Good afternoon. My name is Julianne, and I will be your operator today. At this time, I would like to turn the call over to Tracy Robinson, CN's President and Chief Executive Officer. Ladies and gentlemen, Ms. Robinson.

Thank you, Julianne, and good afternoon, everyone. We're here in Memphis today. We've had our Board meetings over the past two days and have had an opportunity to spend some time visiting our local facilities. Now we did a prerecording of our prepared remarks over the weekend. But before we play those remarks, we received some very sad news today about the loss of one of our engineering employees. Early this morning, there was a motor vehicle accident in British Columbia. A semi-truck collided with the CN engineering vehicle with two employees on board. We are deeply saddened that one of our CN family members suffered fatal injuries as a result of the accident and died at the scene. The other employee traveling in the truck was taken to the hospital with critical injuries. I understand he's now in critical, but stable condition. Our prayers are with him and his family. The second group of CN employees who were traveling behind the first vehicle were the first on the scene to respond. They showed tremendous courage and compassion in a critical situation, a very tragic and painful loss for all of us at CN and our hearts go out to his family. Before we move on to the business today, I want to remind all CN employees and everyone listening in today to take care of yourself and those around you, stay safe. So operator, could you please start the prerecording with Stacy Alderson, our Head of Investor Relations.

Good afternoon, everyone, and thank you for joining us on CN's First Quarter 2024 Financial and Operating Results Conference Call. Before we begin, I would like to highlight the forward-looking statements and additional legal information available at the start of the presentation. Please remember that today's conference call includes certain projections and other forward-looking statements according to U.S. and Canadian securities laws. These statements are subject to risks and uncertainties that could cause actual results to vary significantly from what is expressed or implied. Further details are outlined in our cautionary statement regarding forward-looking statements in the presentation. After the prepared remarks, we will have a Q&A session, and I kindly ask you to limit yourself to one question. The Investor Relations team will be available after the call for any follow-up inquiries. On the call with us today are Tracy Robinson, our President and CEO; Pat Whitehead, our Chief Network Operations Officer; Derek Taylor, our Chief Field Operations Officer; Doug MacDonald, our Chief Marketing Officer; and Ghislain Houle, our Chief Financial Officer. I will now turn the call over to CN's President and Chief Executive Officer, Tracy Robinson.

Thanks, everyone, for joining our call today. Q1 was a solid quarter, aligning with our expectations and positioning us well for future growth. I'd like to begin with comments regarding last week's press release about the transitions of Remi and Doug. First, I want to express my gratitude to Doug for his years of service to CN, and particularly for his leadership and insight over the past two years. You've done a great job, Doug. The restructuring of our business model as we move back to our scheduled operating format will set the commercial team up for ongoing success. I sincerely wish you health and happiness in your retirement. We've been deliberate in Remi's transition, which began with extensive field exposure since he joined in January and continued with a thorough exploration of the commercial organization. He is an excellent fit for our team and will bring a fresh perspective to his Chief Commercial Officer role, especially considering his experience from the customer's viewpoint. He is with us today but is not mic'd up. He'll take his position next quarter and will engage with the investment community in the upcoming months. Before we delve into the quarter's details, I understand that TCRC negotiations in Canada have been a concern for our customers, employees, and various stakeholders. I want to provide some context regarding the situation. It is crucial for us to reach an agreement that ensures our crews can operate trains on schedule, which is vital for our customer service commitments and the growth of the industries we serve. Additionally, it's essential that we provide our employees with a reliable schedule that guarantees days off, promotes safe operations, and allows them to manage their lives outside of work. This will help us attract the next generation of conductors and engineers. The introduction of new Canadian duty and rest regulations last year, combined with existing collective agreement provisions, has adversely affected crew availability and scheduling. In this round of negotiations, we aim to enhance the predictability of our train crew schedules and time off. This is a significant part of improving safety, providing employees with more predictability in their working hours, offering better work-life balance, and ensuring crew availability supports consistent service for our customers and the Canadian economy. We have a similar agreement in the U.S., which has proven effective. We are continuing our positive discussions with TCRC leadership and are committed to achieving a negotiated agreement, which will bring benefits for both parties. Now, regarding our financial performance this quarter, safety remains a primary focus. Pat will discuss our performance in this area. We are dedicated to enhancing our safety performance as we strive for our goal of zero harm. On the operational front, we achieved solid velocity and speed this quarter, despite facing colder temperatures in Western Canada, congestion in Vancouver, and a reduction in crew availability due to the new Canadian regulations. I'm proud of our performance and adaptability in aligning with our plans. Customer service remains our top priority, and I would like to highlight our local service commitment performance, which is a crucial customer-focused metric. With an improvement to 92%, we saw a 6% increase compared to last year. Volumes are stabilizing, and we are witnessing a growing momentum. Doug will touch on end market performance and the outlook for the remainder of the year, along with updates on our CN-specific initiatives, which are aligning nicely and boosting our confidence in our volume outlook. We are comparing against strong performance from last year, which included a favorable impact of $0.10 on fuel surcharge lag. Therefore, I am pleased to report a solid EPS of $1.72, which aligns with our expectations after three months. Ghislain will soon walk us through the financial highlights for the first quarter. Overall, we are where we want to be: the team is coalescing, operations are strong, and volumes are on the rise. In summary, I’m very satisfied with our progress and would like to reaffirm the guidance issued in January. Now, I’ll turn it over to the team. Pat, the floor is yours.

Injury and accident rates increased in Q1, despite our best efforts, as intense winter weather has led to greater safety risks. However, we've noticed improvement in April, and year-to-date, we are currently aligned with CN's lowest frequency ratio ever recorded in 2023. One key area of concern in our safety performance is the rise in slips, trips, and falls this quarter. In response, we are implementing several initiatives. One of the first is the introduction of walking simulators at our training centers, which have resulted in a 30% reduction in walking injuries among trained employees. We plan to roll out a mobile version of this simulator to our field workforce. Additionally, we have launched our Enable on Go app for the entire workforce, which serves as our system for reporting hazards and near misses. Since its launch in 2023, we have identified and addressed over 3,300 hazards through this system. Before discussing the network, I would like to clarify some recent comments regarding CN's negotiations with TCRC concerning safety-critical rest. This information is inaccurate. To clarify, we successfully implemented the mandated duty and rest period rules in Canada in May 2023 and have been fully compliant with these regulations. We have adjusted our operations accordingly. Our focus now is on simplifying the complexity related to the cumulative effects of recent paid sick and personal leave days, the duty and rest period rules, and the unavailable time stipulated by the legacy collective agreement. We remain dedicated to ensuring our employees have adequate rest and will collaborate with our union partners to identify solutions that benefit both our employees and customers. Moving on to the network, we maintained good fluidity this quarter, despite experiencing more severe winter weather than usual. Our scheduled operations have enhanced our resilience, although we faced challenges in certain areas due to the newly mandated work rest rules affecting labor availability. Currently, we are observing what appears to be a sustained rise in intermodal demand on the West Coast, leading to larger train sizes, which has allowed us to add a total of eight additional trains per week from Vancouver and Prince Rupert in April. To support this anticipated growth, we will continue investing in network capacity in key corridors, which we refer to as no regret capital. In 2024, we are on track to complete further double-tracking along our Vancouver to Chicago corridor and will finish a siding extension project west of Kamloops, British Columbia. These enhancements will increase capacity in this busy corridor and help mitigate some congestion we occasionally encounter in and out of Vancouver. I will now turn it over to Derek to discuss field execution in the first quarter.

Thanks, Pat, and good afternoon, everyone. Time and again, we've seen that our make the plan, run the plan, sell the plan model is the right one for our network. As you heard from Pat, Q1 had a number of ups and downs. January brought an extended cold snap in Western Canada that we recovered from in short order. Interestingly, in February, we had some ideal operating conditions and demand started to pick up. Then in March, Mother Nature reminded us that winter wasn't over yet on the northern part of our network. During that March time period, we also had a combination of continued strengthening demand, along with the beginning of work block season, particularly in the Edmonton to Vancouver corridor. In fact, daily train counts in that corridor are now approaching our 2018, 2019 high watermark years. These work blocks are critical for us to comply with and complete as they will support growth and fluidity going forward. However, they did cause some additional pressure in and out of the Vancouver gateway. Importantly, we've kept our yards fluid, which has enabled us to maintain a high level of service for our customers. In fact, our local Service Commitment Performance or LSCP, improved 6% versus last year to 92% for the quarter. Running the plan as the team is focused, and I'm really pleased that a few weeks into April, speed and velocity are back in line where we need them to be. We've got good operational momentum. So as volumes continue to ramp up through the year, we expect to deliver incremental operating leverage particularly in terms of our manifest trains, which have room for growth at low incremental cost. To wrap it up, I'm convinced that continued strong alignment between the operations, marketing, and finance teams is key for us to grow profitably. This is a team effort. We're making sure there's tight coordination across the entire organization so that we have the capacity and service in place to keep delivering for our customers. Now I will turn it over to Doug.

And thanks, Tracy, for the kind words. I've been fortunate to spend my entire career at CN and it has been a gratifying 35-year journey. I am thankful to all of you around the table as well as the many others in and outside of CN for their support and help. I leave knowing that the team is well set up for the future. Looking at Slide 11, first quarter revenues were down 1% versus last year due to a lower applicable fuel surcharge. We had solid pricing ahead of CN's cost of inflation. RTMs, our standard measure of volume were flat in the quarter as higher shipments of potash, refined petroleum products, frac sand, international intermodal and natural gas liquids were offset by lower shipments of coal, grain, forest products, and crude oil. Petroleum and chemicals led the way in Q1 at 6% RTM growth, with record volumes in refined products and natural gas liquids. Q1 crude volumes were down year-over-year, but we expect them to move higher sequentially for the rest of 2024 from new business to the Gulf Coast. Our strategic investments in Northeast BC are paying off with stronger frac sand volumes, which drove a 4% increase in metals and minerals RTMs in Q1. Aluminum volumes also increased in the quarter due to market share gains from truck given our consistent car supply and service. We also had new raw lithium interline shipments with the UP to Texas for battery production. Forest products RTMs decreased 5% in the quarter but center beam orders for lumber have increased sequentially since Q4 last year. Our bus car fleet remains nearly sold out, indicating solid demand in multiple segments. In the bulk sector, Canadian coal was down 20% from production problems at several mines, while U.S. coal was down 23% from softer export demand for thermal coal. Grain and fertilizer RTMs were flat overall as strong potash growth in Q1 fully offset softer grain volumes. Canadian grain demand was strong all quarter. We moved record grain tonnage in February, and there's pent-up demand heading into Q2. U.S. corn volumes decreased versus last year due to muted domestic and export demand. Automotive RTMs were up 6% on stronger Vancouver imports despite a slow start in Q1 from delayed new product launches. All plants are running normally now. Turning to intermodal, international was up 5% for the quarter, continuing the steady upward trend we've seen since Q4. Import RTMs via the ports of Vancouver and Prince Rupert are up 12% as U.S. destined traffic returned after last summer's West Coast Canada strike. Port of Halifax volume was down due to Red Sea impacts. In Q1, we lapped the remaining comparable container storage revenues, roughly a $35 million impact this quarter, which negatively impacted revenue per RTM. Domestic volume was down 3% on ample truck capacity. Let's move to the outlook on Slide 12. The North American economy continues to be supportive. International intermodal continues to strengthen with strong service and dwell times at our ports. The Canadian export development at Rupert is well underway, as well as land clearing for the Ridley Island energy export facility. We are also expecting to see a gradual recovery in the domestic intermodal markets as capacity exits the over-the-road segment. Automotive demand remains strong with some OEMs pushing back the timeline for retooling their plants for EV production. In bulk, Canadian met coal mines should return to full production. In addition, Conuma's Quintette mine will start this summer, and the new Valerie mine is delayed until 2025 due to permitting. U.S. export thermal coal volumes will be challenged with low global demand and a surplus of natural gas. In terms of grain, we expect more oil and meal production from new and expanding crush plants on CN in the second half. Our IANR acquisition, which remains subject to SCB approval, will create further volume growth for U.S. grain. Potash demand remains firm, but we expect lower volume in the balance of 2024 as we lap last year's Portland terminal outage. Our CN-specific growth projects are advancing as expected. In Northeast BC, our growing frac sand market for natural gas drilling also produces propane for export via Prince Rupert. New frac sand terminals are expected to be announced in the coming months to grow the market even more. Partnership initiatives like the EMP program, Falcon Premium, and Crowley service in Mexico and access to Gulf Port will deliver intermodal growth in the second half and beyond. CN's new fuel terminal at our yard in Toronto has received its first cars and ramp-up is commencing in May. Construction took a little longer since some Phase 2 construction was advanced to minimize downtime later in the year. Both Phase 1 and 2 are now sold out. We also moved our first steel cars into our new transload in Flat Rock, Michigan, which is all truck to rail conversion. We've come through the first quarter of 2024 in great shape with excellent service for our customers and a strong pipeline of significant growth opportunities that are starting to deliver. I want to recognize Remi, who has spent the last few months getting up to speed with the great CN people across our network. He'll be ready, more than ready for our next quarterly call. Over to you, Ghislain.

Turning to Slide 14. In the first quarter, we achieved financial performance that met or possibly exceeded our expectations. Volumes measured in RTMs were stable compared to last year, while revenues decreased by approximately 1%. We reported an operating income of around $1.5 billion, which is 7% lower than the previous year, along with a more winter-like operating ratio of 63.6%, up from 61.5% last year. The first quarter EPS was $1.72, down from $1.82 in the same quarter last year, a decrease of $0.10 or 5%. Last year, we benefited from a favorable fuel lag that contributed about $0.10 to EPS. We are closely monitoring fuel prices. The OHD, which affects fuel surcharge revenue, declined by 17% compared to last year, while our fuel expenses decreased by only 6% year-over-year in Q1. On the expense side, labor costs increased by 10% compared to last year, driven by a 3% rise in average headcount and general wage increases. Fuel expenses were over $40 million lower than the same period last year, mainly due to the 6% drop in fuel prices I mentioned earlier. Our effective tax rate for the quarter was 24%, slightly below the guidance provided in January, mainly due to the excess tax benefit on incentive compensation recognized in Q1. We had anticipated this benefit, so we expect our effective tax rate for the full year to be around 25%. We generated approximately $530 million in free cash flow during Q1, about $65 million less than last year, primarily due to higher capital expenditures, partially offset by increased net cash from operating activities. Under our current share repurchase program running from February 1, 2024, to January 31, 2025, we have repurchased nearly 3.5 million shares for almost $600 million by the end of March. Our leverage ratio rose to about 2.4x at the end of Q1, primarily due to timing and reflecting an unusual earnings trend in 2023. We expect the leverage ratio to decrease as we progress through 2024 and earnings improve sequentially. Moving to Slide 15, I would like to provide some outlook for 2024. As economic sentiment improves gradually, we remain optimistic that the broader economy in 2024 will perform better than last year, with slightly positive growth in industrial production and interest rates stabilizing. However, the environment remains volatile due to ongoing monetary policy and geopolitical risks. Weak sectors, especially intermodal international and forest products, are showing sequential improvement. We expect Canadian grain to return to a three-year average in the latter half of the year. We have clear visibility on our CN-specific growth initiatives, which contribute to half of our mid-single-digit volume growth assumption in RTMs. These initiatives are diversified across commodities and geographies and are progressing as planned. The foreign exchange rate for the year remains around $0.75. Our WTI price assumption is now between USD 80 and USD 90 per barrel, up from the previous range of USD 70 to USD 80 per barrel. With these considerations, we are confident in achieving 10% EPS growth in 2024 compared to 2023. In conclusion, I would like to emphasize several points. We continue to deliver solid operational and financial results. Our customers benefit from our outstanding service. We are encouraged by the positive trends in the macro environment. Demand from end markets in most segments, especially intermodal international and forest products, continues to show sequential growth. Our CN-specific growth initiatives are on track and delivering as expected. We are committed to realizing operating leverage, and we are confident in achieving around 10% EPS growth this year compared to 2023. Now I will hand it back to Tracy.

Thanks, Ghis. We're ready to take questions now.

Our first question comes from Steve Hansen from Raymond James.

Look, I was hoping you could provide some additional color here on the international intermodal segment of late, seen some really good outsized growth there, but also seeing an increase in shipping length that looks like a distance halt. Just based upon your discussions with customers, what kind of visibility do you have on that sustaining through summer into the back half of the year?

Thanks, Steve, it's Doug. So we're seeing some great growth on the West Coast. Customers have really come back there after the strike last summer. We're seeing lots of growth in Vancouver, but we're also seeing it start to push up to Rupert. So that's working really well, and I think you can see that in the numbers. The customers are very confident that that's going to continue moving forward. They really like the service and the dwell time they're seeing from us. Now when you shift over to the East Coast, it's a little bit different story. They have more of an impact because of the Suez Canal, they're routing the boats around south of Africa and they come back up, which doesn't impact the Canadian business, but it does impact the U.S. business because they're going to buy a bunch of U.S. ports where they can offload that business there. So we're seeing a little bit down at Halifax, a little bit down at Montreal because of all that. And we're just hoping that, that will come back once that issue in the world gets cleared.

Our next question comes from Fadi Chamoun from BMO Capital Markets.

Doug, congratulations on your retirement and thanks for all the insights and help over the years. My question is on pricing. You mentioned pricing ahead of inflation. What is inflation first, just to kind of help us benchmark what the pricing environment is like? And also, given kind of the strong demand we're seeing both on your network and your competitor network, is the pricing firming up? Do you expect that we could start to see some firming up in the pricing as we move through the year?

Okay. Well, thanks, Fadi. So overall, what we're seeing in pricing is we're still able to price above rail inflation, and I'll get to the second part of your question there. The only part we're starting to see obviously some pressure is in – within the domestic intermodal section, which I think everyone would understand is due to the truck capacity issues that are out there today. There's a lot of surplus capacity. We're expecting that overall within North America, the decline as more and more shops, I'll say, go bankrupt and some of that capacity comes out of the market. So that is where the only area is I think we're seeing some pressure. So with respect to that, when it comes to what we gauge, we still use the all-inclusive index less fuel for the AR as our major benchmark that we tell people for what our rail costs are.

Our next question comes from Ken Hoexter from Bank of America.

I just want to – I guess you're coming up against a comp against maybe the strikes and want to understand the CN-specific initiatives. So I think you said there's minimal economic growth in there in that mid-single digits. It sounded like maybe some of the CN specific issues were delayed. You mentioned a coal field, Doug. I think somebody mentioned the auto field was delayed, but Phase 1 and 2 were sold out. Just want to understand, does that impact the outlook on growth? Or are those coming back online? I just want to understand the CN-specific growth initiatives to meet that target.

Thanks, Ken. So everything is kind of running, I'll say, as per plan is the easiest way to say it. So we have seen a delay just in the one, I'll say, project that we have ongoing for this year, right? So with respect to that, that's the facility we have in our Mac Yard for our Eastern fuels. And we pushed that back so we could actually add some construction and sell out Phase 2. So if we didn't do that, we would have to take more outage in Phase 2 later this year and into next year. We didn't want to do that. It made more prudent economic sense to do it at the beginning. But with that, we actually got additional commitment from the customer. So that project is moving full steam ahead, and we will recoup those volumes. With respect to the Valerie coal mine, we had very limited number of volumes into this year really was in the next couple of years. So what we're looking at is when does that permitting get done that gets done in the next couple of months, then they'll be getting that moving forward. So we will be able to give you – or Remi will be able to give you a great update on the next call, actually. So everything else seems to be running really well. I don't think we're going to see any other issues. The projects will deliver where we've said they will and the economy is doing okay. And I think Ghislain has talked to the community quite a bit about that.

TD Cowen, please proceed.

Doug, all our best to you in your retirement. I wonder if there's a way that you could help us frame how much the CN-specific growth opportunities added either volume or revenue in the quarter? And in terms of the relative importance of each that you're expecting for the year, are they basically listed in rank order of importance, the way that they're listed on Slide 11?

Thanks, Cherilyn. They're not listed in any order. We just kind of go through them. We don't really give guidance per specific projects out there. We have given some specific updates as to where we expect them to be on the list that we gave at Investor Day last year. So I'm sure the team can probably help you out with that after the call and say, here's where we're on each single one, but it's a little much to go into right here. Thanks for your question.

Next question comes from Ravi Shanker from Morgan Stanley.

So I think the tone of this call is surprisingly bullish in this environment, especially given what you've seen from other transportation companies that we've heard so far. Do you guys have like evidence or more confidence in the cycle inflection in the back half of the year that's giving you that confidence? Obviously, you spoke of the idiosyncratic catalyst as well. But obviously, you need a macro backdrop to be supportive as well. So just trying to get a sense of how confident you are kind of in that full year number and the environment that's going to power it?

Ravi, thanks for the question. Listen, we're mapping out a year – when we put the 3-year guidance in front of you, we looked at industrial production that was about in the 2% range. Industrial production is turning more positive. It's not 2% yet. But we are following a number of those indicators that Ghislain spoke about. And it does give us some confidence in a lift in the underlying economy. That's 50% of our growth. The other 50% is the CN-specific growth initiatives that Doug is taking you through. We're watching it all pretty closely. And Ghis, do you have any other comments?

Yes. I think, Ravi, what makes us confident is that these CN-specific growth initiatives are very diversified from a commodity and from a geographic standpoint. So it's not a one home run type of thing. It's a lot of different singles. So if we're wrong on one of them on the negative side, we'll be more right on the positive for something else. So it's the law of compensating errors. The fact that it's a bunch of different projects, and we have great visibility on these as Doug just talked about, I think makes us very confident that our volume – we will deliver on our volumes. Thank you for the question.

Our next question comes from Benoit Poirier from Desjardins Bank.

Yes, Doug, happy retirement and best wishes. I have a question. You mentioned the decline in domestic intermodal, but could you explain if there's a different situation in Canada, considering the longer average length of haul? Also, regarding headcount for the rest of the year, what are your expectations as volume is expected to increase in the second half?

Okay. Thanks a lot, Benoit. So I'll address the intermodal specific numbers. So listen, within Canada, you're correct. We have a much longer length of haul than in the U.S. So there's a little bit added protection there, where we don't – we do face pressure because if there's excess capacity, you can see the truckers are dropping the rates and they put pressure on our pricing. But so far, because of that length of haul, we've been able to hold our own pretty well. And there will be cases where we'll let go some market share. There will be cases where we're going to gain some market share, and that happens all the time. Not too worried about that, and we feel it's also the business is going to come back right away that we've lost because as the trucking capacity diminishes across North America and in Canada, that will shift back. I'll say from the headcount perspective, I guess the team will be able to ...

Yes, I can address that. We should consider that training T&E employees takes about 6 to 9 months to prepare them ahead of the anticipated volume. Therefore, while we expect an increase in headcount, it won't match up one-to-one. We will be preparing for the increased volume, leading to a busy quarter at the training centers, but the headcount growth won't be directly proportional. Thank you for the question.

Our next question comes from Konark Gupta from Scotiabank.

Congratulations Doug. Maybe just one question on one of the projects you guys highlighted last year at the Investor Day. The Milton project, I think, it seems like the court to overturn the federal government's decision to approve that project. Any thoughts on what are you expecting from that? Will that be delayed? Or will that be canceled back to the drawing board? Any thoughts would be appreciated.

Thank you, Konark. This is indeed a complex issue. We have submitted our appeal and anticipate receiving a decision on the stay we have appealed within the next couple of months. Until then, we won't provide further comments and will wait for the outcome. If we are successful, we will proceed with our plans. If we are not, we'll need to determine our next steps for the project. We are committed to advancing this project as it is vital for economic growth in Canada and Southwestern Ontario. We will ensure it progresses. Thank you for your question.

Our next question comes from David Vernon from Bernstein.

Doug, congratulations. I wanted to ask if you could help us understand the outlook for the second half of the year, particularly regarding RTMs. We're still anticipating mid-single-digit growth, but there seems to be a mix involved. Can you provide insights on where the strength in the RTMs will come from? I know you have detailed information on the growth initiatives and the effects of the mix. Many are questioning whether the mid-single-digit RTM target is still realistic. Clarifying that would be greatly appreciated.

Yes. So great question, David. So first of all, you are right. We were flat for Q1, but our whole project and list was geared towards April and on. So as a good example, in April, we're 7% up in RTM so far this month. So we knew that was really going to start the pop. We have the comparables that are there from last year. So we're easily going to be able to tap some of them. So we're all set. We know there's going to be good growth in intermodal overseas, and that's what we've been seeing. It's a little bit lighter on domestic. We're seeing some other things pop in other areas. All of these are really just part of the economy as well as part of the projects combined. We're pretty confident that we are still going to be able to maintain our guidance. Thanks for the question.

Okay. And just as a quick follow-up, fuel increased by 5% in the quarter. How much of that is due to the previous winter being mild? How much is related to preparing for the anticipated volume growth? And how much is simply the result of natural cost inflation in a quarter with weaker revenue?

Yes. When you look at fuel, as I said, we're comping – I talked about the fuel lag, positive lag last year versus no lag this year. When you look at the overall fuel situation in the first quarter, and you can look at it in the MD&A, it's all disclosed, but our fuel surcharge, as Doug mentioned, was down on a year-over-year basis by about $170 million, while our fuel expense related just to the price was down $30 million. So the fuel issue in the quarter was about $140 million of headwind or call it, $0.15 of EPS or 180 basis points of OR. So that's the fuel. And yes, we did consume, David, more fuel this year versus last year due to a harsher winter specifically in January. Thanks for the question.

Our next question comes from Walter Spracklin from RBC Capital Markets.

Yes. So when I look back at your guidance that you issued when you reported your fourth quarter, I know there was some trepidation that perhaps it was a little bit too robust, maybe too optimistic, especially around the 5% volume and very encouraging given that you've kind of reiterated that – there was a lot also mentioning about how with high single-digit revenue where you're only achieving 10% earnings. And I know Ghislain, since that you've been – through your public remarks at various conferences, you've kind of hinted that perhaps there is some upside there if that volume growth does come in. So I guess my question is, as you're now one quarter through the year or obviously a bit more than that here, how much – where has things changed relative to your original guide, even though you're maintaining it? Do you feel a bit more comfortable about volume? Are you feeling more comfortable about price? Is margin coming in better or worse? If there's any indication as to the kind of comfort level you have around the guidance, I'd love to hear your thoughts on which areas are coming in a bit better or worse in each of those elements.

Thanks, Walter. So I would tell you that Q1, we delivered exactly as per plan. Even in my opening remarks, I said we did probably a little bit better than planned. So I think that – and when you look – now the volumes are coming in, in April, as Doug mentioned, 7% up on a year-over-year basis. I think at the end of the day, as we said, to get to our 10%, we can't just focus on one area. We need a little bit of price, and Doug talked about that. We need that volume that we've talked about, and we need better operating, better operations from our guys here. I call our guys to be a little bit here, sandbaggers, and that's my own opinion. Share buyback is not that accretive for the current year, especially when you look at it from an active financing point of view, but it is helpful a little bit more in the out years because you get that compounding effect of having the shares out of circulation. So when you put all of this in, and I'm happy because when you – we got out of the winter, Q1 is typically very noisy. As I said, we delivered per plan. So I think those growth opportunities are happening. I'm crossing my fingers that the economy holds up. We're not banking, as Tracy said, on a 2%- we're banking on a slightly positive economy, call it, 0.5% and I think that I'm getting – I'm very comfortable that we can deliver and we will deliver our 10% EPS growth.

So let me just add to that, Walter, if I could. So as we look at volumes, you heard Derek and Pat talk about what we went through in the first quarter, but I think that we are more optimistic on the volume from an economic perspective. We are – as Doug has outlined pretty much on plan on our feeling very, very strongly about our CN-specific growth alternatives, our plans. Derek keeps reminding us that if you look at Q1, it's the best Q1, Derek, on operating metrics that we've had in the last …

7 years since 2017.

In the last 7 years since 2017, with the exception of last year. So the railroad's running, the volumes are coming. And as we look at our plan going forward, we're feeling pretty good about our 10%.

Our next question comes from Kevin Chiang from CIBC.

Best of luck in your retirement, Doug. I would like to get your thoughts on the report released this morning by the Canadian Competition Bureau regarding the potential merger between Viterra and Bunge and its possible anticompetitive effects. How are you viewing this potential combination? Does it influence your perspective on the grain franchise? Additionally, does it affect any of the specific CN initiatives related to grain and fertilizer that you discussed at the Investor Day?

Thanks for the question, Kevin. We did provide our opinion to the transport candidate when asked. From our perspective, we don’t see much conflict if this merger goes through. Viterra is one of our top ten customers, and we handle a significant amount of grain for them, primarily on the West Coast and to locations like Vancouver and Montreal. We're satisfied with this relationship and don't envision many conflicts with Bunge, with whom we have limited business. They mostly transport other products with a different carrier. Overall, we don't anticipate any issues with the Competition Bureau regarding the merger of these companies, so we plan to remain uninvolved. This will not impact our markets today. The companies are exploring the construction of canola meal or crush plants, which could increase future business. One potential plant is in the Regina market, along with other possibilities on CN's lines. However, these developments are not part of our plans for 2024 to 2026. Therefore, we don't expect any issues.

Our next question comes from Scott Group from Wolfe Research.

So Ghislain, it looks like we can often see a 4 to 5 points of OR improvement from 1Q to 2Q. Is that right that we should be sub-60% this quarter? And then I guess, I'm just wondering how the labor negotiation impacts how you're thinking about Q2 in the year? Maybe, Tracy, just some thoughts like on the scenarios, what's the upside potential if we get hourly deals? What's the risk that inflation ends up higher than what you're thinking? Just any thoughts there.

Ghis, why don't you start off and I'll take it from there.

So thanks, Scott. Listen, we don't give guidance on OR on a quarterly basis. But as you know, if you look historically, from a seasonality standpoint, Q1 has been the quarter that has the highest OR. Q3 has been typically the one that has the lowest and then Q2 is in between and Q2 and Q4 is more or less in between depending on how you finished Q1 getting into the spring and in Q4 is how you get into the winter in October, November and December. So definitely, from a historical standpoint, you would assume that, that OR in Q2 would be better than Q1.

And from a labor perspective, we're working very hard at – and still in discussions with the TCRCs. We would like a negotiated agreement with them and we believe that, that is possible. The proposal that we have in front of them now is an hourly agreement. We don't yet have an agreement with them, but it's an hourly agreement. It would have economic benefits, of course, for both of us. For our employees, that would be predictable scheduling, two consecutive days off and increased earnings for the company. The benefits would fall largely in improvements in availability and productivity. I think trains awaiting crews, recruits, deadheads, those types of things. We're in discussion with them. I think given that we are in discussion with them right now, until negotiations, it would be inappropriate to comment much further than that, Scott. Thanks for the question.

Our next question comes from Tom Wadewitz from UBS.

Doug, congratulations. I hope you enjoy the retirement as well. I guess two questions for you. I think you talked about some new or – I don't know, I'll call it Part A, Part B. Just on the bulk side, you said, I think, some new business on crude by rail. I don't know if you have any color on how big that is or what that is? And then coal, you were kind of one is getting – Canadian is getting better. U.S. stays weak. What's the kind of net coal view within that? Is coal going to be – overall volume is going to be flat or still down, but down less?

Okay. Well, thanks, Tom. So on the crude by rail, so we have a natural crude heavy oil franchise that moves down to the U.S. We've been working with a couple of our customers to create a new terminal that's on CN. So rather than having to worry about moving this product offline to other railways, we've been able to work with our customer base to create a new crude receiving terminal for heavy oil down in the Baton Rouge market and that is great because we're able to cycle those sets from the Alberta market down there and back a lot faster. So we were able to turn our customers' assets and move Canadian oil to the U.S. market as fast as anybody has ever been able to do. So we expect that to continue moving forward with other opportunities there as well. On the coal market, we're expecting obviously Canadian coal to pick up only because we had a couple of mines that were down earlier in Q1. Those mines are now back running properly. So we expect to see very comparable numbers moving forward on the Canadian coal side. The U.S. coal side is more market dependent. So our U.S. coal franchise is mostly export through the Gulf Coast. That coal moves typically over to Europe. And that market is tough right now because they use it for blending with Russian coal and they're not taking Russian coal. So it's a complex, I'll say, blending operation. But our customers, at the same time, are looking at new opportunities in different countries around Asia as well as in Europe. So we'll see what happens there, and we'll only be able to give an update once they're able to convince their customers to take that coal market. So I think that covers both topics. Thanks for the question.

Is the crude new volume or extended length of haul?

Some of it – most of it is extended length of haul, but there will be some new volume in there.

Our next question comes from David Zazula from Barclays.

Doug, congrats on a great period of service. I guess any time I've left anywhere I've always had some undone items. I was wondering what your undone items that you never really got to and would you be excited to turn it over to Remi for him to get started on?

Well, thanks very much. So there's always lots of undone items like you've said. But listen, my key goal was to help find a great replacement, and that's one goal heavily accomplished. So there's nothing much we can say about that. You're going to love having Remi on these calls, and the rest of the team will straighten him out if it's not really working. So – but it's not like he's a stranger. He's been doing this in some of his other jobs. So he is going to be awesome. With respect to that, there's always tons of work to do, and I work with the team around that. You always want to be able to grow and help your customers grow. So we're always trying to find new ways to work with our customers to create either new products or even get deeper into their supply chains. And we accomplish that on a regular basis, but there's always the next one and the next one and the next one. And that's really what I haven't been able to get done. You can't get them all done. It's just impossible because there's always something else to do. So I'm looking forward to turning that over to Remi, and he'll be able to do that and work with the team here on creating those products that the customers really need to drive additional growth at CN.

Our next question comes from Jon Chappell from Evercore.

On the productivity front, there's significant attention on headcount, but your purchase services declined by 4% year-over-year in a flat volume environment. Is that related to the winter you experienced this year compared to last year? Are we seeing all of that as productivity? As we consider this major cost item, are we looking at a much lower run rate going forward? Or was there something unusual in the first quarter that caused that cost item to decrease despite the flat volumes?

I'll hand that one over to Ghislain.

Yes. I mean, when you look at the year-over-year, you're right, our purchasing services material were down 4%. A lot of it was a little bit of less snow clearing, a little bit of less outsourced services and a little bit of less maintenance. But these are not big variants. But you're right, when you add them up, we're down 4%. And those are mainly the items that make it up. Thanks for the question, Jon.

Any reason to extrapolate that as a lower run rate then going forward? Or are you saying it's basically just kind of a one tiny decline?

I would not assume that this would – that will deliver a lower run rate in the following quarters.

Our next question comes from Brian Ossenbeck from JPMorgan.

Doug, two quick ones for you. One on the Canadian grain pricing on the regulated side. You had think 2, 12% in a row. I don't know if you'd expect something similar just based on how that formula works, but we're going to get that any day now. So any way to level set what we should expect for the coming year? And then just maybe some brief thoughts on the pipeline as you look further out from the CN-specific growth opportunities. Obviously, you outlined it at the Investor Day a little while ago, and there have been a few moving pieces, but any other themes you've seen since then in terms of what's coming to come out or maybe accelerated or slowed down as you look on a multiyear view?

Okay. So thanks, Brian. So on the Canadian grain pricing, it's been 1 year at 12%. And so that's the current year we're in. The prior year, if memory serves me right, it was more than that 4% to 5%. But it's still all good numbers. So we're going to do very well on Canadian grain this year. So we continue to have a strong grain market even into the spring. So it's going extremely well. And we expect that to continue moving forward actually through Q2 for at least the next month or so. So we're very happy with the overall grain this year. Now we've also been able to get the pricing with there. So we should finish very well on grain pricing. For next year, we – listen, it's a little bit of a black box within the CTA and Transport Canada. So when they come back, they consider a lot of different things. And then out comes the number. So we usually budget just in that 3% range and just try and move forward from there. If we're surprised on the upside grade, if we're surprised on the downside, we'll adjust accordingly. So we'll all be surprised when the number comes out in a week or two. Now with respect to some of the other pipeline of growth opportunities, we've done obviously very well at what you've seen. Some of the things we've really been delivering on is on the refined products and on the LPGs. So that's one that's really started to add up. We obviously got the long-term agreement with AltaGas, which we announced before, but we're seeing additional growth head towards both the West Coast for export as well as we're still servicing the domestic market really, really well. So we continue to see that and refined products have actually been the surprise this year. The number is up quite a bit. Now we're moving up to different markets. It was moving export during the winter, and we're expecting to see more and more domestic market during the rest of this year. So we're very happy with all that. And then that ties in nicely with our new facility in Mac Yard as well, which would be above and beyond that. Thanks for your question, Brian.

Our last question will come from Justin Long from Stephens.

So I know the CapEx guidance didn't change overall, but I was wondering if you could provide any update on your locomotive plans for this year as it relates to both new locomotives and modernizations? And in addition to that, the CARB has proposed some regulations in the U.S. I know the EPA is looking at those currently. Just curious if you have any thoughts around what's been proposed and how that could potentially impact your locomotive strategy going forward if passed?

So I'll take that one. This is Pat Whitehead. So our plan is that we continue to modernize our fleet. We will continue to work with Wabtec, and we have some progress rail modernization as well. That's been our chosen path. That's the most reliable locomotive in the industry currently, and we will continue to invest in that. We are working with both OEMs and exploring other technologies for the locomotive of the future. And we'll continue down that path, and we'll continue to have – we purchased donors last year that we could convert for our modernization program, and we will be converting those between this year and next.

And just let me add a little bit to that as we finish up today. We are watching CARB very closely and where that is going to go with the rest of the industry. As an industry, this is something that we've got to get our head around. We have made some investments ourselves on electric battery, electric locomotive and on a hybrid locomotive. But clearly, as we go forward, this is something the industry will collaborate on more fully and decide on the ultimate path. It's an important effort for us and for the industry, and we'll keep you guys in the loop as we go along. Thanks so much for the question. So we'll wrap it up today. And as we do that, I'll reiterate the plan is working clearly. You guys' minds are on growth. Thanks for giving Doug such a good workout on his last call. Our minds on growth as well, and we're feeling very optimistic around what we see ahead of us. We look forward to talking again with you in a few months. Thank you.

The conference call has now ended. Thank you for your participation. You may now disconnect your lines.