Canadian National Railway Company (CNR) Morgan Stanley's 14th Annual Laguna Conference summary

Growth opportunities and network expansion

• Expansion into Mexico via a new agreement with Union Pacific and FXE offers a significant, long-term growth opportunity, tapping into a CAD 45 billion Canada-Mexico trade market and a CAD 3.5 billion truck market for potential rail conversion.

• Energy and agriculture remain strong growth drivers, with investments in NGLs, crude, and bulk facilities supporting multi-commodity, multi-market expansion, largely insulated from North American macroeconomic trends.

• Automotive, metals, and domestic intermodal segments are seeing growth through targeted programs, including outreach to smaller customers.

• The network's extension to Memphis and potential access to Kansas City (pending merger approval) will provide immediate and future volume benefits.

• Diversification across commodities and geographies reduces reliance on any single market or economic cycle.

Operational execution and productivity

• Scheduled railroading and initiatives like Fast Track have driven improvements in asset utilization, workforce productivity, and locomotive efficiency, with workforce productivity up 5% and train crew productivity up 13%.

• Fuel efficiency is at record levels, contributing to cost savings and environmental benefits.

• Capital investments have shifted from heavy expansion to a normalized spend of 15–17% of revenues, focusing on filling existing capacity and incremental de-bottlenecking.

• Free cash flow generation is strong, with excess cash being returned to shareholders and leverage increased to 2.5x–2.7x.

• Cost savings from Fast Track are ongoing, with CAD 100 million realized by 2Q and further multi-year opportunities identified in facilities, engineering, procurement, and support functions.

Market dynamics and resilience

• Growth in energy, agriculture, and critical minerals is driven by global demand and policy, not just macroeconomic cycles.

• Customers and industries are adapting to uncertainty by investing in supply chains and seeking new markets, creating new rail opportunities.

• The company is positioned to benefit from shifts in trucking economics, such as high diesel prices, which make rail more attractive for long-haul freight.

• The USMCA trade agreement and related negotiations are seen as potential catalysts for volume, but impacts will vary by industry.

• The company is prepared for both strong and moderate crop years, with capacity and operational flexibility in place.