6-K
CANADIAN NATIONAL RAILWAY CO (CNI)
6-K
2023-11-22
For: 2023-11-20
View Original
Added on
April 11, 2026
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of November 2023
Commission File Number: 001-02413
Canadian National RailwayCompany
(Translation of registrant’s name into English)
935 de la Gauchetiere Street West
Montreal, Quebec
Canada H3B 2M9
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F | ¨ | Form 40-F | x |
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Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
| Yes | ¨ | No | x |
|---|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
| Yes | ¨ | No | x |
|---|
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
| Yes | ¨ | No | x |
|---|
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Canadian National Railway Company | ||||
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| Date: | November 20, 2023 | By: |  |
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| Name: | Cristina Circelli | |||
| Title: | Vice-President, Corporate Secretary and General Counsel |
CANADIAN NATIONAL RAILWAY COMPANY
Table of Contents
| Items | Description | |||||
|---|---|---|---|---|---|---|
| 1 | 2023 Investor Fact Book Update | |||||
| SUSTAINABLE, PROFITABLE GROWTH<br>ACCELERATING<br>2023 INVESTOR FACT BOOK | ||||||
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| As used herein, “Company” or “CN” refers to Canadian National Railway Company and, as the context requires, its wholly owned subsidiaries.<br>FORWARD-LOOKING STATEMENTS<br>Certain statements included in the CN 2023 Investor Fact Book constitute “forward-looking statements” within the meaning of the United States Private Securities<br>Litigation Reform Act of 1995 and under Canadian securities laws, including statements based on management’s assessment and assumptions and publicly available<br>information with respect to CN. This forward-looking information also includes but is not limited to, statements with respect to CN’s operations, business and revenue<br>growth opportunities, including those referring to general economic and business conditions; and statements relating to our environmental, social and governance<br>(ESG) strategies and targets, including our climate goals and sustainability commitments. By their nature, forward-looking statements involve risks, uncertainties and<br>assumptions. CN cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time<br>they were made, subject to greater uncertainty. Forward-looking statements may be identified by the use of terminology such as “believes,” “expects,” “anticipates,”<br> “assumes,” “outlook,” “plans,” “targets” or other similar words.<br>2024–2026 Key Assumptions: CN has made a number of economic and market assumptions in preparing its three-year financial perspective. CN assumes that the<br>North American industrial production will increase by approximately two percent CAGR over the next three years. CN assumes continued pricing above rail inflation.<br>CN assumes that the value of the Canadian dollar in U.S. currency will be approximately $0.75 and that the average price of crude oil (West Texas Intermediate) will be<br>approximately US$80 per barrel during this period.<br>Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors, which may cause actual results, performance<br>or achievements of CN to be materially different from the outlook or any future results, performance or achievements implied by such statements. Accordingly, readers<br>are advised not to place undue reliance on forward-looking statements. Important risk factors that could affect the forward-looking statements include, but are not<br>limited to, general economic and business conditions including factors impacting global supply chains such as pandemics and geopolitical conflicts and tensions; the<br>business opportunities referred to in the 2023 Investor Fact Book not fully materializing; industry competition; inflation, currency and interest rate fluctuations; changes<br>in fuel prices; legislative and/or regulatory developments; compliance with environmental laws and regulations; actions by regulators; increases in maintenance and<br>operating costs; security threats; reliance on technology and related cybersecurity risk; trade restrictions or other changes to international trade arrangements;<br>transportation of hazardous materials; various events, which could disrupt operations, including illegal blockades of rail networks and natural events such as severe<br>weather, droughts, fires, floods and earthquakes; climate change; labour negotiations and disruptions; environmental claims; uncertainties of investigations,<br>proceedings or other types of claims and litigation; risks and liabilities arising from derailments; timing and completion of capital programs; the availability of and cost<br>competitiveness of renewable fuels and the development of new locomotive propulsion technology; and other risks detailed from time to time in reports filed by CN<br>with securities regulators in Canada and the United States. Reference should be made to “Management’s Discussion and Analysis” in CN’s annual and interim reports,<br>Annual Information Form and Form 40-F, filed with Canadian and U.S. securities regulators and available on CN’s website (www.cn.ca) for a description of major risk<br>factors relating to CN.<br>Forward-looking statements reflect information as of the date on which they are made. CN assumes no obligation to update or revise forward-looking statements to<br>reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities laws. In the event CN does update any forward-looking<br>statement, no inference should be made that CN will make additional updates with respect to that statement, related matters, or any other forward-looking statement.<br>Information contained on, or accessible through, our website is not part of the 2023 Investor Fact Book.<br>TOTAL REVENUES<br>$17.1B<br>FREE CASH FLOW(1)<br>$4.3B<br>ADJUSTED<br>OPERATING RATIO(1)<br>59.9%<br>DILUTED EARNINGS<br>PER SHARE<br>$7.44<br>2022 Highlights<br>(1) See section entitled Non-GAAP Measures for an explanation of these non-GAAP measures.<br>ADJUSTED ROIC(1)<br>15.9%<br>ADJUSTED DILUTED<br>EARNINGS PER SHARE(1)<br>$7.46 | ||||||
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| Contents<br>FEATURED<br>ON THE COVER<br>One of CN’s next generation<br>of railroaders and recently<br>hired conductor Geordan<br>Price, seen here at MacMillan<br>Yard, Toronto, ON, during her<br>onboarding training.<br>1 | OVERVIEW<br>Message from Tracy Robinson 02<br>Accelerating Sustainable, Profitable Growth 04<br>Rewarding Shareholders 06<br>Competitive Strengths 08<br>Looking Back, Moving Forward 10<br>Planning for Growth 12<br>Simplifying and Enabling with Technology 14<br>Building Relationships 16<br>Delivering Responsibly 20<br>Financial and Operating Measures 30<br>2 | MARKETS<br>Market Overview 32<br>Intermodal 36<br>Industrial Products 48<br>Forest Products 50<br>Metals and Minerals 58<br>Bulk Products 66<br>Grain and Fertilizers 68<br>Coal 78<br>Petroleum and Chemicals 82<br>Automotive 94<br>Supply Chain Solutions 102<br>3 | OPERATIONS<br>Operations Overview 104<br>Network and Field Operations 106<br>Western Region 108<br>Eastern Region 110<br>Southern Region 112<br>Multimodal 114<br>Mechanical 116<br>Engineering 118<br>Capital Investments 120<br>Labour Relations 122<br>4 | FINANCIALS<br>Financial Overview 124<br>Quarterly Consolidated Financial 125<br>and Statistical Information<br>Non-GAAP Measures 130<br>Shareholder and Investor Information 138<br>CN | 2023 INVESTOR FACT BOOK<br>CN is a world-class transportation leader.<br>Along with our supply chain partners, we<br>safely power the North American economy.<br>The customers and communities we serve<br>and the goods we deliver are vital to people<br>across the continent and around the world.<br>Committed to environmental stewardship,<br>social responsibility, and good governance,<br>CN has been enabling sustainable trade<br>since 1919.<br>PICTURED (ABOVE): CN's high-capacity grain cars move through<br>Hinton, AB, to market. Photo by CN Employee Tim Stevens<br>TICKER SYMBOLS<br>CNR: Toronto Stock Exchange<br>CNI: New York Stock Exchange<br>Except where otherwise indicated, all financial information reflected in this<br>document is expressed in Canadian dollars and determined on the basis of<br>United States generally accepted accounting principles (GAAP).<br>CN | 2023 INVESTOR FACT BOOK 01 |
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| MOVING THE PLAN FORWARD<br>Welcome to the 2023 CN Investor Fact Book, where you will<br>find a wealth of information about our Company. Beyond the<br>facts and figures on our financials, markets and operations,<br>we present our roadmap for building the railway of the future<br>by accelerating sustainable, profitable growth.<br>Our Focus Is Clear<br>CN is committed to delivering reliable service to our customers and to<br>continuously improving our performance. We are taking action to improve<br>our scheduled operation, aligning capacity with demand, and working<br>closely with our customers and supply chain partners to maximize the<br>safety and efficiency of the whole supply chain.<br>The Plan Is Sacred<br>When I came on board in early 2022, I was very excited about focusing<br>on what this iconic Company does best: scheduled railroading.<br>We moved quickly to restore a disciplined approach to our<br>operating plan, where Network Operations makes a plan that<br>optimizes volumes for the entire rail network, Field Operations<br>runs that plan, and Sales and Marketing sells into our available<br>capacity. Together, they monitor plan effectiveness and make<br>any necessary adjustments to make sure we meet the needs<br>of our customers while ensuring the efficiency of our operations,<br>in the short- and longer-term.<br>This integrated “Make the Plan, Run the Plan, Sell the Plan”<br>operating model has improved service reliability, resiliency, and<br>efficiency. Car velocity and on-time performance are at levels<br>not seen in years. And, with our back-to-basics approach, and<br>a supportive economy, we were able to deliver record revenues<br>in 2022, with best-ever volumes for several commodities.<br>Safety Is Our Core Value<br>CN has an uncompromising commitment to the health and<br>safety of our employees, customers, and the communities and<br>environments in which we operate. Everything we do starts<br>with safety. During every shift, every job, every activity, safety<br>is at the forefront of our minds and guides all our actions.<br>MESSAGE FROM TRACY ROBINSON<br>1 Overview Overview Markets Operations Financials<br>02 CN | 2023 INVESTOR FACT BOOK | |||||
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| Working on a railway can be unforgiving. Losing one of our<br>own affects us all. We must always remain vigilant. Nothing<br>is more important than being able to return home safely to<br>our loved ones.<br>With our relentless commitment to safety, we achieved,<br>in 2022, our lowest-ever injury frequency rate. The progress<br>continued in the first half of 2023 with an even lower injury<br>rate and an improved accident rate. However, we know<br>we still have much to do on our path to a safer future.<br>We need to leverage all the best ideas, technologies and<br>processes. We need to collaborate within our Company<br>and with the industry to continue our journey to zero.<br>My personal commitment to our employees, union leaders,<br>communities and investors is we will not stop until we<br>achieve that goal.<br>Building the Next Generation of Railroaders<br>We understand the importance of the work we do and our<br>potential impact when we come together as an integrated<br>and empowered team. We are focused on making ours the<br>best company to work for by evolving our way of working<br>to be more modern, innovative and inclusive. We are<br>committed to ensuring our workforce reflects the diversity<br>of the communities where we operate, and all employees<br>can embrace their full potential.<br>Raising the Bar on Environmental Leadership<br>CN's ambition is to play a key role in the transition to a lower-carbon economy. We have set a science-based 2030 target<br>and committed to setting a net-zero 2050 target. One way we<br>will get there is by continuing to improve our industry-leading<br>locomotive fuel efficiency by increasing our use of renewable<br>fuels and working toward alternative locomotive propulsion.<br>We are proud that CN's leadership in corporate transparency<br>and performance on tackling climate change continues to be<br>recognized by global organizations like CDP. We will continue<br>to bring visibility to supply chain emissions and contribute to<br>a circular economy.<br>Creating Value for Our Shareholders<br>Our network footprint, our integrated operating plan, and<br>our ability to develop and apply advanced technologies<br>are some of the key elements that contribute to our strategy<br>going forward. By driving incremental safety, efficiency, and<br>customer service, CN aims to grow faster than the economy<br>and price ahead of rail inflation. With the right operating<br>model and the right leadership team in place, CN is committed<br>to achieving the objectives we laid out earlier this year.<br>We take a consistent approach to capital allocation. First and<br>foremost, reinvestment in the business to support the safety,<br>efficiency and resiliency of our network, and to enable growth.<br>With respect to shareholder distributions, we aim for steady<br>dividend growth in line with earnings growth, and we use share<br>repurchases as a tool to achieve our targeted leverage.<br>CN will continue to collaborate and partner with our customers,<br>as well as our supply chain partners, to safely move the economy<br>and to accelerate sustainable, profitable growth.<br>Tracy Robinson<br>President and Chief Executive Officer<br>The entire CN team leaned into delivering our plan. I am incredibly<br>proud of what the team has accomplished so far, and I am excited about<br>what lies ahead."<br>Tracy Robinson recently met with employees at<br>Woodcrest Shop in Homewood, IL, to hear their thoughts<br>about their jobs, our Company's safety culture, and<br>ways to make CN the best place to work.<br>CN | 2023 INVESTOR FACT BOOK 03 | |||||
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| To learn more about CN’s financial assumptions, visit: www.cn.ca/InvestorDay<br>SUSTAINABLE, PROFITABLE GROWTH<br>A Disciplined Execution of Our Plan<br>With the right operating model, alignment on how to implement it, and the<br>right leadership team in place, CN unveiled its 2024–2026 financial perspective<br>for growth at Investor Day on May 2–3, 2023, in Chicago, IL.<br>Creating<br>the Winning<br>Conditions<br>Running a safe scheduled<br>operation<br>Increasing car velocity and<br>on-time performance<br>Delivering consistent and<br>reliable service<br>Embedding<br>a Disciplined<br>Selling Approach<br>Selling where we have capacity<br>Collaborating with customers to<br>maximize supply chain fluidity<br>Closely integrating Operations<br>with Sales and Marketing teams<br>Elevating<br>the Customer<br>Experience<br>Deepening relationships<br>with customers<br>Fostering more collaborative<br>end-to-end supply chain partnerships<br>Using technology that adds value<br>and delivers operational efficiencies<br>ACCELERATING<br>1 Overview Overview Markets Operations Financials<br>04 CN | 2023 INVESTOR FACT BOOK | |||||
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| 2024–2026 FINANCIAL PERSPECTIVE(1)<br>(1) As communicated in May 2023 at CN’s Investor Day. See the 2024-2026 Assumptions section in the Forward-Looking Statements<br>on the inside front cover of this report.<br>(2) Annual capital expenditures expected to increase from approximately $3.5 billion in 2024 to $4.0 billion in 2026.<br>PICTURED:<br>Mixed freight train on<br>Chicago’s outer belt. CN<br>has the fastest, most<br>efficient rail route around<br>congested Chicago, IL.<br>10%–15%<br>DILUTED EPS CAGR<br>15%–17%<br>ANNUAL ROIC<br>SUSTAINABLE, PROFITABLE GROWTH<br>A Disciplined Execution of Our Plan<br>Developing<br>CN-Specific Growth<br>Opportunities<br>Developing new emerging markets<br>Expanding port and in-land<br>terminals; building interline<br>partnerships<br>Achieving annual carload growth<br>potential of 800K–900K by 2026<br>Driving<br>Top-line Growth<br>to the Bottom Line<br>Aiming to grow faster than<br>the economy<br>Syncing targeted investments<br>with volume growth<br>Combining efficiency improvements<br>with pricing above rail inflation<br>Allocating<br>Capital<br>Efficiently<br>Reinvesting in the business<br>Maintaining a strong<br>balance sheet<br>Continuing to grow dividends<br>in line with earnings<br>~$3.5B – $4.0B(2)<br> ANNUAL CAPEX OVER PLAN PERIOD<br>Make the plan.<br> Run the plan.<br> Sell the plan.<br>ACCELERATING<br>CN | 2023 INVESTOR FACT BOOK 05 | |||||
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| 250%<br>SHARE PRICE RETURN SINCE<br>JANUARY 2013(1)<br>CN’s share price on the TSX (CNR)<br>has increased at a compound annual<br>growth rate (CAGR) of 18% over the<br>last 10 years.<br>TSX<br>S&P<br>CNI<br>CNR<br>CNR (TSX)<br>CNI (NYSE)<br>S&P 500<br>TSX<br>CN’S STOCK PERFORMANCE (2013–2022) (1)<br>(Index: Closing price on December 31, 2013 = 100)<br>2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>(1) Data extracted on December 31, 2022 Source: Factset<br>50<br>100<br>150<br>200<br>250<br>300<br>350<br>400<br>Solid Share Price Performance<br>DELIVERING LONG-TERM VALUE CREATION<br>CN is committed to long-term value creation through solid financial performance, increased<br>shareholder distributions, a strong balance sheet, and sound capital investment, all while striving<br>to reduce our overall carbon emissions intensity.<br>REWARDING SHAREHOLDERS<br>$32B<br>RETURNED TO SHAREHOLDERS<br>OVER THE LAST 10 YEARS<br>CN’s strong financial position<br>allowed us to return $6.7 billion to<br>our shareholders in 2022. With an<br>8% increase in 2023, we have raised<br>our dividend every year since our<br>IPO in 1995 at an average CAGR<br>of 14% since 2013.<br>3,239<br>1,239<br>2,000<br>3,159<br>1,159<br>2,000 2,746<br>996<br>1,750 2,323<br>818<br>1,505<br>2,124<br>724<br>1,400<br>3,333<br>2,000<br>1,333<br>3,244<br>1,700<br>1,544<br>2,013<br>379<br>1,634<br>3,322<br>6,713<br>1,740<br>1,582<br>2,004<br>4,709<br>W Share repurchases<br>W Dividends<br>SHAREHOLDER DISTRIBUTION<br>($ millions)<br>2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>Returning Value to Shareholders<br>11 Overview Overview Markets Operations Financials<br>06 CN | 2023 INVESTOR FACT BOOK | |||||
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| $29B<br>CAPITAL INVESTMENTS OVER THE LAST 10 YEARS<br>Railroading is a capital-intensive business, and CN has<br>a strong track record of capital investment. Improving the<br>safety and reliability of our service, investing to support<br>the growth of our customers, and digitizing our processes<br>enable us to continue to compete effectively.<br>Strong Cash Generation Disciplined Capital Investment<br>11% CAGR<br>IN FREE CASH FLOW SINCE 2013<br>Growth in free cash flow demonstrates CN’s ability to repay<br>debt and allocate funds for discretionary uses such as payment<br>of dividends, share repurchases, and strategic opportunities.<br>CN is rated A- by S&P Global and continues to have the lowest<br>leverage of all Class I railroads.<br>2,017<br>2,297<br>2,706 2,752 2,703 2,757<br>3,531<br>4,079<br>2,863 2,897<br>2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>15.1% 16.1% 16.9% 15.8% 15.8% 15.6% 15.1% 13.3% 14.1% 15.9%<br>CAPITAL INVESTMENTS VS. ADJUSTED ROIC(1)<br>Capital Investment ($ millions)<br>Adjusted Return on Invested Capital (%)(1)<br>1,623<br>2,220<br>2,373<br>2,520<br>2,778<br>4,259<br>2,514<br>1,992<br>3,227 3,296<br>2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>FREE CASH FLOW(1)<br>($ millions)<br>Decoupling Carbon Emissions from Growth<br>45%<br>REDUCTION IN CARBON EMISSIONS<br>INTENSITY SINCE 1993<br>Since 1993, CN has made significant<br>progress in decoupling carbon emissions<br>from volume growth, reducing our<br>locomotive emissions intensity by 45%<br>and avoiding over 54 million tonnes of<br>greenhouse gas (GHG) emissions while<br>consuming approximately 15% less<br>locomotive fuel per gross ton mile than<br>the industry average.<br>(1) See section titled Non-GAAP Measures for an explanation of these non-GAAP measures.<br>CARBON EMISSIONS INTENSITY VS. GROSS TON MILES (GTMs)<br>(Tonnes CO2<br>e/Million GTMs vs. Traffic in Billion GTMs)<br>500<br>400<br>300<br>200<br>100<br>0<br>20<br>16<br>12<br>8<br>4<br>0<br>Tonnes CO2e/Million GTMs<br>GTMs (Billions)<br>Locomotive Emissions Intensity Gross Ton Miles<br>9694 9593 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 2221<br>CN | 2023 INVESTOR FACT BOOK 07 | |||||
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| Kamloops<br>Fort Nelson<br>Hay River<br>Fort McMurray<br>Matane<br>Baie-Comeau<br>Sept-Îles<br>Springfield<br>East St. Louis<br>East Peoria<br>Conneaut<br>Pittsburgh<br>New London<br>Duluth<br>Stevens<br> Point<br>Omaha<br>Sioux City<br>Sault<br>Ste.Marie<br>Fond<br>du Lac<br>Sarnia Buffalo<br>Baton Rouge<br>Minneapolis/St. Paul<br>Regina<br>Toledo<br>Decatur<br>Jackson<br>Prince George<br>Worcester<br>Arcadia<br>Chippewa Falls<br>Auburn<br>Indianapolis<br>Joliet<br>Pascagoula<br>Green<br>Bay<br>Gulfport<br>Moncton<br>Syracuse<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Calgary<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>Robust Balance Sheet<br>CN is committed to generating<br>sustainable value for our shareholders.<br>Our first use of cash is to reinvest in<br>the business to ensure the safety and<br>fluidity of our network and to enable<br>growth. CN’s consistent approach to<br>capital allocation helps maintain a<br>strong balance sheet. CN also returns<br>value to shareholders through dividend<br>payments and share repurchases.<br>Strong Team of Railroaders<br>What truly makes CN special is our<br>talented team, who show up every day<br>to get the job done. We are evolving our<br>workplace culture to be more modern,<br>innovative, inclusive and reflective of the<br>future we want for our Company and<br>industry. Together, we are building the<br>right team for today and tomorrow.<br>Advantaged Network<br>CN spans the continent, reaching<br>from coast to coast to coast. The<br>network was built through key<br>acquisitions across Canada and in<br>the U.S., including the EJ&E that<br>provides our fluidity advantage<br>around Chicago. CN’s exceptional<br>footprint provides optionality that<br>is of increasing importance to our<br>customers in a world of emerging<br>and shifting trade patterns.<br>Scheduled Railroad<br>CN’s focus on scheduled railroading<br>and car velocity benefits customers<br>and shareholders alike. Running<br>a scheduled railroad allows<br>us to unlock additional capacity,<br>while identifying key corridors for<br>further capacity investment.<br>CN main lines<br>Secondary and feeder lines<br>Shortline partners<br>Ports served by CN<br>LEGEND<br>CN is an operational and sustainability leader and an engine of<br>North American economic growth and prosperity. We deliver<br>reliable, efficient and cost-effective transportation services with a<br>continuous focus on service, productivity and safety. CN facilitates<br>end-to-end supply chains to generate long-term, profitable growth.<br>A FAR-REACHING AND DIVERSIFIED BUSINESS<br>COMPETITIVE<br>STRENGTHS<br>2022 REVENUES BY COMMODITY GROUP<br>(% of total revenues)<br>W 29% Intermodal<br>W 19% Petroleum and chemicals<br>W 16% Grain and fertilizers<br>W 12% Forest products<br>W 11% Metals and minerals<br>W 5% Automotive<br>W 5% Coal<br>W 3% Other revenues<br>2022 REVENUES BY GEOGRAPHIC FLOW<br>(% of freight revenues)<br>W 34% Overseas<br>W 32% Transborder<br>W 18% Canadian domestic<br>W 16% U.S. domestic<br>Broad Geographic Exposure Balanced and Diverse Portfolio<br>1 Overview Overview Markets Operations Financials<br>08 CN | 2023 INVESTOR FACT BOOK | |||||
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| Kamloops<br>Fort Nelson<br>Hay River<br>Fort McMurray<br>Matane<br>Baie-Comeau<br>Sept-Îles<br>Springfield<br>East St. Louis<br>East Peoria<br>Conneaut<br>Pittsburgh<br>New London<br>Duluth<br>Stevens<br> Point<br>Omaha<br>Sioux City<br>Sault<br>Ste.Marie<br>Fond<br>du Lac<br>Sarnia Buffalo<br>Baton Rouge<br>Minneapolis/St. Paul<br>Regina<br>Toledo<br>Decatur<br>Jackson<br>Prince George<br>Worcester<br>Arcadia<br>Chippewa Falls<br>Auburn<br>Indianapolis<br>Joliet<br>Pascagoula<br>Green<br>Bay<br>Gulfport<br>Moncton<br>Syracuse<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Calgary<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>1) As at or for the year ending December 31, 2022<br>Gary<br>Leithton<br>Munger<br>West<br>Chicago<br>Joliet<br>Matteson<br>Chicago<br>Heights<br>Griffith<br>Goose Lake<br>Markham<br>Waukegan<br>South Chicago<br>Chicago<br>Outer Belt<br>(former EJ&E)<br>Chicago<br>INDIANA<br>ILLINOIS<br>LAKE<br>MICHIGAN<br>FASTEST<br>RAIL ROUTE IN<br>AND AROUND<br>CHICAGO<br>300M<br>TONS OF CARGO<br>5.7M<br>CARLOADS<br>18,600<br>ROUTE MILES<br>24,000<br>EMPLOYEES (end of period)<br>$50.7B<br>ASSETS<br>$2.8B<br>CAPITAL INVESTMENTS<br>(1) As at or for the year ending December 31, 2022<br>2022 KEY STATISTICS(1)<br>CN | 2023 INVESTOR FACT BOOK 09 | |||||
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| Quebec<br>City Montreal<br>Ottawa<br>New Orleans<br>Prince Rupert<br>Prince George<br>Vancouver<br>Halifax<br>Moncton<br>Saskatoon<br>Regina Calgary<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Duluth<br>Green Bay<br>Winnipeg<br>CN in 1995 (Privatization)<br>1999<br>2001<br>2004<br>2006-2007<br>2008<br>2009<br>TIMELINE OF ACQUISITIONS<br>Gary<br>Leithton<br>Munger<br>West<br>Chicago<br>Joliet<br>Matteson<br>Chicago Heights<br>Griffith<br>Goose Lake<br>Markham<br>Waukegan<br>South Chicago<br>Chicago<br>Outer Belt<br>Chicago<br>INDIANA<br>ILLINOIS<br>LAKE<br>MICHIGAN<br>Unparalleled Network Built Through Strategic Acquisitions<br>1995<br>CN UNLEASHES THE<br>CREATIVE POWER OF<br>COMPETITION<br>One of the largest rail<br>privatizations and most<br>successful Initial Public<br>Offerings in Canadian<br>history, raising $2.2 billion.<br>1998<br>CN PIONEERS<br>SCHEDULED<br>RAILROADING<br>Innovates a fixed<br>data-driven 24/7 schedule<br>for railcars to improve<br>both profitability and<br>customer service.<br>1999<br>CN EXPANDS<br>TO THE<br>GULF OF MEXICO<br>Acquires Illinois Central,<br>linking Canada through<br>Chicago to New Orleans —<br>making CN the fifth-largest<br>Class I railway.<br>2001<br>CN FILLS A GAP BY<br>BUYING WISCONSIN<br>CENTRAL<br>Further expanding<br>CN’s reach by adding an<br>important corridor to<br>connect Western Canada<br>to the U.S. Midwest.<br>2004<br>CN EXTENDS ITS REACH<br>WITH FIVE STRATEGIC<br>ACQUISITIONS<br>In addition to three small<br>railroads, CN acquires<br>BC Rail and Great Lakes<br>Transportation, gaining further<br>access to key markets.<br>MORE THAN A QUARTER-CENTURY OF TRANSFORMATIONAL GROWTH<br>We are proud of the progress we have made and the milestones we have achieved since our IPO more<br>than 25 years ago. CN has evolved from Canada’s largest and oldest Crown corporation into an efficient<br>North American transportation and logistics trade enabler. Today, CN plays an essential role, connecting<br>employees to communities and customers to markets across the continent and around the globe.<br>LOOKING BACK<br>MOVING FORWARD<br>Overview Markets Operations Financials<br>1 Overview - Looking Back, Moving Forward<br>1 Overview<br>10 CN | 2023 INVESTOR FACT BOOK | |||||
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| 2007<br>CN PARTNERS<br>WITH THE PORT OF<br>PRINCE RUPERT<br>Exclusively served by<br>CN and the closest<br>port to Asia, offers the<br>fastest all-in transit times<br>to major destinations.<br>2009<br>CN ACQUIRES<br>THE ELGIN, JOLIET &<br>EASTERN RAILWAY<br>Creating a key<br>advantage for CN<br>with the fastest<br>rail route around<br>congested Chicago.<br>2018<br>CN DEEPENS<br>ITS SUPPLY CHAIN<br>FOCUS<br>Acquires TransX and<br>the intermodal division<br>of H&R, offering new<br>first mile/last mile options<br>for our customers.<br>2020<br>CN CELEBRATES<br>A QUARTER CENTURY<br>OF GROWTH<br>CN’s journey has forged<br>its crucial role in the many<br>supply chains that power<br>the North American and<br>global economies.<br>2023<br>NEW INTERLINE<br>PARTNERSHIPS FOR<br>INTERMODAL<br>CN is partnering with<br>other Class I railroads to<br>reach new markets and<br>serve new customers.<br>CN | 2023 INVESTOR FACT BOOK 11 | |||||
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| PLANNING<br>FOR GROWTH<br>Operational and Service Excellence<br>As a key North American and global trade enabler,<br>we leverage our tri-coastal network to unlock long-term,<br>profitable growth. We have returned to a back-to-basics<br>approach to scheduled railroading that increases the<br>velocity and consistency of our operation. By making a<br>network-wide plan and running that plan with discipline,<br>we are creating the capacity to move more goods and<br>deliver the level of service predictability and efficiency<br>our customers need and expect.<br>Growth through Collaboration and Partnerships<br>One way CN is planning to achieve the ambitious growth<br>targets we set out on Investor Day in Chicago in May 2023<br>is to grow organically through partnerships with other<br>Class I railroads. Together, we are launching new intermodal<br>interline services to access new markets and compete<br>directly with trucks, consistently and reliably.<br>By delivering on our commitments, we are building trust and<br>confidence with our customers and supply chain partners.<br>Collaboration and integration within the whole supply chain<br>are the keys to how we will move forward.<br>Creating Value with Innovation<br>We are pursuing an ambitious innovation agenda by<br>leveraging the rapid evolution in technology, analytics and<br>automation to be more efficient, improve safety, grow<br>market share, and deliver more reliable and seamless services<br>to our customers. Our innovation efforts are focused on<br>making it easier to do business with us through closer data<br>integration and transparency. We are also exploring<br>applications of advanced analytics to proactively remove<br>human error, reduce risk, optimize our decision making,<br>and improve predictive maintenance.<br>A ROBUST STRATEGIC PLANNING PROCESS<br>CN has an integrated business strategy to create shareholder and stakeholder value in the short,<br>medium and long term. Our dynamic planning process allows us to prioritize our resources and<br>concentrate on our five strategic areas of focus so we can effectively measure progress and achieve<br>our goals. A key component is making sure our people understand and can execute that strategy.<br>CN train crossing the<br>Obion River near Trimble, TN.<br>Photo by CN Employee Eric Graf<br>1 Overview Overview Markets Operations Financials<br>12 CN | 2023 INVESTOR FACT BOOK | |||||
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| Our plan is focused on consistently delivering the quality service our<br>customers expect by using the strength of our network, people, technologies<br>and partnerships to accelerate sustainable, profitable growth.<br>Operational and Service Excellence<br>Making, running and selling a scheduled<br>railroading plan to deliver predictable<br>and efficient customer service.<br>Growth through Collaboration<br>Working with all our stakeholders<br>and supply chain partners to help our<br>customers succeed.<br>Creating Value with Innovation<br>Leveraging the evolution in tech to be<br>safer and more efficient, deliver seamless<br>service, and support our growth ambitions.<br>Disciplined Capital Approach<br>Staying ahead of the curve to understand<br>where best to apply our resources and<br>capital to grow profitably.<br>Our Focus Areas<br>Delivering Responsibly<br>Our sustainability focus on people, safety,<br>environment, community, and governance<br>underpins all our decisions.<br>Disciplined Capital Approach<br>CN competes in a transportation market that is changing<br>rapidly. We are enhancing our medium and long-term capital<br>planning to prioritize our investments systematically and ensure<br>they are aligned with our goals. We are also upgrading our<br>end-to-end project management and execution capabilities to<br>ensure we spend our capital effectively. Both are key measures<br>to maximize our return on invested capital.<br>Delivering Responsibly<br>Delivering Responsibly, the encapsulation of our sustainability<br>leadership, underpins all our decisions, commitments,<br>governance standards, and investments.<br>CN’s people are our single most important competitive<br>differentiator. We continue to adapt our talent model and<br>HR practices to attract, retain and motivate top talent,<br>with a focus on diversity and an inclusive workplace culture<br>to deliver strong employee engagement.<br>We have an uncompromising commitment to the health and<br>safety of our employees, the communities and environments<br>where we operate, and the customers we serve. We will continue<br>to develop a strong safety culture based on a fundamental<br>conviction that all injuries and accidents should be preventable<br>with the right combination of vigilance, training, leadership,<br>technology and proactive maintenance.<br>CN contributes to the economic prosperity of the communities<br>along our network. We are proud of the work we do to be good<br>neighbours by investing in community development and<br>creating positive socioeconomic benefits.<br>CN aims to play a key role in the transition to a lower-carbon<br>economy. We lead Class I railroads as the first to commit to<br>setting a net-zero 2050 carbon emissions target by signing the<br> “Business Ambition for 1.5°C.” To achieve net-zero by 2050, we<br>will continue to work with our partners to increase our use of<br>renewable fuels and other innovative technologies.<br>CN | 2023 INVESTOR FACT BOOK 13 | |||||
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| w<br>Enabling Operational Excellence<br>CN’s pioneering innovations in rail operations include leadership in scheduled<br>railroading. With this disciplined operating model, we manage the complexity<br>of the network, bringing rigorous planning and execution to ever-shifting operating<br>conditions. Today, CN is evolving scheduled railroading by applying advanced<br>technologies to continue to be the transportation provider of choice for<br>our customers.<br>Improving Customer and Supply Chain Ecosystems<br>At CN, we are not only focused on the efficiency of our operations, but also on<br>the experience of our customers, the safety of our employees, and the impact<br>we have on our communities and the environment. New technologies present<br>exciting opportunities to improve the safety and sustainability of our operations,<br>opening a future for CN centred around even more streamlined operations,<br>informative operating metrics, and increased customer and employee satisfaction.<br>Application programming interfaces (APIs) are an important component of CN’s<br>digital transformation, allowing customers to connect seamlessly and in real time<br>with CN data for system-to-system “track and trace” information. APIs unlock<br>actionable data that empowers our customers and partners to increase revenue<br>and create new efficiencies.<br>GLOBAL SUPPLY CHAINS ARE EVOLVING<br>Supply chains and CN’s role within them are more complex than ever.<br>CN has an important role to play in enabling modern supply chains<br>to contribute to economic prosperity in a collective and collaborative<br>way. We are using technology and data to power operational efficiency,<br>ease the way our customers and partners do business with us, and<br>protect CN and our customers with a solid cybersecurity foundation.<br>SIMPLIFYING AND ENABLING<br>WITH TECHNOLOGY<br>SPOTLIGHT<br>On the Move with<br>Our Customers<br>Doing business with CN just<br>got a whole lot easier thanks to<br>a new shipment tracking tool for<br>customers. The CN One mobile<br>app provides a snapshot of a<br>customer’s carload or intermodal<br>shipment on the North American<br>rail network in real time, 24/7.<br>Customers can access intuitive<br>map views and multiple tracking<br>features that allow them to share<br>critical shipment information<br>anytime, anywhere.<br> Watch the video to learn more about how CN is enabling customers and supply chain<br>partners at: vimeo.com/820641128<br>CN One mobile app provides<br>real-time shipment tracking 24 hours<br>a day, 7 days a week.<br>Overview Markets Operations Financials<br>1 Overview - Future-proofing with Technology<br>1 Overview<br>14 CN | 2023 INVESTOR FACT BOOK | |||||
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| Protecting CN and Our Customers<br>Ensuring our Company’s network is secure and security<br>controls are functioning well requires a constant state of<br>preparedness. To that end, we continuously identify cyber risks<br>and vulnerabilities to detect malicious activity and deploy an<br>effective incident response. Regular testing is a key component<br>of our program. This includes exercising incident response plans<br>and audits of our program maturity to identify opportunities<br>for improvement. Our investments in talent, technology and/or<br>processes are focused on protecting normal operation in an<br>ever-evolving threat environment.<br>Improving Safety and Accelerating Digital Agility<br>Technology presents exciting opportunities to improve the<br>safety of our operations. CN is installing powerful sensor<br>and AI technology into Automated Track Inspection Program<br>(ATIP) railcars positioned in regularly scheduled trains, enabling<br>track inspections at normal track speed. Our 11 ATIP cars are<br>inspecting approximately 800,000 miles of track per year.<br>In the future, CN will continue to upgrade our ATIP cars with<br>new technologies like ground-penetrating radar to scan<br>into the roadbed looking for soft spots.<br>We have over 2,800 wayside detectors along our mainline<br>to measure things like bearing temperature and noise,<br>wheel load impacts and dragging equipment. Our seven<br>automated railcar inspection portals use machine vision<br>and AI to complement current manual railcar inspections.<br>All these inspection technologies generate over 24 million<br>data points a day, which we are using to build preventative<br>maintenance schedules that improve safety with<br>data analytics.<br>Other recent safety advancements include:<br> • Electronic Track Authority Verification to alert<br>Engineering crews if they exceed their track limits.<br> • A hazardous situations reporting app.<br> • Electronic delivery of key instructions to train engineers.<br>PICTURED:<br>One of CN’s ATIP railcars crosses<br>the Fox River in Oshkosh, WI.<br>16X more<br>TRACK INSPECTED THAN WITH<br>NON-AUTONOMOUS METHODS<br>3 million<br>MILES OF TRACK INSPECTED<br>WITH ATIP SINCE 2020<br>Watch the video to learn more about how CN is leveraging technology<br>to power operational efficiency and improve safety: vimeo.com/820639756<br>By using technology to its full potential, CN is generating more value<br>for our customers, supply chain partners and investors as we build the<br>digital backbone of the railroad of the future.<br>CN | 2023 INVESTOR FACT BOOK 15 | |||||
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| w<br>CN Community Fund President and CEO Lynn Blais (centre)<br>and CN Community Fund Coordinator Rebecca Tremblay (centre-left)<br>accompanied by CN Canadiens alumni event volunteers.<br>Proud to Be a Good Neighbour<br>CN plays an essential role and contributes to the economic prosperity of more than<br>2,000 cities, towns and Indigenous communities throughout North America. We are<br>proud of the work we do to be good neighbours who listen, learn and do our part to<br>help communities be great places to live, work and play. Each year, CN contributes<br>millions of dollars ($15.7 million in 2022) to non-profits that promote health and safety,<br>innovation, environmental sustainability, and diversity.<br>Our employees are part of the fabric of our communities and, together, we help<br>build safer, stronger communities by investing in community development, creating<br>positive socioeconomic benefits, and ensuring open lines of communication. And,<br>when our neighbours are in crisis, CN and our employees step up to help recover and<br>rebuild, such as during severe weather events.<br>Helping Keep Communities Safe<br>The cities, towns and Indigenous communities we serve are powerful allies in<br>promoting rail safety. By educating people of all ages, CN employees, retirees,<br>stakeholders and community leaders focus on our common goal of bringing<br>railroad crossing and trespassing deaths and injuries down to zero.<br>STRONGER TOGETHER WITH OUR STAKEHOLDERS<br>We are committed to building and maintaining strong, lasting<br>relationships with all our stakeholders. Through our engagement<br>activities, we seek to understand the concerns and interests of our<br>stakeholders, participate in open dialogue, and build trust.<br>BUILDING RELATIONSHIPS<br>RANKED AMONG THE BEST 50<br>CORPORATE CITIZENS IN CANADA<br>BY CORPORATE KNIGHTS FOR<br>THE 15th CONSECUTIVE YEAR,<br>PLACING FIRST IN THE FREIGHT<br>TRANSPORTATION CATEGORY.<br>Giving Back to Communities<br>CN employees and pensioners gave generously to<br>the Community Fund’s 2023 campaign, coming together<br>to raise a record $2.19 million, including a record<br>$550,000 raised through the CN Canadiens Alumni<br>Challenge hockey game. Over 600 non-profit<br>organizations benefited from every dollar.<br>CN Railroader in the Community<br>Wonda Warren, Senior Clerk,<br>Operations, helps young lacrosse<br>players in Chilliwack, BC.<br>Overview Markets Operations Financials<br>1 Overview - Building Relationships<br>1 Overview<br>16 CN | 2023 INVESTOR FACT BOOK | |||||
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| During the industry’s annual Rail Safety Week campaign<br>in September, CN police officers and other employees, in<br>partnership with Operation Lifesaver®, participate in many<br>safety initiatives to raise awareness about preventing<br>accidents and saving lives. CN employees also make hundreds<br>of presentations and talk to thousands of children and adults<br>at schools and community events about the dangers of<br>walking or playing on or near railway tracks. In addition, the<br>Company trains hundreds of community first responders to<br>help them understand the movement of hazardous materials<br>and the response required in the event of an incident.<br>Consistent Engagement with the Investment Community<br>Our Investor Relations department communicates with the<br>investment community on behalf of CN and actively engages<br>with shareholders, sell-side analysts, potential investors, and<br>shareholder advocacy groups. Throughout 2022, our Board<br>Chair, CN executives, and our Investor Relations team engaged<br>in dialogue with shareholders through earnings calls, roadshows,<br>sell-side-sponsored conferences, and investor meetings. On<br>May 2–3, 2023, CN hosted an Investor Day in Chicago, IL, to<br>update the investment community on CN’s vision for the future.<br>Working with Governments and Associations<br>The rail industry is regulated by Transport Canada and the<br>Federal Railroad Administration. CN works closely with<br>the regulators, all levels of government, industry associations<br>and others to promote a consistent, balanced and collaborative<br>approach. For example, we help lead the Proximity Initiative<br>with the Federation of Canadian Municipalities to address issues<br>that come with living and working near rail lines.<br>Learn more about CN's commitment to the communities we serve:<br>www.cn.ca/delivering-responsibly/community<br>CN Police – Celebrating a<br>Century of Pride and Purpose<br>On April 1, 2023, CN Police Services (CNPS)<br>marked its 100th anniversary as an integral<br>part of our railroad and communities. It is<br>a rich history closely tied to the history of<br>CN itself.<br> “For a century, the men and women of the<br>CNPS have safeguarded CN’s network, built<br>collaborative and trusted relationships with<br>law enforcement agencies and community<br>safety partners, and remained at the<br>forefront of rail safety promotion that has<br>made a difference in saving lives.<br>I would like to thank the hundreds of our<br>members, past and present, for their<br>dedicated service and excellence in policing<br>that have been hallmarks of the department.<br>We will help lead CN to be the safest and<br>most secure railway in North America for the<br>next century and beyond.”<br>Stephen Covey<br>CN Chief Security Officer and Chief of Police<br>PICTURED: Members of the CNPS Mountain Division,<br>past and present, celebrate 100 years of service at<br>Walker Yard in Edmonton, AB.<br>We recognize that the contributions we make and the way in which we<br>conduct ourselves have meaningful impacts on building safer, stronger<br>communities and working with all stakeholders on the path to growth.<br>CN | 2023 INVESTOR FACT BOOK 17 | |||||
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| CN’s Priorities to Guide How We Deliver Our Indigenous Vision<br>Training: CN will continue to provide cultural awareness training to management,<br>non-management and unionized employees, and its Board of Directors. The training<br>includes the history and culture of Indigenous peoples, the legacy of residential schools,<br>the United Nations Declaration on the Rights of Indigenous Peoples, treaties and<br>Indigenous rights, Indigenous law, and Indigenous–Crown relations.<br>Employment: CN will partner more with Indigenous organizations to ensure Indigenous<br>people have access to jobs, training, education and opportunities to help increase<br>Indigenous representation at all levels of the Company.<br>Procurement: CN will continue to identify and foster opportunities that will deliver<br>long-term and sustainable benefits to Indigenous-owned businesses. CN has an<br>Indigenous procurement strategy in place that pledges to increase spending with<br>Indigenous businesses.<br>STRENGTHENING OUR TIES WITH INDIGENOUS PEOPLES<br>Operating within or adjacent to nearly 230 reserve lands of more<br>than 120 First Nations and Métis peoples, CN is in regular contact with<br>Indigenous peoples across our network, developing respectful and<br>mutually beneficial relationships. We continue to engage in open<br>dialogue with Indigenous communities and Nations, identify and<br>foster business opportunities, increase our employees’ awareness and<br>understanding of Indigenous culture, and enhance our ability to<br>attract Indigenous talent.<br>Spotlight<br>BUILDING RELATIONSHIPS<br>Learn more about CN's commitment to Indigenous communities and Nations:<br>www.cn.ca/delivering-responsibly/community/indigenous-relations<br>CN’s Indigenous<br>Vision Since 2013<br>We will develop respectful and<br>mutually beneficial relationships<br>with all Indigenous peoples,<br>while ensuring service to our<br>customers. In addition, we will<br>be recognized by key stakeholders,<br>including customers and<br>governments, as having a sound<br>approach to engaging with<br>Indigenous communities and<br>having a respectful and sustainable<br>relationship with Indigenous<br>peoples across the CN network.<br>1 Overview Overview Markets Operations Financials<br>18 CN | 2023 INVESTOR FACT BOOK | |||||
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| We are working<br>alongside Indigenous<br>communities across<br>the CN network<br>to strengthen our<br>ties and move toward<br>reconciliation.<br>Consulting with Indigenous Leaders<br>In 2021, CN created the Indigenous Advisory Council (IAC), an independent body<br>comprised of Indigenous leaders from across Canada. The IAC’s mandate is to provide<br>advice to CN’s Board and CEO on relevant issues such as reinforcing diversity and<br>inclusion at CN. The guidance provided by the IAC has been instrumental in laying the<br>path for CN’s journey toward reconciliation.<br>Indigenous Employee Resource Group (ERG)<br>CN’s Indigenous ERG is a safe space for employees to share, learn, and grow together<br>around the unique experiences, culture, and histories of Indigenous peoples. The<br>ERG reaches out to Indigenous communities to promote hiring opportunities with CN<br>and holds virtual educational seminars, sponsorships, and fundraising activities. The<br>Indigenous ERG marked National Indigenous History Month and National Indigenous<br>Peoples Day with activities featuring Indigenous art, dance, and culture.<br>PICTURED:<br>Greeting all visitors and trainees<br>at the CN Campus in Winnipeg, MB,<br>a mural painted by Indigenous artist<br>Annie Beach captures Indigenous<br>culture within the contemporary world<br>and is a vibrant visual reminder of<br>CN’s commitment to reconciliation.<br>A Welcoming Symbol of Reconciliation<br>This beautiful mural was unveiled as part of CN’s commemoration of<br>2022 National Day for Truth and Reconciliation and was sponsored<br>by CN’s Indigenous ERG. “I’m proud of CN for allowing the Indigenous<br>ERG to come up with different strategies and activities that work<br>toward reconciliation in small, constant ways. The mural is a symbol to<br>all new employees of diversity and inclusion, providing a sense of<br>belonging for all.” – Vanessa James, Manager, Indigenous Affairs,<br>Co-chair of the Indigenous ERG, and the daughter of a residential<br>school survivor.<br>From left: April Krahn, Assistant Superintendent, Indigenous<br>Way of Life, Frontier School Division; Colleen Omand, a local<br>Cree language teacher who helped organize the event;<br>Vanessa James, Co-chair, Indigenous ERG.<br>CN | 2023 INVESTOR FACT BOOK 19 | |||||
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| DELIVERING RESPONSIBLY<br>Sustainability<br>is not just an<br>important part of<br>CN; sustainability<br>is our business.<br>SELECTED 2022 MEMBERSHIPS AND RECOGNITION<br>Listed on the Dow Jones Sustainability<br>World Index for 11 consecutive years<br>and on the DJSI North American Index<br>for the 14th straight year.<br>Earned a spot for the seventh<br>time on CDP’s prestigious A List<br>for our leadership in corporate<br>transparency and performance on<br>tackling climate change.<br>Pledged to set a net-zero carbon<br>emissions by 2050 target, which<br>aligns with the Government of<br>Canada’s Net-Zero Challenge, to<br>which CN is also a signatory.<br>In 2022, CN joined the United Nations<br>Global Compact initiative —<br>a platform for the development,<br>implementation and disclosure of<br>responsible business practices.<br>Learn more about sustainability at CN: vimeo.com/831616714<br>TOWARD A MORE SUSTAINABLE FUTURE<br>CN is building a sustainable future by Delivering Responsibly:<br>moving our customers’ goods safely, efficiently and in a manner that<br>minimizes our impact on the environment; attracting, developing and<br>retaining top diverse talent; helping to make our communities safer<br>and stronger while fostering close relationships with stakeholders;<br>and adhering to the highest governance standards.<br>Our five sustainability pillars are at the heart of every decision we take at CN.<br>Climate change is the defining issue of our time and we are determined to be<br>part of the solution. Ensuring everyone goes home safely at the end of each<br>day is our responsibility. The people and communities we engage with, including<br>our Indigenous neighbours, power our growth. And, by conducting ourselves<br>with integrity, we are keeping a steady eye on the future.<br>Since rail is up to four times more fuel efficient than trucking, by leveraging CN<br>for the long haul we can support our customers’ efforts to reduce their overall<br>transportation GHG emissions by up to 75%. CN is making a positive contribution<br>in the urgent fight against climate change and helping in the transition to a<br>lower-carbon economy.<br>Our sustainability approach and performance continue to earn CN a place<br>among the world’s best, including in the 2023 S&P Global Yearbook as one of<br>the top 5% sustainability performers in the worldwide transportation industry.<br>Diversity, equity and inclusion are<br>important aspects of CN’s sustainability<br>plan. Orson Jones, Locomotive Engineer,<br>Kirk Yard, Gary, IN.<br>Overview Markets Operations Financials<br>1 Overview - Delivering Responsibly<br>1 Overview<br>20 CN | 2023 INVESTOR FACT BOOK | |||||
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| GHG EMISSIONS (Scope 1 and 2)<br>43%<br>Scope 1 and 2 intensity reduction by 2030<br>based on 2019<br>GHG EMISSIONS (Scope 3)<br>40%<br>Scope 3 intensity reduction from fuel- and energy-related<br>activities by 2030 based on 2019<br>AIR EMISSIONS<br>6%<br>Intensity reduction by 2022 based on 2017<br>WASTE<br>95%<br>Waste diverted from landfill by 2030<br>BIODIVERSITY<br>3 million trees<br>Planted across our network by 2030<br>PERSONAL SAFETY<br>55%<br>Reduction in personal injury frequency rate<br>(per 200,000 person hours) by 2030 based on 2019<br>OPERATIONAL SAFETY<br>45%<br>Reduction in accident rate (per million train miles)<br>by 2030 based on 2019<br>EXECUTIVE DIVERSITY<br>30%<br>Female representation at executive level by 2022<br>BOARD DIVERSITY<br>50% diversity<br>Non-management Board members from underrepresented<br>groups, including gender parity by 2022<br>Our Sustainability Targets<br>People<br>Provide a safe,<br>supportive and diverse<br>work environment where<br>our employees can grow<br>to their full potential<br>and be recognized for<br>their contributions to<br>CN’s success.<br>Safety<br>Be the safest railroad<br>in North America by<br>establishing an<br>uncompromising safety<br>culture and implementing<br>systems designed to<br>minimize risk and drive<br>continuous improvement.<br>Governance<br>Continuously improve<br>our culture of integrity<br>and ethical business<br>conduct, building trust<br>and confidence with all<br>our stakeholders.<br>Community<br>Build safer, stronger<br>communities by investing<br>in community development,<br>creating socioeconomic<br>benefits, and ensuring<br>open dialogue with all<br>stakeholders, including<br>Indigenous peoples.<br>Environment<br>Conduct our operations<br>in a manner that<br>seeks to minimize our<br>environmental impact,<br>while providing cleaner,<br>more sustainable<br>transportation services<br>to our customers.<br>ALIGNING OUR SUSTAINABILITY PILLARS TO GLOBAL GOALS<br>* Progress toward our targets is at December 31, 2022. For the most up-to-date performance see our Delivering Responsibly Data Supplement available at:<br>www.cn.ca/delivering-responsibly. Please refer to CN’s Climate Action Plan Report for additional details. The Climate Action Plan Report can be found in CN’s<br>2023 Management Information Circular and Notice of Annual Meeting of Shareholders available online on SEDAR+ at www.sedarplus.com, on the SEC’s<br>website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section.<br>Environment Social<br>Governance<br>Progress<br>18%<br>Progress<br>40%<br>Progress<br> Achieved<br>Progress<br>99%<br>Progress<br>80%<br>Progress<br>26%<br>Progress<br>90%<br>Progress<br> Achieved<br>Progress<br>77%<br>CN | 2023 INVESTOR FACT BOOK 21 | |||||
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| DELIVERING RESPONSIBLY<br>ENABLING THE TRANSITION TO A LOW-CARBON FUTURE<br>Rail has tremendous potential to reduce the environmental impact of transportation<br>and we are actively working with many of our customers and supply chain partners,<br>including ports, to help them reduce their emissions. We also continue to strengthen<br>our position within emerging cleaner energy markets, such as wood pellets, wind<br>turbines, solar panels, and biofuels.<br>Our Climate Action Plan<br>With 87% of our direct GHG emissions generated from rail operations, the<br>best way to reduce our carbon footprint is by continuously improving our rail<br>efficiency, and by applying those leading practices to the other fleets we<br>operate. To achieve our science-based target to reduce our Scope 1 and Scope 2<br>GHG emissions intensity by 43% by 2030 based on 2019 levels, we are focused<br>on five key strategies:<br> • Targeting incremental fuel efficiency • Enhancing our operating practices<br> • Employing innovative technologies • Increasing the use of cleaner fuels<br> • Leveraging big data analytics<br>In accordance with our leading governance practices, we held an advisory<br>vote on our Climate Action Plan, which received an approval rate of 96.53% at<br>the 2023 annual meeting of shareholders. Full details on CN's Climate Action<br>Plan can be found in CN's 2023 Management's Information Circular.<br>Playing a Key Role<br>CN is making significant progress in decoupling carbon emissions from volume<br>growth. Since 1993, we have reduced our locomotive emissions intensity by 45%,<br>avoiding over 54 million tonnes of GHG emissions while our cargo volumes continue<br>to grow. In 2022, total Scope 1 and 2 emissions intensity was 2.0% less than in 2021,<br>and Scope 3 GHG emissions intensity from fuel- and energy-related activities was<br>4.3% less than in 2021.<br>We maintain our leadership position among Class I railroads, consuming<br>approximately 15% less locomotive fuel per gross ton mile (GTM) than the industry<br>average. In 2022, we improved our locomotive fuel efficiency by 1.9% compared to<br>2021 and achieved a record 0.867 US gallons of fuel consumed per 1,000 GTMs.<br>Building Momentum on<br>Climate Leadership<br>SPOTLIGHT<br>Working to Preserve<br>Biodiversity<br>Protecting biodiversity is an<br>important part of CN’s corporate<br>culture and sustainability<br>objectives. We have a broad range<br>of programs in place to preserve<br>and restore habitat and<br>ecosystems close to railway tracks,<br>such as rehabilitating salmon<br>streams. Additionally, through<br>our EcoConnexions programs,<br>we are promoting biodiversity<br>and combating climate change<br>by planting millions of trees along<br>our network. CN is the leading<br>private non-forestry tree planter<br>in Canada.<br>15% less<br>LOCOMOTIVE FUEL PER<br>GROSS TON MILE THAN<br>THE INDUSTRY AVERAGE<br>53million<br>TONNES OF GHG<br>EMISSIONS AVOIDED<br>SINCE 1993<br>2.3 million<br>TREES PLANTED<br>ACROSS OUR NETWORK<br>SINCE 2012<br>MEASURING OUR PERFORMANCE<br>The acquisition of cleaner, more<br>fuel-efficient locomotives enables<br>CN to decouple our GHG emissions<br>from business growth.<br>1 Overview Overview Markets Operations Financials<br>22 CN | 2023 INVESTOR FACT BOOK | |||||
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| Setting Ambitious Climate Targets<br>In 2021, CN updated its approved science-based targets<br>and is now aiming to reduce Scope 1 and 2 GHG emissions<br>by 43% per GTM and Scope 3 GHG emissions for fuel- and<br>energy-related activities by 40% per GTM by 2030 from<br>a 2019 base. Also in 2021, CN formally committed to setting<br>a net-zero target by joining the Business Ambition for 1.5°C<br>and the United Nations’ Race to Zero campaign. In 2022,<br>we joined the Government of Canada’s Net-Zero Challenge.<br>All these programs encourage companies to transition to<br>net-zero emissions by 2050.<br>Planning for the Future<br>We are proud of our leading fuel efficiency, but fuel efficiency<br>alone will not be enough to achieve net zero by 2050. The<br>entire rail transportation industry will need to collaborate<br>and make significant investments to find innovative solutions<br>such as increasing the use of sustainable renewable fuels.<br>That is why, in early 2022, along with Progress Rail and<br>Chevron Renewable Energy Group, we began testing high-level renewable fuel blends, including both biodiesel and<br>renewable diesel. We also announced the acquisition<br>of a battery-electric freight locomotive from Wabtec. The<br>technology is expected to reduce overall locomotive fuel<br>emissions by up to 30%. In addition, we intend to test electric<br>trucks in various applications at our intermodal terminals.<br>PICTURED:<br>Edmundston, NB<br>Photo by CN Employee Maxime Larouche<br>Decoupling Emissions from Growth Progress Toward Our Targets<br>500<br>400<br>300<br>200<br>100<br>0<br>20<br>16<br>12<br>8<br>4<br>0<br>GHG EMISSIONS INTENSITY vs. GROSS TON MILES (GTMs)<br>(Tonnes CO2<br>e/Million GTMs vs. Traffic in Billion GTMs)<br>Locomotive Emissions Intensity Gross Ton Miles<br>Tonnes CO2e/Million GTM<br>45%<br>GTMs (Billions)<br>Reduction since 1993<br>93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22<br>500<br>400<br>300<br>200<br>100<br>0<br>20<br>16<br>12<br>8<br>4<br>0<br>GHG EMISSIONS INTENSITY vs. GROSS TON MILES (GTMs)<br>(Tonnes CO2<br>e/Million GTMs vs. Traffic in Billion GTMs)<br>Locomotive Emissions Intensity Gross Ton Miles<br>Tonnes CO2e/Million GTM<br>45%<br>GTMs (Billions)<br>Reduction since 1993<br>93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22<br>EMISSIONS TRAJECTORY IN A WELL-BELOW 2˚C SCENARIO<br>(Tonnes CO2<br>e/Million GTMs)<br>2019 2020 2021 2022 2030 2050<br>Scope 1 and 2<br>Scope 3<br>43%<br>40%<br>TARGET<br>Scope 1 and 2 Emissions Scope 3 Emissions from Fuel- and Energy-related Activities<br>18%<br>40%<br>EMISSIONS TRAJECTORY IN A WELL-BELOW 2˚C SCENARIO<br>(Tonnes CO2<br>e/Million GTMs)<br>2019 2020 2021 2022 2030 2050<br>Scope 1 and 2<br>Scope 3<br>43%<br>40%<br>TARGET<br>Scope 1 and 2 Emissions Scope 3 Emissions from Fuel- and Energy-related Activities<br>18%<br>40%<br>We recognize that our climate is changing, and that businesses must<br>not merely adapt, but be part of the solution. As a mover of the economy,<br>CN is committed to playing a key role.<br>Learn more about CN's climate change strategy and progress toward our<br>targets at:/www.cn.ca/delivering-responsibly/environment<br>CN | 2023 INVESTOR FACT BOOK 23 | |||||
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| PERSONAL INJURY RATIO(2)<br>(Injuries per 200,000 person-hours)<br>2019 2020 2021 2022 2023<br>H1(4)<br>2030<br>* Based on Federal Railroad Administration (FRA)<br> reporting criteria.<br>TARGET<br>Reduction<br>55%<br>1.97<br>1.64<br>1.36<br>1.10 0.98 80%<br>* Based on FRA reporting criteria, includes only accidents<br> with a cost in excess of US$10,000 (C$14,100).<br>2019 2020 2021 2022<br>TRAIN ACCIDENT RATIO(3)<br>(Accidents per million train miles)<br>2030<br>45% Reduction<br>2019 2020 2021 2022 2023<br>H1(4)<br>2030<br>TARGET<br>2.23<br>1.87 1.84 1.97<br>1.69 26%<br>DELIVERING RESPONSIBLY<br>Driven to Keep Safe<br>in All That We Do<br>Tracking Our Progress(1)<br>19%<br>REDUCTION IN PERSONAL<br>INJURY RATIO IN 2022<br>FROM 2021<br>$1.6B<br>OF OUR $2.8-BILLION 2022<br>CAPITAL PROGRAM WAS<br>ALLOCATED TO MAINTAINING<br>OUR RAIL NETWORK<br>A journey<br>to zero.<br>OUR UNCOMPROMISING COMMITMENT TO SAFETY<br>At CN, safety is a core value. Embedding it in everything we do is a journey<br>that has no finish line. Our ambition is to be the safest railroad in North America<br>with an uncompromising commitment to the health and safety of our employees,<br>the customers we serve, and the communities and environments in which we operate.<br>Our objective is simple: aim to reduce on-the-job accidents and injuries to zero by<br>fostering a culture of commitment to safety at all levels of our organization.<br>Strengthening our Safety Culture<br>Our safety culture is instilled at our two CN Campuses and across our network through<br>ongoing safety training, coaching, leadership, employee engagement initiatives,<br>and by managing exposures to risk. Our longstanding Looking Out for Each Other<br>program urges team members to work together, be vigilant about safety and speak<br>up if they spot an unsafe situation. We also focus on strict adherence to Life Critical<br>Rules, which address the day-to-day activities that have the potential to cause serious<br>injury or even loss of life. CN has more than 80 joint union-management health and<br>safety committees across the system that are helping to address the main causes of<br>accidents and injuries and improve our safety culture at the local level.<br>Improving Our Safety Performance<br>On the road to zero, CN has set 2030 targets to reduce our personal injury ratio by<br>55% and our accident ratio by 45%, both based on 2019. Our safety results reflect<br>good progress in 2022. Our personal injury ratio was down 44% compared to 2019<br>to its lowest level ever, achieving 80% of our 2030 target. CN’s accident ratio in 2022<br>was down 12% compared to 2019, achieving 26% of our 2030 target. The positive<br>trend has continued in the first half of 2023, with the injury frequency ratio down 20%<br>and the accident ratio down 27% compared to the same period in 2022.<br>Andrew Nii Noi, Journeyman<br>Mechanic, operating a safety brake<br>at Walker Yard, Edmonton, AB.<br>(1) Safety indicators are unaudited and based on estimated data available at such time and are subject to change as more<br>complete information becomes available.<br>(2) Based on Federal Railroad Administration (FRA) reporting criteria.<br>(3) Based on FRA reporting criteria, includes only accidents with a cost in excess of US$10,000 (C$14,100).<br>(4) For more information, see CN's second quarter 2023 results available at www.cn.ca<br>1 Overview Overview Markets Operations Financials<br>24 CN | 2023 INVESTOR FACT BOOK | |||||
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| Technology to Help Keep<br>Field Track Employees Safer<br>An innovative real-time technology app<br>developed by CN to keep field track<br>employees safer has earned a 2022 Railway<br>Association of Canada (RAC) Safety Award.<br>CN was recognized for its Electronic Track<br>Authority Verification (ETAV) tool, which<br>provides precise location information to<br>Engineering hi-rail operators and warns<br>them prior to exceeding their track<br>authority limits.<br>ETAV complements existing processes<br>that hi-rail operators use to get permission<br>from rail traffic controllers to access and<br>work on tracks. Operators log on to the ETAV<br>application to see their precise location<br>within their authorized track limits. Their<br>truck’s exact position is monitored in<br>real-time through a global navigation<br>satellite system. If they approach the limits<br>of their track authority, ETAV sends them<br>auditory and visual alerts.<br>EARNED THE PRESTIGIOUS TRANSCAER® NATIONAL ACHIEVEMENT<br>AWARD FROM THE AMERICAN CHEMISTRY COUNCIL FOR THE 13th<br>CONSECUTIVE YEAR.<br>Learn more about CN's commitment to safety at: www.cn.ca/safety<br>Building and Maintaining Resilient Infrastructure<br>In 2022, we invested approximately $2.8 billion in our capital<br>program, with $1.6 billion allocated to maintaining the<br>safety and integrity of our network. Projects focused on the<br>replacement of rail and ties, plus maintenance of crossings,<br>bridges, culverts, signals, and other track infrastructure.<br>For example, in 2022, the Engineering team eliminated over<br>8,400 rail joints from core routes, almost twice as many as the<br>previous year. Replacing jointed track with continuously welded<br>rail provides for stronger and safer track, which reduces the<br>potential for accidents.<br>Investing in Technology for Safety<br>We are leveraging new technologies to drive improved safety<br>performance. Our Autonomous Track Inspection Program (ATIP)<br>railcars are equipped with powerful sensors and artificial<br>intelligence. The ATIP cars run 24/7 in regularly scheduled trains.<br>Using this technology, CN inspected over 800,000 miles<br>of track in 2022, with some of our key corridors receiving up to<br>16 times more inspections than non-autonomous methods.<br>Other recent safety advancements include predictive analytics,<br>Positive Train Control, a hazardous situations reporting app,<br>and a walking simulator to show frontline employees how to<br>avoid falling on slippery surfaces.<br>Emergency Preparedness and Response<br>An important component of CN’s work is supporting<br>TRANSCAER® (Transportation Community Awareness and<br>Emergency Response), an outreach effort to train emergency<br>personnel in communities near rail lines where dangerous<br>goods are transported. In 2022, CN participated in 283<br>TRANSCAER®<br> events, bringing critical training to over 4,290<br>first responders. In addition, over 370 first responders attended<br>web-based training on the CN Dangerous Goods website.<br>Since 1988, CN has participated in over 5,950 TRANSCAER®<br>events, reaching over 124,000 first responders.<br>Our safety aspirations are anchored on our commitment to eliminate<br>injuries and accidents. Nothing is more important than being able to<br>return home safely.<br>CN | 2023 INVESTOR FACT BOOK 25 | |||||
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| ~6,500<br>STUDENTS RECEIVED TRAINING AT<br>OUR CN CAMPUSES IN 2022<br>DELIVERING RESPONSIBLY<br>Producing the Next<br>Generation of Railroaders<br>PICTURED:<br>Following their initial<br>onboarding training<br>at CN Campus, new<br>hires receive additional<br>on-the-job training in<br>Kamloops, BC.<br>OUR PEOPLE POWER OUR SUCCESS<br>CN employees take pride in contributing to the North<br>American economy and people’s every day lives by delivering<br>safely, reliably and efficiently. They power the Company’s<br>success by caring about our business and bringing a high<br>level of commitment and resilience to our operations.<br>Building a solid team of railroaders is a key component<br>of CN’s strategy. We continue to focus on hiring the right<br>people, onboarding them, helping them build positive<br>relationships with their colleagues, and supporting all<br>employees in their growth and development. Given the long<br>lead times required to hire and train new employees, we<br>proactively work with our customers to understand their<br>growth plans and hire ahead of demand.<br>As part of our strategy to instill and reinforce a strong<br>safety culture, we leverage our two state-of-the-art training<br>campuses in Winnipeg, MB, and Homewood, IL. There, CN<br>new hires, experienced railroaders and customers take<br>hands-on and classroom training for all key railway jobs.<br>They receive training in modern indoor labs with equipment<br>such as locomotive and walking simulators. Outdoor labs<br>are equipped with dedicated rolling stock, track and<br>wayside equipment. Experienced mentors delivered a robust<br>curriculum to approximately 6,500 students in 2022.<br>We support all employees in their development and growth,<br>with a commitment to providing a strong bench of talent<br>and skills to handle future business. Throughout their career<br>at CN, employees are given opportunities to hone their<br>technical and leadership skills to ensure we have a pipeline<br>of potential diverse successors at the executive and<br>management levels.<br>1 Overview Overview Markets Operations Financials<br>26 CN | 2023 INVESTOR FACT BOOK | |||||
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| 27%<br>OF CN’S EXECUTIVES WERE WOMEN<br>AT THE END OF 2022, SLIGHTLY BELOW<br>OUR TARGET OF 30%<br>We continue to foster relationships with our union partners,<br>seek feedback through onboarding and engagement<br>surveys, and take a comprehensive view to supporting our<br>people’s health and wellness. We strive to create an<br>environment and culture that is inclusive and where we are<br>equipping our leaders with the right skills set to accelerate<br>readiness and where people see CN as a favoured employer.<br>Fostering Diversity, Equity and Inclusion (DE&I)<br>We are focused on making CN the best company to work<br>for; a forward-thinking and inclusive organization where all<br>talent is valued and able to thrive. Our people decisions are<br>not only aligned with our strategic business needs, but also<br>reflect the needs and intersectionality of all our employees.<br>Our workplace strives to reflect the diversity of the<br>communities where we operate by increasing the<br>representation of all under-represented groups. Having<br>diverse perspectives on the team enables CN to better<br>understand the needs of our various stakeholders and<br>elevates everyone’s decision making thanks to a wider<br>range of experiences and sensibilities. For example,<br>all recruiters, hiring managers and senior managers are<br>required to take our The Changing Face of CN course to<br>enhance CN’s practices to improve diversity representation<br>across all levels of the organization.<br>Another way we create visibility and engagement on<br>DE&I is by recognizing and celebrating the contributions<br>of our railroaders from all backgrounds. Whether through<br>social media and/or in-person events, we work with our<br>Employee Resource Groups to mark special events, such as<br>Women’s History Month, Black History Month, Autism/<br>Neurodiversity Month, Asian Heritage Month, Pride Month,<br>Indigenous History Month, Hispanic/Latin American<br>Heritage Month, and more.<br>Creating a Culture<br>of Belonging<br>CN’s Employee Resource Groups (ERGs)<br>bring individuals with similar backgrounds<br>and/or interests together to share ideas<br>and support one another. In 2020 and 2021,<br>CN launched seven ERGs:<br> • Indigenous<br> • Latinos CN<br> • PACE (Pan-Asian Community Engagement)<br> • PRIDE (LGBTQ2+)<br> • RISE (Black/African American)<br> • Veterans at CN<br> • WE (Women Employees)<br>In 2022, the A.D.A.P.T. (Allies of Diverse<br>ABILITY Partnering Together) ERG<br>was created to increase awareness about<br>issues important to people with visible<br>and non-visible disabilities.<br>Inclusion and diversity at CN are key to our future success. We are<br>committed to creating an engaged workforce that reflects the diversity<br>of the stakeholders we serve.<br>Learn more about CN's commitment to our people at: www.cn.ca/careers<br>CN | 2023 INVESTOR FACT BOOK 27 | |||||
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| PICTURED:<br>CN’s iconic logo, which has<br>symbolized the fluidity of our<br>network since 1960, is proudly<br>displayed on our headquarters<br>in downtown Montreal.<br>Committed to the<br>Highest Standards<br>DELIVERING RESPONSIBLY<br>EARNED 2nd PLACE OUT OF 226 COMPANIES<br>LISTED ON THE S&P/TSX COMPOSITE<br>INDEX IN 2022 FOR CORPORATE GOVERNANCE<br>WITH A SCORE OF 98% BY THE GLOBE<br>AND MAIL.<br>INDUSTRY-LEADING CORPORATE GOVERNANCE<br>CN is committed to the highest standards of corporate<br>governance, with an emphasis on shareholder engagement<br>and transparency. How we deliver success is just as important<br>as what we achieve. Therefore, we work diligently to bring<br>integrity and excellence into everything we do.<br>As a Canadian reporting issuer with securities listed on the<br>Toronto Stock Exchange and the New York Stock Exchange<br>(NYSE), CN ensures its corporate governance practices comply<br>with the highest standards and rules adopted by the Canadian<br>Securities Administrators, applicable provisions of the U.S.<br>Sarbanes Oxley Act of 2002 and related rules of the U.S.<br>Securities and Exchange Commission. CN is exempted from<br>complying with many of the NYSE corporate governance rules,<br>provided it complies with Canadian governance requirements.<br>CN’s governance practices comply with the NYSE corporate<br>governance rules in all significant respects, except as summarized<br>on our website at www.cn.ca/delivering-responsibly/governance.<br>Modern Governance Culture<br>Consistent with the belief that ethical conduct goes beyond<br>compliance and resides in a comprehensive and modern<br>governance culture, CN publishes and enforces its Corporate<br>Governance Manual, Code of Business Conduct, Anti-Corruption<br>Policy, Supplier Code of Conduct, and Human Rights Policy.<br>We also maintain several methods for employees and third<br>parties to anonymously report accounting, auditing and<br>other concerns.<br>1 Overview Overview Markets Operations Financials<br>28 CN | 2023 INVESTOR FACT BOOK | |||||
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| Embedding ESG<br>The Board and CN’s executive team recognize that<br>ESG responsibility is a key priority for our stakeholders.<br>Accordingly, the Board has put in place measures to<br>ensure CN is ready to meet these complex challenges.<br>Our ESG measures include:<br> • Diversity of the Board of Directors and senior management<br>of the Company, which aims to include members<br>from under-represented groups and represent diverse<br>backgrounds and experiences.<br> • Creation of the CN Indigenous Advisory Council, an<br>independent body comprised of Indigenous people from<br>across Canada. The IAC’s guidance is helping CN on its<br>journey toward reconciliation.<br> • An annual advisory vote on CN’s Climate Action Plan. This<br>vote complements CN’s long-standing and robust climate<br>change plans and disclosures, its public reporting of its GHG<br>emissions, its strategy to reduce emissions, as well as its<br>year-over-year progress.<br> • Retirement age limit for directors, Board tenure and term<br>limits, and setting a low maximum number of public boards<br>on which directors can serve.<br>Our approach to ESG is aligned with international<br>standards, including the United Nations Global Compact,<br>the Global Reporting Initiative, the Sustainability Accounting<br>Standards Board, the World Bank Mobility Goals, and the<br>Task Force on Climate-related Financial Disclosures. For<br>more information on CN’s sustainability disclosures, visit:<br>www.cn.ca/delivering-responsibly.<br>50%<br>OF INDEPENDENT BOARD MEMBERS WERE<br>WOMEN IN 2022, MEETING OUR TARGET<br>Setting and Achieiving<br>Board Diversity Targets<br>In 2021, CN’s Board of Directors set a target<br>that at least 50% of the independent<br>directors will come from under-represented<br>groups, including gender parity, by the end<br>of 2022 — an objective CN achieved.<br>CN also set a gender diversity target for<br>executive management (comprising all<br>vice-presidents and more senior positions),<br>whereby at the end of 2022, at least 30% of<br>this group would be women. CN has made<br>significant progress with respect to the<br>representation of executive women, which<br>increased from 18% at the end of 2021 and<br>briefly attained the 30% target in early<br>December 2022. On December 31, 2022,<br>27% of executive management were women.<br>CN has renewed its gender diversity target<br>for executive management where, by the<br>end of 2023, at least 30% of this group will<br>be women.<br>Learn more about CN's Board of Directors, governance practices, and policies<br>please visit: www.cn.ca/delivering-responsibly/governance<br>At CN, we are committed to delivering corporate governance with<br>an emphasis on engagement and transparency, as well as encouraging<br>diverse experiences and perspectives.<br>CN | 2023 INVESTOR FACT BOOK 29 | |||||
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| 14,32114,917<br>13,81914,477<br>17,107<br>2018 2019 2020 2021 2022<br>TOTAL REVENUES<br>($ millions)<br>61.6 62.5<br>65.4<br>61.2 60.0<br>OPERATING RATIO<br>(%)<br>2018 2019 2020 2021 2022<br>Adjusted Operating Ratio(1)<br>5.85 5.81<br>4.97<br>6.90<br>7.44<br>DILUTED EARNINGS PER SHARE<br>($)<br>2018 2019 2020 2021 2022<br>Adjusted Diluted Earnings Per Share(1)<br>Financial Measures<br>2018 2019 2020 2021 2022<br>KEY FINANCIAL PERFORMANCE INDICATORS<br>Total revenues ($ millions) 14,321 14,917 13,819 14,477 17,107<br>Freight revenues ($ millions) 13,548 14,198 13,218 13,888 16,569<br>Operating income ($ millions) 5,493 5,593 4,777 5,616 6,840<br>Adjusted operating income ($ millions)(1) 5,520 5,708 5,263 5,622 6,862<br>Net income ($ millions)(2) 4,312 4,198 3,545 4,899 5,118<br>Adjusted net income ($ millions)(1) (2) 4,040 4,171 3,767 4,225 5,134<br>Diluted earnings per share ($)(2) 5.85 5.81 4.97 6.90 7.44<br>Adjusted diluted earnings per share ($)(1) (2) 5.48 5.78 5.28 5.95 7.46<br>Free cash flow ($ millions)(1) 2,514 1,992 3,227 3,296 4,259<br>Gross property additions ($ millions) 3,531 4,079 2,863 2,897 2,757<br>Share repurchases ($ millions) 2,000 1,700 379 1,582 4,709<br>Dividends per share ($) 1.82 2.15 2.30 2.46 2.93<br>FINANCIAL POSITION<br>Total assets ($ millions) 41,214 43,784 44,804 48,538 50,662<br>Total liabilities ($ millions) 23,573 25,743 25,153 25,794 29,278<br>Shareholders’ equity ($ millions) 17,641 18,041 19,651 22,744 21,384<br>FINANCIAL RATIOS<br>Operating ratio (%) 61.6 62.5 65.4 61.2 60.0<br>Adjusted operating ratio (%) 61.5 61.7 61.9 61.2 59.9<br>Adjusted debt-to-adjusted EBITDA multiple (times)(1) 1.93 2.01 1.98 1.82 1.86<br>Return on invested capital (ROIC) (%)(1) (2) 16.6 15.2 12.7 16.4 15.8<br>Adjusted ROIC (%)(1) (2) 15.6 15.1 13.3 14.1 15.9<br>(1) These non-GAAP measures do not have any standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other<br>companies. See section entitled Non-GAAP Measures for an explanation of these non-GAAP measures.<br>(2) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in accounting policy filed on September 9, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>FINANCIAL AND<br>OPERATING MEASURES<br>Financial Highlights<br>CAGR (2022 VS. 2018) CAGR (2022 VS. 2018) VARIANCE (2022 VS. 2018)<br>+4.5% +6.2% -160 BPS (Favourable)<br>Overview Markets Operations Financials<br>1 Overview - Financial and Operating Measures<br>1 Overview<br>30 CN | 2023 INVESTOR FACT BOOK | |||||
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| 5.45<br>5.87 5.74 5.96<br>7.03<br>FREIGHT REVENUE PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>184<br>194 185<br>195 196<br>CAR VELOCITY<br>(car miles per day)<br>2018 2019 2020 2021 2022<br>8.3 7.9<br>8.6<br>7.9 7.6<br>THROUGH DWELL<br>(hours)<br>2018 2019 2020 2021 2022<br>Operating Measures(3)<br>2018 2019 2020 2021 2022<br>STATISTICAL OPERATING DATA<br>Gross ton miles (GTMs) (billions) 490.4 482.9 455.4 458.4 463.7<br>Revenue ton miles (RTMs) (billions) 248.4 242.0 230.4 233.1 235.8<br>Carloads (thousands) 5,976 5,912 5,595 5,701 5,697<br>Route miles (includes Canada and the U.S.) 19,500 19,500 19,500 19,500 18,600<br>Employees (end of period) 25,720 25,975 24,381 22,604 23,971<br>Employees (average for the period) 25,423 26,733 23,786 24,084 23,396<br>KEY OPERATING MEASURES<br>Freight revenue per RTM (cents) 5.45 5.87 5.74 5.96 7.03<br>Freight revenue per carload ($) 2,267 2,402 2,362 2,436 2,908<br>GTMs per average number of employees (thousands) 19,290 18,063 19,144 19,033 19,820<br>Operating expenses per GTM (cents) 1.80 1.93 1.99 1.93 2.21<br>Labor and fringe benefits expense per GTM (cents) 0.58 0.61 0.60 0.63 0.63<br>Diesel fuel consumed (US gallons in millions) 462.7 451.4 407.5 405.2 402.2<br>Average fuel price ($/US gallon) 3.32 3.17 2.42 3.28 5.42<br>Fuel efficiency (US gallons of locomotive fuel consumed per 1,000 GTMs) 0.943 0.935 0.895 0.884 0.867<br>OPERATING METRICS<br>Car velocity (car miles per day) 184 194 185 195 196<br>Locomotive utilization (trailing GTMs per total horsepower) 208 198 196 198 197<br>Train weight (tons) 9,163 9,125 9,501 9,658 9,324<br>Train length (feet) 8,247 8,232 8,572 8,559 8,160<br>Through dwell (hours) 8.3 7.9 8.6 7.9 7.6<br>Through network train speed (miles per hour) 18.0 18.5 18.5 19.2 18.9<br>CN ROLLING STOCK<br>Diesel locomotives (end of period) 2,412 2,398 2,382 2,302 2,351<br>Freight cars (end of period) 66,978 64,607 62,857 56,730 56,469<br>(3) Statistical operating data, key operating measures, operating metrics and rolling stock information are unaudited and based on estimated data available at such time and are<br>subject to change as more complete information becomes available. Definitions of these indicators are provided on our website, www.cn.ca/glossary.<br>Operational Highlights<br>CAGR (2022 VS. 2018) CAGR (2022 VS. 2018) CAGR (2022 VS. 2018)<br>+6.6% +1.6% -2.2% (Favourable)<br>CN | 2023 INVESTOR FACT BOOK 31 | |||||
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| DELIVERING THE SERVICE OUR CUSTOMERS NEED<br>CN’s freight revenues are derived from seven business units<br>representing a balanced and diversified portfolio of 180 product<br>types. This diversity positions CN to better weather economic<br>fluctuations and enhances our potential for growth. All our business<br>units collaborate with their customers and supply chain partners<br>to understand their market cycles and anticipate future demand to<br>unlock long-term, profitable growth.<br>We apply this spirit of collaboration within the Company as well, breaking down<br>silos by working closely with our colleagues from Operations. In fact, Operations<br>teams are embedded within Sales and Marketing to ensure we only sell where<br>we have the ability to deliver. We do this by matching what and where we sell to<br>available capacity in an integrated way, building new capabilities where needed<br>for future sales, and prioritizing traffic.<br>It all starts with an advantaged network; one that is geared for growth and<br>velocity. For example, our bypass loop around Chicago saves up to 48 hours of<br>transit time. CN has access to nine ports on three coasts. At our crown jewels in<br>Prince Rupert and Halifax, we have exclusive access and lots of capacity to grow.<br>The Port of Vancouver is Canada’s largest, and the Port of Montreal has plans to<br>expand. We have access to the Port of Saint John, NB, which also has expansion<br>plans. Finally, we have access to two ports on the U.S. Gulf Coast, Mobile and<br>New Orleans, both of which have big expansions coming up. So, CN can expect<br>significant volume growth through all these ports in the coming years.<br>CN is North America’s most northern railway and the North is where a lot of<br>development is taking place — in forest products, mining, gas exploration, and<br>more. CN is working in lockstep with our customers to grow their businesses.<br>MARKET OVERVIEW<br>At CN, we put the<br>customer at the<br>centre of everything<br>we do so we can<br>provide faster and<br>more consistent,<br>reliable service.<br>300M<br>TONS OF CARGO<br>CARRIED ANNUALLY<br>10,000+<br>ORIGIN-DESTINATION<br>PAIRS<br>85%<br>OF TRAFFIC ORIGINATES<br>ON CN’S NETWORK<br>Over<br>Devona, AB<br>Photo by CN Employee Tim Stevens<br>Overview Markets Operations Financials<br>2 Markets - Market Overview<br>2 Markets<br>32 CN | 2023 INVESTOR FACT BOOK | |||||
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| 3%<br>OTHER<br>REVENUES<br>19%<br>PETROLEUM<br>AND<br>CHEMICALS<br>5%<br>COAL<br>16%<br>GRAIN AND<br>FERTILIZERS<br>BUSINESS UNIT REVENUE MIX<br>5%<br>AUTOMOTIVE<br>12%<br>FOREST<br>PRODUCTS<br>18%<br>INTERNATIONAL<br>INTERMODAL<br>11%<br>DOMESTIC<br>INTERMODAL<br>11%<br>METALS AND<br>MINERALS<br>2022 REVENUES BY COMMODITY GROUP<br>(% of total revenues)<br>Intermodal (29%) Bulk Products (21%) Automotive (5%)<br>Industrial Products (23%) Petroleum and Chemicals (19%) Other (3%)<br> 29% Intermodal<br> 5% Automotive<br> INDUSTRIAL PRODUCTS<br> 12% Forest products<br> 11% Metals and minerals<br> BULK PRODUCTS<br> 16% Grain and fertilizers<br> 5% Coal<br> 19% Petroleum and chemicals<br> 3% Other revenues<br> 29% Intermodal<br> 19% Petroleum and chemicals<br> 16% Grain and fertilizers<br> 12% Forest products<br> 11% Metals and minerals<br> 5% Automotive<br> 5% Coal<br> 3% Other revenues $17B<br>TOTAL<br>REVENUES<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 33 | |||||
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| Opportunities<br>for Growth<br>MARKET OVERVIEW<br>Navigating Shifts in Global Trade<br>Greener Supply Chains<br>Transition to Electric Vehicles (EVs)<br>3<br>coasts<br>SERVING NINE PORTS<br>75%<br>REDUCTION IN GHG EMISSIONS BY<br>USING RAIL INSTEAD OF TRUCKS<br>Supply chains have been diversifying their supplier base by partnering<br>across different geographies to enhance their resilience in the face of major<br>disruptions, including Southern California port congestion. Decoupling of<br>the Chinese and U.S. economies could lead to further fragmentation of global<br>supply chains, with Southeast Asian countries gaining more prominence<br>and shifting supply routes to the Atlantic through the Suez Canal. CN expects<br>to benefit from these shifting global trade routes with continued growth at<br>the Port of Prince Rupert and the Port of Halifax, both of which are exclusively<br>served by CN, as well as the Gulf Coast ports of Mobile and New Orleans.<br>The demand for greener supply<br>chains is growing. And, since<br>rail is up to four times more fuel<br>efficient than trucks, our customers<br>can reduce their carbon footprint<br>by shifting their supply chains<br>from truck to rail. Already the most<br>fuel-efficient Class I railroad,<br>CN has cut locomotive emissions<br>intensity by 45% since 1993.<br>CN is testing green propulsion<br>technologies such as renewable<br>fuels and fully electric locomotives<br>to help achieve our carbon-reduction targets.<br>Three of CN's five largest automotive customers are "All In" with 100% EV<br>production expected by 2035. This exciting shift is providing CN with new<br>opportunities as EV assembly plants are being announced on or near our<br>network. EV battery production is expected to create long-term opportunities<br>for CN to transport critical inputs like lithium, copper, nickel, cobalt and<br>graphite. Also, demand for aluminum is expected to increase<br>as a lighter alternative to steel in EV manufacturing.<br>Canada has large deposits of these materials, and CN<br>is actively working with our customers on supply chain<br>solutions for several large mining projects.<br>Access to<br>Delivering Clean Energy<br>Worldwide efforts to combat climate change are driving policy and demand<br>shifts toward cleaner, renewable energy sources, like wood pellets, biofuels,<br>propane and hydrogen. CN is a key player in all these rapidly developing<br>supply chains. For renewable fuels, we transport oilseed to crush plants,<br>vegetable oil to refineries, and renewable fuels to end markets.<br>We are also proud to play a critical role in transporting zero-emission products such as solar panels and wind turbines.<br>With CN’s unique network and integrated supply chain<br>solutions, we access lower-carbon products and create<br>hubs to consolidate them onto rail for shipment to both<br>domestic and international markets.<br> Up to<br>22 Markets Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>34 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| REVENUES CARLOADS<br>$ millions thousands<br>2018 2019 2020 2021 2022<br>%<br>Change(1) 2018 2019 2020 2021 2022<br>%<br>Change(1)<br>Petroleum and chemicals 2,660 3,052 2,631 2,816 3,229 15% 653 688 597 596 636 7%<br>Metals and minerals 1,689 1,643 1,409 1,548 1,911 23% 1,030 1,008 935 969 956 (1%)<br>Forest products 1,886 1,808 1,700 1,740 2,006 15% 418 375 342 339 330 (3%)<br>Coal 661 658 527 618 937 52% 346 335 289 379 503 33%<br>Grain and fertilizers 2,357 2,392 2,609 2,475 2,783 12% 632 619 663 628 614 (2%)<br>Intermodal 3,465 3,787 3,751 4,115 4,906 19% 2,634 2,618 2,582 2,611 2,450 (6%)<br>Automotive 830 858 591 576 797 38% 263 269 187 179 208 16%<br>Total rail freight 13,548 14,198 13,218 13,888 16,569 19% 5,976 5,912 5,595 5,701 5,697 0%<br>Other 773 719 601 589 538 (9%)<br>Total 14,321 14,917 13,819 14,477 17,107 18%<br>RTMs FREIGHT REVENUE PER RTM<br>millions cents<br>2018 2019 2020 2021 2022<br>%<br>Change(1) 2018 2019 2020 2021 2022<br>%<br>Change(1)<br>Petroleum and chemicals 50,722 53,989 43,556 42,436 46,273 9% 5.24 5.65 6.04 6.64 6.98 5%<br>Metals and minerals 27,993 25,449 21,561 26,743 27,606 3% 6.03 6.46 6.53 5.79 6.92 20%<br>Forest products 29,918 27,187 25,602 25,948 25,020 (4%) 6.30 6.65 6.64 6.71 8.02 20%<br>Coal 17,927 17,653 16,173 18,471 22,679 23% 3.69 3.73 3.26 3.35 4.13 23%<br>Grain and fertilizers 57,819 55,597 61,736 58,733 55,359 (6%) 4.08 4.30 4.23 4.21 5.03 19%<br>Intermodal 60,120 58,344 59,165 58,412 56,029 (4%) 5.76 6.49 6.34 7.04 8.76 24%<br>Automotive 3,884 3,735 2,597 2,395 2,822 18% 21.37 22.97 22.76 24.05 28.24 17%<br>Total 248,383 241,954 230,390 233,138 235,788 1% 5.45 5.87 5.74 5.96 7.03 18%<br>(1) % change from 2021 to 2022.<br>Performance<br>Summary<br>$17B<br>REVENUES<br>5.7M<br>CARLOADS<br>236B<br>REVENUE TON MILES<br>(RTMs)<br>7.03 cents<br>FREIGHT REVENUE<br>PER RTM<br>743 miles<br>AVERAGE LENGTH<br>OF HAUL<br>2022 PERFORMANCE TOTALS<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 35 | |||||
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| READY TO GROW<br>Our collaborative partnerships enable the sustainable growth of our<br>intermodal business and allow our customers to reach new markets.<br>CN has been resilient in delivering for our customers as we meet<br>the challenges brought about by global supply chain disruptions, and<br>we continue to work with our supply chain partners to build capacity<br>and enable growth.<br>INTERMODAL<br>Over the next two<br>to three years, growth<br>in CN’s intermodal<br>market is expected to<br>come from three main<br>sources: port capacity,<br>inland capacity and<br>partnerships.<br>Shipping by CN rail for the long haul and leveraging the flexibility of trucks for the<br>first/last mile offer our customers fast and consistent service to all major Canadian<br>and U.S. Midwest and Gulf Coast markets. The environmental benefits of shipping<br>by rail combined with our fluid operations also contribute to CN’s compelling<br>intermodal service offering by helping our customers take more long-haul trucks<br>off the road and achieve their carbon reduction goals.<br>Growth from Port Expansions<br>CN’s intermodal port partners have efficient operations and available capacity, with<br>some terminals planning major expansions over the next three years. Prince Rupert<br>has the fastest service from Asia to the Midwest and we are working with partners to<br>develop new import and export facilities. With shifting trade flows, Halifax has the<br>momentum to attract more volumes. CN is the exclusive carrier for both these ports.<br>CN also accesses the Port of Vancouver, by far Canada’s largest, and the Port of<br>Saint John, one of Canada’s fastest growing, which CN serves with fast, reliable<br>trains, a focus on low dwell, and best-in-class customer service. Additional capacity<br>is also planned to come onstream through the ports of New Orleans and Mobile<br>on the best route to the Midwest from southern markets.<br>Adding Inland Capacity to Handle Growth<br>Our three core terminals in Montreal, Toronto, and Chicago touch about 70% of our<br>intermodal business every day. As volumes grow, we can double capacity in Montreal<br>at minimal cost with increased ground storage, additional intermodal container<br>handling equipment and gate automation. In Toronto, construction continues on our<br>Milton Logistics Hub, which will provide 730,000 TEUs of domestic and international<br>capacity by 2026. We are also planning a new footprint in the heart of distribution<br>centres southwest of Chicago to enable us to win business from Class I competitors<br>and take more trucks off the road.<br>CN Intermodal train delivering<br>essential goods to market faster,<br>safer, better.<br>Overview Markets Operations Financials<br>2 Markets - Intermodal<br>2 Markets<br>36 CN | 2023 INVESTOR FACT BOOK | |||||
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| INTERNATIONAL<br>CN Intermodal’s international<br>segment handles import and export<br>container traffic on behalf of ocean<br>carriers, directly serving the major<br>ports of Vancouver, Prince Rupert,<br>Montreal, Saint John, Halifax, Mobile<br>and New Orleans. The international<br>segment is driven by world and<br>North American economic and<br>trade conditions.<br>CN Intermodal's domestic segment<br>transports consumer products,<br>manufactured goods, and natural<br>resources within and between<br>Canada, the U.S. and Mexico. The<br>domestic segment is divided into<br>wholesale and retail services and is<br>driven by North American consumer<br>markets. Growth is generally tied<br>to the economy and competition<br>from trucks.<br>DOMESTIC<br>Leaman, AB<br>Photo by CN Employee Tim Stevens<br>Brampton, ON<br>Port of New Orleans, LA<br>Port of Prince Rupert, BC<br>Port of Halifax, NS<br>Photo by Steve Farmer<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 37 | |||||
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| Covering the Continent with EMP<br>CN is the sole Canadian partner in the Equipment<br>Management Pool (EMP), a domestic interline service that<br>provides extensive coverage throughout North America,<br>offering a fleet of more than 40,000 53-foot dry containers.<br>CN’s participation in the EMP enables shippers to reach new<br>markets. EMP shippers benefit from CN’s double-stacked<br>scheduled intermodal service to/from all Canadian origins/<br>destinations from coast to coast. The EMP also enables<br>CN customers to access all major cities in the U.S. and<br>numerous major markets in Mexico.<br>Overview(cont.)<br>INTERMODAL<br>Growth through Strategic Partnerships<br>In partnership with Union Pacific (UP) and Ferromex (FXE),<br>Falcon Premium is a best-in-class intermodal service between<br>Canada, the U.S. and Mexico. More recently, CN is partnering<br>with Norfolk Southern (NS) to operate a domestic intermodal<br>service through interchanges in Detroit and Chicago to convert<br>long-haul truck traffic to/from Kansas City and Atlanta to<br>rail. CN is also the sole Canadian partner in the Equipment<br>Management Pool (EMP), an interline equipment sharing<br>program with over 40,000 containers across North America.<br>We expect to continue to grow with our eastern railroad<br>partners in New York, New Jersey, Philadelphia, the Ohio<br>Valley and Indianapolis. We are also partnering with Trealmont<br>and Kaptan to develop a new transload facility at our<br>Calgary Logistics Park.<br>Collaboration Is Key<br>As an integrated team of intermodal experts, we aim to<br>provide the highest level of cost-effective transportation and<br>logistics services to our customers. Service level agreements<br>are in place with all the port authorities and terminal operators<br>we serve. Our collaborative approach ensures imports are<br>transported from the ports in a timely fashion, exports arrive<br>in time to meet vessel schedules, and our trucking partners<br>move quickly in and out of our inland terminals.<br>Our Domestic Repositioning Program and extensive transload<br>facilities provide our ocean carrier customers with match-back<br>opportunities that enhance their round-trip economics when<br>repositioning empty containers back to port.<br>Continuous Investment Drives Value<br>With recent expansions of many of our 22 inland terminals,<br>we are increasing capacity to meet our customers’ growing<br>needs. We are strengthening our unique Chicago bypass loop<br>advantage by increasing capacity for both inbound and<br>outbound business via our Chicago Intermodal Terminal (CIT).<br>The 100-acre CIT is the largest on CN’s U.S. network and<br>receives about 1,500 trucks a day.<br>We are also investing in the digital intermodal supply chain<br>of the future by equipping our terminals with advanced<br>operational technology like telemetric sensors, smart screens,<br>and the latest operating system. CN’s suite of Application<br>Programming Interfaces (APIs) offers robust supply chain<br>visibility tools that demonstrate our commitment to managing<br>customer supply chains through system integration.<br>Our strategic acquisitions of TransX and H&R’s temperature-controlled businesses allow us to broaden our supply chain<br>focus and provide expanded opportunities for our customers,<br>especially in the domestic refrigerated market.<br>222 Markets Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>38 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| 3,465<br>3,787 3,751<br>4,115<br>4,906<br>REVENUES<br>($ millions)<br>2018 2019 2020 2021 2022<br> 2,634 2,618 2,582 2,611<br>2,450<br>CARLOADS<br>(thousands)<br>2018 2019 2020 2021 2022<br> 60,120 58,344 59,165 58,412 56,029<br>RTMs<br>(millions)<br>2018 2019 2020 2021 2022<br>5.76<br>6.49 6.34<br>7.04<br>8.76<br>FREIGHT REVENUE<br>PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>KEY FACTS<br> • Supply chain collaboration<br>agreements with key ports<br> • CargoCool®, CN’s temperature-controlled transport business, has<br>one of Canada’s largest reefer fleets<br> • CNTL, a fully owned CN subsidiary,<br>is one of Canada’s largest trucking<br>companies<br> • Full membership in the Equipment<br>Management Pool (EMP)<br> • Dedicated customer service desk<br>COMMODITIES<br>INTERNATIONAL<br> • Import and export containerized traffic<br>DOMESTIC<br> • Consumer products for large retailers<br> • Raw materials, manufactured goods<br>and consumer products for wholesale<br>trucking and logistics clients<br> • International to domestic container<br>transload conversion options<br>for shippers<br>MARKET DRIVERS<br> • North American economy and<br>consumer spending<br> • Global trade patterns<br> • North American industrial<br>production<br>$4,906M<br>2022 REVENUES<br>BUSINESS UNIT OVERVIEW AND MARKET DRIVERS<br>W 63% International<br>W 37% Domestic<br>2022 COMMODITY BREAKDOWN<br>(% of revenues)<br>+9.1% -1.8% -1.7% +11.0 %<br>CAGR ( 2022 vs. 2018)<br>1,821 miles AVERAGE LENGTH OF HAUL (2022)<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 39 | |||||
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| MEXICO<br>Duluth<br>Regina<br>Jackson<br>Prince George<br>Arcadia<br>Chippewa Falls<br>Indianapolis<br>Joliet<br>Moncton<br>Mobile<br>Montreal<br>Quebec<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Winnipeg<br>Thunder Bay<br>Monterrey<br>Silao<br>Mexico City<br>Calgary<br>ENABLE EFFICIENT AND FLEXIBLE DELIVERY TO END MARKETS<br>10,000 chassis<br>CN’S VAST INVENTORY, INCLUDING DOMESTIC AND<br>CARGOCOOLMD CONTAINERS, ENABLES GROWTH<br>10,600 containers<br>CN’s intermodal service allows our customers to<br>benefit from the lower cost and carbon benefits of<br>shipping by rail, which is up to four times more fuel-efficient than trucking.<br>With CNTL and TransX, CN pairs the efficiency of<br>rail with the added flexibility of trucking to better serve<br>our local and non-rail-served customers.<br>CN has access to ports with available import/export<br>capacity and shorter transit times to/from Asia, the<br>Indian subcontinent, Europe, the Middle East, Africa<br>and South America.<br>DELIVERING BEST-IN-CLASS SERVICE<br>An intermodal container’s journey harnesses the<br>global reach of vessels, the efficiency of trains<br>and the flexibility of trucks. Serving 22 intermodal<br>terminals located near ports and large urban<br>centres, CN’s intermodal franchise is a true supply<br>chain enabler, providing innovative transportation<br>services to our customers.<br>Supply Chain<br>at a Glance<br>INTERMODAL<br>Key Advantages CN’S INTERMODAL SUPPLY CHAIN<br>For more information, please visit<br>www.cn.ca/our-services/intermodal<br>International<br>Domestic<br> Falcon Premium<br> Ports served by CN<br> Intermodal ports served by CN<br>P Intermodal terminals<br>P Logistics parks<br>2 Markets Overview Markets Operations Financials<br>40 CN | 2023 INVESTOR FACT BOOK | |||||
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| MEXICO<br>Duluth<br>Regina<br>Jackson<br>Prince George<br>Arcadia<br>Chippewa Falls<br>Indianapolis<br>Joliet<br>Moncton<br>Mobile<br>Montreal<br>Quebec<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Winnipeg<br>Thunder Bay<br>Monterrey<br>Silao<br>Mexico City<br>Calgary<br>Monterrey<br>Eagle Pass, TX<br>Silao<br>Mexico City<br>Montreal<br>Halifax<br>Chicago<br>Toronto<br>Detroit<br>Moncton<br>CN’S INTERMODAL SUPPLY CHAIN<br>New Transformational Service to Mexico<br>CN, UP and FXE created the Falcon Premium intermodal service, a game-changing<br>Mexico–U.S.–Canada route with seamless interconnection in Chicago. The service<br>connects all CN origin points to FXE terminals in Monterrey and Silao, Mexico.<br>Falcon Premium is the fastest, most reliable intermodal service between Canada<br>and Mexico by combining the unique advantages of each partner: FXE’s best-in-class<br>transit times between Silao and Eagle Pass, TX, UP’s superior route from Eagle Pass<br>to Chicago, and CN’s time-saving Chicago bypass loop. This service directly benefits<br>intermodal customers shipping automotive parts, food (especially temperature-controlled products), and freight of all kinds. Falcon Premium will also lower GHG<br>emissions through reduced rail miles and truck-to-rail conversion.<br>CN<br> UP<br> FXE<br>Falcon Premium<br>~40%<br>FASTER TRANSIT TIME TO MEXICO<br>THAN PRIOR ROUTING<br>Superior<br>ROUTE THROUGH CHICAGO FOR<br>SHIPMENTS BETWEEN MEXICO<br>AND CANADA<br>FALCON PREMIUM: EXTENDING OUR REACH INTO MEXICO<br>CN | 2023 INVESTOR FACT BOOK 41 | |||||
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| CONNECTING CUSTOMERS TO THE WORLD<br>Vast Network Reach<br>Our network gives us direct access to 14 ocean terminals at<br>the Canadian ports of Vancouver, Prince Rupert, Montreal,<br>Saint John and Halifax, and the U.S. ports of New Orleans<br>and Mobile. We also access intermodal terminals at the ports<br>of New York, New Jersey and Philadelphia through our<br>partnerships with CSX.<br>CN has exclusive access to the Port of Prince Rupert, one<br>of the fastest growing and most sustainably operated ports<br>in North America. Prince Rupert offers some of the shortest<br>transit times to key markets like Chicago due in part to its<br>one-to-two-day shorter sailing time to/from Asia.<br>International Intermodal<br>in Review<br>INTERMODAL<br>New Cross-Gulf Shuttle Service from Mexico<br>CN is collaborating with Crowley, a U.S. maritime, energy and logistics solutions<br>company, to launch a multimodal service between Mexico, the U.S. Midwest<br>and Canada. Starting in the fall of 2023, Crowley ships will make a weekly roundtrip<br>call between the Port of Tuxpan, Mexico, and the Port of Mobile carrying up to<br>1,000 TEUs, including more than 200 refrigerated containers. Daily CN trains<br>connect Mobile to Memphis, Minneapolis, Chicago, Detroit, Toronto, Montreal<br>and beyond.<br>CN also has exclusive access to the Port of Halifax, which<br>offers a competitive gateway from Europe, Asia, Africa, and<br>South America into Ontario and the U.S. Midwest. Close<br>partnership between terminal operators and CN drives efficiency<br>and premium customer service, while our numerous transload<br>terminals promote favourable roundtrip economics for ocean<br>carriers by filling containers that would otherwise return<br>empty to port.<br>PICTURED:<br>The capacity of DP World’s<br>Fairview Terminal at<br>the Port of Prince Rupert is<br>expected to increase to<br>1.8 million TEUs by 2024.<br>22 Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>42 CN | 2023 INVESTOR FACT BOOK | |||||
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| Gateway Terminal Expansions<br>DP World’s Fairview Terminal at the Port of Prince Rupert, which expanded from<br>an annual capacity of 1.35 million 20-foot equivalent units (TEUs) to 1.6M TEUs in<br>2022, has plans to further expand to handle 1.8M TEUs annually by Q3 2024.<br>Vancouver ports also have capacity expansion plans in the next few years.<br>Deltaport, which recently doubled from 1.2 million TEUs to 2.4 million TEUs, has<br>plans to add a fourth berth and 2.0 million TEUs in the 2030s. Vanterm recently<br>expanded by 215,000 TEUs to 1.065 million TEUs and has plans to further increase<br>container handling capacity by approximately 25% with two new cranes.<br>Centerm completed its expansion project in May 2023, increasing capacity<br>from 900,000 TEUs to 1.5 million TEUs.<br>The Port of New Orleans plans to build a US$1.5-billion state-of-the-art container<br>facility on the Lower Mississippi River able to serve vessels of all sizes, dramatically<br>increasing Louisiana’s import/export capacity by 2028.<br>At Mobile, the Alabama Port Authority has plans to boost its annual container<br>throughput capacity to 1.0 million TEUs. And APM has announced a US$60-million<br>rail expansion that doubles the capacity for customers. The latter project is<br>expected to take approximately 24 months to complete and increase the total<br>length of working track at the facility to 12,000 feet.<br>CN expects to be able to handle the resulting additional volumes from these<br>expansion projects by building capacity ahead of demand with our capital<br>investments in double track and long sidings, new high-horsepower locomotives,<br>and inland terminals.<br>Grain Exports Via Intermodal Containers<br>In our role as a true supply chain enabler, we facilitate the use of import containers<br>for exports on their return trip. This makes better use of available ocean carrier<br>container capacity, resulting in fewer containers returning empty. For example, CN<br>is transloading significantly more grain and specialty crops from the Canadian<br>Prairies and U.S. Midwest into international shipping containers, allowing shippers<br>to grow their export capacity during periods of peak demand.<br>Outlook<br>Supported by our rail access to three North American coasts, as well as<br>expansions of CN-served ports, inland terminals and our partnerships, CN's<br>international intermodal franchise is prepared for new opportunities for our<br>import/export customers and additional international intermodal volumes. 2.35M TEUs<br>OF ADDITIONAL CAPACITY<br>EXPECTED THROUGH OUR NEW<br>MILTON AND CHICAGO HUBS<br>Expanding Inland<br>Terminal Capacity<br>Construction continues on our<br>Milton Logistics Hub in Ontario,<br>which will provide 730,000 TEUs<br>of much-needed inland terminal<br>capacity by 2026. We are also<br>planning a large new terminal<br>surrounded by new distribution<br>centres southwest of Chicago<br>with an annual capacity of up to<br>1.62 million TEUs. Both these<br>facilities will improve our<br>customers’ access to key markets<br>and the coastal gateways we<br>serve. The facilities will also<br>benefit the environment by<br>converting truck traffic to more<br>carbon efficient rail.<br>CN provides full transportation services to global ocean carriers and<br>North American importers and exporters with gateway optionality for<br>the import/export of goods throughout the world.<br>Artist’s rendition<br>Milton Logistics Hub<br>CN | 2023 INVESTOR FACT BOOK 43 | |||||
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| INTERMODAL<br>Spotlight<br>PORT OF PRINCE RUPERT PORT OF VANCOUVER<br>The closest North American port to Northeast Asia, with a<br>fluid and reliable rail connection to major markets, the port has<br>realized significant growth. Its most recent expansion project<br>is expected to increase annual capacity from 1.6M TEUs to<br>1.8M by Q3 2024.<br>The largest port in Canada and in the Pacific Northwest,<br>Vancouver’s four container terminals recently expanded from<br>a combined 3M TEUs to 5.6M. The port also handles large<br>volumes of bulk commodities such as grain, fertilizers,<br>coal and sulfur.<br>CN’s Tri-Coastal Network<br>West Coast<br>Through partners and our own three-coast network, CN’s international intermodal business directly<br>serves 14 ocean terminals and 22 inland terminals. We reach 70% of the North American population,<br>serving the largest metropolitan areas in Central Canada and U.S. Midwest.<br>22 terminals<br>STRATEGICALLY LOCATED TO SUPPORT EXPANDED CAPACITY<br>AND MEET OUR CUSTOMERS’ GROWING NEEDS<br>12.5M TEUs ANNUAL CAPACITY OF THESE 7 PORTS SERVED BY CN<br>Exclusively served by CN<br>22 Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>44 CN | 2023 INVESTOR FACT BOOK | |||||
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| PORT OF MOBILE<br>PORT OF NEW ORLEANS<br>PICTURED:<br>On Canada’s East Coast, CN has<br>exclusive rail access to the Port of<br>Halifax, which has the shortest<br>transit time from Europe and is<br>only two days by rail from Toronto.<br>Set a new throughput record in 2022<br>at over 500,000 TEUs, with expansion<br>plans to increase capacity to 1M TEUs.<br>Port NOLA has plans to build a US$1.8-billion<br>state-of-the-art container terminal on the<br>Lower Mississippi River by 2050.<br>CN’s Tri-Coastal Network<br>East Coast Gulf Coast<br>With close collaboration, CN is prepared to handle growth through<br>the international gateways we serve with connections to major<br>North American consumer markets.<br>PORT OF HALIFAX PORT OF MONTREAL<br>PORT OF SAINT JOHN<br>The closest North American gateway to<br>Europe and the Mediterranean, Halifax is<br>becoming an increasingly competitive<br>gateway from Southeast Asia through the<br>Suez Canal, with transit time advantages<br>to key North American consumer markets.<br>Halifax aims to capture growth from<br>ultra-large container vessels.<br>Already Canada's largest eastern port,<br>Montreal has plans to further increase<br>capacity in the coming years and CN is<br>set to capture its share of that growth.<br>Saint John has plans to more than<br>quadruple its annual container capacity<br>to 800,000 TEUs by the end of 2024.<br>Exclusively served by CN<br>Photo credit:<br>Montreal Port Authority<br>CN | 2023 INVESTOR FACT BOOK 45 | |||||
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| INNOVATING FOR FLEXIBILITY AND SUSTAINABILITY<br>CN’s Supply Chain Approach<br>CN’s domestic intermodal network is a unique combination<br>of rail service, trucking, warehousing, and distribution.<br>We support both retail cargo owners directly as well as<br>the wholesale community, and our domestic intermodal<br>business is evenly balanced between these two markets.<br>With a supply chain perspective, we collaborate with<br>our customers and key partners to enhance the value we<br>provide to them. Our seamless off-rail service leverages<br>the flexible nature of intermodal and CN’s extended<br>trucking arms: CNTL and TransX.<br>Domestic Intermodal<br>in Review<br>INTERMODAL<br>TransX: Delivering<br>First Mile/Last<br>Mile Value<br>As part of our drive to provide<br>optimal and sustainable<br>shipping solutions across<br>North America, CN’s 2018<br>acquisition of TransX allows<br>us to deliver additional<br>value to our customers by<br>providing new market<br>opportunities, especially in<br>the service-sensitive<br>temperature-controlled<br>transportation business.<br>TransX broadens our supply<br>chain focus and allows us to<br>continue to offer the best<br>services to our customers,<br>from the first mile to the<br>last mile.<br>PICTURED:<br>A TransX container is lifted<br>into position in Calgary, AB.<br>Accommodating Growth<br>Domestic intermodal is comprised of a highly diversified<br>portfolio of products and markets for customers across<br>North America. We continue to expand our franchise,<br>focusing on the development of new markets, products<br>and services. Over the years, we have become the<br>largest user of ocean carrier 40-foot containers through<br>our Domestic Repositioning Program and continue to<br>develop our containerized auto parts business. Our<br>extensive interconnection agreements, including the new<br>Falcon Premium partnership with UP and FXE, increase<br>end-to-end connectivity between Canada, the U.S.,<br>and Mexico.<br>2 Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>46 CN | 2023 INVESTOR FACT BOOK | |||||
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| Collaborative Partnerships<br>Our collaboration with the wholesale community for<br>specialized services to reach U.S. markets beyond the<br>CN rail network includes the expansion of our CargoCool®<br>program and ongoing innovations in our key retail,<br>manufacturing, less-than-truckload, and full-load wholesale<br>businesses. CN is a full partner member of the EMP domestic<br>container program with Union Pacific and Norfolk Southern.<br>We build on our unique competitive advantages to<br>develop new supply chain options with our strategic partners<br>by tapping into new markets and working with existing<br>customers. These include commodity-based segments like<br>grain and specialty crops, to drive strategic marketing<br>initiatives and new innovative product offerings.<br>CargoCool®<br>CN was the first railroad to introduce a refrigerated program<br>operating in Canada, the U.S. and Mexico that offers<br>traceability. CN CargoCool®<br> provides a fast, convenient,<br>cost-competitive, and eco-friendly approach to moving<br>temperature-sensitive goods.<br>With 1,000 next-generation refrigerated containers, CN<br>CargoCool®<br> provides superior reach, competitive transit times,<br>critical remote monitoring through ReeferTrak©, the latest<br>door-to-door tracking technology, and seamless customs<br>services that ensure our customers’ cargo gets to the right<br>place at the right time at the right temperature. For example,<br>fresh produce moves by rail daily from Halifax, NS, and weekly<br>from Saint John, NB, to inland markets like Brampton, ON,<br>using CN’s IntelliGen®<br> gensets to ensure temperature<br>integrity and food safety throughout the journey.<br>Guaranteed Equipment Program<br>CN’s Guaranteed Equipment Program (GEP) is open to<br>all CN Domestic Intermodal customers. The program offers<br>priority allocation of empty dry, heated or refrigerated<br>containers. Operating on an order-by-order basis rather<br>than a contractual basis, GEP provides the flexibility and<br>speed-to-market to deliver high-priority loads.<br>Outlook<br>Driven in part by strength in domestic Canadian and<br>transborder road-to-rail conversion, as well as full partnership<br>in the EMP program, multiple service offerings to/from Mexico<br>and capacity challenges in the long-haul trucking industry,<br>CN is prepared for expected growth in our domestic<br>intermodal franchise.<br>The Future of Intermodal Today<br>CN is building the intermodal terminal of the future by<br>using advanced technologies to improve decision making<br>related to capacity, productivity, and service levels. We are<br>putting telematic sensors on cranes and shunt trucks to<br>better locate containers within the yard. Smart screens and<br>3D maps help visualize the inventory and equipment<br>movement within the yard to reduce the number of lifts per<br>container. The result is better work order optimization and<br>inventory management, enhanced customer and partner<br>experience, and increased terminal capacity and fluidity. Visualizing inventory and equipment movement<br>with smart screen technology.<br>We integrate CN’s philosophy<br>of working closely with all our<br>partners within our domestic<br>intermodal franchise.<br>CN | 2023 INVESTOR FACT BOOK 47 | |||||
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| REACHING FARTHER AND EXPANDING SUPPLY CHAINS<br>Industrial Products at CN represents a very diversified portfolio<br>of forest products, metals, minerals, and iron ore. We also transport<br>large volumes of energy materials such as frac sand and drilling<br>pipe. Many of these commodities have long been part of CN’s core<br>business, utilizing multiple types of equipment and often complex<br>supply chains.<br>INDUSTRIAL PRODUCTS<br>We continue to adapt with our customers to ever-changing trade lanes and lingering<br>supply chain disruptions resulting from the recovery from the pandemic, the war in<br>Ukraine, and other factors. With a renewed focus on our scheduled operation, and by<br>working in close alignment with our Operations teams, CN’s merchandise business<br>is finding new ways to move our customers’ products consistently, reliably and<br>predictably to market.<br>Our business model is anchored on end-to-end collaboration with our customers<br>and supply chain partners from true origin to ultimate destination. As examples, CN<br>moves frac sand from mine to shale formation, while lumber is moving from sawmill<br>to domestic and overseas markets, and iron ore is moving from mines across the<br>Great Lakes to steel mills in the U.S. and Canada.<br>Helping to Reach New Emerging Markets<br>The economic landscape in North America is favourable to the shift to electric<br>vehicles. CN’s unique network reaches far to the north, where we can access products<br>and create hubs to consolidate them onto rail. Whether it is access to mines,<br>transformation materials, finished products or recycling, CN is creating long-term,<br>sustainable supply chains. For example, we are beginning to ship lithium for export<br>out of the Port of Quebec to international markets. With more than 20 projects in<br>the works right now, mostly located on the eastern and southern parts of our network,<br>CN has the capacity to grow. By maintaining close relationships with our customers,<br>as well as our port, terminal, transload and vessel partners, CN is developing<br>and enhancing innovative supply chain solutions that help our customers grow<br>their markets.<br>CN is a critical trade<br>enabler, helping to<br>move our customers’<br>industrial products<br>throughout North<br>America and around<br>the world.<br>High-capacity centrebeams loaded<br>with lumber alongside gravel cars at<br>Thornton Yard, Surrey, BC.<br>Overview Markets Operations Financials<br>2 Markets - Industrial Products - Overview<br>2 Markets<br>48 CN | 2023 INVESTOR FACT BOOK | |||||
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| The Forest Products commodity<br>group includes lumber, panels, paper,<br>wood pulp, logs, wood chips and wood<br>pellets. CN has extensive rail access to<br>the western and eastern Canadian fibre-producing regions, which are among<br>the largest in North America. In the U.S.,<br>CN is strategically located to serve both<br>the Midwest and southern states as well<br>as other U.S. corridors with interline<br>connections to other Class I railroads.<br>Key drivers include housing starts<br>and renovation activities, primarily in<br>the U.S., as well as the consumption<br>of wood pulp, paper, pulpboard and<br>containerboard in North American and<br>offshore markets.<br>The Metals and Minerals commodity<br>group consists primarily of materials<br>related to oil and gas development,<br>steel, iron ore, non-ferrous base metals<br>and ores, construction materials,<br>machinery, railway equipment, and<br>dimensional (oversize) loads. CN<br>provides unique rail access to mining<br>regions rich in base metals, iron ore,<br>and frac sand, as well as to aluminum-and steel-producing regions. This<br>strong origin franchise, coupled with<br>CN’s access to port facilities and the end<br>markets for those commodities, has<br>made CN a leader in the transportation<br>of metals and minerals products.<br>Lucerne, BC<br>Hamilton Distribution Centre,<br>Hamilton, ON<br>FOREST<br>PRODUCTS<br>METALS<br>AND MINERALS<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 49 | |||||
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| Focusing on Markets<br>CN is helping our customers grow their markets and reach<br>new ones by enhancing and developing innovative supply<br>chain solutions. We continue to invest in our network<br>infrastructure and rolling stock to improve the fluidity and<br>reliability of our service. Our industry-leading premium<br>equipment, direct access into large fibre-producing regions,<br>extensive reach into the U.S., and our numerous<br>interconnection agreements give our customers the flexibility<br>to adjust their production levels to take advantage of<br>available opportunities.<br>Providing Alternatives<br>CN’s direct access to capacity at the West Coast ports of<br>Vancouver and Prince Rupert provides our customers with the<br>option to pivot toward the Asian market when U.S. demand<br>slows. The Port of Prince Rupert has an especially compelling<br>service value proposition, including reduced sailing time to/<br>from Asia, fluid terminal operations, no truck congestion, as<br>well as fast and consistent rail transit into Central Canada<br>and U.S. markets.<br>Matching Fleet to Demand<br>To continuously adapt fleet requirements and provide car<br>order fulfillment for our customers, CN closely tracks active<br>demand, customer forecasts, and other market drivers by<br>origin and destination.<br>Providing Options with Intermodal Service<br>In line with our Sell One CN focus, we provide customers the<br>flexibility of using our intermodal and transload facilities<br>for first/last mile trucking.<br>We work closely with ocean carriers and forest product<br>producers to provide “match-back” of international containers.<br>Match-backs occur when CN loads an import container, which<br>would otherwise return to Asia empty, with export products<br>such as lumber or wood pulp. This enables steamship lines to<br>cover some of the cost of shipping empty containers back<br>to their home port.<br>Our integrated service also provides customers with the<br>flexibility of transloading their products into our domestic<br>intermodal containers and extending their reach to non-rail-served destinations through CNTL and TransX. This is<br>enhanced by our participation in the interline Equipment<br>Management Pool program.<br>AT THE HEART OF COMPLEX SUPPLY CHAINS<br>For more than 100 years, forest products have been at the<br>heart of CN’s business. A trade enabler and logistics partner, CN<br>is helping to move our customers’ forest products throughout<br>North America and around the world. We continue to support<br>our customers with a dedicated fleet reflecting regular demand<br>for lumber and panels used in home repair, renovation and<br>new construction.<br>FOREST PRODUCTS<br>CN maintains the largest<br>high-capacity centrebeam fleet<br>and one of the biggest box car<br>fleets in the industry.<br>Loading panels onto one of CN’s<br>10,000 centrebeam cars in Toronto, ON.<br>Overview Overview Markets Markets Operations Operations Financials Financials<br>2 Markets - Industrial Products - Forest Products<br>222 Markets Markets<br>50 CN | 2023 INVESTOR FACT BOOK | |||||
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| 1,886 1,808 1,700 1,740<br>2,006<br>REVENUES<br>($ millions)<br>2018 2019 2020 2021 2022<br>418<br>375<br>342 339 330<br>CARLOADS<br>(thousands)<br>2018 2019 2020 2021 2022<br> 29,918<br>27,187 25,602 25,948 25,020<br>RTMs<br>(millions)<br>2018 2019 2020 2021 2022<br>6.30 6.65 6.64 6.71<br>8.02<br>FREIGHT REVENUE<br>PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>KEY FACTS<br> • Largest rail carrier of forest products<br>in North America<br> • Nearly 15% of total CN revenue tied<br>to the housing market<br> • Upgraded fleet of over 20,000<br>premium cars, including centrebeams<br>for lumber and boxcars for pulp<br>and paper<br>COMMODITIES<br>LUMBER AND PANELS<br> • Lumber, oriented strand board (OSB)<br>panels, plywood, siding, engineered<br>wood products, timber mats<br>PULP AND PAPER<br> • Woodpulp, newsprint, printing paper,<br>paperboard, containerboard, logs,<br>wood chips, wood pellets<br>MARKET DRIVERS<br>LUMBER AND PANELS<br> • Residential construction,<br>repair and remodelling activity,<br>industrial activity<br>PULP AND PAPER<br> • Global consumption of pulp,<br>paper, tissue and packaging<br>$2,006M<br>2022 REVENUES<br>BUSINESS UNIT OVERVIEW AND MARKET DRIVERS<br>W 55% Lumber and Panels<br>W 45% Pulp and Paper<br>2022 COMMODITY BREAKDOWN<br>(% of revenues)<br>+1.6% -5.7% -4.4% +6.2%<br>CAGR ( 2022 vs. 2018)<br>867 miles AVERAGE LENGTH OF HAUL (2022)<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 51 | |||||
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| Edson<br>Surrey<br>North Battleford<br>Atikokan<br>Brockville<br>Prince George<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg Moncton<br>Calgary<br>Strategically located to move forest products across<br>Canada and the U.S. and reach our overseas markets.<br>CN’s direct access to West Coast port capacity<br>gives our customers an advantage in shipping to Asia,<br>where demand is growing.<br>CN is experiencing solid demand for growth<br>products such as wood pellets, engineered wood siding,<br>containerboard, and tissue paper.<br>FULLY INTEGRATED<br>END-TO-END SOLUTIONS<br>CN serves the U.S. housing market with high-quality Canadian lumber, panels and siding.<br>Asia is the principal market for Canadian wood<br>pulp and an attractive diversification option<br>for Canadian lumber producers. Our 14 and<br>growing forest products distribution centres<br>provide our customers with intermodal<br>flexibility and trucking alternatives for mills<br>that are not served by rail.<br>Supply Chain<br>at a Glance<br>FOREST PRODUCTS<br>CN’S FOREST PRODUCTS SUPPLY CHAIN<br>14 distribution centres<br>STRATEGICALLY LOCATED IN KEY LOCATIONS ACROSS<br>OUR NETWORK TO BETTER SERVE OUR CUSTOMERS<br>CN MAINTAINS THE LARGEST FLEET IN THE INDUSTRY TO<br>ADAPT TO EVOLVING CUSTOMER DEMAND<br>10,000 centrebeams<br>Over<br>Key Advantages<br>Lumber and panels<br>Pulp and paper<br>Wood pellets<br>Ports served by CN<br>P CN forest products<br> distribution centres<br>P Wood pellet producers<br>2 Markets Overview Markets Operations Financials<br>52 CN | 2023 INVESTOR FACT BOOK | |||||
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| Edson<br>Surrey<br>North Battleford<br>Atikokan<br>Brockville<br>Prince George<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg Moncton<br>Calgary<br>Delivering<br>Cleaner Energy<br>With the emphasis on renewable<br>energy to combat climate change,<br>demand for clean-burning wood<br>pellets is expected to continue to rise<br>in Europe and Asia. Canada is also<br>a potential growth market for wood<br>pellets as the carbon tax and mandated<br>coal phase-out drive conversion<br>of power plants. Ontario Power<br>Generation’s 205 MW Atikokan station<br>already runs on 100% pellet fuel.<br>The increasing negative impacts of<br>climate change continue to motivate<br>policies that support the use of wood<br>pellets for power generation. With<br>rail access to fibre-rich areas, CN<br>collaborates with existing customers<br>to implement their expansion plans<br>and with new customers to locate<br>on our network.<br>For more information, please visit www.cn.ca/your-industry/forest-products<br>CN is a player in the fight against climate change<br>through the transportation of wood pellets, a<br>renewable and cleaner alternative to fossil fuels.<br>CN | 2023 INVESTOR FACT BOOK 53 | |||||
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| FOREST PRODUCTS<br>Lumber and Panels<br>in Review<br>WORKING WITH PRODUCERS TO DELIVER<br>Wide Reach and Know-How<br>CN’s transport of lumber and panels reflects our strong origin<br>and destination franchise. Our lumber and panel shipments<br>originate mainly in Western Canada (~60%) and continue to<br>grow in Eastern Canada (~30%), with the balance in the<br>United States (~10%). The commodities are destined primarily<br>for the U.S. housing and renovation market, accounting for<br>over 70% of lumber and panels carloads in 2022.<br>With innovations developed by Canadian producers, such<br>as engineered wood siding, and new markets cultivated,<br>CN is working alongside producers to offer supply chain<br>solutions that protect and grow market share.<br>U.S. Housing Market<br>Historically low mortgage rates helped fuel a housing boom in<br>2020 when many North Americans sought more space, with<br>homes serving as offices and classrooms during the pandemic.<br>Following the pandemic, although lean inventories drove up<br>prices, higher borrowing costs among other factors have<br>cooled the momentum.<br>At the same time, builder backlogs and the need for new<br>homes remain elevated, indicating residential construction will<br>stay firm for the longer term and contribute to good lumber<br>demand. Housing starts in the U.S. are forecast to decline in<br>the short term, but long-term prospects remain positive despite<br>current macro-economic pressures.<br>Canadian Lumber<br>CN has extensive access to Canadian producers of lumber and<br>panels, and we continue to improve our end-to-end service<br>to enhance our competitive position with our diverse customer<br>base. CN continuously monitors geopolitical factors, such as<br>the application of U.S. tariffs on Canadian softwood lumber<br>imports. Canada remains the primary supplier of softwood<br>lumber and siding to the U.S.<br>Canadian lumber is coveted for its high quality as it is generally<br>lighter, drier, easier to cut and nail, and more durable. Demand<br>for Canadian lumber remains stable despite the consumers’<br>shift of discretionary spending from home renovations during<br>the pandemic to travel and other leisure activities.<br>PICTURED:<br>A CN lumber train rolls<br>through Edmundston, NB,<br>on its way to supply<br>the U.S. housing and<br>renovation market.<br>2 Markets Overview Markets Operations Financials<br>54 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| CN LUMBER AND PANEL VOLUMES VS.<br>U.S. HOUSING STARTS<br>(thousands of carloads)<br>2016 2017 2018 2019 2020 2021 2022<br>CN’s Supply Chain Remains Competitive<br>to Satisfy U.S. Housing Requirements<br>CN volumes include Canadian and U.S. origins<br>Lumber Panels U.S. Housing Starts<br>106.3 104.7 101.4<br>110.3<br>119.5 119.5 118.9<br>Engineered Wood Siding<br>CN continues to experience good growth in the transport<br>of engineered wood siding, an eco-friendly and durable<br>alternative to natural wood, aluminum and vinyl siding.<br>This product, made of wood fibre coated with resin<br>and compressed to create a board of superior strength,<br>is used primarily in the residential construction and<br>remodelling market.<br>To take advantage of the growing remodelling trend in<br>the U.S. and Canada, an increasing number of mills have<br>opened or restarted. CN works closely with existing customers<br>and develops relationships with new ones to support this<br>area of growth. Our competitive strengths in this market<br>include our extensive reach into fibre-producing regions, our<br>large fleet of centrebeams required to ship long-length<br>engineered wood siding, and our quick and reliable transit<br>times for prompt delivery of orders.<br>Outlook<br>The U.S. housing market is expected to continue to decline<br>through the remainder of 2023 and into 2024, driven by higher<br>interest rates. The construction of single-family units is a key<br>indicator of lumber demand, as they require up to four times<br>more lumber per unit than multi-family units. We continue to<br>work with customers to develop market options for their<br>products, including U.S.-based mills.<br>CN’s supply chain remains<br>competitive to satisfy U.S.<br>housing requirements with<br>products such as engineered<br>wood siding, which is an<br>environmentally friendly and<br>long-lasting alternative.<br>Approximately 15% of CN’s revenues are directly tied to the new housing<br>market, including lumber, panels and roofing shingles, as well as<br>containerized goods like furniture, lighting and appliances.<br>CN | 2023 INVESTOR FACT BOOK 55 | |||||
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| CN WOOD PELLET VOLUME<br>(thousands of carloads)<br>2016 2018 2017 2019 2020 2021 2022<br>24.7 24.6 24.0<br>21.0 21.8 20.6 20.7<br>CN WOOD PELLET VOLUME<br>(thousands of carloads)<br>2016 2018 2017 2019 2020 2021 2022<br>24.7 24.6 24.0<br>21.0 21.8 20.6 20.7<br>FOREST PRODUCTS<br>Pulp and Paper<br>in Review<br>LEVERAGING AREAS OF GROWTH<br>Flexible Product Offering<br>CN’s pulp and paper services continue to evolve and diversify,<br>including our warehousing, transload and intermodal options.<br>Canada remains the second-largest wood pulp producer in<br>the world, surpassed only by Brazil. Pulp is predominantly<br>used in the production of paper, paperboard, tissue and other<br>personal care products.<br>Due to the rapid pace of digitization, world-wide demand<br>for most paper grades continues to shrink. Nevertheless,<br>CN’s direct access to some of the most cost-competitive<br>mills and regions has benefited our franchise. CN remains<br>focused on growing market share with its current customer<br>base to help them remain competitive in their markets.<br>Pulpboard, which is mainly containerboard used to package<br>consumer goods, and tissue products are the exceptions<br>to the decline.<br>E-Commerce Driving Demand for Packaging<br>Consumer behaviour is being shaped by the ready availability<br>of an almost infinite variety of goods online, from food to<br>furniture. The containerboard market is being driven by the<br>shift to online shopping that accelerated during the pandemic<br>when many brick-and-mortar shops were closed and people<br>were encouraged to stay at home.<br>Containerboard is also used inside packages as protective<br>material to prevent damage in transit. As e-commerce is<br>expected to be increasingly dominant in the overall retail<br>market in the coming years, the demand for packaging is<br>also anticipated to rise.<br>Tissue Remains a Growth Story<br>Over the past decade, rising income levels and hygiene-consciousness among individuals have escalated the demand<br>for tissue papers around the globe. The ongoing COVID-19<br>pandemic has increased the demand for hygiene products,<br>such as toilet paper and paper towels.<br>CN train transporting wood chips in gondola cars north of Quebec City to market<br>to meet the continued rise in global demand for wood pellets.<br>2 Markets Overview Markets Operations Financials<br>56 CN | 2023 INVESTOR FACT BOOK | |||||
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| PICTURED:<br>CN meets with customers<br>in Entwistle, AB, as a unit<br>train is loaded with wood<br>pellets destined for export<br>as an alternative to coal in<br>power generation.<br>+40%<br>INCREASE IN CN'S WOOD PELLET<br>SHIPMENTS SINCE 2013<br>Also, some companies are introducing premium quality products<br>and eco-friendly options. Favourable government policies to<br>promote public health are anticipated to help propel market<br>growth through 2025.<br>While some CN-served pulp producers are in Eastern Canada,<br>most are in Western Canada. CN also plays a significant role in<br>moving eucalyptus pulp from Brazil to consumers in North<br>America via the U.S. Gulf ports.<br>Growth in Wood Pellet Market<br>Wood pellets are made from compacted residue from<br>the lumber production process and can be used as fuel for<br>power generation as well as commercial and residential<br>heating. Wood pellets are renewable and have a very high<br>combustion efficiency, making them one of the cleanest-burning energy sources available.<br>A significant portion of global wood pellet production comes<br>from Canada, with a concentration of production in British<br>Columbia and Alberta. New production facilities are also coming<br>on stream in Saskatchewan, Ontario and Quebec to take<br>advantage of this growing market. All wood pellet production<br>plants in Canada are on CN’s network.<br>CN’s wood pellet shipments have increased by 40% over the<br>past 10 years to 2.4 million tons (or 24,600 carloads). There are<br>more projects being developed in Canada as the demand<br>overseas continues to grow and the price remains favourable.<br>Outlook<br>Despite the overall downward trend for printing and newsprint<br>grades, demand for pulpboard and tissue paper is expected to<br>increase and Canadian wood pulp production to remain stable.<br>Worldwide efforts to combat climate change by reducing<br>GHG emissions are driving policy shifts toward cleaner,<br>renewable energy sources like wood pellets. CN continues to<br>collaborate with customers on their expansion plans for the<br>expected growth in North American wood pellet production<br>through 2025 and beyond.<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 57 | |||||
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| SUPPLY CHAIN COLLABORATION DRIVES GROWTH<br>Demand for cyclical commodities like metals and minerals<br>follows drivers such as manufacturing, construction and<br>energy sector activity. CN works closely with our customers<br>to understand and anticipate their market cycles and help<br>them reach new markets. We plan our capacity and service<br>accordingly while looking for opportunities to create new<br>supply chain options.<br>Creating Value for Our Customers<br>We work closely with all our stakeholders to encourage the<br>free flow of information to better understand our customers’<br>volume forecasts and systematically develop growth strategies.<br>We proactively review locomotive and railcar requirements<br>to right-size capacity with current demand and future plans.<br>Being a key player in the metals and minerals supply chain,<br>we can identify opportunities to put suppliers and consumers<br>together. For instance, through our relationship with oil and<br>gas producers at North America’s major shale basins, we<br>connect those producers with frac sand producers in Wisconsin.<br>In addition to upgrading our Wisconsin subdivisions to handle<br>the heavier traffic, we established a dedicated team to<br>coordinate our frac sand shipments from origin to destination.<br>Another exciting opportunity is the emerging electric vehicle<br>(EV) supply chain. CN is not only strategically located for<br>delivering the finished products, but also for transporting<br>minerals from mines to transformation plants and for moving<br>inputs to battery and EV assembly plants.<br>CN is also a significant iron ore transporter on the Great Lakes,<br>with an integrated end-to-end supply chain from mines to<br>mills, all on CN-owned trains and ships.<br>Flexible Shipping Solutions<br>CN leverages our reach and know-how to get metals and<br>minerals traffic quickly and safely to destination. CN operates<br>over 56,000 railcars of all types. CN’s fleet planning process is<br>designed to be flexible by constantly reviewing and adjusting<br>our fleet based on expected demand and customer forecasts,<br>with a focus on supporting growth.<br>We provide customers located on and off our network with<br>opportunities to leverage the low costs and environmental<br>benefits of shipping by rail as part of our Sell One CN<br>integrated service. Customers can use our intermodal service,<br>combined with our metals distribution centres, to get their<br>products to a wide range of destinations. Our containers<br>can handle extremely heavy goods like steel thanks to our<br>sliding floor mobile transport trays that can load up to<br>50,000 lbs in less than a minute.<br>METALS AND MINERALS<br>CN has a proven track record as a matchmaker by connecting<br>producers with end markets.<br>CN gondolas transporting iron ore in<br>Two Harbors, MN.<br>Overview Overview Markets Markets Operations Operations Financials Financials<br>2 Markets - Industrial Products - Metals and Minerals<br>222 Markets Markets<br>58 CN | 2023 INVESTOR FACT BOOK | |||||
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| 1,689 1,643<br>1,409<br>1,548<br>1,911<br>REVENUES<br>($ millions)<br>2018 2019 2020 2021 2022<br>1,030 1,008<br>935 969 956<br>CARLOADS<br>(thousands)<br>2018 2019 2020 2021 2022<br> 27,993<br>25,449<br>21,561<br> 26,743 27,606<br>RTMs<br>(millions)<br>2018 2019 2020 2021 2022<br>6.03 6.46 6.53<br>5.79<br>6.92<br>FREIGHT REVENUE<br>PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>KEY FACTS<br> • Serves 10 aluminum smelters,<br>more than any other railroad in<br>North America<br> • Is the top mover of aluminum,<br>iron ore and base metal ore in<br>North America<br> • Reaches all the top shale plays in<br>Canada, including the Western<br>Canada Sedimentary Basin<br>COMMODITIES<br>METALS AND MINERALS<br> • Steel, non-ferrous ores and base<br>metals, construction materials,<br>machinery, railway equipment and<br>large loads<br>ENERGY MATERIALS<br> • Frac sand and pipe<br>IRON ORE<br>MARKET DRIVERS<br> • Manufacturing production<br>(e.g., automobiles, railcars, heavy<br>equipment, aerospace)<br> • Non-residential construction activity<br> • Large infrastructure projects<br> • World demand for ores and metals<br> • Oil and gas production<br> • Consumer goods production<br>BUSINESS UNIT OVERVIEW AND MARKET DRIVERS<br>W 29% Metals<br>W 27% Minerals<br>W 24% Energy Materials<br>W 20% Iron Ore<br>2022 COMMODITY BREAKDOWN<br>(% of revenues)<br>$1,911M<br>2022 REVENUES<br>+3.1% -1.8% -0.3% +3.5%<br>CAGR ( 2022 vs. 2018)<br>359 miles AVERAGE LENGTH OF HAUL (2022)<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 59 | |||||
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| Scotford<br>Bienfait<br>Flat Rock<br>Hamilton<br>Escanaba<br>Two Harbors<br>Surrey<br>North<br>Vancouver<br>Saguenay<br>Fort McMurray<br>Baie-Comeau<br>Sept-Îles<br>Conneaut<br>Pittsburgh<br>Duluth<br>Sault<br>Ste.Marie<br>Minneapolis/St. Paul<br>Toledo<br>Decatur<br>Jackson<br>Prince George<br>Arcadia<br>Chippewa Falls<br>Joliet<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>Calgary<br>Moncton<br>Our rail access reaches deep into mining regions<br>rich in metals, minerals, iron ore, and frac sand, as well<br>as key aluminum- and steel-producing areas.<br>With our strong origin franchise and our access to<br>end markets, CN is one of the top movers of aluminum<br>and iron ore in North America.<br>CN owns and operates a fully integrated supply<br>chain that transports iron ore directly from mines to<br>mills entirely with CN ships and trains.<br>WORKING CLOSELY WITH CUSTOMERS<br>CN is committed to creating value for customers<br>through collaboration and innovation. From<br>aluminum to steel and iron ore to frac sand,<br>CN has the network reach, railway-supplied<br>equipment, transload facilities, port access and<br>supply chain solutions to get our customers’<br>products to market quickly and safely.<br>Supply Chain<br>at a Glance<br>METALS AND MINERALS<br>Metals<br>Minerals<br>Iron ore<br>Ports served by CN<br>E Aluminum smelters<br>P CN metals distribution centres<br>P CN iron ore docks<br>CN’S METALS AND MINERALS SUPPLY CHAIN<br>IN CANADA TO ADAPT TO EVOLVING CUSTOMER DEMAND<br>Largestfleet<br>14 distribution centres*<br>STRATEGICALLY LOCATED AT KEY SITES ACROSS OUR<br>NETWORK TO BETTER SERVE OUR CUSTOMERS<br>Key Advantages<br>* Including Flat Rock, MI, opening in 2024<br>2 Markets Overview Markets Operations Financials<br>60 CN | 2023 INVESTOR FACT BOOK | |||||
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| Scotford<br>Bienfait<br>Flat Rock<br>Hamilton<br>Escanaba<br>Two Harbors<br>Surrey<br>North<br>Vancouver<br>Saguenay<br>Fort McMurray<br>Baie-Comeau<br>Sept-Îles<br>Conneaut<br>Pittsburgh<br>Duluth<br>Sault<br>Ste.Marie<br>Minneapolis/St. Paul<br>Toledo<br>Decatur<br>Jackson<br>Prince George<br>Arcadia<br>Chippewa Falls<br>Joliet<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>Calgary<br>Moncton<br>Electric Vehicles Drive<br>Up Demand for Metals<br>A few years ago, only 1% of automotive<br>sales were electric vehicles (EVs). In<br>2022, EVs accounted for 14% of sales.<br>By 2040, EVs could represent more<br>than half of total automotive sales.(1)<br>The demand for EVs will drive up<br>demand for certain metals. For<br>example, demand for aluminum used<br>in motor vehicle production is expected<br>to increase. Demand for copper, nickel<br>and lithium, key metals used in EV<br>battery production, will also increase<br>substantially, as will consumption<br>of other critical minerals such as<br>graphite. Canada is a major producer<br>of these metals and minerals, and<br>CN is well positioned to take advantage<br>of the sustainable growth.<br>(1) Source: Forbes<br>For more information, please visit www.cn.ca/your-industry/metals-minerals<br>CN is ready to capture growth in electric<br>vehicles and their components with several<br>mines and production plants opening on<br>our network.<br>CN | 2023 INVESTOR FACT BOOK 61 | |||||
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| Metals and Minerals<br>in Review<br>READY TO PARTICIPATE IN EXPECTED GROWTH<br>METALS AND MINERALS<br>CN is an Agile Metals Supply Chain Partner<br>CN has the metals market covered from A to Z, from<br>aluminum to zinc. By staying close to our customers and<br>understanding their operations and markets, we can better<br>anticipate our customers’ needs, especially in volatile<br>economic times. Through our network of 13 strategically<br>located metals distribution centres and with the largest fleet<br>of railcars for metals in Canada, we provide efficient and<br>competitive supply chain solutions to reach a wide range<br>of customers. Our 14th metals distribution centre, located in<br>Flat Rock, MI, is expected to be operational in 2024 and will<br>serve automotive manufacturers and other customers.<br>The steel and aluminum industries in Canada and the<br>U.S. are deeply integrated and support supply chains that<br>strengthen the global competitiveness of the North American<br>economy. Canada is a longstanding and reliable supplier<br>of steel and aluminum to the United States.<br>Our customers serve a wide variety of markets, including<br>non-residential construction, oil and gas development,<br>heavy industry, and automobile manufacturing. This<br>diversification helps minimize the impact of market<br>cycles in certain sectors on our business.<br>Strong and lightweight, aluminum is an important ingredient<br>in a wide array of products, from motor vehicles and aircraft<br>to beverage containers and consumer electronics. The<br>electrolysis process used to manufacture aluminum requires<br>a large amount of electricity. Therefore, the Canadian<br>aluminum industry has concentrated in Quebec, where<br>relatively low-cost hydroelectricity is abundant.<br>CN moves more aluminum from Canada to the U.S. than<br>any other railroad. Over 80% of Canada’s primary aluminum<br>production is exported to the U.S. CN’s unique access to the<br>Canadian aluminum smelters, coupled with our rail network<br>reaching deep into the U.S., have made CN a strategic supply<br>chain partner to the aluminum industry.<br>ALUMINUM PLANTS IN CANADA<br> Current Production Capacity<br>Customer Plant Location (Metric Tonnes)<br>Alouette(1) Sept-Îles, QC 620,000<br>Rio Tinto Alcan Alma, QC 473,000<br>Alcoa / Rio Tinto Alcan(2) Becancour, QC 462,000<br>Rio Tinto Alcan Kitimat, BC 432,000<br>Alcoa Baie Comeau, QC 312,000<br>Alcoa Deschambault, QC 287,000<br>Rio Tinto Alcan Laterriere, QC 257,000<br>Rio Tinto Alcan Grand Baie, QC 233,000<br>Rio Tinto Alcan Arvida, Saguenay, QC 174,000<br>Rio Tinto Alcan AP60, Arvida, Saguenay, QC 60,000<br>Total 3,310,000<br>(1) Alouette is the largest aluminum smelter in the Americas. The Aluminerie Alouette<br>consortium is made up of the following five shareholders: Rio Tinto Alcan (Canada,<br>40%), Austria Metall AG (Austria, 20%), Hydro Aluminium (Norway, 20%), Marubeni<br>Metals & Minerals (Japan, 13.33%) and Investissement Québec (Canada, 6.67%).<br>(2) Alcoa (74.9%), Rio Tinto Alcan (25.1%)<br>2 Markets Overview Markets Operations Financials<br>62 CN | 2023 INVESTOR FACT BOOK | |||||
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| Growth in Minerals Continues<br>Frac sand, aggregates, cement and non-ferrous ore<br>concentrates are CN’s main commodities in the minerals<br>group. As with other commodities, supply and demand for<br>minerals generally follow global market cycles and local<br>factors, including large infrastructure projects. CN closely<br>monitors projects and gets involved at the early stages to<br>collaboratively develop supply chain solutions.<br>Activity in the oil and gas sector and government spending<br>on large projects continue to drive CN’s volumes of gravel,<br>crushed stone, fly ash and cement. Cement production is<br>responsible for 5% of worldwide carbon emissions. As shippers<br>are focused on sustainable options, CN is working closely<br>with customers for the movement of fly ash, a fine powder<br>byproduct of burning pulverized coal in electric power<br>generation plants. When mixed with cement, fly ash reduces<br>the overall carbon footprint of cement production.<br>A Leading Player<br>Canada is widely known for its large deposits of non-ferrous<br>metals, including lithium and graphite, both key ingredients<br>in batteries for consumer electronics, power tools and EVs. CN’s<br>network reaches into lithium-rich regions, and we are actively<br>working on supply chain solutions with our customers on several<br>large lithium-mining projects, which are progressing toward<br>production. In fact, we recently began shipping lithium out of<br>northern Quebec.<br>Outlook<br>An eventual resumption of growth in industrial production,<br>a more positive outlook in the oil and gas sector, and the U.S.<br>infrastructure stimulus program are expected to drive steel<br>production. Aluminum demand is anticipated to rise as the metal<br>is increasingly used in vehicle production and other applications.<br>However, CN continues to assess the impact of any potential<br>geopolitical factors. CN is well positioned to benefit from the<br>favourable market outlook for most non-ferrous minerals.<br>PICTURED:<br>CN limestone<br>and iron ore trains in<br>Iron Junction, MN.<br>CN | 2023 INVESTOR FACT BOOK 63 | |||||
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| METALS AND MINERALS<br>Energy Materials<br>in Review<br>POISED TO MEET DEMAND FROM OIL AND GAS SECTOR<br>Facilitating Demand for Frac Sand<br>Large amounts of frac sand are used in the hydraulic<br>fracturing process, where the sand is pushed into wells under<br>high pressure to hold the shale fractures open to free oil and<br>gas trapped within the rock formations. Modern horizontal<br>drilling techniques increase lateral lengths, add more stages<br>per foot, and require ever more sand pumped per stage.<br>With direct rail access to over 20 million tons of annual<br>processing capacity of Wisconsin Northern White sand<br>and more than 30 Western Canadian transload terminals,<br>CN has invested over $100 million in infrastructure upgrades<br>to help create an efficient and highly competitive supply<br>chain connection between our sand customers and energy<br>producers in Western Canada and the U.S., including the<br>Montney, Duvernay, Marcellus and Utica, and Bakken<br>shale formations.<br>Shipping More Steel Pipe<br>We ship large-diameter pipe for pipelines and small-diameter<br>pipe for oil and gas drilling. Following CN’s construction of<br>long sidings and double track to improve fluidity in Western<br>Canada, as well as expansion of certain yards to reduce<br>railcar dwell times , the rail network is prepared for increased<br>shipments of both commodities.<br>Outlook<br>Western Canada is expected to benefit from further<br>development of gas production, increasing demand for<br>small diameter pipe and frac sand. The completion<br>of LNG Canada’s facility in Kitimat is expected to drive<br>increased drilling activity in Western Canada. CN’s network<br>is well positioned for the shipment of products to support<br>this activity and we are collaboratively working with all our<br>customers to support the increased demand for products<br>in drilling regions.<br>Expanding natural gas<br>liquids and liquified<br>petroleum gas export<br>markets have created<br>the opportunity to<br>move more frac sand<br>and drilling pipe.<br>Wisonsin Northern White frac sand being loaded<br>and transported to energy markets.<br>2 Markets Overview Markets Operations Financials<br>64 CN | 2023 INVESTOR FACT BOOK | |||||
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| Iron Ore<br>in Review<br>LEADING TRANSPORTER OF IRON ORE ON THE GREAT LAKES<br>CN’s Seamless Iron Ore Supply Chain<br>CN’s iron ore operation is an excellent application of our<br>end-to-end supply chain mindset. By closely collaborating<br>with our mine and steel mill customers, we transport iron<br>ore from mine to mill entirely with CN assets.<br>CN handled 44 million tons of iron ore in 2022 with an<br>operation that requires finely tuned end-to-end coordination.<br>Trains are loaded quickly at the mine and arrive at the dock on<br>time. The ore is transferred to vessels that depart on schedule<br>and arrive at destination, where the ore is transferred onto<br>another CN train for delivery to the steel mill. CN is adding<br>600 ore cars in 2023–2024 to support our iron ore supply chain.<br>Great Lakes Fleet is the Industry Leader<br>For over 100 years, CN subsidiary Great Lakes Fleet has<br>been an industry pioneer and leader. With reliable vessels<br>able to deliver up to 75,000 tons in all seasons, we carry<br>many bulk commodities to any port on the Great Lakes and<br>St. Lawrence Seaway.<br>Our principal commodities and trade routes include:<br> • Iron Ore: Sourced on Lake Superior and the Upper<br>Peninsula of Michigan and shipped to lower Lake Michigan,<br>Lake Erie and export via the Gulf Coast.<br> • Limestone: Sourced in northern Lake Huron and shipped<br>throughout most of the Great Lakes.<br> • Coal: Sourced from lakes Erie, Michigan and Superior,<br>and shipped throughout the Great Lakes.<br>Outlook<br>The demand for iron ore is forecast to be stable, with large<br>infrastructure projects, continued oil and gas exploration, and<br>export opportunities on the horizon. This demand outlook,<br>coupled with the long life of the mines served by CN, supports<br>continued solid volumes throughout CN’s iron ore supply chain.<br>PICTURED:<br>Great Lakes Fleet vessel<br>Arthur M. Anderson at the<br>Two Harbors, MN, ore dock.<br>44 million<br>TONS OF IRON ORE HANDLED<br>BY CN IN 2022<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 65 | |||||
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| BULK<br>PRODUCTS<br>SUPPLY CHAIN COOPERATION AND COLLABORATION<br>Moving bulk commodities like grain, fertilizers and coal is a team<br>sport. CN and our supply chain partners must be fully integrated<br>to efficiently deliver 200-plus car unit trains. Together, we plan our<br>capacity segment by segment along each lane. Then, the local CN<br>Operations teams move it in that lane. Our collaborative process<br>identifies where we have capacity to move more, and we go do it<br>using this “team of teams” approach.<br>Collaboration Is Key to Moving Large Volumes<br>The 2022–2023 grain crop was expected to be a big one, and it turned out to be one<br>of the top five ever. And volumes of other commodities we move — like potash and<br>coal — were strong as well. We set records in October 2022 and February 2023 for<br>Canadian grain shipments in a single month. We also saw significant growth in our<br>U.S. grain franchise given strong bulk grain export demand as well as expansion of<br>renewable diesel production. In fact, in 2022, unit train shipments of U.S. grain to the<br>Gulf beat the previous record set in 2006. Coal demand was also very strong, setting<br>a record with over 45 million metric tonnes (MMT) shipped in 2022.<br>These record-setting results show what can get done when partners collaborate<br>to create supply chain solutions to supply chain challenges. We are confident our<br>railroaders will continue to deliver for Canadian farmers and all our customers.<br>Because, from farm to table, it takes a lot of people to move all types of grain and<br>value-added grain products: farmers, grain companies and processors, elevator staff,<br>port workers, and our own CN railroaders. Innovation in crop production, processing<br>and handling can be found at every point in the grain supply chain.<br>CN has a central role to play in delivering bulk commodities like grain, fertilizers<br>and coal to end-users across North America and around the world. We are<br>committed to transparency and dialogue with all our supply chain partners.<br>CN is a key supply chain partner in the<br>movement of bulk commodities like grain,<br>fertilizers and coal to market.<br>SPOTLIGHT<br>CN Increases Steel-Wheel Visibility<br>Conuma, a leading Canadian<br>exporter of steelmaking coal,<br>employs CN to deliver their product<br>to Asian customers via the Port of<br>Prince Rupert. Our custom GPS app<br>provides Conuma with very granular<br>views of the location, speed and<br>direction of movement of CN unit<br>trains. With data refreshed every five<br>minutes, Conuma’s employees can<br>see exactly where their railcars are<br>on a digital screen at the loading<br>area, which helps optimize the entire<br>supply chain, from production<br>through to the port, maximizing<br>capacity and throughput.<br>CN's high-capacity grain hopper<br>cars, alongside open gondolas carrying<br>coal for export at Ridley Island,<br>Prince Rupert, BC.<br>Overview Markets Operations Financials<br>2 Markets - Bulk Products - Overview<br>2 Markets<br>66 CN | 2023 INVESTOR FACT BOOK | |||||
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| The grain and fertilizer segments of<br>CN’s business are driven primarily by<br>crops grown and fertilizers produced<br>in Western Canada and the U.S.<br>Midwest. Production of grain varies<br>from year to year due mainly to<br>weather conditions and harvested<br>acreage. Grain exports are sensitive<br>to the size and quality of the crop<br>produced, international market<br>conditions and foreign government<br>policy. CN’s commitment to the<br>agriculture industry also includes<br>shipping fertilizers like potash for<br>export, as well as ammonium nitrate,<br>anhydrous ammonia, urea and other<br>fertilizers across Canada and the U.S.<br>The key drivers for fertilizers are input<br>prices, demand, government policies<br>and international competition.<br>The Coal commodity group consists of<br>thermal and metallurgical grades of<br>bituminous coal and petroleum coke.<br>Canadian coal is largely exported via<br>terminals on the West Coast. In the<br>U.S., coal is transported from mines in<br>Illinois, or from western mines via<br>interchange with other railroads, to<br>utilities in the Midwest and Southeast.<br>U.S. coal is also exported to offshore<br>markets via terminals on the Gulf<br>Coast. Petroleum coke is exported via<br>terminals on the Canadian West Coast<br>and U.S. Gulf Coast, as well as shipped<br>to industrial users in domestic<br>markets. Key drivers include weather,<br>environmental regulations, demand<br>for energy and steel, and natural<br>gas prices.<br>CN's high capacity<br>hopper cars<br>Jasper, AB<br>GRAIN AND<br>FERTILIZERS<br>COAL<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 67 | |||||
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| Moving Record Amounts of Canadian Grain<br>Unlike many other types of rail traffic, overall demand for<br>Western Canadian grain increased during the pandemic,<br>both within North America and overseas. Favourable weather<br>and enhanced crop management, combined with CN’s strong<br>execution and capacity investments, allowed the industry<br>to meet that demand with record Western Canadian grain<br>movements. In fact, we moved over 3.3 MMT of bulk grain and<br>processed grain products by carload in October 2022, more<br>than we ever have in a single month. This was accomplished<br>despite some challenges in the supply chain that we addressed<br>by working closely with our supply chain partners.<br>New High-Water Mark for U.S. Grain<br>Most of CN’s grain movements in the U.S. originate in Illinois,<br>Iowa, Wisconsin and Michigan. This area of the Corn Belt<br>produces roughly 40% of the corn and 30% of the soybeans<br>grown in the U.S. In 2022, CN celebrated a new high-water<br>mark for its direct rail program to the Gulf, exceeding the<br>previous record set in 2006, with strong export demand for<br>corn and soybeans due in part to significant shifts in<br>commodity trade flows.<br>Emphasis on Car Supply<br>At CN, we understand that timely railcar supply is critical<br>to grain shippers of every size. Today, over 90% of cars<br>are secured by shippers using a variety of CN commercial<br>products. Since 2010, the growth in CN’s grain-handling<br>capacity has exceeded the growth in crop production over<br>the same period, enabling a more effective end-to-end supply<br>chain. Since 2019, CN has purchased 3,500 high-capacity<br>hopper cars, with another 750 to be added to CN’s fleet<br>in 2024.<br>Helping Our Fertilizer Customers Win<br>CN understands the distinct needs of our Canadian and<br>U.S. fertilizer customers, as well as the economic factors that<br>affect domestic and global markets. To respond to changing<br>trends, we leverage our tri-coastal network for fertilizer<br>exports and imports to optimize the supply chain. As an<br>example, we helped our fertilizer customers gain market<br>share in the U.S. Corn Belt through our routing advantage<br>around Chicago.<br>EVOLUTION AND INNOVATION IN THE SUPPLY CHAIN<br>A strong, vibrant grain sector, supported by a well-functioning<br>supply chain, is essential to the Canadian economy. CN’s network<br>investments and hopper car fleet renewal are complimented by<br>in-country grain handling capacity improvements over the past<br>decade. The supply chain’s efficiency has increased to deliver<br>record grain movements. CN’s grain franchise is growing and we<br>are participating in the renewable fuel production market.<br>GRAIN AND FERTILIZERS<br>CN is focused on helping power the agriculture economy.<br>By efficiently moving grain and<br>fertilizers for export, CN is helping to<br>feed the world. Dufresne, MB<br>Overview Markets Operations Financials<br>2 Markets - Bulk Products - Grain and Fertilizers<br>222 Markets Markets<br>68 CN | 2023 INVESTOR FACT BOOK | |||||
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| BUSINESS UNIT OVERVIEW AND MARKET DRIVERS<br>2,357 2,392<br>2,609 2,475<br>2,783<br>REVENUES<br>($ millions)<br>2018 2019 2020 2021 2022<br>632 619 663 628 614<br>CARLOADS<br>(thousands)<br>2018 2019 2020 2021 2022<br>57,819 55,597<br>61,736 58,733 55,359<br>RTMs<br>(millions)<br>2018 2019 2020 2021 2022<br>4.08 4.30 4.23 4.21<br>5.03<br>FREIGHT REVENUE<br>PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>COMMODITIES<br>GRAIN<br> • Wheat, canola, peas, oats, barley,<br>peas, corn, soybeans, ethanol,<br>distiller's dried grains, canola and<br>soybean meal and oil, other oils<br>and fats, malt<br>FERTILIZER<br> • Potash, ammonia nitrate, urea,<br>phosphate fertilizers, anhydrous<br>ammonia, ammonium sulphate,<br>liquid fertilizers<br>MARKET DRIVERS<br>GRAIN<br> • Weather conditions, seeded and<br>harvested acreage, mix of grain crops<br>and crop yield, size and quality of<br>individual crops, international<br>market conditions<br>FERTILIZER<br> • Input prices, government policies,<br>international competition<br>$2,783M<br>2022 REVENUES<br>W 32% Canadian Grain – Regulated<br>W 13% Canadian Grain – Commercial<br>W 22% U.S. Grain – Domestic<br>W 11% U.S. Grain – Exports<br>W 13% Fertilizers – Potash<br>W 9% Fertilizers – Other<br>2022 COMMODITY BREAKDOWN<br>(% of revenues)<br>KEY FACTS<br> • Canadian grain accounts for roughly<br>60% of CN’s grain-related revenue<br> • CN moves Western Canadian grain<br>for export via the ports of Vancouver,<br>Prince Rupert and Thunder Bay<br> • Our U.S. grain footprint stretches<br>from the Midwest to the Gulf Coast<br> • We transport fertilizer throughout<br>North America and to/from ports on the<br>Canadian West and East Coasts for<br>import/export<br>+4.2% -0.7% -1.1% +5.4%<br>CAGR ( 2022 vs. 2018)<br>877 miles AVERAGE LENGTH OF HAUL (2022)<br>CN | 2023 INVESTOR FACT BOOK 69 | |||||
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| Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg Moncton<br>Calgary<br>Supply Chain<br>at a Glance<br>With our reach to ports on three coasts and the<br>Great Lakes, CN helps customers meet growing<br>demand in key markets in Asia and Latin America.<br>With our investments in sidings up to 12,000 feet<br>long in Western Canada, CN can run trains of more<br>than 200 railcars.<br>Stuffing facilities at strategic locations along CN’s<br>network load grain products into containers ready<br>for export shipment.<br>Key Advantages<br>HELPING OUR CUSTOMERS<br>FEED THE WORLD<br>CN believes in a collaborative approach to<br>shipping grain, potash and processed products to<br>ports in Prince Rupert, Vancouver, Thunder Bay,<br>the St. Lawrence Seaway, and the U.S. Gulf Coast,<br>as well as domestic flows to/from ethanol plants,<br>canola and soybean crush plants, and a wide<br>variety of other processors and end-users.<br>NEW HOPPER CARS ARE SHORTER AND LIGHTER AND<br>CAN HANDLE UP TO 40% MORE GRAIN PER TRAIN<br>3,500 grain hopper cars<br>new<br>Canadian grain<br>U.S. grain<br>Fertilizers – potash<br>Fertilizers – other<br> Ports served by CN<br>CN’S GRAIN AND FERTILIZER SUPPLY CHAIN<br>70% grain elevators<br>of new high-throughput<br>BUILT IN WESTERN CANADA SINCE 2015 ARE EXCLUSIVELY<br>ON CN'S NETWORK<br>GRAIN AND FERTILIZERS<br>2 Markets Overview Markets Operations Financials<br>70 CN | 2023 INVESTOR FACT BOOK | |||||
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| Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg Moncton<br>Calgary<br>Investing in<br>Equipment and Crews<br>We are increasing the grain-handling<br>capacity of our three-coast network<br>with sustained investments. At the<br>end of 2022, we had approximately<br>1,950 locomotives on our mainline and<br>feeder network. For delivery during<br>the 2022–2023 crop year, we acquired<br>53 high-horsepower locomotives and<br>500 high-efficiency hopper cars, with<br>750 more to come in 2024. Investment<br>in railcars and locomotives requires<br>investment in people to move and<br>maintain them, so we are attracting,<br>hiring, training and deploying<br>employees across our network. At<br>the end of 2022, CN employed over<br>1,300 more people than at the<br>beginning of 2022, with most of the<br>increase in operating crews.<br>For more information, please visit:<br>www.cn.ca/your-industry/grain and www.cn.ca/your-industry/fertilizer<br>CN, complemented by in-country elevators<br>and port terminals, is part of a strong and<br>vibrant grain supply chain.<br>CN | 2023 INVESTOR FACT BOOK 71 | |||||
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| GRAIN AND FERTILIZERS<br>Spotlight<br>Massive Investments in Canadian Grain Supply Chain<br>$27B<br>INVESTED BY CN IN EQUIPMENT AND INFRASTRUCTURE IN<br>THE GRAIN SUPPLY CHAIN SINCE 2013<br>Grain producers, grain companies, and railways have<br>invested heavily in technology and infrastructure, with<br>$27 billion invested by CN alone. This combined effort<br>helped CN deliver record grain movements in the last<br>two years, demonstrating that strategic investment<br>and coordination can yield positive results.<br>All players in the grain supply chain — including CN,<br>grain handlers and producers — have been making<br>significant capital investments to implement hook-and-haul processes at both ends of the route. Grain handling<br>capacity in Western Canada is increasing rapidly to<br>meet growth in grain production and global demand.<br>Our customers have invested in over 70 high-throughput<br>grain elevators, many with loop tracks enabling faster<br>grain loading of unit trains, with one more coming online<br>in the second half of 2023. In fact, 70% of the new<br>elevators are exclusively on CN lines.<br>At the other end of the route, two new export terminals at<br>the Port of Vancouver opened in 2020. Our customers,<br>including G3 Canada Limited, GrainsConnect Canada,<br>Cargill, and Richardson, have expanded their grain export<br>terminal capacity, collectively increasing West Coast grain<br>export terminal handling capacity by 50%.<br>We are also encouraging customers to invest in more efficient<br>facilities, so loaded grain trains are fully charged with air<br>when our crews arrive, reducing cycle times and increasing<br>car velocity. In fact, velocity during the 2022–2023 crop year<br>reached the highest levels recorded since 2016.<br>CN is investing in extending sidings and doubling mainline<br>tracks, mainly in Western Canada. We have also acquired<br>close to 300 high-horsepower locomotives and 3,500 high-capacity grain hopper cars as part of our multi-year fleet<br>renewal program.<br>Farming and railroading are both very capital-intensive businesses, and the past decade has seen<br>investment in all aspects of the end-to-end grain supply chain.<br>2 Markets Overview Markets Operations Financials<br>72 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| Massive Investments in Canadian Grain Supply Chain<br>PICTURED:<br>CN customer G3's new grain<br>terminal and loop track in<br>Melville, SK, welcomes a CN<br>grain unit train.<br>Photo by CN employee Kyle Price<br>Viterra<br>Viterra Viterra<br>Viterra<br>G3<br>G3<br>G3<br>G3<br>G3<br>G3<br>G3<br>G3<br>P&H<br>P&H<br>DG Global<br>GrainsConnect<br>GrainsConnect, Viterra<br>Fraser Grain Terminal,<br>G3 Vancouver, Fibreco<br>Ray-Mont<br>Logistics Richardson<br>Richardson<br>GrainsConnect<br>G3<br>P&H AGT Foods<br>Richardson<br>Announced new grain elevators<br>Completed new grain elevators<br>Waterfront export facilities<br>NEW GRAIN ELEVATORS BUILT ON CN LINE<br>CN average weekly grain tonnage shipped - Oct-Nov (000 metric tonnes)<br>Compound annual growth of CN fall grain shipment program outpacing<br>compound annual growth in Prairie crop production<br>!<br>"!!<br>#!!<br>$!!<br>%!!<br> &!!<br>'!!<br>(!!<br>)!!<br>!!!*+,-./0*-122,3<br>2007-08<br>2008-09<br>2009-10<br>2010-11<br>2011-12<br>2012-13<br>2013-14<br>2014-15<br>2015-16<br>2016-17<br>2017-18<br>2018-19<br>2019-20<br>2020-21<br>2021-22<br>2022-23<br>CN AVERAGE WEEKLY GRAIN TONNAGE SHIPPED DURING<br>OCTOBER–NOVEMBER<br>(000 metric tonnes per week)<br>800<br>700<br>600<br>500<br>400<br>300<br>200<br>100<br>0<br>Trend<br>Average tonnes shipped Drought<br>year<br>There has been a grain elevator construction boom in Western Canada<br>in recent years. These high-throughput elevators, many with loop<br>tracks, help get grain to market faster.<br>NEW GRAIN ELEVATORS BUILT ON CN LINE<br>Grain Supply Chain Handling More Grain During Peak Harvest Season<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 73 | |||||
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| Grain<br>in Review<br>SERVING THE GRAIN INDUSTRY’S RAPID GROWTH<br>Moving Grain from Origin to Destination<br>Our Western network offers export capacity through the ports<br>of Vancouver and Prince Rupert. Our transcontinental system<br>also offers the option of exporting eastward through ports in<br>Thunder Bay, Montreal or Quebec City. So, as grain yields<br>grow because of technology-enabled farming practices, and<br>our partners and CN invest to expand capacity, we have the<br>network that can move grain more effectively and efficiently<br>from origin to destination.<br>The peak demand period for grain movement in fall and<br>winter coincides with high demand for rail transportation from<br>other commodities, especially to the West Coast. When the<br>combined demand for rail movement from all customers in a<br>specific corridor exceeds capacity, CN can shift volumes to<br>another corridor, where capacity is available. For example,<br>the Eastern Canadian network represents an opportunity to<br>increase shipment volumes of grain and other commodities.<br>Since 2018, CN has taken delivery of 3,500 new-generation,<br>high-efficiency hopper cars, with plans to add more as part of<br>our fleet renewal program. Our new high-capacity hopper cars<br>each have 900 cubic feet more loading capacity and weigh less<br>than legacy cars, which means we can haul more grain per car.<br>Each car is also more than four feet shorter than the hopper<br>cars built in the 1970s and 1980s, which translates into being<br>able to spot an additional 8 to 10 cars on the same length of<br>track. More tonnes per car and more cars per train adds up to<br>20% to 40% more grain going to port per unit train.<br>Significant Optionality in the U.S.<br>In the U.S., our grain customers can ship to the Mississippi River<br>or to the Gulf, wherever their netback is highest. Our three-coast rail network allows customers producing ethanol and<br>building additional oilseed processing capacity to extend their<br>reach into the rapidly expanding renewable fuels market.<br>PICTURED:<br>A CN unit train being loaded<br>with grain at the Cargill<br>silos in Davidson, SK, before<br>starting its journey to market.<br>GRAIN AND FERTILIZERS<br>2 Markets Overview Markets Operations Financials<br>74 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| Supporting the Growth of Renewable Fuels<br>CN is a key player in the rapidly developing renewable fuels<br>market in North America. We transport seed to oilseed crush<br>plants, vegetable oil and other feedstocks to refineries, and<br>renewable fuels to end markets. CN has efficient and integrated<br>supply chain solutions to participate in the transportation of<br>raw materials and finished products for the renewables industry<br>in Canada and the U.S.<br>Canola oil and soybean oil are both important sources of<br>feedstock to support the dramatic expansion in renewable<br>fuels production in North America. New canola crush plants in<br>Western Canada and soybean crush projects in the U.S. are<br>coming online or being expanded. Growth in ethanol demand<br>on both sides of the border is also expected thanks to changes<br>in government fuel standards as well as the sustainable<br>aviation fuel market.<br>Regulatory Environment<br>Western Canadian export grain movements to port terminals<br>are subject to government regulation that determines a<br>maximum revenue entitlement. This is based on a formula<br>accounting for tonnage and length of haul as well as costs and<br>investments. Rates for shipments of grain exported to the U.S.,<br>or shipped within the Prairies or in other specific traffic lanes,<br>are not regulated.<br>Outlook<br>Improved agronomic practices and crop enhancements are<br>promoting continued crop yield increases in North America.<br>Ongoing investments by CN and our in-country and port<br>partners provide a very constructive backdrop for grain<br>shipments into the future. CN has taken steps to have the<br>resources in place to move the harvest over the course of<br>the 2023–2024 crop year.<br>Effective Planning is Key<br>to Delivering Grain<br>A critical element of our supply chain<br>collaboration model is open communication<br>and planning with all our stakeholders.<br>For example, CN collects input from grain<br>producers, grain-handling companies,<br>customers and government officials to<br>develop our CN Grain Plan, a comprehensive,<br>robust and focused action plan to deliver<br>the anticipated volume of grain. And, as we<br>are the most northerly Class I railroad<br>operating in North America, the challenges<br>of winter and its effects on rail transportation<br>are deeply ingrained in CN’s operations and<br>planning activities. Our CN Winter Plan sets<br>out the actions and innovations we have<br>implemented to ensure we meet the needs<br>of our customers and stakeholders during<br>the difficult winter months.<br>A comprehensive weekly report on<br>CN’s grain performance is also available.<br>www.cn.ca/en/your-industry/grain/<br>western-canadian-grain<br>Viterra Grain<br>Vegreville, AB<br> Watch the video to find out how the complex grain supply chain<br>operates, from the farm to vessels loading at ports, and learn more about the<br>many partners who play a critical role in keeping things running smoothly at:<br>www.cn.ca/pullingtogether<br>11,800<br>OWNED/OPERATED/LEASED GRAIN HOPPER CARS ON BULK<br>GRAIN SERVICE IN WESTERN CANADA IN FALL 2023<br>CN | 2023 INVESTOR FACT BOOK 75 | |||||
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| GRAIN AND FERTILIZERS<br>Fertilizers<br>in Review<br>COMMITTED TO OUR FERTILIZER CUSTOMERS<br>Positive Long-Term Fundamentals for Potash<br>Canada is the largest producer of potash and Saskatchewan<br>is the centre for Western Canadian production. CN serves<br>or has access to most of the major potash mines in<br>Saskatchewan. Most Canadian potash moves by rail to<br>markets in the U.S. or to ports for export to overseas markets.<br>CN reported record potash shipments through the Port<br>of Thunder Bay in 2022, as customers took advantage<br>of underutilized capacity in the Eastern Canada corridor.<br>Even during the COVID-19 pandemic, the potash industry<br>endured better than many others. Potash demand continues<br>to grow worldwide, and Canada has a strong competitive<br>position in global markets. Population growth and limited<br>farmland mean that crop yield improvements will play<br>a critical role in meeting the increasing demand for food<br>around the world, driving solid demand for fertilizers.<br>Our customers are investing to grow along with that demand.<br>Nutrien has invested to expand capacity in 2023 and the new<br>BHP potash mine is expected to come online in Saskatchewan<br>mid-decade, with construction on the connection to<br>CN underway.<br>Government of Saskatchewan incentives are expected to<br>promote further expansion of the province’s potash sector.<br>CN is poised to move more potash for decades to come.<br>Our tri-coastal North American network and tightly scheduled<br>operation position us to benefit from increases in production<br>through key ports to reach growth areas such as China, Brazil,<br>India and Southeast Asia.<br>PICTURED:<br>Potash train going through<br>Les Coteaux, QC, on its way<br>to the Port of Saint John, NB.<br>2 Markets Overview Markets Operations Financials<br>76 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| Regina<br>Saskatoon<br>Rocanville<br>Allan<br>Lanigan<br>Jansen<br>Vanscoy<br>Belle Plaine<br>Colonsay<br>Esterhazy<br>Cory Patience Lake<br>+2.7% CAGR<br>INCREASE IN GLOBAL POTASH DEMAND SINCE 2018<br>CN Continues to Grow with Canpotex<br>Most Canadian export volumes of potash are sold through<br>Canpotex. CN is an integral part of Canpotex’s supply<br>chain and, as their share of the global potash market grows,<br>we have been able to increase our market share with them.<br>All Canpotex’s exports used to be shipped through<br>just two terminals: Vancouver, BC (170-car unit trains), and<br>Portland, OR (130-car unit trains). As these terminals ran<br>into capacity constraints and to provide Canpotex with<br>additional flexibility, CN worked with them to develop the<br>Port of Saint John, NB, as a third export terminal.<br>Access to Saint John provides Canpotex with a competitive<br>advantage into Brazil, one of the fastest growing fertilizer<br>regions in the world. And CN had already invested to<br>implement long-train operations in Eastern Canada by<br>doubling the length of some rail sidings from 6,000 to<br>12,000 feet, acquiring new high-horsepower locomotives,<br>and expanding the use of distributed power. By leveraging<br>available capacity in Eastern Canada and coordinating<br>with the Port of Saint John, CN runs 205-car unit trains at<br>30,000 tonnes from Saskatchewan to the East Coast.<br>At 1.5 MMT, 2022 was a record year for potash shipments<br>to Saint John.<br>Neptune Terminal on the Port of Vancouver’s North Shore<br>has increased potash capacity from 6 MMT to 11.5 MMT,<br>and CN has applied the 205-unit-train model to Vancouver,<br>allowing Neptune to process more tonnage per train. CN’s<br>ongoing investments in Western Canada support this new<br>export capacity.<br>Outlook<br>CN is a leader in shipping nitrogen, phosphate and potash<br>fertilizers from Canada and the U.S. to global agricultural<br>markets. Over the last two decades, Canada has seen a<br>steady increase in potash exports, with 2019 seeing an all-time<br>high. This trend is expected to continue over the foreseeable<br>future due to growing populations and the need for more<br>food, notably in India, China and Brazil.<br>In addition, Canada's access to vast potash reserves and its<br>commitment to sustainability make it an attractive option for<br>global buyers. Furthermore, supply from Russia and Belarus,<br>the world’s second- and third-largest producers, respectively,<br>could continue to be disrupted by ongoing sanctions. As a<br>result, demand for North American potash is forecast to<br>persist and CN expects to be able to maintain its position as<br>a leading transporter of potash.<br>Potash Production Continues to Grow<br>As an important plant nutrient, potash is a key ingredient<br>to improve crop quality and increase food production.<br>Potential new producers in Canada continue with their<br>development plans, keeping in mind the rising global demand<br>for potash attributable to such factors as population growth,<br>urbanization and technological advances. As a result, the<br>long-term prospects for Canadian potash are favourable.<br>P Existing Potash Mines<br>P Potential New Potash Mines<br>SASKATCHEWAN POTASH MINES<br>CN | 2023 INVESTOR FACT BOOK 77 | |||||
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| COAL<br>Integrated with Our Customers<br>We coordinate with our customers to improve visibility<br>of the entire move with common metrics and integrate our<br>services into their supply chain operations. All parties<br>continually share information to understand and optimize<br>performance, including scheduling railcar supply, planning<br>vessel loading, and managing the supply chain from mine<br>to end consumer to avoid pinch points.<br>High-Quality Canadian Coal<br>In an ever-evolving global marketplace with increasing<br>environmental regulation, coal quality is becoming an<br>important factor for end users. Fewer impurities and lower<br>sulfur content are keeping Canadian coal in demand. Almost<br>two-thirds of the coal transported by CN is metallurgical<br>coal used in steelmaking in Asia. CN is moving significant<br>added volumes of metallurgical coal from Teck’s four<br>mines near Kamloops, BC. CN invested over $125 million<br>to strengthen its rail network between Kamloops and<br>Vancouver to handle the heavier traffic.<br>Neptune Terminals at the Port of Vancouver has made<br>improvements to its metallurgical coal-handling operations,<br>including a new train dumper building and new conveyors<br>as well as a modern ship loader. The upgrades have<br>increased throughput capacity from 12.5 MMT to 18.5 MMT,<br>or the equivalent of one additional unit train per day.<br>U.S. Serves Two Distinct Markets<br>CN provides the only direct unit train service from Illinois Basin<br>mines to the rail-served Gulf Coast coal terminals (Convent, LA,<br>and Mobile, AL), which continue to grow exports to Africa,<br>Asia and Europe. These terminals, equipped with loop tracks to<br>unload unit trains, can receive up to 20 million tons of export<br>thermal coal annually. CN also handles over 10 million tons of<br>domestic thermal coal annually from the Powder River Basin to<br>coal-fired power plants in the U.S. Midwest and Southwest.<br>Outlook<br>Our coal business is steady due to market share gains and<br>increased production at our customers’ mines. Continuing<br>global modernization is driving the demand for steel and<br>energy, especially in Asia. High-quality Canadian coal has a<br>strong position in the export market and CN’s franchise is set<br>to take advantage. However, U.S. domestic coal continues<br>to face challenges from low natural gas prices, lower-carbon<br>alternatives, and environmental regulations. Opportunities<br>exist to grow metallurgical coal exports from Canada through<br>Convent Terminal in Louisiana as producers favour the<br>higher-priced export market.<br>FOSTERING RELIABLY EFFICIENT COAL SUPPLY CHAINS<br>At CN, we work closely with the end-to-end coal supply chain —<br>from mine to export terminal — to understand every detail<br>of our customers’ shipments, adapting services to focus on the<br>entire movement. By leveraging our multiple coal export<br>outlets, we have provided consistency and resiliency for our<br>customers, which has strengthened their reputation as<br>reliable world-class suppliers of coal.<br>Neptune Terminal at the Port of<br>Vancouver, one of six export terminals<br>for coal CN serves.<br>Overview Overview Markets Markets Operations Operations Financials Financials<br>2 Markets - Bulk Products - Coal<br>222 Markets Markets<br>78 CN | 2023 INVESTOR FACT BOOK | |||||
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| 661 658<br>527<br>618<br>937<br>REVENUES<br>($ millions)<br>2018 2019 2020 2021 2022<br>346 335<br>289<br>379<br>503<br>CARLOADS<br>(thousands)<br>2018 2019 2020 2021 2022<br> 17,927 17,653<br>16,173<br> 18,471<br>22,679<br>RTMs<br>(millions)<br>2018 2019 2020 2021 2022<br>3.69 3.73<br>3.26 3.35<br>4.13<br>FREIGHT REVENUE<br>PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>KEY FACTS<br> • Canadian coal consists mainly of metallurgical coal<br>destined for steelmaking plants in Asia. Some thermal<br>coal is transported to powerplants in the U.S.<br> • U.S. thermal coal is shipped domestically to powerplants<br>in the Midwest and Southeast as well as to export<br>terminals in Convent, LA, and Mobile, AL.<br> • CN moves an average of 37 MMT of coal per year,<br>representing about 5% of CN revenues.<br>COMMODITIES<br> • Grades of bituminous<br>coal from thermal to<br>metallurgical<br> • Metallurgical coke<br> • Petroleum coke<br>MARKET DRIVERS<br> • Weather<br> • Environmental regulations<br> • Global supply/demand<br>conditions<br> • U.S. and global demand<br>for energy and steel<br> • Price of natural gas<br>$937M<br>2022 REVENUES<br>BUSINESS UNIT OVERVIEW AND MARKET DRIVERS<br>W 54% Canadian Coal – Export<br>W 20% Petroleum Coke<br>W 14% U.S. Coal – Export<br>W 12% U.S. Coal – Domestic<br>2022 COMMODITY BREAKDOWN<br>(% of revenues)<br>+9.1% +9.8% +6.1% +2.9%<br>CAGR ( 2022 vs. 2018)<br>395 miles AVERAGE LENGTH OF HAUL (2022)<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 79 | |||||
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| East<br>Dubuque<br>Grand Rivers<br>Calvert City<br>Metropolis Mound City<br>Lloydminster<br>Kamloops<br>Fort McMurray<br>East St. Louis<br>Sarnia<br>Baton Rouge<br>Regina<br>Prince George<br>Joliet<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg Moncton<br>Calgary<br>CN HAS A SUPPLY CHAIN ADVANTAGE WITH EXCLUSIVE ACCESS<br>TO TRIGON AT THE PORT OF PRINCE RUPERT<br>1-3 days faster to Asia<br>CN’S ACCESS TO HIGH-CAPACITY EXPORT TERMINALS CREATES<br>DIRECT LINKS FOR OUR CUSTOMERS<br>6 export terminals<br>CN is the only railway to serve all three Canadian<br>coal export terminals on the West Coast: Westshore,<br>Neptune and Trigon.<br>CN provides single-line access from coal mines in<br>the U.S. Midwest to domestic powerplants and export<br>terminals on the Gulf Coast.<br>Our dedicated Bulk Operations service group works<br>with all supply chain partners to manage inventories at<br>mines and terminals, including coordination to meet<br>vessel schedules.<br>Key Advantages 2022 Overview<br>CONNECTING GLOBAL MARKETS<br>CN is the only railway in North America<br>linking Western Canadian and U.S. Midwest<br>coal mines with direct access to multiple<br>coal export terminals on the West Coast<br>and the Gulf of Mexico, enabling coal<br>producers to better serve both the Asian<br>and European markets.<br>Canadian coal<br>U.S. coal<br>Petroleum coke<br>Ports served by CN<br>P Coal mines<br>P Petroleum coke sourcing<br>P Barge transload terminals<br>E Export terminals<br>CN’S COAL SUPPLY CHAIN<br>Supply Chain<br>at a Glance<br>COAL<br>CN-SERVED COAL MINES IN CANADA<br>CN-SERVED MAIN COAL EXPORT TERMINALS<br>Company/Mine Type Status<br>(Million Metric<br>Tonnes)<br>Coalspur: Vista Thermal Operating 12.0 (3)<br>Teck: Elkview Metallurgical Operating 9.0<br>Teck: Fording River Metallurgical Operating 9.0<br>Teck: Greenhills Metallurgical Operating 5.4<br>Conuma: Quintette Metallurgical Idle 4.0<br>Teck: Line Creek Metallurgical Operating 4.0<br>Westmoreland: Coal Valley Thermal Operating 4.0<br>Conuma: Brule Metallurgical Operating 2.5<br>CST Canada: Grande Cache Coal Metallurgical Operating 2.0<br>Conuma: Wolverine Metallurgical Operating 1.7<br>Anglo American: Trend Metallurgical Idle 1.5<br>Conuma: Willow Creek Metallurgical Operating 1.5<br>(3) Includes potential expansion currently under Federal review.<br>Terminal Capacity 2022<br>Westshore Terminal – Vancouver, BC 35.0 (1)<br>McDuffie Coal Terminal – Mobile, AL 30.0 (2)<br>Trigon Terminal – Prince Rupert, BC 18.0 (1)<br>Convent Terminal – Convent, LA 15.0 (2)<br>Neptune Terminal – Vancouver, BC 12.5 (1)<br>Thunder Bay Terminal – Thunder Bay, ON 11.0 (1)<br>(1) Million metric tonnes (2) Million short tons<br>Estimated Capacity<br>2 Markets Overview Markets Operations Financials<br>80 CN | 2023 INVESTOR FACT BOOK | |||||
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| East<br>Dubuque<br>Grand Rivers<br>Calvert City<br>Metropolis Mound City<br>Lloydminster<br>Kamloops<br>Fort McMurray<br>East St. Louis<br>Sarnia<br>Baton Rouge<br>Regina<br>Prince George<br>Joliet<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg Moncton<br>Calgary<br>Petroleum Coke:<br>Demand Drives<br>Export Growth<br>Petroleum coke is a byproduct of<br>the oil refining process and is used<br>as a high-energy, cost-efficient fuel<br>in the cement, smelting and power<br>generation industries. Economic<br>growth in developing markets is<br>driving up demand for petroleum coke.<br>North American production is on the<br>rise because of ongoing increased use<br>of heavy crude slates by refineries.<br>CN carries petroleum coke from<br>refineries to domestic and export<br>markets. In recent years, CN has<br>tripled carloads of petroleum coke<br>by targeting export terminals with<br>the ability to receive petroleum<br>coke by rail.<br>For more information, please visit www.cn.ca/your-industry/coal<br>CN serves ten metallurgical coal mines in<br>Western Canada with primary flows to<br>steel mills in Asia.<br>CN | 2023 INVESTOR FACT BOOK 81 | |||||
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| STRONG DOMESTIC AND EXPORT FRANCHISE<br>CN is a true supply chain enabler, connecting petroleum and<br>chemicals producers in the Alberta Industrial Heartland, the<br>Louisiana Petrochemical Corridor, and Sarnia's “Chemical Valley,”<br>among others, with their suppliers and markets via a safe and<br>flexible alternative to pipelines.<br>Facilitating Efficient Supply Chains<br>Alberta is Canada's largest hub for petrochemical production and refining.<br>There are 36 petrochemical manufacturers currently operating in central Alberta,<br>85% of which are located on CN’s rail lines. CN directly serves all the top shale<br>plays in Canada, including the Western Canada Sedimentary Basin. Large volumes<br>of natural gas liquids (NGL) produced from improved fracking technologies and<br>processes provide cheap feedstocks to many petrochemical manufacturers. We<br>also serve the key petrochemical hubs in Louisiana and Southwestern Ontario.<br>Capital investments in our main corridors to ports we serve in Prince Rupert,<br>Vancouver and Mobile — coupled with customer investments in their own<br>facilities — promote free-flowing and efficient supply chains. As a result, CN is<br>a strategic partner helping customers compete on a global scale.<br>The two propane export terminals at the Port of Prince Rupert (AltaGas and<br>Pembina) are exclusively served by CN. The successful opening of these export<br>facilities provides our customers with an outlet to overseas markets that may offer<br>a better netback at any given time. In fact, AltaGas and Vopak recently announced<br>a joint venture to build a large liquids terminal at Prince Rupert.<br>The Petroleum and Chemicals commodity group is developing a business model<br>to encourage the aggregation of distribution facilities into centralized terminals<br>that reduce the industry’s overall GHG emissions. For example, CN and Keyera<br>have agreed to leverage our joint expertise to develop the Alberta Clean Energy<br>(ACE) terminal to aggregate clean energy products such as hydrogen, biodiesel<br>and renewable jet fuel for transport to markets across North America and around<br>the world.<br>PETROLEUM AND CHEMICALS<br>The global demand<br>for secure, clean<br>energy continues to<br>drive growth along<br>our energy corridors.<br>(see pages 90–91)<br>Decoigne, AB<br>Photo by CN Employee, Tim Stevens<br>Overview Markets Operations Financials<br>2 Markets - Petroleum and Chemicals<br>2 Markets<br>82 CN | 2023 INVESTOR FACT BOOK | |||||
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| PETROLEUM<br>CN’s Petroleum business comprises<br>a wide range of commodities,<br>including refined petroleum products<br>(e.g., gasoline, diesel, jet fuel), crude<br>oil, and natural gas liquids such<br>as propane. The performance of this<br>commodity group is closely correlated<br>with the North American and global<br>economies as well as oil and gas<br>production. Most of CN’s petroleum<br>shipments originate in the Alberta<br>Industrial Heartland, a key oil and gas<br>development area. CN also supplements<br>pipeline capacity by moving refined<br>petroleum products from facilities in<br>Ontario, Illinois and Louisiana.<br>AltaGas, Prince Rupert, BC<br>CN’s Chemicals business includes a<br>wide variety of petrochemicals, plastics,<br>and sulfur. The performance of this<br>group is closely correlated with the<br>price of North American natural gas<br>feedstocks as well as global demand<br>from the automotive, construction<br>and packaging sectors. Most of CN’s<br>chemicals shipments originate in the<br>Alberta Industrial Heartland, a major<br>centre for natural gas feedstock and<br>world-scale petrochemicals and<br>plastics. We also serve the Louisiana<br>petrochemical corridor between<br>New Orleans and Baton Rouge as well<br>as Sarnia’s “Chemical Valley” in<br>Southwestern Ontario.<br>CHEMICALS<br>CN unit train en route from Sarnia's<br>"Chemical Valley" near Paris, ON.<br>Photo from CN Employee, Chris Wilson<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 83 | |||||
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| Network Reach and Capacity<br>Natural gas and crude oil are the building blocks of the<br>petrochemical industry. CN’s geographical footprint allows<br>our customers access to three major North American<br>petrochemical hubs in Alberta, Louisiana and Ontario.<br>Additionally, our access to state-of-the-art export terminals<br>on the Pacific Coast and the U.S. Gulf of Mexico position<br>our customers’ products to compete on a global scale.<br>This efficient supply chain also allows CN to support North<br>America’s new clean energy evolution.<br>CN’s access to export capacity through the Canadian<br>West Coast and U.S. Gulf Coast ports we serve, as well as<br>available East Coast capacity, allows us to help our customers<br>stay competitive in their markets. In addition, our extensive<br>reach provides customers with the ability to use a single<br>rail carrier from origin to destination. Finally, our CargoFlo®<br>network enables first/last mile delivery to/from non-rail-served customers.<br>Simple Approach, Dependable Results<br>Our approach is simple: to go beyond offering safe and<br>rapid transportation from origin to destination by providing<br>value to our customers through integration of our services<br>with theirs. For instance, enhanced communications between<br>our conductors and customers allows customers to have<br>more cars ready to ship when CN crews arrive.<br>We also help our customers be more efficient and improve<br>their operations to meet the demands of their end markets.<br>Our supply chain approach allows us to share best practices,<br>encourage aggregation, and ensure safer, more efficient<br>operations at our customer sites.<br>CN continues to make significant investments between<br>Edmonton and West Coast ports to build more capacity<br>where our network is experiencing the most volume growth<br>and to convert more truck traffic to rail.<br>Our Customers Continue to Invest<br>AltaGas and Vopak recently announced a joint venture to<br>build a terminal for liquified petroleum gas (LPG) and other<br>liquids in Prince Rupert. We also signed a long-term agreement<br>with a major LPG exporter out of northeastern BC and east<br>of Edmonton to the ports of Prince Rupert and Ferndale, WA.<br>As significant gas supply continues to come online from<br>drilling in northeastern BC, we expect to see announcements<br>of plant de-bottlenecking projects across Alberta in the next<br>three years. As evidence, Pembina recently announced a new<br>propane fractionator expansion at their Redwater facility.<br>This facility is forecast to add about 55,000 barrels per day<br>of propane and butane by 2026. We continue to work with<br>midstream producers to ensure our capacity is in lockstep<br>with their plant capacity.<br>PETROLEUM AND CHEMICALS<br>Overview(cont.)<br>CN offers a safe and<br>complementary service to<br>pipelines, providing customers<br>with greater market reach<br>and scalability.<br>222 Markets Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>84 CN | 2023 INVESTOR FACT BOOK | |||||
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| 2,660<br>3,052<br>2,631 2,816<br>3,229<br>REVENUES<br>($ millions)<br>2018 2019 2020 2021 2022<br>653 688<br>597 596 636<br>CARLOADS<br>(thousands)<br>2018 2019 2020 2021 2022<br> 50,722<br>53,989<br>43,556 42,436<br>46,273<br>RTMs<br>(millions)<br>2018 2019 2020 2021 2022<br>5.24 5.65 6.04<br>6.64 6.98<br>FREIGHT REVENUE<br>PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>KEY FACTS<br> • Serves three key petrochemical hubs<br>in North America: Alberta, Louisiana<br>and Ontario<br> • Handles over 50% of all Canadian<br>chemicals production<br> • Petroleum and chemicals shipments<br>move in customer-supplied private cars<br> • Export of propane and plastics<br>broadens customer access to<br>international markets<br>COMMODITIES<br>PETROLEUM PRODUCTS<br> • Propane, butane, crude oil, gasoline,<br>diesel, jet fuel, fuel oil, lubricants,<br>asphalt, condensate<br>CHEMICALS AND PLASTICS<br> • Polyethylene, polyvinyl chloride<br>(PVC), caustic soda, sulfuric acid,<br>pulp mill chemicals<br>SULFUR<br> • Molten and prilled sulfur<br>MARKET DRIVERS<br> • North American and international<br>economic growth<br> • Demand for plastics<br> • Chemicals and plastics feedstock prices<br> • North American liquified natural gas<br>(LNG) production<br> • Demand for propane for heating and<br>crop drying (weather-related)<br> • North American hydrogen production<br> • Investment in clean energy<br>$3,229M<br>2022 REVENUES<br>BUSINESS UNIT OVERVIEW AND MARKET DRIVERS<br>W 45% Refined Petroleum Products<br>W 37% Chemicals and Plastics<br>W 13% Crude and Condensate<br>W 5% Sulfur<br>2022 COMMODITY BREAKDOWN<br>(% of revenues)<br>+5.0 % -0.7% -2.3% +7.4%<br>CAGR ( 2022 vs. 2018)<br>830 miles AVERAGE LENGTH OF HAUL (2022)<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 85 | |||||
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| Scotford<br>Flat Rock<br>Hamilton<br>Ferndale, WA<br>Mont Belvieu, TX<br>Blue Hills<br>North<br>Vancouver<br>Kamloops<br>Hay River<br>Fort McMurray<br>Sarnia<br>Baton Rouge<br>Regina<br>Prince George<br>Joliet<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>Calgary<br>Moncton<br>DISTRIBUTION FACILITIES STRATEGICALLY LOCATED ON<br>OUR NETWORK FOR TRANSFER AND BAGGING OF BULK<br>COMMODITIES LIKE PLASTIC PELLETS<br>20 CargoFlo®<br>OF THE CANADIAN PETROCHEMICAL INDUSTRY IS<br>DIRECTLY SERVED BY CN<br>85%<br>CN provides producers with single line access to<br>refineries in Eastern Canada as well as the U.S. Midwest<br>and Gulf Coast.<br>CN’s access to three coasts and numerous ports<br>with available import/export capacity facilitates<br>international supply chains.<br>CN’s loop track around the heavily congested<br>Chicago rail network provides a 24-to-48-hour<br>advantage compared to other railroads.<br>Key Advantages<br>CN’S REACH BENEFITS OUR CUSTOMERS<br>CN serves the North American petrochemical<br>industry. We are a true supply chain enabler,<br>connecting petroleum and chemicals producers<br>in Alberta, Louisiana and Ontario with their<br>suppliers and markets, including overseas<br>through export terminals in Prince Rupert,<br>Vancouver, Mobile, and Eastern Canada.<br>Supply Chain<br>at a Glance<br>PETROLEUM AND CHEMICALS<br>Petroleum<br>Chemicals<br> and plastics<br>Sulfur<br> Natural gas liquids<br>Ports served by CN<br>P CargoFlo®<br>P Propane export facility<br>P Petrochemical facility<br>P Petrochemical hub<br> Shale play<br>CN’S PETROLEUM AND CHEMICALS SUPPLY CHAIN<br>2 Markets Overview Markets Operations Financials<br>86 CN | 2023 INVESTOR FACT BOOK | |||||
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| Scotford<br>Flat Rock<br>Hamilton<br>Ferndale, WA<br>Mont Belvieu, TX<br>Blue Hills<br>North<br>Vancouver<br>Kamloops<br>Hay River<br>Fort McMurray<br>Sarnia<br>Baton Rouge<br>Regina<br>Prince George<br>Joliet<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>Calgary<br>Moncton<br>Export Opportunities at<br>the Port of Prince Rupert<br>Dredging has begun on Trigon’s Berth 2<br>Beyond Carbon (B2BC) project, which is<br>planned to nearly double terminal capacity<br>and help connect clean energy exporters to<br>global markets. B2BC will handle hydrogen-as-ammonia, biofuels, methanol, ethanol,<br>and liquefied petroleum gas (LPG).<br>Vopak has received environmental approval<br>for its bulk liquids terminal on Ridley Island.<br>The terminal will provide much-needed<br>tidewater access for LPG, diesel, gasoline and<br>methanol. At full capacity, the terminal will<br>be able to handle 240 railcars daily.<br>The Ridley Island Export Logistics Platform<br>will transload bulk commodities such as<br>plastic pellets into containers for export. The<br>platform is designed to be able to transload<br>400,000 TEUs annually, with the potential to<br>increase to 750,000 TEUs.<br>For more information, please visit www.cn.ca/your-industry/petroleum-chemicals<br>13<br>14<br>2<br>19<br>20<br>11<br>12<br>8<br>8<br>10<br>15<br>18<br>16<br>17 9<br>6 4<br>3<br>2<br>4<br>5<br>1<br>7 5<br>ALBERTA’S INDUSTRIAL<br>HEARTLAND – Scotford, AB<br>CN line<br>Major roads<br>Existing<br>and<br>Proposed<br>Facilities<br>CN<br>Scotford Yard<br>Heartland Boundary<br>(also includes<br>Edmonton)<br>North<br>Saskatchewan<br>River<br>1 Sherritt<br>2 Nutrien<br>3 Dow Chemicals<br>4 Keyera<br>5 Plains Midstream<br>6 AltaGas<br>7 Inter Pipeline<br>8 Pembina<br>9 Suncor<br>10 ATCO<br>11 Shell<br>12 Wolf Midstream<br>13 Evonik Canada<br>14 North West Redwater<br>15 Heartland Sulphur<br>16 Gibson Energy<br>17 TransCanada<br>18 Enbridge<br>19 Cenovus<br>20 MEG Energy<br>1 Sherritt 8 Pembina 15 Heartland Sulphur<br>2 Nutrien 9 Suncor 16 Gibson Energy<br>3 Dow Chemicals 10 ATCO 17 TransCanada<br>4 Keyera 11 Shell 18 Enbridge<br>5 Plains Midstream 12 Wolf Midstream 19 Cenovus<br>6 AltaGas 13 Evonik Canada 20 MEG Energy<br>7 Inter Pipeline 14 North West Redwater<br>CN'S HEARTLAND ADVANTAGE<br>Direct Access<br>TO OVER 20 COMPANIES WITHIN ALBERTA'S INDUSTRIAL<br>HEARTLAND ON CN'S NETWORK<br>CN | 2023 INVESTOR FACT BOOK 87 | |||||
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| CN IS AN IMPORTANT LINK IN THE PETROLEUM SUPPLY CHAIN<br>PETROLEUM AND CHEMICALS<br>New Supply Chains for Export<br>The Canadian West Coast continues to see significant<br>natural gas liquids (NGL) exports to Japan and Korea. Three<br>years ago, we were averaging 34,000 carloads of NGL exports<br>through the Port of Prince Rupert. In 2023, we are on target<br>to deliver more than 55,000 carloads of NGL exports, an over<br>60% increase.<br>Our export propane program also continues to gain<br>momentum. Working with our partners at the Port of Prince<br>Rupert, CN moved over 10,000 railcars in Q4 2022 to<br>support Canada’s growing energy export market, an increase<br>of 17% over Q4 2021. AltaGas’ propane export terminal on<br>Ridley Island and Pembina’s propane export facility on<br>Watson Island are in line with their operating targets of<br>50,000 and 20,000 barrels per day, respectively.<br>These facilities provide quick and easy access to Asian<br>markets for Western Canadian propane, giving our customers<br>the option of serving either the domestic or export market,<br>depending on which provides better prices at the time.<br>Investment Drives Growth<br>CN’s capital investments in key NGL corridors, coupled with<br>customer investments in their terminals in and around the<br>Edmonton area, allow CN to provide a balanced flow of loaded<br>railcars for delivery and empty railcars for our customers to<br>reload. Methane, ethane, ethylene and propane (among others)<br>are some of the petrochemicals used in the Alberta Industrial<br>Heartland as chemical ingredients for manufacturing. Other,<br>less carbon-intensive, products are also being developed in the<br>Heartland, including biodiesel and other renewable fuels, glycol,<br>blue methanol, and blue ammonia used for carbon-capture<br>processes in Asia.<br>PICTURED:<br>CN provides Western<br>Canadian propane access<br>to Asian markets through<br>propane terminal partnerships,<br>such as the Pembina terminal<br>in Prince Rupert, BC.<br>Petroleum<br>in Review<br>55,000 carloads<br>CN IS ON TRACK TO DELIVER MORE THAN 55,000<br>CARLOADS OF NGL TO EXPORT TERMINALS AT THE<br>PORT OF PRINCE RUPERT IN 2023<br>Over<br>2 Markets Overview Markets Operations Financials<br>88 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| CN Is Also Strong in the East and South<br>In addition to the direct access to NGL fractionation capacity<br>in Edmonton, CN also has a strong origination franchise<br>at facilities in Sarnia, ON, East Morris, IL, and Geismar, LA,<br>generating additional product that must move by rail due<br>to the lack of pipeline capacity. CN is also capturing growth<br>in refined petroleum products in the Greater Toronto Area<br>with five active terminals on CN producing multi-commodity<br>opportunities (e.g., gasoline, diesel, jet fuel, lubricants,<br>benzene, toluene, xylene and biofuels).<br>Crude-by-Rail<br>CN works with all shippers to build incremental capacity for<br>crude-by-rail through long-term contracts and by promoting<br>diluent recovery units (DRUs). Through our vast system of rail<br>terminals, we provide over 100,000 barrels per day of safe<br>loading capacity to Western Canadian undiluted heavy crude<br>oil and diluted bitumen (dilbit) producers. Approximately<br>50% of CN’s crude oil traffic consists of undiluted heavy crude,<br>which is less sensitive to pipeline capacity and differentials.<br>CN’s network directly overlays the Peace River, Athabasca<br>and Cold Lake production areas, enabling us to provide<br>producers with single-line access to refineries in Eastern<br>Canada, the U.S. Midwest and Gulf Coast as well as export<br>terminals in Louisiana. In addition, with CN’s interconnections<br>with other Class I railroads, CN customers can access the<br>Pacific Northwest, Texas and the Eastern seaboard, where<br>current pipeline infrastructure is limited.<br>Outlook<br>CN is ready to handle Western Canada’s energy growth,<br>from propane export facilities in Prince Rupert to drilling and<br>fracking in NGL-rich areas in Alberta and British Columbia.<br>CN is working with crude producers to remove costs from the<br>supply chain through the development of DRUs, which increase<br>rail capacity to transport safely. We expect our propane export<br>program to continue to grow as additional drilling and gas<br>processing takes place in advance of the new LNG Canada<br>plant coming online in 2025.<br>Growing Is Easier with<br>the Right Partner<br>CN's unique access to three major<br>petrochemical hubs allows our customers<br>to access their feedstocks and get their<br>products to end markets with a single<br>rail carrier. Our Certified Rail-Ready Site<br>program makes it easier for customers<br>to find a suitable development location.<br>Each industrial site is strategically situated<br>along CN’s network and guaranteed to<br>be rail accessible and ready to build on.<br>Each property has been rigorously<br>evaluated by a third party using stringent<br>criteria, including zoning, electricity,<br>gas, water, sewage, telecom, highways,<br>and environmental assessment. This<br>approach reduces development risk<br>and time, enabling customers to start<br>shipping sooner.<br>CN’s rail-ready sites suitable for<br>petrochemical projects include two in<br>Fort Saskatchewan, the gateway to the<br>Alberta Industrial Heartland, as well<br>as Edson, AB, Grande Prairie, AB, and<br>Long Sault, ON.<br>CN | 2023 INVESTOR FACT BOOK 89 | |||||
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| Key Player in Renewable Fuels<br>Canada is a competitive player in the growing global<br>sustainable renewable fuels market, and renewable fuels<br>are expected to be a large driver of growth. CN is the only<br>railroad that directly serves the refining hubs in Western<br>Canada, Eastern Canada, the U.S. Gulf Coast and the U.S.<br>Midwest. As such, CN is a key player in the renewable fuels<br>market in North America. We transport raw materials to<br>processing plants and refineries, and the renewable fuels they<br>produce to end markets. CN is also testing green propulsion<br>technologies, such as biodiesel and renewable diesel, for<br>use in our locomotives to help improve fuel efficiency and<br>achieve our carbon-reduction targets.<br>Accelerating CN’s Fuels Strategy<br>CN is building a high-throughput fuel distribution centre<br>in the heart of the Greater Toronto Area at MacMillan Yard.<br>The new rail facility will receive imported lower-carbon fuels<br>like sustainable aviation fuel, lower-CI ethanol, and renewable<br>diesel from around the world for delivery throughout Ontario.<br>The new rail terminal will not only help with the shortage of<br>fuel in Ontario anticipated over the next three years, it will<br>also help with the transition to cleaner fuels. CN also plans to<br>use this new supply chain for our own stock of renewable fuel<br>for our locomotives. We expect this new terminal to extend<br>CN’s already leading share of the fuel market.<br>LEADING THE ENERGY TRANSITION<br>PETROLEUM AND CHEMICALS<br>Spotlight<br>Part of the Climate Solution<br>Rail is a safe and sustainable way to move goods and part of the climate solution. Since<br>trains are up to four times more fuel efficient than trucks, aggregating transportation<br>into centralized hubs and leveraging rail for the long haul supports our customers’ efforts<br>to reduce their overall supply chain GHG emissions by up to 75%. CN trains consume<br>approximately 15% less locomotive fuel per gross ton mile than the industry average.<br>CN uses<br>~15%<br>LESS LOCOMOTIVE<br>FUEL PER GROSS<br>TON MILE THAN THE<br>INDUSTRY AVERAGE<br>2 Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>90 CN | 2023 INVESTOR FACT BOOK | |||||
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| Keyera<br>Josephburg<br>Terminal<br>Highway 15<br>CN<br>Land<br>Keyera<br>Josephburg<br>Land<br>Keyera/CN<br>ACE<br>Terminal<br>CN Scotford Yard<br>CN line<br> Proposed road<br> upgrades<br>PICTURED:<br>CN and our partner AltaGas are<br>well positioned to participate in<br>the transition to renewable and<br>lower-carbon fuels.<br>Alberta Clean Energy: A Partnership for Growth<br>Part of CN’s sustainable business model involves the<br>aggregation of distribution facilities into centralized hubs<br>that reduce the industry’s overall GHG emissions and<br>operating costs. An example of this strategy is the<br>Alberta Clean Energy (ACE) terminal.<br>CN and Keyera, a Canadian energy infrastructure business,<br>plan to leverage our joint expertise to develop the most<br>efficient rail logistics solution in the Alberta Industrial<br>Heartland. ACE aims to aggregate natural gas liquids along<br>with clean energy products such as biodiesel, hydrogenation-derived renewable diesel (HDRD), hydrogen, and renewable<br>jet fuel from multiple sources for transport to markets<br>across North America and around the world.<br>Over the next 10 years, as many as nine new plants are<br>planned to be built in the Alberta Industrial Heartland,<br>with the potential to be tightly connected to ACE. By<br>steering the aggregation of commodities into one central<br>rail loading terminal, CN expects to be able to move more<br>goods with fewer assets at no incremental cost.<br>By working together with our customers and supply chain<br>partners, CN is a key player in the rapidly developing renewable<br>fuels market in North America.<br>CN | 2023 INVESTOR FACT BOOK 91 | |||||
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| PETROLEUM AND CHEMICALS<br>Plastics<br>in Review<br>GETTING OUR CUSTOMERS’ PRODUCTS TO MARKET<br>Cheap Feedstock Fuels Demand<br>With low natural gas prices and increased demand for plastics from the automotive,<br>construction and packaging sectors, investments are being made to plastics<br>plants to improve productivity. We work closely with our partners, from the Alberta<br>Heartland to the Louisiana petrochemical corridor, to deliver required capacity.<br>Our strategically located CargoFlo® facilities provide flexible transload options to<br>our customers, combining the economic and environmental benefits of long-haul<br>rail service with the flexibility of short-haul truck delivery.<br>Export Opportunities for Plastics<br>Increased bulk handling infrastructure on CN is facilitating overall plastic pellet and<br>resin handling capacity. Ray-Mont Logistics’ transload facility at the Port of Prince<br>Rupert is capable of handling unit trains of plastic pellet hoppers to bag and stuff<br>containers for export to Asia. The Ridley Island Export Logistics Platform will create<br>a facility for transloading bulk commodities such as plastic pellets into containers<br>for export. The platform is designed to have annual export capacity of 400,000<br>TEUs, with the potential to increase to 750,000 TEUs.<br>In 2022, NOVA Chemicals in Sarnia, ON, completed a five-year project to build<br>a new plant with a capacity to produce approximately one billion pounds of<br>polyethylene plastic a year. It uses ethylene Nova produces from NGL at its Corunna<br>site, and the project expanded that site’s capacity by more than 50%.<br>In collaboration with the Alabama Export Railroad and Ray-Mont Logistics, CN is<br>developing a high-tech logistics park in Mobile, AL. The first phase of the project<br>is a facility for bagging and containerizing plastic pellets with an annual capacity<br>of 25,000 TEUs. The facility is expected to provide customers with extensive export<br>capacity to Asian, Latin American and European markets, while reducing<br>warehousing and handling costs.<br>PICTURED:<br>Above: CN Marketing<br>Director Benoit Lachance<br>with plastic pellets at the<br>Ray-Mont Logistics transload<br>facility in Montreal, QC.<br>Right: Ray-Mont Logistics’<br>facility at the Port of Prince<br>Rupert, BC, where plastic<br>pellets are transloaded from<br>hoppers into international<br>containers for export to Asia.<br>SPOTLIGHT<br>Circular Economy<br>of Plastics<br>CN plays an important role in the<br>circular economy of plastics,<br>where plastics are transformed<br>within a closed-loop system rather<br>than being discarded after use.<br>It is well known that CN transports<br>feedstocks to plastics producers,<br>intermediate products like pellets<br>to manufacturers, and finished<br>goods to retailers. CN also<br>collaborates with resin suppliers,<br>packaging manufacturers, waste<br>contractors, and recyclers to help<br>keep plastics out of landfills.<br>2 Markets Overview Markets Operations Financials<br>92 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| Chemicals and Sulfur<br>in Review<br>FLEXIBLE SOLUTIONS SERVE DOMESTIC AND EXPORT MARKETS<br>Comprehensive Solutions<br>CN handles over 50% of all Canadian chemicals production.<br>While chemicals are shipped in private cars, CN leverages our<br>expertise in railcar fleet management and railroad operations<br>for our customers to optimize their overall logistics costs. We<br>strive to ensure our customers have the right number of cars at<br>the right place at the right time.<br>The current low natural gas prices in North America are having<br>a positive effect on the chemicals sector. Lower feedstock costs<br>are leading to new investments that increase the productivity<br>of North American chemical plants. These plants are in areas<br>where CN enjoys significant market share, namely Louisiana,<br>northern Alberta and southern Ontario. CN works with<br>producers and receivers to establish end-to-end supply chain<br>solutions and promote the trade of CN-sourced raw materials<br>and end products.<br>Increase in Sulfur Production<br>The use of fertilizers to maximize food production is the main<br>driver of sulfur consumption. A significant portion of Canadian<br>sulfur for export in both molten (liquid) and prilled (dry) form is<br>handled by CN. Sulfur from sour gas is prilled and shipped to<br>the Port of Vancouver for export to Asia, South America, Africa<br>and Oceania. Sulfur from crude oil can be shipped in molten<br>form to North American markets or trucked to gas plants with<br>prilling capacity and then shipped overseas, depending on<br>which has the best netbacks.<br>Outlook<br>The North American chemicals market is mature, with growth<br>expected to be in line with North American industrial production.<br>CN has the capacity and supply chain connections to benefit<br>from any growth.<br>The offshore market continues to be highly attractive for<br>Canadian-sourced sulfur and CN is positioned to help customers<br>get their product to tidewater most efficiently.<br>GETTING OUR CUSTOMERS’ PRODUCTS TO MARKET<br>CN has access to increasing<br>sulphur production in Alberta’s<br>oil and gas industry, from which<br>prilled sulfur is exported via the<br>Port of Vancouver.<br>Photo courtesy of: Jeff Vinnick, Vancouver Fraser Port Authority<br>50%<br>OF ALL CANADIAN CHEMICALS<br>PRODUCTION IS TRANSPORTED BY CN<br>Over<br>CN | 2023 INVESTOR FACT BOOK 93 | |||||
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| AUTOMOTIVE<br>WORKING WITH CUSTOMERS TO PROVIDE<br>RELIABLE SERVICE IN A NEW WORLD<br>CN’s automotive business maximizes our network advantage<br>by providing consistent service with ongoing investment<br>in infrastructure and equipment. While CN continues to work<br>closely with customers to mitigate the impacts of global<br>automotive supply chain disruptions and vehicle parts shortages,<br>we have proven we have the capacity to handle customer<br>demand in an efficient and cost-effective manner.<br>Driving Supply Chain Flexibility<br>While global supply chain challenges continued to impact our automotive clients<br>in the aftermath of the pandemic, volumes improved throughout 2022. CN remains<br>ready to serve our automotive customers by right-sizing operations and implementing<br>sustainable technologies to improve throughput while keeping our employees,<br>customers and supply chain partners safe.<br>We continue to invest in equipment and infrastructure to drive growth, meet<br>customer expectations, and be responsive to changes in the automotive market.<br>For example, we have invested significantly in track and equipment at our<br>Autoports and distribution facilities to drive velocity improvements by increasing<br>railcar spotting capacity, reducing switching and dwell times, and enhancing<br>our ability to safely and efficiently transport finished vehicles. We have also<br>improved security and implemented new electronic gates that provide haul-away<br>carriers quicker access. CN is adding 300 bi-level autoracks in 2023–2024 to<br>transport SUVs for our automotive customers.<br>With direct access to<br>ports on three coasts<br>and major North<br>American vehicle<br>assembly and parts<br>production facilities,<br>CN has the auto<br>industry covered.<br>~1.6 million<br>FINISHED VEHICLES ON AVERAGE<br>TRANSPORTED ANNUALLY BY CN<br>~20%<br>OF CANADIAN AND AMERICAN AUTOMOTIVE<br>PRODUCTION IS ACCESSED BY CN<br>Multi-level rail cars at Taschereau<br>Autoramp, Saint-Laurent, QC.<br>Overview Markets Operations Financials<br>2 Markets - Automotive<br>2 Markets<br>94 CN | 2023 INVESTOR FACT BOOK | |||||
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| FINISHED<br>VEHICLES<br>CN moves finished vehicles<br>throughout North America,<br>providing service to assembly plants<br>in Ontario, Michigan and Mississippi.<br>The group also serves shippers of<br>finished vehicles for import/export<br>via the ports of Halifax, Vancouver<br>and Mobile. CN has distribution<br>facilities across Canada and the U.S.<br>Midwest, from which vehicles are<br>delivered to dealers.<br>CN moves auto parts from<br>production facilities in Michigan<br>and Ontario as well as from<br>Europe and Asia through our port<br>access. CN’s intermodal service also<br>provides the efficient transportation<br>of auto parts from domestic and<br>international suppliers.<br>AUTO PARTS<br>Gregory Veinot, Service Manager,<br>at one of CN’s 18 automotive<br>and post-production facilities.<br>Taschereau Autoramp,<br>Saint-Laurent, QC<br>Electric vehicles off-loaded at<br>CN’s Autoport, Halifax, NS<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 95 | |||||
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| AUTOMOTIVE<br>CN is ready for the growth<br>in electric vehicle (EV)<br>sales by equipping our<br>auto compounds with<br>EV charging stations to<br>serve this emerging<br>market segment.<br>Capitalizing on Market Opportunities<br>Although internal combustion engine vehicles are still relevant<br>and will remain so for years, many of our automotive customers<br>are beginning to also produce electric vehicles (EVs). This<br>exciting shift is providing CN with new opportunities as EV<br>assembly plants are being announced on or near our network.<br>CN is also working to provide sustainable transportation<br>solutions, creating a new value chain as it relates to the<br>EV future. Original equipment manufacturers and suppliers<br>are making capital investments in lithium and rare earth<br>mineral mines, and given CN’s far-reaching access into the<br>mining regions, we expect this market to drive sustainable<br>growth for the Company.<br>Broad Geographic Footprint<br>Today, CN handles over half the finished vehicles sold in<br>Canada and we are the largest Class I railroad in Michigan, the<br>automotive capital of the world. Our latest auto compound in<br>New Richmond, WI, serves the northern Midwest market. CN<br>has many other rail-ready development sites for future growth<br>opportunities. In addition, the Port of Mobile on the Gulf Coast<br>now supports roll-on/roll-off vessels for both global and<br>short-sea shipping from Mexico.<br>CN’s north-south corridor — with rail connections to all<br>Class I carriers at major gateways, including Chicago, IL,<br>Detroit, MI, Buffalo, NY, and Memphis, TN — offers automotive<br>customers routing alternatives to Canadian, U.S. and<br>Mexican destinations. CN provides access to key ports and<br>the global automotive trade. CN has the solutions, the<br>experience, the expertise and the market reach to grow our<br>automotive franchise.<br>50%<br>OF NEW VEHICLES SOLD IN<br>CANADA ARE MOVED ON CN<br>Over<br>Overview(cont.)<br>222 Markets Markets Overview Overview Markets Markets Operations Operations Financials Financials<br>96 CN | 2023 INVESTOR FACT BOOK | |||||
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| 830 858<br>591 576<br>797<br>REVENUES<br>($ millions)<br>2018 2019 2020 2021 2022<br>263 269<br>187 179<br>208<br>CARLOADS<br>(thousands)<br>2018 2019 2020 2021 2022<br> 3,884 3,735<br>2,597 2,395<br>2,822<br>RTMs<br>(millions)<br>2018 2019 2020 2021 2022<br>21.37 22.97 22.76 24.05<br>28.24<br>FREIGHT REVENUE<br>PER RTM<br>(cents)<br>2018 2019 2020 2021 2022<br>KEY FACTS<br> • Average of 1.6 million finished<br>vehicles handled annually<br> • 18 automotive compounds accessing<br>10 North American vehicle<br>assembly plants<br> • Three import/export ports for finished<br>vehicles served on three coasts<br> • 5,000 multi-level railcars<br> • Six ports handle containerized auto<br>parts for import/export<br>COMMODITIES<br> • Finished vehicles<br> • Auto parts<br>MARKET DRIVERS<br> • Global and North American<br>automotive production and sales<br> • Consumer confidence and<br>disposable income<br> • Average age of vehicles in<br>North America<br> • Price of fuel<br> • Emerging market for<br>electric vehicles<br>$797M<br>2022 REVENUES<br>BUSINESS UNIT OVERVIEW AND MARKET DRIVERS<br>W 92% Finished Vehicles<br>W 8% Auto Parts<br>2022 COMMODITY BREAKDOWN<br>(% of revenues)<br>-1.0% -5.7% -7.7% +7.2%<br>CAGR ( 2022 vs. 2018)<br>661 miles AVERAGE LENGTH OF HAUL (2022)<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 97 | |||||
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| Windsor<br>Markham<br>Charny<br>St. John’s<br> Canton Nissan<br>New Richmond<br>Jackson<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>Calgary<br>Moncton<br>Sarnia<br>CN’s three-coast network enables imports and<br>exports of finished vehicles and auto parts globally.<br>CN’s intermodal service offers an efficient<br>transportation option for auto parts for both<br>North American domestic shippers and overseas<br>international suppliers.<br>CN manages the full automotive supply chain,<br>including, rail, truck, transload, customs, customer<br>service, and special vehicle processing requests.<br>CONNECTING AUTOMOTIVE MARKETS<br>CN services 10 vehicle assembly plants,<br>accounting for an estimated 20% of Canadian<br>and American production. CN also handles<br>finished vehicle imports and exports via three<br>ports: Vancouver, Halifax and Mobile. Our<br>network allows us to distribute vehicles and<br>parts to major population centres across<br>Canada and the U.S.<br>Supply Chain<br>at a Glance<br>AUTOMOTIVE<br>Finished vehicles<br>Auto parts<br> Ports served by CN<br>P Automotive compounds<br>P Assembly plants<br>Key Advantages CN’S AUTOMOTIVE SUPPLY CHAIN<br>OF BI-LEVEL AND TRI-LEVEL AUTORACKS HELPS CN TRANSPORT<br>SUVs AND OTHER FINISHED VEHICLES<br>~5,000 railcar fleet<br>FACILITATE THE TRANSPORT OF FINISHED VEHICLES AND<br>AUTO PARTS ACROSS CANADA AND THE U.S.<br>18 automotive compounds<br>2 Markets Overview Markets Operations Financials<br>98 CN | 2023 INVESTOR FACT BOOK | |||||
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| Windsor<br>Markham<br>Charny<br>St. John’s<br> Canton Nissan<br>New Richmond<br>Jackson<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Halifax<br>Saint John<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg<br>Calgary<br>Moncton<br>Sarnia<br>The Future is<br>Electrifying<br>The North American electric<br>vehicle market is forecast to grow<br>at a compound annual growth<br>rate of 35% to 37% through 2028.<br>A desire to reduce carbon emissions,<br>supportive government incentives,<br>wider deployment of charging<br>stations, and lower operating costs<br>for electric vehicles compared<br>to those with internal combustion<br>engines are factors anticipated<br>to drive market growth. Rising<br>governmental automotive<br>electrification targets are expected<br>to stimulate growth in the electric<br>vehicle market.<br>For more information, please visit www.cn.ca/our-services/automotive<br>The majority of automotive<br>production facilities in Michigan<br>and Ontario are located on<br>CN’s network.<br>Sarnia<br>Port Huron<br>London<br>Milton<br>Chicago<br>Detroit<br>Toronto<br>2<br>3<br>1<br>4<br>5<br>6 7<br>8<br>9<br>10<br>11 12<br> 1 Lansing GM<br> 2 Flint Truck GM<br> 3 Flat Rock Ford<br> 4 Dearborn Truck Ford<br> 5 Windsor Stellantis<br>6 Ingersoll GM<br>7 Woodstock Toyota<br>8 Cambridge Toyota<br>9 Brampton Stellantis<br> 10 Oakville Ford<br> 11 Oshawa GM<br>12 Honda Alliston<br>CN | 2023 INVESTOR FACT BOOK 99 | |||||
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| GROWTH IN NORTH AMERICAN SUPPLY CHAINS<br>Pent-up Demand for Finished Vehicles<br>After two years of reduced vehicle production during the<br>pandemic, dealer inventories were depleted while customer<br>demand remained strong. In 2022, vehicle manufactures<br>were better able to fill new vehicle orders, but consumer<br>demand continues to outstrip supply.<br>Investing in Quality, Safety and Capacity<br>CN invests in infrastructure, rolling stock and technological<br>innovation to enable growth in the dynamic automotive<br>business. CN has invested over $50 million in the past few<br>years to significantly increase capacity and fluidity at<br>our existing automotive facilities throughout our network.<br>CN has also ordered hundreds of new bi-level railcars to<br>be delivered in 2023–2024 to make sure our capacity aligns<br>with customer requirements and to retire older rolling stock.<br>CN’s latest inland distribution terminal opened in New<br>Richmond, WI, in March 2021, and includes an automotive<br>compound for finished vehicles to serve shippers and<br>receivers in the Twin Cities of Minneapolis–Saint Paul, MN.<br>New Richmond offers single-line and interchange business<br>solutions to automotive shippers. Additional storefronts<br>are expected to open in the coming years.<br>Moving Auto Parts to Market<br>Because of our network reach, as well as our access to<br>production facilities in Michigan and Ontario, CN is a major<br>participant in the end-to-end auto parts supply chain.<br>In the auto parts business, we move 53-foot domestic<br>containers throughout North America via rail and in<br>conjunction with our supply chain partners.<br>PICTURED:<br>In 2021, CN Autoport in<br>Halifax celebrated 50 years<br>of operational and service<br>excellence to North America’s<br>automotive industry.<br>Finished Vehicles and<br>Auto Parts in Review<br>AUTOMOTIVE<br>2 Markets Overview Markets Operations Financials<br>100 CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK | |||||
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| In addition, we transload 40-foot import containers into<br>53-foot domestic containers when it adds value to our<br>customers and to minimize the empty flow of equipment<br>to/from the east and west coast ports into the Midwest.<br>CN’s intermodal service has the flexibility and fleet capacity<br>to handle growth.<br>Many auto parts originate and terminate overseas, including<br>Mexico. We handle containerized parts for import/export<br>through the ports of Prince Rupert, Vancouver, Montreal,<br>Halifax as well as Mobile and New Orleans.<br>Managing Global Shipments of Auto Parts<br>We offer services to manage the movement of auto parts<br>from the origin suppliers to the destination production<br>plants, dealers and aftermarket retailers. We understand<br>the importance of production parts for vehicle assembly<br>and have a dedicated customer care team to accommodate<br>shifting needs and support the inventory strategy of<br>automotive manufacturers.<br>Outlook<br>CN expects robust demand from the automotive sector as<br>dealer inventories are replenished through 2023. CN expects<br>to see opportunities for more north/south traffic between<br>Canada and Midwest markets.<br>Manufacturing volumes of auto parts are expected to follow<br>finished vehicle production. CN accesses international and<br>domestic intermodal service to support the auto parts market.<br>CN’s focus will be on further extending our market reach<br>through partnerships and on developing new facilities like<br>New Richmond.<br>The increasing focus on reducing vehicular emissions is<br>shifting the attention of the automotive industry toward<br>electric vehicles (EVs). As a result, we may see changes in the<br>auto parts supply chain (new plants) as well as in the number<br>of parts required in each vehicle assembled (EVs need fewer<br>parts). We are working with our customers to develop the<br>emerging EV value chain — from raw materials for steel and<br>batteries all the way to the finished vehicle or part.<br>Auto-Desk For<br>Containerized Shipments<br>At CN, we understand the importance<br>of today’s modern “just-in-time” inventory<br>management systems to our OEM<br>customers. Our Auto-Desk provides<br>dedicated customer service for time-sensitive, high-value auto parts shipped<br>in containers. Auto-Desk staff engage<br>with customers, steamship lines and<br>truckers to track each shipment from the<br>vessel to the auto plant door.<br>CN expects strong import/export demand for finished vehicles as well as<br>continued domestic market growth in Ontario and the U.S. Midwest.<br>CN | 2023 INVESTOR FACT BOOK 101 | |||||
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| GOING THE EXTRA MILE<br>Iron Ore Supply Chain<br>In a true example of a seamless<br>end-to-end supply chain, we ship<br>iron ore from the mines to steel<br>mills entirely on CN-owned trains<br>and ships via our docks on the<br>Great Lakes.<br>Automotive Supply Chain<br>CN handles finished vehicles<br>and auto parts from domestic<br>manufacturers and imports/exports<br>through ports on three coasts to 18<br>auto compounds across our network<br>for distribution to local dealers.<br>For more information on CN’s supply<br>chain solutions, please visit: www.cn.ca/<br>our-services/supply-chain-services<br>TOP-TIER SERVICE WITH ROOM TO GROW<br>CN has an important role to play in enabling modern supply<br>chains to contribute to economic prosperity in a collective and<br>collaborative way.<br>At CN, we work hard to eliminate silos and operate as a single fully integrated<br>team. Understanding the scope of our customers’ supply chains is also key to<br>proposing the right suite of services to meet their business needs. After all, that<br>is what being a supply chain enabler is all about.<br>Our comprehensive suite of services includes rail, intermodal, trucks, ships, bulk<br>handling, transloading, warehousing, and customs brokerage. With such a broad<br>spectrum of products, we look for ways to offer flexibility and capacity to our<br>customers so we can move their goods quickly and efficiently to market. For example,<br>we provide our traditional carload customers (e.g., lumber, plastics, steel, grain)<br>with innovative transloading solutions to provide cost-effective, lower-emission<br>transportation versus trucking. This co-operative approach is a win-win for<br>CN and our customers.<br>SUPPLY CHAIN SOLUTIONS<br>CN’s extensive network of distribution centres<br>includes strategically positioned transfer,<br>warehousing and reload facilities, allowing us<br>to extend our market reach and enable our<br>customers to benefit from rail transportation’s<br>cost and environmental benefits.<br>CN serves 22 intermodal terminals<br>strategically located near ports and<br>large urban centres.<br>2 Markets Overview Markets Operations Financials<br>102 CN | 2023 INVESTOR FACT BOOK | |||||
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| Distribution Services<br>CN has an extensive network of<br>strategically located distribution<br>centres, bulk transfer facilities,<br>CargoFlo® transload terminals and<br>warehouses to help our customers<br>reach their markets.<br>Supply Chain Sales<br>We work collaboratively with<br>our customers across North<br>America to facilitate end-to-end<br>supply chains that deliver vital<br>goods businesses need to drive<br>sustainable, profitable growth.<br>Customs Brokerage<br>Our licenced customs brokers<br>ensure our customers’<br>shipments moving in/out of<br>the U.S., Canada and Mexico<br>are cleared and managed<br>efficiently.<br>PICTURED:<br>A CN unit train transports<br>wind turbine blades to<br>producers and consumers of<br>renewable electricity.<br>Saint-Lazare, SK<br>Supporting Growth in<br>Sustainable Products and Markets<br>Every year, CN handles over 300 million tons of cargo of all kinds. If you<br>eat it, use it or drive it, chances are we move it! CN is proud to play a critical<br>role in supporting the green energy industry by providing energy-efficient<br>transportation solutions for products such as wood pellets, solar panels,<br>biofuels, and wind turbine components. Wind power is a renewable and<br>zero-emission source of electricity, and its demand is growing globally. CN<br>has been making tremendous strides in the transportation of wind turbine<br>components to support the installation and maintenance of wind farms.<br>Business Development<br>When companies look to<br>connect to rail, CN’s Business<br>Development team has solutions,<br>including Certified Rail-Ready<br>Sites in strategic markets across<br>our network.<br>CNCN | 2023 2023 INVESTOR FACT BOOK INVESTOR FACT BOOK 103 | |||||
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| CN has an advantaged network and a skilled team of operating people to maximize<br>its efficiency and enable growth for the North American economy. The team cares<br>about scheduled railroading and wants to drive even more improvement going<br>forward by running trains on time with a renewed focus on velocity.<br>Railroading needs to remain simple. For CN, the railcar is the driving mechanism.<br>Car velocity creates capacity. The faster we are, the more volume we can handle with<br>the same number of assets and crews. It’s all part of a disciplined plan. And we are<br>delivering results. Velocity in 2022 and 2023 is up, reaching levels not seen since 2016.<br>But it means nothing if we do not do it safely. Railroading is a dangerous business.<br>We must always be aware and look out for each other so everyone goes home safely<br>at the end of each shift.<br>We are also focused on preventing train accidents. We have over 2,800 wayside<br>detectors on our network to measure things like bearing temperature, unusual noises,<br>wheel impacts, and dragging equipment. Our 11 automated track inspection railcars<br>measure track geometry, cross level, and gauge, covering hundreds of thousands of<br>miles a year, and doing it all at track speed. The next generation of automated track<br>inspection railcars will be equipped with ground-penetrating radar to scan six feet into<br>the roadbed to look for soft spots. All our safety inspection technologies produce over<br>24 million data points a day that, along with artificial intelligence and trend analysis,<br>are used to address problems before they happen.<br>As a team, we are building resiliency based on running a scheduled operating plan,<br>with emphasis on service, asset utilization, and velocity. At the same time, we are<br>attracting and developing the next generation of railroaders.<br>OUR SCHEDULED OPERATION IS RUNNING SMOOTHLY<br>At CN, we are energized about making scheduled railroading<br>more consistent than ever. All Operations teams understand the<br>railway’s focus on safety, car velocity and on-time performance<br>to free up capacity for our customers. We work with Sales and<br>Marketing to ensure we are aligned to only sell into where the<br>Company has the capacity to deliver, together.<br>OPERATIONS OVERVIEW<br>For up-to-date weekly key operating metrics, please visit: www.cn.ca/investors/key-weekly-metrics<br>CN operates an<br>on-time scheduled<br>railroad that<br>creates capacity<br>by increasing car<br>velocity with a<br>strong level of safety<br>and commitment<br>to our customers.<br>Cory Klashinsky, Watchman/Engine<br>Hostler, at Chappell Yard in<br>Saskatoon, SK.<br>3 Operations Overview Markets Operations Financials<br>104 CN | 2023 INVESTOR FACT BOOK | |||||
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| 674 677 666 632 633<br>WESTERN REGION<br>(millions of GTMs per route mile)<br>2018 2019 2020 2021 2022<br>REGIONAL GTMs<br>(% of 2022 total GTMs)<br>50% Western Region<br>22% Eastern Region<br>28% Southern Region<br>361 349 310 334 360<br>SOUTHERN REGION<br>(millions of GTMs per route mile)<br>2018 2019 2020 2021 2022<br>308 297 272 290 277<br>EASTERN REGION<br>(millions of GTMs per route mile)<br>2018 2019 2020 2021 2022<br>SOUTHERN REGION<br>EASTERN REGION<br>WESTERN REGION<br>Kamloops<br>Fort Nelson Hay River<br>Fort McMurray<br>Springfield<br>East St. Louis<br>East Peoria<br>Conneaut<br>Pittsburgh<br>New London<br>Duluth Stevens<br> Point<br>Omaha<br>Sioux City<br>Sault Ste.Marie<br>Fond<br>du Lac<br>Sarnia Buffalo<br>Baton Rouge<br>Minneapolis/St. Paul<br>Regina<br>Toledo<br>Decatur<br>Jackson<br>Prince George<br>Worcester Arcadia<br>Chippewa Falls<br>Auburn<br>Indianapolis<br>Joliet<br>Green<br>Bay<br>Mobile<br>Quebec<br>Montreal<br> New Orleans<br>Prince Rupert<br>Vancouver<br>Saint John Halifax<br>Saskatoon<br>Chicago<br>Memphis<br>Edmonton<br>Toronto<br>Detroit<br>Thunder Bay<br>Winnipeg Calgary Moncton<br>REGIONAL PERFORMANCE<br>We are working as a single integrated<br>team to maintain quality service by<br>aligning our volumes with existing<br>and future capacity.<br>Over 100 million<br>50–100 million<br>30–50 million<br>10–30 million<br>Up to 10 million<br>Shortline partners<br>Ports served by CN<br>TRAFFIC DENSITY LEGEND<br>(GTMs per route mile)<br>CN | 2023 INVESTOR FACT BOOK 105 | |||||
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| NETWORK AND<br>FIELD OPERATIONS<br>Alexander Sanchez, Rail Traffic Controller, coordinates safe<br>and efficient train traffic across the entire rail network<br>from Homewood, IL.<br>MAKING AND RUNNING A SCHEDULED OPERATING PLAN<br>Rail networks are complex systems that require careful planning and execution to ensure trains run on time<br>and reach their destinations safely. The Network Operations teams make a comprehensive plan that<br>optimizes volumes for the entire rail network and the Field Operations teams run that plan. Together, they<br>monitor the effectiveness of the plan.<br>Planning<br>The Central Nervous System for Scheduled Railroading<br>The Network Operations teams analyze all volumes across<br>the network and metrics like car velocity and on-time train<br>performance to set a plan that optimizes capacity for the<br>entire network. Effective operational design, planning,<br>coordination and communication are vital to building the<br>most efficient trip plan and train service package to meet<br>customer demand. They are also critical to maximizing<br>network capacity and making the best use of operating<br>assets (i.e., crews, locomotives, rolling stock and rail<br>infrastructure) to deliver the goods safely and reliably.<br>By analyzing data on train movements and scheduling,<br>we identify potential bottlenecks, refine the model, and<br>optimize train transits and connections to minimize delays<br>and improve overall efficiency and capacity.<br>Network Operations also manages and directs the safe<br>and effective movement of trains everywhere along the rail<br>network. Having a coordinated and all-encompassing<br>network plan makes it easier to adjust to volume fluctuations<br>and ensures the whole network is more resilient to disruptions.<br>Our scheduled railroad is our platform for growth as we<br>move forward.<br>Making the plan<br>means optimizing volumes<br>for the overall network, aligning<br>parameters across all three<br>operating regions and seven<br>business units.<br>3 Operations Overview Markets Operations Financials<br>106 CN | 2023 INVESTOR FACT BOOK | |||||
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| The best way to run an efficient railroad is to run a disciplined,<br>scheduled operating plan. Our plan is sacred. We only run one plan,<br>and everyone understands their role.<br>Kirk Yard in Gary, IN, is the most productive hump yard on<br>our network and the first to introduce our new scheduled<br>operating plan in April 2022.<br>213 miles<br>PER DAY – AVERAGE CAR VELOCITY<br>IN H1 2023, UP 15% VS. H1 2022<br>6.9 hours<br>DWELL ACROSS ALL YARDS IN H1 2023,<br>DOWN 15% VS. H1 2022<br>20%<br>REDUCTION IN OUR INJURY FREQUENCY<br>RATE IN H1 2023 VS. H1 2022<br>Faster Trains<br>Reduced Dwell<br>Improved Safety<br>Executing<br>Running the Plan with Focus and Discipline<br>When it comes to running the plan, we focus on safety, train speed and dwell.<br>Trains need to make their connections at the scheduled time with the correct<br>blocks of cars. So, we work hard to reduce terminal and yard dwell. And we do not<br>run a train longer than the sidings along its route. These basic principles, when<br>done right, equate to velocity and capacity, and drive balance across the network<br>while lowering costs.<br>When running on a schedule, it is critical that every train departs on time because<br>its locomotive is expected at the next terminal to be put on another train with a<br>new crew. And the railcars are planned for connections so our team can get them<br>to the customers on time. Strict adherence to the schedule drives more asset<br>velocity, more consistent utilization of power and crews, and more predictable<br>and consistent customer service.<br>Together with Network Operations, we refine the plan on a continuous basis.<br>When any issues arise, we work in lockstep to resolve them at the network level<br>and get safely back on plan. Any changes are always made with a view to<br>optimizing the whole network, not just the train or the yard, because this is how<br>we drive efficiency.<br>Running the plan<br>means making sure the trains<br>depart and arrive on time,<br>railcars are in the right blocks,<br>and trains make their<br>connections safely, every time.<br>MEASURING OUR SUCCESS<br>CN | 2023 INVESTOR FACT BOOK 107 | |||||
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| READY FOR GROWTH<br>Carrying about 50% of CN’s annual volumes, Western Region runs<br>from two ports on the Pacific in Vancouver and Prince Rupert eastward<br>through every major Western Canadian city, including Edmonton,<br>Calgary, Saskatoon, Regina and Winnipeg, extending as far east as the<br>port in Thunder Bay, ON. CN also reaches north to the resource-rich<br>areas of Fort Nelson, BC, Hay River, NT, and Fort McMurray, AB.<br>OUR ADVANTAGE<br>Fastest Route to/from Asia<br>Exclusively served by CN,<br>the deep-sea Port of Prince<br>Rupert, the closest port to Asia,<br>offers a one-to-two-day transit<br>advantage versus the Ports<br>of L.A./Long Beach.<br>Low Grades<br>CN enjoys the lowest grades<br>of any railroad through<br>the Rockies, allowing us to<br>deliver our customers’ cargo<br>more safely and efficiently<br>while maximizing train<br>length and fuel productivity,<br>even in winter.<br>Scheduled Operation<br>Western Region is leaning<br>into CN’s scheduled<br>operating plan to increase<br>train velocity and unlock<br>capacity to better serve<br>our customers.<br>Investing in Safety and Capacity<br>Western Region has built for the future with large capital investments in long-term<br>capacity to meet the growing needs of customers. Since 2020, CN has invested over<br>$1 billion in Western Canada tied to key track expansions and new equipment to help<br>us operate with resiliency and drive schedule adherence, creating superior service for<br>our grain, forest products, intermodal, petroleum and chemicals customers.<br>CN’s modern Claude Mongeau National Training Centre (CN Campus) in Winnipeg<br>is focused on instilling a strong safety culture in our new hires, who receive a complete<br>range of hands-on technical training. And, in partnership with labour unions, new<br>conductors’ skills development and assessment continues for six months after<br>qualification. Employees return to CN Campus throughout their careers for refreshers<br>and training on new equipment. These investments in training are achieving results<br>in Western Region, with a 2022 accident ratio 60% lower than in 2020.<br>New Opportunities for Growth<br>Propane export terminals in Prince Rupert – AltaGas’ terminal on Ridley Island and<br>Pembina’s terminal on Watson Island – are exclusively served by CN from production<br>facilities in northern BC and the Alberta Industrial Heartland (AIH). These facilities,<br>which are meeting their production targets, provide our customers with the option of<br>serving the export market. Aggregating clean energy production in the AIH is<br>another exciting opportunity.<br>The oilseed crushing industry in Western Canada has been growing steadily in<br>recent years, driven by increased demand for canola products as an ingredient in<br>renewable biofuels as well as by the dairy market in the U.S. and the aquaculture<br>industry in Asia. Several major projects have been announced that should result in a<br>significant increase in canola crushing capacity in the next few years, and agriculture<br>in general is expected to continue to grow as crop sizes continue to increase. CN is<br>ready to serve this growing market.<br>WESTERN REGION<br>Port of Prince Rupert – CN’s exclusive<br>gateway to/from Asia.<br>3 Operations Overview Markets Operations Financials<br>108 CN | 2023 INVESTOR FACT BOOK | |||||
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| Kamloops<br>Fort Nelson<br>Hay River<br>Fort McMurray<br>Regina<br>Prince George<br>North<br>Battleford<br>Bienfait<br>Edson<br>Atikokan<br>Thunder Bay<br>Prince Rupert<br>Vancouver Calgary<br>Saskatoon<br>Edmonton<br>Winnipeg<br>WESTERN REGION FACILITIES<br>KEY FACTS<br> • The ports of Vancouver and Prince Rupert are dynamic gateways to<br>international trade, and Thunder Bay is a key export option for grain.<br> • Winnipeg is home to Symington Yard, our only hump yard in Western<br>Canada, and Transcona Shops, our railcar and locomotive repair facility.<br> • CN’s Claude Mongeau National Training Centre in Winnipeg delivers<br>railroader training focused on instilling a strong personal safety mindset.<br>Record<br>Grain Movement<br>With our customers and farmers,<br>CN is driving record grain movement<br>with hopper car spots and pulls<br>scheduled with precision and velocity<br>in mind. We are also leveraging our<br>investments in longer sidings,<br>high-horsepower locomotives, and<br>3,500 new high-capacity hopper cars<br>capable of handling up to 40% more<br>grain per train to increase capacity<br>and improve service to our grain<br>customers. As a result, in October<br>2022, CN delivered more grain in a<br>single month than ever before.<br>PICTURED:<br>A CN grain train is loaded<br>at the Viterra grain elevator<br>in Acheson, AB.<br>P Automotive<br>P CargoFlo®<br>P Forest products<br> distribution centre<br>P Intermodal terminal<br>P Logistics park<br>P Metals and minerals<br>Ports served by CN<br>Y Main yard<br> Hump yard<br> Car/locomotive<br> repair shop<br>W CN Campus<br> training facility<br>LEGEND<br>CN | 2023 INVESTOR FACT BOOK 109 | |||||
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| CAPACITY TO SELL, CAPACITY TO GROW<br>CN’s Eastern Region extends from Winnipeg eastward,<br>interconnecting with our U.S. network at several points in southern<br>Ontario and Quebec. Our network reaches deep into the mineral-and timber-producing regions of northern Quebec. The rails<br>continue east into the Maritimes to Halifax. Eastern Region serves<br>four ports: Halifax, Saint John, Quebec City and Montreal.<br>OUR ADVANTAGE<br>Gateway to the East<br>CN has exclusive rail access<br>to the Port of Halifax,<br>which has the shortest transit<br>time from Europe and the<br>Mediterranean, and is only<br>two days by rail from Toronto.<br>Unparalleled Access<br>CN serves major ports in<br>the region, including Montreal,<br>Quebec City, Saint John<br>and Halifax, and through<br>partnerships with CSX, the<br>ports of New York, New Jersey<br>and Philadelphia.<br>Right-Sized Operations<br>CN’s investments in longer<br>sidings and high-horsepower<br>locomotives enable us to<br>build trains to fit both demand<br>and capacity.<br>A Diverse Region<br>About two-thirds of the region’s volumes are manifest traffic with the balance<br>mostly intermodal. Our extensive system of intermodal terminals, autoports<br>and transload facilities enables non-rail-served customers to benefit from rail’s<br>cost and environmental advantages. Supply chains are evolving, with mines<br>in northern Quebec being developed to supply the burgeoning EV market.<br>Available Capacity for Today and Tomorrow<br>Given expectations of solid freight volumes in the years ahead, CN’s eastern<br>network has sufficient capacity and fluidity with little to no capital expenditures<br>required for growth. We are focused on growing our volumes through a disciplined<br>scheduled operation, supply chain innovation, and strategic investments to<br>create more efficient solutions for our customers. CN is planning to develop<br>additional inland terminals, including a new sustainable fuel terminal in Toronto.<br>We are continuing the construction of our $250-million logistics hub in Milton, ON,<br>expected to be completed in 2026. The facility will benefit our customers and<br>the environment by converting more truck traffic to carbon-efficient rail.<br>Eastern Hub for Petrochemicals<br>Sarnia, ON, is nicknamed “Chemical Valley” due to the high concentration of<br>large industrial facilities, such as IOL-Exxon, Plains-Midstream, NOVA Chemicals<br>and 15 other local customers. NOVA has completed a five-year project to build<br>a new plant with a capacity to produce approximately one billion pounds of<br>polyethylene plastic a year. It uses ethylene Nova produces at its Corunna, ON,<br>site from NGL delivered by pipeline and railcar.<br>EASTERN REGION<br>Brampton, ON, is home to CN’s<br>largest inland intermodal terminal<br>in Eastern Region.<br>3 Operations Overview Markets Operations Financials<br>110 CN | 2023 INVESTOR FACT BOOK | |||||
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| Hamilton<br>Sarnia<br>Windsor<br>St. John’s<br>Brockville<br>Brampton<br>Milton<br>Charny<br>Toronto<br>Winnipeg<br>Montreal<br>Quebec<br>Saint<br>John<br>Halifax<br>Moncton<br>EASTERN REGION FACILITIES<br>KEY FACTS<br> • Montreal is home<br>to CN’s corporate<br>headquarters.<br> • CN’s largest inland<br>intermodal terminal<br>(Brampton) and our<br>largest classification<br>yard (MacMillan Yard<br>near Toronto) are in<br>Eastern Region.<br> • Up to 51 VIA passenger<br>trains use our network<br>between Toronto and<br>Quebec City every day.<br>Continued Growth<br>on the Horizon for the<br>Port of Halifax<br>As Canada’s Ultra Atlantic Gateway,<br>Halifax offers natural, deep-harbour<br>and big-ship infrastructure. With<br>one of the lowest import container<br>dwell times of any North American<br>port, Halifax welcomed more than<br>1,100 cargo vessels carrying over<br>600,000 TEUs and over 500,000<br>metric tonnes of bulk cargo in 2022.<br>From Halifax, CN has the best transit<br>times to Montreal, Toronto, Detroit<br>and Chicago than from any other<br>East Coast port.<br>PICTURED:<br>MSC Stella from Mundra, India.<br>Shifting trade patterns are<br>forecast to increase shipping<br>from South Asia to East Coast<br>ports and CN is ready with<br>available capacity.<br>P Automotive<br>P CargoFlo®<br>P Forest products<br> distribution centre<br>P Intermodal terminal<br>P Logistics park<br>P Logistics park<br> (under construction)<br>P Metals and minerals<br>Ports served by CN<br>Y Main yard<br> Hump yard<br> Car/locomotive<br> repair shop<br>W CN Campus<br> training facility<br>LEGEND<br>P Automotive<br>P CargoFlo®<br>P Forest products<br> distribution centre<br>P Intermodal terminal<br>P Logistics park<br>P Logistics park<br> (under construction)<br>P Metals and minerals<br>Ports served by CN<br>Y Main yard<br> Hump yard<br> Car/locomotive<br> repair shop<br>W CN Campus<br> training facility<br>LEGEND<br>CN | 2023 INVESTOR FACT BOOK 111 | |||||
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| OUR ADVANTAGE<br>Chicago Outer Belt<br>CN can link all five of our rail<br>lines entering Chicago from<br>all directions into one seamless<br>system, resulting in higher<br>capacity and faster throughput.<br>Energy Market Opportunity<br>CN is prepared to seize growth<br>in demand in North American<br>energy markets by leveraging<br>our superior network and<br>capacity improvements to<br>create a dependable supply<br>chain to ports on three coasts.<br>Partnering for the Future<br>CN is the only Canadian<br>member of the Equipment<br>Management Pool (EMP)<br>and, through partnerships,<br>is gaining greater access<br>to Mexico.<br>OPTIMIZED FOR SPEED AND MARKET OPPORTUNITY<br>Our extensive network in the U.S., the product of a series of acquisitions<br>and investments, is an integral part of CN’s transcontinental North<br>American system. Our rails run north-south from the Canadian border<br>with Minnesota down to ports in New Orleans and Mobile, through the<br>Chicago area, with lines extending west to Nebraska and east through<br>Michigan, Pennsylvania and New York.<br>An Advantaged Network<br>CN’s network encircles Chicago, allowing our trains to bypass inner-city congestion.<br>CN is the only railroad in Chicago not heavily reliant on belt roads to deliver traffic<br>to interchange points. Our trains move twice as fast through Chicago, giving us an<br>up to 48-hour head start over the competition. Automotive and intermodal traffic is<br>streamlined at Markham Yard and manifest traffic is classified at Kirk Yard in nearby<br>Gary, IN, enabling us to keep our dwell time to a minimum and maintain speed.<br>Investing to Accomodate Growth<br>CN continues to build for the future with strategic capital investments. In 2021,<br>we opened a new inland automotive terminal in New Richmond, WI, to serve<br>Minneapolis–Saint Paul. CN is adding a 14th metals distribution centre in Flat Rock, MI,<br>in H2 2023 to serve automotive manufacturing and other customers.<br>And our customers are investing too. The Port of New Orleans recently announced<br>plans to begin construction of a new Louisiana International Terminal in 2025,<br>with plans to open in 2028. And, with 2022 a record year for containerized shipping,<br>the Port of Mobile plans to increase capacity to 1.0 million TEUs.<br>Extending Our Reach<br>With a population of 130 million and a GDP of US$1.3 trillion, Mexico is among<br>the top 15 economies in the world. CN’s strategy is to increase our access to Mexico<br>through partnerships. One example is our new intermodal service with UP and<br>FXE from Chicago through Texas all the way to Monterrey and Silao. Another<br>example is our new short-sea service with Crowley, which will bring international<br>and refrigerated containers from Mexico to the Port of Mobile.<br>CN is also partnering with NS to operate a domestic intermodal service with<br>interchanges in Detroit and Chicago for deliveries to/from Kansas City and Atlanta.<br>Together, we aim to convert more long-haul truck traffic to rail. In addition, we are<br>leveraging our competitive capabilities and our EMP partnership with UP and NS<br>to further stimulate intermodal growth.<br>SOUTHERN REGION<br>The Port of Mobile offers opportunities<br>for import growth and U.S. supply<br>chain diversification.<br>3 Operations Overview Markets Operations Financials<br>112 CN | 2023 INVESTOR FACT BOOK | |||||
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| Gary<br>Stevens<br>Point<br>Fond du Lac<br>Joliet<br>Indianapolis<br>Jackson<br>Duluth<br>Two Harbors<br>Proctor Escabana<br>Battle<br>Creek<br>Chippewa Falls<br>Arcadia<br>New Richmond<br>Flat Rock<br>Markham<br>Chicago<br>Mobile<br>Memphis<br> New Orleans<br>Detroit<br>Conneaut<br>SOUTHERN REGION FACILITIES<br>P Automotive<br>P CargoFlo®<br>P Forest products<br> distribution centre<br>P Intermodal terminal<br>P Logistics park<br>P Metals and minerals<br> Ports served by CN<br>Y Main yard<br>Hump yard<br>Car/locomotive<br> repair shop<br>W CN Campus<br> training facility<br>KEY FACTS<br> • About one-third of our rail network and employees are in<br>Southern Region and roughly 25% of all CN carloads originate,<br>terminate or transit through our Chicago hub.<br> • Homewood, a Chicago suburb, is home to CN’s U.S. corporate<br>headquarters, our state-of-the-art training centre, and our<br>largest and newest Locomotive Reliability Centre, Woodcrest.<br> • CN transports iron ore from mines to steel mills entirely<br>with CN trains, Great Lakes ships, and expert personnel.<br>PICTURED:<br>Chicago is the heart of<br>CN’s Southern Region,<br>which has the straightest,<br>fastest route to the Gulf.<br>Photo by CN employee<br>Martin Simane<br>Leveraging Our<br>Chicago Advantage<br>With our bypass loop around city<br>congestion, CN is the only railroad in<br>Chicago not heavily reliant on belt<br>roads to deliver traffic to interchange<br>points, cutting up to two days off<br>transit times. We are leveraging this<br>unique strength to connect our<br>premium service to Mexico with our<br>partners UP and FXE.<br>CN is currently planning a new,<br>much larger intermodal terminal<br>southwest of Chicago that will serve<br>over 100 million square feet of<br>warehousing space. With an annual<br>capacity of up to 1.62 million TEUs, the<br>facility will benefit our customers and<br>the environment by converting truck<br>traffic to carbon-efficient rail.<br>CN | 2023 INVESTOR FACT BOOK 113 | |||||
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| With our renewed focus on a disciplined operating plan to optimize network capacity, CN has moved its<br>emphasis to maximizing train velocity within a tight schedule. The results are better railcar utilization,<br>lower costs, and improved customer service.<br>Working Together<br>The Multimodal Operations group is embedded within Sales<br>and Marketing to ensure CN’s commercial efforts correspond<br>with available capacity. By collaborating closely in a single<br>integrated team, bottlenecks are minimized, resiliency is<br>enhanced, and promises made to customers are kept.<br>The Multimodal team cares about scheduled railroading and<br>aims to improve consistency by departing trains on time and<br>controlling train lengths to drive velocity. By building and<br>coordinating daily block plans, we help meet the needs of our<br>customers. The team is also responsible for fleet planning,<br>train reporting, and customer service for all intermodal unit<br>trains. We oversee and manage the movement and planning<br>for individual business segments, providing end-to-end supply<br>chain oversight to ensure fluid network operations and<br>maximize productivity.<br>VELOCITY DELIVERS CAPACITY<br>MULTIMODAL<br>PICTURED:<br>Rail has a tremendous<br>potential to reduce the<br>environmental impact<br>of transportation.<br>Elma, MB<br>Photo by CN employee<br>Ildar Noureev<br>Optimizing Our Block Plan<br>As an example of how our team is optimizing our block plan<br>and running to a schedule, an intermodal unit train destined<br>from the Port of Prince Rupert to Toronto departs on time<br>and right-sized for the capacity-constrained Prince Rupert<br>to Edmonton corridor. The train has the option to pick up<br>another block in Edmonton that is also destined for Toronto<br>and extend the length of the train.<br>By optimizing our block plan to ensure consistency and<br>minimize rail transit time, we have shaved two full days from<br>the trip to Toronto. Our transit time is now comparable<br>to truck service, providing us opportunities to grow as we<br>continue to fine-tune the network.<br>3 Operations Overview Markets Operations Financials<br>114 CN | 2023 INVESTOR FACT BOOK | |||||
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| Building Resiliency through Partnerships<br>Our customers look for resiliency and we deliver. In Toronto,<br>we have the second-largest inland container terminal in<br>North America, as our disciplined plan has allowed us to<br>continue to create capacity and find solutions. We have also<br>established exclusive partnerships with some smaller<br>container yards in Toronto. These agreements enable us to<br>handle surge volumes when required, without jeopardizing<br>the capacity or the fluidity of our network.<br>Building on the partnerships we created, we also established<br>new collaborations with boutique terminals in key growth<br>markets, including Hamilton in southern Ontario. These<br>facilities allow our customers to be closer to their markets and<br>lower their carbon footprint, which is a growing necessity.<br>Helping Our Customers Reduce Their GHG Emissions<br>As more companies are looking to quantify and lower their<br>transportation GHG emissions, CN launched a new online<br>tool, My Carbon Emissions, to provide customers with an<br>estimate of their GHG emissions based on all their shipments<br>moved on CN’s network, as well as the emissions they<br>avoided by choosing rail over truck. These insights into the<br>environmental benefits of shipping via CN’s transcontinental<br>network empower customers to make data-driven decisions<br>that support their climate objectives.<br>Getting into the Fast Lane<br>CN is currently rolling out a mobile system<br>called Express Pass, which allows our<br>trucking partners to use their smartphone<br>to “check in” in advance of arriving at the<br>intermodal terminal. The application has<br>improved the experience of truck drivers<br>when they come into our terminals by<br>simplifying gate operations and reducing<br>truckers’ wait times.<br>The application has launched at the<br>Brampton and Malport terminals and is<br>planned to roll out to other CN terminals<br>soon. This next-generation application<br>builds on the successes of the ModalPass<br>application, enriched with features that<br>allow truckers to accurately validate<br>travel information before they come to<br>the terminal. Additional functionalities<br>are planned for future releases, including<br>the ability for dispatchers to have direct<br>access in support of driver journeys<br>at CN terminals.<br>At CN, we are optimizing our tri-coastal network with a disciplined<br>operating plan that is closely integrated with the Commercial team<br>to deliver better, faster service.<br>75%<br>MOVING FREIGHT BY RAIL<br>INSTEAD OF TRUCK REDUCES<br>GHG EMISSIONS BY UP TO 75%(1)<br>480 miles<br>THE DISTANCE ONE TRAIN CAN<br>MOVE A TON OF FREIGHT ON<br>ONE GALLON OF FUEL (1)<br>3-4x<br>TRAINS, ON AVERAGE ARE<br>THREE TO FOUR TIMES MORE<br>FUEL EFFICIENT THAN TRUCKS (1)<br>300trucks<br>ONE SINGLE FREIGHT TRAIN<br>CAN REPLACE OVER 300<br>BIG TRUCKS (2)<br>ENVIRONMENTAL BENEFITS OF SHIPPING BY RAIL<br>(1) The Association of American Railroads (2) The Railway Association of Canada<br>CN | 2023 INVESTOR FACT BOOK 115 | |||||
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| CN’s dedicated team of mechanics and other trades is responsible for inspecting, maintaining and repairing<br>the railway’s thousands of locomotives and railcars. We help ensure all components are functioning correctly<br>and potential safety hazards are identified and addressed before they can cause accidents or disruptions.<br>PICTURED:<br>Locomotive washing station at<br>Thornton Yard in Surrey, BC.<br>MAINTAINING SAFE AND RESILIENT OPERATIONS<br>MECHANICAL<br>Fleet renewal improves the safety<br>and reliability of our motive power,<br>enhances customer service, and<br>reduces GHG emissions.<br>Modernizing Our Fleet<br>CN has approximately 1,950 locomotives used on our mainline<br>trains and for local assignments to customer sidings. Of these,<br>290 are the more fuel-efficient Tier 4 high-horsepower<br>locomotives. We also added 75 pre-owned high-horsepower<br>locomotives to our fleet in 2021 and nearly 50 in 2022. Under<br>our modernization program, we are refurbishing up to 60<br>locomotives by upgrading them from direct current (DC) to<br>alternating current (AC) traction motors, which provide<br>more efficient traction effort, and outfitting them with<br>state-of-the-art technology. This cost-effectively improves<br>the reliability of our existing fleet and contributes to reducing<br>our rail carbon footprint. In addition, CN has recently<br>acquired 800 high-capacity boxcars for our woodpulp,<br>paper and metals customers as well as 500 high-efficiency<br>grain hopper cars, bringing the total CN-available railcar<br>fleet to over 56,000.<br>3 Operations Overview Markets Operations Financials<br>116 CN | 2023 INVESTOR FACT BOOK | |||||
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| Key to Achieving Our Sustainability Goals<br>CN’s Mechanical team is building important partnerships to reduce the<br>Company’s GHG emissions intensity. For example, we are working with<br>Progress Rail and Chevron’s Renewable Energy Group to test biodiesel and<br>renewable diesel. This program is allowing us to better understand the<br>long-term operational impacts of renewable fuels on locomotives, especially<br>in cold weather, and plan needed modifications to fully leverage their usage<br>over the next decade. We also purchased Wabtec’s FLXdrive battery-electric<br>freight locomotive, the first 100% zero-emission heavy-haul locomotive,<br>for testing under various conditions. It is anticipated the technology will reduce<br>locomotive fuel consumption and emissions by up to 30%.<br>Automated Inspection Portal inspecting train in Ste. Anne, WI.<br>Leveraging Tech for Safer Operations<br>Automated Inspection Portals (AIPs) feature high-definition<br>panoramic cameras and high-intensity LED lighting that<br>capture a 360° view of a train as it travels at track speed.<br>Artificial intelligence (AI) then helps experienced mechanics<br>identify railcars requiring repair before a train arrives at the<br>yard. CN has seven AIPs in operation 24/7 across its network.<br>The following technologies located along CN’s right-of-way<br>enhance rail safety as well as network capacity and<br>resiliency. These detectors use algorithms to generate alarms<br>when problems are discovered and prompt the repair or<br>replacement of a component before it fails. CN aggregates<br>the data collected by its detector network to identify trends.<br>Examples of the types of wayside detectors employed<br>by CN include:<br>Hot box detectors monitor the condition of wheel bearings<br>to identify overheated components before they reach<br>temperatures that can lead to failure.<br>Cold wheel detectors are placed at the bottom of long<br>grades where trains typically apply brakes. Since the braking<br>process generates heat, cold wheels are flagged for brake<br>system inspection.<br>Wheel impact load detectors measure the impact of each<br>wheel going over the detector. Flat spots on wheels that<br>generate excessive impacts are a problem because they can<br>cause parts to rattle loose as well as damage rails and ties.<br>Dragging equipment detectors look for anything that is<br>hanging from the train.<br>Acoustic bearing detectors monitor the sound signatures of<br>bearings to find bearing defects before they generate enough<br>heat to be detected by hot box detectors.<br>Broken wheel detectors operate by using various technologies,<br>including wheel weight gauges, lasers, cameras, and machine<br>pattern algorithms to identify defects.<br>CN | 2023 INVESTOR FACT BOOK 117 | |||||
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| Our rail network consists of 18,600 miles of track, 60 million rail ties, 8,000 bridges, and innumerable<br>other assets. We are committed to not only maintaining our infrastructure, but striving to make it more<br>resilient in the face of extreme weather and other disruptions.<br>ESSENTIAL TO NETWORK SAFETY AND RESILIENCY<br>PICTURED:<br>A rubber-tired excavator and<br>hi-rail perform regular track<br>maintenance on the Ashcroft<br>Subdivision near Kamloops, BC.<br>CN has strategically stationed<br>equipment like this every 30<br>miles on busy corridors without<br>road access to facilitate a quick<br>response in the event of a rock<br>slide or other outage.<br>ENGINEERING<br>Investing in Rail Infrastructure<br>A significant portion of CN’s annual capital investments is<br>dedicated to right-of-way maintenance to support safe<br>and efficient operations, including the replacement of rail<br>and ties, bridge improvements, crossing upgrades, and<br>maintenance of culverts, signals, switches, and other track<br>infrastructure. By keeping the right-of-way in good condition,<br>we ensure the safety of our operations and keep the trains<br>running on time.<br>Coordination Is Key<br>Close collaboration is required between CN’s Engineering,<br>Transportation and Rail Traffic Control centres to coordinate<br>the many construction projects while rail traffic is moving<br>24 hours a day, 365 days a year. Managing major construction<br>work on busy corridors is a highly complex task. It requires<br>significant planning and resources and involves temporary<br>disruptions of service to provide work crews with needed<br>access to the network.<br>At CN, we continue to build upon our leadership<br>role in rail infrastructure and innovative<br>technologies to monitor the condition of<br>track and proactively minimize risks.<br>3.6 million<br>FEET OF RAIL REPLACED<br>448<br>RAIL CROSSINGS REFURBISHED<br>1.1 million<br>RAIL TIES REPLACED<br>2022 HIGHLIGHTS<br>3 Operations Overview Markets Operations Financials<br>118 CN | 2023 INVESTOR FACT BOOK | |||||
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| Track Inspection Technologies<br>Historically, track inspections have been done visually<br>on slow-moving hi-rail vehicles between train movements<br>within specific sections of the network, consuming<br>precious capacity.<br>Autonomous Track Inspection Program: CN’s Autonomous<br>Track Inspection Program (ATIP) uses technology to inspect<br>track and assign preventative maintenance. CN’s ATIP<br>consists of 11 railcars equipped with multiple advanced<br>measurement systems. The cars are operated 24/7 within<br>regularly scheduled trains at track speed and allow for real<br>time measurement of track conditions under load. Since their<br>deployment in 2019, ATIP cars have substantially improved<br>CN’s track safety metrics by covering 100% of the network<br>and performing up to 16 times more track inspections. New<br>in 2022, CN’s third generation ATIP cars are equipped with<br>the ability to analyze joint bars and assess the quality<br>of rail-to-wheel contact.<br>Complementary Technologies: CN also uses technologies<br>that complement ATIP and provide a wider spectrum<br>of data that we plan to eventually integrate into future<br>generations of ATIP. One of these is ground-penetrating<br>radar used to provide detailed assessments of ballast<br>and subgrade conditions.<br>In addition, CN uses accelerometers on our locomotives<br>to monitor track quality and help prevent derailments by<br>identifying unusual movements or accelerations resulting<br>from track impact, alignment, geometry or rail joint issues. Issues<br>are located by GPS and email alerts are automatically sent to<br>Engineering crews for remediation.<br>CN Engineering also uses a wide array of monitoring devices<br>to detect rock falls, landslides, high water levels, avalanches,<br>and roadbed instability and to warn approaching train crews<br>to prevent derailments. In addition, CN uses drones to inspect<br>hard-to-reach areas such as bridge structures as well as water<br>levels in culverts and ditches along its tracks.<br>Award-Winning Feat of Engineering<br>CN recently completed the US$100-million reconstruction of<br>the Bonnet Carré-McComb Spillway Bridge near New Orleans,<br>replacing a two-mile-long historic timber bridge that had<br>a 10-mph speed limit with a pre-cast concrete structure<br>with a 60-mph limit. For outstanding achievement in railway<br>engineering, the American Railway Engineering and<br>Maintenance-of-Way Association honoured CN with its 2021<br>Dr. William W. Hay Award for Excellence. Learn more at:<br>vimeo.com/644881097<br>Automated Track Inspection Program railcar near Udo, MB.<br>CN’s “Bridge Builder” was custom-built for the project. Designed to advance<br>building materials, drive piles, set spans, and move forward on the new<br>structure, it helped limit the environmental impact of the construction effort.<br>CN | 2023 INVESTOR FACT BOOK 119 | |||||
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| When fire destroyed the Grand Cache Bridge in<br>northwestern Alberta, CN Engineering crews not only<br>pulled out all the stops to quickly restore service, they<br>rebuilt the bridge with added resiliency in mind. “Working<br>safely around the clock in an isolated area required<br>careful planning, coordination, and good communication<br>between the teams,” says Track Supervisor Brad Murray.<br>Reconstruction of the bridge, which was almost 600 feet<br>long and nearly 40 feet high, was completed in just six<br>days, without a single injury or accident.<br>INVESTING FOR OUR CUSTOMERS<br>We continue to invest to build safety, reliability, and resiliency to meet the evolving<br>needs of our customers and the emerging supply chain of the future.<br>Building a Safe and Efficient Network<br>CASE STUDY | Teamwork Restores Service for Customers<br>Over the past five years (2018–2022), CN has invested<br>about $16 billion to improve the safety and reliability of<br>our service, support the growth of our customers, and<br>digitize and automate processes to keep our network well<br>maintained, safe and fluid while continuing to earn the<br>return on investment expected by shareholders. In 2022,<br>CN’s return on invested capital was 15.9%, up 180 basis<br>points compared to the previous year.<br>Capital projects in 2022 included building long sidings<br>and double tracks as well as acquiring 53 high-horsepower<br>locomotives, 800 high-capacity boxcars, and 500 high-efficiency hopper cars. We are investing in our intermodal<br>terminals around Toronto and Chicago to promote gateway<br>growth and deploying advanced technologies to improve<br>decision making, capacity, and service levels.<br>CAPITAL INVESTMENTS<br>Bridge Supervisor Kevin Halabi (left) and Travis Nichols, Senior<br>Manager, Bridges and Structures, point to the first section of track<br>successfully laid down after the fire.<br>3 Operations Overview Markets Operations Financials<br>120 CN | 2023 INVESTOR FACT BOOK | ||||
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| PICTURED:<br>The newly restored<br>Grande Cache Bridge,<br>which was destroyed by fire<br>and completely rebuilt<br>by CN Engineering crews<br>in only six days.<br>INFRASTRUCTURE LOCOMOTIVES ROLLING STOCK<br>Siding and double track projects improve<br>network capacity and fluidity. Maintenance<br>programs include the replacement of rail<br>and ties, bridge improvements, plus upkeep<br>of crossings, culverts, signals, and other<br>track infrastructure.<br>We are continuously upgrading our fleet.<br>Cleaner, more fuel-efficient equipment<br>also enables us to decouple our business<br>growth from GHG emissions. Tier 4<br>locomotives reduce particulate emissions<br>by up to 90%.<br>In 2022, CN acquired 800 new high-capacity boxcars to allow us to increase our<br>share of new industrial production and<br>respond to shifts in demand. We also added<br>500 high-efficiency hopper cars and plan to<br>take delivery of 750 more in 2024.<br>150+ miles<br>OF DOUBLE TRACK AND 20+ SIDING<br>PROJECTS SINCE 2016<br>~300<br>LOCOMOTIVES ADDED SINCE 2019<br>TO INCREASE CAPACITY<br>+3,500<br>HIGH-CAPACITY GRAIN HOPPER CARS<br>ADDED IN LAST 3 YEARS<br>Building a Safe and Efficient Network<br>Strategic Capital Investments<br>Double track, Edson Sub, Edmonton, AB New tier 4 locomotives in Jasper, AB Grain hopper cars in Prince Rupert, BC<br>CN | 2023 INVESTOR FACT BOOK 121 | |||||
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| LABOUR<br>RELATIONS<br>UNIONIZED EMPLOYEES: CANADA AND U.S.<br>As at December 31, 2022 Number Expiration(1)<br>CANADA<br>Conductors and Yard Coordinators 3,974 31/12/2023<br>Track Forces 2,431 31/12/2023<br>Locomotive Engineers 1,840 31/12/2023<br>Special Agents 61 31/12/2023<br>Shopcraft 1,772 31/12/2024<br>Clerical and Intermodal 1,553 31/12/2024<br>Signals and Communications 740 31/12/2025<br>Rail Traffic Controllers 149 31/12/2025<br>Other (Cogema, Autoport, Accomodated Employees) 321 Various Dates<br>UNITED STATES<br>Trainmen, Conductors and Yard Coordinators 1,546 01/01/2025<br>Track Forces 1,306 01/01/2025<br>Locomotive Engineers 1,026 01/01/2025<br>Shopcraft 869 01/01/2025<br>Signals and Communications 341 01/01/2025<br>Clerks 177 01/01/2025<br>Rail Traffic Controllers 61 01/01/2025<br>Special Agents 10 01/01/2025<br>Other (Autoport, Dockworkers) 235 Various Dates<br>CN WORKFORCE<br>As at December 31, 2022 Canada U.S. Total<br>All employees 17,392 6,579 23,971<br>Unionized employees 12,841 5,571 18,412<br>Non-unionized employees 4,551 1,008 5,559<br>(1) Under the Railway Labor Act, the United States law governing labor relations in the airline and railroad industries, there are no pre-determined expiration dates for railroad<br>collective bargaining agreements. All U.S. agreements are currently closed, and the next round of negotiations (which usually take place industry-wide) are likely to commence later<br>in 2024. Resolution of these negotiations typically takes several years, and the contract terms remain in place and unchanged throughout the negotiating process.<br>For more information on working for CN, visit www.cn.ca/careers<br>For the latest status of ongoing labour negotiations, visit www.cn.ca/media/bargaining-updates<br>FOSTERING POSITIVE RELATIONSHIPS AND OPEN COMMUNICATION<br>Unions play a key role in ensuring our employees’ voices<br>are heard at all levels of the Company. We respect this<br>fundamental right for which employees should never fear<br>retaliation. CN is committed to maintaining a strong<br>and consistent engagement with those who represent our<br>employees. We recognize that this dialogue is essential<br>to ensure fair working conditions.<br>Our commitment to our employees and our employees’ unions<br>is to maintain positive relationships that enable us to build<br>and sustain regular and ongoing dialogue with union leaders<br>and work with them on issues of mutual interest. We strive to<br>reach consensus whenever we can, and when we cannot, we<br>use traditional and alternative forms of dispute resolution to<br>successfully resolve our differences.<br>Overview Markets Operations Financials<br>3 Operations - Labour Relations<br>3 Operations<br>122 CN | 2023 INVESTOR FACT BOOK | |||||
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| PICTURED:<br>We are a family of railroaders.<br>Proud next-gener, Conductor<br>Alexis Vezina (left) has<br>joined CN, following in the<br>footsteps of his father Michel,<br>a Transportation Manager<br>in Joffre, QC.<br>We are committed to<br>working with our<br>railroaders and their<br>union representatives<br>to create a workplace<br>where employees thrive<br>and, together, we deliver<br>better and safer service<br>to our valued customers.<br>CN | 2023 INVESTOR FACT BOOK 123 | |||||
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| CN IS BUILT STRONG, IT IS BUILT TO LAST<br>CN has long played an essential role in the economy. We serve a<br>well-diversified portfolio of commodities and a broad customer<br>base with a wide geographic coverage. Approximately 65% of<br>our traffic originates and terminates on our network. With our<br>renewed focus on a disciplined scheduled operation, our Company<br>continues to enable sustainable shareholder value creation.<br>FINANCIAL<br>OVERVIEW<br>Our Finance Team makes important contributions to CN’s success by formulating<br>detailed business plans, supporting the investment of capital to drive safety, growth<br>and efficiency, and making the right financial decisions to support these objectives.<br>CN is committed to creating value for our customers and shareholders by investing<br>in technology, deepening customer engagement, and leveraging the advantages<br>of our three-coast network and strong balance sheet to deliver operational,<br>service and financial optionality.<br>CN has a disciplined approach to capital allocation, which is to support the safety<br>of our network, improve efficiency and resilience, and enable growth. We are skilled<br>at creating value for our shareholders, as evidenced by our 27 consecutive years<br>of increasing dividends to reward our shareholders (15% cumulative annual growth<br>rate) and nearly $30 billion of share repurchases since 2000.<br>At CN, we are focused on growing with our customers, driving further operating<br>efficiencies, and pricing above rail inflation. We are committed to providing industry-leading service and delivering on the longer-term growth plans we outlined at<br>Investor Day in Chicago in May 2023.<br>At CN, we are proud<br>of our performance<br>with strong free<br>cash flow generation<br>and solid returns on<br>invested capital —<br>up 180 basis points<br>in 2022 vs. 2021.<br>(1) As communicated in May 2023 at CN’s Investor Day. See the 2024-2026 Assumptions section in the Forward-Looking Statements<br>on the inside front cover of this report.<br>(2) Annual capital expenditures expected to increase from approximately $3.5 billion in 2024 to $4.0 billion in 2026.<br>2024–2026 FINANCIAL PERSPECTIVE(1)<br>10%–15%<br>DILUTED EPS CAGR<br>15%–17%<br>ANNUAL ROIC<br>~$3.5B – $4.0B(2)<br> ANNUAL CAPEX OVER PLAN PERIOD<br>CN is maintaining discipline to drive<br>top-line growth to the bottom line.<br>Overview Markets Operations Financials<br>4 Financials - Overview - Statements<br>4 Financials<br>124 CN | 2023 INVESTOR FACT BOOK | |||||
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| Unaudited<br>($ millions, unless otherwise indicated)<br>2021 2022 2023<br>Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2<br>REVENUES 3,535 3,598 3,591 3,753 14,477 3,708 4,344 4,513 4,542 17,107 4,313 4,057<br>OPERATING EXPENSES<br>Labor and fringe benefits 785 692 728 674 2,879 753 681 770 731 2,935 812 747<br>Purchased services and material 549 527 502 504 2,082 538 557 520 576 2,191 593 571<br>Fuel 364 380 350 419 1,513 525 672 649 672 2,518 557 485<br>Depreciation and amortization 404 406 405 383 1,598 420 423 435 451 1,729 448 449<br>Equipment rents 89 83 82 82 336 95 87 72 84 338 90 83<br>Casualty and other 154 128 99 125 506 150 155 135 116 556 151 122<br>Loss (recovery) on assets held for sale (137) - - - (137) - - - - - - -<br>Transaction-related costs - - 84 - 84 - - - - - - -<br>Total operating expenses 2,208 2,216 2,250 2,187 8,861 2,481 2,575 2,581 2,630 10,267 2,651 2,457<br>Operating income 1,327 1,382 1,341 1,566 5,616 1,227 1,769 1,932 1,912 6,840 1,662 1,600<br>Interest expense (130) (158) (197) (125) (610) (126) (128) (141) (153) (548) (165) (173)<br>Other components of net periodic<br>benefit income(1) 99 98 98 112 407 125 124 125 124 498 119 120<br>Merger termination fee - - 886 - 886 - - - - - - -<br>Other income (loss) (2) 51 (27) 21 43 (14) (10) (1) (2) (27) 1 1<br>Income before income taxes (1) 1,294 1,373 2,101 1,574 6,342 1,212 1,755 1,915 1,881 6,763 1,617 1,548<br>Income tax expense(1) (318) (337) (415) (373) (1,443) (294) (430) (460) (461) (1,645) (397) (381)<br>Net income (1) 976 1,036 1,686 1,201 4,899 918 1,325 1,455 1,420 5,118 1,220 1,167<br>Operating ratio 62.5% 61.6% 62.7% 58.3% 61.2% 66.9% 59.3% 57.2% 57.9% 60.0% 61.5% 60.6%<br>EARNINGS PER SHARE ($)(1)<br>Basic 1.37 1.46 2.38 1.70 6.91 1.31 1.92 2.13 2.10 7.46 1.83 1.76<br>Diluted 1.37 1.46 2.37 1.70 6.90 1.31 1.92 2.13 2.10 7.44 1.82 1.76<br>WEIGHTED AVERAGE NUMBER<br>OF SHARES (millions)<br>Basic 711.0 709.0 708.7 705.3 708.5 698.4 690.0 682.3 674.9 686.4 668.3 661.6<br>Diluted 712.8 710.6 710.4 707.4 710.3 700.2 691.7 684.3 676.9 688.3 669.9 663.1<br>Dividends declared per share ($) 0.6150 0.6150 0.6150 0.6150 2.4600 0.7325 0.7325 0.7325 0.7325 2.9300 0.7900 0.7900<br>(1) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in accounting policy filed on September 9, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>Quarterly Consolidated<br>Statements of Income<br>For more information on our financial results, please visit www.cn.ca/investors/financial-results<br>CN | 2023 INVESTOR FACT BOOK 125 | |||||
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| Quarterly Consolidated<br>Balance Sheets<br>Unaudited<br>($ millions)<br>2021 2022 2023<br>Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2<br>ASSETS<br>Current assets<br>Cash and cash equivalents 518 569 2,194 838 490 465 403 328 484 539<br>Restricted cash and cash equivalents 529 525 493 503 555 555 503 506 453 451<br>Accounts receivable 1,177 1,219 1,210 1,074 1,318 1,358 1,526 1,371 1,385 1,223<br>Material and supplies 633 638 622 589 660 731 706 692 764 757<br>Other current assets 517 535 418 422 216 245 251 320 330 296<br>Total current assets 3,374 3,486 4,937 3,426 3,239 3,354 3,389 3,217 3,416 3,266<br>Properties 39,816 39,918 40,753 41,178 40,944 41,761 43,450 43,537 43,499 43,546<br>Operating lease right-of-use assets 403 395 444 445 443 429 483 470 443 416<br>Pension asset(1) 959 1,085 1,209 3,050 3,199 3,331 3,460 3,033 3,139 3,245<br>Intangible assets, goodwill and other 416 459 431 439 411 410 424 405 406 403<br>Advance to KCS and other transaction costs - 921 - - - - - - – –<br>Total assets (1) 44,968 46,264 47,774 48,538 48,236 49,285 51,206 50,662 50,903 50,876<br>LIABILITIES AND SHAREHOLDERS’ EQUITY<br>Current liabilities<br>Accounts payable and other 2,162 2,171 2,328 2,612 2,344 2,309 2,565 2,785 2,289 2,394<br>Current portion of long-term debt 676 1,579 1,224 508 1,504 2,447 792 1,057 2,325 1,107<br>Total current liabilities 2,838 3,750 3,552 3,120 3,848 4,756 3,357 3,842 4,614 3,501<br>Deferred income taxes(1) 8,407 8,486 8,698 9,303 9,278 9,503 9,841 9,796 9,858 9,910<br>Other liabilities and deferred credits 529 508 451 427 418 435 439 441 445 461<br>Pension and other postretirement benefits 759 752 751 645 639 610 612 486 484 480<br>Long-term debt 12,252 12,140 12,332 11,977 11,879 11,925 14,600 14,372 14,323 15,831<br>Operating lease liabilities 289 284 321 322 322 312 357 341 320 295<br>Total liabilities 25,074 25,920 26,105 25,794 26,384 27,541 29,206 29,278 30,044 30,478<br>SHAREHOLDERS’ EQUITY<br>Common shares 3,710 3,709 3,727 3,704 3,695 3,660 3,625 3,613 3,589 3,573<br>Common shares in Share Trusts (96) (97) (104) (103) (88) (88) (88) (170) (141) (142)<br>Additional paid-in capital 368 379 381 397 382 374 378 381 360 369<br>Accumulated other comprehensive loss(1) (3,728) (3,766) (3,581) (2,241) (2,280) (2,019) (1,546) (1,969) (1,986) (2,079)<br>Retained earnings(1) 19,640 20,119 21,246 20,987 20,143 19,817 19,631 19,529 19,037 18,677<br>Total shareholders’ equity(1) 19,894 20,344 21,669 22,744 21,852 21,744 22,000 21,384 20,859 20,398<br>Total liabilities and shareholders' equity (1) 44,968 46,264 47,774 48,538 48,236 49,285 51,206 50,662 50,903 50,876<br>(1) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in accounting policy filed on September 9, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>4 Financials Overview Markets Operations Financials<br>126 CN | 2023 INVESTOR FACT BOOK | |||||
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| Quarterly Consolidated Statements<br>of Cash Flows<br>Unaudited<br>($ millions)<br>2021 2022 2023<br>Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2<br>OPERATING ACTIVITIES<br>Net income(1) 976 1,036 1,686 1,201 4,899 918 1,325 1,455 1,420 5,118 1,220 1,167<br>Adjustments to reconcile net income<br>to net cash provided by<br>operating activities:<br>Depreciation and amortization 404 406 405 383 1,598 420 423 435 451 1,729 448 449<br> Pension income and funding(1) (112) (52) (51) (99) (314) (112) (92) (91) (92) (387) (105) (105)<br> Amortization of bridge financing<br> and other fees - 32 65 - 97 - - - - - - -<br> Deferred income taxes(1) 152 98 109 154 513 (12) 120 108 188 404 70 109<br> Loss (recovery) on assets<br> held for sale (137) - - - (137) - - - - – - -<br>Changes in operating assets<br>and liabilities:<br> Accounts receivable (129) (49) 21 135 (22) (255) (29) (132) 126 (290) (21) 165<br> Material and supplies (49) (5) 17 30 (7) (67) (65) 39 11 (82) (73) 3<br> Accounts payable and other (212) (10) 82 281 141 (369) (52) 140 272 (9) (557) 105<br> Other current assets 1 18 40 (24) 35 (43) 25 58 (70) (30) (30) 51<br>Other operating activities, net 58 1 84 25 168 90 58 100 (34) 214 103 41<br>Net cash provided by<br>operating activities 952 1,475 2,458 2,086 6,971 570 1,713 2,112 2,272 6,667 1,055 1,985<br>INVESTING ACTIVITIES<br>Property additions (412) (729) (836) (914) (2,891) (379) (707) (744) (920) (2,750) (461) (875)<br>Advance for acquisition and<br>other transaction-related costs - (908) - - (908) - - - - – - -<br>Refund of advance for acquisition - - 886 - 886 - - - - – - -<br>Proceeds from assets held for sale - - - - - 273 - - - 273 - -<br>Other investing activities, net (1) (5) (8) 54 40 5 (9) (12) (17) (33) (1) (10)<br>Net cash used in investing activities (413) (1,642) 42 (860) (2,873) (101) (716) (756) (937) (2,510) (462) (885)<br>(1) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in accounting policy filed on September 9, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>CN | 2023 INVESTOR FACT BOOK 127 | |||||
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| Unaudited<br>($ millions)<br>2021 2022 2023<br>Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2<br>FINANCING ACTIVITIES<br>Issuance of debt 389 14 - - 403 - - 1,899 - 1,899 - 1,730<br>Repayment of debt (258) (16) (568) (19) (861) (17) (12) (10) (344) (383) (12) (215)<br>Change in commercial paper, net 13 903 164 (1,014) 66 1,020 686 (1,745) 602 563 1,228 (989)<br>Bridge financing and other fees - (93) (4) - (97) - - - - – - -<br>Settlement of foreign exchange<br>forward contracts on debt (9) (15) 25 (9) (8) (1) 13 49 18 79 10 (12)<br>Issuance of common shares for<br>stock options exercised 20 2 19 11 52 29 6 5 21 61 13 18<br>Withholding taxes remitted on the net<br>settlement of equity settled awards (27) - (5) (5) (37) (23) (18) (3) - (44) (35) (2)<br>Repurchase of common shares (277) (137) (72) (1,096) (1,582) (1,258) (1,172) (1,157) (1,122) (4,709) (1,160) (1,045)<br>Purchase of common shares for<br>settlement of equity settled awards - - (25) (2) (27) - (16) (7) (1) (24) (1) (2)<br>Purchase of common shares by<br>Share Trusts (7) (7) (7) (5) (26) (6) (6) (6) (87) (105) (7) (7)<br>Dividends paid (436) (436) (435) (433) (1,740) (509) (504) (498) (493) (2,004) (526) (521)<br>Net cash used in financing activities (592) 215 (908) (2,572) (3,857) (765) (1,023) (1,473) (1,406) (4,667) (490) (1,045)<br>Effect of foreign exchange<br>fluctuations on cash, cash<br>equivalents, restricted cash, and<br>restricted cash equivalents - (1) 1 - - - 1 3 (1) 3 - (2)<br>Net increase (decrease) in cash,<br>cash equivalents, restricted cash,<br>and restricted cash equivalents (53) 47 1,593 (1,346) 241 (296) (25) (114) (72) (507) 103 53<br>Cash, cash equivalents, restricted<br>cash, and restricted cash<br>equivalents, beginning of period 1,100 1,047 1,094 2,687 1,100 1,341 1,045 1,020 906 1,341 834 937<br>Cash, cash equivalents, restricted<br>cash, and restricted cash<br>equivalents, end of period 1,047 1,094 2,687 1,341 1,341 1,045 1,020 906 834 834 937 990<br>Cash and cash equivalents,<br>end of period 518 569 2,194 838 838 490 465 403 328 328 484 539<br>Restricted cash and cash<br>equivalents, end of period 529 525 493 503 503 555 555 503 506 506 453 451<br>Cash, cash equivalents, restricted<br>cash, and restricted cash<br>equivalents, end of period 1,047 1,094 2,687 1,341 1,341 1,045 1,020 906 834 834 937 990<br>SUPPLEMENTAL<br>CASH FLOW INFORMATION<br>Interest paid (174) (85) (174) (79) (512) (171) (86) (182) (103) (542) (251) (115)<br>Income taxes paid (188) (193) (201) (177) (759) (320) (370) (264) (334) (1,288) (424) (284)<br>Quarterly Consolidated Statements<br>of Cash Flows (cont.)<br>4 Financials Overview Markets Operations Financials<br>128 CN | 2023 INVESTOR FACT BOOK | |||||
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| Quarterly Financial and<br>Statistical Data<br>Unaudited<br>2021 2022 2023<br>Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2<br>REVENUES ($ millions)<br>Petroleum and chemicals 661 685 715 755 2,816 756 829 850 794 3,229 828 748<br>Metals and minerals 368 377 410 393 1,548 406 466 539 500 1,911 529 497<br>Forest products 429 451 425 435 1,740 426 513 550 517 2,006 511 480<br>Coal 126 158 169 165 618 195 249 258 235 937 263 263<br>Grain and fertilizers 713 609 510 643 2,475 604 604 621 954 2,783 861 688<br>Intermodal 968 1,037 1,061 1,049 4,115 1,056 1,326 1,340 1,184 4,906 1,012 983<br>Automotive 158 135 137 146 576 165 208 208 216 797 215 235<br>Total freight revenues 3,423 3,452 3,427 3,586 13,888 3,608 4,195 4,366 4,400 16,569 4,219 3,894<br>Other revenues 112 146 164 167 589 100 149 147 142 538 94 163<br>Total revenues 3,535 3,598 3,591 3,753 14,477 3,708 4,344 4,513 4,542 17,107 4,313 4,057<br>STATISTICAL OPERATING DATA<br>Gross ton miles (GTMs) (millions) 120,780 116,735 110,690 110,196 458,401 111,066 120,742 115,585 116,317 463,710 115,442 109,693<br>Revenue ton miles (RTMs) (millions) 61,454 59,246 55,875 56,563 233,138 56,554 60,551 58,540 60,143 235,788 59,961 55,877<br>Carloads (thousands) 1,431 1,469 1,427 1,374 5,701 1,346 1,474 1,469 1,408 5,697 1,353 1,369<br>Route miles (includes Canada<br>and the U.S.) 19,500 19,500 19,500 19,500 19,500 18,600 18,600 18,600 18,600 18,600 18,600 18,600<br>Employees (end of period) 24,577 24,376 23,765 22,604 22,604 22,953 22,783 23,828 23,971 23,971 24,718 25,178<br>Employees (average for the period) 24,508 24,410 24,312 23,107 24,084 22,720 23,137 23,729 23,998 23,396 24,403 25,005<br>KEY OPERATING MEASURES<br>Freight revenue per RTM (cents) 5.57 5.83 6.13 6.34 5.96 6.38 6.93 7.46 7.32 7.03 7.04 6.97<br>Freight revenue per carload ($) 2,392 2,350 2,402 2,610 2,436 2,681 2,846 2,972 3,125 2,908 3,118 2,844<br>GTMs per average number of<br>employees (thousands) 4,928 4,782 4,553 4,769 19,033 4,888 5,219 4,871 4,847 19,820 4,731 4,387<br>Operating expenses per GTM (cents) 1.83 1.90 2.03 1.98 1.93 2.23 2.13 2.23 2.26 2.21 2.30 2.24<br>Labor and fringe benefits expense<br>per GTM (cents) 0.65 0.59 0.66 0.61 0.63 0.68 0.56 0.67 0.63 0.63 0.70 0.68<br>Diesel fuel consumed<br>(US gallons in millions) 111.3 101.7 93.9 98.3 405.2 101.1 101.2 96.9 103.0 402.2 104.1 97.4<br>Average fuel price ($/US gallon) 2.89 3.24 3.33 3.70 3.28 4.42 5.82 5.70 5.73 5.42 4.79 4.24<br>Fuel efficiency (US gallons<br>of locomotive fuel consumed<br>per 1,000 GTMs) 0.922 0.871 0.848 0.892 0.884 0.910 0.838 0.838 0.886 0.867 0.902 0.888<br>SAFETY INDICATORS(1)<br>Injury frequency rate<br>(per 200,000 person hours) 1.62 0.97 1.44 1.40 1.36 1.23 1.21 1.01 0.93 1.10 1.02 1.00<br>Accident rate (per million train miles) 1.28 1.92 2.13 2.08 1.84 2.78 1.82 1.69 1.82 1.97 1.64 1.91<br>Statistical operating data, key operating measures and safety indicators are unaudited and based on estimated data available<br>at such time and are subject to change as more complete information becomes available. Definitions of these indicators are<br>provided on our website, www.cn.ca/glossary.<br>(1) Based on Federal Railroad Administration (FRA) reporting criteria.<br>CN | 2023 INVESTOR FACT BOOK 129 | |||||
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| Non-GAAP Measures<br>CN reports its financial results in accordance with United States generally accepted accounting principles (GAAP). CN may use non-GAAP measures that do not have any standardized meaning prescribed by GAAP, including adjusted performance measures, free cash<br>flow, adjusted debt-to-adjusted EBITDA multiple and return on invested capital (ROIC) and adjusted ROIC. These non-GAAP measures<br>may not be comparable to similar measures presented by other companies. From management’s perspective, these non-GAAP measures<br>are useful measures of performance and provide investors with supplementary information to assess the Company’s results of operations<br>and liquidity. These non-GAAP measures should not be considered in isolation or as a substitute for financial measures prepared in<br>accordance with GAAP.<br>Adjusted Performance Measures<br>Adjusted net income, adjusted earnings per share, adjusted<br>operating income, adjusted operating expenses and adjusted<br>operating ratio are non-GAAP measures that are used to<br>set performance goals and to measure CN’s performance.<br>Management believes that these adjusted performance<br>measures provide additional insight to management and<br>investors into the Company’s operations and underlying<br>business trends as well as facilitate period-to-period<br>comparisons, as they exclude certain significant items that<br>are not reflective of CN’s underlying business operations and<br>could distort the analysis of trends in business performance.<br>These items may include:<br>i. operating expense adjustments: workforce reduction<br>program, depreciation expense on the deployment of<br>replacement system, advisory fees related to shareholder<br>matters, losses and recoveries from assets held for sale,<br>business acquisition-related costs;<br>ii. non-operating expense adjustments: business acquisition-related financing fees, merger termination income, gains<br>and losses on disposal of property; and<br>iii. the effect of tax law changes and rate enactments.<br>These non-GAAP measures do not have any standardized<br>meaning prescribed by GAAP and, therefore, may not be<br>comparable to similar measures presented by other<br>companies.<br>Adjusted net income is defined as Net income in accordance<br>with GAAP adjusted for certain significant items. Adjusted<br>diluted earnings per share is defined as adjusted net income<br>divided by the weighted-average diluted shares outstanding.<br>Overview Markets Operations Financials<br>4 Financials - Overview - Non-GAAP Measures<br>4 Financials<br>130 CN | 2023 INVESTOR FACT BOOK | |||||
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| Unaudited<br>($ millions, except per share data)<br>Year ended December 31 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>Net income (1) 2,575 3,135 3,529 3,630 5,470 4,312 4,198 3,545 4,899 5,118<br>Adjustments:<br>Operating expense adjustments:<br>Workforce reduction program – – – – – 27 31 – 39 -<br> Depreciation expense on the<br>deployment of replacement system – – – – – – 84 – – -<br> Advisory fees related to<br> shareholder matters – – – – – – – – 20 22<br> Loss (recovery) on assets held for sale – – – – – – – 486 (137) -<br> Transaction-related costs – – – – – – – – 84 -<br>Non-operating expense adjustments:<br>Amortization of bridge financing<br>and other fees – – - - - – – – 97 -<br> Merger termination fee - - - - - – – – (886) -<br> Gains on disposal of property (69) (80) – 76 – (338) – – – -<br>Tax adjustments:<br>Tax effect of adjustments (2) 15 8 – 10 – 39 (30) (123) 109 (6)<br> Tax law changes and rate enactments 24 – 42 7 (1,706) – (112) (141) – -<br>Total adjustments (30) (72) 42 (59) (1,706) (272) (27) 222 (674) 16<br>Adjusted net income (1) 2,545 3,063 3,571 3,571 3,764 4,040 4,171 3,767 4,225 5,134<br>Diluted earnings per share (1) 3.04 3.81 4.38 4.66 7.22 5.85 5.81 4.97 6.90 7.44<br>Impact of adjustments, per share (0.03) (0.09) 0.05 (0.08) (2.25) (0.37) (0.03) 0.31 (0.95) 0.02<br>Adjusted diluted earnings per share (1) 3.01 3.72 4.43 4.58 4.97 5.48 5.78 5.28 5.95 7.46<br>The following table provides a reconciliation of Net income and Earnings per share in accordance with GAAP, as reported for<br>the periods specified, to the non-GAAP adjusted performance measures presented herein:<br>(1) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in accounting policy filed on September 9, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>(2) The tax impact of adjustments is based on the nature of the item for tax purposes and related tax rates in the applicable jurisdiction.<br><br>For the year ended December 31, 2022, the Company's reported adjusted net income was $5,134 million, or $7.46 per diluted<br>share, which excludes advisory fees related to shareholder matters of $22 million, or $16 million after-tax ($0.02 per diluted<br>share) recorded in Casualty and other within the Consolidated Statements of Income.<br>CN | 2023 INVESTOR FACT BOOK 131 | |||||
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| For the year ended December 31, 2021, the Company reported<br>adjusted net income of $4,225 million,<br>(2) or $5.95 per diluted<br>share,(2) which excludes:<br> • employee termination benefits and severance costs<br>related to a workforce reduction program of $39 million, or<br>$29 million after-tax ($0.04 per diluted share) recorded in<br>the third quarter in Labor and fringe benefits within the<br>Consolidated Statements of Income;<br> • advisory fees related to shareholder matters of $20 million,<br>or $15 million after-tax ($0.02 per diluted share) of which<br>$13 million, or $10 million after-tax ($0.02 per diluted share)<br>was recorded in the fourth quarter and $7 million, or<br>$5 million after-tax ($0.01 per diluted share) was recorded<br>in the third quarter in Casualty and other within the<br>Consolidated Statements of Income;<br> • the recovery of $137 million, or $102 million after-tax<br>($0.14 per diluted share) recorded in the first quarter related<br>to the loss on assets held for sale in the second quarter<br>of 2020, to reflect an agreement for the sale for on-going<br>rail operations, certain non-core rail lines in Wisconsin,<br>Michigan and Ontario to a short line operator;<br> • transaction-related costs, consisting of an advance to<br>Kansas City Southern (KCS) and a related refund, net of<br>transaction costs, of $84 million, or $70 million after-tax<br>($0.10 per diluted share), recorded in the third quarter<br>resulting from the terminated CN Merger Agreement<br>with KCS;<br> • amortization of bridge financing and other fees of<br>$65 million, or $60 million after-tax ($0.08 per diluted share)<br>recorded in the third quarter and $32 million, or $24 million<br>after-tax ($0.03 per diluted share) recorded in the second<br>quarter, resulting from the KCS transaction, recorded in<br>Interest expense within the Consolidated Statements of<br>Income; and<br> • merger termination fee paid by KCS to CN of $886 million,<br>or $770 million after-tax ($1.08 per diluted share), recorded<br>in the third quarter resulting from KCS’ notice of termination<br>of the CN Merger Agreement with KCS.<br>For the year ended December 31, 2020, the Company reported<br>adjusted net income of $3,767 million,(2) or $5.28 per diluted<br>share,(2) which excludes a loss of $486 million, or $363 million<br>after-tax ($0.51 per diluted share) in the second quarter,<br>resulting from the Company’s decision to market for sale for<br>on-going rail operations, certain non-core lines in Wisconsin,<br>Michigan and Ontario, and a current income tax recovery<br>of $141 million ($0.20 per diluted share) in the first quarter<br>resulting from the enactment of the Coronavirus Aid, Relief,<br>and Economic Security (CARES) Act, a U.S. tax-and-spending<br>package aimed at providing additional stimulus to address<br>the economic impact of the COVID-19 pandemic.<br>For the year ended December 31, 2019, the Company reported<br>adjusted net income of $4,171 million,(2) or $5.78 per diluted<br>share,(2) which excludes employee termination benefits and<br>severance costs related to a workforce reduction program of<br>$31 million, or $23 million after-tax ($0.03 per diluted share)<br>in the fourth quarter; a deferred income tax recovery of<br>$112 million ($0.15 per diluted share) in the second quarter,<br>resulting from the enactment of a lower provincial corporate<br>income tax rate; and a depreciation expense of $84 million,<br>or $62 million after-tax ($0.09 per diluted share) in the first<br>quarter, related to costs previously capitalized for a Positive<br>Train Control (PTC) back office system following the<br>deployment of a replacement system.<br>For the year ended December 31, 2018, the Company reported<br>adjusted net income of $4,040 million,(2) or $5.48 per diluted<br>share,(2) which excludes employee termination benefits and<br>severance costs related to a workforce reduction program of<br>$27 million, or $20 million after-tax ($0.03 per diluted share)<br>in the fourth quarter and gains on disposal of property of<br>$338 million, or $292 million after-tax ($0.40 per diluted share),<br>consisting of the following:<br> • in the fourth quarter, a gain previously deferred on the 2014<br>disposal of a segment of the Guelph subdivision located<br>between Georgetown and Kitchener, Ontario, together with<br>the rail fixtures and certain passenger agreements (the<br> “Guelph”), of $79 million, or $70 million after-tax ($0.10 per<br>diluted share);<br>Non-GAAP Measures (cont.)<br>(2) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in accounting policy filed on September 9, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>4 Financials Overview Markets Operations Financials<br>132 CN | 2023 INVESTOR FACT BOOK | |||||
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| • in the third quarter, a gain on disposal of property located<br>in Montreal, Quebec (the “Doney and St-François Spurs”)<br>of $36 million, or $32 million after-tax ($0.04 per diluted<br>share); and<br> • in the second quarter, a gain on transfer of the Company’s<br>finance lease in the passenger rail facilities in Montreal,<br>Quebec, together with its interests in related railway<br>operating agreements (the “Central Station Railway Lease”),<br>of $184 million, or $156 million after-tax ($0.21 per diluted<br>share), and a gain on disposal of land located in Calgary,<br>Alberta, excluding the rail fixtures (the “Calgary Industrial<br>Lead”), of $39 million, or $34 million after-tax ($0.05 per<br>diluted share).<br>For the year ended December 31, 2017, the Company<br>reported adjusted net income of $3,764 million,(2) or $4.97 per<br>diluted share,(2) which excludes a net deferred income tax<br>recovery of $1,706 million ($2.25 per diluted share) consisting<br>of the following:<br> • in the fourth quarter, a deferred income tax recovery of<br>$1,764 million ($2.33 per diluted share) resulting from the<br>enactment of a lower U.S. federal corporate income tax<br>rate due to the Tax Cuts and Jobs Act (“U.S. Tax Reform”)<br>and a deferred income tax expense of $50 million<br>($0.07 per diluted share) resulting from the enactment<br>of higher provincial corporate income tax rates;<br> • in the third quarter, a deferred income tax expense of<br>$31 million ($0.04 per diluted share) resulting from the<br>enactment of a higher state corporate income tax rate;<br> • in the second quarter, a deferred income tax recovery<br>of $18 million ($0.02 per diluted share) resulting from the<br>enactment of a lower provincial corporate income<br>tax rate; and<br> • in the first quarter, a deferred income tax recovery of<br>$5 million ($0.01 per diluted share) resulting from the<br>enactment of a lower provincial corporate income<br>tax rate.<br>For the year ended December 31, 2016, the Company reported<br>adjusted net income of $3,571 million,(2) or $4.58 per diluted<br>share,(2) which excludes a gain on disposal of approximately one<br>mile of elevated track leading into Montreal’s Central Station,<br>together with the rail fixtures, of $76 million, or $66 million<br>after-tax ($0.09 per diluted share) in the fourth quarter, and a<br>deferred income tax expense of $7 million ($0.01 per diluted<br>share) resulting from the enactment of a higher provincial<br>corporate income tax rate in the second quarter.<br>For the year ended December 31, 2015, the Company reported<br>adjusted net income of $3,571 million,(2) or $4.43 per diluted<br>share,(2) which excludes a deferred income tax expense of<br>$42 million ($0.05 per diluted share) resulting from the<br>enactment of a higher provincial corporate income tax rate<br>in the second quarter.<br>For the year ended December 31, 2014, the Company reported<br>adjusted net income of $3,063 million,(2) or $3.72 per diluted<br>share,(2) which excludes a gain on disposal of the Deux-Montagnes subdivision, including the Mont-Royal tunnel,<br>together with the rail fixtures, of $80 million, or $72 million<br>after-tax ($0.09 per diluted share) in the first quarter.<br>For the year ended December 31, 2013, the Company reported<br>adjusted net income of $2,545 million,(2) or $3.01 per diluted<br>share,(2) which excludes a first quarter gain on disposal of a<br>segment of the Oakville subdivision, together with the rail<br>fixtures and certain passenger agreements, of $40 million, or<br>$36 million after-tax ($0.04 per diluted share) and a second<br>quarter gain on exchange of perpetual railroad operating<br>easements including the track and roadway assets on specific<br>rail lines, of $29 million, or $18 million after-tax ($0.02 per<br>diluted share). The adjusted figures also exclude a second<br>quarter income tax expense of $5 million ($0.01 per diluted<br>share) and a third quarter income tax expense of $19 million<br>($0.02 per diluted share), both resulting from the enactment<br>of higher provincial corporate income tax rates.<br>(2) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in accounting policy filed on September 9, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>CN | 2023 INVESTOR FACT BOOK 133 | |||||
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| Non-GAAP Measures (cont.)<br>Adjusted Performance Measures (cont.)<br>Adjusted operating income is defined as Operating income<br>in accordance with GAAP adjusted for certain significant<br>operating expense items. Adjusted operating expenses is<br>defined as Operating expenses in accordance with GAAP<br>adjusted for certain significant operating expense items.<br>Adjusted operating ratio is defined as adjusted operating<br>expenses as a percentage of revenues.<br>The following table provides a reconciliation of Operating<br>income, Operating expenses and operating ratio, as<br>reported for the periods specified, to the non-GAAP adjusted<br>performance measures presented herein:<br>Unaudited<br>($ millions, except percentages)<br>Year ended December 31 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>Operating income 3,819 4,498 5,155 5,032 5,243 5,493 5,593 4,777 5,616 6,840<br>Operating expense adjustments:<br>Workforce reduction program - - - - - 27 31 – 39 -<br>Depreciation expense on the<br>deployment of replacement system - - - - - – 84 – – -<br>Advisory fees related to<br>shareholder matters - - - - - – – – 20 22<br>Loss (recovery) on assets held for sale - - - - - – – 486 (137) -<br>Transaction-related costs - - - - - – – – 84 -<br>Total operating expense adjustments - - - - - 27 115 486 6 22<br>Adjusted operating income 3,819 4,498 5,155 5,032 5,243 5,520 5,708 5,263 5,622 6,862<br>Operating expenses 6,756 7,636 7,456 7,005 7,798 8,828 9,324 9,042 8,861 10,267<br>Total operating expense adjustments – - - - - (27) (115) (486) (6) (22)<br>Adjusted operating expenses 6,756 7,636 7,456 7,005 7,798 8,801 9,209 8,556 8,855 10,245<br>Operating ratio(1) 63.9% 62.9% 59.1% 58.2% 59.8% 61.6% 62.5% 65.4% 61.2% 60.0%<br>Impact of adjustments 0.0% 0.0% 0.0% 0.0% 0.0% (0.1)% (0.8)% (3.5)% 0.0% (0.1)%<br>Adjusted operating ratio 63.9% 62.9% 59.1% 58.2% 59.8% 61.5% 61.7% 61.9% 61.2% 59.9%<br>(1) Operating ratio is defined as operating expenses as a percentage of revenues.<br>4 Financials Overview Markets Operations Financials<br>134 CN | 2023 INVESTOR FACT BOOK | |||||
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| (1) Relates to income tax payments of $102 million for KCS merger transaction-related payments and cash receipts. See Note 4 – Acquisitions, Terminated CN Kansas City Southern<br>(KCS) merger agreement, to the Company’s 2022 Annual Consolidated Financial Statements and the section entitled Adjusted performance measures to the Company’s 2022<br>Annual MD&A filed on January 31, 2023, which may be found online on SEDAR+ at www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the<br>Company’s website at www.cn.ca in the Investors section, for additional information.<br>(2) Relates to the terminated CN KCS merger agreement. See Note 3 – Acquisitions, Terminated CN KCS merger agreement, to the Company’s 2021 Annual Consolidated Financial<br>Statements and the section entitled Adjusted performance measures to the Company’s 2021 Annual MD&A filed on February 1, 2022, which may be found online on SEDAR+ at<br>www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>(3) Relates to the acquisitions of H&R Transport Limited (“H&R”) and the TransX Group of Companies (“TransX”). See the section entitled Liquidity and capital resources – Investing<br>activities to the Company’s 2021 Annual MD&A filed on February 1, 2022, which may be found online on SEDAR+ at www.sedarplus.com, on the SEC’s website at www.sec.gov<br>through EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for additional information.<br>Unaudited<br>($ millions)<br>Year ended December 31 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>Net cash provided by<br>operating activities 3,548 4,381 5,140 5,202 5,516 5,918 5,923 6,165 6,971 6,667<br>Net cash used in<br>investing activities (1,925) (2,161) (2,767) (2,682) (2,738) (3,404) (4,190) (2,946) (2,873) (2,510)<br>Net cash provided before<br>financing activities 1,623 2,220 2,373 2,520 2,778 2,514 1,733 3,219 4,098 4,157<br>Adjustments:<br>Cash income taxes for<br>merger transaction-related<br>payments and cash receipts(1)<br> – – – – – – – – – 102<br>Transaction-related costs paid(2) – – – – – – – – 125 -<br>Advance for acquisition(2) – – – – – – – – 845 -<br>Refund of advance for acquisition(2) – – – – – – – – (886) -<br>Merger termination fee (2) – – – – – – – – (886) -<br>Acquisition, net of cash acquired(3) – – – – – – 259 8 – -<br>Total adjustments – – – – – – 259 8 (802) 102<br>Free cash flow 1,623 2,220 2,373 2,520 2,778 2,514 1,992 3,227 3,296 4,259<br>Free Cash Flow<br>Free cash flow is a useful measure of liquidity as it<br>demonstrates the Company’s ability to generate cash for<br>debt obligations and for discretionary uses such as payment<br>of dividends, share repurchases and strategic opportunities.<br>The Company defines its free cash flow measure as the<br>difference between net cash provided by operating activities<br>and net cash used in investing activities, adjusted for the<br>impact of (i) business acquisitions and (ii) merger transaction-related payments, cash receipts and cash income taxes,<br>which are items that are not indicative of operating trends.<br>Free cash flow does not have any standardized meaning<br>prescribed by GAAP and, therefore, may not be comparable<br>to similar measures presented by other companies.<br>The following table provides a reconciliation of Net cash<br>provided by operating activities in accordance with GAAP,<br>as reported for the periods specified, to the non-GAAP<br>free cash flow presented herein:<br>CN | 2023 INVESTOR FACT BOOK 135 | |||||
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| Non-GAAP Measures (cont.)<br>Adjusted Debt-To-Adjusted EBITDA Multiple<br>Management believes that the adjusted debt-to-adjusted<br>EBITDA multiple is a useful credit measure because it reflects<br>the Company’s ability to service its debt and other long-term<br>obligations. The Company calculates the adjusted debt-to-adjusted EBITDA multiple as adjusted debt divided by the last<br>twelve months of adjusted EBITDA. Adjusted debt is defined<br>as the sum of Long-term debt and Current portion of long-term debt as reported on the Company’s Consolidated<br>Balance Sheets as well as Operating lease liabilities, including<br>current portion and pension plans in deficiency recognized<br>on the Company’s Consolidated Balance Sheets due to the<br>debt-like nature of their contractual and financial obligations.<br>Adjusted EBITDA is calculated as Net income excluding<br>Interest expense, Income tax expense, Depreciation and<br>amortization, operating lease cost, Other components of<br>net periodic benefit income, Other income (loss), and other<br>significant items that are not reflective of CN’s underlying<br>business operations and which could distort the analysis of<br>trends in business performance. Adjusted debt and adjusted<br>EBITDA are non-GAAP measures used to compute the<br>Adjusted debt-to-adjusted EBITDA multiple. These measures<br>do not have any standardized meaning prescribed by GAAP<br>and, therefore, may not be comparable to similar measures<br>presented by other companies.<br>The following table provides a reconciliation of debt and<br>Net income in accordance with GAAP, as reported for the<br>periods specified, to the adjusted measures presented herein,<br>which have been used to calculate the non-GAAP adjusted<br>debt-to-adjusted EBITDA multiple:<br>(1) Represents the present value of operating lease payments.<br>(2) Represents the total funded deficit of all defined benefit pension plans with a<br>projected benefit obligation in excess of plan assets.<br>(3) In the first quarter of 2022, the Company changed its method of calculating<br>market-related values of pension assets for its defined benefit plans using a<br>retrospective approach. See the Company’s selected financial information restated for<br>change in accounting policy filed on September 9, 2022, which may be found online<br>on SEDAR+ at www.sedarplus.com, on the SEC’s website at www.sec.gov through<br>EDGAR, and on the Company’s website at www.cn.ca in the Investors section, for<br>additional information.<br>(4) Represents the operating lease costs recorded in Purchased services and material and<br>Equipment rents within the Consolidated Statements of Income.<br>(5) Relates to employee termination benefits and severance costs for a workforce<br>reduction program, recorded in Labor and fringe benefits within the Consolidated<br>Statements of Income.<br>(6) Relates to advisory fees related to shareholder matters recorded in Casualty<br>and other within the Consolidated Statements of Income.<br>(7) Relates to the loss (recovery) on assets held for sale resulting from the Company<br>entering into an agreement for the sale of non-core lines.<br>(8) Relates to the terminated CN KCS merger agreement.<br>Unaudited<br>($ millions, unless otherwise indicated)<br>As at and for the year ended December 31 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>Debt 7,802 8,372 10,427 10,937 10,828 12,569 13,796 12,906 12,485 15,429<br>Adjustments:<br>Operating lease liabilities, including<br> current portion (1)<br> 570 607 607 533 478 579 501 418 430 466<br>Pension plans in deficiency (2) 303 400 469 442 455 477 521 553 447 353<br>Adjusted debt 8,675 9,379 11,503 11,912 11,761 13,625 14,818 13,877 13,362 16,248<br>Net income (3) 2,575 3,135 3,529 3,630 5,470 4,312 4,198 3,545 4,899 5,118<br>Interest expense 357 371 439 480 481 489 538 554 610 548<br>Income tax expense (recovery) (3) 964 1,182 1,333 1,283 (400) 1,348 1,207 976 1,443 1,645<br>Depreciation and amortization 980 1,050 1,158 1,225 1,281 1,329 1,562 1,589 1,598 1,729<br>Operating lease cost(4) 179 201 204 197 191 218 171 143 131 142<br>Other components of net periodic benefit income (3) (4) (83) (99) (266) (296) (280) (297) (292) (407) (498)<br>Other income (73) (107) (47) (95) (12) (376) (53) (6) (43) 27<br>Adjustments:<br>Workforce reduction program (5) – – – – – 27 31 – 39 -<br>Advisory fees related to shareholder matters (6) – – – – – – – – 20 22<br>Loss (recovery) on assets held for sale (7) – – – – – – – 486 (137)<br>Transaction-related costs (8) – – – – – – – – 84 -<br>Merger termination fee (8) – – – – – – – – (886) -<br>Adjusted EBITDA 4,978 5,749 6,517 6,454 6,715 7,067 7,357 6,995 7,351 8,733<br>Adjusted debt-to-adjusted EBITDA multiple (times) 1.74 1.63 1.77 1.85 1.75 1.93 2.01 1.98 1.82 1.86<br>4 Financials Overview Markets Operations Financials<br>136 CN | 2023 INVESTOR FACT BOOK | |||||
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| (1) In the first quarter of 2022, the Company changed its method of calculating market-related values of pension assets for its defined benefit plans using a retrospective<br>approach. See the Company’s selected financial information restated for change in<br>accounting policy filed on September 9, 2022, which may be found online on SEDAR+<br>at www.sedarplus.com, on the SEC’s website at www.sec.gov through EDGAR, and on<br>the Company’s website at www.cn.ca in the Investors section, for additional information.<br>(2) The effective tax rate, defined as Income tax expense as a percentage of Income<br>before income taxes, used to calculate the tax on Interest expense for 2022 was 24.3%<br>(2021 - 22.8%, 2020 - 21.6%, 2019 - 22.3%, 2018 - 23.8%, 2017 - 25.8%, 2016 - 26.1%,<br>2015 - 27.4%, 2014 - 27.4%, 2013 - 27.2%). Due to the negative effective tax rate<br>reported by the Company in 2017, tax on interest expense for 2017 was calculated using<br>an adjusted effective tax rate.<br>(3) In the fourth quarter of 2015, the Company adopted ASU 2015-03 Interest – Imputation<br>of Interest on a retrospective basis. As a result, debt issuance costs were reclassified<br>from assets to Long-term debt in the amount of $42 million, $37 million, $38 million and<br>$37 million as at December 31, 2015, 2014, 2013 and 2012, respectively.<br>Unaudited<br>($ millions, except percentage)<br>As at and for the year ended December 31 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022<br>Net income (1) 2,575 3,135 3,529 3,630 5,470 4,312 4,198 3,545 4,899 5,118<br>Interest expense 357 371 439 480 481 489 538 554 610 548<br>Tax on interest expense (2) (97) (102) (120) (125) (124) (116) (120) (120) (139) (133)<br>Return(1) 2,835 3,404 3,848 3,985 5,827 4,685 4,616 3,979 5,370 5,533<br>Average total shareholders' equity 11,986 13,212 14,210 14,896 15,749 17,149 17,841 18,846 21,198 22,064<br>Average long-term debt(3) 6,534 7,305 8,407 9,217 9,098 10,067 11,626 11,931 11,987 13,175<br>Average current portion of<br>long-term debt 799 783 993 1,466 1,785 1,632 1,557 1,420 709 783<br>Less: Average cash, cash equivalents,<br>restricted cash and restricted<br>cash equivalents (669) (589) (596) (674) (613) (656) (674) (844) (1,221) (1,088)<br>Average invested capital 18,650 20,711 23,014 24,905 26,019 28,192 30,350 31,353 32,673 34,934<br>ROIC(1) 15.2% 16.4% 16.7% 16.0% 22.4% 16.6% 15.2% 12.7% 16.4% 15.8%<br>Adjusted net income (1)(4) 2,545 3,063 3,571 3,571 3,764 4,040 4,171 3,767 4,225 5,134<br>Interest expense 357 371 439 480 481 489 538 554 610 548<br>Less: Amortization of bridge<br>financing and other fees (5) - - - - - – – – (97) -<br>Adjusted tax on interest expense (6) (95) (103) (117) (126) (124) (120) (131) (137) (123) (133)<br>Adjusted return(1) 2,807 3,331 3,893 3,925 4,121 4,409 4,578 4,184 4,615 5,549<br>Average invested capital 18,650 20,711 23,014 24,905 26,019 28,192 30,350 31,353 32,673 34,934<br>Adjusted ROIC(1) 15.1% 16.1% 16.9% 15.8% 15.8% 15.6% 15.1% 13.3% 14.1% 15.9%<br>ROIC and Adjusted ROIC<br>ROIC and adjusted ROIC are useful measures for management<br>and investors to evaluate the efficiency of the Company’s use<br>of capital funds and allow investors to assess the operating and<br>investment decisions made by management. The Company<br>calculates ROIC as return divided by average invested capital,<br>both of which are non-GAAP measures. Return is defined as<br>Net income plus interest expense after-tax, calculated using<br>the Company’s effective tax rate. Average invested capital is<br>defined as the sum of Total shareholders’ equity, Long-term<br>debt and Current portion of long-term debt less Cash and<br>cash equivalents, and Restricted cash and cash equivalents,<br>averaged between the beginning and ending balance over the<br>last twelve-month period. The Company calculates adjusted<br>ROIC as adjusted return divided by average invested capital,<br>both of which are non-GAAP measures. Adjusted return is<br>defined as adjusted net income plus interest expense after-tax,<br>calculated using the Company’s adjusted effective tax rate.<br>Return, average invested capital, ROIC, adjusted return and<br>adjusted ROIC do not have any standardized meaning<br>prescribed by GAAP and, therefore, may not be comparable<br>to similar measures presented by other companies.<br>The following table provides a reconciliation of Net income<br>and adjusted net income to return and adjusted return,<br>respectively, as well as the calculation of average invested<br>capital, which have been used to calculate ROIC and<br>adjusted ROIC:<br>(4) This non-GAAP measure does not have any standardized meaning prescribed by<br>GAAP and, therefore, may not be comparable to similar measures presented by other<br>companies. See the section entitled Adjusted performance measures for an explanation<br>of this non-GAAP measure.<br>(5) Relates to amortization of bridge financing and other fees resulting from the KCS<br>transaction, recorded in Interest expense within the Consolidated Statements of Income.<br>(6) The adjusted effective tax rate is a non-GAAP measure, defined as Income tax expense,<br>net of tax adjustments as presented in Adjusted performance measures as a percentage<br>of Income before taxes, net of pre-tax adjustments as presented in Adjusted performance<br>measures. This measure does not have any standardized meaning prescribed by GAAP<br>and, therefore, may not be comparable to a similar measure presented by other<br>companies. The adjusted effective tax rate used to calculate the adjusted tax on interest<br>expense for 2022 was 24.3% (2021 - 24.0%, 2020 - 24.8%, 2019 - 24.4%, 2018 - 24.5%,<br>2017 - 25.8%, 2016 - 26.2%, 2015 - 26.6%, 2014 - 27.7%, 2013 - 26.7%).<br>CN | 2023 INVESTOR FACT BOOK 137 | |||||
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| DESIGN: CAPSULE CREATIVE WWW.CAPSULECREATIVE.CA<br>Transfer Agent and Registrar<br>Computershare<br>Trust Company of Canada<br>Offices in:<br>Montreal, QC; Toronto, ON;<br>Calgary, AB; Vancouver, BC<br>Telephone: 1-800-564-6253<br>www.investorcentre.com/service<br>Co-Transfer Agent<br>and Co-Registrar<br>Computershare Trust Company, N.A.<br>Attn: Stock Transfer Department<br>Overnight mail delivery:<br>250 Royall Street<br>Canton, MA 02021<br>Regular mail delivery:<br>P.O. Box 43078<br>Providence, RI 02940-3078<br>Telephone: 303-262-0600<br>or 1-800-962-4284<br>Shareholder Services<br>Shareholders with questions<br>concerning their shares<br>should contact:<br>Computershare<br>Trust Company of Canada<br>Shareholder Services<br>100 University Avenue, 8th Floor<br>Toronto, ON M5J 2Y1<br>Telephone: 1-800-564-6253<br>www.computershare.com<br>Investor Relations<br>Stacy Alderson<br>Assistant Vice-President<br>Investor Relations<br>Telephone: 514-399-0052<br>Greg Hamilton<br>Senior Manager, Investor Relations<br>Telephone: 514-399-4654<br>Mariusz Chojnacki<br>Senior Manager, Investor Relations<br>Telephone: 514-399-6464<br>Fax: 514-399-5985<br>Email: investor.relations@cn.ca<br>Mailing Address<br>CN Investor Relations<br>935 de La Gauchetière St. W.<br>16th Floor<br>Montreal, QC H3B 2M9<br>www.cn.ca/investors<br>Shareholder and<br>Investor Information<br>Overview Markets Operations Financials<br>4 Financials - Shareholder and Investor Information 4 Financials<br>138 CN<br> | 2023 INVESTOR FACT BOOK | |||||
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| www.cn.ca/investors<br>CN Investor Relations understands the importance of communicating the CN story<br>and the most current and timely information to our shareholders, the financial<br>community and other stakeholders. The Investors section of our website holds a wealth<br>of information to keep investors and potential investors informed and up-to-date.<br>Key<br>Weekly Metrics<br>CN reports our performance measures weekly.<br>These measures represent some of the key indicators<br>of railroad performance. We report key weekly volume<br>data for RTMs and carloads, and key weekly operating<br>metrics such as car velocity, average train speed and<br>through dwell.<br>www.cn.ca/investors/key-weekly-metrics<br>Latest Financial<br>Results and Reports<br>We understand the importance of accessing the latest<br>and historical financial and other company reports,<br>including the Investor Fact Book, Annual Report and<br>Sustainability Report. Each quarter, we update our<br>Investor Presentation to showcase our commitment<br>to share our great CN story.<br>www.cn.ca/investors/reports-and-archives<br>Current<br>Stock Information<br>We have a host of tools that provide helpful data<br>about CN’s common shares on the Toronto Stock<br>Exchange (TSX: CNR) and the New York Stock<br>Exchange (NYSE: CNI). These tools include: stock<br>information, interactive charts, stock price history<br>and splits, an investment calculator and dividends.<br>www.cn.ca/investors/stock-information<br>Upcoming<br>Webcasts and Events<br>Our executive team regularly interacts with the<br>investment community through our quarterly<br>investor call and industry conferences. We provide<br>a comprehensive schedule of upcoming investor<br>events on our website, including webcast information.<br>Don’t miss out on the latest news and events from CN.<br>www.cn.ca/investors/events<br>KEEPING INVESTORS UP-TO-DATE<br>CN | 2023 INVESTOR FACT BOOK 139 | |||||
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| facebook.com/CNrail twitter.com/CNRailway linkedin.com/company/cn www.cn.ca<br>STAY CONNECTED WITH CN:<br>CN has an exciting future and a clear plan to achieve it.<br>We are committed to growing the North American economy<br>by focusing on providing our customers with the right service,<br>the right supply chain solutions, and the right partnerships.<br>Collaboration and integration are the key to how we will<br>accelerate sustainable, profitable growth."<br>Tracy Robinson<br>President and CEO | ||||||
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