Good afternoon. My name is Sarah, and I'll be your operator today. Welcome to CN's Fourth Quarter and Full Year 2021 Financial and Operating Results Conference Call. [Operator Instructions] I would like to turn the call over to Paul Butcher, Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher.

So good afternoon, everyone, and thank you for joining us today to discuss CN's fourth quarter and 2021 and full year results as we continue to make progress on our strategic plan, redefining railroading for the 21st century. We are joined today by Mr. Robert Pace, Chair of the CN Board who would like to kick things off this afternoon with a few words about our new CEO. Then we will turn the call over to JJ Ruest, outgoing President and CEO; Rob Reilly, Executive Vice President and COO; Ghislain Houle, Executive Vice President and CFO; James Cairns, our Senior Vice President, Rail Centric Supply Chain; Keith Reardon, our Senior Vice President, Consumer Product Supply Chain; and Helen Quirke, our Senior Vice President and Chief Strategy Officer. They will talk about the results in the fourth quarter and full year of 2021. We will then hold a question-and-answer period. And I would like to remind you to please limit yourself to one question. Now before we get started, we'd like to draw your attention to the forward-looking statements and additional legal information, which are available at the beginning of the presentation. As a reminder, today's presentation 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 and are more fully described in our cautionary statements regarding forward-looking statements in our presentation. So before we begin, Board Chair, Mr. Robert Pace, would like to say a few words. Robert?

Thank you, Paul. Our Board today is pleased to announce the appointment of Tracy Robinson as President and CEO of CN. Tracy brings 35 years of operational management, strategy development expertise, which will help drive growth for CN, operational improvements and long-term shareholder and stakeholder returns and ensure we continue to attract a world-class workforce. She comes to us from TC Energy where she holds the title of Executive Vice President and President, Canadian Natural Gas Pipelines and President of Coastal Links (sic) [ Coastal GasLink ]. She's been there for approximately 8 years. And prior to that, she had a career of 27 years at CP, where she held positions in operations, finance and commercial. Today, we are also pleased to welcome a new Board member, Jean Charest, as a member of our Board. Jean Charest has a distinguished public service career for over 30 years in Canada, including serving as the 29th premier of Quebec. Under his leadership, Quebec experienced a sustained period of economic prosperity and improved significantly major infrastructure. Our Board will benefit from his knowledge of Canada and his global network. And finally, we're excited to announce that Shauneen Bruder, a Director of CN, will become the Vice Chair of our Board. And I want to thank, on behalf of all our Board, the outstanding job that she did as chairing the search committee for our new CEO, along with Justin Howell, Kevin Lynch and Bob Phillips. And I know she'll have a distinguished career at CN in the future. And on that note, I'd just like to highlight the fact that Tracy will not be joining us on the call today because we want to focus on the fourth quarter and year-end results. So on that note, JJ, I'll turn the meeting over to you.

Thank you, Robert. And congratulations on all of these excellent news. And good evening, everyone. Let's start with the fourth quarter highlights on Page 5, a quarter that demonstrated CN resiliency and profitability. The strategic plan we introduced in September is already showing tangible results in Q4. All in, the business produced adjusted diluted EPS growth of 20% and adjusted operating ratio of 57.9% and free cash flow for the full year of $3.3 billion, at the upper end of our guidance. We also achieved a number of noteworthy all-time record in 2021, including an all-time best safety performance on personal injuries, an all-time best performance on fuel efficiency and an all-time best OR for the fourth quarter at CN. The EPS growth came from both pricing and cost initiatives. Incremental margin was solid, and labor cost and productivities were also very solid. Volume was softer mainly because of the BC line washout and lower level of Canadian grain. As a reminder, the BC washout took out our mainline to Vancouver for 3 weeks from November 14 to December 4. This major segment of our rail network normally sees about 21% to 23% of our total revenue running over these tracks on any given day. But in spite of this condition, the CN team performed. The ROIC for the year was 14.1% and sequentially improving towards our 2022 guidance of 15% return on investment capital. Ghislain will go into this detail later. Regarding pricing and upscaling, James will provide evidence of the continued momentum on all aspects of how we're pricing upscale, that is priority segment premium, weekly option -- weekly auction, same-store pricing, demurrage and storage. Regarding labor costs, we ended the quarter about 1,800 fewer people than last year and sequentially about 1,150 million fewer than at the…

All right. Thank you, JJ. In Q4, CN once again showed its resiliency by restoring our network and meeting the needs of our customers safely and efficiently after the catastrophic weather events in British Columbia. The credit and the thanks goes to the dedicated men and women of CN who worked around the clock to return our tracks to service in November and December, restoring over 50 outages caused by the significant rains. As JJ indicated, we've made considerable progress against the goals set out in our strategic plan on September 17. The results of those efforts began to take hold in Q4, giving us momentum heading into 2022 and the confidence in our ability to make gains and create additional shareholder value in 2022 and beyond. The sequential headcount reduction of 1,150 exceeded the target we set in September and was completed in Q4. Our other efforts in cost containment and purchasing service and materials showed significant reductions year-over-year. Moving to Page 8. Despite the weather impacts to our core operating metrics in the last half of the quarter, the CN team improved in every operating metric again in 2021 versus last year and 2019. The exception was train length, which was flat year-over-year and remains an opportunity for us going forward. From a safety standpoint, as JJ mentioned, CN employee performance improved nearly 20% in 2021 to an all-time best for fewest injuries, while the number of accidents improved as well, reducing our cost by $40 million. Our leadership position in sustainability was further enhanced by our all-time record in industry best fuel efficiency. Our efforts reducing carbon emissions in 2021 also saved us an additional $30 million. Our railroad is in great shape, and we are very well prepared to capitalize on future growth. On Page 9, as announced on December 14, we signed a long-term strategic partnership with Google to transform CN supply chain as part of digital scheduled railroading to deliver new customer experiences and modernize our technology infrastructure in the cloud. The first part of the partnership is IT modernization. This will involve transition of key infrastructure and applications to the cloud, which will allow us to improve IT operating costs and better support the operations. The second part of the partnership will drive our innovation agenda and will employ an intuitive digital platform powered by Google Cloud's AI and machine learning tools, which will ultimately give customers and supply chain partners more visibility. Our partnership with Google Cloud is central to our strategic plan and reinforces our industry leadership and commitment to digital scheduled railroading, or DSR. With that, I'll pass it on to James and Keith to provide some insights on the efforts of our marketing team.

Thank you, Rob. Disciplined approach to pricing ahead of railway cost inflation has been a core competence for the CN team for many years. We've been an industry leader in consistently pricing ahead of railway cost inflation in terms of timing and scale. Our customers understand that in order for us to continue to invest in capacity to support their growth, we need to maintain price discipline. Throughout 2021, we saw the real effects of many of our yield and pricing initiatives, delivering an all-time record same-store price of 5.4% for the year. This momentum is expected to continue through 2022. The mix of our business sequentially improved through the year, with the balance of carload and intermodal coming more in line with prepandemic levels in Q4. The CN sales, marketing and operations team again delivered double-digit intermodal and automotive contribution margin improvement over Q4 2020 and sequentially versus Q3. Train density, velocity enhancements, single-destination train packages, productivity improvements in our terminals and in our first mile service, all contributed greatly to the margin improvements. Capacity has value. We don't wait for annual renewals to test the market. We utilize key tools such as guaranteed equipment pricing, premium priority port trains and equipment auctions to allocate incremental capacity when demand exceeds supply. This multifaceted approach allows for real price discovery and provides insight to the value of our capacity. Threshold pricing and seasonal pricing are additional tools used to price incremental capacity at the market rate when an existing contract is in place. We are always careful to match price to capacity. When a market is hot and more capacity is needed, we use price to allocate scarce capacity. The pricing and yield story for CN is strong, and we continue to focus on balanced profitable growth. With that, I'll turn it to Keith to talk about the CN growth story. Keith?

Thank you, James. In Q4, we saw revenue growth in all carload segments with the exception of Canadian grain. West Coast coal was up close to 50% in the quarter, while refined petroleum products and propane on the back of new and growing export capacity in Prince Rupert, both continued to set new Q4 revenue records. Frac sand revenue was up 30% in the quarter and finished the year over 20% better than 2020. While worldwide supply chain disruptions and the BC flooding adversely affected our Q4 intermodal and automotive volumes, we did experience 30% growth versus 2020 in our international intermodal business through the ports of Halifax, Saint John, New York, New Jersey, Philadelphia, New Orleans and Mobile to set an all-time record. Domestic revenues were up 12%. The TransX business, which just posted their best ever quarter, along with our retail volumes, our Canadian wholesalers volumes and the port transload business were all solid before and after the BC flooding. We continue to see sequential improvements in our automotive segment, which positions us well for 2022. Our carload franchise is unique as we have a strong coal growth story on the back of Teck volumes to Rupert and Neptune as well as the restart of the CST and Coal Valley mines in Western Canada. This is expected to offset the weak Canadian grain volumes expected for H1 2022. We're adding new transload capacity in the Greater Toronto area for refined fuels that would have otherwise moved on the TNPL pipeline. We are further solidifying our position as the dominant carrier for undiluted heavy crude with a start-up late last year of a new undiluted bitumen unit train facility in Saskatchewan capable of handling volumes in the range of 40,000 barrels per day. The increasing demand for renewable fuels is expected to be as transformational to the grain business this decade as ethanol was in the early 2000s. We have 3 new CN-served renewable fuels facilities ramping up this year in the Gulf. Longer term, we see new carloads coming from the emerging hydrogen market. This market could be of the scale of crude by rail at its peak. But unlike crude, this will be long-term ratable business. With regard to intermodal and automotive, we continue to drive business to our CN-served ports in line with our partner, ocean terminal operators, bringing on import and export capacity over the next several years. On the East and Gulf Coast, we see the 2022 volumes continuing to remain strong with new trains being introduced to the CN-served ports as solutions to reach U.S. Midwest markets. CN's auto franchise is well positioned to drive growth for our customers as we continue to innovate and support their industry's evolution. The pricing, yield and profitable growth story for CN is strong and well balanced. I'll now pass it on to Ghislain for the financial perspective.

Yes. Thank you, Keith. My comments will start on Page 14 of the presentation, which will provide more visibility on our outstanding fourth quarter performance. Revenues for the quarter were up 3% to $3.75 billion, despite volume on an RTM basis being down 11%, due in large part to the washout in BC, lower Canadian grain volumes and a sustained cold snap during the second half of December. We delivered solid pricing above rail inflation and delivered on yield, optimizing CN's precious network. Our adjusted results exclude advisory costs related to shareholder matters. We delivered a record Q4 adjusted operating ratio of 57.9%, which was 350 basis points lower than last year. Q4 adjusted net income was slightly over $1.2 billion with adjusted diluted EPS of $1.71, up 20% versus last year. Turning to Page 15. Let me highlight a few of our key expense categories expressed on a constant currency basis, many of which are driven by our initiatives under the strategic plan. Labor and fringe benefit expense was 10% lower versus last year. This was mostly driven by a lower average headcount and higher capital credits from more capital work in the quarter. Purchased services and material expense was down by 10% versus last year, mostly due to lower repairs and maintenance, trucking and transload and material expense. Fuel expense was up by over 40%, driven by a 62% increase in price, partly offset by lower volumes in terms of gross ton miles. This quarter, we also continued to see improvement in equipment rents with a 13% decrease versus last year, driven by lower car hire expense. Turning to our full year results on Page 16. I am very proud of our adjusted EPS growth of 12% versus last year, demonstrating our resiliency and capacity to adapt to quickly changing conditions. These great results were achieved despite the loss of our Vancouver mainline for a total of over 5 weeks this year. Now moving to cash on Page 17. We generated free cash flow of $3.3 billion for the year, at the high end of our guidance. Finally, on to Page 18, let me provide an update on our 2022 targets we introduced back on September 17. I'm pleased to report that with the solid progress we have made in Q4, we remain confident in delivering on our 2022 financial outlook of 20% EPS growth, around $4 billion of free cash flow, 15% ROIC, resulting in a full year operating ratio of 57%. Our capital envelope for the year will be at 17% of revenues. Excluding the impact of the significantly weaker Canadian grain crop, the volume environment remains positive, as outlined by Keith. We are continuing to focus on yield management and cost efficiencies. I will now turn the call back to you, JJ for some closing remarks.

Well, thank you, Ghislain. And just to close it before we go to Q&A, as a reminder, on September 17, we announced the next step of our strategy to redefine railroading for the next generation. And as you saw during the Q3 and the Q4 results, we are on track to deliver on that strategic plan. Entering 2022, supply chain continued to be disrupted, and we expect volume growth will be mostly a second half of the year story with the return of Canadian grain at that time. As you saw in our results, we operate with nimbleness and our network is resilient. We already have the capacity to respond to demand when it materializes, and their team is running a solid price and cost action plan. I am very pleased with the solid progress we've made since last summer. The team also responded very decisively to the huge network disruption that we had back in July and more recently in November in British Columbia. So kudos to all of our engineering and operating people out there who work very hard. CN has a bright future of leveraging technology, combining with operational excellence, enabling us to build the premier railroad of the 21st century and delivering industry-leading returns for our shareholders over the long term. And now operator, we'll turn it back to you for the questions.

[Operator Instructions] The first question comes from the line of Cherilyn Radbourne from TD Securities.

JJ, I want to start by wishing you a very best in your retirement. It's almost hard to detect severe flooding in the results in Q4. So I was just wondering if there's any way you can help us frame the revenue and the earnings impact of that weather incident and how much of a traffic backlog there might be to move as we enter Q1.

So thank you for the question. Obviously, a very important question. Ghislain can help quantify a bit, and James can talk to us about what might be still around that business.

Yes, Cherilyn, thanks for the question. Listen, as JJ mentioned, we did lose our mainline from middle of November to early December. And this is the main line going to Vancouver. So we did quantify it. And I would tell you that it had an impact of around $120 million to $130 million of revenue that we could not move. We thought we were going to be able to catch some of that back up in December. However, we got hit by a cold snap mid-December to the end of December. So we did not catch up any of this in December. And I'll let you, James, jump in, in terms of the business that's still out there to move from that flooding.

Yes. We're not going to get it all back, of course, Cherilyn, but there's a lot of business that's still there to move. We're going to have a very, very busy first quarter here once we get some good weather behind us. If you think about the grain, you think about the coal, you think about the international imports, they're all there ready to move. And I know Rob and his team are excited to get after here in the first quarter. Thanks for the question, Cherilyn.

Your next question comes from the line of Konark Gupta from Scotiabank.

I echo Cherilyn, best wishes for you, JJ. So my question is on the supply chain issues and the labor issues going on in the industry right now. So in light of what's happening in the trucking market with the vaccine mandates, I'm curious as to what kind of hiring outlook you have for employees, given you have restructured a lot of employees here. The demand environment seems pretty strong this year. Do you see -- or do you anticipate any kind of need for significant hiring at some point this year?

So on the CN part of how we're doing with labor, Rob is very well equipped to do that. And as it comes to the impact of supply chain to our business, I think Keith will do that after that. Rob?

Yes. Konark, in terms of our labor, we're rightsized to the volumes that are out there right now. Really in terms of the virus itself, we did see a spike in terms of positive cases here over the holidays and early January. We've seen that come down quite a bit. As you look out to the year, our second half is really where the growth is going to be as we look forward to a more robust Canadian harvest. So we will do some hiring here in the first half of the year in preparation for that, but also for attrition. It won't be on a one-to-one basis because we'll have productivity in there as well, but we will do some hiring as this first half evolves.

And Keith, the truck drivers disruption, how do we leverage these supply disruptions?

Yes. So the -- it's not only truck drivers [indiscernible]. Our customers, they're actually keeping away from just-in-time inventory program, more like an just-in-case model. So as the supply chain disruptions create the stock-outs [indiscernible] for a lot of our customers. Just-in-time models rely more heavily on trucks than intermodal. So there is opportunities for intermodal as those -- as that model has changed. In addition to that, the driver shortages and the lack of truck capacity are in part reasons for the shift of the customers -- for these supply chain shifts, excuse me. I understand you couldn't hear me. We've got the mic now. I apologize for that. Our intermodal products are right in place for the truck drivers to be able to -- excuse me, got a little flustered because I was off-line there, sorry. The driver shortages and lack of truck capacity are things that are boding well for us to pick up some volume. As JJ mentioned, vaccine mandates and the cross-border demand has more recently developed with driver vaccines and overall driver shortage issues. Just this past week, we saw a big uptick in those discussions with our retail customers, our TransX customers and our wholesale customers. So the opportunities are definitely there. Just not sure how to quantify that. But the opportunities are there, and we're going to work with our customers to offer them the services. We have the capacity on their trains, and we're moving forward on that. I apologize for that.

Your next question comes from the line of Brian Ossenbeck from JPMorgan.

JJ, congrats on the retirement. Just wanted to see if -- it's not uncommon for the industry here, but off to a slow start to begin the year for volumes. So I just wanted to see maybe you can put a little more color around the back half recovery. Clearly, Canadian grain is going to be a big part of that. You walked through some of the other opportunities. But I wondered if you can maybe drill down a bit on that and maybe put some pros and cons around whether you have more confidence, more visibility in as you look into the back half and start to prepare for that.

Okay. Thank you. It's a good question. And just maybe starting with the current environment, it has been still a very challenging operation, especially in Western Canada, all of Canada if you call it quarter to date. But the second half looks bright. James, you may want to talk about the bulk. And the merchandise actually has been a solid story all along, and there is freight out there for us to move.

Yes. I mean it's been a tough start to the winter, but we're not -- no strangers to tough winners here. We're very confident we're going to meet our full year guidance. The demand is there. I think about the early winter snowfall we're having here in the Prairies. It's creating tough operating conditions, but I'll tell you, we need that snow pack, so we can have a good crop recovery here for next crop year. And all indications are that's going to happen. So if you think about the second half of this year, when grain comes back, that's significant. The grain -- this poor crop is going to hit us in the first half to the tune of about $300 million. Fair crop, normal crop, we get all that back in the second half. So we're pretty excited about how we're going to finish out 2022. And like we said earlier, we still got a lot of demand there to move in the first quarter -- first half of this year. So we're going to be busy. Rob and his team are going to be real busy here.

[indiscernible] this up, we have -- the DP World of Port of Prince Rupert will have its expansion coming this summer. I think it's around July. They're going to be at 1.8 million TEU. That would be just in time for the fall peak at a time where Long Beach might be kind of in the heavy negotiation with their longshore person. So we will want to exploit these 2 things as well.

Your next question comes from the line of Jason Seidl from Cowen.

JJ, let me join everyone in wishing you all the best. It's certainly been a pleasure. I wanted to talk a little bit about the pricing side. You guys obviously called that out. We've seen that with the other 2 rail operators that have reported. Given some of the ongoing supply chain constraints, especially in the cross-border that might be developing with the vaccine mandate, do you think that, that pricing environment is only getting better for you as we're in '22 here?

Well, James can talk to that. Definitely, fourth quarter story was about price and cost. So James...

Yes. When I look at my crystal ball, I really don't see it slowing down. I mean we price to the market, and we do it very effectively. And I think the market demand is out there. There is value for capacity, and capacity is something we have. And as we continue to have ongoing discussions with our customers, everyone is kind of settled in and realized that there's going to be a higher price for rail service moving forward as there are as many goods. So fully expect that strong pricing environment to continue through well into '22 and beyond. So thank you for your question.

Your next question comes from the line of David Vernon from Bernstein.

I just actually had a question for the Chairman Pace if he is on the line taking questions today.

I don't know if he is still on the line, but ask the question.

Sure. The question really, JJ -- I mean the numbers are obviously very strong. But the question was going to be rightly or wrongly, the market's perception is that the operational discipline or focus around CN maybe has lapsed. Obviously, the numbers speak for themselves. But I was just wondering if the Chairman might have wanted to comment as to why a decision to maybe go outside the industry from someone who doesn't have maybe not as much hands-on experience with PSR is the right solution for CN for the next 3 to 5, 7 years, whatever it may be.

Well, thanks for the question. And I think to your point, the numbers speak for themselves. We have a very solid operating ratio in Q4, and we were tracking also from Q3 to Q4. And the ambition we have for this year, in our view, are balanced, but they're also ambition. It doesn't mean the 57% is the end of what we could do, but it's definitely solid with a 20% EPS. As it relates to Tracy, many of us know Tracy. She's been at CP for a long time. She -- I wouldn't define her as an outsider. I think she'd be more like myself, where she has basically 2 career, 1 -- in our case, mostly in the rail and partly in the energy sector, heavy TransCanada -- a portion of the TransCanada pipeline. She was on the board of a frac sand company. In other words -- at CP, she did a number of jobs in operations, customer service, treasury. And for a time, early days in my career, I was competing with her fiercely in some of the segments. So she knows the railroad. She knows the network. She knows the competition. And she is passionate about railroading. And I think you will find that her love is very much -- passion is in railroading. So I think, in my view, she is a railroader and she is not really from outside, but she did work for a number of years, I think about 6 or -- about 8 years in a network company in energy space. And by the way, just on that point, CN has a huge potential on the energy space. When you talk about the blue hydrogen and the prospects around Edmonton and the petrochemical plant, which are promoted out there, to export product to Asia via Rupert, I think that will be one of the things that she will [indiscernible] and understanding very quickly what is it that we need to do to exploit that bright future on the western part of the network.

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

JJ, again, congrats and good luck for the next phase. I wanted to follow up on the pricing commentary. I just wanted to dig a little bit deeper again. I know you gave a little bit of color, but has something changed with your go-to-market strategy and pricing? And also, how do we think about that pricing level going forward? Is it going to be like mid-single digits, pushing high single digits on an absolute basis? Or are we still kind of pricing very much relative to inflation? If inflation comes down, that pricing kind of comes down as well?

So we're using many, many different levers in our pricing. That's why we call it forward price. And James can expand on that. And we are above rail inflation. Rail inflation has really picked up. But what was the latest number, James?

I think [indiscernible] latest was just shy of 7%.

And you want to talk about pricing going forward?

Yes. Ravi, I think the marketplace there is very favorable to increase pricing. When you say what kind of changed, if you look at what happened as we developed through 2021, demand really picked up and capacity really gained to have value. And we're pretty smart at CN getting the right price for the capacity we have available on the marketplace. So that's been very successful. If you think about just this December, we renewed almost in the range of 15% of our total book of business with an average rate of 5.5% just in December. So you think about that carrying through all the way in 2022. First half of 2022, we got about another 25% of our book of business that's up for renewal. So this is a big opportunity for us, and I think the timing is exactly right. And we've got the capacity and the ability to move our customers' freight and help them win in their end markets. So very, very excited about prospects for 2022 and price and not just same-store price, but total price. All these things we do to try and lean out a little bit more value for this capacity that we have to offer in the marketplace, so excited about that.

Next question comes from the line of Jon Chappell from Evercore ISI.

Rob, maybe, you pointed out on the cost side, the headcount is obvious and the fuel prices, the higher price, but offset by lower volumes. Was there any impact to maybe purchase services, equipment rents, anything else on the cost side from the actual lack of volumes in 4Q because of the mainline washout? But as things start to accelerate in the first half of the year, maybe you need to add a few more heads as mentioned, due to attrition, a little bit more equipment than we may be seeing the trough of the cost side and these volumes influx, you need to see a little bit of cost push as well?

Rob, you want to start and...

Yes. So really, none of the impact from the floods was in that [ PNSM ]. Really where we saw the benefit was some of our older locomotives. We were able to lay up some of our older, least reliable, very expensive to maintain. That was a big part of that. We have seen the benefit of our capital investment with grain cars that's allowed us to turn back some grain leased cars as well. That's also been a part of this that we saw here in Q4.

I could add to that as well is if you remember, at the end of Q3, when we were talking about our strategic plan on purchasing services and material, we said we had identified $100 million dollars of cost-saving initiatives that was already secured. I think right now, we're still making good progress on this, and I would tell you that we're about $150 million identified as we speak. So again, a lot of different things coming together in terms of reducing contractors, laying up all locomotives as Rob just mentioned, consolidating facilities and a ton of projects that we have very, very detailed accountability on, and we're very confident that we will deliver on our target. If you remember on PNSM, in our strategic plan, we had to deliver $250 million, and we're continuing to progress on that. So very proud of that progress.

Next question comes from the line of Brandon Oglenski from Barclays.

JJ, it's been a pleasure. Congrats on getting the deal done tonight. So I guess in light of that, can you just talk a little bit about maybe what happened in last few years? Did you guys just get maybe a little bit complacent on costs or maybe not enough focus on the nonrail businesses? And maybe more importantly, from your perspective, as you exit CN, what's the biggest opportunity that you see going forward as you leave the company?

Thank you for the question, Brandon. Now CN -- complacency is not part of the CN culture. We worked very hard last year on potentially doing a transaction with the folks in Kansas City. During that time, we were already working on how we would integrate, which signaled code for how we would potentially streamline workforce. When the transaction could not come together, we didn't -- we actually had the plan to accelerate how we would become more efficient on the labor side. And the sales team has been very focused on price since the beginning of the year. You see the result. And you also saw the traction that Rob is driving on the operating matrix. You also have to put in perspective, we lost the mainline to Vancouver twice last year. We lost it for 2 weeks back in July when we lost the bridge for fire and we had to rebuild it. That has an impact that -- it's real. It's a major line for us. It'd be like a Western Railroad losing their access to [indiscernible] Long Beach. Vancouver is key to us. And then we lost it again in November. But putting that aside, every year, there's different things. Last year was kind of a special thing from that point of view. But the team is set -- we look forward, we don't look backward. And the plan that we have for this year for the team, with Tracy coming on board, is a solid plan. We're entering the year with solid labor costs, solid pricing. As soon as the weather allows us to operate at regular train speed, regular train weight, meaning temperature warmer than minus 25, which hasn't been quite the case so far this year on the Canadian network, we will be able to produce GTM. So I'm very confident all these things will come together, and this team is energized to deliver this year and the years to come.

The next question comes from the line of Chris Wetherbee from Citigroup.

Best of luck, JJ. I guess maybe a couple of questions here. Just when I think about the 57 OR for 2022, could you just remind us sort of where you are with the asset sales sort of discussion and process and what's sort of in the number versus what may not be in the number? And I guess I'm curious to see if Tracy wants to weigh in on some of those bigger picture strategic decisions when she arrives next month. And then I guess -- and then also maybe as asset sales pertain to capital allocation, just maybe some thoughts on the buyback and how much if all of that can you get done in '22, maybe what the cadence of that might be?

So we have 3 things baked in our assumption. There's a freight forwarding to be shut down this year, which it is done. And then we have a vessel sale that we are looking to do in the spring and then sales on TransX. So I think Helen has got this in her hands. She can provide you with some more color. But that's -- these are the 3 items. Helen?

Yes. Thanks very much for the question, Chris. Regarding the Great Lakes Fleet of vessels sale, a potential vessel sale process is progressing with some active bidders. And as you'll recall, the fleet of vessels is accretive to earnings, but dilutive to operating ratio. And so we're working through the final details of a potential sale. But any transaction needs to be at a favorable value to us. Therefore, we are willing to continue to operate the vessels should a deal not be concluded at a favorable value to us. With regards to TransX, just a reminder, we are not actively selling TransX. We are exploring models to change the ownership structure potentially with a strategic partner. Again, TransX is accretive to earnings, yet dilutive to the operating ratio. As Keith highlighted, TransX has done a great job of helping to grow our business, and we are continuing to improve the performance of it. In fact, rail miles generated through TransX are up nearly 10% year-on-year on improved margins. So therefore, we're continuing to explore models to reduce our ownership interest, but retain the ability to drive road-to-rail conversion, which is good for CN, good for customers and good for the environment. And I'm sure Tracy will have a view on that as she comes into the role. So stay tuned for further update.

Ghislain, you want to add on the main capital?

Well, maybe yes, the -- so as JJ mentioned, we did announce a $5 billion share buyback, Chris. That's exactly in line with what we signaled to the market on September 17. So we'll -- we plan on deploying this. Actually, as you know, share buyback is the residual use of our capital. The first use of CapEx will always be towards the business, but we have announced it. And with the plan that we have in front of us, delivering 20% EPS growth, 57% OR with a share buyback of $5 billion, we plan on finishing our leverage ratio, which is adjusted debt to adjusted EBITDA to about 2x. And if you look at this year in 2021, because I'm still this year -- because we -- I have not closed the books yet. This year, we finished at 1.82. So that's what we're planning on doing.

Yes, we are moving forward with the share buyback of $5 billion. That's right. That was on February 1.

Your next question comes from the line of Justin Long from Stephens.

I know Tracy isn't on the call today, but is there anything from a high level that you could speak to about her initial vision for the company, things that she could potentially tweak relative to the strategic plan that you've laid out and you're executing on today? And at what point do you feel like we'll get to hear more details around her plan and how she sees the business going forward?

So that will come soon, Justin. In the April earnings results, she'll be with the team, leading the team and she'll be participating in financial conference definitely from March 1 and beyond. I think the Board has also been fairly clear -- since fairly early beginning as to what is the strategy for CN and what they're looking for. And I'm sure Tracy will add in her color based on the scale and her own view. But I think I would defer that question to when Tracy can actually do that herself in a couple of weeks. So if you could be so patient.

The next question comes from the line of Amit Mehrotra from Deutsche Bank.

JJ, congrats on a great career. I wish you the best. I wanted to follow up on that comment that you just mentioned. You said the Board has been clear after the strategy. And that may be the case, but I'm still a little bit uncertain about it. Because I think back in September, something got lost in translation with this discussion about growth versus profitability, and we didn't get beyond 57 because we want to grow. And so can you just refresh us, like has there been an evolution in that philosophy around growth versus margin expansion? And when the Board is picking a new CEO, was that like to talk about the strategy in terms of growth versus margin because I think that was the biggest issue that people were confused about back in September.

Yes, thanks for the question. So yes, back in September, some of the comment we got back was is 57 the endpoint. And I just want to clarify, 57 is a very important milestone, and that milestone is for 2022. And I think we're tracking well through that. Is that the endpoint? No, that's not the endpoint. Just don't want to speculate at this point as to what we'd be the endpoint that Tracy and the Board will want to do. But definitely, we have to get into 57, generate very good EPS growth this year. We'll generate good free cash flow and an improvement in ROIC. Because right now, the Canadian crop is down. Remember, in September, it was difficult to talk about solid RTM growth because supply chain had disrupted. And on the Canadian side, there's no crop this year. The crop is 35% below last year, and it's a huge part of our business. So we have to do everything on price and cost. But CN is a growth story. CN is a story also about ESG, about balance, about rewarding shareholders, but also customers and making sure that we're there for the economy. And if you're there for the economy, then you grow. Rob right now has the capacity to move more freight than what we do today because we were basically set up late last -- early last summer for a solid crop that never showed up. So he's got capacity for when the crops come in, in the fall. And you often hear Keith talk about Rupert, the expansion in Rupert, the tweak of the strategy, the work we're doing in Mobile and Halifax and New Orleans. And James has got great stories, long term about blue ammonia, petrochemical in Edmonton, about biodiesel. And…

Your next question comes from the line of Scott Group from Wolfe Research.

Best of luck, JJ. So you guys did a 58 OR in Q4 with weak volumes and you're talking about bad weather and the pricing environment. There's still more pricing to go Why isn't there upside to the 57 OR this year? I would think that there could be some. And then JJ, I also just want to follow up on one of your comments. You had a comment about Tracy saying that she is a railroader. And rightly or wrongly, I think people are going to look and say, hey, well, she was at CP during some of the tough years at CP. So maybe just curious, just to follow up to that, why you think she's the right railroader?

So Ghislain will talk about the OR and what's the potential for OR? And then I'll talk about Tracy after that.

Yes. So thanks, Scott. Listen, yes, we are very proud of our OR for Q4. 57.9 is actually a record. I mean the lowest we've ever done on OR in Q4 was 58, and I think that was back in 2015. So listen, the plan is there. I mean remember, for the full year, we finished at 61.2. So it's quite a drop going from 61.2 to 57. And you need to get to 57 to eventually go to 56 and 55. So our plan is there. I think we've got all the backup to deliver it. We're confident we're going to deliver it. There's going to be ups and downs during the year. As you know, we're an outside sport and things happen. And we -- I hope investors can see our resiliency and our ability to adapt in quickly changing conditions. When JJ mentioned, we lost our main line to go to Vancouver for 5 weeks overall, so we're resilient. I think we're a good team, and 57 is the goal. And stay tuned. And hopefully, if we do ever better, great, but the 57 is the goal. And I think it's quite a drop going from 61.2 to 57.

Yes, it's a good goal. It's a goal of [indiscernible] result. It doesn't mean 57 is the end. But 57 is definitely the goal for 2022. And we're only in the third week of the year. So give us some time to see whether or not we can improve on the guidance. But the guidance is the guidance. Going back to your question about Tracy, you will have the chance to meet her very shortly. I think she will impress you. She is a very solid leader. She has a very solid followship. I think to be a CEO of the company, you want people who want to work with this leader. She has [indiscernible] vision. She has railroading in her blood. She has -- she did a number of different positions at CP. She was part of the team, but was not the only player on that team. And I think what she brings to CN is what we need for the future. I mean it's sometimes I take it in the rail industry, and it's becoming almost a bit of a -- you've got to ask yourself whether it's right or wrong that we want to go back to the past. And I think, in fact, where you want to escape where the fox is going to go next. So what is -- what will make a company like CN a 3-coast network, huge potential for growth, the leader in fuel efficiency, making a huge amount of effort on inclusion, diversity, ESG and technology, things that weren't necessarily prevalent 5, 10 years ago. So we want to go back to where we were 5, 10 years ago, what we want to use what we had 5, 10 years ago and have a solid operating scale that Rob and…

Yes. I think that's fair that we'll all get to meet her soon enough, and we should be open minded. Appreciate it.

Your next question comes from the line of Tom Wadewitz from UBS.

Yes. JJ, I also wanted to say I really appreciate working with you over the years. And appreciate your great insights on the markets and customers. And so wish you the best. I wanted to -- you talked a little bit about the prior question on kind of the Board criteria and focus and kind of growth versus margin. I don't know if you can offer a little more on just kind of how you think about that growth focus and going forward and what the Board was looking for. And then I guess, I think CN over -- I guess if I go back to when Claude took over, he said we're going to pivot to volume growth, and you guys had a great run for volume. Do you think CN kind of goes back to that, that -- like can you grow RTMs like you did for that period of time? Or how do we think about the level of growth potential if we look at the way the Board is viewing things and kind of the strategy?

Thank you. Well, again, Tracy will have to share with you very soon some of our vision. But I go back to when Claude became CEO at that time, I became Chief Marketing Officer. And at that time, we had made enough progress on the operation that we had find a way to make better use of the network, and we grew the RTM and the volume very solidly. And this is where Rupert went from a fishing port of not known by anybody to becoming a place where we do business for both bulk and container. I think the future of CN, though, is really diverse. So at this point, we really want to leverage technology to reduce -- make our railroads safer as you saw in progress we've done so far. And we want to use technology to make the railroad lower operating costs. We also want to use the technology to improve our customers' relationship, make the business more sticky and attract more freight. And that's what the agreement with Google is all about is to go deeper to the supply chain. Today, some customers want something more than just the raw rail service. They want this thing to be friendly. And then operating margin will always be key. We're an industry, which is very capital intensive and operating ratio is very key. We're very focused on that. You heard a lot about operating ratio in the third quarter and the quarter to date. So I think there's a combination of these different things that says between growth, between good cost, between technology, between making sure that we are relevant to society on ESG emission and also attracting the right talent and keeping the right talent, all these things are part of the CN's long-term strategy. And on the -- remember, I think the first time I met you, I was handling the chemical and you asked a lot of question about Dow Chemical and whatnot. Well, guess what, 25 years later, there's still huge potential, a lot of potential in Edmonton, Calgary. There's another wave of capital investment, not refinery or oil sand at this time, but they're more about petrochemical plant that will be export. And that's part of the CN's future again is how these landlocked facility like coal mine, like potash mine, like petrochemical mine, like big, vast growing area for -- in the Canadian Prairies, how do they access the world market. And there's only one good way to do that, it's with rail. And CN has a fantastic network to make that happen with the 3 coasts and especially Rupert and Vancouver. So I think there's a lot out there for CN to be successful. I'm actually the biggest shareholder of CN as on the management team, and I intend to remain a shareholder, and I'm voting strong for the team and for Tracy. Thank you for the question, Tom.

Your next question comes from the line of Steve Hansen from Raymond James.

Congrats on these pretty outstanding results in the face of some tough conditions. Just looking at the buckets of traffic here that can plug the grain gap, so to speak, I think you've referenced several already, but I just wanted to get some degree of color or cadence around the coal ramp that you described with the new coal mines. Just curious if you have any visibility around the ramp of those 2 mines. I think in the past, you had suggested met coal could plug about half of the gap. But just trying to understand how that might play out here through the first half until we get some better grain volume.

Definitely, we'll do that. James will pick that one.

Yes. Thanks for the question, Steve. I've been itching to give that answer all call here. I'm extremely excited about our prospects for coal, particularly in H1, but first quarter as well. We get the full year effect of that Teck deal, and that's big, but also 2 mines restarting with significant tonnage available to us. So if you think about just from a carload basis, not a revenue base, but a carload basis, we are going to more than replace the lost carloads of grain with new carloads of coal. And it's a big deal. And of course, it's coming right when we have that available capacity to us because we're not moving that grain. So the timing is perfect. You look at the pricing for met coal and thermal coal, they're close to record highs. I mean the market is there, the demand is there. And we're going to be able to move that -- be there to move that coal, whether it's going to Vancouver or Prince Rupert. We've got the capacity, desire. And I've got to tell you, very, very excited about what's going to happen in the first half year, even though we're lapping on the grain side, an all-time record in 2020 -- 2021 tough comps. Get into the second quarter, that tough comp goes away, and we still have this solid, solid coal story to lean on. Also had some significant growth on the frac sand side of our business. I mean as you think about the future and how things are going to ramp up in Western Canada, the leading indicator is drilling activity and leading indicator for railroads is that frac sand volume that's going to be part of that. Also a great story, as JJ talked about around our renewable 3 new facilities starting up in the U.S. Gulf Coast on CN to produce renewable fuels. We're in talks with several parties about how we can position new crush plants on CN, both in Canada and the U.S. As a matter of fact, we just concluded a new deal on a soybean crush plant with our friends at Platinum Crush. More of those coming. So when I look at the drumbeat and the opportunities in front of us, we're sowing the seeds in 2022 for the next 5 years to be just incredible, incredible growth story for CN. And 2022, boy, oh boy, hold on the second half is going to be really exciting. And I know Rob and his team just can't wait to get in there and move those carloads for our customers.

I think you also have the undiluted crude facility that's ramping up right now.

Yes. Thank you. About the same size as kind of the Hardisty facility. It's a new, heavy undiluted, that's the safe product, moving down to the Gulf Coast, got started up late Q4 of last year. But there's 40,000 barrels a day of potential coming out of that facility and we expect it to be full. We, for a long time, we've been the leader when it comes to moving heavy crudes. And we're still going to be the leader moving heavy crudes. I fully expect our run rate for crude is going to be in the range of 95,000 to 100,000 barrels a day going into 2022. We haven't seen numbers like that for a long time. We finished in Q4 about 75,000 barrels a day for crudes. And remember, at CN, we're very weighted towards that heavy crude. About 65% to 75% of our carloads are heavy, safe, undiluted crude. So exciting times.

And that's the [indiscernible] located in Saskatchewan.

Saskatchewan, yes, JJ, yes.

Our last question comes from the line of Jeff Kauffman from Vertical Research.

JJ, congratulations and best of luck in your new endeavors. A lot of my questions have been answered, so I'm going to focus on CapEx. You're going to be spending about 17% of revenue as you advertised. So that's a reduction of a couple of hundred million. Yet you have a number of new projects coming along. So I was just wondering what's not in the capital budget that has been in the last year or 2? And how are we kind of reshaping capital allocation in lieu of the new program?

Rob, you want to talk about how we're going to allocate capital this year?

Yes, Jeff, the big difference in terms of year-over-year really is around basic cap, and that is a credit to technology. The use of the autonomous track inspection cars, we have 10 of those now running from coast to coast to coast across our network, is giving us real-time information in terms of the condition of our network. And what we do know is our network is in really, really good shape. So when it comes to the ties and the undercutting and the ballasts that we plan each year, we can be much more prescriptive with that real-time information. That's really where we're seeing the benefit. We think that's a sustainable model going forward, but we'll check it as the year evolves and make sure we're doing the right thing. That's really the biggest difference. We are investing in capacity as we go forward. We'll extend for sidings between Winnipeg and Edmonton, which will help during this year to help enhance running longer trains. And we'll also break ground on a new intermodal facility in the Toronto area at Milton. So we're continuing to invest in the future. And I think you'll see that going forward as the business is there, we'll invest and be ready to handle it.

I guess the dividend of DSR, are you implying then that this is a sustainable level with some of the advances in technology, for example, the autonomous inspection?

Yes. That's what I tried to say. We do believe that's sustainable, but we're going to review it each year and make sure we're making the right decisions. We know the railroad is in really good shape. And we're not ever going to sacrifice safety as we go forward. So we'll make those decisions on an annual basis, but we're certainly reaping the benefits of technology.

This concludes the question-and-answer session. I would like to turn the call back over to Mr. JJ Ruest.

Well, thank you, and thank you for joining us here. It's kind of bittersweet for me. It's been a privilege to lead this incredible company over the past 4 years, very proud of what we've been able to accomplish for the last 26 years in order to have served alongside over 20,000 of the finest people in the industry. But to all of you, the sell-side analysts with whom I have interacted over these quarterly calls since 2010, a special thank to you and special thanks for your keen interest in CN as a great company and your keen interest in the rail industry. I'm confident our new CEO, Tracy Robinson, is the right leader with the right vision at the right time. And I'm very confident this team, which is around me -- around this table here will produce solid results in 2022 and beyond. So on that note, [Foreign Language]

You are welcome. The conference call has now ended. Thank you for your participation. You may disconnect your lines at this time.