Canadian National Railway Company

Canadian National
Railway Company
OCTOBER 2016
TSX: CNR
NYSE: CNI
Forward-Looking Statements
Certain statements included in this presentation constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995
and under Canadian securities laws. By their nature, forward-looking statements involve risks, uncertainties and assumptions. The Company cautions that its assumptions may
not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Key assumptions
used in determining forward-looking statements are set forth below. Forward-looking statements may be identified by the use of terminology such as “believes,” “expects,”
anticipates,” “assumes,” “outlook,” “plans,” “targets,” or other similar words.
2016 key assumptions
CN has made a number of economic and market assumptions in preparing its 2016 outlook. The Company now assumes that North American industrial production for the year
will be slightly negative (compared with its April 25, 2016, assumption that North American industrial production would increase by less than one per cent) and assumes U.S.
housing starts in the range of 1.2 million units and U.S. motor vehicle sales of approximately 17.5 million units. For the 2015/2016 crop year, the Canadian grain crop was in line
with the five-year average and the U.S. grain crop was above the five-year average. The Company now assumes 2016/2017 grain crops in both Canada and the U.S. will be
above their respective five-year averages (compared with its April 25, 2016, assumption that both the Canadian and U.S. 2016/2017 grain crops would be in line with their
respective five-year averages). With these assumptions, CN now expects total carloads for 2016 will decrease in the mid-single-digit range (compared with its April 25, 2016,
assumption that total carloadings for the year would decline four to five per cent versus 2015). CN expects continued pricing improvement above inflation. CN assumes that in
2016 the value of the Canadian dollar in U.S. currency will be in the range of $0.75 to $0.80, and that the average price of crude oil (West Texas Intermediate) will be in the range
of US$35 to US$45 per barrel. CN plans to invest approximately C$2.75 billion in its capital program, of which C$1.5 billion is targeted toward track infrastructure.
Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results
or performance of the Company to be materially different from the outlook or any future results or performance implied by such statements. Accordingly, readers 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 limited to, the effects of general
economic and business conditions; industry competition; inflation, currency and interest rate fluctuations; changes in fuel prices; legislative and/or regulatory developments;
compliance with environmental laws and regulations; actions by regulators; security threats; reliance on technology; transportation of hazardous materials; various events which
could disrupt operations, including natural events such as severe weather, droughts, floods and earthquakes; effects of climate change; labor negotiations and disruptions,
environmental claims, uncertainties of investigations, proceedings or other types of claims and litigation; risks and liabilities arising from derailments; and other risks detailed from
time to time in reports filed by CN with securities regulators in Canada and the United States. Reference should be made to the “Management’s Discussion and Analysis” in CN’s
annual and interim reports, Annual Information Form and Form 40-F, filed with Canadian and U.S. securities regulators and available on CN’s website, for a description of major
risk factors.
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 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 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.
Non-GAAP Measures
The financial results in this presentation were determined on the basis of U.S. GAAP. This presentation includes non-GAAP measures that do not have any standardized meaning
prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies. These non-GAAP measures should not be considered in isolation
or as a substitute for financial measures prepared in accordance with GAAP. For further details of these non-GAAP measures, including a reconciliation to the most directly
comparable GAAP financial measures, refer to the Company’s website, Second Quarter Results at www.cn.ca/nonGAAP. To the extent that CN has provided non-GAAP financial
measures in its outlook, the Company may not be able to provide a reconciliation to the GAAP measures, due to unknown variables and uncertainty related to future results.
2
Company Highlights
• Second largest publicly traded North American
railway with a market capitalization of approximately
C$65 billion
• CN trades on Toronto (CNR) and New York (CNI)
stock exchanges with average daily volume of close
to 3 million shares
• Unique network of approximately 20,000 route miles
(32,000 km) spanning Canada and mid-America,
connecting North America to global markets on three
coasts, with product, geographic and customer
diversity
• Diversified franchise with a mix of natural resources
and manufacturing reaching key industrial markets
and approximately 75% of North American
consumers
• Solid financial policy framework to maintain a strong
balance sheet and investment grade credit ratings
A solid track record and a strong commitment to
creating value for customers and shareholders
TSX: CNR
NYSE: CNI
3
Financial Highlights
Change
H1 2016
Favorable
(Unfavorable) (1)
9
5,806
(7%)
5,266
12
2,510
4%
3.76
4.44
16
2.11
5%
1,623
2,220
2,373
8
1,169
11%
62.9
63.4
61.9
58.2
56.8
420 bps
1,420
1,400
1,400
1,505
1,750
14
1,053
26%
0.54
0.65
0.75
0.86
1.00
1.25
18
0.75
20%
Adjusted debt-to-adjusted EBITDA multiple (times) (2) (3) (4) (5)
1.68
1.68
1.60
1.72
1.57
1.71
Return on invested capital (ROIC) (%) (6)
12.2
14.5
15.6
14.1
15.4
15.6
In Canadian dollars, unless otherwise indicated
2010
2011
2012
2013
2014
Total revenues ($ millions)
8,297
9,028
9,920
10,575
12,134
12,611
Operating income ($ millions)
3,024
3,296
3,685
3,873
4,624
2.10
2.41
2.81
3.06
1,618
1,746
1,661
Operating ratio (%)
63.6
63.5
Share repurchases ($ millions)
913
Dividends per share ($)
Adjusted diluted earnings per share ($) (2)
Free cash flow ($ millions) (2)
2015 CAGR (%)
_
_
_
1.66
_
_
_
(1) H1 2016 vs H1 2015.
(2) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of these non-GAAP measures.
(3) As a result of the retrospective adoption of a new accounting standard in the fourth quarter of 2015, the prior year debt balances have been adjusted and the related financial ratio
has been restated. See Note 2 - Recent accounting pronouncements to the Company's 2015 Consolidated Financial Statements for additional information.
(4) Debt is adjusted to include the present value of operating lease commitments.
(5) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, and is adjusted to exclude Other income and the deemed interest on operating
leases. For H1 2016, the Adjusted debt-to-adjusted EBITDA multiple is based on the EBITDA for the twelve months ended June 30, 2016.
(6) Source: FactSet – Calculated by dividing the estimated net profit by the sum of the estimated shareholder equity and total debt of the security.
TSX: CNR
NYSE: CNI
4
Leadership Team
Mike and Ghislain
are certified train
conductors and
engineers
Luc Jobin
President and CEO
MikeGhislain
Cory Houle
Executive
VPVP
and
Chief
Executive
and
Operating
Officer
Chief Financial Officer
186 years of
experience
JJ Ruest
Executive VP and
Chief Marketing Officer
Mike Cory
Executive VP and
Chief Operating Officer
Solid and deep
bench strength
Kim Madigan
VP Human Resources
Sean Finn
Executive VP Corporate
Services and
Chief Legal Officer
Serge Leduc
VP and Chief
Information Officer
Janet Drysdale
Kim VP
Madigan
Corporate
VP Human
Resources
Development
Solid team of
railroaders
Visit our website to meet our company officers: www.cn.ca/en/about-cn/who-we-are/company-officers
TSX: CNR
NYSE: CNI
5
The CN Journey
1990’s – Fundamental Turnaround – 1995 IPO
• Largest IPO in Canadian history.
• New integrated back-office systems to drive productivity and cost control.
2000’s – Precision Railroading
• $8B of acquisitions: IC, WC, GLT, BC Rail to become a true North American
Railway.
• Precision Railroading model positions CN as the industry’s efficiency leader.
2010 to Today – Becoming a True Supply Chain Enabler
• Balancing Operational and Service Excellence.
• Playing our role as a true backbone of the economy.
TSX: CNR
NYSE: CNI
6
A Great Franchise
Global West 24%
Prince
Rupert
Edmonton
Vancouver
Calgary
Global East 4%
Domestic Canada 18%
Saskatoon
Montreal
Winnipeg
Halifax
Transborder 35%
Detroit
Chicago
Well Diversified Portfolio
Intermodal
24%
Petroleum and Chemicals
18%
Grain and Fertilizers
17%
Forest Products
16%
Metals and Minerals
10%
Automotive
7%
Coal
3%
Other Revenues
5%
Based on H1 2016 revenues
Domestic U.S. 17%
Toronto
Unique three-coast access
Originating carrier for ~85% of
traffic moving on CN’s network
Memphis
Global South 2%
Jackson
Mobile
New Orleans
Close to 70% of traffic originating
and terminating on CN’s network
Well diversified: economic
exposure; products; geography;
customers
TSX: CNR
NYSE: CNI
7
Our Strategic Agenda
TSX: CNR
NYSE: CNI
8
Operational Excellence
• Starts with an unwavering commitment to safety
• Fosters enhanced employee engagement
• Targets continuous productivity improvement
• Anchored on data, fact-based dialogue and a culture of execution
Train Productivity
Yard Productivity
(GTMs per train mile)
(Cars per yard switching hour)
9,239
8,625
8,739
49
48
8,600
46
44
7%
7%
2014
2015
H1 15
H1 16
2014
2015
H1 15
Locomotive Utilization
Car Velocity
(Trailing GTMs per total horsepower)
(Car miles per day)
235
224
219
212
H1 16
224
216
214
199
10%
4%
2014
2015
TSX: CNRNYSE:
NYSE:
CNI
TSX: CNR
CNI
H1 15
H1 16
2014
2015
H1 15
H1 16
99
Service Excellence
•
Customer-centric metrics
•
Level of service agreements
with ports and terminal
operators
•
CustomerFIRST initiatives
including a greater focus on
first-mile/last-mile service
•
Visibility tools and enhanced
communication channels
Becoming a true supply chain enabler -driving end-to-end efficiency and profitable growth
TSX: CNR
NYSE: CNI
10
A Network Advantage in Chicago
To/From Vancouver
and Prince Rupert
Chicago is the major freight hub in North
America
• More than 25% of U.S. rail traffic touches
Chicago at some point on its route (1)
• 500 freight trains and 800 passenger trains
pass through Chicago on a daily basis (2)
• Total freight volumes expected to rise 45%
by 2040 (3)
To/From Montreal
and Halifax
CN acquired the EJ&E in 2009
• Efficient operations and streamlined
interchange points with other carriers
• Enabling consistent service by
circumventing downtown Chicago
• More than doubled train speed through
Chicago
To/From New Orleans
and Mobile
CN’s outerbelt around Chicago provides a key differentiator from other Class 1 railroads
(1) Kristine Owram, November 18, 2015, http://business.financialpost.com/welcome-to-chokepoint-usa
(2) Chicago Region Environmental And Transportation Efficiency (CREATE) Program, www.createprogram.org
(3) Illinois Section American Society of Civil Engineers, Rail – 2014 Report Card for Illinois’ Infrastructure, www.isasce.org/wp-content/uploads/2014/04/2014-Illinois-Rail-Final-Report.pdf
TSX: CNR
NYSE: CNI
11
Delivering on Our Agenda…
at Low Incremental Cost
Industry Revenue Ton Miles
Industry Operating Ratios (%)
(Index – 2008=100)
(Expenses / Revenues)
CAGR
85%
130
3.4%
80%
120
2.2%
110
75%
1.1%
70%
0.4%
65%
-1.0%
60%
-2.1%
55%
100
90
80
50%
2008
2009
CN
2010
CP
2011
KSU
2012
2013
NSC
2014
CSX
2015
UNP
CN
2008
CP*
2009
UNP
2010
2011
CSX
2012
NSC
2013
2014
KSU*
2015
*Adjusted for certain years
.
Industry-leading operating margins for over 15 years
TSX: CNR
NYSE: CNI
12
Market Outlook
Intermodal
Merchandise
Bulk
• International
− Volumes remain challenging in H2
− Sequential improvements at Rupert
− Capacity constraints during expansion
project at Deltaport / Vancouver
− First volumes to Mobile from expanded
Panama Canal
• U.S. housing starts driving growth in
lumber and other housing-related goods
• Positive outlook for Canadian grain
− Bumper crop ahead, shipments may
start a month early
• Domestic
− Relative strength in CNTL door-to-door
service in Canada
− Expanding our cold supply chain
versus long haul over the road
• Steel and iron ore seem set to improve
by year end
• Strong automotive franchise
− Automotive sales steady, focus on
network and Autoport fluidity to
outperform the market
• Crude and frac sand volumes looking to
be at bottom since mid Q2
• Coal markets remain in secular
decline
− Coal revenues at about 3% of
CN’s book of business – the
lowest exposure of all Class 1s
• Improving outlook for U.S. grain
volumes
• Building for 2017
− Pre-selling port expansions on the
West Coast and Gulf Coast
− Canadian ports benefit from weaker
currency to compete in Mid Continent
24%
• Stronger H2 potash exports amid
bottoming global prices
51%
20%
H1 2016 revenue breakdown – Other revenues represent the remaining 5%
Supply chain / customer centric approach uniquely positions CN within market place
Please see Forward-Looking Statements at the beginning of the presentation for a summary of key assumptions and important risk factors underlying CN’s 2016 financial outlook.
TSX: CNR
NYSE: CNI
13
13
International Intermodal –
Unparallel Market Reach
PRINCE RUPERT
• Exclusively served by CN
• Closest port to Asia
• Capacity: 850k TEUs
(+500k TEUs by mid 2017)
MONTREAL
• Capacity: 1,700k TEUs
(+350k TEUs by late 2016/ early 2017)
VANCOUVER
• Capacity: 3,500k TEUs
(+650k TEUs by mid 2017)
Seattle / Tacoma
HALIFAX
• Capacity: 1,400k TEUs
• New vessel calls added late 2015
Arcadia
New York / New Jersey
Import Discharge - West Coast
(TEUs)
To U.S.
Savannah / Brunswick
To Canada
49%
32%
33%
2010
2011
43%
2012
42%
42%
2013
CAGR 13%
TEU: Twenty-foot equivalent unit
2014
2015
48%
50%
H1 15
H1 16
Mobile
CN terminal investments
GULF COAST
• Panama Canal expansion mid 2016
• Port of Mobile
• Near-dock rail service spring 2016 and
new vessel call from Asia
• Capacity: 350k TEUs (+125k in 2016)
• Port of New Orleans
• On-dock rail expansion completed
• Capacity: 800k TEUs (+100k in 2016)
CN and partners coordinating terminal / port expansions
TSX: CNR
NYSE: CNI
14
Domestic Intermodal – Growing Against
and with Truck
Differentiating Our Service Offering
• CN has the fastest and only single line doublestack
service running between Chicago and Toronto
• Improved 3rd morning transcontinental service from
Toronto to Calgary
• Improved 4th morning transcontinental service from
Toronto to Vancouver
• Dedicated customer service desk
• Only rail LTL (less than truckload) cross border
domestic container service
• Only overseas cross border repositioning program
• Most fuel-efficient Class I railroad
Intermodal Length of Haul (miles)
2,000
1,500
1,000
500
0
CN
CP
CSX
NSC
UNP
BNSF
KSU
Source: Company Reports and BMO Research estimates
Note: Length of haul for the U.S. carriers are estimated
.
Developing Innovative Products
• Refrigerated service for long haul cold supply chain
• Protected temperature service in super insulated
ecotherm containers for beverages
• Container sleds for steel to compete with flatbed trucks
• Only steelwheel service running between Canada, U.S.
and Mexico
• New Canada to U.S. continental service in collaboration
with the best in class Intermodal leaders (JB Hunt &
Schneider)
• Transloading imports at Vancouver into domestic
equipment for furtherance to U.S. destinations
Average length of haul 1,600 miles (~2,500 km)
TSX: CNR
NYSE: CNI
15
Leveraging the U.S. Housing Market
CN Lumber / Panel Volumes to the U.S.
(thousands of carloads)
• Largest carrier of forest products
among Class I railroads
200,000
187
180,000
1,801
Panels
Lumber
U.S. Housing2,000
Starts (000s) 1,800
160,000
1,600
• Strong Western Canadian lumber and140,000
120,000
panel franchise
107
100,000
• Over 10% of CN revenues tied to
housing
78
80,000
95
84
88
587
609
928
115
1,400
121
1,102
1,000
1,001
784
60,000
554
1,200
1,200*
57
65
800
600
40,000
400
20,000
200
• Softwood Lumber Agreement expired in
October 2015
-
0
2006
2009
2010
2011
2012
2013
2014
2015
2016F
H1 15
H1 16
CAGR 8%
CN volumes include Canadian and U.S. origins
*CN assumption
TSX: CNR
NYSE: CNI
16
Well Positioned to Handle Automotive Growth
Domestic Canada
IMPORTS
Asia
Transborder
• CN handles over 60% of cars produced
in Canada
IMPORTS
Europe
• Origin strength: access 16 vehicle
assembly plants in Ontario, Michigan and
Mississippi
• Destination strength: extensive network of
17 automotive distribution facilities
• Only rail-direct service from west coast to
Detroit to handle imported vehicle parts in
containers
• Well leveraged to strong U.S. sales of
SUV’s and light trucks
TSX: CNR
NYSE: CNI
Domestic
U.S.
IMPORTS
Mexico
17
Prospects for Increased Grain Production
Canadian Grain Production*
U.S. Corn and Soybean Production
CN Draw Territory (IL, IA, MI, WI)
77
6.8
63
61
5-year
average
13/14
Record
Crop
14/15
63
15/16
• First look at 2016/17 crop; potential for
bumper crop given early planting,
favourable precipitation this spring
Billions of
bushels
Millions of
metric tonnes
6.6
6.0
5-year
average
6.1
13/14
14/15
15/16
• First look at 2016/17 crop; good growing
conditions, suggest potential strong corn
and soybean crops
*6 major grains (wheat, barley, canola, oats, flax, rye)
+ lentils and peas
CN grain revenues: 66% originates from Canada and 34% from U.S.
TSX: CNR
NYSE: CNI
18
Low Energy Prices Benefitting
Refiners and Petrochemical Industry
Capacity Expansion Details
Potential export propane facility
Customer
Location
Capacity
(MT)
Timeline
Commodity
Nova
Chemicals
Joffre, AB
450,000
Completed
Polyethylene
Methanex
Geismar, LA
2,000,000
Completed
Methanol
Westlake
Geismar, LA
270,000
Completed
Plastics
Westlake
Paducah, KY
82,000
Completed
Polyethylene
Huntsman
Geismar, LA
400,000
2018
Methylene
diphenyl
diisocyanate
Williams
Energy
Scotford, AB
250,000
Q4-2019
Propylene
Nova
Chemicals
Corunna, ON
•
Propane Carloads
~51k
~46k
~40k
~32k
2010 2011 2012 2013 2014 2015
Naphtha to
Ethane
Growing supply of propane in Alberta, resulting
from increased petroleum refining and natural gas
processing
•
No pipeline options for propane; product will
move to storage or to offshore export positions
•
Western Canada already long on diesel
~42k
~37k
Change for lighter
feedstocks
•
Cheap feedstock gas prices is driving investment
in petrochemical processing facilities
•
Serving the Alberta Industrial Heartland as well as
the Louisiana Petrochemical Corridor
Alberta ethane and propane supply expected to increase significantly in the next 5 years
TSX: CNR
NYSE: CNI
19
Limited Exposure to Coal
H1 2016 Rail Industry Coal Revenues
(% of total revenues)
CN
3%
Industry Peers (1)
12%
(1) Includes CP, NS, CSX, UP, KCS
H1 2016 CN Coal Revenue Breakdown
TSX:
TSX: CNRNYSE:
NYSE:
CNI
CNR
CNI
Thermal
Metallurgical
Total
Canadian coal
Export
13%
13%
26%
U.S. coal
Export
Domestic
26%
29%
-
26%
29%
Coal
81%
Pet Coke
19%
20
Negotiating Value for Our
Service and Our Capacity
Same Store Price
Value Pricing
H1 16
• Consistent measure of all past renewals
2.3%*
2015
3%
• Targeting 2.0-2.5% in 2016
2014
3%
• Canadian regulated grain pricing
2013
3.5%
2012
4%
2015/16 crop – 5% rate decline
2011
4%
2016/17 crop –  5% rate increase
2010
3%
2009
5%
2008
5%
2007
Sophisticated Yield Management Tools
4%
2006
5%
2005
3%
2004
• 2016 also impacted by long lag fuel pricing for “life of mine”
iron ore
3.5%
• Unit revenue to cost ratio: customer provided cars
• Unit contribution per car day: CN provided cars
• Unit round trip revenue to cost ratio: Intermodal
* 2.9% excluding regulated grain and legacy contracts
Same Store Pricing excludes foreign exchange
changes and fuel surcharges. Measures year-over-year
price changes on same store traffic (origin, destination,
commodity, car type, customer).
~ 75% of CN’s revenues are same store.
Targeting inflation plus pricing and
taking a disciplined approach to yield management
TSX: CNR
NYSE: CNI
21
21
Managing Resources Effectively
• CN’s Precision Planning Process Excellence (P3X):
- at the core of CN’s resource planning
- enabling to connect the dots between the demand outlook, our operating model and required
resources
• Ability to plan for longer term business changes, but also to adapt quickly to shorter term fluctuations
People
Locomotives
• Hiring the right people at
the right time at the right
place
• Onboarding and training
programs engaging the
next generation of
railroaders
• Fuel-efficient locomotive
fleet to drive productivity
and better serve our
customers
• Added 180 high HP AC
locomotives over the last
2 years
Cars
Network
• CN car fleet is a mix of
owned cars (2/3) and
leased cars (1/3)
mitigating risk to changing
market conditions
• CN investment in generic
fleet vs. customer
investment for more
specific car types
• Safety and integrity first
and foremost
• Significant investment in
plant over the last 5 years
to increase capacity and
harden network
Adapting to the current environment
• Just under 1,000 layoffs
at the end of August
• Approximately 400
locomotives in storage
• Approximately 10,000
cars in storage
• Leveraging lower traffic
volumes and cheaper
commodity prices to
maximize capital dollar
efficiency
Ample capacity available and ready to deploy as required
TSX: CNR
NYSE: CNI
22
Sustainability Commitment
CN’s commitment to sustainability is a long term strategic priority, extending to all aspects of the business, from the field
to the boardroom, to customer interactions. Our vision guides how we conduct our business every day and defines our
contribution to building a more sustainable future. Five key areas of focus anchor our sustainability commitment:
ENVIRONMENT
SAFETY
PEOPLE
COMMUNITY
Conduct our operations
with minimal
environmental impact,
while providing cleaner,
more sustainable
transportation services to
our customers.
Be the safest railroad in
North America by
establishing an
uncompromising safety
culture and implementing
a management system
designed to minimize risk
and drive continuous
improvement.
Provide a safe, supportive
and diverse work
environment where our
employees can grow to
their full potential and be
recognized for their
contributions to our
success.
Build safer, stronger
communities by investing
in community
development, creating
positive socio-economic
benefits and ensuring
open lines of
communication.
TSX: CNR
NYSE: CNI
GOVERNANCE
Continuously improve
our culture of integrity
and ethical business,
building trust and
confidence with all our
stakeholders.
23
Delivering Responsibly
FRA Train Accident Ratio (1)
Strengthening Safety
(accidents per million train miles)
Lower
is better
2.73
2.25
2.10
2.11
2.48
2.06
•
Building on our strong 2015 performance
•
On-going investments in infrastructure,
rigorous train and track inspections,
continued focus on safety culture and
employee training
•
Unwavering commitment to safety
1.33
2011 2012 2013 2014 2015
H1 15 H1 16
(1) U.S. Federal Railroad Administration
Fuel Efficiency
Reducing Carbon Emissions
(GTMs per US gallon )
Higher
is better
1,040
1,019
973
987
994
2011 2012 2013 2014 2015
TSX: CNR
NYSE: CNI
•
Rail emits up to 4 times less greenhouse
gas emissions than heavy trucks
•
~ 20% improvement in fuel productivity
over the last 10 years
•
~ 15% better than the industry average
1,031
1,008
H1 15 H1 16
24
D E L I V E R I N G R E S U LT S Delivering Solid Results
Revenues
Net Income
(in millions $ Cdn)
(in millions $ Cdn)
$3,538
$12,611
$12,134
$8,297
$9,028
$9,920
$3,167
$10,575
$2,457
$2,680
$2,612
$2,104
H1 2016 vs H1 2015
Down 7%
2010
2011
2012 2013
CAGR 9%
2014
H1 2016 vs H1 2015
Up 4%
2010
2015
2011
2012 2013
CAGR 11%
2014
Adjusted Diluted EPS (1)
Dividend per share
(per share $ Cdn)
(per share $ Cdn)
2015
$4.44
$1.25
$3.76
$2.81
$2.10
$1.00
$3.06
$0.86
$2.41
H1 2016 vs H1 2015
Up 5%
2010
2011
2012
2013
2014
2015
$0.65
$0.75
H1 2016 vs H1 2015
Up 20%
$0.54
2010
2011
CAGR 16%
2012
2013
2014
2015
CAGR 18%
Protecting our profitability despite a tougher environment
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this non-GAAP measure.
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Generating Solid Cash Flow
Free Cash Flow (1)
(in millions $ Cdn)
2,373
2,220
1,618
1,746
1,661
1,623
1,051
2010
2011
2012
2013
2014
2015
H1 15
1,169
H1 16
Steady cash flow generation
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this
non-GAAP measure.
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Investing to Support Our Business
Capital Investments
(in millions $ Cdn)
C$18B Capital
Investments over
last 10 years
2,706
2,750
Positive Train Control (PTC)
2,297
Equipment, including
90 AC locomotives
2,017
1,718
1,712
1,825
Productivity initiatives,
including IT
57%*
52%*
50%*
52%*
50%*
51%*
2010
2011
2012
2013
2014
2015
Core network investments
2016F
* Reflects % of Operating Income
• Strong capital program driving safety, fluidity and productivity
• In 2016, leveraging lower traffic volumes and cheaper
commodity prices to maximize capital dollar efficiency
• Significant improvement in unit cost of installing rail and ties
Committed to investing for the long term
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Maintaining a Strong Balance Sheet
Adjusted Debt-to-Adjusted EBITDA Multiple
(1) (2) (3)
(times)
1.72
1.68
1.71
1.68
1.66
1.63
• Within adjusted debt / EBITDA guideline
of 2.25x
1.60
1.57
• Committed to maintaining investment
grade credit ratings
• Continuous, low cost access to financing
2010
2011
2012
2013
2014
2015
H1 15 H1 16
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this non-GAAP measure.
(2) Debt is adjusted to include the present value of operating lease commitments.
(3) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, and is adjusted to exclude Other income and the deemed interest on operating
leases. The Adjusted debt-to-adjusted EBITDA multiple is based on the EBITDA for the twelve months ended June 30, 2016
TSX: CNR
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Rewarding Shareholders
Total Shareholder Distribution
(in millions $ Cdn)
Share Repurchases
Dividends
$2,746
Dividends
• 20% increase in dividend in 2016 vs 2015
$2,323
$2,005
$2,052
• Dividends increased every year since 1995
IPO
$2,124
1,750
$1,457
$1,416
• Moving towards a 35% payout ratio
1,505
1,400
1,400
1,420
1,021
Share buyback
913
$474
996
503
585
652
818
474
724
436
2008
2009
2010
2011
2012
2013
2014
2015
26%
27%
27%
28%
26%
28%
Dividend Payout Ratio
25%
31%
- CAGR of 17% over 20 years
• Current share repurchase program of up to
33 million shares with budget of approximately
C$2B (October 30, 2015 to October 29, 2016)
- As at June 30, 2016, repurchased 20.4
million shares for C$1.5B under the
current program
• Over C$15B of share repurchases since 2000
~80% of net income returned to shareholders in 2015
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Solid
TrackRecord
Record
Solid
Track
Record
Solid
Track
Market Cap ~C$65B
CNR, CNI vs TSX, S&P 500
2010-2016
350
CNR
300
CNI
250
S&P 500
200
150
TSX
100
CAD/USD $
50
0
2010
2011
2012
2013
2014
2015
2016
Jan 2010 = 100
Up to September 30, 2016
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NYSE: CNI
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2016 Financial Outlook
CN aims to deliver earnings in line with 2015 adjusted diluted
EPS of C$4.44 (1)
− Carloads expected to be lower than last year in the mid-singledigit range, with pricing staying above inflation
Continuing to reinvest in the business for safety and efficiency
− Capital envelope of C$2.75B
Delivering sustainable value for our shareholders
− Protecting our profitability despite a tougher environment
− Rewarding our investors with consistent dividend and share
buyback returns
(1) Please see website, Second Quarter Results, www.cn.ca/nonGAAP, for an explanation of this non-GAAP measure.
Please see Forward-Looking Statements at the beginning of the presentation for a summary of key assumptions
and important risk factors underlying CN’s 2016 financial outlook.
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Investor Relations Contacts
TSX: CNR
Paul Butcher
Stacy Alderson
Vice President, Investor Relations
Senior Manager, Investor Relations
[email protected]
[email protected]
514-399-0052
514-399-4654
NYSE: CNI
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