Canadian National Railway Company - Q4 2016

Transcript

Operator (participant)

All participants, thank you for joining to CN's Q4 and Full Year 2016 Financial Results Conference Call, which will begin momentarily. I would like to remind you that today's remarks contain forward-looking statements within the meaning of applicable securities laws. Such statements are based on assumptions that may not materialize and are subject to risks described in CN's Q4 and full year 2016 financial results, press release and analyst presentation documents that can be found on CN's website.

As such, actual results, pardon. Actual results could differ materially. Reconciliations for any GAAP, non-GAAP, pardon, measures are also posted on CN's website at www.cn.ca. Please note questions will be taken at the end of the presentation. Should you have a question and are using a speakerphone, please lift your handset before making your selection.

Should you wish to cancel your question, please press the pound sign. Once again, please continue to stand by. Your call will begin shortly.

Paul Butcher (Head of Investor Relations)

Thank you.

Operator (participant)

Welcome to the CN Q4 and full year 2016 financial results conference call. I would now like to turn the meeting over to Paul Butcher, Vice President, Investor Relations. Ladies and gentlemen, Mr. Butcher.

Paul Butcher (Head of Investor Relations)

Thank you, Lorettt. Good afternoon, everyone, and thank you for joining us today. I would like to remind you of the comments already made regarding forward-looking statements. With me today is Luc Jobin, our President and Chief Executive Officer. Mike Cory, our Executive Vice President and Chief Operating Officer. JJ Ruest, our Executive Vice President and Chief Marketing Officer, and Ghislain Houle, our Executive Vice President and Chief Financial Officer.

After our prepared remarks, we will conclude with a question and answer session. In consideration of your time, we are trying to keep this call to one hour, and I will ask that you please limit yourselves to one question. I will be available after the call for any follow-up questions. It is now my pleasure to turn the call over to CN's President and Chief Executive Officer, Luc Jobin.

Luc Jobin (CEO)

Thanks very much, Paul, and let me in turn welcome all of you to CN's quarterly call. Today, we'll review our results for the Q4 and the full year 2016. The CN team is pleased to report another very strong quarter, one that caps a solid year of performance, both financial and operating, including significant improvement in terms of safety, service, and productivity.

These results continue to show how CN is adapting to changing market conditions, seizing opportunities every day whilst positioning for the future. We achieved strong results in the Q4 with an Adjusted Diluted EPS of CAD 1.23, and that's up 4% versus last year's Q4. We also saw positive momentum on volume with RTMs up 4%.

That's an encouraging sign that the worst of the market correction in several commodity sectors is behind us and brighter prospects lay ahead. JJ will give you more color on this in a minute. In terms of operating performance, we delivered very good metrics despite a more difficult winter in December of last year.

Also, we're very proud of our performance, especially given how challenging the year has been from a market standpoint. For 2016, we achieved a full year adjusted diluted EPS growth of 3% to stand at CAD 4.59. We also delivered a record-breaking operating ratio of 55.9%, 30 basis points better than last year.

It's very tough to achieve this level of results, and the entire CN team deserves credit since we have accomplished this with a clear view to meet high service levels and supply chain collaboration, but not undermine our ability to grow as the market improves. Mike will give us a good look at how innovation, productivity, and teamwork has been instrumental in reaching this milestone.

In 2016, CN generated free cash flow of CAD 2.5 billion, up 6% versus last year. Last but not least, we announced today a 10% increase in our dividend. Later on the call, Ghislain will expand on other key financial metrics for Q4 and the full year, as well as provide you with our earnings guidance for 2017, along with some key assumptions.

Let me now turn it over to the team for their more detailed commentaries, starting with Mike Cory. Mike?

Mike Cory (COO)

Well, thank you, Luc. The CN team of professionals deserves accolades for achieving very good results for the Q4, in spite of the impact of December's winter comeback story. I'll go into further detail on the subject of winter a little later. On a full year basis, the overall results were outstanding, and they reinforce our supply chain approach.

This is an approach that produces premium service at the lowest possible cost by understanding the customer demand and executing our operations to efficiently deliver it. On a full year basis, all of our key operating metrics beat previous records, with the exception of train speed. Train speed was slightly down since our record performance of 2010. However, volume is up 24%, and trains are carrying 16% more payload since that time period.

For Q4 workload, and I'm measuring this in GTMs, we were up 8.4% from Q3 and up 4% from Q4 of 2015. In Q4, we set an all-time record for train productivity at 9,449 tons per train, which is 5% higher than last year's Q4. We also set a Q4 record for locomotive utilization, which was up 7% year over year.

All this was accomplished against a very tough comparable, with a significant headwind of winter in December that we did not experience last year. In fact, going back over the last five years, the month of December 2016 was the second coldest, with more days colder than -20 degrees Celsius than any other period but one year.

As well, the snowfall we experienced was the second highest in the last five years, and our major operating yards in Winnipeg recorded the highest level of snowfall in the history of the city. Considering the dramatic change in weather that December brought, our response was swift, and it ensured our game plan of operational and service excellence remained intact.

In fact, I can objectively say that in my 35 years in this industry, and you have to remember, a good majority of that's been in operations in Western Canada, we have not performed this well in the type of winter conditions we were faced with in December, in all of my recollection. We were able to deliver these results because our focus is on two tracks, and the first track is really about the day-to-day management of our business. We focus intensely on our metrics.

Our attention to detail is second to none, and continuous improvement, if you will, leads us to meet the demand of our customers efficiently. The other track is our line to the future. We invest time and capital to continue to create more efficient solutions for our customers. In turn, we create reliability, efficiency, and business growth in the long term.

This track allows for innovation that produces results. Our investments in assets like AC locomotives, network and yard improvements, technology to reduce the impact of weather and increase our service offering for our customers, have created an environment of innovation. I'll tell you, our that environment is something our team takes full advantage of.

Our alignment with JJ and his team on developing and delivering a superior product offering for grain, supported by our investments in both network and locomotive capacity, has produced by far the best movement of grain, and not only over a winter period, but over any period in recent history.

This alignment transcends across all business segments and allows for a clustering of innovation and ideas that continue to drive our results. Now, I've said it before, but no one metric generates these results on its own. It's all about balance. We believe our model of operational and service excellence, with a view to the future, is what delivers results that are best in class. One last point of thanks to our operating team leaders.

They believe in and they deliver our plan, they sacrifice for their teams, and they create the environment that allows this success to happen. We have work to do, but good work is being done. Over to you, JJ.

Jean-Jacques Ruest (CMO)

Well, thank you, Mike. Great operating result by the operating team of CN. The Q4 revenue of CN was up CAD 51 million, or 1.6% versus last year. The CN carload was up 3.4%. The revenue ton mile was up 4.2%. Both were above the industry average. Q4 was broadly as follows: revenue increase from volume was about 3.5%.

Our most positive business were Canadian and U.S. grain, market share gain in refined petroleum products and automotive. U.S. housing start was driving our lumber and panel. Our intermodal from the East Coast port did well, and finally, we had recovery in Canadian export of petcoke and potash. On the negative side, less long haul of crude by rail, less U.S. thermal coal, and less sulfur.

The applicable fuel surcharge lowered our revenue by about 1%, and the all-in same-store price on same-store sales was up 2.7%. When excluding regulated grain, same-store price was up 2.4%. The Canadian dollar had no impact on revenue this past quarter. I will now go through some selected details and outlook of our very diversified portfolio. Starting with grain.

Our grain operation was very fluid. As my partner, Mike, just described earlier, we did a great job, especially in December, which meant that for U.S. grain, when I look at the as-reported Q4 our carload, we were up 8,000 cars, and the revenue, reported revenue was up 19% or CAD 30 million. This was driven by soybean and corn export.

On the Canadian grain, when you look at it on the as reported under Q4 our carloads, we were also up about 6,000 cars. These are longer haul, and the reported revenue was up 13% or CAD 40 million. This was driven by strong export of canola and by our peak season pricing program.

We had solid carload performance during the month of December, where the prairie was, got very cold, which is really the result of past capital investment in our, our network that we can now benefit, and really, and as Mike described, his strong team operation, winter preparation, but also in partnership with our grain customers. On the ARQ4, carloads, we moved 87,000 cars of Canadian grain, which is notably 12,000 more than our counterpart. The future of our grain franchise and grain market share is, is to grow.

We do have better yield per acreage. There's more acreage being planted, and we do have a number of commercial agreements already in place with customers that will locate on CN about two-thirds of the next wave of prairie elevator construction in the next few years.

Staying with bulk commodities, potash produced 20% incremental revenue, while sulfur from oil and gas declined 30%. Q1 outlook for potash car loading is positive for Canpotex export via Vancouver, but is also positive at East Coast, where we use our new 29,000-ton unit train to the Saint John Potash Terminal. Overall, core revenue for CN in total was down 6%. Our U.S. terminal core revenue was down.

To note, effective January 1, we lost the short-haul Midwest utility contract that in 2016 was worth CAD 13 million for CN, and this is about 42,000 carloads. These were short-haul carloads. On the flip side, Canadian met coal was up 13% versus last year, but the volume trend have turned around. CN, the met coal mine, have increased their production in response to better world pricing.

Three of our idle Canadian coal mine were acquired by a company called Conuma. One mine did restart and is now in full production, and Conuma is looking to restart the second mine this year. We also have two other idle mine in CN, which are also under restart consideration. Our met coal and petcoke exports should be growing in 2017.

Housing starts drove our lumber and panel revenue, which was up 4% versus last year. The lumber and panel shipments to the U.S. increased 6%. The expiry of the Softwood Lumber Agreement on October 12 had little impact on our carloads, which remained consistent during the quarter and into this month, driven by U.S. housing starts in the range of 1.2 million units per year.

Moving to consumer purchases of motor vehicles, our automotive, as reported under Q4 our carloads, was up 5,000 cars, and on a reported revenue basis, we were up 6%. Vehicle sales were favorable, and we also gained new business from a few contract renewals. This year, in 2017, we expect our automotive carloads to grow, and CN is now touching close to 70% of all the finished vehicles sold in Canada.

Regarding energy, our carload for crude by rail was about 15,000 for the past quarter and 52,000 carload for 2016. Crude has sequentially improved during the Q4. We also had share gains in refined petroleum products, such as propane and motor fuel, which produced solid revenue growth, which should continue in the Q1. On frac sand, our revenue was up 7%.

The resurgence in drilling activities has sequentially improved sand carload during the Q4. Intermodal revenue was up only 1%. Domestic volume growth was modest, mostly coming from door-to-door service, from our industrial carload customers, as well as from the Canadian retailers. The hub-to-hub wholesales and cross-border business stayed weak.

With the growing numbers of shipping line partners now doing business with CN, we had a much bigger pool of international containers at our disposal this year to grow our domestic repo program. International volume was flat.

In Rupert, after Hanjin filed for bankruptcy in September, we are well on our way to recover the volume from with other shipping lines, especially with the DP World Terminal expansion coming soon in July, and the reshaping of the World Shipping Line Alliance, which will come into effect sometime in May.

In Vancouver, all of our major contracts are renewed. Starting this month, we picked up the Yang Ming business, and Mike's team has put a new service in place for the container business offloaded at Vanterm and Centerm Terminal, solving the congestion issues.

Also notable, at the end of April, we will see a final phase of the rail yard construction at Deltaport, which will create 40% more rail capacity than what's available there today. On the East Coast, our Halifax position in the hinterland is growing. Revenue growth was about 17% in the Q4.

The Port of Montreal is also doing well, growing 15%. One thing that we're very, very proud and we want to emphasize, is how the teamwork with our supply chain partners has allowed all of us to be able to grow these businesses. Rail volume in, from the Gulf Coast is still building very slowly. And one, another thing to add is we will be adding an intermodal ramp in Minnesota sometime in the Q4. Finally, iron ore.

Our combined iron ore rail, dock, and vessel business increased 8% in revenue in last quarter. The outlook for iron ore is positive. There is less steel being dumped in the United States. There is strength in auto manufacturing. There's prospect for U.S. infrastructure spending, and the CapEx expenditure from the oil and gas industry is getting healthier.

In closing, we have a constructive volume outlook, given the momentum we saw since last September, which has been sustained in the first few weeks of this year. We are aiming to outperform the rail industry average as it relates to volume growth. On the pricing side, the pricing environment remain influenced by excess capacity in all mode of transportation. However, we are seeing some early signs of tightening and discipline. We continue to expect pricing to be above rail inflation in 2017. Thank you.

I think I will turn it over here to Ghislain, our Chief Financial Officer.

Ghislain Houle (CFO)

Thanks, JJ. Starting on page 11 of the presentation, I will summarize the key financial highlights. Then I will comment on our full year 2016 performance. Finally, I will provide our guidance for 2017. As JJ previously pointed out, revenues for the quarter were up 2% versus last year at slightly over $3.2 billion.

Fuel lag on a year-over-year basis represented a revenue headwind of $24 million or $0.02 of EPS, driven by an unfavorable lag this year of $10 million versus a favorable lag of $14 million experienced in Q4 of 2015. Operating income was just shy of $1.4 billion, up $40 million or 3% versus last year.

Our operating ratio came in at 56.6%, a record for a Q4 and representing an improvement of 60 basis points over last year. Other income was CAD 91 million compared to CAD 16 million in 2015. This increase is the result of the gain on the line sale in Montreal of CAD 76 million or CAD 66 million after tax. Net income stood at CAD 1.018 billion or 8% higher than last year, with reported diluted earnings per share of $1.32 versus $1.18 in 2015 and offset by a reduction of about 5% in average headcount for the quarter versus 2015.

At the end of the year, we still had about 500 employees laid off, and we finished 2016 with 4% fewer employees or roughly 800 less than last year. Pension expense was CAD 46 million favorable this quarter, ending the year with a higher than expected tailwind of CAD 195 million, mostly driven by the adoption of the spot rate approach to estimate current service costs and interest costs.

As interest rates moved up since the Q3 and the discount rate finished at 3.81% at December thirty-first, pension expense will be roughly flat in 2017 versus 2016 on a year-over-year basis. Finally, these items were partly offset by higher incentive compensation of CAD 15 million in the quarter versus last year.

Purchase services and material expenses were CAD 428 million, 2% lower than last year. This was mostly the result of higher credits driven by our capital program and lower repair and maintenance costs, partly offset by higher outsourced services.

Fuel expense came in at CAD 312 million, or 3% higher than last year, mainly attributable to stronger volumes, partly offset by fuel productivity, which was up by 2.5% versus last year. Depreciation stood at CAD 310 million, 7% higher than last year. This was mostly a function of net asset additions. Equipment rents were down 7% versus last year, driven by lower lease expense due to return of lease cars.

Finally, casualty and other costs were CAD 111 million, which was roughly CAD 40 million higher than last year, mainly driven by our annual actuarial true up for legal claims of CAD 25 million and a workers' compensation credit of around CAD 15 million recorded in Q4 of 2015.

Let me, let me now turn to our full year results on page 13. We completed 2016 with revenue slightly above CAD 12 billion or 5% lower than 2015. However, our operating expenses at around CAD 6.7 billion were 8% lower than last year, producing a 1% increase in operating income versus 2015.

The operating ratio stood at an impressive 55.9%, which, as Luc indicated, is a full 230 basis point improvement versus our all-time record of 58.2% set last year. This demonstrates our continued ability to balance operational and service excellence consistent with our supply chain focus in good and tougher times.

Net income was up roughly CAD 100 million, or 3% at just over CAD 3.6 billion. Excluding the impact of the one-time line sale in 2016 and income tax adjustments in both years, adjusted diluted EPS for 2016 came in at CAD 4.59, up 3% versus 2015. Quite a performance in an environment where volumes in terms of RTMs were down 5% for the year. Now moving to free cash flow on page 14.

For the full year 2016, we generated just above CAD 2.5 billion of free cash flow, which is close to CAD 150 million or 6% higher than in the prior year. This was mostly driven by improvements in net income, lower cash taxes, and higher proceeds on sale of property. Our capital expenditure finished roughly at our budgeted CAD 2.75 billion, and our balance sheet remains strong, with debt and leverage ratios well within our guidelines.

Finally, let me turn to our 2017 financial outlook on page 15. We are cautiously optimistic with regards to CN's prospect for the year, and while we see volume growth in 2017, we are continuing to experience some volatility and weaker conditions in a number of commodity sectors.

As we look into 2017, North American economic conditions are improving, with favorable consumer confidence, which should support progress in many sectors. In addition, we are leveraging our superior service to continue to gain market share in key customer service sensitive markets.

While energy markets, namely crude and frac sand, have demonstrated sequential growth since the trough experienced in the Q2 last year, we still expect this sector to remain relatively muted in 2017. So this environment should translate into volume growth in the range of 3%-4% in terms of RTMs for the full year versus 2016, while overall pricing above inflation. Therefore, we expect to deliver EPS growth in the mid-single-digit range over the 2016 adjusted diluted EPS of $4.59.

We remain committed to reinvesting in the business for the long run with a capital envelope of CAD 2.5 billion for 2017. We will allocate CAD 1.6 billion to our basic track infrastructure, supporting our safety agenda, and an investment of around CAD 400 million will be allocated to PTC as we continue to advance the implementation of our program.

Furthermore, we continue to pursue our shareholder return agenda. In 2016, we returned to shareholders roughly 90% of our net income through dividends and share repurchases, and our current share buyback program is approximately CAD 2 billion for 2017.

Finally, we are pleased to announce, as Luc mentioned, that our board of directors has approved a 10% dividend increase for 2017, reflecting our solid performance in 2016, and our confidence in the future as we move towards a 35% dividend payout ratio. In closing, we remain committed to our agenda of operational and service excellence with our supply chain focus, and we continue to manage the business to deliver sustainable value for our customers and shareholders today and for the long term. On this note, back to you, Luc.

Luc Jobin (CEO)

All right, well, thank you very much, Ghislain, JJ, and Mike. I think what we'll do now is we'll open the lines to take your calls. Loreta, we are now ready to take the calls.

Thank you, Mr. Jobin. We will take questions. Please press star one at this time if you have a question. The first question is from Wayne MacDonald of CN. Please proceed.

Wayne MacDonald (Senior Manager and Head ofInvestor Relations)

That was a mistake. There, there are no questions. I was just listening to the call.

Luc Jobin (CEO)

All right. Thank you.

Operator (participant)

Thank you very much. The next question is from Brandon Oglosky of Barclays. Please proceed.

Brandon Oglosky (Analyst)

Hey, good afternoon, everyone, and thanks for taking my question. Luke or JJ, can you just give us some feedback on, you know, obviously, the landscape, or at least the future landscape for NAFTA has changed a little bit with the US elections. Have you gotten any feedback from your customers? I mean, has anything structurally changed yet?

And are you guys rethinking your capital allocation process? I mean, when you think about some of the assets that are involved in North America trade, especially some other railroad stocks, I mean, valuations have come down a lot now. Does that make you think strategically a little bit differently about the outlook?

Luc Jobin (CEO)

Thanks, Brandon, for your question. Well, just talking a little bit about NAFTA. I mean, again, from the Canadian perspective, you know, we're cautiously optimistic, that, you know, again, we've been long trading partners with the United States, and, you know, there's a lot, there's a lot going on, and there's certainly a relationship which is very different, between Canada and the U.S. versus Mexico and the U.S. You know, the balance of trade is much more much closer.

You know, we also, you know, when you look at the manufacturing jobs that have left the U.S., in many cases, over to Mexico. You know, if you look at what might be more affected, certainly the automotive sector, both parts and new cars would be potentially, you know, at the crosshair of that. But that's a very small percentage of what we actually export to the U.S. southbound.

You know, we are. We don't expect any significant change, at least not in the foreseeable future. And I think most of our customers, and JJ can supplement, you know, are taking the same sort of, you know, optimistic yet cautious approach, and we'll have to work things out. But generally, what we've been hearing from you know from our U.S. from the U.S. folks is encouraging, and we'll have to kind of work through it.

There is a free trade agreement which predates NAFTA, and so, you know, there's a long-standing relationship of you know, bilateral negotiations and working out issues. As it relates to how this may affect other railways, at this point, it hasn't necessarily changed our views. I think it's still too early to call the game, and so we're gonna have to see how things evolve and where the dust settles in the end. JJ, anything you want to add in terms of-

Jean-Jacques Ruest (CMO)

As I said in my opening comment, we are constructive about the volume outlook. We are aiming to outperform the rail industry average, and after three weeks, we are leading with 5.5% cargo growth.

Luc Jobin (CEO)

You know, and also, we look at the U.S. I mean, we've got about, you know, 17% or so of our business, which is domestic U.S., Brandon. You know, that's, you know, I think there are plenty of opportunities for us to grow as potentially more manufacturing and more jobs get created in the U.S. We're looking forward to that. Thank you.

Brandon Oglosky (Analyst)

No problem.

Operator (participant)

Thank you. The next question is from Walter Spracklin of RBC. Please proceed.

Walter Noel Spracklin (Analyst)

Very much. Good afternoon, everyone.

Luc Jobin (CEO)

How you doing, Walter?

Walter Noel Spracklin (Analyst)

I guess the most common question I get is on your OR improvement and how you can get much lower, and it seems to be a question that recurs every year, and you do deliver on that. I guess I'll ask it again.

Mike, you've got and you've demonstrated some significant trends and improvements that seem to look like they're gonna carry forward into next year. Luc, you talked a bit about technology investment. Is there any sense, you know, is OR improvement in the cards for next year? Can you give us some insights into what your assumption is for OR that drives your current EPS guidance?

Jean-Jacques Ruest (CMO)

Gee, that's a tough one, Walter. We can never answer it, it seems. I'm gonna give you this. I'm gonna give you four points that are basic to what I would say, fundamental success in railroading. The first thing that we focus on is understand what we're trying to accomplish. You know, from that, we set plans that have targets that require improvement, whether we we put one less asset into the plan, one less person, whatever it is, we set very tough targets.

We measure them religiously. And when we see something, we take action immediately. Now, that's all done with strong leadership, the sacrifice I talked about, that, that's what gets a strong OR. We'll never stop doing that. The other thing is the investment, the eye of the future, technology. Yep, everything's in the works. We just expect to continue to improve on not just OR, but every aspect of the business that we go after.

Luc Jobin (CEO)

Thanks, Mike. You know, Walter, it's always a balancing act. What we try to do is be as productive as we can, and as Mike pointed out, to drive down the cost where we're not, you know, necessarily adding a whole lot of value.

The flip side is, you know, we are set on gaining traction in the marketplace. We're not shy about if we see opportunities and we wanna invest a little bit in getting that business on board, we can do so. Our low OR allows us some flexibility and our confidence that, you know, we can continue with continuous improvement, that we can, you know, bring on new business and drive it to a level of productivity, that's our strength.

All that to say, you know, we're not gonna guide on OR, and we're always trying to solve for what's the best bottom line and sustainable growth that we can bring on the network. You know, it'll bounce around a little bit, given, you know, sometimes you'll have weather that comes into play, and at times you'll have a few other things that can, you know, cause it to bounce around.

I think, you know, we just deliver, and, you know, you can rest assured that, you know, the team here is set on growing the business and doing so as efficiently as possible, but not at the expense of our service offering. That's the key, that's the magic to the equation here.

Okay, thank you very much.

We look forward to the question next year.

Thanks, okay. Thank you.

All right.

Operator (participant)

Thank you. The next question is from Ravi Shanker of Morgan Stanley. Please proceed.

Ravi Shanker (Analyst)

I want to follow up on that question at the risk of maybe asking the same question again, different way. If I were to kind of try to bridge your top-line guidance to your EPS guidance, it does look like you said 3% to 4% volume growth, and pricing over inflation.

That by itself should get you to something close to mid-single-digit EPS growth, not to mention, as you just said, continuous OR improvement and the buyback on top of that. I just wanna make sure that there isn't something we're missing in terms of a headwind to earnings next year, kind of below the line or at the OR line itself.

Luc Jobin (CEO)

Well, I mean, you're not missing much. I mean, the reality is, again, I mean, we set out and we look at, you know. I mean, we have as much visibility as anybody else. You know, we take a view, and I think that what we've said is a fairly constructive view in terms of a number of commodity sectors seem to have stabilized and are showing encouraging signs of progress.

You know, the guidance that we've provided, mid-single digit, is a reflection of what I would describe as that volume growth, the pricing that we've talked about, and continuing to, you know, to deliver solid operating metrics, including OR. You know, that's the equation. If you solve for that, you get mid-single digit.

Ravi Shanker (Analyst)

Great. If I can just one more. On the share gains, I mean, you certainly had a very good recent track record with picking up share. Where are we with that shift? Do you think that's kind of normalized between you and your chief peer, or do you think there are more opportunities out there? Thank you.

Chris Wetherbee (Analyst)

There is more opportunity, either as geographic expansion or serving customers who are, today, would like to get a better service. No, there is a, I would not discount potential to, you know, I'm not gonna get into which market, but there is some business out there that we think that we could have, that we'd like to have, that maybe the customers would like to do business with us.

Luc Jobin (CEO)

Thank you, Ravi. Appreciate it.

Thank you. The next question is from Fadi Chamoun of BMO Capital Markets.

Fadi Chamoun (Analyst)

Yes, good evening. Just a clarification, I'm not sure if you said that. Does the guidance include a buyback for 2017? And, secondly, just for JJ, when you look at the, what's going on with the new alliances, ocean, ocean shipping alliances, do you feel on balance that this is something that creates opportunities for you to fill that incremental capacity on the West Coast? Or, does it represent more of a risk at this stage? Any visibility on that would be good.

Luc Jobin (CEO)

Hi, Fadi, this is Sylvain. For your first question, yes, the guidance includes a CAD 2 billion program for share buyback in 2017. And then, JJ, if you want to take that-

Jean-Jacques Ruest (CMO)

Fadi, on the ocean shipping, all the ocean shipping alliance will come into effect May first. This is where all the musical chairs, when the music stop, everybody has a different chair. It does provide some chaos in the marketplace, if you wish, from that point of view.

At the same time, in the case of Rupert, because the expansion is coming in June, in July, I'm sorry, and will have the second berth, it does provide opportunity. We are selling what there is in Rupert right now, very hard.

In the case of Vancouver, with Deltaport having this rail on dock capacity off of 40% by the end of April, it also offered opportunity for us and our partners to go out and sell to for a bigger ship, bigger ship, having bigger discharge.

If the big, if the ship coming in as a Q1 call with a group of Vancouver, it really gives us a great service to go and sell into market where our, in, into the market, where our market share today is suboptimal. Last year, we were restricted the capacity. I think this year we have, we have an open field as of sometime in the spring, and we are going to be running hard to exploit all we can out of that.

Fadi Chamoun (Analyst)

Thanks very much, Fanny.

Chris Wetherbee (Analyst)

Thanks, Fanny.

Operator (participant)

Thank you. The next question is from Jason Seidl of Cowen and Company. Please proceed.

Jason Seidl (Analyst)

Thank you, operator, and thank you for taking the time. I wanted to build back on the pricing side. I think earlier on, you mentioned that things were starting to tighten up. I was wondering if you can give us a little more color as to where you're starting to see that and sort of are you starting to reprice contracts at a little bit better rate than you thought you were?

Jean-Jacques Ruest (CMO)

I thin think the line was not that great. Your question was around pricing and pricing outlook getting slightly better. Is that right, Jason?

Jason Seidl (Analyst)

That is correct, yes.

Jean-Jacques Ruest (CMO)

Definitely the last two years have been, you know, a little more challenging than, you know, the years prior to that, partly because the capacity of all mode available. You know, we see, I think, I think, you know, on the trucking side, there's been less equipment being purchased, and people have cut back on their capital expenditure.

On the rail side, the capacity is going to be tightening. This is where you're going to get into commodity by commodity. Now, railroad may have a lot of, a lot of locomotive, but they may no longer have, you know, the specific type of gondola or specific type of a rail equipment that a customer is looking for.

This is where you start to get into these subsegments of, I do have CN network capacity and, and, and I have a locomotive, but I don't have any more centerbeam, or I don't have any more, bi-level. And or on the trucking side, I think, people can only do so long at, quoting low price and then year after year after quoting low price, and then eventually start to get the result of what, living up to the result of this low price. I think the discipline often comes back as a result of, phases with some pain. Each market players, I think, would like to have eventually slightly better price.

Each market players also, in some cases, or at least in some equipment, getting to the point where they invest new capital money, and now they look at it differently. It's no longer an incremental sale. It's, it's a sale that has to pay for the new rail car, the new equipment that they have to bring in. I think.

Jason Seidl (Analyst)

Again, uh.

Jean-Jacques Ruest (CMO)

It's a turn. Yeah.

Jason Seidl (Analyst)

Okay, and how much of your book of business is already priced for 2017?

Jean-Jacques Ruest (CMO)

Same as in the past. You know, we signed a multi-year contract and, you know, you know, so we're probably turning the book of business maybe like every three years or so.

Jason Seidl (Analyst)

Okay.

Thanks very much.

Guys, I appreciate the time.

Jean-Jacques Ruest (CMO)

Thank you.

Operator (participant)

Thank you. The next question is from Thomas Wadewitz of UBS. Please proceed.

Thomas Richard Wadewitz (Analyst)

Good afternoon. Wanted to see if you could offer, within the volume growth guidance, I think you said 3 to 4. Is there, is there a mix effect, that would be, you know, meaningful and, and positive or negative that, you know, might, you know, kind of translate to revenue growth in a certain way?

I don't know if, you know, just to kind of a little more color on the intermodal volume outlook. It sounds like there's potential, but it was kind of, you know, has been weak recently. So, any thoughts on those two? We'd appreciate it. Thank you.

On intermodal, we haven't hit our stride yet. I think intermodal, we're, we were negative for a while. Now we're flat, and we're, you know, hoping for better days to come the spring and the summer time, for the reason I mentioned earlier.

I think the mix has changed quite a bit last year, you know. Short haul business being lost, long term business being gained, long haul, you know, long haul crude disappearing, long haul frac sand coming back in. I think we're going to get some of that this year as well. As you know, intermodal, if it, if it comes in, that's fairly long haul, too, but it's, it's lower weight. And, and, you know, we talked about the expansion of the Deltaport.

Right now, on the mix side, I'm not too sure exactly where it will go for this year. There's a lot of, you know, we're not into a steady in the environment. We're into a bit of a recovery phase from a volume side. But I think, you know, we, there's reason to be optimistic about volume for this year. I think for the rail industry in general, but definitely at CN.

Okay. Thank you.

Jean-Jacques Ruest (CMO)

Thank you.

Thanks, Tom.

Operator (participant)

Thank you. The next question is from Steve Hansen of Raymond James.

Steve Hansen (Analyst)

Hey, guys, thanks for the time. If I'm looking again at the volume growth side of things, you know, the strength that appears to be carrying over into Q1 appears quite robust. If I'm looking at the pretty low hurdle into Q2, given last year's turmoil, it strikes me that your back end guidance assumptions are, you know, probably a little bit conservative, or it strikes me that they are conservative. Any thoughts around sort of the cadence throughout the year in terms of how the growth will progress in that 3%-4%?

Jean-Jacques Ruest (CMO)

The Q1 last year, we had a tougher winter, so we wouldn't necessarily move all the volume that we wanted to move. By the time we got to the Q2, we were running very smoothly, but the demand for our product was not that great.

You remember that, you know, that the volume signal in Q2 wasn't that great, and then things started to pick up in the, in the summertime. Our Q4 volume, you know, there, you know, last year they've been pretty good. That's kind of the cycle of what you'll see and, but all in, the guidance environment we talked about is the one we're sticking to it right now, so.

Luc Jobin (CEO)

Steve, It's Luke. Just, you know, keep in mind, I mean, if you've got better visibility on the second half than we do, we'd, we'd be more than happy to, you know, share notes with you. It this point, I think, you know, this is, this is a fair-

It's a fair annual guidance, and, as you indicated, I mean, we do expect to have stronger, you know, stronger comps through the first half. You know, as the year unfolds, then if we see that the trends are evolving in a way that's either better or worse, then we'll readjust things, so-

Jean-Jacques Ruest (CMO)

We're cautious people. I think last year, everybody had different guidance. We finished at 3% EPS growth, which in the end, was one of the best in the industry.

Steve Hansen (Analyst)

I appreciate the color. Thanks, guys.

Luc Jobin (CEO)

Thank you.

Operator (participant)

Thank you. The next question is from Scott Group of Wolfe Research. Please proceed.

Scott H. Group (Analyst)

Hey, thanks. Afternoon, guys. I wanted to go back to just the OR question. So if I just take the pieces of your guidance with volume and price and buyback and earnings, you know, it does imply about a point or so, maybe even a point or two of OR degradation this year.

Is that what you're telling us? Or, you know, maybe is there something conservative in the guidance, or maybe something's changing, right? If you look in the Q4, RTMs were up 4% and earnings were up 4%. Maybe something's changing where you're just not getting the operating leverage anymore. I don't know, however you kind of want to answer that, but, you know, the guidance does seem to imply OR degradation this year, and curious on your thoughts.

Luc Jobin (CEO)

Scott, it's Luc. Just to, you know, give you a little bit more color. One of the issues that you still have to keep in mind is that we did have a fairly mild winter, when we look at the last year. So you know, that's not a God-given right.

Even though people talk about global warming, we're certainly facing, you know, a more, what I'd call a more normal winter. In fact, a little bit, more than that, if you look to, you know, how, December, you know, came up. In any event, so, you know, I think there's a little bit of noise there, in terms of, where and how the year will unfold, from a, from a pure cost, standpoint.

I think, you know, again, we take a cautious view of sort of the second half in terms of volume. You know, the numbers are there, and, you know, it's in, it's in the zone, so it's, it's still too early to, you know, to say whether our OR will deteriorate or not. There isn't anything that's going on that is particular. It'll be, again, I mean, it'll be a question of mix. It'll be, you know, a question of when and how the volume is layered on.

Certainly, you can expect that we'll continue to manage, you know, the cost very tightly and continue, as I mentioned earlier, to seize opportunities where we can, and we are prepared to invest a little bit more and take on business that may be at a slightly higher OR, if that's the right thing for the franchise for the long term.

You know, I think the precision you're looking for is not what we do focus on. I mean, what we're doing is, you know, we get out there, we've got a good operating plan, we've got a good commercial plan, and, you know, every time there is an opportunity, we look at it and we move on it.

It could be just as much in terms of lowering costs, increasing productivity, or putting on more business. You're in the zone, but, you know, we'll have to see how it shakes out.

Scott H. Group (Analyst)

Okay, that's helpful. If I can just ask JJ just one clarifying point. I think you said price was up two and 2.7%, and fuel was down 1%, but total carload yields were down 2%? That implies like a 3 to 4 point headwind from mix, and carloads and RTMs were pretty similar. What, what am I missing on the mix headwind this quarter?

Jean-Jacques Ruest (CMO)

On the same store price, it was 2.7%. When I, if I remove the regular grain, it was 2.4%. The difference between the two, as I said, is because we do have, we do have peak pricing on our grain business that we started October first.

What you're referring to is the impact of the mix. You know, we, we lost, we've-- we lost some long-haul business, you know, versus the year before in crude by rail. There's also been shift in our, frac sand, which is also long haul. The intermodal business was flat, so there's a lot of mix, noise in our mix, result, which impact these revenue ton mile and these revenue per carload. Then we really manage the business, we don't manage the business on those metrics.

We manage it on same-store price, we manage on revenue-to-cost ratio, contribution per carload, revenue, you know, ROI on equipment. Also, you have the impact of exchange and fuel on these revenue ton-mile and revenue per carload. You're looking at data that, in the end, is not really that useful to understand our yield. The element that we use are the one I mentioned, the one I listed here.

Scott H. Group (Analyst)

Okay, thank you.

Luc Jobin (CEO)

Okay, thank you.

Thank you. The next question is from Turan Quettawala of Scotiabank. Please proceed.

Milan Bezarka (Analyst)

Hi there. This is Milan Bezarka on the line for Turan. Just wondering, CapEx has been coming down here the last couple of years, and you're guiding for a small decline in 2017 as well. As volumes are recovering a bit here in 2017, should we expect CapEx then to resume its upward trajectory in 2018? Or do you think you'll have a little bit of a longer holiday? Thanks.

Luc Jobin (CEO)

Well, this is just Milan. Absolutely, CapEx, as I guided, was CAD 2.5 versus CAD 2.75 last year. We did say that we had locomotives in 2016 that we were not expecting in 2017, that helped, you know, reduce the envelope, offset a little bit by an uptick on the PTC investments. Going forward, I think we've been very consistent on our investment and capital program. I think we're always going around 20% of revenues or close to 50% of operating income back to the business.

Milan Bezarka (Analyst)

On my view, you know, if I were you, I would not assume anything otherwise. I think in that range is the range that we're looking for.

Luc Jobin (CEO)

Milan, it's Luc. I mean, you know, we obviously are looking whenever we can see opportunities to invest and to further advance our competitive advantage, you know, we're not shy about doing that. Our eye is in the long term.

You know, as we move forward, we have indicated that there may be, you know, some opportunities more on the technology side. We're looking, you know, we're looking really hard, and, you know, we're not shy about investing. We do have a good track record of delivering, you know, returns on capital invested. So that's kind of our posture on that.

Milan Bezarka (Analyst)

Okay, great. Thank you.

Luc Jobin (CEO)

Thank you.

Operator (participant)

Thank you. The next question is from Ken Hoexter of Merrill. Please proceed.

Ken Hoexter (Analyst)

Great, good afternoon. Nice job on the quarter, and a tough weather spike, it sounds like, but that clearly impacted a bunch of your peers. For that reason, I guess, was there any reason for the casualty spike? It was the highest level since the Q4 level since 2004.

Just a technical question following on Scott's cost side. But just a longer term picture, the thoughts on large wins, your big revenue wins with the GM business, Yang Ming. Should we look at this as the pricing side, as you got asked before, is there a capacity need? What's driving those wins?

I'm just wondering, you know, I guess there was a large expectation some of that would move back to your peer, but when you keep winning like this, it. Just wondering, is that just service or there, or is it pricing?

Ghislain Houle (CFO)

Ken, I think there's two sides to your question to make sure. The first one is on casualty and other, and then the second one is market share. I'll tackle the first one, and I'll let JJ tackle market share. The first one I explained what happened in the Q4 that explained that variance of $40 million.

It's really an annual true up that you do with our U.S. legal claims, and of about $25 million, and there was another $15 million or so that was a credit in last year. T

You know, when you look at casualty and others, sometimes there are lumpy items that come in a quarter.

You know, if you want to look at a run rate, I think we've said in the past that CAD 90 million, give or take, in a quarter is a good number, and that's what, you know, I would use going forward. But sometimes, depending on what happens in certain quarters, you may have a lumpy piece hitting, like the one that we had on the Q4. JJ, you want to talk about the market share piece?

Jean-Jacques Ruest (CMO)

When you look at, say, accounts like General Motors or Kia or Mazda or Yang Ming, they're, you know, they're in a world where service is very key for their own success. AndI think, Mike Cory, in his opening comment, said it right. Our aim is to produce a premium service at the lowest operating ratio, and that's supply chain.

Our mindset is to try to put ourselves in the shoes of this company, especially those who are faced, who are in a world where service does matter, you know, automotive and delivering to warehouse and assembly plant and, and retailers, and try to create a supply chain that starts before CN and finish after CN, so we become relevant to them.

That's how we, you know, customers don't change, you know, from one supplier to another without good reason. You know, everybody's got things worth trying. You know, if things are running well, why would you make a change?

It starts probably with some level of dissatisfaction, and then looking at something that's more appealing, and then having a little taste of it, because we do business with all of these people. We're doing business with all of these customers. We're just gonna be doing more of it. Our job is to help them win in their market, and that's the reason why they like a little more with CN. We're a part of, part of the extension of their success, so.

Of course, people want to pay a fair market price, and having the lowest operating ratio in the industry allows us to compete when we want to.

Ken Hoexter (Analyst)

Very helpful. I appreciate the insight from both. Thank you.

Jean-Jacques Ruest (CMO)

Thank you.

Ghislain Houle (CFO)

Thank you, Ken.

Operator (participant)

Thank you. The next question is from David Tyerman of Cormark Securities. Please proceed.

David Tyerman (Analyst)

Hello. Two questions, please. One is just on headcount. Can you give us your thoughts on that? The second is on tax rate. Can you give us your thoughts on tax rate for 2017, both the effective and cash tax?

Ghislain Houle (CFO)

Okay.

Mike Cory (COO)

Hi, David, it's Mike here. You know, we modulate our labor based on demand, demographics, productivity. We have people still laid off in some crafts. However, we have a very, very strong planning process and alignment with a variety of functions, finance, marketing, sales, operations, where we meet regularly, and we have a good view of the future, and then we modulate our labor, like I said.

Ghislain Houle (CFO)

Okay, and on David, on the effective tax rate, I think we had guided 2016 at 26.5%, and I would continue to use that same number for 2017. On the cash taxes, we're still around the mid-teen level, so that's what I would use.

David Tyerman (Analyst)

Okay, that's helpful. Thank you.

Luc Jobin (CEO)

Thanks, David.

Jean-Jacques Ruest (CMO)

Thank you, David.

Operator (participant)

Thank you. The next question is from Brian Koenigsberg of Vertical Research Partners. Please proceed.

Brian Konigsberg (Analyst)

Yes, hi, good afternoon. Actually, just starting out with a point of clarification. On the revenue ton miles on the release in the presentation, it talks about 4%. If I look at your AAR data, it actually indicates our TM's up 6.3%. Can you tell us what the difference is between those two?

Jean-Jacques Ruest (CMO)

The, through now our press release, I think we're using the calendar month, the calendar quarter, which is, start, December. It starts the first of October to December thirty-first, and the AAR does not use the same period.

This is why in my comment, I did refer when I was talking ARR data, I was specifically saying that, and I think because a lot of, a lot of people actually use the ARR data to compare, but this is where you get into... It, it's not a, it's not a quarter with, 90 days like we have on the ARR. I think Paul could probably explain that in more specific detail after the call. That's-

Brian Konigsberg (Analyst)

Okay. Yeah. Thanks for, thanks for that. Can you talk a little bit on met coal? I think you indicated you had a customer that was expanding some production. There are possibly some others that could open up business again in 2017. Maybe a little more color on that, on how significant that could be to the extent these production ramps do happen.

Jean-Jacques Ruest (CMO)

In the last quarter of last year, the price of met coal, coking coal, started to go up as a result of the Chinese production cutting back. We had a customer, Walter Energy, who was in a bankruptcy situation. He had three mines shut down. All of his assets were bought at a reasonable price by a company called Conuma. They did reopen one of the mines in November.

They intend to open another mine sometime in, probably sometime in the first half. May open the third one. It will all depend on the price of coking coal move around the world. If you want to have a very good color what the Conuma game plan is, they actually, their CEO gave an interview on BNN, where he explained all of his game plan, how that comes together.

But all that to say that coking coal for CN will not, should not be a negative headwind. It should be something positive. And that in itself is what I was talking about earlier.

Luc Jobin (CEO)

All right. Thank you, Brian.

Brian Konigsberg (Analyst)

Yeah. Thank you.

Operator (participant)

Thank you. The next question is from David Vernon at Bernstein.

David Vernon (Analyst)

Hey, guys. Thanks for taking the question. I guess, Luke, maybe from a bigger picture sort of strategy perspective, as you guys are kind of operating on all cylinders in a decent volume environment, is there a point where you guys start looking at other ways to enhance cash flow, whether monetization of assets, maybe looking at co-production with CP, maybe looking at investing in some adjacencies?

Is this how critical is this for the board, and could you give us some sense for what you would think would be sort of fair game for what you could do to supplement the operating, excellent operating results with corporate action?

Luc Jobin (CEO)

Thanks for your question. It's, you know, it, it's something that we're always looking at, and the first, the first opportunity we look at is opportunities for growth in terms of advancing, you know, our book of business and investing in the franchise.

You know, if there are opportunities for, for some co-investment or, or helping one of our customer grow and investing along with them, we, we look at these things. You know, in terms of, co-production, again, there, these things are on the, you know, on the radar, but there are very few that actually right now, that we can look to that might be, you know, interesting. I don't, I don't think there's a lot of potential there.

You know, we always look at other opportunities, whether it's adjacencies or, you know, bolt-on smaller rails to acquire. So those again tend to be a little bit lumpy, and we are cautious on adjacencies because again, you need to keep in mind, you know, we know what we do very well, and unless we think that we can have a competitive advantage or improve our overall product by venturing into these things, you know, we're not presumptuous enough to say that, you know, we can do all things well.

In many cases, what we've done as well is to ally, is to have alliances and work supply chain, and, you know, so we don't necessarily need to own the asset, but the way we work with our partners and with, you know, reciprocal scorecards and, and the way we work to improve the performance, is, is clearly has paid off for us.e look at every opportunity to grow, to continue to grow the franchise. There are, you know, these things, they're not linear in terms of when and how they come to, they come to us. But, you know, rest assured that, you know, we are, we are looking, and we are intent on growing this, this franchise.

On the flip side, we're good custodians of the shareholders' money, and we do look for, you know, good returns before we, you know, we look at acquisitions, you know, especially when they're outside of our field of expertise. But thank you for the question.

David Vernon (Analyst)

Just maybe just as a quick follow-up. Is there anything material that we should expect on asset monetization for, for next year or kind of, kind of run rate, you'll see how it goes?

Luc Jobin (CEO)

No, I think, you know, and that's, from that standpoint, you know, Ghislaine referred to, you know, a little transaction that we were able to achieve by the end of the year. We don't expect anything of magnitude being out there. Having said that, you know, we're always looking at things and, you know, turning stones.ou know, maybe, Ghislaine, I mean, would typically you look at, what? About a CAD 20 million sort of run rate for miscellaneous parcels and stuff?

I would, I would say about CAD 20 million. And to your, to your point, Luke, I mean, we, we always try to find out things, and sometimes things unfold in a, you know, different ways during the year. Obviously, if we find some unused asset that we can monetize, we certainly will run after it. But at this point in time, I would say that we don't have anything specific on the docket, and I would assume about CAD 20 million of small sales spread over the year, basically.

Very good. Thank you.

Operator (participant)

Thank you. The next question is from Cherilyn Radbourne of TD Securities.

Cherilyn Radbourne (Analyst)

Thanks very much. Good afternoon. A very strong operating quarter, given the winter that you described. A bit of slippage in terms of the train and car velocity. I assume a lot of that is winter, but, as I looked at the metrics, I was also curious whether there were some trade-offs being made in order to achieve the improvements in train productivity and locomotive utilization you reported. Maybe you can just kind of talk a little bit about where you've continued to unearth efficiency gains.

Mike Cory (COO)

Sure, Cherilyn, it's Mike here. Winter has, you know, obviously had its impact and will continue till it's over. You know, I said it before, it's really, we balance all those metrics to produce, first of all, the service the customers demand. And to JJ's point, make sure that we're, you know, just not looking at our internal workings, but we're looking at the entire supply chain and continue to grow that profitable business.

So you'll see changes throughout the year. We try to make the best decision again, to grow the business at the most controlled price and give JJ and the team the opportunity to make sure that we are leading the supply chain. That really, you'll see those numbers fluctuate a little bit. They're certainly not out of the range that they normally are.

There's no priority over either of them. It's just about the demand for the customer.

Cherilyn Radbourne (Analyst)

Great. That's all for me. Thank you.

Luc Jobin (CEO)

Thank you.

Jean-Jacques Ruest (CMO)

Thank you, Cherilyn.

Thank you. The last question is from Chris Wetherbee of Citi. Please proceed.

Chris Wetherbee (Analyst)

Hey, great, thanks, and thanks for slipping me in here at the end. A question on frac sand. So I think, JJ, you mentioned seeing some pickup there. Just want to get a sense of kinda how we think about 2017. You know, some of our internal views here would suggest significant step up in production. Just wanna get a sense of kinda how you participate and maybe what that means to the mix of the order.

Jean-Jacques Ruest (CMO)

The drilling activities is up definitely. I think it's well reported in most part of the continent. In the case of CN, we participate the same way as in the past, that we are we have a destination franchise in Alberta and BC, where the drilling activity is also up for example, in the month of January.

That's frac sand coming from Wisconsin, long haul, and we're competing with some local brown sand. We also participate in other some shale play, where we bring the unit train or the cargo of the frac sand to Chicago, and we interchange with either Eastern Railroad or Western Railroad going south. So it is a good story. It has been sequentially up in the fall, sequentially up in Q4.

We had a good start here to the year. On the Canadian side, the people drill, they love it when it's cold because they can get in the, in, in the muskeg with their heavy equipment, on frozen ground. And things, don't be surprised if things on the frac sand sand for CN start to slow down sometime in the spring.

They call this during the break up, after the break up, after the, when it gets very mushy, you know, or, or muddy, and then there's a pause of a couple of weeks, and then it restarts again. So no, it's a positive story. The price of crude and, and all of the technology of today, is a decent outlook for, anything which is fracking, either for gas or oil.

Chris Wetherbee (Analyst)

All right.

Jean-Jacques Ruest (CMO)

Thank you.

Chris Wetherbee (Analyst)

Thank you, Chris.

Luc Jobin (CEO)

Perhaps, in closing, to kind of recap, first, I need to say I'm very proud of what the team has accomplished this year. We've certainly demonstrated in spades our ability to deliver great results in a very challenging environment. You heard JJ describe how our volume outlook has now turned positive.

Mike illustrated for you how the operating team continues to drive our agenda of operational and service excellence in leveraging innovation. Jocelyn shared with you how our financial performance came together in 2016. It's clean, and it's straightforward. You've received our annual earnings guidance for 2017, which is calling for mid-single-digit EPS growth.

Looking ahead, we set out for 2017 with a constructive view, and while the environment remains somewhat mixed, we do expect to see moderate volume growth, and we'll see how it unfolds. One thing for sure, you know, with relentless focus on safety, productivity, and service, our industry leading team is intent on delivering solid execution, with continued focus on leveraging our superior customer service and our supply chain approach to help us gain traction in the marketplace.

We continue to reinvest in our business with a long-term perspective, and we're well positioned to deliver continued shareholder value. On that note, we look forward to reviewing our Q1 results with you sometime in April. In the meantime, thank you very much for joining the call, and be safe. Thank you. We're ready to close the call. Rena?

Operator (participant)

Thank you.

Jean-Jacques Ruest (CMO)

Thank you.

Luc Jobin (CEO)

Thank you.

Operator (participant)

Thank you very much. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.