Core Natural Resources, Inc. Q1 FY2024 earnings call

Tracy Robinson began by thanking Doug for his service and introducing Remi's transition. She provided context on TCRC negotiations in Canada. Safety was a key focus, with injury and accident rates rising in Q1 but improvement observed in April. The network remained flexible despite winter weather, with increased intermodal volumes on the West Coast. Derek Taylor spoke about field execution, highlighting good operational momentum. Doug MacDonald discussed segment performance, including revenue details, volume changes across various sectors, and the outlook for different markets. Ghislain Houle walked through financial highlights, such as EPS, operating income, and free cash flow.

In the first quarter, CN's revenues decreased by 1% compared to the previous year due to a lower applicable fuel surcharge. Petroleum and chemicals led the growth in Q1 with a 6% RTM (Revenue Ton-Mile) increase. Forest products RTMs declined by 5% during the quarter. International intermodal saw a 5% growth for the quarter, while domestic volume dropped by 3% due to ample truck capacity. The first quarter EPS was $1.72, down from $1.82 in the first quarter of the previous year, a decrease of $0.10 or 5%. Labor expenses were 10% higher year-over-year, driven by a 3% increase in average headcount and general wage hikes. Fuel expense was more than $40 million lower than the same period last year, mainly because of a 6% decrease in fuel prices.

CN reaffirmed the guidance issued in January. They anticipate the broad economy in 2024 to be more favorable than the previous year, with slightly positive industrial production growth and stable interest rates. They are confident in achieving a 10% EPS growth in 2024 compared to 2023. CN-specific growth initiatives are progressing as expected.

Uncertainty surrounds TCRC negotiations, winter weather poses risks to safety, fuel price fluctuations, and geopolitical risks affect segments like East Coast intermodal.

Q: Steve Hansen asked about the visibility of the international intermodal segment.

A: Doug MacDonald stated that growth on the West Coast is strong, but the East Coast is impacted by issues related to the Suez Canal.

Q: Fadi Chamoun asked about pricing.

A: Doug MacDonald said pricing is above rail inflation, but there is pressure in the domestic intermodal sector due to truck capacity.

Q: Ken Hoexter asked about CN-specific initiatives.

A: Doug MacDonald said initiatives are proceeding as planned with some delays, but projects will deliver.

Q: Ravi Shanker asked about confidence in growth.

A: Tracy Robinson and Ghislain Houle said they are confident due to economic indicators and diversified CN-specific initiatives.

Q: Benoit Poirier asked about domestic intermodal and headcount.

A: Doug MacDonald and Patrick Whitehead discussed intermodal dynamics and headcount plans.

Q: Konark Gupta asked about the Milton project.

A: Doug MacDonald said they are waiting for a court decision on the stay.

Q: David Vernon asked about RTMs and fuel.

A: Doug MacDonald and Ghislain Houle talked about RTM growth and the impact of fuel.

Q: Walter Spracklin asked about comfort with guidance.

A: Ghislain Houle and Tracy Robinson said they are comfortable as Q1 was in line with the plan.

Q: Kevin Chiang asked about the Viterra-Bunge merger.

A: Doug MacDonald said there is no major impact.

Q: Scott Group asked about OR and labor negotiation.

A: Ghislain Houle and Tracy Robinson discussed OR seasonality and the status of labor negotiations.

Q: Thomas Wadewitz asked about crude and coal.

A: Doug MacDonald talked about crude by rail and the outlook for the coal market.

Q: David Zazula asked about undone items and the pipeline.

A: Doug MacDonald said he is happy with Remi's transition and progress in the pipeline.

Q: Jonathan Chappell asked about productivity.

A: Ghislain Houle said the decrease in purchasing services was due to temporary factors.

Q: Brian Ossenbeck asked about grain pricing and the pipeline.

A: Doug MacDonald talked about grain pricing and growth in the pipeline.

Q: Justin Long asked about locomotive plans and CARB regulations.

A: Patrick Whitehead and Tracy Robinson discussed locomotive modernization and the impact of CARB regulations.