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

Good morning. My name is Krista, and I will be your operator today. [Operator Instructions] At this time, I would like to turn the call over to Jamie Lockwood, CN's Vice President of Investor Relations and Special Projects. Ladies and gentlemen, Mr. Lockwood.

Thank you, Christoph. [Operator Instructions] Welcome, everyone. Thank you for joining us for CN's Third Quarter 2026 Financial and Operating Results Conference Call. Joining us on the call today are Tracy Robinson, our President and CEO; Pat Whitehead, our Chief Operations Officer; Janet Drysdale, our Chief Commercial Officer; and Ghislain Houle, our Chief Financial Officer. You can turn to Page 2 of the presentation, which includes our forward-looking statements and non-GAAP definitions for your reference. These forward-looking statements reflect our current information and educated assumptions and include estimates, goals and expectations about the future. These involve risks and uncertainties, and actual lot may differ from what we expect. As a reminder, forward-looking statements are not guarantees and factors such as economic conditions, competition, fuel prices and regulatory changes could impact actual outcomes. It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.

[Foreign Language] Thanks, everyone, for joining our call today. Now before I turn to the quarter, I want to take a moment on the announcement that you will have seen come out yesterday. After nearly 3 decades at CN, Jaden has decided to retire. Now he's been a very close partner to me over the past 5 years and to our leadership team, and I know to many of you on this call as well, and the financial discipline that he has built here is a large part of the CN that we are today. Now we've not gone yet Ghis continues as CFO through February 1, taking us through our full year results. And after that, we'll remain with CN as an adviser in Tila's retirement at the end of March. Jamie Lockwood, who many of you know, will succeed Jazan as our Chief Financial Officer on February 1. And Jamie has been with CN for nearly 20 years. He's worked across finance, strategy, supply chain and operations. And he's been part of shaping our financial and our corporate strategy. And we're excited about Jamie moving into the role. And for now, I just want to thank his for his partnership over these last 5 years and to congratulate both of you as you move into your next role. Now on to the business. This was another solid quarter. We move more freight while maintaining a fluid network and translated that volume growth into higher earnings and free cash flow. EPS grew 18% on 4% volume growth. Looking at the balance of the year, we are reaffirming our guidance for mid- to high single-digit EPS growth based on a low single-digit RTM growth. And as we sit here today 1 month into the quarter, I can say we're tracking more towards the upper end of that range. And we remain focused on running the railroad safely and efficiently, converting commercial opportunities driving structural productivity and maintaining financial discipline. This focus is producing results. So let me highlight 3 key messages from the quarter. But firstly, the team continues to execute well. Now it all starts with safety. We delivered our best third quarter accident and injury performance in the last decade, while handling more volume and maintaining reliable service across the network. We improved the productivity of our people and assets and delivered record third quarter fuel efficiency. And these are structural gains which reflect changes to how size and deploy our resources and run our network. Fast Track has delivered about $120 million year-to-date, and that run rate carries into next year. These results demonstrate the strength of our team and our operating model and the leverage inherent in our network given the capacity investments we've made over the last several years. We're well positioned to accommodate additional volume while maintaining our current level of capital intensity. And secondly, our commercial strategy is delivering broad-based growth. Our teams remain focused on opportunities that fit our network and generate value for the railroad and our customers. The close alignment between operations and sales is driving results. Reliable service gives Janet and our team the confidence to pursue new business and price for the value of the service we deliver. The commercial team is moving with speed and agility to convert these opportunities. our boots on the ground efforts have contributed approximately $300 million in new revenues so far this year. And thirdly, we continue to exercise financial discipline. Year-to-date, free cash flow has increased 25%, driven by our strong commercial and operating performance and disciplined capital spending. This, in turn, has allowed greater flexibility with our balance sheet and we continued to execute our share repurchase program to return cash to shareholders. So the railroads operating well, service is reliable, productivity continues to improve and we have the capacity and resources in place to support our customers as opportunities develop. Now looking beyond the quarter, we remain excited about CN's long-term prospects. But a year ago, we updated you on some important changes being made at the company around investment spending, productivity drivers and a continued commitment to driving shareholder value. We remain focused on what we control. And over the past year, we've developed enhanced capabilities and culture to drive execution. As we plan for 2027 and beyond, we're pushing further to ensure that we set the agenda for CN, and there's a lot to be excited about. The opportunity set ahead of us continues to expand. The positive final investment decisions for Phase 2 of LNG Canada and Coastal GasLink reinforced the long-term outlook for the Montney development supporting additional frac sand and natural gas liquids volumes. And additionally, as soon to be finalized agreement with Union Pacific Railroad to extend CN's reach into Mexico positions us to compete for a larger share of the approximately USD 45 billion in annual Canada to Mexico trade, much of which is tied to Eastern Canada. It creates an opportunity to market directly for additional cross-border traffic. Now importantly, these opportunities are supported by network with available capacity. We've completed much of the heavy investment required to support growth. And as additional business comes on to the railroad, we can improve asset utilization, lower unit costs and generate higher earnings and free cash flow without a proportional increase in resources or capital. And to be clear, capital intensity is normalized to a range in line with our North American peers and additional volume on the network will continue to drive operating leverage in our model. The railroad is more productive than it was a year ago and the opportunity set in front of us is larger. We are delivering on our commitments and have a network that's built to convert broad-based growth into earnings and free cash flow. With that, I'll turn it to you, Pat.

Thank you, Tracy. The team delivered another solid quarter, safely moving more freight while maintaining a fluid and reliable network. I want to thank our entire team of professional railroaders across the system for their continued focus, discipline and commitment to our customers. As always, it starts with safety. Safety is the foundation of everything we do. We remain focused on reinforcing our operating discipline and ensuring the trains run safely and that every member of our team goes home safely at the end of the day. I'm pleased to report that we have had the best third quarter accident and injury ratios in the last 10 years. This is encouraging progress but we are never satisfied, and we will continue to push to improve. Now turning to operations. We entered the quarter with a clear plan centered on network fluidity, service reliability and productivity. The team executed that plan and the results continue to demonstrate the strength of our team, our operating model and the capacity available across the network. We handled 4% more volume in the quarter while maintaining strong operating metrics. That combination is important. It shows that we can absorb growth, protect service and make better use of our existing assets and resources. Locomotive productivity improved 5% in the quarter, employee productivity improved 7%. This is the seventh consecutive quarter with year-over-year improvement. These are not simply operating statistics. They translate directly into the cost structure by allowing us to move more freight without a proportional increase in locomotives or employees. Fuel efficiency is another area where the team continues to raise the bar. We achieved record third quarter fuel efficiency, including our best month ever in September, further reinforcing CN's position as the industry leader. We are the most fuel-efficient railroad in the industry, and we are setting new records every quarter, beating ourselves. This performance reflects disciplined train handling, improved locomotive utilization and the continued refinement of our operating practices. Together, these efforts generated $15 million in fuel savings during the quarter. Focusing on our Western region. Gross ton miles increased 4%, while car velocity improved 3%. We moved record volumes of grain while also moving more refined products metals, NGLs, automotives and improving service metrics, and we have capacity in place to do more. We currently have over 200 stored locomotives, and we have available network capacity, including in the West. This gives us the ability to respond as additional business comes on to the network without adding resources at the same rate as volume. As we grow into that capacity, we improve asset utilization, lower our unit costs and create operating leverage. Fast Track remains an important part of how we run this railroad. We have now realized approximately $120 million in benefits, up $20 million from last quarter. The work began with our major yards and terminals, but the mindset extends well beyond those locations. We continue to challenge how we use our facilities, vehicle fleet and other assets. and how we manage processes and purchase services across the operation. Fast Track is not a onetime initiative. It is a continuous improvement discipline built into our scheduled operating model. We are pleased with the progress, and we are not done. The takeaway from the quarter is straightforward. We remain committed to safety as the foundation upon which we build this organization. The network is running well. We handled more volume maintain strong fluidity and service and improve the productivity of our assets and workforce. We have the capacity and resources to accommodate additional growth efficiently and the team remains focused on executing the plan. And what is under our control. Janet, over to you.

Thank you, Pat, and good morning, everyone. I am extremely pleased with our performance in the third quarter, which highlights the growth opportunities enabled by unique network reach and the resiliency that comes from our diversified portfolio. Revenues were up 15% in Q3, revenue ton miles increased 4%. The Same-store pricing continues to come in ahead of our rail cost inflation. However, in the quarter, it was partly offset by mix and lower pricing on regulated grain. Our Boots on the Ground efforts, business development work and our pipeline of CN-specific growth initiatives continues to produce. In Q3, we increased NGL exports through Prince Rupert, moved the first cars from the new Wolf Midstream fractionator, continued the ramp-up of Phase 2 of our GTA fuel terminal, brought on additional canola crush capacity, shipped the first unit train from a newly expanded grain elevator in Illinois, and we celebrated the opening of the CanExport Transload Facility at Prince Rupert. We are also continuing to leverage transload capabilities. We shipped the first cars into a new facility in New Brunswick, broke ground on a facility expansion in Nova Scotia and increased transload capacity in Wisconsin. These are great examples of our BD efforts and Boots on the Ground. Now near term, energy continues to be a key growth driver. Over the medium and longer term, we expect growth between Mexico and Canada, and between Canada and the world. Our agreement with UP provides CN with direct access to Mexico's high-growth manufacturing corridor, complementing our existing access to Central and Southern Mexico via the CG Rail Ferry. We are also very well positioned to benefit from increasing investment in Canadian industrial and resource projects including the recently announced $2 billion of federal and provincial level investment to develop Ontario's critical minerals in the vast Rinafire. The progress we are seeing across the portfolio gives us confidence in our ability to continue to create value for many years to come. Now let me walk you through the key Q3 highlights. Grain and Fertilizer RTMs were up 12%, supported by record crop production and robust export demand. Petroleum & Chemicals RTMs were up 5%, driven by continued growth in shipments of refined products, mainly gasoline and diesel as well as increased crude shipments to the Gulf Coast. In Metals & Minerals, growth was driven by strong long-haul field movements within Canada as well as higher scrap iron and aluminum shipments. Frac sand reflected a mix change as growth in shipments to Northeast DC and within the U.S. replaced volumes destined for Alberta. The positive automotive results reflect continued share gains and a shift towards longer haul import traffic. Coal RTMs declined in the quarter due to production challenges impacting West Coast volume. In forest products volumes were impacted by ongoing market challenges. In Intermodal, domestic volumes were impacted by wildfire-related disruptions, while we received performance reflected the demarking of certain shipments and weather-related disruptions in Asia affecting customer supply chains. Moving now to Slide 9 and turning to the fourth quarter. Petroleum & Chemicals is expected to benefit from new crude business, including the expansion of Strat Kona's Moda facility, fractionator expansion by Pembina and Wolf and continued growth in NGLs and refined products. In coal, we expect steady demand for U.S. exports. Canadian coal shipments will depend on mine level production as well as operational conditions, including at Prince Rupert, where labor disruption of the terminal continues to impact volume throughput. In Metals & Minerals, demand for steel and aluminum remain constructive through the remainder of the year as does demand for frac sand in Northeast BC. In Grain and Fertilizers, growth is expected to moderate as we lap last year's record performance. There's no change to our Forest product outlook. Turning to Intermodal. We expect domestic performance to strengthen in Q4 supported by recent commercial gains and additional opportunities for truck to rail conversion. In overseas, we expect volumes to be weaker than prior year levels but we're encouraged by CMA CGM's Inomec service expansion to Halifax. The first vessel expected to arrive late November, enhances coverage between Canada and the Mediterranean and India. In automotive, we expect to trend towards higher offshore imports to continue. So, let me wrap up. Our third quarter results demonstrate both the strength of our franchise today and the opportunity that lies ahead. Our foundation is solid. We have a great franchise, available capacity, and we're delivering operational and service excellence. We are built for growth. With multiyear multi-commodity growth prospects across our network, a new connection to Mexico and increasing investment in Canadian industrial and resource projects. I remain confident in and very proud of the commercial team's commitment to find new opportunities, capture the volumes that best fit our network and maintain our pricing discipline. Ghislain Houle.

[Foreign Language] Third quarter reported diluted EPS was $2, up 9% from last year, which included a onetime expense of $118 million in asset impairments and $14 million in advisor fees related to industry consolidation. The impairment is a noncash charge and is related to the discontinued development of portions of certain technology projects before completion. It does not change our commitment to using technology where it improves safety, customer service, productivity or the efficiency of the railroad. Therefore, adjusted diluted EPS was $2.16, up 18% from last year or $2.14, 17% higher on an exchange adjusted basis. This strong performance was driven by solid volume growth, continued pricing discipline and the productivity improvement that Pat talked about. We delivered an adjusted operating ratio of 61%, a 40 basis point improvement. The quarter was impacted by higher year-over-year fuel prices, which had a diluted impact on operating ratio of 60 basis points. Excluding the impact of fuel, our adjusted OR would have been 60.4%. This demonstrates the value of the productivity initiatives across the business and our ability to generate operating leverage as volumes grow. Free cash flow for the first 9 months was $2.9 billion, an increase of 25% compared with the same period last year. The improvement reflects disciplined capital expenditures partially offset by higher cash tax payments. Free cash flow conversion is now 80% year-to-date at the end of Q3. during the quarter, we repurchased close to 4 million shares for approximately $675 million. Our adjusted debt to adjusted EBITDA ratio was about 2.6x at the end of the quarter -- and with strong operating performance for this year, we now expect the leverage ratio to come back to around 2.5x by the end of the year instead of in 2027. We will continue repurchasing shares through the end of the current program consistent with our capital allocation framework. Turning to Slide 12, let me review the quarter's key operating expense categories adjusted for foreign exchange. Labor increased by 6% driven by general wage increases and an approximately $35 million increase in incentive compensation versus last year, which were partially offset by 3% lower average head count and strong labor productivity. Purchased services and material was up 11%, driven by higher trucking and vessel costs, mostly due to stronger volumes and higher material and advisory costs. Reduced capital credit from our lower capital program had an approximately $15 million impact on operating expenses, mainly affecting Virtus services and material and labor expenses. Fuel expense was about $235 million higher on a year-over-year due to higher fuel prices, with the impact of higher volumes, offset by record fuel efficiency. Fuel prices had a positive impact of $0.14 on EPS in the quarter. However, as noted, it had 60 basis point dilutive impact on operating ratio. For Q4, if fuel prices remain at current spot rates, we expect an EPS tailwind of approximately $0.10 with a 100 to 150 basis point headwind to the operating ratio. Other expenses were largely flat year-over-year. Moving to Slide 13, let me provide some visibility for the balance of the year. Supported by our third quarter performance, we are reaffirming our guidance for mid- to high single-digit growth in adjusted diluted EPS and based on the low single digit RTM growth, and we are currently tracking more towards the upper end of that range. As a reminder, we will be lapping stronger year-over-year comparison in the fourth quarter, which is reflected in our outlook. We also continue to expect approximately $2.8 billion of capital investment in 2026, net of customer reimbursements. We entered the fourth quarter in a solid position. The railroad is opening well. Service remains strong. We are staying closely connected to our customers, and we have capacity available across the network. We will continue to match resources to demand and maintain our focus on productivity pricing discipline and cost control. To summarize, Q3 was another solid quarter. We continue to demonstrate the operating leverage and cash generation potential of the business when we combine profitable growth with strong execution and financial discipline. With that, I will turn it back to Tracy.

Thanks. So if you heard today, this was another strong quarter and a clear demonstration of what this team can deliver. So operator, over to you, we're ready to take questions.

[Operator Instructions] The first question comes from the line of Brian Ossenbeck with JPMorgan.

Congrats on the retirement. And Jamie, congrats on your motion as well. Maybe just couple of quick things to start. It's great to get the update on the fast track from Pat. Maybe a little bit more details if that's $120 million run rate so far if it's actually realized in net or if that's a gross number. So a little bit more clarity on that. And then just from a competitive dynamic, we saw the headlines of the Elk Valley Coal agreement. So I just wanted to hear how that would affect the rest of the year, if anything? And if there's any sort of operational changes that you need to make on that front when it starts to transition.

Okay. And I'll start with the Fast Track and that is $120 million realized. And to be clear, I want to make sure this is clear. Fast Track is not a onetime initiative. This is how we run the place. And it's about bringing the discipline and the urgency to execution. This is about challenging how we work and making continuous improvement in the day-to-day operations. So we're excited about this. We're excited about what we've accomplished in 2026 and how we take that momentum into 2027. Janet, over to you.

Thanks, Pat, and thanks, Brian, for the question. I think the topic was discussed earlier this week, but I do appreciate the opportunity to take a minute and share my perspective. So under the existing contract, EBR traffic to Neptune moves on CPK from the mines in Southern BC to the Camlin interchange at which point CN will then take the train and move it into the terminal. Starting on January 1, about half of the volumes will continue in that manner. The other half of the volumes will move, I would say, a little bit further down the rail line before interchanging with CN, and we will, again, complete the delivery of the train into the terminal. So 1 hand off under the current operating model and 1 hand off under the future operating model. I will quantify it for all of you. The impact of this is about $0.03 of EPS to us in 2027. But I want to assure you that the commercial team is laser-focused on backfilling those contribution dollars with other opportunities, and I have full confidence in the team. We're going to tackle that challenge head on in the same way that we've overcome the $350 million of tariff headwinds from last year. More broadly, we're going to continue to focus on selling the value of our service and pricing ahead of our rail cost inflation.

Your next question comes from the line of Fadi Chamoun with BMO Capital Markets.

Houle, Jamie, congrats both on the retirement and promotion. Ghis you for all the good conversation over the years. I appreciate that -- it's appreciated. Janet, maybe kind of just following up on the volume question, I guess, on the coal question. Your RTM are probably tracking year-to-date, if I exclude grain and for category, somewhere in that 1% range. But it seems from your commentary, you highlighted a lot of kind of opportunities on the energy side and maybe metals and sand. I just wanted to kind of get your perspective, like as we go into '27, does this kind of nongrain business accelerate? What are the kind of the key driver of what you see potentially accelerating your growth there, right? But I know grain will have a bit of a tough comp. Maybe there's an opportunity on the potash later in the year. But -- just trying to get some perspective on that non-brain business and some of the opportunities that you're talking about as we go to '27. If we see an acceleration from the level you're at today or.

So that's a creative waste side of trying to get me into the detail. I'll give you a little bit of high level on that one. We've been talking a lot about energy. I hope folks have been listening. This is a great multi-commodity multiyear opportunity for us. And so when we look ahead to '27, we see continued strength in the refined products into our GTA fuel terminal we see growth of NGLs going into Prince Rupert, and that's backed up by new fractionation capacity with Pembina Wolf coming online. We have incremental crude business that's coming online -- we see strength in plastics. So that overall kind of energy franchise under our petroleum and chemicals banner, we see a lot of good growth. We see continued growth in automotive. We have 2 plants that had been down for retooling, 1 in Canada and 1 in the U.S., and those are coming back online. So 1 of them has started up already. The other 1 is more kind of an end of March time line, but that's going to support continued growth in automotive. I think at this point, Forest products has kind of lapped the worst of its issues. So while we don't see growth there, we don't see significant risk either. We're excited about the BHP facility coming online in the second half of the year. And we think our boots on the ground effort that kind of every 1 carload count, carloads that we can service well on our network, that has been producing pretty close to $100 million a quarter, as Tracy referred to. And so we're going to keep the team focused on growing. And of course, we also have this new Mexican opportunity. And maybe it's worth I'd take a minute or 2 more on that one. We're pretty excited about it. Tracy kind of gave you a high-level sense of kind of the trade between Canada and Mexico, over $45 million U.S. and trade that moves between those 2 countries. And the majority of that is actually moving towards Eastern Canada. So we think we're really well positioned there. I would think about that opportunity may be in 3 buckets. There is an immediate opportunity to extend our length of haul with the new Memphis gateway. And so we capture incremental revenue on those movements. Second, we see an opportunity to compete for rail traffic already moving, and we're confident in our ability to offer customers a compelling service. And third, there's a longer-term opportunity there to convert truck to rail. And I think as you all know, there's a pretty substantial truck market between Mexico and Canada. We believe our network together with Vera gives us a really great platform to pursue this business. So what I really love about this deal is allows us to extend our reach by leveraging our existing network while partnering with a really strong Mexican rail operator. So we have the network. We've got the customer relationships, and we're excited to drive that growth. Hopefully, that gives you a bit of context for next year. I appreciate the question.

Your next question comes from the line of Ravi Shanker with Morgan Stanley.

Jamie, congratulations as well. Tracy, a big picture question for you. It's been a year since your reset of store on the guidance in the communications. You said in the topic of your remarks that the focus is producing results. The machine is working well. You have your team in place. What's the next leg of the story here beyond just waiting for the up cycle? And have you considered maybe having an Investor Day in 2027 or something to tell us what the next 7 years look like?

Ravi, yes, we've gone through -- as we've discussed before, there was an early evolution where it was obvious that we needed to make some investments in the network and in our locomotive fleet to get us where we needed to go. And so we went through that. To your point, we got to a point last year, middle of the year, where we brought that down to a more, what we would call a more industry level or a sustainable level. But it gave us the capacity that we need largely in the West and local fleet for Pat to respond to the opportunities that Janet is creating. Since then, the focus has been to lean in on quarter-over-quarter, more efficiently running the operation and lean into that. We've kind of named as Fast Track, but as he said, it's just the way that we're going to operate this business, and you're going to see more of that. And we are now executing that well, and you're seeing the results from the execution of that. We also as we put Janet on this job about now how long we go Janet, a year and a bit year -- it was a renewed focus, boots on the ground, get in front of our customers that was at a time when is a pretty volatile environment with -- especially on the Canadian side with the impact of tariffs. She was very successful through that process. And not only providing solutions for our customers but also in replacing that $350 million of tariff impact. We've largely cycled through that. So we've got now the network that we need, that we've got the extension into Mexico, we're finalizing, we've got the capacity that we need, and we're continuing to invest in bits and pieces on that. So yes, we're turning our attention to growth. And as a railroad, without a doubt, we rise and fall a little bit on the strength of the economy, and we'll operate in whatever economy kind of presents itself. But we have some kind of unique asymmetric growth opportunities. Janet took you through them. We have the benefit of being the railroad of the North up in the energy sector and the benefit of having new access to Mexico, but we also are the beneficiary of a renewed Canadian administration focused on getting natural resources and other kind of industries ramped up. So the carne administration has leaned into creating a more positive environment for investment, whether it be the tax changes that they've made, whether it be the permitting changes they announced a couple of months ago on the 1 project, 1 permit, 1 year and some of the regulatory changes that they're making. So this is a very constructive environment, and it's focused on getting Canada's natural resources, which are in high demand to markets across the continent around the world. And CN is uniquely positioned for that, both with our connections into North America and our partnerships with the other railroads as well as with a pretty unparalleled port access into global markets on both the western and the eastern side of the country. So, we see, as we look forward, it will take some time for some of this to manifest. Janet took you through some of the near-term things we see in 2027. But there's -- she's also involved in a tremendous number of dialogues with industry around other plants as this environment gets better and better. So we do think we'll ride and fall with the economy, we're really well positioned to do that. We've been delivering the productivity that it takes to kind of handle the ups and downs in that and the commercial flexibility, but we'll also be looking to capitalize on those unique opportunities at this network and this time kind of presents us. We are thinking through when we do the next Investor Day, I think we'll -- we're thinking through whether it will be next year shortly. After we'll want a couple of things to sell maybe a little more clarity on the final stages of the tariff kind of environment that we may be in and the impact of that, we'll see where the merger kind of discussion settles out, but it won't be too long, ready.

Your next question comes from the line of Cherilyn Radbourne with TD Cowen.

I also wanted to start just by extending congratulations to Ghislain and Jamie. My question is whether you could give us some perspective on your sense of the state of U.S.-Canada trade negotiations. Talk about some of the shifting trade patterns you've seen as a result of the tariff regime -- and whether you think some of those would stick even once we get a resolution.

Thanks, Cherilyn. Listen, it's been a journey, hasn't it. And I don't think that journey is over. We saw a very kind of volatile year last year with the tariffs of big tariff announcements. I think we've all managed that particularly well. There are some -- this is a sectoral story. So I think 85% of the goods, I think that's the case. Maybe it's fallen a little bit with the 338 of the goods between Canada and U.S. travel across the border with no tariff. But there are some sectors that are disproportionately and uniquely impacted. And we've been -- Janet has been working with our steel customers with their automotive customers with their forest parks customers. And there are some adjustments that have been made there around the kinds of markets that they're shipping into. And the question is, if we get a resolution, how much of that continues or do we revert back to the U.S., we'll be nimble in working with our customers on that as well. It appears that there are some dialogues going on again after there was a near miss in August on a USMCA extension or a deal. So we'll see where that takes us. But without a doubt, this has driven 2 things: a level in kind of resilience and nimbleness on our company and how we manage through the volatility that things like this bring us. And secondly, and as I just mentioned, the renewed focus in Canada make to create the conditions under which industry and natural resources growth takes place and we are very supportive of that, as I said, and I think uniquely positioned to both help that and benefit from it.

Your next question comes from the line of Ken Hoexter with Bank of America.

Congrats, Ghislain, on your retirement. It's been a great decade working with you. Appreciate all the help and discussions over time. And Jamie, certainly congrats on the new role, been a great start working with you in your prior role, so looking forward to it. Janet, I guess I'll jump over to intermodal, right? This is the rails and CN cyclical opportunity to take share but you mentioned international demarketing lanes congestion in Asia, the impact of Rupert's labor disruption. The West Coast U.S. ports are posting some of the best levels ever, and domestic, you noted some wildfires. Maybe talk a bit about the opportunity for a rebound, talk about the win back and backfill and the time frame for that. And then just a side note, race, I don't know if you want to mention what tech projects were canceled, that was a large charge.

Okay. Ken, I'll try and take it kind of 1 at a time there. Just for clarification, the Prince Rupert labor disruption is related to a coal terminal. So that has -- there's no issue there currently in terms of container side. The wildfires did disrupt us a little bit and that impacted mainly domestic, but it also impacted a little bit on the overseas side. We're past that now. We -- Pat and his team, frankly, did a phenomenal job kind of delivering the service recovery on that. And prior to that, we had a really solid kind of run rate performance on domestic growth, and I fully expect that to continue. And so it's not quite as robust, I would say. The the kind of truck market in Canada as it is in the U.S. So we haven't had as much of the capacity reductions on the Canadian side, and that's where we're more exposed on the domestic side. But certainly, the service that Pat and his team are providing is enabling us to get more of that truck to rail conversion to get more market share wins, and that is something we see continuing in the fourth quarter and certainly into next year. On the international side, I guess I would say we're going to sell to the value of our service first and foremost. We have some opportunities that we're chasing down there across a number of the port terminals. We believe in the value of Prince Rupert. We're excited about the incremental value that we have at Prince Rupert with the can export facility opening. We went up there and celebrated that opening in August, and we have Intermodeat's actually coming on, and that brings new capability for import transloading and that's going to support, I think, more stickiness with the customers. So stay tuned on that one, but we're optimistic about intermodal over the near term, maybe just not in the first half of next year. I hope that gives you a bit more color.

On the IT systems, let me just take your second question there. Listen, I got to tell you that I and this team find this completely unacceptable that we would find ourselves in a position where we're taking this action, but it was a necessary one. There was a couple of systems that between us and the vendors that we have chosen, we have sofas, 1 with the dispatch system with PDS and that was just -- so we've regrouped on that. We're being careful about our vendor selection as we go forward. And I'll talk a little bit more about the governance on this as we go forward. The second was a reorientation of our SAP 4 HANA as it hit a couple of the operating areas we originally undertaking a greenfield approach. We've reverted back to a brownfield approach. We think that that's appropriate, which meant a small portion of that work needed to be set aside. So this is -- we take our capital -- our capital execution very, very seriously in this organization, and this has caused us to relook at our governance right up to me and the ELT level to reconsider our vendor selection and how we manage vendors and our internal processes. So as we refocus on these areas, you'll see different outcomes as we go forward. I'll leave it at that, Ghislain, unless you want to add anything.

No, I think you covered it very well.

Your next question comes from the line of Walter Spracklin with RBC Capital Markets.