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Canadian National Railway Co (CNI) Q4 2020 Earnings Call Transcript

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Canadian National Railway Co (NYSE: CNI)
Q4 2020 Earnings Call
Jan 26, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, CN's Fourth Quarter and Full Year 2020 Financial Results Conference Call will begin momentarily.

I would like to remind you that today's remarks contain forward-looking statements within the meaning of applicable securities laws. Such statements are based on assumptions that may not materialize and are subject to risks described in CN's fourth quarter and full year 2020 financial results press release and analyst presentation documents that can be found on CN's website. As such, actual results could differ materially. Reconciliations for any non-GAAP measures are also posted on CN's website at www.cn.ca. Please standby, your call will begin shortly.

Welcome to the CN fourth Quarter and Full Year 2020 Financial Results Conference Call.

I would now like to turn the meeting over to Paul Butcher Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher.

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Paul Butcher -- Vice President, Investor Relations

Thank you, Simon. Good afternoon, everyone, and thank you for joining us for CN's fourth quarter and full year 2020 financial results conference call. I would like to remind you about the comments already made regarding forward-looking statements.

With me today is JJ Ruest, our President and Chief Executive Officer; Ghislain Houle, our Executive Vice President and Chief Financial Officer; Rob Reilly, our Executive Vice President and Chief Operating Officer; Keith Reardon, our Senior Vice President, Consumer Products Supply Chain; and James Cairns, our Senior Vice President, Rail Centric Supply Chain.

I do want to remind you to please limit yourselves to one question so that everyone has the opportunity to participate in the Q&A session. The IR team will be available after the call for any follow-up questions.

It is now my pleasure to turn over the call to CN's President and Chief Executive Officer, JJ Ruest.

Jean-Jacques Ruest -- President and Chief Executive Officer

Well, thank you. Thank you, Paul, and good afternoon, everyone. At CN, we wish you all a safe, healthy and constructive 2021. Reflecting back on 2020, a year with blockade, a spring of COVID, a summer of sharp but uneven business recovery, and a year when our railroaders became recognized as truly essential workers, a year when our people produce far as society, produce for CN, and for that, I personally offer my appreciation to all of them.

The business recovery will continue. Volume are steady and strong at CN. Some sectors remain challenge, but our operating metrics are improving and the commercial team has a game plan to work on the yield of our new business mix. We are optimistic about 2021, especially the economy and the GDP of the second half. We are more cautious about Q1, especially as it pertain to lockdown and preventive quarantine on our operating employee in the communities where we operate. This recovery has a different mix of business. Some market recovered very fast in V-shape, like consumer goods coming onshore via our five ports and some markets they depress like crude and refinery product. And one market has been simply solid like a rock and that would be grain export in both Canada and United States.

We ended 2020 solid. We generated record free cash flow of over $3.2 billion for the year. The Q4 adjusted EPS growth was 14%. We have industry-leading fuel efficiencies and our revenue ton mile volume growth was 10%.

Today, we are showing our confidence in the future by reinstating guidance, by announcing a 7% dividend increase, by resuming share buyback, and investing to accelerate technology to our operation and investing in connectivities with our customers, in simple terms, investing in the long-term.

On that note, I will pass it on to Rob. Rob?

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

All right. Thank you, JJ. And I also want to thank the women and men of CN for their efforts, not only this quarter but also during this truly unprecedented year. While many people in the world and even on this call were able to work remotely, our railroaders have shown up day-in and day-out to move our customers' freight. I'm extremely proud of the work performed this year by the team.

We continue to build on the momentum we came out of Q3 with following the volume recovery, and we're optimistic about the future and are prepared to handle the volume that is coming at us. During Q4, we experienced a volume increase of 10%, but through the team's disciplined execution of the plan, our corresponding crew starts grew by just 4%. We also saw both our train length and train weight improve moving more freight with fewer crew starts while maximizing the use of our locomotive fleet.

Our train and engine crude labor productivity improved 19% year-over-year as we moved more freight with fewer people. Our headcount in transportation was down 8%, engineering down 7%, mechanical down 11% and network operations down 20%.

The team has also delivered for our customer setting all-time records for movement of Canadian grain during 10 consecutive months. And in January here, as of yesterday, we've already set another record for the 11 straight month. All of this while effectively handling volume increases in propane, lumber and intermodal, the railroad continues to operate well. We continue to raise the bar for fuel efficiency, improving by 6% versus the same quarter last year and achieving over a 4% improvement for the entire year.

The team's efforts this year have helped us avoid nearly 300,000 tons of CO2 emissions and saved us nearly CAD60 million from our fuel efficiency initiatives alone this year. CN continues to be the fuel efficiency leader of all North American railroads.

Safety is the core value at CN, we were able to improve our personal injury rate by 15% for the year, while our accident rate also improved 18%. We have an uncompromising commitment to safe operations, making sure that CN will be the safest railroad possible for our railroaders, our customers and the communities in which we operate.

In the quarter, we continue to prepare for the future by expanding our capacity in Western Canada in completing three additional sidings on the route to the Port of Prince Rupert. We have a strategic advantage in Prince Rupert, and we plan to deliver on that advantage by having the available capacity to handle the projected growth over the next decade.

As we look ahead, we are prepared for the projected growth and we will continue to safely deliver for our customers. We will expand our leadership in fuel efficiency and carbon emissions reduction. We will build on our strong foundation of PSR principles with the evolution of digitized scheduled railroading, DSR, improving the safety, efficiency and the customer experience with CN.

Our autonomous track inspection cars and our autonomous inspection portals will add next generation technology to them in 2021, expanding their positive safety impact to our railroad, while our handheld device technology will continue to eliminate millions of printed pages of paper annually and improve our customer facing services.

As I pass this to James, I again want to recognize the extraordinary resilience of our CN network and our employees that helped deliver these results. James?

James Cairns -- Senior Vice President, Rail Centric Supply Chain

Thank you, Rob. During Q4, we started to see a more balanced demand recovery with many carload markets tracking near or above pre-COVID levels. Overall, our carload franchise finished the year strong setting several new records in December. Energy related carloads, which tend to be much longer haul, are still well off 2019 levels and had an outweighed negative impact on yield for the quarter.

Grain, both Canadian and US remained strong through Q4. And as Rob mentioned, we set new records records for Canadian grain each month of the quarter. We saw strong shipments of potash in the quarter, and December market an all-time record for domestic potash shipments as we grew market share.

Lumber and panel volumes were strong in the quarter, setting a record in December, a full 6% better than our previous record set at 2015. Propane volumes for the quarter, both domestic and export were a bright spot with AltaGas propane exports exceeding 53,000 barrels per day in December.

In Q4, crude revenue declined by close to 65%, but we saw an increase in the relative percentage of heavy crude, which made up almost 60% of our crude revenue in the quarter, demonstrating the resiliency of our heavy crude franchise.

US export coal volumes were up nearly 40% for the quarter, while Canadian coal was negatively impacted by the temporary closure of CST and Coal Valley mines and the permanent closure of the Teck Cardinal River mine. In summary, the positive momentum we saw in Q4 and December, in particular, positions us well for 2021, where we expect to see continued improvement in our mix and yield.

Smartly managing capacity and price will be the theme for 2021. We have introduced several new commercial programs car auction, seasonal pricing and threshold pricing that creates flexibility to adjust price to meet increasing market demand. Additionally, lower volumes of speed restricted light crude in Q1 will help us protect network fluidity in winter and create capacity for quicker turning, higher margin freight. This year we expect to see continued strength in lumber and panels with strong housing demand, as well as repairs and renovations pushing inventory restocking earlier than usual. We continue to focus on turning assets faster to improve yield and meet demand.

Canadian and US grain are expected to be growth drivers in 2021. The current Canadian crop was at all time record, and there are still more grain to move. Demand for US grain is driven by strong export pricing for soybeans and corn. We are well positioned to move more grain in both Canada and the US. By the end of Q1, we will have over 4,200 new high-capacity hopper cars cycling on our network. We will also continue to take advantage of the 50% increase in Vancouver grain export capacity, all exclusively and physically served by CN, allowing us to move more grain faster using fewer resources.

Our three coast network reach helps drive durable carload growth as a long-term structural advantage that cannot be replicated. Propane export volumes through Prince Rupert will continue to ramp up as Pembina's new export facility comes online and AltaGas momentum continues. US export coal volumes will grow in Q1, driven by new pet coke moving from Chicago to the US Gulf Coast. Ray-Mont Logistics will open a new export plastic bagging facility in Mobile, Alabama in late 2021.

Once again, demonstrated how our unique tri-coastal reach, connects producers with desirable end markets. We continue to price ahead of railway cost inflation and maintain a disciplined approach to yield management in order to optimize our network utilization.

With that, I'll turn it over to Keith.

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

Thank you, James. CN's participation in the strong consumer-based economic recovery continued into the fourth quarter. We handled record port volumes in Q4 combined the West Coast ports of Prince Rupert and Vancouver grew at just under 17% versus 2019, and set an all-time quarterly record. Halifax and Montreal combined grew just over 5% versus 2019, setting a Q4 record.

Domestic business was also strong as grocery, e-commerce and consumer products purchasing drove the new economy. Our combined container volumes led all railroads and growth for Q4 at about 15% above 2019. 2021 volumes are strong into week three and are projected to continue at these levels into at least the end of Q1.

In automotive, we have a year-over-year decline in volumes and an improvement in per unit profitability. Macroeconomic factors, delays in SUV product launches and some volume demarketing related to profit margin drove the volume decline. We made progress in fixing the port train imbalances of Q3 due to the huge surge of imports and the lack of enough exports back to the ports.

Ongoing joint efforts have increased train sizes, slot utilization and train balance, key levers of profitability. In Q4, yield management initiatives produced year-over-year margin improvement for intermodal and automotive. Densification of trains, elimination of work events online and in terminals, reduction of MT mile improved in efficiencies, in container, in auto handling, and our terminals are some of the many initiatives we will continue to drive in 2021.

Technology solutions in our first and last mile door-to-door services are producing significant fuel savings and decarbonization improvement. Collaboration with our supply chain partners to expand their gateways into our network has produced significant growth opportunity. Our teams continuously work on key infrastructure and technology initiatives that improve our supply chain costs and service level.

With a robust 2021 demand climate, we are focused on the best use of our capacity, while pricing our services in line with the economic value being created by our unique, three coast network.

I will now pass it on to Ghislain for the financial perspective.

Ghislain Houle -- Executive Vice President and Chief Financial Officer

Thanks, Keith, and good evening, everyone. My comments will start on page 11 of the presentation with highlights of our solid fourth quarter performance. During the quarter we witnessed significant volume improvements both sequentially and on a year-over-year basis and continue to rightsize our resources for the recovery, while remaining disciplined and focused on tightly controlling our costs. Volumes in terms of RTMs were up 10% versus last year, while revenues were up 2% at almost CAD3.7 billion impacted by continuing changes in business mix.

Operating income was up 16% versus last year. Our operating ratio was 61.4%, a 380 basis point improvement over adjusted operating ratio last year. Net income grew by roughly CAD150 million with diluted EPS of CAD1.43, 17% higher than last year. Excluding our workforce adjustment provision in 2019, our adjusted diluted EPS was up a solid 14% versus last year. Foreign exchange had no material impact on our financial results in the quarter.

Turning to page 12, let me highlight a few of our key expense categories. Labor and fringe benefit expense was essentially flat versus last year. This was mostly driven by higher incentive compensation and pension expense offset by a workforce adjustment in 2019 and 8% lower average headcount in 2020 or 2,200 less employees.

Purchased services and material expense was 4% lower than last year, mostly due to lower outsourced services and incident costs, partly offset by higher repairs and maintenance expense. Fuel expense was 25% lower than last year, driven by a 27% decrease in price and an over 6% improvement in fuel efficiency partly offset by 9% higher workloads.

Now let me turn to our full-year results on page 13. I'm very proud of our performance that again demonstrated our resiliency and capacity to adapt to quickly changing conditions in unprecedented time. We completed 2020 with revenues close to CAD14 billion, 7% lower than 2019. Our operating expenses were 3% lower than last year, resulting in 15% lower operating income versus 2019. Our adjusted operating ratio stood at 61.9%, essentially flat with 2019's adjusted operating ratio. Excluding one-time non-recurring events in both years, our adjusted diluted EPS came in at CAD5.31, 8% lower than 2019.

Now moving to cash on page 14. We generated free cash flow of over CAD3.2 billion for the full year. Excluding CAD330 million tax refund related to the US Cares Act, new law's carry back rules, free cash flow was close to CAD2.9 billion. While there is still much uncertainty and instability in the current environment, we are seeing some positive economic signs and we remain confident about the outlook for this company. With that said, we are pleased to reinstate our financial outlook for 2021, which is summarized on page 15.

The current demand for 2021 that James and Keith talked about should translate into mid-single digit volume growth in terms of RTMs for the full year versus 2020, with pricing ahead of rail inflation at a minimum and continuing our strong focus on yield management.

With this, we expect to deliver EPS growth in the high single-digit range versus 2020 adjusted diluted EPS of CAD5.31. This assumes the Canadian to US dollar average exchange rate of around CAD0.80 for the full year versus approximately CAD0.75 in 2020 generating a headwind of roughly CAD0.20 to CAD0.25 on EPS year-over-year.

Our capital envelope for 2021 is approximately CAD3 billion with initiatives to increase capacity in Western Canada, enable growth and continue investing in technology as we move to a digitized scheduled railroading model. With that, we expect to deliver free cash flow in the range of CAD3 to CAD3.3 billion, which will continue to drive improvement in free cash flow conversion.

Finally, we are pleased to announce that our Board of Directors approved a 7% dividend increase for 2021. This represents the 25th consecutive year of dividend increase since the IPO of 1995, providing consistent returns to shareholders year-after-year. The Board also approved a new share buyback program of up to 14 million shares for an amount of up to CAD1.5 billion to be returned through a normal course issuer bid from February 1st, 2021 to Jan 31st, 2022 and we plan to resume buybacks next week. We are supporting the recovery, while controlling our costs and we remain confident in our ability to deliver value to our long-term shareholders.

On this note, back to you, JJ.

Jean-Jacques Ruest -- President and Chief Executive Officer

Well, thank you, Ghislain. And before we turn it to question, I just want to use a few second here to make some closing remarks. Our focus is very clear. We price ahead of inflation at a minimum, we manage yields and productivity both, we generate steady and solid free cash flow. We are a leader to bring technology into rail operation and the customers' experience, and we have a solid and broad ESG agenda. CN is a long -- long-term investor play, focus on sustainable, profitable growth.

With that operator, we will turn it back to you to answer the questions from the analysts.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And your first question comes from the line of Fadi Chamoun with BMO. Your line is open.

Jean-Jacques Ruest -- President and Chief Executive Officer

Good afternoon, Fadi.

Fadi Chamoun -- BMO Capital Markets -- Analyst

Good afternoon. Thank you for taking my question. Maybe on this mix and yield story and kind of going into 2021, I mean the yield per RTM was, I think, down 1% in Q2 and that went to 3% in Q3 and 6% in Q4. Can you give us a little bit of -- kind of background around what's kind of causing this --- more specifically within the categories and how should we think about that yield going into the first half of 2021? And I'm guessing it's probably one of the factor why the operating leverage implied in the guidance seem a little bit muted. And there are the factors that are kind of holdings that operating leverage, if you can kind of walk us through those as well?

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah. Thank you, Fadi. So it's an important aspect, definitely we -- and we recognize that. So I think, James could probably provide good colors on the mix, but also on the action plan that we have in term of working on the mix of our new book of business. James?

James Cairns -- Senior Vice President, Rail Centric Supply Chain

Yeah. Well, thanks for the question, Fadi. As we came out of COVID, we've seen a quicker recovery in our consumer products business, that's our intermodal business that we saw on the carload business. Industrial production to key indicator of carload growth continues to improve and our mix is getting -- it's getting back to historic levels. Thinking about Q3, we moved about 59% of our business with carload, going into Q4 that escalated that 74% of our business was carload, as industrial production picks up and rest assured, we're going to continue to move the needle on the carload growth, driven by improvements in North American industrial production.

We're also working to make our own luck and improved yield within each segment. For example, on the carload side, we purposely scaled back speed restricted light crude through December, and into Q1 to create capacity for higher margin freight moving through the winter months where capacity as you know is precious.

In addition to that, we have a number of commercial yield initiatives that protect capacity to ensure that we can move the most profitable freight as we see the pace of recovery escalate. As we move into the second half of the year, I think things get back in balance for sure and we want to make sure that we have the capacity protected to move the highest margin freight. Thanks for that, Fadi.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you, Fadi. And mix is an important aspect, and we are working on it very hard.

Fadi Chamoun -- BMO Capital Markets -- Analyst

Okay.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you.

Fadi Chamoun -- BMO Capital Markets -- Analyst

The other part of the question, just the other part of the question like on the cost side, are there anything on the pension side or cost per comp or anything like that that could be kind of holding that operating leverage, going into 2021.

Jean-Jacques Ruest -- President and Chief Executive Officer

Okay. So, since Fadi, you are the first one asking question. We'll do it in two part, but I will ask everybody to focus on one item. On the cost side, Ghislain?

Ghislain Houle -- Executive Vice President and Chief Financial Officer

Yeah. Fadi, on the cost side, we do have cost headwind. We have about CAD200 million of cost headwind related to depreciation and related to incentive compensation. And I would say it's about 50-50. And on the pension side, I would say we have a very insignificant tailwind in 2021 versus 2020. So no, nothing to report huge on pension, but definitely CAD200 million of cost headwinds coming into 2021. Thanks, Fadi.

Fadi Chamoun -- BMO Capital Markets -- Analyst

Thank you.

Operator

Thank you. Your next question comes from the line of Chris Wetherbee with Citi. Your line is open.

Chris Wetherbee -- Citigroup -- Analyst

Hey, thanks, guys. Maybe if I can sneak on, on that line there for a minute just thinking about the operating ratio and certainly if you want to provide some color around 2021 that would be great. And I guess maybe bigger picture, as you think about sort of the opportunities for growth on the network, are we going to see years where there is maybe equal parts revenue opportunity as well as operating ratio opportunity. I guess I'm kind of thinking about that 60 benchmark that's out there, whether you have the ability to kind of get past that lower than that, what do you see from a revenue opportunity that's out there?

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah. Chris, very good question. So definitely at CN, we don't have a volume problem. Volume is an opportunity, but regarding the operating ratio, Rob, you want to talk that.

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

Yeah, absolutely. And thanks for the question, Chris. Yeah, I think there is opportunities around here as we look into 2021. In terms of the operating ratio we're certainly shooting for a full year operating ratio below 60. And we do believe that's achievable. Beyond some of the structural headwinds that Ghislain talked about that are non-operating challenges on depreciation and compensation and even some of the mix headwinds that way off.

We found ways coming out of the volume recovery to do things more efficiently. Some of that you're seeing in the headcount and some of those efficiencies are structural. But we still see opportunities as we look into 2021, car velocity, train speed, train length. We see opportunities to improve all three as we go into this year. We'll continue to drive -- even though we're the leader in fuel efficiency, we will continue to improve that here in 2021.

So we're optimistic about it. All of that with the work hand-in-hand with James and Keith and what they're doing on the topline that will help us. We're about people, fuel and purchasing and we're focusing on all three to try and make this cost structure as effective as it can be. But very, very optimistic as we look into 2021.Thanks for the question.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you, Chris.

Operator

Your next question comes from the line of Cherilyn Radbourne with TD Securities. Your line is open.

Cherilyn Radbourne -- TD Securities -- Analyst

Thanks very much and good afternoon. Wanted to ask a question on the technology agenda, which I believe is expected to yield CAD200 million to CAD400 million of savings over time, and I appreciate those savings are back-end loaded. But I was just curious whether they are starting to crystallize more fully as you make progress against that agenda? Thanks.

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah. Thank you, Cherilyn. Very good question. It's one of our focus for this year and the years to come. And we're making significant progress, especially as it relates to preventive maintenance. You want to give some example Rob of some of the benefit that we currently experience right now, and maybe talk about somewhat we have in mind for 2021.

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

Yeah, absolutely. Thanks for the question, Cherilyn. So specifically when you talk about the portals in the ATIP cars, we know of four cases in the past 12 months in terms of track cause derailments that are ATIP cars would have prevented had they've been running. And now we've got those during the course of 2020 covering our entire core main from the Atlantic to the Pacific to the Gulf. As we move into 2021 and we take on a couple more cars, we will start to expand into our branch lines. So along the safety piece of it and reducing train accidents, we did see a decrease in terms of the cost of train accidents and also the number of train accidents.

And on the portals themselves, we're about halfway through our algorithm development, but each week and each day, I can tell you our portals are actually finding defects that the human eye is not. And they are actually making our railroad safer. We will continue to develop that here in the 2021 as we add cameras to our portals, and then we'll reassess as we go forward. Thanks for the question.

Cherilyn Radbourne -- TD Securities -- Analyst

Thank you.

Operator

Your next question comes from the line of Ken Hoexter with Bank of America. Your line is open.

Ken Hoexter -- Bank of America -- Analyst

Great. Good afternoon. Hey, JJ. Just I'm a little surprised, I don't think I've ever heard the term structural costs so many times from CN on a call, it used to be the other rails. But let me go to the gross side, do you think -- coming back to James and Keith's comments before, do you think you're being conservative on the growth given the need for Western investments like, is that something that's slowing you down from chasing more volume in 2021 or is that not an issue, it's more the market place.

Jean-Jacques Ruest -- President and Chief Executive Officer

So let's say James if yeah -- not James, Keith if you want to talk about that, I mean there is volume growth at CN, until there is no shortage of that. But we also want to manage what comes at us. Keith?

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

Yes. Thanks for the question, Ken. We do have other course that we service well. We saw growth in Halifax and we actually see some -- some opportunities in the first and second quarter there and maybe have some new services. Well, we will.

We also see in the Gulf Coast opportunity for another service we bring -- we've been bringing more business on in Q3, Q4. We also are leveraging our TransX and H&R product that's one of the things that we've been able to do is growing the consumer and the refrigerated market, but we do have plans for growth on the West with our customers, whether it's through Rupert or Vancouver. So we are trying to grow, Ken. We're just working with Rob and his team to manage it effectively and efficiently. We want to make sure we provide a good service for our customers day-in and day-out. So we are going to grow.

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah, Ken, if I might ask, on Q1, we're a little more conservative because there's still a lot of things that might happen with COVID and vaccine, and you know either things start to go the right direction or we might slip a bit. But when we look at the second half, you got to believe that the pandemic will have -- be more under control. And we are much more bullish in the second half, especially as James mentioned earlier on the Industrial Products side, on the carloads side, and that's good business for CN. So we'll see how the winter goes along into the COVID. But I think so far so good. We're 10% above RTM year-to-date. And grain, intermodal and forest products at CN are currently very solid. Thank you for the question.

Operator

Your next question comes from the line of Benoit Poirier with Desjardins. Your line is open.

Benoit Poirier -- Desjardins Capital -- Analyst

Yeah. Good afternoon, everyone. With respect to Milton, you just received approval for the Logistics Hub project. Could you maybe talk about the next milestone, the capital deployment and how it will impact the flow on your network down the road? Thank you very much.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you, Benoit. And yes, we did obtain approval. Keith, do you want to talk about the next step from here.

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

Yes. Thanks, JJ, and thanks, Benoit. Yes, we're very pleased with the approval that we received last week. We know there is a couple of more small steps to go through that we will go through here in the next several months, but we do plan construction to start in 2021. We do see that this new terminal will allow us to expand our capacity in the GTHA. It's going to allow us to provide better service, it's going to allow us to have better cost of providing that service, and again it's going to grow our capacity. How we -- what trains we run through there and that type of thing is still to come since it's probably going to be about two years out before it's completed, Benoit.

Benoit Poirier -- Desjardins Capital -- Analyst

Okay, perfect. Thank you very much.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you.

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

Thank you.

Operator

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

Scott Group -- Wolfe Research -- Analyst

Hey, guys. Thanks.

Jean-Jacques Ruest -- President and Chief Executive Officer

Hello, Scott.

Scott Group -- Wolfe Research -- Analyst

So I just want to make sure I'm understanding the model and pieces right, Ghislain. So if we have mid single-digit RTM and some price in the buyback and you get to a sub 60 OR [Phonetic], it gets you above -- it gets you to at least double-digit earnings growth. Maybe just are we missing something there, any thoughts for us? Thank you.

Ghislain Houle -- Executive Vice President and Chief Financial Officer

Yeah. No, listen, I mean, as you know, we have a big headwind on FX that I talked in my remarks, Scott. And I'll just remind you of the rule of thumb. It is every cent of appreciation of the Canadian dollar to the US dollar is CAD0.05 of EPS on an annualized basis and it's CAD35 million of net income. So I mean, if you back that in and we are assuming that this FX will create a headwind of anywhere between CAD0.20 and CAD0.25, and we're assuming that FX will remain at CAD0.80. Now god knows where it's going to be, but that's what we're assuming. So if you adjust for that, I mean we would be in the double-digit range to your point. So the FX is really a big headwind for us at this point in time and we'll see how it evolves during the year. Thanks, Scott, for your question.

Scott Group -- Wolfe Research -- Analyst

Okay.

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah. So it's high single-digit, but if it was at constant FX, we would be at double-digit. It's CAD0.25 of EPS at CAD0.80. Thank you, Scott.

Operator

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

Konark Gupta -- Scotiabank Global Banking and Markets -- Analyst

Thanks, and good afternoon. My question is on capacity. As obviously several container terminals on your network expand capacity or target growth and you're obviously seeing some industrial economy recovery here. Would you say, I think, the 20% kind of capital intensity on the lots that you kind of boil down to this year and maybe in the future. Will that be enough to prepare for potential opportunities you have in 2021 and beyond?

Jean-Jacques Ruest -- President and Chief Executive Officer

Rob, do you want to talk about network capacity especially through Rupert and Vancouver?

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

Yeah, absolutely. And Konark, I just want to make sure I understood it, you also asked about Container Hub capacity [Speech Overlap].

Konark Gupta -- Scotiabank Global Banking and Markets -- Analyst

Yeah, absolutely. And I'm talking about the total capital envelope that comes up with your expansion of plastics?

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

Yeah, absolutely. In terms of the main mine capacity, we continue -- as I said in my opening remarks, continued to expand our capacity particularly headed to the Port of Prince Rupert. But really, you'll see our focused investment in terms of mainline capacity going forward as it is last year and continuing West of Edmonton. We see the growth opportunities in Western Canada, both in Rupert and Vancouver, and we'll continue to prepare to handle that. From a container terminal standpoint, I don't know Keith -- Keith on here maybe do you want to add a few things.

Jean-Jacques Ruest -- President and Chief Executive Officer

Keith?

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

S Thanks, Rob. Thanks, Konark. Yes, we do have plans. We're going to finish up our construction process at our new terminal just outside of Minneapolis. We're also expanding and making some improvements in Chicago. We have a couple of things that we're doing here in Brampton, we have some things we're doing in Calgary, Edmonton. So all of these minor expansions or some updates to some of our terminals are all in the capital plan.

Konark Gupta -- Scotiabank Global Banking and Markets -- Analyst

Thank you.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Walter Spracklin with RBC. Your line is open.

Walter Spracklin -- RBC Capital Markets -- Analyst

Yeah. Thanks very much. Good afternoon, everyone. And I was wondering if you could talk a little bit about some of the inputs into your labor cost side. I know you mentioned the pension, but can you give us some color on how you see headcount evolving through the year certainly going through winter now? And whether that is aiming to come off and a little bit on your kind of total cost per employee, I know you didn't pay out all your bonuses this year and what kind of headwind -- certainly if you hit your targets here, what kind of headwind would we be looking at in terms of bonus payments for next year?

Jean-Jacques Ruest -- President and Chief Executive Officer

Okay. So, thank you, Walter. So maybe on the headcount and the operating -- the ratio of people to volume, do you want to take that Rob, and then Ghislain can finish it regarding the replenishment of the bonus. Rob?

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

Yeah, absolutely. And when you look at some of our operating functions, mechanical engineering, NetOps, we'll see those that headcount remain muted. Some of the changes we made will continue to produce dividends going forward. On the train and the engine standpoint, crew members will continue to grow that headcount as volume dictates, but we'll do it at a lesser rate than the increase in volume. Good example is Q3 to Q4, and a sequential growth, we saw 12% growth in volume and only a 5% headcount. So we will be hiring to handle the volume, particularly in the second half of the year, but it won't be at the same rate as the volume increase design.

Ghislain Houle -- Executive Vice President and Chief Financial Officer

Yeah, maybe on your second part, Walter, of your question, so as I said previously, we have CAD200 million of cost headwinds next year, CAD100 million is incentive compensation. So it's really the replenishment of our bonus. So obviously when you look at the average comp per employee, then you should expect that to be slightly up because again you will have more incentive compensation per employee next year than we have this year.

Jean-Jacques Ruest -- President and Chief Executive Officer

Appreciate the time. Thank you, Walter.

Ghislain Houle -- Executive Vice President and Chief Financial Officer

Thanks, Walter.

Operator

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

David Vernon -- Bernstein -- Analyst

Hey, good afternoon, guys. Wondering if you could talk about this margin topic outside of the framework of 2021. You guys have put a lot of money into technology capacity efficiency. Sounds like the revenue side, you're managing yields pretty well. As you think about where you're going to be running the railroad in the next three to four years, what should we be expecting as far as kind of how those investments in technology and things play into the business? Is this going to be a case of it helping you to accelerate growth or should we be thinking that you're going to be running the business in some of that that mid to high 50s range on an operating ratio perspective?

Jean-Jacques Ruest -- President and Chief Executive Officer

So broadly speaking, David, they'll be coming, so they maybe have enough commercial effort on getting better value for our product, and as well as on the cost. But do you want to talk about incremental margin, Ghislain?

Ghislain Houle -- Executive Vice President and Chief Financial Officer

I can talk a little bit about your question on margins, David, and also on technology. I think we're quite bullish on technology. I think that as you know in the last Analyst Day we said, and I think Cherilyn asked the question about the benefits, and we told people 200 to 400, we're still tracking that very, very well. I think first and foremost that technology will really improve safety. That's first and foremost. So the productivity and efficiency in the cost take-out is a byproduct, very good byproduct. Don't get me wrong, but really it's safety. I mean if we can fully automate all the inspection we do of track and of train, I mean it's incredible what we can do in terms of reducing accident costs and solidifying our social license to operate.

So I think with the effective deployment and the value created deployment of technology, absolutely you can expect in the next few years that our margins will improve, absolutely. And we've said that when we talked about this a few years ago, that unfortunately in IT and in technology, the benefits are back-end loaded because you need to build it and test it before it actually produce, but now we can see it starting producing and you should see that in the next -- in the next two years and that will really not only produce the savings and produce -- improve the margins to where we need to be, but also it will fundamentally change the way we do business at CN and we're quite bullish about it.

Jean-Jacques Ruest -- President and Chief Executive Officer

And if I might add, I mean it's high time for rail industry to adapt technology and automation. It's also high time for the rail industry to really define ESG in a much broader perspective and that we are very much focused on those two area, also meaning technology and ESG will be way beyond just fuel efficiency.

David Vernon -- Bernstein -- Analyst

And then just -- and this is more of a follow-up in the second question. But as you think about that rate of change, are we thinking that it starts to accelerate in the next two to three years, in the next three to five? I'm just trying to get a sense of where I should be directing investors in terms of expectations on how quickly this can develop?

Jean-Jacques Ruest -- President and Chief Executive Officer

I think we're starting to see benefits coming in this year, and then it will continue to accelerate. I mean, we didn't have a lot of benefits before because again you need to build it before you actually can see. But Rob has got some good examples on how we use the ATIP car and how we use the portal, and it's coming in loud and clear. So stay tuned, but we're quite excited and quite bullish about it.

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

Yeah. So maybe simply said, as Rob said earlier, an OR that starts with a five is very achievable at CN. Despite the CAD200 million, [Indecipherable] that Ghislain was talking about on depreciation and replenishment of bonus, the team is capable of doing that. Thank you, David.

David Vernon -- Bernstein -- Analyst

Thank you.

Operator

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

Steve Hansen -- Raymond James -- Analyst

Yeah. Good evening, guys. Just a quick one on the coal side, if I may. I don't think we've seen real net growth in your coal business for some time now, and you've obviously got some contract, which is coming over your way. Can you maybe give us a bit better perspective on what we should expect here going forward both with the new-tech business, it's ready to go live soon as well as the broader set of opportunities you guys have, I know you've spoken of some export opportunities, just trying to frame that in the context of not a segment that we've seen a lot of growth in recently? Thanks.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you, Steve. Good question. And James is our expert in coal that we have a couple of puts and take in that market. James, do you want to give some more color?

James Cairns -- Senior Vice President, Rail Centric Supply Chain

Yeah, I would say coal is looking very good, very strong for CN in 2021. The tech deal I think we're all familiar with that. April is going to be our go time for the tech deal, and we should see a fairly rapid ramp up to pull volumes with that tech deal. Part of that tech deal was some significant investments we made in unlocking capacity on the North Shore and Vancouver. And because we made those investments, now we're well positioned to move more grain in the North Shore, more products in North Shore and looking at growing our volumes beyond just the core business.

Also when you look at US coal, US coal is really going to be a significant tailwind for CN as we move into 2021, a very strong export program. The pricing for export thermal and metallurgical coal seems to be favorable if you look at the futures, certainly above our customers breakeven. And last, I'd like to say that we've got two coal plants, one metallurgical, one thermal, that were shuttered in on CN in 2020, and looking at the forward curve on pricing, it's favorable for one or both of those new -- I'm sorry, one or both of those coal plants to restart. So, we're pretty bullish on what the outlook is going to be for coal on the CN network through 2021. Thank you for the question.

Jean-Jacques Ruest -- President and Chief Executive Officer

Maybe while we're talking about bulk, Rob, do you want to talk about how we're doing this month in terms of grain?

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

Yeah. As I mentioned, we set 10 straight monthly records, all-time monthly records in terms of moving Canadian grain. January, we've actually already exceeded the all-time January record. So we're well positioned. We're bringing on new high-capacity cars, just like we did in the latter half of 2020. We have more of those come in, which will help further that, but we're in really good position and we continue to handle it.

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah. Six days ago, we've already exceeded all-time record in grain export. Thank you, Steve.

Operator

Your next question comes from the line of Jon Chappell with Evercore ISI. Your line is open.

Jon Chappell -- Evercore ISI -- Analyst

Thank you. Good afternoon. Rob, earlier you addressed the cadence around bringing headcount back on slower than volumes. But the term managing capacity and the excitement around volumes, especially in the second half of the year, has come up a few times. When you think about other parts of the cost structure, so equipment locomotives whether leased or owned cars, etc, etc, should we think about it the same way as the T&E labor continuing to bring it on in anticipation of a recovery in the business, but still at a slower pace, and then kind of wait and see the whites of the eyes on volume before you really move on bringing some of those costs back.

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah, Rob?

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

Yeah, really good question. And the short answer to that is yes, think about it the same way. We will make sure the volumes there as we bring resources on, whether that's equipment, people, and we'll continue to build capacity for it. As we see the car miles and train speed improve that will also help in terms of our car velocity and trains. As I look at it so far this month and the months almost out, we're operating really well right now. We're up double digits in terms of volume, car velocity is up double digits, train speeds up, train lengths up. So we are seeing some of the fruits of the labor here in late Q3, early Q4 and we plan on building on that momentum here as we go through it.

You can say, we really haven't had a winner. Well, we've had three straight days of nearly minus 40 in Manitoba and Saskatchewan. And however we see some degradation in a minor way to some of those key metrics. We're are well positioned to respond to it and we don't see it. We see a quick recovery. So really off to a very strong start this year and we plan on building on that momentum. Thanks.

Jon Chappell -- Evercore ISI -- Analyst

That's great. Thank you, Rob.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you, Jon. Thank you.

Operator

Your next question comes from the line of Brian Ossenbeck with JP Morgan. Your line is open.

Brian Ossenbeck -- JP Morgan -- Analyst

Hey, good afternoon. Thanks for taking the question. Maybe one on price. You know, there's a lot of new initiatives, I think, James mentioned. Maybe help us if you can give an example of how those are being deployed in some of the early results. And then I guess looking past maybe offsetting the management of mix a bit, do you think that these things are something you can push further on in terms of price, maybe go a little bit higher than inflation as you mentioned JJ volumes, not a problem. So, looking to see your willingness to maybe pull the pricing lever to mitigate some of those challenges and also to get recoup of the capital spent and the accelerated tech investment?

Jean-Jacques Ruest -- President and Chief Executive Officer

Very good question, Brian. So, James, you're starting, after that, Keith, if you could also compliment. James?

James Cairns -- Senior Vice President, Rail Centric Supply Chain

Yeah. Thank you, Brian. Just talking about yield a little bit. I mean we've got a number of initiatives. I think I talked about a couple of my opening remarks. I'll give you a couple of more examples. On the iron ore side of our business, iron ore volume was up 22% in the fourth quarter, in its part because of some yield initiatives we have under way with new fleet, longer trains, more efficient trains. With the new fleet, we deployed where we have them in place, we can move 15% more iron ore using the same resources, allows us to take out a train start a week and do the same amount of iron ore, so that's been successful.

Also on the grain side of things, I mean grain has just been an outstanding example of how we can put a detailed focus on the business and get some really, really good outcome. The outcome we're looking for here is moving more grain for our grain customers. And this is a combination of deploying the new cars, rightsizing our unit trains to match horsepower, so that we don't leave any empty spots available that we could have moved.

And its customer investment and country infrastructure allow us to run very efficient long unit trains. And new signings on the CN side of things that we can accommodate this additional grain growth and not deteriorate our velocity on the network. Another example might be some seasonal pricing that we put in place. As you know Q1 every year is a capacity constraint. So where we can, we want to drive traffic that would prefer to run in Q1 and in the Q4 where we have the capacity to move it.

So we did that quite successfully, particularly on the frac sand side of the business. So these are all activities that are undergoing to great capacities, so we can move more freight or create the opportunity to move the best paying freight where we have capacity [Indecipherable]. It's pretty exciting time at CN as we embark on this renewed focus on yield, I would say. Thank you.

Jean-Jacques Ruest -- President and Chief Executive Officer

Keith?

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

Yes. So, Brian, we are focused on yield and we're focused on price. And we have a lot of cross-functional teams actually in the intermodal. And then Rob's shop, Doug Ryhorchuk and others where we're working on those yield programs. I mentioned quite a few of the operational side earlier. But on the commercial side, we also have yield programs in place and price program.

On the yield side, it's making sure that the right containers are getting on the right trains. We've worked with our customers. They want capacity. So we're working with them to get them the right capacity in the right gateways. We've moved some trains around some stuff that was maybe in one gateway, we've moved it to another gateway to densify that train. All of that together, and then as Rob is talking about, we're running the railroad better. We're able to go out and get more price, and our target is inflation plus pricing in all that we do, not just one or two customers, but in all that we do.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you, Brian.

Brian Ossenbeck -- JP Morgan -- Analyst

All right. Thank you.

Operator

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

Jean-Jacques Ruest -- President and Chief Executive Officer

Hello, Tom.

Tom Wadewitz -- UBS -- Analyst

Yeah. Hi, JJ. I guess this question maybe a little bit of a variation on the one you were just talking about. But I just want to think of your franchise and how you run it? I think you guys have a lot of potential for kind of leading the industry in RTM growth, the volume growth or at least being at the high end. And your forecast is somewhat muted given easy comps are reaching second quarter. I understand the quality revenue, but is there -- I guess is there a capacity consideration that's meaningful too or is there an element that says we can be -- there can be upside scenarios that are maybe likely or maybe it's a little bit conservative on volume. I guess I'm just surprised there isn't maybe a base case that's stronger on the volume side. So I'm wondering if you could talk a little bit more about that?

Jean-Jacques Ruest -- President and Chief Executive Officer

Okay. Tom, so it's a very good question, maybe I'll take that one. So we are a bit conservative at Q1. We would like CDI of the Q1 economy, we would like the CDI of how the pandemic will evolve, whether or not at some point we may have a number of employees in quarantine and that might affect the capacity in our network. So far so good, but it's -- I mean it's -- we're in lockdown in Montreal today since it had a curfew overnight. So that's not necessarily a usual thing.

We are very, very confident that when the pandemic start to be controlled with vaccination, and vaccinations get me a little slow in kind of the US, there should be a strong economy for us on the other side, whether the industrial product and the consumer is already very solid. So volume at CN is not a problem, volume at CN is a strength. We have enough crews to run our train. We want to be sure they all stay healthy and don't have too many of them in quarantine. And after that, we'll see.

We -- I think so, on the capacity side, there is capacity at CN, there is also a very conscious effort at CN to recognize capacity is precious. Capacity costs money. And we'd like to see intermodal vessel coming to our port, but we want to be sure that they pay the price, the price to pay, especially when its business that it may not be there 12 months from now, because it's obviously coming from US West Coast port as well. And we wanted to be sure we protect capacity for propane going for West Coast, coal going into West coast, grain going to the West Coast. So there is a mindset of doing some arbitrage, if you wish, into what we do first and what we do second. Long-term business first and the business that may, may not be there 12 months from now. If we do it, we would want to be paid at a higher price for a different price than normal contract business.

So as we do all that, which is a bit of a new sport at CN, because let's face it, our port business has become almost too good. I mean, it's -- and also it was imbalanced early days, because we basically had lots of imports and no export, which is not the most way to -- when you run an imbalance network, it's -- it cost little money. So, are we conservative? No. Ask us again in April.

Tom Wadewitz -- UBS -- Analyst

Right. Okay. Thanks. Thanks for the perspective.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you, Tom.

Operator

Your next question comes from the line of Brandon Oglenski with Barclays. Your line is open.

Brandon Oglenski -- Barclays -- Analyst

Hey. Good afternoon, everyone, and thanks for taking my questions. So I guess, JJ, following up on that or maybe this one is better for Keith, but can you talk about the competitive dynamic specifically in international and domestic intermodal markets? I think we saw another large contract go to your competitor at the end of the year, is that part of the conservative outlook on volume as well?

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

So, Brandon, I guess, I'll take that one. Just not to correct you, but the large customer that you're talking about will hold the majority of that volume moving forward. It was not a winner-take-all type of thing. In fact, we picked and choose what we wanted and where we wanted it that fit into our network. We've been working very hard on that contract. It's not complete yet, but we will definitely get our -- more than fair share.

With regard to the domestic business, we are always competing, but the types of products and services that we have and the geography that we serve has served us very well during COVID, but I think there is a reason why you saw our growth in Q4 and why you see the growth in Q1 being our industry leading. So we're satisfied with our products or services and we love our network. Thanks, Brandon.

Brandon Oglenski -- Barclays -- Analyst

Thanks for the clarification.

Operator

Your next question comes from the line of Allison Landry with Credit Suisse. Your line is open.

Jean-Jacques Ruest -- President and Chief Executive Officer

Good afternoon, Allison.

Allison Landry -- Credit Suisse -- Analyst

Allison for William. Good afternoon. So I just wanted to ask about the potential for M&A mix related space. We've obviously seen some activity recently and historically, CN have been relatively active. So if you could maybe speak to you any opportunities that might be a strategic fit for CN that you see and then sort of specifically as we think about the growth potential at Halifax and in Eastern Canada and perhaps if you could comment on CSX acquisition of the Pan Am and if there are -- you see any commercial opportunities there that you could benefit from? Thank you.

Jean-Jacques Ruest -- President and Chief Executive Officer

You want to talk about M&A activities or joint venture, Ghislain.

Ghislain Houle -- Executive Vice President and Chief Financial Officer

I can talk to overall, Allison. Thanks for the question of M&A. I mean, as you know, we're always on the look out to do M&A. I mean it needs to fit our network. We're not -- we don't want to diversify for the pleasure of diversification. That's not our game. For whatever we can add to our network either extending our reach or that we can put more business on our network, we're always on the look out. And I mean we have a list that we're following up and nothing really that is really hot right now, but it's certainly on our radar screen. We want that. I mean, part of our strategy is on inorganic growth. So that's -- we're following up on that, for sure, and if it allows us to get to market that today we can get, because of our reach and obviously it makes a lot of sense. Hence why we also want to keep a strong balance sheet. We want to keep a strong balance sheet, because not only we saw the value of it during the pandemic in 2020, but also because if there is a deal coming in we can act very, very quickly and do it on an all-cash basis and be successful.

So, I mean, we're on the look out. I mean if something makes sense and fit our network and fit our strategy, it needs to fit our strategy long term, then obviously we can move very quickly on it.

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah. So we have a small team that look at that all the time and we don't wait for phone calls to come in, we also make some outbound calls and we'll see what the future holds. Thank you, Allison.

Allison Landry -- Credit Suisse -- Analyst

Thank you.

Operator

Your next question comes from the line of Bascome Majors with Susquehanna. Your line is open.

Jean-Jacques Ruest -- President and Chief Executive Officer

Hello, Bascome.

Bascome Majors -- Susquehanna International Group -- Analyst

Yeah. Thanks for taking -- yeah, good afternoon, and thanks for taking my question. The extent sort of the Jon's question, a bit further out, I mean you've embraced the supply chain collaboration and share gains driven strategy for a decade now and we're approaching the point where every other Class 1 rail is going to enter a steady state of running their version of the Hunter Harrison operating, for instance, [Indecipherable] that underpin what you do at CN and in operating ratio that reflects that. As the industry pivots kind of from this operational realignment too, so maybe a broader and more consistent growth strategy, does this open up some modal share opportunities for CN and the industry as a whole for, say, the next three years versus the last three, just strategically how do you think about that? Thanks.

Jean-Jacques Ruest -- President and Chief Executive Officer

Yeah. Thank you. It's a very good question. It's -- and it's certainly does so. We -- that's one of the reason when we look at the capex and when we look at implementing technology, we just -- they will talk just about railroad operation, life inspection in the locomotive are eventually equipment different than diesel. But we also talk about -- we want to invest into the customers' experience, where we would automate and digitize the customer experience in a way that they want us to provide services to them. And, in that case, doing that also with other supply chain partner in the supply chain like port operators or shipping line or rental company.

So definitely the CN story long term is one of growth, profitable growth, profitable growth from an existing account and profitable growth from new accounts and some of these new accounts buy company with the competition, but they might very well also come from supply chain that we're not part of it to date. But the reality is, at CN, at least at CN, we believe that investing in technology that relates to the supply chain experience people being able to track their product, from A to Z and not just at CN but when they're on the -- coming to us or via port -- or going back to a port is very much part of how the long-term future of the company is.

So if we do joint venture or acquisition, some of them might be technology related, but some of them might be with partners like port operators and whatnot. So the evolution of PSR, it gets into digitizing the scheduled railroading but also into bringing the element of service and the scheduled railroading that's also closer to what the customers expect, which means that it's visibility and control to their freight beyond the rail before the rail and after the rail as well.

We actually have a group that's really working on that very actively. This morning the Board approved two promotion in our technology group. One of them is a person who is going to be very strong on automation of rail operation and the other one is very strong in terms of that automating the supply chain related to the supply chain services that we offer to our customers.

So good question, Bascome, because it really talks about the future of CN and the future of the industry. Thank you.

Bascome Majors -- Susquehanna International Group -- Analyst

Thank you.

Jean-Jacques Ruest -- President and Chief Executive Officer

We have time for more question, Paul? No? 5:30.

Operator

Thank you. This is Simon, I would like to turn the meeting back over to yourself, Mr. Jacques.

Jean-Jacques Ruest -- President and Chief Executive Officer

Thank you. Thank you for all of you to joining us today. And, as usual, we wanted to have as many of you to ask questions and then making good use of your time. So thank you for your time, and then we'll see you again in three months. Thank you.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Paul Butcher -- Vice President, Investor Relations

Jean-Jacques Ruest -- President and Chief Executive Officer

Robert E. Reilly -- Executive Vice President and Chief Operating Officer

James Cairns -- Senior Vice President, Rail Centric Supply Chain

Keith Donald Reardon -- Senior Vice President, Consumer Product Supply Chain

Ghislain Houle -- Executive Vice President and Chief Financial Officer

Fadi Chamoun -- BMO Capital Markets -- Analyst

Chris Wetherbee -- Citigroup -- Analyst

Cherilyn Radbourne -- TD Securities -- Analyst

Ken Hoexter -- Bank of America -- Analyst

Benoit Poirier -- Desjardins Capital -- Analyst

Scott Group -- Wolfe Research -- Analyst

Konark Gupta -- Scotiabank Global Banking and Markets -- Analyst

Walter Spracklin -- RBC Capital Markets -- Analyst

David Vernon -- Bernstein -- Analyst

Steve Hansen -- Raymond James -- Analyst

Jon Chappell -- Evercore ISI -- Analyst

Brian Ossenbeck -- JP Morgan -- Analyst

Tom Wadewitz -- UBS -- Analyst

Brandon Oglenski -- Barclays -- Analyst

Allison Landry -- Credit Suisse -- Analyst

Bascome Majors -- Susquehanna International Group -- Analyst

More CNI analysis

All earnings call transcripts

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

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