Firm Individuals
Stacy Alderson – Assistant Vice President, Investor Relations
Tracy Robinson – President and Chief Govt Officer
Patrick Whitehead – Govt Vice President and Chief Community Working Officer
Derek Taylor – Govt Vice President and Chief Discipline Operations Officer
Doug MacDonald – Govt Vice President and Chief Advertising and marketing Officer
Ghislain Houle – Govt Vice President and Chief Monetary Officer
Convention Name Individuals
Christian Wetherbee – Citi
Cherilyn Radbourne – TD Cowen
Ken Hoexter – Financial institution of America
Scott Group – Wolfe Analysis
David Vernon – Bernstein
Fadi Chamoun – BMO Capital Markets
Ravi Shanker – Morgan Stanley
Walter Spracklin – RBC Capital Markets
Konark Gupta – Scotiabank
Brandon Oglenski – Barclays
Thomas Wadewitz – UBS
Amit Mehrotra – Deutsche Financial institution
Brian Ossenbeck – JPMorgan
Justin Lengthy – Stephens
Jonathan Chappell – Evercore ISI
Michael Kypreos – Desjardins Capital Markets
Operator
Good afternoon. My title is Julianne and I might be your convention operator at the moment. Welcome to CN’s Fourth Quarter and Full 12 months 2023 Monetary and Working Outcomes Convention Name. All contributors are actually in listen-only mode. After the audio system’ remarks, there might be a question-and-answer session, throughout which we ask that you just kindly restrict your self to at least one query.
I might now like to show the decision over to Stacy Alderson, Assistant Vice President, Investor Relations. Girls and gents, Ms. Alderson.
Stacy Alderson
Thanks, operator. [Foreign Language] Good afternoon, everybody, and thanks for becoming a member of us for CN’s Fourth Quarter and Full 12 months 2023 Monetary and Working Outcomes Convention Name.
Earlier than we start, I’d like to attract your consideration to the forward-looking statements and extra authorized data obtainable at the start of the presentation. As a reminder, at the moment’s convention name accommodates sure projections and different forward-looking statements inside the that means of the US and Canadian securities legal guidelines.
These statements are topic to dangers and uncertainties that will trigger precise outcomes to vary materially from these expressed or implied in these statements. They’re extra absolutely described in our cautionary assertion relating to forward-looking statements in our presentation.
After the ready remarks, we are going to conduct a Q&A session. I might ask that you just please restrict your self to at least one query, so we will get to listen to from as lots of you as potential. The IR staff might be obtainable after the decision for any follow-up questions.
Becoming a member of us on the decision at the moment are Tracy Robinson, our President and CEO; Pat Whitehead, our Chief Community Operations Officer; Derek Taylor, our Chief Discipline Operations Officer; Doug MacDonald, our Chief Advertising and marketing Officer; and Ghislain Houle, our Chief Monetary Officer.
It’s now my pleasure to show the decision over to CN’s President and Chief Govt Officer, Tracy Robinson.
Tracy Robinson
[Foreign Language] I wish to begin at the moment by welcoming Derek and Pat to their first name. It’s nice to have you ever guys with us. And I additionally wish to lengthen a heat welcome to Remi, who’s out within the subject at the moment, immersing himself within the operation. You’ll all have an opportunity to fulfill him over the subsequent few months or so.
Doug stays answerable for our industrial group and our progress efforts and he’s after all right here at the moment with us. Doug might be retiring this 12 months and there’ll be a bit of extra to say on this at the moment. However I very a lot admire Doug your presence and partnership over the past couple of years. And I do know that Doug will do an amazing job in getting Remi arrange with our industrial staff. Now this transition later this 12 months might be seamless to each our prospects and our workers.
We’re railroading right here for the long run. And we’re lucky to have numerous very sturdy and skilled expertise at CN and we’re going to complement that every so often with expertise with completely different backgrounds and views. And that is going to make us even stronger, which is necessary as we proceed to refine our path ahead and advance our progress mandate.
And we’re additionally taking a long-term method on the subject of our community. We all know that our community has at all times been core to the CN benefit and to our means to supply our prospects with options for his or her companies, the place it is smart so as to add to our community, to place us to do extra or higher of this, we’ll accomplish that. Now within the fourth quarter, we closed on the CBNS, which can give us extra alternatives to densify the japanese a part of our community in coming years.
And in December, we signed an settlement to buy the Iowa Northern. It’s a pleasant addition to our community within the Midwest. It’s going to give prospects in that space higher market entry, and for us, it should deepen our community attain and enhance our Ag enterprise. So I wish to welcome those that is likely to be listening in for the primary time at the moment to our railroad household. We do count on to totally combine the Iowa Northern property later this 12 months pending a optimistic end result of the STB overview course of.
Now, earlier than I ask the staff to get into the main points, I’ll simply recap the place we’re and I’ll begin with security. We ended the 12 months with some significant enhancements in each our accident and damage frequencies, and I’m more than happy with each the work that has gone into this and the impression it has had and we’re going to proceed these efforts. This might be a relentless drive to zero.
And on the operation, we got here into the fourth quarter a bit of battle-hardened after a few tough quarters final 12 months and the place we managed via a freight recession and quite a lot of exterior shocks. And in This fall, we had the reward of some kinder climate and our operations staff took full benefit, posting some actually sturdy on-time and velocity metrics.
Now, as we rounded the nook into this 12 months, we kicked off with some excessive winter temperatures throughout the community. However as we elevate out of that, the staff is effectively on their strategy to getting this place again to that very same stage of operation.
No matter comes at us, we all know that sticking with this mannequin will guarantee resiliency, enabling us at all times to carry out at our greatest. Our full-year automobile velocity, for instance, and that is together with the challenges of the second and third quarters, was 213 miles per day, that’s a 9% enchancment over 2022.
We’re working a plan. We’re getting extra out of our belongings and that is driving some very constant service ranges to our prospects. A robust, constant, resilient operation is desk stakes on this business and the required basis to maneuver the financial system and for us to ship our progress agenda. On the finish of the day, that is about doing what we are saying we are going to do.
We’ve got a plan and we’re executing it. We’ve been increase our monitor file operationally over these final seven quarters and I believe I communicate for the whole staff that it feels actually good to have that CN grew again.
Now, turning to our quarter and full-year outcomes, I’ll maintain it to just some highlights. Our fourth quarter adjusted EPS was 4% decrease than final 12 months and our working ratio was 59.3%. For the 12 months, adjusted EPS was 2% decrease and our working ratio was 60.8%.
These are the type of outcomes we will be very pleased with in a difficult atmosphere. And we mentioned final quarter that we’ve seen the underside in volumes and this has performed out as we anticipated. We’ve seen sequential enchancment and our This fall RTMs had been up 10%.
Now there stay query marks on the financial system as we transfer into 2024. We’re anticipating a continued enchancment because the 12 months progresses and Ghislain offers you extra particulars on all of our assumptions.
However past the elevate from a strengthening financial system, we’re additionally working our progress initiatives that leverage our community, our sturdy service, and our buyer and provide chain partnerships. And these are beginning to bear fruit and in some circumstances extra rapidly than we deliberate.
Doug offers you some coloration on this and also you’ll hear Pat and Derek overview the state of our operations and we’re prepared for the volumes to begin to elevate. This provides me the arrogance in our EPS steering of roughly 10% progress over 2023.
I’ll now hand it over to the staff to fill out the main points. Pat, you’re up.
Patrick Whitehead
[Foreign Language] It’s nice to be on the decision at the moment. I’ll start with security. Within the fourth quarter, our damage frequency ratio was down 14% and our accident charge was down 29%. These outcomes capped a strong full-year efficiency, demonstrating our progress towards a commitment-based security tradition.
For the total 12 months, damage frequency ratio improved 13% and the accident charge improved 17%. This represents a record-low 12 months for accidents at CN, however we all know we will and that we should do higher.
I’m pleased with the optimistic strides we’re making on our security metrics, however it is a journey and we gained’t be glad till all workers go house safely on the finish of each shift. We’re targeted on our imaginative and prescient of a office that is freed from accidents and accidents. We’re dedicated to working as a staff throughout all crafts and departments to realize this imaginative and prescient. Coaching and growth, expertise, and behavior-based security actions are important to enhancing our security tradition.
One of many keys supporting higher security outcomes is working a extra predictable operation. Predictability is what underpins our velocity and our resiliency. CN’s scheduled working mannequin has delivered seven consecutive quarters of operational and repair excellence.
Now, as we’ve mentioned, the plan is dynamic and desires to regulate to our site visitors. So with volumes rising, we’ve got been refining our prepare package deal. For instance, we added a prepare begin out of Prince Rupert and we adjusted the Vancouver prepare plan to accommodate an uptick of quantity on this hall.
Departing and arriving trains on time, what we name launch and land, continued to be a key focus of each the community operations and subject groups. These are the fundamentals of scheduled railroading.
Fourth quarter origin prepare efficiency remained strong and according to prior quarters at round 90%, proper the place we wanted to be to make sure on-time prepare meets. This fall vacation spot prepare efficiency was 70%, and we all know there’s room for enchancment right here by persevering with to cut back our prepare meet delays and making well timed crew swaps at intermediate terminals.
I’m happy with how the community and subject groups have managed the complexity to crew scheduling launched by the brand new Canadian Work/Relaxation Guidelines. We proceed to study and modify prepare schedules to adapt to this new requirement.
Now you’re going to listen to extra from Doug on volumes, however my staff is preparing for the enterprise, ensuring we’ve got the suitable assets in place. We’ve got quite a lot of capital initiatives that may allow short-term working effectivity and unlock long-term progress throughout the core mainline from the West Coast to Chicago.
In 2024, we’re investing in further double monitor alongside our Vancouver to Chicago corridors, with initiatives on our Edson Sub and on the previous EJ&E round Chicago. We proceed to put money into rolling inventory.
The locomotive modification program is effectively underway and we’re renewing quite a lot of our automobile fleets. Our coaching campuses had been very busy in 2023. We certified 900 plus new conductors to cowl attrition and meet the necessities of the Work/Relaxation adjustments in Canada and we’re now ramping as much as align with our progress forecast. So general, from a useful resource perspective, we’re poised to fulfill the forecasted demand and develop with our prospects.
I’ll now move it to my good pal Derek to speak about how the staff executed within the fourth quarter.
Derek Taylor
Thanks, Pat, and good afternoon, everybody. The staff completed the final quarter of 2023 with sturdy operational momentum and we began the New 12 months with a really fluid community. Whereas we benefited from unseasonably gentle climate and no main disruptions within the fourth quarter, I give full credit score to the staff for remaining targeted and persevering with to ship wonderful customer support.
Ending with optimistic momentum was key as a result of, over the past two weeks, we’ve had extra seasonal climate throughout the community with frigid temperatures, vital snow, and blizzard situations.
As we mentioned earlier than our Make The Plan, Run The Plan method isn’t just about driving velocity and reliability, it additionally builds an operational resiliency permitting us to bounce again faster after this type of disruption. We’re speaking days as an alternative of weeks. I’ll now cover-off a number of the key working metrics.
Beginning with automobile velocity, what we view because the all-in metric of how effectively the railway is working, it averaged 215 miles per day in This fall. That’s up 4% versus final 12 months in considered one of our greatest Q4s ever.
Importantly, we maintained this stage of velocity proper as much as the tip of the 12 months, whilst volumes had been ramping up. Via dwell of 6.9 hours was a 4% enchancment over final 12 months. That is much more spectacular given our site visitors combine had much less intermodal quantity this 12 months, which we all know usually doesn’t sit in a terminal for very lengthy.
Continued concentrate on terminal throughput and collaboration between yards and the operation facilities enabled this additional enchancment. To offer you a bit extra coloration on our strong working efficiency, community prepare pace of 19.6 miles per hour for This fall is flat versus final 12 months, however improved 5% on a full-year foundation to 19.8 miles per hour versus 18.9 in 2022.
Doug will discuss in regards to the prospects perspective of our service in a minute, however the metric I maintain an in depth eye on is our native service dedication efficiency or LSCP. This implies getting the shoppers the suitable vehicles on the suitable day and in the suitable service window.
Our fourth quarter LSCP was nearing all-time highs. I’m assured the staff will proceed to execute and maintain it at or above our 90% purpose as we undergo 2024. Incremental metric enchancment is a steady journey, searching for each acquire we will via course of and execution.
The staff is at all times searching for any sorts of operational efficiencies in every thing they do. A few of our current efficiency, as Ed used to say, has hit the candy spot for this community. Our focus is to have steadiness in our metrics, not focus solely on one to the detriment of the opposite and at all times being conscious of value versus advantages.
Now, I’ll flip it over to Doug.
Doug MacDonald
Thanks, Derek. Tracy already touched on the transition later this 12 months with Remi, who’s out within the subject getting his boots soiled and seeing the operations up shut. I obtained handy it to Derek and Pat and the entire working staff who proceed to ship top-notch service. The suggestions from prospects is that we’re persevering with to hit the suitable spot and make changes the place wanted. We proceed to ship core pricing forward of CN value inflation.
Turning to slip 11 now, fourth quarter revenues had been down 2% versus final 12 months on decrease intermodal storage charges and a decrease relevant gas surcharge, partially offset by volumes and strong same-store pricing. RTMs, which we view as the perfect measure of quantity had been up 2% within the quarter, pushed by file potash actions, sturdy propane, Canadian met coal exports, and refined petroleum merchandise. We’ve seen sequential quantity enchancment since we hit the trowel in July, as we mentioned on our final name.
P&C volumes had been up 12% within the quarter, except crude oil, all segments had been up on a year-over-year foundation. We’re dealing with file propane exports and according to the CN particular progress initiative laid out at Investor Day.
We additionally noticed elevated gasoline and diesel shipments out of Alberta and a modest restoration for chemical substances and plastics feedstocks. Metals and minerals RTMs had been up 3% with optimistic progress throughout all segments, together with frac sand, scrap metal, and aluminum aside from iron ore the place vehicles had been up and RTMs had been down because of a shift again to extra short-haul home shipments.
To complete off on merchandise, forest merchandise volumes had been down 5%, pushed by softer market situations. For bulk beginning with fertilizers, RTMs had been up 85%. We dealt with incremental home and file potash exports utilizing our obtainable capability within the Jap and Southern areas. Coal was up 1%, with Canadian coal up 5%, because of sturdy export met coal from Northern BC and US coal down 9% because of an operational problem at considered one of our prospects’ mines.
Canadian grain shippers didn’t use all the obtainable provide chain capability in This fall. Weaker international commodity pricing led to a holdback in grain, shifting volumes into H1 2024. Our This fall US grain exports had been tempered by decrease demand in China and elevated international provide. Automotive RTMs had been up 22%, persevering with the sturdy pattern that began in early 2023 with seller stock restocking.
Turning to intermodal, worldwide was down 11%, primarily as a result of lingering impact of the port strike, notably for Prince Rupert site visitors. Nonetheless imports at each West Coast ports return to pre-ILWU strike ranges by December.
We’re inspired by the sequential uptick in volumes within the fourth quarter and with our ongoing discussions with steamship line prospects. Home was down 3%, primarily in our retail phase. Our efforts within the CN-specific initiatives like Falcon and EMP produced volumes, mitigating a number of the general market softness.
Shifting to the outlook on slide 12. As Tracy mentioned, we are going to profit from a extra favorable financial system, however extra importantly, our CN-specific progress initiatives are beginning to ship. We see lumber and panels coming again progressively in 2024. There’s optimism within the financial system about rates of interest coming down, which ought to assist stimulate new building permits, and there’s nonetheless a scarcity of roughly 6 million properties within the US.
We venture extra frac sand and LPG shipments because of elevated drilling in Northeast BC and this might be supported by the brand new siding close to Fort St. John as talked about in our Investor Day initiatives.
In 2023, crude shipments had been at an nearly five-year low, however pushed — given the forecast for Canadian crude manufacturing together with the delay within the start-up of the TransMountain pipeline, we see alternatives to deal with incremental crude enterprise in 2024. The CN Fuels facility in our MacMillan yard will start moist commissioning this month and can begin producing carloads and ramping up via Q1. We’ve got now bought out capability in Part 2 of this venture and building is underway.
For potash exports, we count on to see a year-over-year headwind beginning in Q1 associated to the enterprise we picked up in 2023, whereas the Portland terminal was down. We proceed to get sturdy rateable volumes with our premium service and using our obtainable capability in Jap Canada. In Canadian coal, we’ve got met coal manufacturing capability coming on-line within the again half of the 12 months associated to the brand new Valerie mine and the Quintet restart in This fall.
As talked about earlier, this 12 months’s Canadian harvest is down versus final 12 months, however we predict a traditional crop for the 2024-’25 crop 12 months and a greater This fall than what we simply noticed. Recall that this 12 months’s inflation index for regulated grain actions is 12% and can obtain our 2024-2025 pricing willpower within the spring.
US grain will profit from the acquisition of the IANR pending STB approval, which we anticipate being accomplished someday by subsequent fall. We’re projecting automotive demand to stay sturdy and volumes was roughly on par with 2023, even with some outages associated to retooling for EV manufacturing.
For worldwide intermodal, we proceed to work on filling up Prince Rupert and constructing on current momentum in Vancouver. We additionally count on progress in our southern ports within the Gulf, pushed by new service choices into the Midwest.
General, we see a gradual return to pre-COVID quantity ranges over the subsequent few quarters. Home progress will come from our new interline partnerships particularly concentrating on truck volumes. We’ve got capability on the community, in our terminals, and with our fleet to develop volumes because the financial system improves.
In abstract, we’ve rotated via a number of the headwinds, which challenged us in 2023. We’ve got good momentum CN’s customer support is superb and our CN-specific progress initiatives are delivering.
With that, I’ll move it over to Ghislain and undergo the numbers.
Ghislain Houle
[Foreign Language] Turning to slip 14, volumes by way of RTMs had been larger by 2% on a year-over-year foundation, whereas our revenues had been down roughly 2%. We delivered working earnings of round $1.8 billion, 5% decrease than final 12 months, with an working ratio of 59.3%, a 140 foundation factors larger than final 12 months.
We had two non-recurring gadgets under the road. Through the quarter, we applied a tax reorganization that produced round $700 million of one-time earnings. As a consequence of this, our general tax standing each in Canada and within the US has not materially modified and our efficient tax charge for 2024 might be roughly 25%. So about 50 foundation factors larger than in 2023.
Money taxes might be round 80% of our general efficient tax, which is according to prior years. We additionally monetize a surplus proper of method in Ontario, amounting to roughly $130 million. On a reported foundation, EPS was $3.29, up 57% versus final 12 months.
Nonetheless, excluding these one-time gadgets, adjusted EPS was $2.02, down 4% year-over-year. When it comes to bills, labor was 12% larger versus final 12 months, pushed by 5% larger common headcount and common wage will increase. Gasoline expense was greater than $100 million decrease than in the identical interval final 12 months, principally because of a 17% lower in gas costs.
Turning to our full 12 months outcomes on slide 15, we delivered an adjusted EPS of two% decrease than final 12 months, which is aligned with our revised steering. Our full 12 months working ratio of 60.8% was up 90 foundation factors versus final 12 months on an adjusted foundation. Regardless of vital disruptions in Q2 and Q3 from forest fires, flooding, and the West Coast ports strike that negatively impacted EPS by roughly $0.17.
We generated near $3.9 billion of free money circulate for the 12 months. Disciplined capital expenditures of $3.1 billion, excluding capital recoverable from prospects represents round 18.5% of revenues. We’re investing in our rail automobile fleet and proceed to take a position steadily in monitor upkeep in addition to capability expansions, time with our prospects’ volumes, and at all times with a view to capital effectivity. ROIC, which is extremely delicate to the earnings numerator got here in just below 15% [Technical Difficulty].
Shifting to slip 16, let me present some visibility to 2024. We consider the financial system for the 12 months might be extra constructive than in 2023, with barely optimistic industrial manufacturing progress and rate of interest stabilizing.
As well as, consensus opinion on the danger of an financial recession seems to have diminished. Nonetheless, the atmosphere stays fairly risky with continued financial coverage and geopolitical threat. Weak sectors notably intermodal, worldwide, and forest merchandise, proceed to enhance sequentially and will stabilize to pre-pandemic ranges.
We assume that Canadian grain will come again to a three-year common within the second half of the 12 months. With this in thoughts, and together with our CN-specific progress initiatives, we count on volumes by way of RTMs to be within the mid-single-digit vary. As volumes come again, we should always see the optimistic impression of our working leverage, notably with merchandise enterprise the place we at the moment have capability on our trains and might herald — on volumes at low incremental prices.
Nonetheless, we’ve got roughly $200 million in value headwinds, principally associated to depreciation, incentive compensation, and pension. We assume overseas trade for the 12 months of round $0.75 and WTI of US$70 to US$80 per barrel. On this atmosphere, we count on to ship about 10% EPS progress in 2024 versus 2023. Our CapEx for 2024 might be round $3.5 billion web of buyer contributions and we count on ROIC to be 15% to 17% inside the focused vary offered at our Investor Day.
When it comes to shareholder distributions, we’re happy to announce that our Board of Administrators authorised a 7% dividend enhance for 2024. This represents the twenty eighth consecutive 12 months of dividend enhance for the reason that 1995 IPO.
The Board additionally authorised a brand new share buyback program of as much as 32 million shares for an quantity within the vary of $4 billion via a traditional course issuer bid from February 1st, 2024, to January thirty first, 2025, according to our earlier program’s finances earlier than we opportunistically elevated it final October.
In conclusion, let me reiterate a number of factors. We’ve got delivered seven consecutive quarters of remarkable working efficiency. We’re offering wonderful customer support. We’ve got managed via vital exterior challenges to ship sturdy relative monetary efficiency.
Though we stay conscious of ongoing financial and geopolitical volatility, we’re calling for some restoration in 2024. Specifically, we count on intermodal, worldwide to return to pre-COVID ranges and forest merchandise to progressively ramp up over the subsequent 18 months.
Our pivot to progress is underway, and assuming a optimistic financial backdrop we’re guiding for EPS progress of round 10% versus 2023, underpinned by mid-single-digit quantity progress. We’ve got a robust steadiness sheet and we plan on utilizing that monetary flexibility to make the most of alternatives.
Let me move it again to Tracy.
Tracy Robinson
Thanks, Ghislain, and effectively mentioned. Operator, we’ll now go to questions.
Query-and-Reply Session
Operator
Thanks. We’ll now start the question-and-answer session. [Operator Instructions] Our first query will come from Chris Wetherbee from Citi. Please go forward. Your line is open.
Christian Wetherbee
Hey, thanks. Good afternoon. Perhaps beginning on the ’24 information, when you might possibly unpack a number of the shifting elements a bit of bit, so RTM information mid-single-digits. After which I believe, Ghislain, you talked about possibly $200 million of some value headwinds there. You will have about 5% coming under the road. So I simply wish to make certain I perceive form of the working leverage of the enterprise, is it principally offset by the $200 million or possibly we will type of take into consideration how it’s best to be capable of generate incremental margins on that mid-single-digit RTM progress?
Tracy Robinson
Okay, Chris, that is Tracy. Let me take a shot at this. So we’ve obtained a forecast of 10% EPS and on quantity as you’ve famous, the forecast assumes a mild type of restoration economically as we undergo the 12 months, nevertheless it additionally assumes these customer-specific progress initiatives that you just heard Doug speak about. On margin, as volumes come again, we should always see the optimistic impression of our working leverage. In order volumes went down, we noticed it go down. As volumes come again up, we’re going to elevate, particularly within the merchandise enterprise, the place we at the moment have capability on our trains. And naturally within the pricing atmosphere, you understand, as you’ve watched us over the past 18 months, we proceed to each ship and we proceed to count on pricing above rail inflation. In order that’s all optimistic information. We do have the headwinds that Ghislain talked about, however that’s going to be offset to the extent that may drive the ten% to the underside line. Does that make sense?
Christian Wetherbee
It does. So only a method to consider it’s there nonetheless is the form of regular working leverage on the income progress principally offset by that — by these incremental prices that type of will get you to type of core progress earlier than the buyback according to RTM progress. Is that roughly the suitable method to consider it?
Tracy Robinson
Yeah. You bought it, just about. Thanks. Subsequent?
Christian Wetherbee
Okay. Thanks.
Operator
Our subsequent query comes from Cherilyn Radbourne from TD Cowen. Please go forward. Your line is open.
Cherilyn Radbourne
Thanks very a lot. Good afternoon. Simply needed to dig in a bit of bit by way of worldwide intermodal. And you probably did point out that the Canadian West Coast market share was again to pre-strike ranges in December. Simply curious, given what we’re seeing within the Crimson Sea and on the Panama Canal. Simply be curious whether or not you’re seeing inquiries at this level that might be incremental to that market share and the way probably these volumes is likely to be to be sticky.
Doug MacDonald
Thanks, Cherilyn. It’s Doug. No, it’s an amazing query. It’s clearly an ever-changing atmosphere on the market. So we spent numerous time speaking with prospects about it. We’re seeing clearly some capability come out of the vessel market with them having to go round Africa now. So we see some tightening general. And with that, we’re beginning to hear with completely different issues at each the Panama and the Suez Canal that the West Coast is trying like a extra viable possibility shifting ahead. We haven’t seen these volumes are available but, however we’re anticipating them to progressively ramp up in the event that they do come ahead, however thus far so good. We’ve really simply been in a position to keep our pre-COVID ranges now for the final, I’ll say nearly eight weeks, and we see that persevering with on, shifting ahead on each Prince Rupert and Vancouver.
Cherilyn Radbourne
That’s my one. Thanks.
Doug MacDonald
Thanks.
Operator
Our subsequent query comes from Ken Hoexter from Financial institution of America. Please go forward. Your line is open.
Ken Hoexter
Nice. Hey, good afternoon. Tracy, you’re simply saying, I assume, within the EPS goal of 10%, you’re taking a look at long-term going as much as 10% to fifteen%. Simply wish to perceive the acceleration, you talked about hiring, I assume, pre-hiring workers. Are you saying you’re pre-resourced now due to the work rule adjustments or are you going to speed up the hiring? I simply wish to perceive the fee implications versus your progress targets? Thanks.
Tracy Robinson
I’ll begin at that one, Ken. So we’ve been hiring via the 12 months to offset attrition, and two, that’s the lever we’re utilizing proper now to handle our workforce dimension is hiring relative to attrition. And as we glance ahead, you’ll see our hiring ramp as much as match the volumes as we see them coming again. We’ve obtained an amazing line of sight on quite a lot of the areas. Doug type of took you thru them, and so we’re preparing for these.
Operator
Our subsequent query will come from Scott Group from Wolfe Analysis. Please go forward. Your line is open.
Scott Group
Hey, thanks. Good afternoon. So, once you speak about value above inflation, I’m simply questioning, do you see that unfold widening or moderating this 12 months? After which simply close to time period, any strategy to quantify the climate impression we’re seeing in Q1? After which any replace you can provide us on the labor entrance simply with the conductors in Canada? Thanks.
Tracy Robinson
Appeared like an terrible lot of questions, however I’m going to take a fast run over them, if I can keep in mind them, and the blokes can are available behind me, however we would like one query. The primary one was on value. So, I imply, I believe it relies upon, clearly, it’s not as a — is a bit of tighter pricing atmosphere than we’ve seen prior to now, however we’ve got for the blokes have given Doug a fairly strong customer support product to promote. And so we’re reaching pricing we proceed to realize pricing that’s above inflation. The margin above inflation goes to be completely different in numerous commodities in numerous areas, however we see no motive to consider that, that’s not going to proceed. What was the subsequent one?
Doug MacDonald
It’s on the climate.
Patrick Whitehead
The winter climate and I can take that one. So we had a really chilly snap of minus 40 to minus 50 Celsius for a couple of week. We did see some disruption throughout that time period as we had problem shifting all through that interval. However I’ll say this to talk to the energy, the resiliency of our disciplined scheduled working plan. Simply as we noticed as we recovered from the ILWU strike, the wildfires, and the flooding final 12 months in 2023. The way in which we run the community and we’re at all times working again to the plan, however that’s our North Star. We had been in a position to get our legs again beneath us, get the operation shifting once more, and we’re regaining our momentum, getting our pace and our velocity again. Metrics are bettering already.
Tracy Robinson
Okay, thanks for that, Scott. David or who’s subsequent?
Operator
Our subsequent query comes from David Vernon from Bernstein. Please go forward. Your line is open.
David Vernon
Hey, good afternoon. Thanks for taking the query. So, Doug, you understand the RTM, the mid-single-digit RTM expectations, are you able to give us some sense of visibility into a number of the larger chunks and when they need to begin coming in? And we’re off to a bit of little bit of a weaker begin on the 12 months. And I’m simply making an attempt to get a way for — as you consider the ramp that you just’ve obtained far more element on when you might share with us any coloration on after we count on to see the inflection within the sequential volumes?
Doug MacDonald
Thanks, David. So, you understand, I assume just like the slide 12 is a superb indicator, however we’re anticipating a gradual ramp-up over the 12 months and issues like forest merchandise, which we count on to see a gradual restoration in. It’s not going to be something, it’s not going to be a straight-up arrow or something. So we all know that’s going to occur. Similar with many of the merchandise which are on there and numerous these are going to tie proper into the financial system. That gradual restoration, that Tracy talked about, that’s what we’re anticipating. So we’re going to see that. So that you’re going to see extra come within the again half than the entrance half, however we’re working with the shoppers to do this as rapidly as potential. We talked in regards to the two coal mines which are approaching, and people are each in H2 as effectively. However with the worldwide intermodal [Technical Difficulty] we’re seeing that perk up as of final December, which we simply talked about. So we’re going to see that begin to pull immediately. And we’re anticipating a gradual restoration within the home market.
David Vernon
All proper. Thanks. After which the labor prices for accommodating the work rule adjustments, has that been form of seasoned now or are we type of working it on the proper stage so far as type of staffing and resourcing? Or are we nonetheless type of determining how one can make the schedules work with the brand new hours of service rules?
Doug MacDonald
Sorry, David, we’re solely taking one per particular person.
David Vernon
I believed I’d give it a shot. Thanks, guys.
Doug MacDonald
Thanks.
Operator
Our subsequent query comes from Fadi Chamoun from BMO. Please go forward. Your line is open.
Fadi Chamoun
Sure. Thanks. Only one clarification. First, the remark round quantity again to 2019 stage, is that for complete RTM or are you speaking about intermodal particularly as effectively? After which my fundamental query is absolutely when you can lengthen type of the outlook that you just talked about, mid-single-digit RTM, like if we take that into revenues, what are the shifting elements? Like from a combination perspective, I’m guessing pricing incremental to that 5, that will get you excessive single digit. However what’s your thought on combine and the way ought to we take into consideration all these shifting items from a income perspective?
Doug MacDonald
Properly, these are lengthy two questions, however I’ll simply. So actually the second is the crucial one, so we don’t forecast on the revenues, Fadi. However on the mid-single digits we count on that to hold out in our ordinary style. We count on the common automobile — {dollars} per automobile to use. And I believe you guys can do the maths from there. However, yeah, we’re fairly pleased with the forecast.
Fadi Chamoun
And with respect to the remark round 2019 stage or pre-COVID stage, is that an intermodal forecast for quantity to be again to 2019 or is that complete RPM?
Doug MacDonald
Yeah, I believe that was your one query. And you may go to the investor relations staff after the decision for the opposite one.
Fadi Chamoun
Thanks.
Doug MacDonald
Thanks.
Operator
Our subsequent query comes from Ravi Shanker from Morgan Stanley. Please go forward. Your line is open.
Ravi Shanker
Thanks, everybody. Tracy or Doug, are you able to give us an replace on the Falcon service, please? What’s the operational rollout been like after the primary few months? What’s had been like promoting the product to prospects, et cetera?
Doug MacDonald
Okay, effectively, that’s a superb query. We’ll have Derek begin off on the operational facet.
Derek Taylor
Yeah. Hey, good afternoon. No, it’s been a really thrilling product we’ve had with our companions on the FXE and the Union Pacific. It’s performing as one seamless service. We’re persistently delivering on the revealed transit time with our prospects. And we stay up for persevering with to develop that right here in 2024. So strong momentum in 2023 and I see that partnership between the three of us solely persevering with to develop in ’24.
Doug MacDonald
Yeah. And on the revenues, pay attention, that we advised everybody it’s going to be very sluggish progress of the truck market, and that’s what it’s. However that’s okay, proper? We’re anticipating it, the place each the UP and FXE and us are working hand in hand to develop that. The large bid cycle is absolutely solely beginning up in Q1, the place we’ll be going after truck enterprise that’s on the market. And we hope to see some strong progress shifting into the remainder of the 12 months. Thanks to your query.
Ravi Shanker
Thanks.
Operator
Our subsequent query comes from Walter Spracklin from RBC Capital Markets. Please go forward. Your line is open.
Walter Spracklin
Yeah. Thanks very a lot. Good afternoon, everybody. So I needed to zero in right here on the primary quarter, and I do know you don’t usually give quarterly steering, however I believe it’s necessary given final 12 months was such a tricky examine and now you’ve come off to a tricky begin right here as a result of climate. Is it potential, do you suppose, after we body the ten% over a quarterly foundation, is it potential that you may see any progress within the first quarter given how powerful the examine is and the climate to start out, and due to this fact is most of all of it type of again finish loaded for the ten%.
Tracy Robinson
Thanks, Walter. Perhaps I’ll simply begin, I’ll hand it over to Ghislain, however I’ll begin by saying it’s going to be a tricky examine. We had a giant quarter final 12 months and a few very completely different climate than the best way we’ve began off this 12 months. However Ghis, did you wish to make any feedback on that?
Ghislain Houle
No, I believe that’s proper. I believe we advised the market on many conferences that Q1 was going to be a really powerful comp. In the event you keep in mind final 12 months our EPS was up 38% and our OR was 61%, which isn’t type of winter like sort of OR. So we all know that we’ve baked that in, into our forecast and into our 10%, however we’ve got accounted for normal winter. We did begin and as Pat mentioned, we had seven days of deep freeze within the west, hopefully, that’s behind us. It’s behind us for now. And hopefully, as we get into February, then we don’t get that sustained chilly. However yeah, I imply, we all know that Q1 was going to be a tricky comp, however that’s all factored in, into our 10% EPS progress for the 12 months. Thanks, Walter, for the query.
Walter Spracklin
Thanks. Thanks.
Operator
Our subsequent query comes from Konark Gupta from Scotiabank. Please go forward. Your line is open.
Konark Gupta
Good night, everybody, and finest needs to Doug and Remi for his or her respective roles. The query is for Pat, you mentioned vacation spot efficiency is bettering. However what’s your lifelike goal there, Pat, and what’s required out of your interchange companions to get to that stage?
Patrick Whitehead
So, Konark, thanks for the query. And we want to proceed to squeeze that delta between launch and land. We glance to get one other few share factors out of that squeeze, that hole between how we launch trains and the way we arrive them into terminals. We originate, terminate nearly all of our site visitors on our personal line, so we’re not as depending on the opposite carriers for that metric. And that’s the place I talked a bit about decreasing prepare meet delays on-line, which is a product of getting trains out on time. Prepare schedules make the prepare meets and making well timed crew swaps. In order that’s actually our focus, to proceed to squeeze that delta between launch and land. Thanks very a lot for the query.
Konark Gupta
Thanks.
Operator
Our subsequent query comes from Brandon Oglenski from Barclays. Please go forward. Your line is open.
Brandon Oglenski
Hey, good afternoon, everybody, and thanks for taking my one query. Ghislain, I hoped you could possibly replace us right here on the change within the dividend. And clearly, when you had been to go to that full repurchase this 12 months, that’d be fairly a bit of money circulate out the door. So the place are you seeing leverage within the close to time period and particularly within the context of that 10% to fifteen% plan over the subsequent three years? Would you be keen to take it up larger proper now?
Ghislain Houle
Yeah. So, as we mentioned, we’re trying on the focused leverage over time of two.5. I imply, when you have a look at this 12 months, we completed at 2.25. We usually develop our dividends according to earnings progress. You’ll see that we’re barely under as a result of we try this over time. And when you keep in mind, in 2023, our dividends had been up 8% and our earnings are down 2%. So we’ve got a long-term view, we’ve got a long-term view on these two issues. I believe that, as we mentioned within the Investor Day, our leverage might be 2.5 over time if financial situations warrant. In order that’s why we went again and toned again a bit of little bit of our share buyback to 4 billion. Final 12 months, we needed to be opportunistic as a result of inventory value and the place it was. And once more, I believe, by way of dividend, I’m very proud to say that it’s the twenty eighth 12 months that we’ve elevated our dividend and that’s superb. In order that’s what we’re considering, and we’re considering long-term and with none jerky response. Thanks for the query, Brandon.
Brandon Oglenski
Thanks.
Operator
Our subsequent query comes from Tom Wadewitz from UBS. Please go forward. Your line is open.
Thomas Wadewitz
Yeah. Good afternoon. Wished to ask you a bit of bit about skilled lengths and the way you view that chance. I believe the place you’re working now’s a bit of bit under the place you’ve achieved prior to now. And so would you count on to see that broaden? I don’t know if you will get to eight,200, 8,300 toes, one thing like that. And is that, when you notice that, is {that a} potential driver of upside on what the margin is likely to be relative to your steering?
Derek Taylor
Hey, Tom, it’s Derek. Good afternoon. I believe once you have a look at it, you understand, proper now we will develop at a decrease incremental value with our manifest enterprise, as a result of we will add the site visitors on current trains. A part of a scheduled operation is remaining balanced and turning and splitting the belongings. Now, once you have a look at it from an intermodal perspective, that’s one thing that’s been down, that’s coming again, that may really assist our prepare size out as that grows all year long. So, general, we’re effectively positioned to develop at a low incremental value, and that’s the important thing as we have a look at it going ahead.
Doug MacDonald
Thanks for the query.
Operator
Our subsequent query comes from Amit Mehrotra from Deutsche Financial institution. Please go forward. Your line is open.
Amit Mehrotra
Thanks. Hello, everybody. I assume my one query would simply be on yield, clearly, there’s a pricing part to yield. There’s a combination part. There’s a gas part. I believe gas was a fairly good profit, at the least on a lag foundation, within the fourth quarter. And Ghislain, are you able to simply speak about like — does yield take a step down once you modify for that gas and when will we really see just like the pricing profit within the yield quantity? Clearly combine adjusted or not adjusted for combine, as a result of the priority, I assume, I’ve at the least, is that yield comes down within the first quarter as these gas surcharges lag. And I’m simply making an attempt to know what the outlook of cadence of that yield enchancment is as you progress via the 12 months.
Ghislain Houle
So I can open up after which I can let Doug discuss extra, a bit of bit in regards to the yield. However on gas, I imply, I believe once you have a look at the lag within the fourth quarter, it was round $0.04 to $0.05 favorable within the quarter and on a year-over-year foundation it was as effectively. So it wasn’t a giant deal. And I can flip it over to you, Doug, for the combo piece.
Doug MacDonald
Yeah, our site visitors is comparatively secure, however there’s at all times going to be a combination part. So relying upon which product line you’re speaking about, it’s going to have a really completely different impression. I imply, I’m not going to get on all of them on the decision right here, Amit, so nevertheless it’s — we will at all times sit down with — we’ll go and do it after. The opposite factor that I wish to simply spotlight is, we did — we should always not see any impression on the container storage charges shifting ahead into Q1 and past. That may have a huge impact. Thanks for the query.
Operator
Our subsequent query comes from Brian Ossenbeck from JPMorgan. Please go forward. Your line is open.
Brian Ossenbeck
Hey, thanks for taking the query. Doug, simply needed to ask, when you can provide us an replace on the CN-specific initiatives, which you quantified on the Investor Day. It appears like possibly a few of them are shifting a bit of bit ahead quicker than you thought. However how does that form appear to be in 2024? Is it again half weighted like a number of the broader financial system stuff that you just’ve been highlighting? And I believe prior to now you’d additionally given some visibility as to how a lot of that’s form of contracted or spoken for by way of these carloads. So an replace there could be useful. Thanks.
Doug MacDonald
Thanks, Brian. I even have the presentation in entrance of me. I do know, I get this query too usually, proper? So once you’re speaking about a number of the bulk commodities, numerous that’s going to be within the new canola crush and in addition to the brand new mines coming on-line. So an instance is like, clearly, BHP, we’re anticipating to see some volumes there, however that gained’t be until 2026. And the canola crush crops appear to be they’ve been pushed again a bit of, so will probably be extra back-end weighted in the direction of 2026. While you have a look at the renewables, proper, we’re beginning to see a few of that with respect to the crush crops as effectively, however we’re beginning to see a number of the renewable initiatives come on and a number of the ethanol. However as soon as once more, that might be a bit of bit extra back-ended, besides we’d — we should always see some ethanol synergies this 12 months. The large one which we’ve managed to maneuver ahead with, clearly, is the announcement we did with AltaGas on the export of LPG. So I’ll be sincere, we’ve really hit our goal already with respect, however will probably be going ahead. However on the going-forward foundation, we’ve hit the 40,000 carloads that we had on the backside finish of the forecast simply with that one contract. In order that’s an enormous, big win for us. Now, the Toronto gas facility, that’s additionally nearly carried out effectively, it’s really carried out building in Part 1, however we really delayed start-up, as a result of we bought out Part 2 now. And we’re really integrating the Part 2 building earlier than it begins up. In order that might be beginning up in Q1. However that’s phenomenal that we’ve really obtained it bought. So we’re really on the excessive finish of that one by the tip of this 12 months. In order that’s incredible once more. And then you definitely obtained a number of the EV provide chains, now that’s one which’s really we’re a bit of unsure now. We’re — we did transfer about 800 carloads of product from the lithium mines from Northern Quebec for export. So that’s shifting ahead. However with the EV pushed again a bit of bit with a number of the bulletins, we’re anticipating a few of that to get pushed again, however we nonetheless see all of the battery crops progressing on our line. They’re nonetheless shifting ahead with Norfolk and a number of the others. And a few are nonetheless beneath NDA that we will’t speak about. After which the final huge one is the Northern BC initiatives that we put ahead and that we did put a siding in there final 12 months. We’re beginning to see the expansion on the frac sand shifting up there, in addition to a number of the propane coming down. In order that one is shifting ahead as effectively on course. And I’ll say the final one was our growth inside the intermodal. So pay attention, we’re beginning to see some progress there with the quantity beginning to come again. We’re working with our prospects diligently each on all of our ports in Halifax, in Montreal, even St. John we restarted service there, in Prince Rupert and in Vancouver. However we additionally begin up a brand new service in Gulfport as effectively, and we’re rising cell. So I believe, general, it’s shifting ahead. I gained’t be capable of offer you particular numbers on that one, as a result of we’re working with our prospects to promote that out. I hope that was a complete reply.
Brian Ossenbeck
Yeah, no want for a second. Thanks.
Operator
Our subsequent query comes from Justin Lengthy from Stephens. Please go forward. Your line is open.
Justin Lengthy
Thanks and good afternoon. You talked about earlier the $200 million of value headwinds this 12 months, however might you break that out in a bit of bit extra element throughout the three completely different buckets that you just talked about? And does the steering assume that you may enhance the OR year-over-year regardless of these value headwinds or will that be difficult?
Doug MacDonald
Yeah. Thanks, Justin. So the $200 million, when you needed — breaking it out is about $100 million on depreciation. And I might say the opposite half, the opposite $100 million, name it half and half on incentive compensation and pension. And completely I believe that having these value headwinds, we nonetheless consider that we are going to enhance our margins. And Tracy made the purpose really that it’s powerful on margins when really volumes is down after which quantity choose up. We do have house, as we’ve talked about earlier than, so as to add the site visitors on a few of our trains, together with and particularly the merchandise prepare. So we’re — undoubtedly consider, you understand, that we are going to enhance margins in 2024.
Tracy Robinson
Let me simply add to that, Justin. I’ve to say that, I’ve been actually happy with our operational value efficiency over the previous two years, particularly in mild of a number of the headwinds that we’ve had over that point. I believe our file speaks fairly positively there. And it simply spoke to you round you understand how we expect it’ll play out this 12 months. However we’ll be managing prices carefully and we count on that our margin leverage goes to proceed to develop over time, as the quantity strengthens. So that may be the best way to consider it.
Doug MacDonald
Thanks for the query.
Justin Lengthy
Understood. That’s useful. Thanks.
Operator
Our subsequent query comes from Jon Chappell from Evercore ISI. Please go forward. Your line is open.
Jonathan Chappell
Thanks. Doug, I wish to return to Rupert, you famous again to pre-COVID ranges, however you additionally talked about a bit of bit later you’re persevering with to work to fill Rupert. So is there any strategy to quantify what capability is out there in Rupert proper now and the way a lot worldwide intermodal can develop if the financial system dodges a tough touchdown and possibly Rupert will get as much as the total capability you envision?
Doug MacDonald
It’s a superb query, so you understand, Rupert is considered one of our — it’s the crown jewel we’ve got up there, proper? So I might sit there and say, not solely are we rising the intermodal, however we’re rising our propane franchise for export on the market. We’re rising the coal nonetheless going on the market. So there’s — and the wooden pellets as effectively. So not simply that, however is absolutely hitting on the intermodal. I’ll say the worldwide most likely dipped all the way down to the bottom at simply over 0.5 million TEUs that we’re working via the terminal. It’s obtained a capability simply over 1. So 1, 1.2, actually, that we will go up too simply. And then you definitely begin to stretch the terminal a bit of bit, however that’s nice. That’s the place we’d like to get to with our associate, DP World. So we’re working with our prospects on how we fill that out. So we’re being very structured about it. And with the adjustments which are happening, clearly, with the Crimson Sea and the Suez Canal and the Panama Canal, we’re seeing some — numerous curiosity come to attempt to fill that up. So we simply wish to be very diligent, we wish to match it to our operation with each Pat and Derek, and we wish to oversell it. We’ve obtained to verify if we’re going to contract it out with their prospects that we’re going to have the ability to transfer it as effectively as we’ve got been and maintain that terminal dwell down beneath three days, which is absolutely what our purpose is.
Jonathan Chappell
Thanks, Doug.
Operator
Our final query will come from Michael Kypreos from Desjardins Capital Markets. Please go forward. Your line is open.
Michael Kypreos
Good afternoon, and thanks for taking my query. Your fourth quarter grain volumes had been down 13%, and also you had talked about earlier that possibly a number of the grain farmers resolve to carry again on some quantity via the tip of the 12 months. Do you could have an concept what share of this grain you count on to be carried over and recouped within the first half? And possibly an replace on the dialogue with the farmers and the present grain dynamics, I consider. Thanks.
Doug MacDonald
Certain. I’ll discuss particularly about Canadian grain first, after which the US grain is a bit of bit. Properly, I’ll simply go Canadian grain first, how’s that? So pay attention, the costs farmers have had nice pricing within the final couple of years. In order that they’re used to getting an excellent value in the marketplace. So this 12 months, the world market really, there’s numerous surplus from different international locations on the market. They’ve had good crops. It’s pushed the value down. So the Canadian farmer is sitting there saying, I’m going to carry on to grain till I get a greater value. So we’ve had most likely one of many lowest This fall calls for I’ve seen in my historical past on the firm, however they nonetheless must promote, proper? In order that they’re sitting on a farm that stock is there something that we didn’t transfer in This fall will shift into Q1 and Q2. In order that’s nice. Now I believe you’ll be able to simply actually take what we did final 12 months, say what didn’t transfer, and it simply strikes additional out. So I gained’t give particular numbers. On the similar time, I do consider we’ve had a reasonably good crop. The StatCan introduced it as much as 67 million metric tons of their forecast, lastly. And that’s really a superb dimension crop, not so good as final 12 months, however a extremely nice crop. And I believe numerous it was actually good on our community. So I believe we’ve got numerous grain to maneuver. We’re going to be very busy for the remainder of Q1 with Pat and Derek, and I believe we’re going to have a extremely good tail into Q2. Thanks to your query.
Michael Kypreos
Thanks. Admire it.
Operator
This concludes the question-and-answer session. I wish to flip the decision again over to Tracy Robinson.
Tracy Robinson
Thanks, Julianne. So a robust end to 2023, by capping off seven quarters now of operational and repair excellence and an amazing setup as we begin into 2024. So our plan is working. Our Make The Plan, Run The Plan, Promote The Plan method is driving the suitable outcomes. And this railroad proper now’s working in addition to ever, and I just like the staff that we’ve got. Our progress initiatives are ramping up. I’m actually excited in regards to the momentum and the alternatives we’ve got over the subsequent quarters. I wish to thanks all for being right here with us at the moment and we stay up for speaking once more very quickly. Thanks.
Operator
The convention name has now ended. Thanks to your participation. Chances are you’ll now disconnect your line.
