Benoit Poirier

Benoit Poirier asked Tracy Robinson, looking beyond 2026 to a normalized environment in 2027, what level of volume growth CN would require to achieve double-digit EPS growth, given the more efficient and lean operating engine being built.

Answer

Tracy Robinson, CEO, suggested that with mid-single-digit volume growth, combined with the cost structure CN has built and continues to refine, the company could generate double-digit EPS growth.

Benoit Poirier asked Tracy Robinson, looking beyond 2026 to 2027, what kind of volume growth CN would need in a normal, stabilized environment to generate double-digit EPS growth, given the company's leaner engine.

Answer

Tracy Robinson, President and CEO, suggested that mid-single-digit volume growth, combined with the efficient and lean cost structure CN has built and continues to develop, could enable the company to generate double-digit EPS growth.

Benoit Poirier asked about CN's contingency plans if the intermodal "air pocket" lasts longer than expected, questioning how quickly the cost structure could be adjusted and what key metrics are monitored.

Answer

Executives detailed a nimble and data-driven approach. Derek Taylor, Chief Field Operations Officer, noted furloughs can be implemented within a week. Patrick Whitehead, Chief Network Operations Officer, explained they closely monitor network health metrics (train speed, dwell, velocity) and resource productivity metrics (GTMs per horsepower, GTMs per employee) to make quick decisions on idling assets and adjusting staffing.

Benoit Poirier asked about the impact of foreign exchange rates on debt leverage and whether the weaker Canadian dollar is attracting more traffic from international shipping lines.

Answer

CFO Ghislain Houle explained that while FX affects U.S. dollar-denominated debt, the sensitivity to the overall leverage ratio is very small and managed within their 2.5x target. CCO Remi Lalonde noted that inbound traffic is driven more by service reliability and shifting ocean carrier alliances than by currency fluctuations.

Benoit Poirier from Desjardins asked for an update on the Mexico-linked Falcon Premium service and the performance of its trucking operations (TransX, H&R) amid challenging market fundamentals.

Answer

Chief Field Operations Officer Derek Taylor described the Falcon service as 'solid' and a 'long game' to build customer trust. Chief Commercial Officer Remi Lalonde noted that the domestic intermodal and trucking business faces challenges from an oversupply of truck capacity but is expected to improve sequentially from Q3.

Benoit Poirier, Managing Director and Senior Equity Research Analyst at Desjardins Capital Markets, asked for an update on the Canadian government's announced measure to subsidize freight rates for steel and lumber companies by 50% starting in spring 2026, and whether this could create a significant volume tailwind for CPKC.

Answer

Nadeem Velani, EVP and Chief Financial Officer, indicated that while CPKC's government affairs team is still working through the mechanics of the subsidy, their analysis suggests some opportunity, particularly in long-haul transload movements. However, he does not anticipate "needle-moving type numbers" from this measure, as much still needs to be sorted out.

Benoit Poirier asked for an update on the Canadian government's measure to subsidize freight rates for steel and lumber companies by 50% starting in spring 2026, and whether this could provide a volume tailwind.

Answer

EVP and CFO Nadeem Velani stated that while the mechanics are still being worked out, CPKC's analysis suggests some opportunity, particularly in long-haul transload movements, but he does not expect it to be a "needle-moving" volume tailwind.

Benoit Poirier of Desjardins Securities asked about customer reactions to potential China vessel surcharges, momentum at the Port of Saint John, and any increased dialogue to ramp up Eastern port operations.

Answer

EVP & CMO John Brooks noted minimal reaction to the surcharges so far, believing steamship lines will adjust. He confirmed strong momentum at Saint John, driven by the Gemini ramp-up and new export opportunities for products traditionally shipped from the U.S. He expressed ongoing positivity about the growth prospects at the port.

Benoit Poirier asked if there was any pull-forward in demand in Mexico related to the U.S. election and inquired about the opportunity to recover the 3% of RTMs lost during the Q3 labor strike.

Answer

EVP and CMO John Brooks stated that while there was some pull-forward ahead of the company's own labor stoppage, he believes the situation has since normalized. Regarding the 3% RTM impact from the strike, he explained that the bulk of that business (coal, grain, potash) was not lost but simply deferred. This deferral is a key reason for the record demand being seen in Q4 for those commodities, ensuring the volume will be recovered.

Benoît Poirier asked if the strong working capital release in Q3 was a one-time event and what to expect for working capital in coming quarters. He also inquired about BRP's actions to mitigate risks and deal with uncertainty regarding potential changes to the USMCA agreement.

Answer

CFO Sébastien Martel expressed satisfaction with year-to-date free cash flow generation of approximately CAD 650 million, expecting CAD 650 million to CAD 700 million for the full year, with working capital being a significant focus and likely providing a slight tailwind for the full year. President and CEO José Boisjoli stated that BRP is actively involved in monitoring USMCA negotiations, providing data and perspectives to industry associations and government, and is not reacting to daily news but focusing on supporting efforts to renew the agreement with minimal changes.

Benoit Poirier of Desjardins asked about the reasons for the retail sales discrepancy between Canada (up) and the U.S. (down). He also inquired about the early impact of recent pricing adjustments and sought thoughts on Yamaha's new fishing PWC.

Answer

CEO José Boisjoli attributed the U.S. softness to consumer uncertainty from tariffs and inflation, which particularly impacts lower-income buyers. He believes the Canadian market dynamic is different, with a loyal dealer base and better economy. While it's too early to measure the impact of price adjustments, he said the timing was perfect to regain competitiveness in key categories. Regarding Yamaha's new PWC, Boisjoli welcomed the competition, stating it could help grow the fishing segment for all players.

Benoit Poirier asked about the implications of potential double-digit top-line growth in the second half on EBITDA margins, and also inquired about expectations for free cash flow and capital deployment priorities.

Answer

CFO Sebastien Martel expressed comfort with consensus expectations for H2, driven by new product launches and wholesale aligning with retail. He anticipates EBITDA margins will improve but remain below long-term targets due to asset underutilization and sales programs. For capital deployment, the near-term priority is organic growth and the dividend, with share buybacks paused until the economic outlook becomes clearer.

Benoit Poirier asked for details on the current promotional environment, an early outlook for fiscal year 2026, and management's comfort level with leverage and the potential for future share buybacks.

Answer

CFO Sebastien Martel described the promotional environment as higher than pre-COVID levels and likely to persist into the first half of next year. He stated it is too early for an FY26 target but assumes current market softness will continue. Martel expressed high comfort with the balance sheet due to a covenant-light debt structure and said the board will be prudent regarding future buybacks.

Benoit Poirier of Desjardins Capital Markets asked about the market acceptance of the new 'stealth technology' in the Marine segment and whether BRP's strategy for the segment has changed. He also questioned the reasons for the discrepancy in PWC retail performance between a strong Canada and a softer U.S.

Answer

CEO Jose Boisjoli reported that the MAX Deck platform, enabled by the Rotax stealth engine, has been well-received by consumers, though the timing of the launch was not ideal. He affirmed BRP's commitment to its long-term Marine strategy. Regarding PWC, he noted that Canada has always been a strong market where BRP has high market share, but cautioned it's too early in the season (May, June, July are key months) to draw firm conclusions about the U.S. market.

Benoit Poirier asked about the sustainability of Stantec's margin improvement into 2026, the company's current exposure to defense work and its potential materiality compared to data center opportunities, and the drivers behind the strong free cash flow performance and DSO maintenance.

Answer

Vito Culmone, EVP and CFO, indicated expectations for continued EBITDA margin expansion, noting the company is at the higher end of its strategic plan range. Gord Johnston, President and CEO, stated U.S. federal government defense exposure is around 5% (sub-5% globally), expecting growth but not material, and highlighted the diversification model. Vito attributed strong free cash flow to business expansion and improved working capital management, with DSOs at 73-74 days, well below the 80-day target.

Benoit Poirier inquired about the sustainability of Stantec's margin improvement pace into 2026 and the associated puts and takes. He also asked about Stantec's exposure to defense work, its potential materiality compared to data center opportunities, and the drivers behind the strong free cash flow performance in Q3.

Answer

Vito Culmone, EVP and CFO, indicated expectations for continued EBITDA margin expansion over a multi-year period, driven by commercial activity and operational leverage, noting Stantec is at the higher end of its strategic plan's margin range. Gord Johnston, President and CEO, explained that defense exposure is low (5% in U.S., sub-5% globally) and primarily infrastructure-based, expecting gradual growth but not material revenue. Culmone attributed strong year-to-date operating cash flow to business expansion and improved working capital management, with DSOs at 73-74 days, highlighting aggressive management efforts.

Benoit Poirier asked about the potential free cash flow impact from the Section 174 tax change and requested an update on the employee count and progress at the Global Technology Center in Pune, India.

Answer

EVP and CFO Vito Culmone noted the tax change is a positive but said it was too early to quantify the cash flow impact. He also reported that the Pune delivery center now has approximately 1,400-1,500 employees and that the company continues to see significant opportunities for growth and operational support from the center.

Benoit Poirier inquired about the U.S. organic growth rate, the decision to maintain 2025 guidance despite recent acquisitions, and the financial impact of stock-based compensation.

Answer

Executive Gordon Johnston explained that U.S. organic growth of 2.4% was compared against a tough 10% comp from a major project in the prior year, and he reiterated confidence in achieving mid- to high single-digit growth for the full year. Executive Vito Culmone added that guidance was maintained pending the closing of acquisitions, not due to a lack of confidence. Culmone also noted that stock-based compensation is now hedged, leading to less earnings volatility.

Benoit Poirier of Desjardins inquired about incremental business from the California fires, the potential net positive impact from U.S. tariffs, and asked for details on the 2025 free cash flow outlook and Pune headcount.

Answer

Executive Gordon Johnston confirmed they expect an uptick in work from the California fires, leveraging existing master service agreements for a quick response. On tariffs, he noted they are seeing some client inbounds about relocating manufacturing to the U.S. Executive Vito Culmone stated the Pune headcount is around 1,200-1,300 and expects 2025 free cash flow to be strong, targeting greater than 1x net income, with a continued focus on DSO management.

Benoit Poirier of Desjardins requested more details on the project ramp-up delays in the Energy & Resources segment, the cause of lower gross margin in Canada, and which global regions might be lagging in performance.

Answer

CFO Theresa B. Jang explained the E&R retraction is due to a persistent delay in the ramp-up of new projects combined with the wind-down of large projects from last year. She noted Canada's lower margin was due to tough comparisons against prior-year high-margin projects, not E&R weakness. CEO Gordon Johnston identified transportation in Australia and community development in the U.K. as the primary areas being monitored for slower activity.

Benoit Poirier questioned the growth of capital employed for the civil segment relative to revenue, the current low utilization rate of 64%, the optimal level for the training network, the training opportunity from the sizable BizJet order by Bond Aviation, and key takeaways from the Canadian Aerospace Summit regarding Canada's defense industrial strategy.

Answer

Matthew Bromberg, President and CEO of CAE, acknowledged significant past investments in civil, noting the strategic advantages of the defense portfolio and the world's largest training network. He indicated a general view that capital and R&D spending are high for CAE's size and sees opportunities for reduction, with more details in next year's guidance. Nick Leontidis, COO, confirmed Bond Aviation will be a customer for Bombardier BizJet training. Calin Rovinescu, Executive Chairman, and Matthew Bromberg discussed Canada's generational defense investment opportunity, emphasizing CAE's role and potential for Canadian companies to participate globally.

Benoit Poirier from Desjardins asked about the significant increase in capital employed for civil, the potential for optimizing this capital, and the optimal utilization rate for the training network, given the current 64% utilization. He also inquired about the training opportunity from the Bond Aviation BizJet order and key takeaways from the Canadian Aerospace Summit regarding Canada's defense industrial strategy.

Answer

Matthew Bromberg, President and CEO of CAE, acknowledged past investments in acquisitions and network expansion, stating that the company is now charting a path forward to leverage its defense portfolio and civil training network. He indicated that the amount spent on capital and R&D is high for CAE's size, with opportunities for reduction, and more details will follow with next year's guidance. Nick Leontidis, COO, confirmed Bond Aviation will be a customer for training. Calin Rovinescu, Executive Chairman, added that Canada's focus on industrial policy creates opportunities for CAE both domestically and internationally when Canada purchases foreign capabilities.

Benoit Poirier from Desjardins Securities asked incoming CEO Matt Bromberg for his initial assessment of CAE's positioning in the U.S. defense market and also inquired about CAE's biggest opportunities in Canada beyond existing major programs.

Answer

CEO Matthew Bromberg stated that CAE is well-positioned to capitalize on a generational growth cycle in defense, leverage its technology across its commercial business, and create scalable solutions. Chairman Calin Rovinescu added that increased Canadian defense spending presents an 'exponential' long-term opportunity for CAE in areas like new platform training and international programs.

Benoit Poirier of Desjardins Capital Markets asked about CAE's longer-term leverage target and future capital deployment strategy. He also sought directional guidance on Defense margins for fiscal 2026, considering the runoff of legacy contracts and the ramp-up of new, higher-margin business.

Answer

Interim CFO Constantino Malatesta stated that CAE is targeting a net debt-to-adjusted EBITDA ratio below 2.5x in the next fiscal year, with a continued disciplined approach to capital deployment. CEO Marc Parent indicated that fiscal 2026 Defense margins should be 'a little bit higher' as accretive new backlog replaces legacy contracts, describing the 10% margin level as a 'waypoint, not a destination,' but deferred a formal outlook to the next quarter.

Benoit Poirier of Desjardins asked about the software business, including the status of the SaaS conversion and expected growth. He also inquired about potential impacts from Canadian defense budget cuts and the ramp-up of major defense contracts like FAcT.

Answer

CEO Marc Parent and COO Nick Leontidis noted the SaaS conversion involves 'heavy lifting' over an 18-24 month timeline but pointed to a growing pipeline with ~$700M in orders as a positive indicator. Parent sees acceleration, not delays, in Canadian defense programs. CFO Sonya Branco added that the FAcT contract is capital-light, with contributions expected to ramp up in the second half of the year.

Benoit Poirier of Desjardins Capital Markets inquired about the company's target financial leverage by year-end and the level it would be comfortable with before pursuing a transformative acquisition. He also asked about normalized earnings potential for 2026.

Answer

Alain Bedard, President, CEO & Chairman, stated the plan is to end 2025 with a leverage ratio of around 2.1x. For a large deal, he said the company could go up to 3.0x leverage before quickly deleveraging. He noted it was too early to give 2026 guidance but mentioned that the Logistics segment's operating income could be $200-$220 million in a normal environment, versus a likely $160 million this year.

Benoit Poirier asked about the performance of the Daseke business, questioning if its high operating ratio was due to economic weakness or internal issues, and inquired about the potential impact of reduced imports from China.

Answer

Executive Alain Bedard clarified Daseke's Q1 OR was closer to 96%, not 99%, attributing the weakness to a 15% drop in miles and excess assets, not cultural issues. He stated the goal is to improve profitability by reducing assets and instilling a stronger business focus. Regarding imports, he explained that TFI's specialty truckload business is more exposed to U.S. industrial activity, which is affected by tariff uncertainty and interest rates, rather than retail goods from Asia.

Benoit Poirier asked about the outlook for free cash flow and CapEx in 2025. He also inquired about the M&A timeline and whether further integration of TForce Freight is needed before a large deal, and if asset monetization was possible.

Answer

Executive Alain Bedard stated that 2025 CapEx will be $50-$100 million lower than in 2024, and that free cash flow should be sufficient to cover dividends, $400-$500 million in debt repayment, and $200 million in M&A. He clarified that TForce Freight's ongoing issues would not stop a strategic M&A transaction, as a deal could be part of the solution. He added that no major asset monetization is planned, aside from potentially some real estate.

Benoit Poirier asked about the primary indicators for a recovery in the freight environment and sought more details on a potential large M&A deal, including target segments and leverage comfort levels.

Answer

CEO Alain Bedard identified a recovery in consumer spending, spurred by lower interest rates and inflation, as the key driver for a freight market rebound. For a large M&A deal, he named U.S. LTL and high-margin Logistics as preferred segments, with a particular interest in an asset-light LTL model. He expressed comfort with leverage going up to 3.0x for the right deal, citing TFI's proven ability to deleverage quickly.

The analyst asked about the status and future milestones for Canada's delayed ZETF program, the strength of the bidding pipeline for upcoming EPA funding, and the potential impact of the U.S. election on customer demand and funding.

Answer

The company sees positive momentum in the ZETF program, highlighted by a recent 200-bus approval. The EPA bidding pipeline is described as 'very healthy' as the program shifts to larger-scale deployments. Regarding the U.S. election, the company believes the $5 billion EPA program is secure and that school bus electrification has broad societal support, supplemented by strong state-level funding and regulations.