Ms. Tracy Robinson reports

CN ANNOUNCES FOURTH QUARTER AND YEAR-END RESULTS

Canadian National Railway Company has released its financial and operating results for the fourth quarter and year ended Dec. 31, 2023. For the fourth quarter, the company delivered diluted earnings per share of $3.29, an increase of 57 per cent, and adjusted diluted EPS of $2.02, a decrease of 4 per cent. Operating ratio for the fourth quarter increased by 1.4 points to 59.3 per cent. For 2023, the company reported diluted EPS growth of 15 per cent while adjusted diluted EPS decreased by 2 per cent. Operating ratio for 2023 increased by 0.8 point, or 0.9 point on an adjusted basis.

"Through 2023, our team of dedicated railroaders leveraged our scheduled operating model to deliver exceptional service for our customers and remained resilient in the face of numerous external challenges. Looking forward, we are optimistic as CN specific growth initiatives are producing volumes. While economic uncertainty persists, we have the momentum to deliver sustainable profitable growth in 2024," said Tracy Robinson, president and chief executive officer, CN.

Financial results highlights

Fourth quarter 2023 compared with fourth quarter 2022:

• Revenues of $4,471-million, a decrease of $71-million or 2 per cent;
• Operating income of $1,818-million, a decrease of $94-million or 5 per cent;
• Operating ratio, defined as operating expenses as a percentage of revenues, of 59.3 per cent, an increase of 1.4 points;
• Net income of $2.13-billion, an increase of $710-million, or 50 per cent, and adjusted net income of $1,305-million, a decrease of $115-million, or 8 per cent;
• Diluted EPS of $3.29, an increase of 57 per cent, and adjusted diluted EPS of $2.02, a decrease of 4 per cent.

Full year 2023 compared with full year 2022:

• Revenues of $16,828-million, a decrease of $279-million or 2 per cent;
• Operating income of $6,597-million, a decrease of $243-million or 4 per cent;
• Operating ratio of 60.8 per cent, an increase of 0.8 point or an increase of 0.9 point on an adjusted basis;
• Net income of $5,625-million, an increase of $507-million, or 10 per cent, and adjusted net income of $4,800-million, a decrease of $334-million, or 7 per cent;
• Diluted EPS of $8.53, an increase of 15 per cent, and adjusted diluted EPS of $7.28, a decrease of 2 per cent;
• The company generated free cash flow of $3,887-million, a 9-per-cent decrease;
• Return on invested capital of 16.8 per cent, an increase of 1.0 point, and adjusted ROIC of 14.5 per cent, a decrease of 1.4 points.

Operating performance

Fourth quarter 2023 compared with fourth quarter 2022

Operating performance improved across most measures in the fourth quarter of 2023, when compared with the same period in 2022:

• Injury frequency rate at a record low of 0.79 (per 200,000 person hours), an improvement of 14 per cent;
• Accident rate of 1.51 (per million train miles), an improvement of 29 per cent;
• Fuel efficiency of 0.874 (U.S. gallons of locomotive fuel consumed per 1,000 gross ton miles), an improvement of 1 per cent;
• Through dwell of 6.9 (entire railway, hours), an improvement of 4 per cent;
• Car velocity of 215 (car miles per day), an improvement of 4 per cent;
• Through network train speed (miles per hour) of 19.6 remained flat;
• Train length of 7,951 (in feet), an increase of 1 per cent;
• Revenue ton miles (RTMs) of 61,136 (millions), an increase of 2 per cent.

Full year 2023 compared with full year 2022

The company's continued focus on scheduled railroading in 2023, helped by more favourable winter operating conditions, partly offset by operational disruptions related to Canadian wildfires and the Canadian West coast dock worker strike, resulted in improvements in car velocity, train speed and through dwell when compared with 2022:

• Injury frequency rate at a record low of 0.96 (per 200,000 person hours), an improvement of 13 per cent;
• Accident rate of 1.74 (per million train miles), an improvement of 17 per cent;
• Through dwell of 7.0 (entire railway, hours), an improvement of 8 per cent;
• Car velocity of 213 (car miles per day), an improvement of 9 per cent;
• Through network train speed of 19.8 (mph), an improvement of 5 per cent;
• Fuel efficiency of 0.874 (U.S. gallons of locomotive fuel consumed per 1,000 GTMs), less efficient by 1 per cent;
• Train length of 7,891 (in feet), a decrease of 3 per cent;
• Revenue ton miles (RTMs) of 232,614 (millions), a decrease of 1 per cent.

2024 outlook and shareholder distributions

In 2024, CN expects to deliver diluted adjusted EPS growth of approximately 10 per cent and expects to invest approximately $3.5-billion in its capital program, net of amounts reimbursed by customers. The company also expects return on invested capital to be within the targeted range of 15 per cent to 17 per cent.

CN reiterates its longer-term financial perspective and continues to target compounded annual diluted EPS growth in the range of 10 per cent to 15 per cent over the 2024 to 2026 period driven by growing volumes more than the economy, pricing above rail inflation and incrementally improving efficiency, all of which assume a supportive economy.

The company's board of directors approved a 7-per-cent increase to CN's 2024 quarterly cash dividend, effective for the first quarter of 2024. This is the 28th consecutive year of dividend increases, demonstrating its confidence in the long-term financial health of the company. In addition, the company's board of directors also approved a new normal course issuer bid that permits CN to purchase, for cancellation, over a 12-month period, up to 32 million common shares, starting on Feb. 1, 2024, and ending no later than Jan. 31, 2025.

Fourth quarter 2023 revenues, traffic volumes and expenses

Revenues for the quarter decreased by 2 per cent to $4,471-million, when compared with the same period in 2022. The decrease was mainly due to lower shipments of intermodal and grain, as well as lower container storage fees and lower fuel surcharge revenues as a result of lower fuel prices, partly offset by freight rate increases and higher shipments of potash, natural gas liquids and refined petroleum products.

Operating expenses for the quarter increased by 1 per cent to $2,653-million, when compared with the same period in 2022. The increase was mainly due to higher labour and fringe benefit expense mainly driven by general wage increases and higher average headcount and higher personal injury and legal claim provisions, partly offset by lower fuel prices.

Full year 2023 revenues, traffic volumes and expenses

Revenues for 2023 decreased by 2 per cent to $16,828-million, when compared with 2022. The decrease in revenues was mainly attributable to lower shipments of intermodal, crude oil, U.S. grain and forest products, as well as lower container storage fees and lower fuel surcharge revenues as a result of lower fuel prices, partly offset by freight rate increases, higher Canadian grain export shipments and higher shipments of potash, and the positive translation impact of a weaker Canadian dollar.

Operating expenses were $10,231-million. Operating expenses remained flat mainly due to lower fuel prices, offset by the negative translation impact of a weaker Canadian dollar and higher labour and fringe benefit expense, mainly driven by general wage increases and higher average head count.

About Canadian National Railway Company

CN is a world-class transportation leader and trade enabler. Essential to the economy, to the customers and to the communities it serves, CN safely transports more than 300 million tons of natural resources, manufactured products and finished goods throughout North America every year. CN's network connects Canada's Eastern and Western coasts with the U.S. south through an 18,800-mile rail network. CN and its affiliates have been contributing to community prosperity and sustainable trade since 1919. CN is committed to programs supporting social responsibility and environmental stewardship.

We seek Safe Harbor.