Good afternoon. My name is Julianne, and I will be your operator today. Welcome to CN's Third Quarter 2023 Financial and Operating Results Conference Call. All participants are now in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session, during which we ask that you kindly limit yourself to one question. I would now like to turn the call over to Stacy Alderson, Assistant Vice President, Investor Relations. Ladies and gentlemen, Ms. Alderson.

Thank you, operator. [Foreign Language] Good afternoon, everyone, and thank you for joining us for CN’s third quarter 2023 financial results conference call. Before we begin, I’d like to draw your attention to the forward-looking statements and additional legal information available at the beginning of the presentation. As a reminder, today’s conference call contains certain projections and other forward-looking statements within the meaning of the U.S. and Canadian securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. They are more fully described in our cautionary statement regarding forward-looking statements in our presentation. After the prepared remarks, we will conduct a Q&A session. I do want to remind you to please limit yourself to one question. As usual, the IR team will be available after the call for any follow-up questions. Joining us on the call today are Tracy Robinson, our President and CEO; Doug MacDonald, our Chief Marketing Officer; Ghislain Houle, our Chief Financial Officer; and Ed Harris, our Chief Operating Officer. It is now my pleasure to turn the call over to CN’s President and Chief Executive Officer, Tracy Robinson.

Merci, Stacy, et bienvenue à tous. I want to start today by saying a few words about the evolution of our operation structure. We were very pleased last week to announce the appointment of Derek Taylor to Executive Vice President and Chief Field Operating Officer; and Pat Whitehead to Executive Vice President and Chief Network Operating Officer. You've all met both Pat and Derek. They are both accomplished and experienced operating officers, and they will both play prominent roles in CN's future and our success. Now this - this isn't splitting as roll into two. We're making this bigger and we'll be focusing on work that we haven't done before. The structure we're creating will strengthen the competencies that are core to our future of driving profitable growth. It recognizes the equal importance and the distinct nature of competencies around building the plan and running the plan. Now, Derek and his is field team will focus on continuing to improve the daily execution of our scheduled operating plan across our three operating regions and our intermodal terminal. They will drive on-time performance, along with continued improvement in dwell and in first mile, last mile delivery to our customers. Pat and his network team owned the plan, and their focus will be on two things, continuing to refine the plan to optimize to our volumes and to improve velocity, and to drive a more focused longer-term plan, including resourcing and the development and execution of the capital plan to both maintain our network on a lower cost per unit basis and expand it for growth where necessary in a more cost-effective manner. Now this structure splits the critical day-to-day focus of running the operation from the very specific work we need to do to ensure that we continue rather to operate…

Thank you, Tracy. Thanks for the kind words. I think before I jump into the quarter, I just want to take a minute to talk about these two guys, Derek and Pat. I've really gotten to know them over the past year, and they are among the finest operators I have ever had the pleasure to work with. Investors got to see a bit of their great chemistry and relationship back in May at Investor Day, and how they work together. The entire network benefits from how well these guys operate every day. I can't tell you how confident I am in the future of the operation and the company with these two working as one, while expanding their responsibilities and pushing the team to be better every day. In fact, this quarter has been a great example of how well they work together because it was a tough operating out there in quarter three. We started out by dealing with a two-week port strike on the West Coast. We then faced constant disruptions from forest fires and flooding until September. Running to a plan makes all a difference. For instance, we have a two-day outage on our mainline east of Edmonton in the quarter. In the past, that would have taken us up to a week or more to get operations back in sync. This one took two days. The team really took it up a notch in September though, with improvements in car velocity, train speed, through dwell and origin and destination train performance. We told you how we decided not to furloughed train crews earlier in the year, now with grain coming on strong, we're seeing the benefit of that decision. All in all, we're set up well for a strong fourth quarter. I'm very proud of…

Thanks, Ed, and all the best on your well-deserved retirement. Also, congratulations to Pat and Derek, I look forward to working even closer with you as we deliver for our customers together. We said it on the Q2 call that our commitment to our customers is to provide industry-leading service, and we continue to deliver on our promise. As for volumes, we believe the worst is behind us. They hit the bottom in July, we saw improvement in August and September. Through the rest of the year, we expect this trend to continue, and I'll give some more details in a moment. We continue to deliver core pricing ahead of CN inflation. The pricing environment remains robust and our service levels are facilitating pricing conversations with our customers. We started the quarter in a bit of a hole with the port strike on the West Coast. This impacted International Intermodal more than any other business segment. And as Tracy mentioned, we continue to see a hangover effect from cargo diversions to U.S. gateways. We ended the quarter with UAW strike starting at the Detroit Big 3. Fortunately, this only had a limited impact on our volumes in Q3. Turning to Slide 9 now. Third quarter revenues were nearly CAD 4 billion, down 12% versus last year on lower fuel surcharge rates, lower volumes, but partially offset by solid pricing. RTMs were down 5%, but excluding overseas, were up 1% for the quarter as we see a continuing recovery across the other business lines. For merchandise, metals and minerals finished with the best quarter so far this year, supported by increased drilling programs in Western Canada driving strong SAM shipments. Demand for forest products remains below pre-COVID levels due to a challenging macro environment. Lower petroleum volumes in the quarter were…

Merci beaucoup, Doug. [Foreign Language] But before I do that, I want to thank Ed for everything he has done this past year. I've known Ed a long time, and I'd like to wish him and his family a long, healthy retirement. And frankly, now I hope he stays in retirement. And the growth felicitation to Derek and Pat on their appointments. Now, I will top the Slide 12 of the presentation, which will provide more visibility on our third quarter performance. Volumes in terms of RTMs were lowered by 5% on a year-over-year basis, including the impact of the external disruptions that Ed talked about earlier. We delivered operating income of around $1.5 billion, 21% lower than last year. Our operating ratio came in at 62%, up 480 basis points versus the operating ratio for percent lower than last year, but is only slightly higher year-to-date on a year-over-year basis. EPS for the quarter finished at $1.69, 21% lower than last year. The estimated impact of external disruptions on our network this quarter was unfavorable to EPS by $0.10 and dilutive to the OR by 130 basis points. In terms of expenses, labor was essentially flat versus last year, driven by 6% higher average headcount and general wage increases, offset by the U.S. wage accrual true-up related to new labor agreements in 2022, and lower incentive compensation this year. We have slowed and, in certain cases, stopped the pace of new hires through the quarter. Fuel expense was more than CAD 175 million lower than in the same period last year, mostly due to a 20% decrease in price and a 6% lower workload in terms of GTMs. With rising fuel prices, we had an unfavorable fuel surcharge lag, which had a CAD 0.10 impact on EPS in the…

Thanks, Ghis. Operator, I think we're ready to take some questions.

[Operator Instructions] Our first question comes from Walter Spracklin from RBC Capital Markets. Please go ahead. Your line is open.

Hi, this is James McGarragle, I'm on for Walter this morning. Thanks for taking my question. We've been tracking some TEU trends out of Prince Rupert and some of the weakness that occurred as a result of the port strike in July looks to be extended into August and more recently in September. And I guess my question relates to the extent this might be structural versus temporary? And I know you addressed this in your opening comments, but can you speak more specifically to some of the servicing cost benefits you have versus U.S. alternatives and the confidence you have in that volume coming back? And any update on your conversations with the shipping lines and how quickly do you think we could see that come back? Thank you.

Good afternoon, James. Yes, as we said earlier, we think this is a temporary issue. There are similar structural advantages to Rupert in particular, both, as you noted, economic and service. So we have set Prince Rupert up with a premium container service into the U.S. markets. And that kind of strategy has been working. And as you noted, when the strike occurred, it's that business that started to move to the U.S. ports, but that structural advantage continues. And we're two days faster from China in Chicago than the other alternatives, and there are some economic advantages based partly on the currency, the Canadian currency and other that we think they stand even as we look into the future. So we think this business is going to come back or we're working with our customers on it. Our call is that it will come back gradually. We've lost a little confidence in the West Coast ports. It will come back gradually unless the volume really starts to pick up and then it will come back more quickly. In the meantime, up at Rupert, we're continuing to lean into an increasing structural advantage. If you think about the import transload is now under construction. The port announced a really as an export Logistics Park that's been approved in this going forward. So all of that, I think, is very supportive on the container side. And even outside of container some Doug mentioned, our AltaGas deal, we very much appreciate the business and the partnership with AltaGas. But that new agreement is going to drive considerable growth in that quarter. So we are actually if you think about the growth that we laid out for you at Investor Day on the Rupert corridor, we are ahead of that plan. So we're feeling pretty good about it and very strong about the structural advantage of Rupert.

I appreciate it. And just a quick one on BILL C-47 and interswitching, I've seen some of the companies post about this one now LinkedIn, but have you seen any customer up-tick on interswitching and any early commentary you can provide on the matter. And I'll turn it over. Thank you.

Yes. I would say that what we are focused on is driving the highest performance out of our supply chains in the country in the continent. And we are prepared to continue to invest in capacity and that performance. The interswitching provisions and the concept of it, is not at all supportive of supply chains that perform at high-level. It slows, cars down, slow service down, and it is not supportive of continued investment. And so, on that basis, we've objected to this. Having said that, we haven't - we've seen a significant impact as of yet, but it's really good.

Our next question comes from Brandon Oglenski from Barclays. Please go ahead. Your line is open.

Hi. Good afternoon and thanks for taking my question. And sorry if this is a little bit near-term focus. But Ghislain, can you just walk us through some of the moving pieces on your implied 4Q guide, because I think it suggests that OR should improve sequentially. And obviously, you had some issues in the third quarter, but can you talk through the moving pieces here on how to get to the full year guide from where you are?

Thanks, Brendan. Well, I think as we said in our opening remarks, I think there's - we see definitely improvement in volumes on a sequential basis. I mean just when you look at our volume sequentially in October versus September were up 7%. So I think you can expect volumes to improve sequentially and as volumes come in, I think that we are very comfortable that we will deliver some operating leverage. And maybe I'll pass it on to Tracy do you want to add anything, Tracy?

Sure. I think the other way to think about it, we are seeing the strength in volumes that Ghislain is talking about. Our pricing is coming in exactly the mandate that we gave Doug, and I am really pleased with the margins that this system is providing and this team is providing. I think we've had the best margins in the industry for the past five, six quarters. And we've got - we know that there's leverage there, particularly in the Manifest business on the merchandise side as the volume starts to lift again were eager for that to happen, and it looks like it's starting to happen now.

Thanks for the question Brandon.

Thank you.

The next question comes from Cherilyn Radbourne from TD Cowen. Please go ahead. Your line is open.

Thanks you very much. Good afternoon. I wanted to pick up on some of the new interchange relationships that you've negotiated with your rail peers. What do you think needs to happen to make these partnerships work better than they have in the past? And do you think that the willingness to cooperate will extend to include trickier situations where perhaps one of the two carriers, have to accept the shorter length of haul.

Yes, Cherilyn. Thanks for that question. It is - I think it is a change that we're seeing in the industry, right, for various reasons as we have our discussion, I would tell you that we are open for business and very eager to work with our partners and the other carriers to provide and design and provide the services that makes sense for our customers. And the ones that you've seen, at least us step into most recently are really targeting getting truck traffic off the road and things like the falcon service, Doug is working as well on our new service with the NS. These are working with FXC in the Cape Falcon and UP. We have a product in place now that's consistently delivering at very truck-like transits, and that's pretty remarkable. I think you're going to see more of this. And I would say that the nature of the dialogues that we've had so far with all of the carriers is that we'll conduct ourselves in a way as though we were a single carrier, right? And that may mean, in some cases, it's advantageous to one and in other cases, an advantageous to the other. But that's a principle that I think needs to underscore these relationships as we go forward. Doug, do you have anything to add to that?

The only thing I'll add is Cherilyn is that it's all about service. So the quickest transit times to compete against truck is really what the operating teams between the railways are really focused on. And we don't really care how long the haul is, right? It's all about - we need to get it there as fastest truck. All the teams are - have been greatly focused on that. They've come up with some great products where we think we are truck competitive in all these corridors and they're major truck lanes. So I assume that we're going to take our time. We're going to start to build this as we build momentum. It's going to take a while to pull trucks off the road, but we're pretty happy with the product so far, and we think we'll be successful.

Thank you.

Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead. Your line is open.

Great. Hi good afternoon, everybody. Ed, congratulations and good luck with your retirement and congrats to the new incoming team as well. Maybe one kind of parting question for you, kind of as you joined the team, was this transition kind of timing, what you had planned when you joined? Or is it something that you brought forward just given some of the traction that you've had with implementing the plan?

Yes. When I came on board, don't forget I consulted here for quite a few months before I came on board and our evaluation of both Derek and Pat was almost immediate. Tracy and I were in agreement and then a lockstep with what the future of this operating department was going to look like. And both of these individuals have stepped up to the plate. Quite frankly, they've been running the show for the last couple of months, just getting ready. And I'm extremely, extremely proud of what they've been able to do. And if there's a testament to their crowns, our third quarter was tough, as I said in my speech, I mean, it was rough operating out there. And our metrics were only off a small percentage and car velocity, train speed, cycles. I mean we were doing everything right. And just to add on to what Doug just talked about between the carriers, just think of what this industry can do. If we take a day out of the cycle, all carriers do that. We get the traffic off the trucks. And that's what it's about. So, thanks for the nice comments. I appreciate it. I missed all of you. Maybe but they - it’s been a lot of fun for me and I'm enjoying every minute over. Thanks.

I don't know who I'll tease and...

Great. Thanks for that, Ed. And then maybe as a follow-up, Tracy, can you share what the initial success has been like selling your Falcon service to your customers? Obviously, your peer has a bit of a speed advantage still, but kind of what are your customers sitting here in terms of their preference for speed versus value or kind of what they're looking for from that intermodal service?

I would tell you that whether it's that intermodal service or any service, table stakes is the consistency of the service that we provide. In the case of going after the truck traffic, like the Falcon service does, we know that means we also have to be fast. And I'm really impressed with the way the three organizations are working together to create a service and continually challenged to where we can get time out. And you've seen that happen. And then to - that's one thing, but to deliver it consistently every day is another thing completely. And we're doing that. And so as Doug said, this is a proof of concept, a model that we've got to prove to our customers, and it's going to grow over time. We expect it to start small, which it is, and it will grow over time, and Doug I think we've said that we think this is a train a day both ways, ultimately, is that.

No. Tracy to answer it. That's the market share that we see out there, and it's going to take a while to get there, and we're going to make some progress. Like I said in my remarks, we are lucky enough to see STG join up on the service, and they started shipping their first load a couple of weeks ago. It's our first real new, I'll say, a third-party person that's come on, and that's a great relative forward to more.

Very helpful. Thank you.

[Operator Instructions] Thank you. Our next question comes from Scott Group from Wolfe Research. Please go ahead. Your line is open.

Hi, thanks, afternoon guys. And best of luck to Ed. So just Lane, the CAD 0.20 of headwinds in Q3 from fuel and external disruptions, should we just assume that, that those entirely go away, and that's basically the bridge to your full year guide? And then as I think about next year, where you stand today? Do you think the long-term guide of 10% to 15% earnings growth is achievable next year?

Thanks, Scott. I can answer the first part of your question, and then I'll turn it over to Tracy for the second part. So you're right. So when you look at the fuel surcharge headwind that we had in the quarter, it's CAD 0.20 year-over-year. It's CAD 0.10 this year. And if you remember, Scott, last year, we had a favorable fuel surcharge of CAD 0.10. So year-over-year, it's CAD 0.20. And then there's another CAD 0.10 of year-over-year disruptions that we quantified for you, so that's what we had to go through in the quarter. And despite all of this, we delivered a 62 OR, which we're quite proud and pleased about it. And then I'll turn it over to you, Tracy, for next year.

Sure. As far as the guidance that we gave at Investor Day on the CAGR of 10% to 15% EPS, we are sticking to that. We see that. So without doubt this railroad is running very well, continues to do so through all the shocks that has gone through this year, a testament to the team, I'm impressed every day. We laid out a growth plan for you. Now that was based on kind of this presumption of what is uncalled the supportive economy. We haven't seen that much this year, but we are starting to see it come back. And that growth plan was a combination of two things. It was a piece of growth that is we're going to capitalize on as the economy is coming from the strength of the economy. And then there's some very specific customer initiatives that we're working through. That, that list is growing that we're progressing without - they're not tied to the strength of the economy. And those are coming on plan or in some cases, does is bringing them in ahead of plan as is the case for the printer corridor. So we think that this plan stands. And the risk to it would be that underlying strength in the economy, but we're feeling pretty good about it as we sit here today.

Thank you.

Our next question comes from David Vernon from Bernstein. Please go ahead. Your line is open.

Hi guys, thanks. So Tracy, I just want to push on that a little bit. I mean, obviously, we're coming in a little bit weaker than we might have a thought for 2023. As you think about that three-year envelope of 10% to 15% with some of the growth initiatives starting to pay off, should we maybe be doing a little bit better than the lower end of the range? Or how should we be thinking about the contouring of that 10% to 15% over the three years? Is it more back-end loaded, middle loaded, frontloaded?

I think it is going to shift as far as in its timing. And we're feeling pretty positive about the specific customer initiatives. What remains to be seen is exactly what the pace of the strength of the economy returning. So we'll give you a little bit more color on that in January exactly what we're seeing. But right now, we're feeling good about our guidance.

And then just one, maybe just real quickly the CapEx side of that, there was a lot of concern, I think, when you had your Investor Day around the level of spend. Are you thinking about regulating that spend still in line with the volume anticipation?

We - I mean, thanks, Dave. Yes, I mean we have these customer initiatives. If these customer initiatives, some of them fall off the table or some of them have been later, then obviously, we will regulate our CapEx accordingly. I mean the capital envelope is a living thing. It's a dynamic thing. We look at it on a regular basis. So obviously, absolutely, we will look at our CapEx in light of those opportunities coming on board.

Thank you.

Our next question comes from Konark Gupta from Scotiabank. Please go ahead. Your line is open.

Thanks for taking my question. Echo my congratulations to Ed, Patrick and Derek. Perhaps on international intermodal side, I want to figure out what's your visibility on timing for when the container traffic fully returns back to Canada from the U.S. And then as a follow-up on domestic intermodal, can you talk about the RFPs you're expecting in terms of size or nature for Falcon premium? Thanks.

Okay. Thanks, Konark. So on the international side, our customers are telling us they see a gradual ramp up over the next year or so. So we're expecting that. That's what's in our forecast and our outlook moving forward. And that's the best visibility we have in the market. So, we're depending upon them, and we think it's right. On the domestic side, outside of - so on the domestic Canadian side, things are going very well. We're actually seeing increases there year-over-year, which is fantastic. So that market has come back - coming back nicely. We see some green shoots there. On the Falcon, we're seeing RFPs on a regular basis. Now the customers have to be able to trust us and do it. So we're getting - we're out there getting trials with them and things like that. It's going to take a while to build this off the road. At the same time, we know truck rates in the U.S. have been depressed over the last year, and we're competing against those as we move forward. We do have a great product, and we know we're going to win as time moves on.

Thank you.

Our next question comes from Fadi Chamoun from BMO. Please go ahead. Your line is open.

Thank you, Ed, Pat and Derek, congrats on the role. And Ed, this is truly a last retirement, all the best, and thanks for all the advice over the years. Maybe, Doug, on the fourth quarter, if you can give us - what are you assuming for volume in the fourth quarter in terms of growth year-on-year or sequentially? Just to kind of help us track your progress on that front? And my question on the cost per head count per employee? Like, how should we think about this sequentially into Q4? And I know you have some labor negotiations coming up here. And how do you think about the best way for us to think about that cost per headcount in 2024?

Listen, Fadi I'm going to take the first one, and I'll hand it off to Ghis for the second one. So as we're looking at volumes, kind of, week-over-week and month-over-month, we're seeing that sequential strength. And right now, we're looking at sequential growth in all but kind of the international, even in the international volumes sequentially, though we're seeing real strength coming from most, if not all of our business lines as you look at it sequentially over time. So we've mapped that out, does pretty close to its customers and what they're planning over the course of this year. So it's on that basis that our confidence remains on our guidance. And if you look at industrial production as well, we've said that we were going to do better than industrial production. Industrial production is strengthening. And I think that Doug what do you think, you'll see us do that on everything, maybe except the international lines. Would that be the case?

No, I agree with that 100%, Tracy.

Okay. Thank you. Ghis.

Yes. So Fadi, on the average comp per employee, when you look at it sequentially, it's up 2% in Q3 versus Q2, and that's mostly due to a 4% wage increase on our U.S. employees that started in July 2023. And for next year, I mean, again, I would continue to assume regular wage increases and we're just replacing employees for attrition, and that's about it. So that's the answer to that question.

Thank you.

Thank you.

Our next question comes from Ken Hoexter from Bank of America. Please go ahead. Your line is open.

Great, good afternoon. I'll stick to it. Congrats on your last call and your attempt on the fifth retirement and congrats to Derek and Pat, which is great, as Tracy said, they have no mic. So Tracy, you can really talk about them now.

That’s right, Ken. I can.

I guess just a numbers question real quick and then a long-term one. The casualty costs, they ramped up in the quarter. I just want to understand, is that sticky? Or is that just because I think it was mentioned there were a couple of extra accidents in the quarter. But long-term, my question would be just on - I know you've talked a little bit about the 10% to 15%. I know that's not linear. But how should we think about that as you start to rebound? And maybe give us upside downside. Is it just the volume because Doug sounds like you've got a lot of confidence that we passed the bottom. So is that just moving past the storms and the U.S. grain crop bouncing up? Maybe talk about the upside, downside on that range for next year.

Yes, Ken, maybe the first - your first question on the casualty cost. I mean, I'm looking at my notes here. I mean, C&O, Casualty & Other is mostly flat on a year-over-year basis in the quarter. So I'm not sure what number you're looking at.

I just looked at it was just up sequentially, right? So I know year-over-year. Is that just - is that seasonal in terms of the actions it ran up?

Okay. Sequentially, it's again, it's just up about 6%, 7%, and it's really lower horsepower - high horsepower income. This is tough to say for a French guidance. So it's just mostly lower high horsepower income in Q3 versus Q2.

Okay, yes. If it's not a trend, that's fine. I just want to make sure if that was nothing that was sticky based on…

We true up on our horsepower every quarter, so you have some ups and downs depending on how we interchange our trains with other roads and so on and so forth.

Okay. Perfect.

Then on the volume question, so you're right, we don't see this as being linear. And what we did put together was kind of - last year was kind of a 10-year view on what our growth would look at what we put in front of you guys in - earlier this year was the three-year view on that. And so a good chunk of that, as we've said. Are a number of customer initiatives that Doug is working and that's not a static list, it moves around a lot. And I'm excited about some of the new ones that are coming on of that list. What remains uncertain is the other part of it, which is the volume growth that's going to come with our customers and our partners on just the economic strength. And so we're modeling in kind of what we've talked to you about next year. We'll give you a little bit kind of related to industrial production. We'll give you a little bit more color on that in January when we talk to you next. But I would say that, that would be the biggest risk for next year.

It is the volume side.

Yes.

Okay.

On the economic, that volume, which is tied to economic strength as opposed to the specific customer initiatives that we're working.

Okay. Thank you.

Thanks for your question.

Thanks.

Next question comes from Benoit Poirier from Desjardins. Please go ahead. Your line is open.

Yes. Bonjour à tous and happy retirement, Ed and congrats to Pat and Derek for their new roles. If we move to Eastern ports, there's a labor agreement up for renewal with the dock workers at the Port of Montreal. And there's also the potential strike with the St. Lawrence Seaway. So just wondering if you have seen any cargo diversions so far and kind of the actions that are taken so far to mitigate the potential impact of those labor agreements?

Okay. Thanks, Ben. I'll take that, it's Doug. So on the St. Lawrence obviously, it's brand new. The products that move on the St Laurence that really, I'll say are complementary to the rail or really grain is the main one. So right now, there's enough elevation capacity in Thunder Bay for this week and probably most of next week. And the strike loss, post that then we have offered a train package to our customers, to be able to move product into the East from Western Canada. So it would be - we'd start to look at some business there. You also have the iron ore that tends to move export via Quebec City from the Minnesota area. So we may - there may be some opportunities there as well, but most of that should just move to the talk like normal. So I don't see a lot of changes for us overall, as these moves forward. When you look at the Port of Montreal, we have prepared for that. We're putting a package together to actually move a lot of our customers' freight over the Port of Halifax. We're only in the process now of going out to the market with that so that they know what's available, and we're just starting that planning now, but we do have the operational plan already in place.

Okay. And just a follow-up on Contract, we've seen a great announcement over the last few weeks. What would be the next milestone to monitor, that?

Okay. Contract curve, the next one will be really I think you will see a new RFP for a port operator. That will be the next big milestone for what they're telling us. They're going to start work on the dock as it is today or the waterfront as they call it. So that's where that money is going belong. So they're going to start there without a port operator being named. And then the port operator will be the next big milestone. So we're looking forward to that as well.

Thank you very much for the time.

Sure Benoit.

Our next question comes from Chris Wetherbee from Citigroup. Please go ahead. Your line is open.

Hi, thanks. Good afternoon guys. I guess I wanted to ask about headcount and resources, maybe in general. As you think about kind of reaccelerating the growth in this line of sight that you have the volume growth as we move forward into where do you think you are in resources. I guess, maybe asked another way, do you think that there's a certain amount of volume growth that you can absorb with the head count and sort of the overall resource base that you have today? Or do you think you'll need to be adding incrementally as we move forward?

Thanks for that question, Chris. So think about it this way, we are resourced right now to move the volume that we have, but the resourcing decisions that we make are based on six or nine months from now. So we're planning now for what we need out there. And as we think about it, think about the bulk business, that business is moving now. As that - if and as that grows, that's new incremental train starts, will meet kind of the resources to that. If you think about the merchandise business, however, that has some quite significant room. If you think about even in this quarter, our volumes were down, for example, 5%. Our train starts are down 2%. So in running the scheduled operations, we're maintaining the integrity and the discipline of that schedule, which means that our trains are running a little short. So the first lift in volume, particularly merchandise is going to go on to the end of those existing trains. And there's a tremendous amount of leverage there. And of course, that's done with the existing crew base. On the international side, as that starts to ramp up, that also will be incremental kind of train starts. So we're doing this planning now for next year, and we've got some hard to hire locations that we're still working on. But other than we're in great shape.

And 4Q should be roughly flattish or slightly higher than where we are from a head perspective?

I think that's pretty much baked right now. So yes, it should be about what we are now.

Thanks for the time.

Thanks for the question, Chris.

Our next question comes from Steve Hansen from Raymond James. Please go ahead. Your line is open.

Yes, Thank you for the time. I'll stick to the one question as instructed. It seems like everyone on this call doesn't understand what that means. But in the case question for Doug or Tracy. Grain has been one of your biggest tailwinds year-to-date piggybacking off last year's harvest. At this juncture, I think it's fairly well known that this year's harvest was anything but superior. I understand you've got a couple of weeks of tailwind from an early harvest, but I'm surprised your comments on the outlook were more balanced or cautious. You suggest it was quite bullish. And I'm just trying to square the two given the harvest backdrop. Thanks.

Yes. So listen, the grain crop this year, it wasn't a bad crop, I can tell you, but it was smaller without a doubt last year. Our lines in the north and the drought was a little bit - we didn't have the same kind of drought conditions. And we're moving a lot of grain right now. What it does mean, as Doug has said in the past is that it can - we can run out a grain to move a little bit earlier in the year next year. And that may be an issue in Q2, I guess, Doug. We've got on the offsetting, we've got a number of customer initiatives that are going to - that are starting to produce volume now that we think it's going to be - it's going to be a good offset to that. Doug, anything else?

No, you covered the Canadian grain really well. And on the U.S. grain, we're seeing some strong volumes right now because of the Mississippi being so low. But a lot of that's going to be tempered by overall demand with China and other countries. So we're moving good volumes right now. The team is doing a great job at that. We're really sold out in the U.S. market. We're going to see how the rest of the year plays out here.

Appreciate the time.

Thanks for the one question.

Our next question comes from Justin Long from Stephens. Please go ahead. Your line is open.

Thanks, and good afternoon. I was wondering if you could comment on your expectation for the sequential progression of yields on a cents per RTM basis as we move into the fourth quarter? And maybe along with that, give a little bit more color on the core pricing trends you're seeing. I heard you say that they remain above inflation. But I'm curious if pricing is getting better, worse or about the same on a year-over-year basis.

So let me start with that one, and then I'll hand it over to Ghis, but I would say that pricing can be difficult to see based on the revenue line. So the revenue line includes a bit of noise around storage fees that were higher last year than this year. There's some fuel surcharge noise in there. There's currency noise in there, and there's - so there's a - it's hard to see the pricing through. But I can tell you this, we've given Doug a mandate on the backs of the service that the guys have been able to provide for our customers to come in above our inflation level. And he's consistently doing that on the contract renewal and we have mechanisms in the multiyear contracts that are providing that for us as well. So the underlying pricing is doing well. And just - I don't remember the first question, but whatever…

You covered it is - when you look at either cents per RTM or revenue per RTM as we've always told you guys not to look at this as a proxy for yield because it's a lot of moving parts. There's FX in there. There's the accelerated charges that you talked about, Tracy, there is also the fuel surcharge. So - and I know that you're looking - you're trying to find metrics for yield. But this has got a lot of noise, but we're very confident and Doug make the point that our pricing is above our rev inflation.

Thank you for the question. I think one more question and then we're out of time.

Certainly. The last question comes from the line of Kevin Chiang from CIBC. Please go ahead, your line is open.

Thanks for squeezing me in here and congrats Ed, Patrick and Derek. Maybe just turning to automotive. When I think back to your Investor Day, you laid out a number of opportunities related to the EV supply chain. It does feel like that we might be slowing down here in terms of EV adoption at least what we're hearing from the OEMs. Just wondering any changes to your long-term potential growth opportunity there, the volume capture opportunity, just given what some of the OEMs are doing as they adjust production around the EV portfolio?

Thanks, Kevin. So it's a great question. So EV, it starts really back at the battery. So, all the minerals that go into it. So we've started to move some of the raw lithium. Listen, on never network, we're now up to - well, it was five, but it's just got the six plants located on our network, really all in Eastern Canada for construction, either of the batteries themselves or for some of the parts that go into the batteries or for the refining of the raw lithium and other metals. So we're starting to build that supply chain up. And what we knew it wasn't going to be right away. These plants take a while to get built. In the interim, we're still seeing the EV production schedules moving forward at most of the big three. Now we know GM just came and pushed their back by about a year, but that's okay, right? There's still lots of other products to move in the automotive side. And that will give us time to actually how all these plants constructed in Eastern Canada, where we can actually hold those batteries down in the other parts of them. So it's moving along quite well.

Perfect. Great color. Thank you.

Okay. Go ahead, operator?

This concludes the question-and-answer session. I would like to turn the call back over to Tracy Robinson.

Thank you. I jumped the gun a little there. Listen, I just want to echo Ed comments on the call today. Thank you for what you've done here and for ending the long, very impressive run with us. It's a privilege and it's been a lot of fun working with you and watching you. And they're not mic'd up, but let me say this about guys at the end of the table here, Derek and Pat, very much looking forward to working with you, but in truth as we all know, this plan was implemented a number of months ago. And so you have this place running really, really well. We're excited about where we're headed. This is all about executing that plan and the plan we laid out at Investor Day. The pieces are all in place. The core engine is performing well. And we're ready and really eager for that rebound. So, thanks for joining us today, and we'll talk to you all early in the year. Thank you.

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