had Derek Taylor, which by the way, I want to thank for all his contribution. I've known Derek for a long time. I want to thank him for all the contributions he's made at CN. So Derek was looking to extinguish fires. And when there's not a fire, they make one, so they can put it out. And then Pat was pushing on engineering, mechanical and some of the opportunities we -- that Jamie just talked about engineering is partly because Pat was overseeing engineering and mechanical. When I look at mechanical, I haven't talked about it, like our locomotive reliability is the highest I've ever seen in my 30 years. I mean it's close to 92%. It's 91% something. So we did this. Now that we've delivered and we know we delivered these savings in engineering and so on and so forth, we thought that consolidating the role into one made a lot of sense for speed of decision and so on. And Pat got the position. I'm very pleased with him. I want to congratulate him on the promotion, and he fits extremely well with the team. And as you see, our operations are running very, very well. Our car velocity is right where it needs to be. Our locomotive utilization is right where it needs to be. So I think like -- I like the team. I think we've got a great team. Like I said, Janet. Jamie now in his new role. Pat Whitehead. We have a new CIO that comes from Enbridge as well, Bhushan. He is doing great. And then, of course, our CEO, Tracy is doing outstanding. And we had a couple of tough years, some of which, as you know, was a little bit out of our control with the labor disruptions that we've had in '23, '24. But I think we demonstrated in '25 that we're pretty resilient. I mean deliver 7% EPS growth and 1% RTM growth for high-cost type of fixed business like we are is pretty good. And I think this year will be very challenging again. It will have ups and downs, I'm sure. But I'm confident that this team will deliver what it needs to deliver. Do you want to talk a little bit about...

Yes. I think overall, the strategy hasn't changed. We're still, make the plan and run the plan scheduled railroad. Having worked for Pat, I can say that he's probably one of the strongest scheduled railroading operators that I've had the pleasure to work with in 20 years, and it's really about reinforcing the discipline. We've had the success in mechanical, as Ghislain talked about where our locomotive reliability and where the fleet is. We've had the success in engineering and now it's about pulling it all together with all of the pieces. So excited to see with the fast tracking that's going on, where we're looking at our crew cost down, as I mentioned, 7% year-over-year, 6% last year. So I think we see that accelerate under Pat.

So I think it's entirely fair to say that CN has faced a number of challenges that have been outside of your control in the last couple of years. For a long time, those of us who have been following the rail industry for some time, we're used to thinking of CN as one of the best networks in North America, having -- being one of the leaders in the industry. How do you think about the prospects for what CN could get to from an earnings growth standpoint or from an OR standpoint if we remove some of these headwinds, if we remove some of these challenges? Can we get back to a sub-60 OR, for instance?

Under a supportive economy, absolutely. I'm very bullish. I think that we're using these -- 2025 will continue 2026 to be fit. Like we lost a lot of weight, like I lost myself, 15 pounds, believe it or not. So we -- and that -- and when volumes come back up, we're not going to gain that weight back. So I'm very bullish. I mean we were hoping, if you remember, and you were at the Investor Day in 2023, Ari, we were hoping that we would get a supportive economy. And we were calling a supportive economy to be industrial production to be 2% plus. Unfortunately, the industry has been in a freight recession for the last 4 years. Eventually, this is going to turn. Eventually, housing starts is going to get to the $2 million range instead of the $1.2 million that currently is. Essentially, industrial production will get to 1.5%, 2% versus the flattish that we've seen in the last couple of years. And the fact that we've lost a lot of weight, we're not going to gain it back. I'm -- the operating leverage that this company will deliver will be, in my view, outstanding. Like I think that under a supportive economy -- I mean, we've done it. There's no reason why we cannot deliver an OR that starts with a 5. I mean we did it. Like when Tracy joined in 2022, we had 59.9. I remember, Jamie, in 2016, if you adjust for the pension reclass, because the real number -- the number was 56, but if you adjust for the pension reclass, it was 58. So we delivered 58. But we're not just focused on OR. I mean OR is the result of everything we do. Like I say sometimes to investors, I'd rather be a $20 billion with a 60 OR than be a $15 billion with the 59.5. I mean just do the math. But I know that people look at OR as a sense of productivity. I think under a supportive economy, there's no reason why this company cannot deliver at least low double-digit EPS growth. Listen, I mean, we delivered 7%, so high single-digit EPS growth with a very weak economy and weak volumes of 1%. You put mid-single-digit volume growth and especially the fact that we got very, very fit in 2025, and this thing is going to fly. And by the way, as you know, we're quite cheap right now. Our stock price is quite cheap. So we've taken the opportunity, as you know, to increase our leverage from 2.5x to 2.7x temporarily. And we've said publicly that we would go back to 2.5x in 2027, because we want to take advantage when you compare our share price currently with our intrinsic value, and I know that this is very sensitive to assumptions that you use, like this is a good investment. So I hope shareholders see that as well and take the opportunity to either get into stock or increase their position because we're cheap right now. And we're going to -- if the economy -- give us a little bit of visibility on tariffs and the economy, and I tell you that this thing is going to fly.

I like that framing. And I want to loop back to some of those points that you made there. Let's talk about the target for EPS to be slightly in excess of the kind of flattish volume growth. Given the upside that you just spoke to, should we understand that EPS target as somewhat conservative if we get -- is outperforming that target really a function of more supportive macro environment?

If volumes do a little bit better than what we have out there, then EPS will do better, for sure. I think that we've learned. I think the way -- the reason we went directional on guidance is when you look at railroads and we were one of them, we gave ranges on EPS and all the railroads that gave ranges on EPS either missed it or had to reduce it. And we've heard shareholders loud and clear that we need to meet our guidance. So we've put it -- this is our best foot forward, but we put it at a place that hell or high water, we need to meet our guidance. And now if we get invaded by aliens, then maybe -- or Canada gets invaded by aliens and not the U.S., maybe that will have an impact on us. But other than that, everything staying around the way it is today, we need to meet that guidance. So I wouldn't say it's conservative. I wouldn't say it's optimistic. I would say we need to meet it, and we will meet it.

Ghislain, you mentioned lowering the CapEx target for this year. What drove that decision? I understand, obviously, the growth has not quite been there. But what does that open up in terms of the free cash flow potential?

Yes. It's going to be great for free cash flow. Listen, I think if you remember, when we did Investor Day in 2023, we said we will invest -- even if volumes are up and down, we will invest to get ahead of the game, especially in Western Canada because our growth has been concentrated in Western Canada. And if volumes are not showing up, then it will be time value of money because eventually we'll need that capacity. So we are in a great spot on capacity right now. Our network -- and Jamie, you are in Edmonton, our network has -- like on the Western Canada, we have capacity, like on the Edson Sub. And the Edson Sub is probably the subdivision that has the most density for CN. It's just west of Edmonton, east of Jasper. I drove trains there. I think as you know, I used to be a locomotive engineer, believe it or not, but -- and you go on the Edson and then when you get to Jasper, you either take a far right to go to Rupert or you take a far left to go to Vancouver. So all of our trains going to Western Canada use that subdivision. I'm happy to report that the Edson Sub will be close to 65%, 63% double track. So we're -- we've added like 7 trains -- 6, 7 trains capacity. So we have capacity on our network. Our high-horsepower locomotives 4, 5 years ago used to be the oldest at 24 years on average. Now it's 19 right in the middle of the pack. And as I said, we've invested in cars, not only in grain cars that I've talked about, but also in the boxcars, and for gen UVs and so on. So we're in a great place on capacity. And I know it was a pain point for shareholders to say, well, you're not growing volumes more than your peers in the U.S., but yet you're investing more. So we're in a great space now. So we said, yes, we don't need -- and we don't see the increase in CapEx to have to go higher in the next couple of years at least. And therefore, we decided to get back more in line with our U.S. peers, around 15%, 16% of revenues. And to your point, that will help and that will generate free cash flow that we intend to return to shareholders. And do you want to add anything?

Yes. No, I think you framed it well. We're coming to the end of a multiyear investment cycle. We have the capacity we need in all 3 regions, our locomotive fleet. Like you said, we went from oldest to mid-pack. So it's not constraining the growth capital. It's not growing into the capacity that we have onto the network. And we can unlock that next tranche of growth without being capital heavy. So we have a few years of growing into the capacity we have.

And this is Western Canada, like we've always had a great capacity and network capacity in Eastern Canada and in the Southern region. So I think the capital is a good new story. And really, we're trying to do more with less by being more productive, especially on the basic track maintenance to your point on the unit cost that you referred to and so on and so forth. And you could expect for us to continue this in 2026, 2027 and going forward.

It sounds like a lot of potential. I want to talk or shift in the time we have left, maybe some strategic considerations. I'd like the way that Tracy framed the conversation on the most recent earnings call where she talked about CN as the railroad of the north, talked about the tremendous asset-based resource base that you guys sit under. How do you think about the moat that CN has? And particularly in the context of, look, we have the M&A discussion coming up, I think a lot of people are concerned about CN maybe being left at a competitive disadvantage. How do you think about the defensibility of CN's business and where you have a structural advantage?

I think -- and of course, I'm biased. I mean I've been with the company for 30 years. I think we have a great network. I think we are the railroad of the north. And therefore, we have better access to Canada's natural resources than our Canadian competitor. You look at Rupert, Rupert is the gift that keeps on giving. We have a tendency, and I had a tendency wrongfully to talk of Rupert more from an intermodal standpoint, but now we're putting Rupert more as a multi-commodity port. So there's growth that will continue on Rupert. And there's not a lot of U.S. coast ports that can expand at low cost. And Rupert has the land to build another terminal, another intermodal terminal. So this is going to feed the network for years. Then we have access to Halifax. Halifax, again, we're the only railroad that have access to Halifax. It's a deep seaport. It has capacity of 1.1 million TEUs. And then, of course, we're the only railroad when we go down to Chicago that can go around Chicago on our own tracks. All the other rails have to go through another railroad through trackage rights to go around Chicago, which is not productive and not efficient and not reliable. So we love our network. We love our business. And I think that this company is going to continue to grow. When you look -- you talked a little bit about the merger, we don't think this is good for the -- and you heard -- if you listened to Tracy yesterday, you'd hear say that we don't think this is good for the industry. We're going to protect our franchise. That's what we need to do. And we have a small team looking into this to make sure that we are going to do the right thing for the company, but also for shareholders. We believe that if ever this is approved, we are going to be impacted, but we believe we'll be the least impacted because remember that we are north-south and that merger would be east-west. And we do originate 85% of our traffic and terminate on our own network, 65% of our traffic. So we think we're in a good space, but it would impact us. I purely believe, my own opinion, not talking on behalf of CN, but talking on behalf of me that if the regulator looks at this merger purely from a pure regulatory standpoint, I think it will be very difficult to be approved. I mean the merge -- the 2 railroads will own 45%, 50% of the rail market share in the U.S. and make the point that with this, you're enhancing competition. So you can't just maintain competition. You've got to enhance competition. I think that's going to be a very hard hurdle to make. But this is -- I must commend my friend, Jim Vena. This is a bold move. I've known Jim for a long time. He's a good guy, and that's a bold move, and we'll see. We'll see what happens. But we'll do what we need to do at CN to protect our franchise and do what's best for our shareholders.

So how do you think about the options that are available to CN as this merger debate unfolds? So obviously it's going to unfold in a very public way. Talk about how CN is trying to position itself and what are the different scenarios like where are the vulnerabilities and how do you ensure that CN isn't...

Without going into too much detail, I mean, we'll be very aggressive in looking at the application. I mean their first application was refused. And now they have to submit. I think the date is end of April.

End of April, yes.

So we'll be -- we'll study this very, very hard. We'll be very as aggressive as we can be on asking for remedies and concessions. And we'll see how it's going to pan out. But as I said, I think our network is well positioned. And as I said, we will protect our franchise as the way that we need to protect our franchise for the value of our shareholders.

Can you give a sense for what are the types of concessions that you might be looking for?

No. I think let us study.

Too early.

Let us study the application in detail, and we have a team of experts that are looking into it. And as shareholders have seen, we have spent a bit of money to -- so far on this. And we have experts to look at this. We are -- we have a very small team of CN's management to get involved in this because we want our management to be involved in delivering value and delivering the day to day. We don't want them to be distracted by this initiative. I think we've got a couple of minutes left.

Let me see if there are questions in the audience, if folks have anything. In the meantime, while the mic makes its way over, Ghislain maybe talk about what's available from a partnership standpoint, right? We've seen CN come out with a number of partnerships. What does that open up? How much does that help in terms of positioning the railroad for potentially -- potential future?

I think -- as you know, there's 3 ways to grow your volumes as a railroad. The first is to grow with your customers. And this is -- you can say, well, this is growing with the economy. The second way to grow your volumes is to convince somebody to build a facility on your rail line, and then you've got them committed for the next 30 years. And as I said, we are fortunate to be the railroad of the north, that there's a reason why the BC Northeast is happening is because that's where the Montney and the Shale opportunities are, and we happen to be there. So that's the second way. The third way is to extend your network reach. And you do this either through a merger or you do this through a partnership. And the partnership has to be made in a way that you operationalize that partnership so that you can compete against trucks. And remember, not compete against trucks in the 500 to 700-mile radius, but long-haul trucking. That's where the railroads in the 1950s lost their market share is to the trucking industry. And there's no reason why in today's environment, long-haul trucking should not be on the railroad. And when you look at the partnership we have on the Falcon with FXE and with UP, we're now moving boxes from Mexico, Monterrey to Toronto in 5 days. That's highly truck competitive. If we can have more of these partnerships -- and because the last way to grow your volumes is through network reach. Like railroads go to where they go, they don't go to where they don't go. So you can't replicate a railroad, which is a strength, but the limitation is, if you don't go to Texas, then you don't go to Texas. The only way that you can do that is through a partnership or through another railroad. So I think let alone this merger, but if this merger is not approved, I think the rail industry going forward in the next 5, 10, 15 years, will grow their network reach through partnerships, and these partnerships will become more and more solid.

It's very helpful, Ghislain. Let's go to the other questions...

Great. Two-parter, if that's okay. The first is with the labor disruption now a couple of years behind us and a lot of the rails have been making agreements with unions over the past couple of years, any risks that you might see in the labor front for '26 and '27, whether it's your unions or the ports or any others? And the second is, you mentioned Rupert versus the other West Coast ports expansion. What are the risks to Rupert, the outlook for Rupert, given ports like Vancouver expanding? Is it because they have less expansion opportunity whereas Rupert is more?

That's right. So I'll take -- maybe you take the labor and I'll take the Rupert. So when you look at expanding in Vancouver, because they have a big city wrapped around the port, it's very expensive to expand. If you go to Rupert, I mean, and it's a hell of a way to get there, and it rains all the time out of 365 days, you're in the middle of nowhere. So it's not expensive. You can actually expand in land and the cost of expansion is way more reasonable than expanding either in L.A. Long Beach or in Vancouver. And to me, that's the value. And remember that Rupert is 2 days earlier, 2 days less sailing time to Asia than any other West Coast port. So -- I mean, it had a little bit of a blip because of the labor disruptions in the last few years. So the Canadian supply chain has got hit a little bit, and we were bragging about how stable it was. So now we need to regain that confidence. We are regaining slowly but surely that confidence. And I think Rupert in the mid- to long term will be, like I said, the gift that keeps on giving. Do you want to talk about labor?

Yes. The union contracts that come up all of the time. Labor stability is important. Canada is an exporting country, obviously. It's a focus not only of us, but of the ports and of the government to make sure as Canada looks to diversify its trade that we have a stable supply chain. So can we predict what's going to happen on labor? We never really can. But all of the players making sure that Canada's supply chain is stable, not only into the U.S., but as an export gateway to the world is really crucial for us.

Maybe, Ari, just to -- I know we're getting out of time. Just a quick conclusion. Listen, I think there's turbulent times for our company, but not only for our company, for the industry and for a lot of companies in the world actually. I'm very pleased with our performance that we did in 2025. I think that the future is quite bright for CN, at least in the mid- to long term. We'll see what happens in 2026. But you can rest assured that this management team is pushing on everything we can control. And I think that's what we heard from our shareholders. Our shareholders have told me, and I meet a lot of them, just, we know you don't control the macroeconomic environment, you don't control the tariffs, you will not control what happens with the USMCA, but we want to see you guys pushing and doing everything you can do on what you can control. And I think we've demonstrated that in 2025, and we'll continue to demonstrate that in 2026.

Well, it sounds like a lot of opportunity ahead, and we'll be hoping for a better macro environment and hopefully, some supportive volumes. Thank you. Ghislain and Jamie, thank you both for joining us.

Thanks for having us. Thank you.

Thanks, everyone.