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Canadian National Railway Management Discusses Q2 2012 Results - Earnings Call Transcript

Our team produced solid results in what proved to be a record quarter in CN's history. We moved more traffic than we ever have before in handling on average over 1 billion GTMs per day. Intermodal, Automotive, Coal, Petroleum and Chemicals, and our Metals and minerals business units all registered double-digit gains in revenue 10 miles driven by economic growth, market share gains and a labor disruption of the key competitor.

And I'd be remiss not to point out that we handled this record volume while continuing to gain traction in our service and operational excellence agenda. So let's spend a few moments reviewing the highlights of the key productivity metrics we speak to each quarter.

As you can see, the team produced year-over-year improvements in virtually every productivity category. We're moving bigger trains, handling increased volumes to our terminals, 7% faster. We're using less yard resources per car handled. These improvements in productivity, again, I'll remind you are being done at the same time we're absolutely focused on improving the reliability of our first-mile/last-mile performance.

Locomotive productivity improved in car velocity, I'll note, is at record levels. And again, this is being accomplished against a backdrop of our improved customer service in terms of car supply performance, which is helping drive a lot of our revenue growth. In the second quarter, we achieved 96% corridor fulfillment performance and provided empty cars by the requested date and times of our customers, with an 86% reliability level.

The only metric we didn't see improve is our industry train speed, which as we all know is a standard AAR metric that measures train speed performance and, emphasis added, terminal-to-terminal.

As you can see, while observing over 8% [ph] GTM growth, second quarter this year versus last, we were down slightly. This is driven more specifically by line segments where we've experienced concentrated significant growth in 2011 and, again, in 2012, which has created a strain on our long train line capacity, which impacted this metric. One meaningful example of this is our BC North territory running the Port of Prince Rupert, where in large part, coal, grain and intermodal growth is driven 13% volume growth in 2011 and an additional 17% in 2012. So effectively, 30% volume growth in a 2-year time span.

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