Canadian Pacific Railway Ltd (NYSE:CP) Q2 2019 Earnings Conference Call July 16, 2019 9:30 AM ET
Maeghan Albiston - Assistant VP of IR
Keith Creel - President, CEO & Director
John Brooks - EVP & CMO
Nadeem Velani - EVP & CFO
- IRe的助理副总裁Maeghan Albiston
- Keith Creel - 总裁，首席执行官兼董事
- John Brooks - 执行副总裁兼首席营销官
- Nadeem Velani - 执行副总裁兼首席财务官
Christian Wetherbee - Citigroup
Walter Spracklin - RBC Capital Markets
Fadi Chamoun - BMO Capital Markets
Allison Landry - Crédit Suisse
Kenneth Hoexter - Bank of America Merrill Lynch
Thomas Wadewitz - UBS Investment Bank
Scott Group - Wolfe Research
Brian Ossenbeck - JPMorgan Chase & Co.
Seldon Clarke - Deutsche Bank
Benoit Poirier - Desjardins Securities
Ravi Shanker - Morgan Stanley
- Christian Wetherbee - 花旗集团
- Walter Spracklin - 加拿大皇家银行资本市场
- Fadi Chamoun - BMO资本市场
- Allison Landry - CréditSuisse
- Kenneth Hoexter - 美国银行美林证券
- Thomas Wadewitz - 瑞银投资银行
- 斯科特集团 - 沃尔夫研究
- Brian Ossenbeck - 摩根大通公司
- 塞尔登克拉克 - 德意志银行
- Benoit Poirier - Desjardins证券
- Ravi Shanker - 摩根士丹利
Good morning, my name is Adam, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Canadian Pacific's Second Quarter 2019 Conference Call. All slides accompanying today's call are available at www.cpr.ca. [Operator Instructions]. I'd now like to introduce Maeghan Albiston, AVP, Investor Relations and Pensions, to begin the conference. Please go ahead.
早上好，我叫亚当，今天我将成为你的会议运营商。 在这个时候，我想欢迎大家参加加拿大太平洋2019年第二季度电话会议。 有关今天电话会议的所有幻灯片均可在www.cpr.ca上获取。 [操作员说明]。 我现在想介绍Maeghan Albiston，AVP，投资者关系和养老金，开始会议。 请继续。
Thank you, Adam. Good morning, everyone, and thank you for joining us today. Before we begin, I want to remind you that this presentation contains forward-looking information, and actual results may differ materially. The risks, uncertainties and other factors that could influence actual results are described on Slide 2 in the press release and in the MD&A that's filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures, which are outlined on Slide 3. With me here today is Keith Creel, our President and Chief Executive Officer; Nadeem Velani, Executive Vice President and Chief Financial Officer; and John Brooks, Executive Vice President and Chief Marketing Officer. The formal remarks today will be followed by Q&A. [Operator Instructions].
It's now my pleasure to introduce Mr. Keith Creel.
亚当，谢谢你。 大家早上好，谢谢你今天加入我们。 在开始之前，我想提醒您，此演示文稿包含前瞻性信息，实际结果可能会有重大差异。 可能影响实际结果的风险，不确定性和其他因素在新闻稿中的幻灯片2以及向加拿大和美国监管机构提交的MD＆A中有所描述。 本演示文稿还包含非GAAP措施，幻灯片3中概述了这一点。今天我在这里是我们的总裁兼首席执行官Keith Creel; Nadeem Velani，执行副总裁兼首席财务官; 和John Brooks，执行副总裁兼首席营销官。 今天的正式讲话将进行问答。 [操作员说明]。
Thanks, Maeghan. Good morning. Listen, the team and I are extremely proud to sit here this morning and represent our 13,000 strong CP family. We get to share and discuss the record-setting quarter for this company. When I say record-setting, it's a mix of records. Second quarter records are all-time records. Records in OR revenue, EPS, all-time record for workload on GTMs on the network, train length records, train weight records, locomotive productivity records, fuel efficiency records, and most importantly, quarterly safety record when it comes to -- we had a very challenging first quarter to bounce back. The way this company has bounced back to regain the momentum that sets us apart from the industries, most specifically in our train accident ratio, the way we run the railway safely every day, speaks to the commitment into the potential that this company represents.
An all-time record as well on personal injuries for the company. So certainly, the culture when it comes to safety is strong and getting stronger. Something we're extremely, extremely focused on and proud of. Now this kind of performance demonstrates what a mature precision scheduled railroading company ran by the best team of railroaders in the industry can produce.
That said, we talk about the records, something even more encouraging. This pursuit of operational excellence is something that -- I call it a journey, it's not a destination. Maintaining a constant pursuit, a constant constructive tension in the organization even in the face of record volumes when we're focused on making sure that we keep our assets rightsized at the peak to accommodate and to allow for any kind of softening or immediate demand that we might face as well as our normal seasonal demands that come out in July, this team is doing that. Within that quarter, taking out locomotives and taking out headcount that's associated with those locomotives, reducing us down almost 10% in the locomotive fleet alone.
So with that being said, the quarter was not without these challenges. We talk about the things that went well. I can tell you this quarter we faced unprecedented pressures from the Mississippi River, much like our Class 1 partners. When I say pressures, the pressures did not let up the duration of the floods that we experienced this year. 40, 50 years, if you go back to history, you're going to be hard-pressed to find anything that was that prolonged in the impact to this rail weight. And their team, I tell you, the men and women that run this railroad day in and day out are inspiring. They battled the floodwaters. They kept the railroad open as long as they possibly could. Yes, we had to reroute some. Yes, we had some additional operating expense tied to it, a little bit of capital expense tied to it and some foregoing revenue. But for us to be able to sustain that kind of pressure and bounce back the way we did, again, speaks to the testament of the strength of this team. Switch it over to the commercial side. I'd tell you we continue to make progress. That's encouraging as well. We laid out a plan at our Investor Day in October.
谢谢，Maeghan。早上好。听着，我和团队非常自豪地今天早上坐在这里代表我们13,000名强大的CP家庭。我们将分享并讨论该公司创纪录的季度。当我说记录设置时，它是记录的混合。第二季度的记录是历史记录。记录OR收入，每股收益，网络上GTM工作量的历史记录，列车长度记录，列车重量记录，机车生产力记录，燃油效率记录，最重要的是季度安全记录 - 我们有一个非常具有挑战性的第一季度反弹。这家公司反弹的方式重新获得了使我们与行业区别开来的势头，特别是我们的列车事故率，我们每天安全运营铁路的方式，说明了公司所代表的潜力。
We told the market, we told our shareholders, we told our investors that we had a unique set of opportunities that we worked hard to set up. We created a capacity and developed a strategic plan to convert it in the marketplace, and that is what's fueling this pace of growth that's unprecedented in the industry in a time where leader demand across the macro economy.
We call it self-help. We call it unique opportunities that allow us to be countered to what the balance of the industry is experiencing and that's what you're seeing in these results. You read about our press release during the quarter of Yang Ming, that's one commercial success that John will talk about the specifics of it. And yes, we're super excited about the partnership and absolutely excited about the revenue and what it's going to do driving earnings and growth in 2020 and beyond. But from an operational perspective, I'm equally as excited because what it allows this company to continue to do, setting itself apart from our competition, setting a new standard for service in our partnership. That's specific, what I call the third leg of the alliance, which is Hapag-Lloyd Ocean Network Express and now will be in 2020, Yang Ming. Allows us to continue to fine-tune and create an industry-best service that will get you from Shanghai to Chicago with the lowest on-dock dwell time. It can't be matched by our competition whether it's U.S. West Coast or other Canadian alternatives into the Midwest markets with our fastest transit time in our shortest routes and our reliable capacity. It's something that's compelling in the marketplace, and it's something that we'll continue to make a strong difference in our operational ability to continue to drive margins and operational excellence within the organization.
To add benefit to that as well, you've probably read HME and Hyundai, which is a -- it's a customer that CP currently enjoys a partnership with. They made a strategic decision as well, effective spring of 2020, they're joining the alliance. So that volume now currently calls them in term on the South Shore, which CP serves, that volume shift to Deltaport will be handled by our partners at GCT and will be moving on the shift with the alliance, which again gives us another step to incremental improvement, takes out complexity in the terminal, takes out additional costs and improves efficiency and velocity.
Just as a proof point, you think about this. If I go back 1.5 year ago, the share at GCT Deltaport is going down to about 20% for CP and the balance for our competitors. With this new contract, it comes online in January. We're going to be about 65% to 70% of the product that's been discharged on the dock at GCT.
Again, enabling that reliable service, industry-best service into the Midwest. So when you think about all these things, you put them together. What does it mean? What does it mean for our customers? What does it mean for our shareholders and our investors? It's a solid proof point that when we say we're going to do something, we do it. It says that sustainable profitable growth, it's not just a catchphrase, it's moving into the DNA of how we run this business. And when you do it and you do it well and you live and die and breathe by that principle, you do what you say you're going to do, you don't try to be everything to everyone but those that you serve, you serve the best. And you do it with this kind of culture and this kind of discipline. These results are possible.
我们称之为自助。我们称之为独特的机会，使我们能够对抗行业的平衡，这就是您在这些结果中所看到的。你读到了杨明季度我们的新闻稿，这是约翰将谈论其具体细节的商业成功。是的，我们对这种合作关系感到非常兴奋，对于收入以及它在2020年及以后推动盈利和增长所带来的收益感到非常兴奋。但从运营的角度来看，我同样感到兴奋，因为它允许这家公司继续做下去，将自己与竞争对手区分开来，为我们的合作关系中的服务设定新的标准。具体而言，我称之为联盟的第三站，即Hapag-Lloyd Ocean Network Express，现在将是2020年的杨明。使我们能够继续微调并创造行业最佳服务，让您从上海到芝加哥的停靠时间最短。无论是美国西海岸还是其他加拿大替代品进入中西部市场，我们的最短路线运输时间和可靠的运输能力都无法与我们的竞争对手相匹敌。这是市场上引人注目的事情，我们将继续在我们的运营能力方面发挥重要作用，继续在组织内推动利润和卓越运营。
And it allows you to grow this company now and into the future. And as excited as we are about 2019, the opportunities that John and the team put together for 2020 and 2021 from an investor standpoint, we certainly expect not only in '19 to meet our guidance but to carry strength and momentum in the 2020 and 2021 as well. That's going to bode well for anybody who's invested in this company as well as our employees as well as our customers. The perfect trisection. With that, I'm going to turn it over to John to provide some more color on the commercial side and after Nadeem covers the financial performance, then we'll open it up for questions.
它允许您现在和未来发展这家公司。 尽管我们对2019年大约兴奋，但是从投资者的角度来看，约翰和团队在2020年和2021年将这些机会放在一起，我们当然希望不仅在'19'中能够满足我们的指导，而且还要在2020年和2021年带来力量和动力。 同样。 对于任何投资这家公司的人以及我们的员工和客户来说，这都是个好兆头。 完美的三分法。 有了这个，我将把它转交给John，以便在商业方面提供更多颜色，在Nadeem涵盖财务业绩之后，我们将打开它以提问。
All right. Thank you, Keith, and good morning, everyone. So total revenues were up 13% this quarter to $2 billion with 6 out of our 9 lines of business being up double digits in revenue. RTMs were up 6%. FX was a tailwind of 2%, and fuel was flat. On the pricing side, as expected, we continue to land in that 3% to 4% range. Now taking a closer look at our second quarter revenue performance on the next slide. I'll speak to the results on a currency adjusted basis. So as Keith spoke to, it was an extremely strong quarter for the bulk portfolio. Grain was up 11%. Canadian grain and grain products delivered a record second quarter, up double digits. And both April and May were record months for volume, and from a tonnage perspective, this was the third-biggest quarter of all time for CP in grain. [Indiscernible] in Canada is now complete and as of right now we expect new crop to be in line with the past couple years.
Additionally, we project carryout stocks to be normal but certainly more heavily weighted on the canola side. All this to say, we expect there to be good volumes of grain to move this fall. As a reminder, the new regulated grain pricing for CP taking effect on August 1 will be 3.7%. But in contrast, U.S. grain volumes were down double digits as the P&W export market continued to be challenged due to the lingering trade dispute with China. We're watching U.S. grain markets closely though because with the flooding and tough-growing conditions that have emerged across the Central and Eastern U.S. Actually this might present a pretty good opportunity for CP grains into these areas that are expected to be short production. Moving onto the coal business. As a result of maintenance outages at both port and mine. Canadian coal volumes decreased this quarter. However, in spite of the supply chain challenges in Canada, we actually saw fairly strong movements of thermal coal in the U.S., and our revenues were up 5%.
The demand environment for met coal remains strong, and we continue to expect a strong back half of the year. On the potash front. Q2 was an all-time record quarter for volume and revenue as strength in our export potash outweighed weakness on the domestic side. That weakness being the result of flooding and again poor weather condition in the upper Midwest in the United States.
But in spite of the weakness from the domestic side and certainly some tough comps we have coming into the second half for the year on potash. With strong global demand and still a very healthy pricing environment, we expect the opportunity for upside as we move into the second half of the year.
On the merchandise front. The energy, chemical and plastic portfolio had another strong quarter with revenue growth of 22%. The growth included another strong quarter of LPGs, plastics, refined products, all moving on our energy train in Vancouver. Excluding crude, ECP volumes were up 9% and revenues grew 13%. On the crude-by-rail, as expected, we came in at around 25,000 carloads or approximately 160,000 barrels per day as production curtailments began to ease and the fundamentals began to improve. Although, crude-by-rail remains a variable, we expect volumes will continue to increase as production and curtailment balance stabilizes, and our new contracts and existing customers continue to ramp up the second half of the year.
行。谢谢基思，大家早上好。因此本季度总收入增长了13％，达到20亿美元，其中9家企业中有6家的收入增长了两位数。 RTM上涨6％。 FX是2％的顺风，燃料持平。在定价方面，正如预期的那样，我们继续在3％至4％的范围内降落。现在仔细看看我们下一季度的第二季度收入表现。我会以货币调整的方式对结果说话。因此，正如凯斯所说，对于大宗商品投资来说，这是一个非常强大的季度。谷物价格上涨了11％。加拿大谷物和谷物产品第二季度创下历史新高，达到两位数。 4月和5月都是成交量的创纪录月份，从吨位来看，这是CP在谷物中有史以来第三大季度。 [音频不清晰]在加拿大现已完成，截至目前我们预计新作物将与过去几年保持一致。
In MMC, volumes declined 9%, largely driven by a frac sand, however, revenues were only down 2%. Consistent with what I've spoken about a number of times in the past, we're executing a surgical strategy to re-hone our frac sand from the Permian basin to the Bakken. This market diversity yields higher revenue per carload, single-line haul efficiencies and improved margins. We currently have 2 unit trains facilities in service, and we're adding a third unit train facility in this region by the end of the year.
In automotive. Certainly, despite a weak North American demand environment, CP revenues were up 12% in the quarter. We continue to see success driven by GLOVIS and the opening and ramp-up of our Vancouver auto compound that we've spoken about. As a reminder, this is only a portion of the GLOVIS business with the full contract coming online to us in 2020.
This, combined with continued growth at Vancouver, gives us confidence in this sector well into next year. And finally, on the intermodal side of the business. Overall revenues were up about 11%. Both domestic and international volumes were up low double digits. In fact, despite some softening in the retail sector, domestic revenues were a record in Q2. On the international side of the business, we continued to excel in the market and execute our playbook.
Most recently, I'm very pleased that CP was named Best Logistics Provider in Rail at the Asian Freight Logistics and Supply Chain awards in Hong Kong. And further, as Keith mentioned, preparations are well underway with Yang Ming for 2020 onboarding of their volumes, which will move to GCT Deltaport, leveraging our capacity not only at the port of Vancouver but also at our capacity and our inland terminals across our network. We're also excited, as is Yang Ming around taking a full advantage of our fastest route into Chicago, Toronto and Minneapolis. So look, I'm extremely pleased with the efforts of the team, sales and marketing team in collaboration with the operating team to deliver this quarter. So well, there's no doubt, there's uncertainty in the macro environment and some softness in some of our lines of business between the combination of our strong bulk franchise coupled with new business that is moving now and new business that will be starting up in 2020. I have a high degree of confidence that we will continue to deliver the growth and outpace the industry.
The CP team is focused, and we're collaborating with our customers to create efficiencies and convert opportunities in the marketplace. With that, I'll pass it over to Nadeem.
Thanks, John, and good morning. As Keith noted, this was a strong quarter by virtually any length. When we reported in April, I was encouraged by how the volume and operating transfer were recovering from a challenging quarter -- challenging winter. Those trends continued throughout the quarter and led to strong revenue growth, as John detailed, as well as very strong cost control. The end result was a Q2 operating ratio, decreased 580 basis points to second quarter OR of 58.4%. Ignoring the impact that last year's labor disruptions had on the OR and Q2, we still saw an improvement of 440 basis points year-over-year.
Adjusting for land sales, depreciation and stock-based comp, we saw incremental margins of about 90%. Taking a closer look at a few items on the expense side. As usual, I'll be speaking to the results on an exchange-adjusted basis. Comp and benefits was up 8% or $28 million versus last year. The primary drivers of the increase were increased stock-based compensation of $20 million, resulting from the higher share price as well as higher headcount.
Fuel expense was flat year-over-year as increase volumes were offset by decreased price and record Q2 fuel efficiency of 0.93 gallons per thousand GTMs. Materials and equipment rent expense were both flat year-over-year. As expected, depreciation was $183 million, an increase of 5%.
Purchased services was $265 million, a decrease of $23 million or 8%. Primary driver behind the decrease was a land sale of $17 million, which we guided to on our Q1 call, decrease ruin in stock cost and other operating efficiencies was a further tailwind. Additionally, the casualty line under the purchased services reverted back to historical levels. Rounding out the income statement. Adjusted income increased by 33% and adjusted EPS grew 36%.
Below the line, I'll note that there was an $88 million income tax recovery related to changes in the Alberta corporate tax rate. This benefit was excluded from normalized earnings and will have a negligible impact to our 2019 expected tax rate. As the benefits are phased in over the four years, we will start seeing more meaningful benefits or effective tax rate.
Turning to the next slide. Our leverage in the quarter came in at 2.4x, adjusted net debt to adjusted EBITDA, within our target range of 2x to 2.5x. In May we repaid our debt maturity, which we refinanced early in March with the strong operating performance and growth in the last 2 years, we worked our way back into our target leverage range. While CapEx increased sequentially given winter, flooding and network investments, we will keep our capital spending within our guidance of $1.6 billion.
We continue to take a balanced approach to shareholder returns. In May, we meaningfully increased our dividend by 27.5%. This marks the fourth straight year we have raised our dividend as we gradually move towards our targeted payout ratio of 25% to 30%. On the share buyback front. As of the end of Q2, we have completed nearly 70% of our current share repurchase program at an average cost of roughly $272 per share.
谢谢，约翰，早上好。正如凯斯指出的那样，几乎任何长度都是一个强劲的季度。当我们在4月份报道时，我对于量和运营转移如何从充满挑战的季度 - 具有挑战性的冬季 - 恢复而感到鼓舞。这些趋势在整个季度持续，并导致强劲的收入增长，正如John所详述，以及非常强大的成本控制。最终结果是第二季度运营率下降580个基点至第二季度或58.4％。忽视去年劳动力中断对OR和Q2的影响，我们仍然看到同比增长440个基点。
We will remain opportunistic and disciplined in our deployment of capital. Combining this discipline with our strong operating performance, we delivered an ROIC of 16.8% the last 12 months. This will undoubtedly be the strongest ROIC in the entire industry through the tremendous achievement by the CP team. The railroad is operating as well as I've ever seen it, and our team at railroaders is getting stronger and deeper each day. We continue to watch the demand environment closely and should the macro environment change, we'll continue to adapt our cost base quickly. As Keith mentioned, we are confident in our full year guidance to expect to deliver another set of strong results when we speak again in October. With that, I'll turn it back to Keith to wrap things up.
在资金部署方面，我们将保持机会主义和纪律。 将这一学科与我们强大的经营业绩相结合，我们在过去12个月内实现了16.8％的ROIC。 通过CP团队的巨大成就，这无疑将成为整个行业中最强大的ROIC。 铁路运营和我见过的一样，我们的铁路车队每天都在变得越来越强大。 我们继续密切关注需求环境，如果宏观环境发生变化，我们将继续快速调整成本基础。 正如基思所说，我们对全年的指导充满信心，期待在10月份再次发言时能够提供另一套强劲的成果。 有了这个，我会把它转回Keith来包装。
Thanks Nadeem, John. Just to wrap up, looking forward to lots been made about our tough comp in the back half of the year. The tough comps are what happen when a company performs the realist, we're going to stay humble, we're going to stay focused. We understand the main environment is not without its challenges, but you can be rest assured this team is going to be focused, disciplined and committed and confident, delivering our guidance for the year. These results are a testament to the prior of our operating model and CP's ability to execute operationally, financially and commercially, all at the same time. With that being said, let's open it up for questions.
谢谢纳德姆，约翰。 为了结束，期待在今年下半年我们的强硬组合做了很多。 当一家公司执行现实主义者时，我们将保持谦虚，我们将保持专注。 我们理解主要环境并非没有挑战，但您可以放心，这支团队将会专注，纪律严明，尽职尽责，自信，为我们提供今年的指导。 这些结果证明了我们的运营模式和CP在运营，财务和商业上同时执行的能力。 话虽如此，让我们打开它来提问。
[Operator Instructions]. And your first question comes from Chris Wetherbee of Citi.
[操作员说明]。 你的第一个问题来自花旗的Chris Wetherbee。
Maybe wanted just to pick up on that comment about the second half and the comps that you guys faced. If you could talk a little bit about some of the key priority [ph] groups that you feel most confident about in terms of maintaining the mid-single-digit RTM growth as you face some of those tougher comps? And If there is some sort of demand, a sluggishness, maybe what are the areas where potentially you could see that kind of flow through? Just kind of curious about what your outlook is there on the volume side?
也许只想了解关于下半场和你们面临的比赛的评论。 如果你能够谈谈一些关键的优先级[ph]群体，你们在保持中等单位数RTM增长方面最有信心，因为你面对一些更强硬的组合？ 如果有某种需求，一种迟缓，也许你可能会看到那种流动的领域是什么？ 只是好奇你对音量方面的看法是什么？
Chris, I can start off. This is John. Look, we turned in a really strong Q2 in the bulk side of the business, and I see that tailwind continuing. I am -- as I mentioned, we're kind of in the grain trough a little bit right now in July but I expect upside as we move through the quarter in the grain. The potash demand environment continues to be strong. We're certainly -- some weakness in the domestic side but we think that picks up through the quarter, and the export side continues to be very strong.
Tech is, for the most part, sold out Q2, Q3. So continue to see some tailwind there. Our year-over-year comp sales results to international intermodal. We still have, I think, some upside as I look through Q3 in that space, sort of, despite some of the challenge that others are facing. We haven't seen the blank sailings with our customers in that area. So I'm a positive on all that space. I think we've outmatched the industry on the auto sector here now for the second straight quarter. And frankly, I think that trend continues as we move in to Q3 also. And then the crude side, in the assets, it's a variable. And there is certainly some moving parts that need to be worked out here. But the contracts are in place. And we're actually, I think, more optimistic today than we have been that these issues are going to get resolved. And this could be significant upside improved by rail.
克里斯，我可以开始了。这是约翰。看，我们在业务的大部分时间内都进入了一个非常强大的第二季度，我看到顺风仍在继续。我 - 正如我所提到的那样，我们现在已经在7月份处于谷物中，但是当我们在谷物中穿过这个季度时，我预计会有上行空间。钾肥需求环境继续强劲。我们当然 - 在国内方面存在一些弱点，但我们认为在本季度有所回升，出口方面仍然非常强劲。
Okay. That's very helpful. No doubt. Last quarter, Nadeem, I think you were pretty constructive about your -- the potential for the OR in the second half of the year even facing the more challenging comps that you had in here in Q2. Could you speak a little bit to sort of how you're feeling after getting the second quarter done? Obviously, really strong performance. You mentioned very high incremental margins. It doesn't appear that there was anything, sort of, blocking that as we move into the back half of the year. But if you could put some color around that, that would be great.
好的。 这非常有帮助。 毫无疑问。 上个季度，Nadeem，我认为你对你的建设非常有建设性 - 即使面对你在第二季度遇到的更具挑战性的比赛，今年下半年OR的潜力。 在第二季度完成之后，你能说一下你的感受吗？ 显然，表现真的很强。 你提到了非常高的增量利润率。 当我们进入今年下半年时，似乎没有任何东西可以阻挡它们。 但是，如果你能在它周围添加一些颜色，那就太好了。
Let me set this up for Nadeem. We're still convicted Chris but over to you Nadeem.
Yes, I think, Chris, I mean we're doing what we said we're going to do. As Keith noted, that's -- our conviction comes from that, comes from a network that's running as we mentioned as good as we've ever seen it. It comes from that within our DNA of strong cost control and not getting involved in a false sense of confidence. But in times like this, we see a bit of softness you can start putting asset aside proactively and only adding resources where necessary. So same level of conviction in the back half. Yes, we had some tough comps, but we feel very good about what we can do from our cost-control point of view. And those incremental margins will add to the bottom line.
是的，我想，克里斯，我的意思是我们正在按照我们所说的去做。 正如基思所指出的那样 - 我们的信念来自于这一点，来自一个正如我们所提到的那样运行的网络，就像我们所见过的那样。 它源于我们在成本控制强大的DNA中，并没有陷入虚假的自信心。 但在这样的时候，我们会看到一些软性，你可以开始主动放置资产，只在必要时添加资源。 所以后半部分的定罪程度相同。 是的，我们有一些艰难的补偿，但我们从成本控制的角度来看我们能做些什么非常好。 而这些增量利润将增加底线。
The fundamental demands, Chris, that drove the performance of second half of last year exists. The second half of this year was even more pent up demand, so to speak and an ability for us to execute, given our investments. Think about the grain fleet alone, we talked about investing in our hopper fleet. The efficiencies we get from that. We'll just start to begin to realize some of those operational efficiencies. Meaning, fewer bad orders. Meaning, more velocity with the fleet. Meaning, I don't need as many cars, I'm using the same more remote room with fewer cars. We're looking at doing things with are potash fleet to respond to surging demand or record demand with our customers and partner in Canpotex, run a 200 car, potash trains to Vancouver and even to a point we're testing with UP over Portland, we ran 188 car train, just recently. So we're going to continue to push the envelope, squeezing what we can of our assets to do more with less, all within the mantra of precision-scheduled railroading as we continue to deliver service. And as we do that, costs come down, capacity increases, velocity improves. It's just the different space to operate in with the same or better demand in the second half. You should expect better performance, which is exactly what this team is focused on producing.
Your next question comes from Walter Spracklin of RBC Capital Markets.
您的下一个问题来自RBC Capital Markets的Walter Spracklin。
I guess coming back to -- Keith, your comments about how much more improved the handling is. The complexity is improved. And I look back at your -- you know just eyeballing the last few years, going from second quarter to third quarter, you've done anywhere from obviously, some of the railroading in Canada is a lot easier, and you've done anything from 200 to 600 basis points quarters sequential. Nadeem, you talked about 100 basis points on the year is something that you generally target. But Gosh, everything you looking at, at here, given the items, Keith, that you mentioned it suggests that you could be well above the 100 to 200 improvement year-over-year on the OR. And then when we go into the next year with Yang Ming coming in and the lower complexity of everything consolidating at Deltaport. Again, my question I guess is are we beyond the 100 to 200 that we've typically come to expect in operating ratio improvement on the annual basis.
我想回到 - 基思，你的评论是关于处理的改进程度。 复杂性得到改善。 我回头看看你 - 你知道过去几年的目光，从第二季到第三季，你已经做了很多事情，显然，加拿大的一些铁路更容易，你做了什么 从200到600个基点连续四分之一。 Nadeem，你在这一年谈到了100个基点是你通常的目标。 但天哪，你看到的所有东西，在这里，给你的东西，基思，你提到它表明你可以远远超过OR的100到200年同比增长。 然后当我们进入第二年，杨明进来，并且在Deltaport整合的一切事物的复杂程度降低。 我想我的问题是，我们通常会在每年的运营率改善方面达到预期的100到200之间。
Walter, I love your optimism and your belief in the model. Part of this art it's possible, we exceed our expectation that have in the past but you're talking about quantum leaps in areas that we make quantum leaps. And it's just hard to keep setting a world-record model if we're doing it every year. So we're going to continue to improve. We're going to sweat our assets, their puts and their takes, and we're going to drive in spite of the headwinds that we face in these areas. We're going to get incremental margin improvement for the next several years, given the business that I have seen on the railroad. And you could say, there's some conservatism in our guidance. We feel we need to be responsible and guide to what we feel confident, that we'll be able to deliver. But at the same time, I don't want to be over exuberant and mislead and create a bar so high that we disappoint. That's -- I don't want to demotivate my team either. But rest assured, you got a team here, you got a leader -- a leadership team that will push this envelope in a responsible constructive way. And we expect and we hope to exceed your expectations.
But I can't tell you that I see 200 basis points of opportunities given all the moving parts that we see out there and all the things that may or may not happen with winter. But I bet you case, when everything goes our way, a euphoric case, I'd love to be able to control it but I can't. So I've got to be reasonable. I've got to be responsible in what my guidance is. And I see it confident and the ability to get that 100 basis points, but I'm not willing to expand this to the 200 not yet. I want to wait and make it happen instead of assume that's going to happen. I just don't think that's a responsible way to handle it.
沃尔特，我喜欢你的乐观主义和对模特的信念。这种艺术的一部分是可能的，我们超出了过去的期望，但是你在谈论我们实现量子飞跃的领域的量子飞跃。如果我们每年都这样做，那就很难保持创造世界纪录的模式。所以我们将继续改进。我们将为我们的资产，他们的投资和他们的投资而流汗，尽管我们在这些领域面临不利因素，我们还是会开车。考虑到我在铁路上看到的业务，我们将在未来几年内获得增量利润率的提升。你可以说，我们的指导中有一些保守主义。我们认为我们需要负责并指导我们有信心的事情，我们将能够提供。但与此同时，我不想过度兴奋和误导，创造一个如此之高的酒吧让我们失望。那是 - 我也不想让我的团队失去动力。但请放心，你在这里有一个团队，你有一个领导者 - 一个领导团队，将以负责任的建设性方式推动这个问题。我们期望并希望超出您的期望。
The stock-based comps is probably the biggest headwind in terms of -- so it's a first class problem and certainly something that our shareholders won't complain about in terms of bad headwind. But that adds a bit of a challenge when looking at year-over-year.
基于股票的股票可能是最大的逆风 - 所以这是一流的问题，当然我们的股东不会在逆风方面抱怨。 但是，与年同比相比，这增加了一些挑战。
Fair enough. And going down to the EPS level. I know your longer-term -- your double digit for this -- your longer-term double digit. Double digit is obviously a very unspecific wide range. Consensus is moving up now into that mid-teen -- mid -- might after this go into the mid-to high teen. Are you comfortable with that kind of progression? I mean you did 36% in the second quarter. Are you comfortable with that trend as you demonstrated very strong second quarter results that expectations go up into that mid-teen -- mid-to-high teen range?
很公平。 并降至每股收益水平。 我知道你的长期 - 你的两位数 - 你的长期双位数。 双位数显然是一个非常不明确的广泛范围。 现在，共识正在上升到中年 - 中期 - 可能会在此之后进入中高端青少年。 你对这种进展感到满意吗？ 我的意思是你在第二季度做了36％。 您是否对这一趋势感到满意，因为您展示了非常强劲的第二季度业绩，预期会进入中青少年 - 中高档青少年范围？
I'd echo what Keith has conveyed on the OR side. I think it's fair to -- we want to be able to deliver on what we're committed to. We've kind of talked about the double-digit, low double-digit type of range. Call it conservative or what have you. Just mindful of the things we can't control, which is things that these curtailments, and if stock continues to run, that could be a headwind, and if you have some sort of weather description in December, what have you. So we're mindful that there's still a long way to go. We're confident in our ability to grow double digits. I don't want to get into that -- the weaves of what level of double digits so I'll just leave it at that.
我会回应Keith在OR方面传达的内容。 我认为这是公平的 - 我们希望能够实现我们所承诺的目标。 我们谈到了两位数，低两位数的范围。 称之为保守或者你有什么。 只要注意我们无法控制的事情，这些缩减的事情，以及如果股票继续运行，这可能是一个逆风，如果你在12月有某种天气描述，你有什么。 所以我们注意到还有很长的路要走。 我们对增长两位数的能力充满信心。 我不想进入那个 - 编码什么级别的两位数，所以我就把它留在那里。
Your next question comes from Fadi Chamoun of BMO.
John, you mentioned pricing in this 3% to 4% range. Is this pricing kind of a broad base? Are you seeing this strength across all the segment? I'm particularly curious about the intermodal market, the domestic intermodal market, we are seeing some easing in the freight-demand environment, I guess. And so if you can speak to that, please?
约翰，你提到这个3％到4％的价格范围。 这种定价是否具有广泛的基础？ 您是否在整个细分市场中看到了这种优势？ 我对多式联运市场，国内多式联运市场特别好奇，我认为我们看到货运需求环境有所缓和。 所以，如果你能说出来，拜托？
Yes. Fadi, so I was -- we were talking earlier this morning. I'm quite pleased with the discipline the team has been able to show and the results we're producing on the pricing front, really now going over the last year, quarter-by-quarter. So we landed in that upper end of that range again. And as I look at the renewal pushing into Q3, I think -- I feel pretty confident that we're going to be able to sustain that.
Certainly, as you called out, there's some areas where there's some weakness or little more challenged than others. We have seen, as you said, some weakness in the domestic sector, particular retail-type business. That being said, the pricing is held in there, also pretty decent, may be towards the lower end of that range specific for that area. I would also just call out, particularly for Q2, we did see some pretty positive mix 1.5 in that space. It had to do with some of our -- less of our longer haul crudes, we had some shorter hall crude that took place that impact of that and then frankly, just some of our new business pricing has been quite strong that we've brought on this year.
是。法迪，所以我 - 我们今早早些时候在说话。我对团队能够展示的纪律以及我们在定价方面所取得的成果感到非常满意，现在真的在去年逐季度上升。所以我们再次登上该范围的上限。当我看到续约进入第三季度时，我认为 - 我相信我们能够维持这一点。
当然，正如你所说的那样，有些领域存在一些弱点或者比其他领域更具挑战性。正如你所说，我们已经看到国内部门的一些弱点，特别是零售业务。话虽这么说，定价在那里保持，也相当不错，可能是针对该区域特定范围的低端。我也想说出来，特别是对于Q2，我们确实在那个空间看到了一些非常积极的混合1.5。它与我们的一些 - 较少的长途运输原油有关，我们有一些较短的大厅原油发生了影响，然后坦率地说，我们的一些新的商业定价已经非常强大，我们带来了在今年。
Okay. Great color. The second question I had is, I mean, you feel very positive, obviously, about the opportunities to grow well into 2020, and you have few new business awards that you have already communicated. Is the CapEx outlook, kind of, continuing to be in that $1.6 billion range into 2020?
Do you see that creeping up? And as related to that, maybe to Nadeem, the free cash flow conversion like net income to free cash flow conversion has been just about 55% I think on average for the last few years. Can you talk about, kind of, the levers that you have as to kind of improve that as we move into the next 2 to 3 years. I understand there's some improvement in the margin obviously, but is there anything else maybe on the CapEx side that is unique that you can highlight that could help improve cash flow performance.
好的。 很棒的颜色。 我的第二个问题是，我的意思是，你对于成长到2020年的机会感到非常积极，而且你已经传达的新商业奖励很少。 到2020年，资本支出的前景是否会持续达到16亿美元的范围？
你看到了爬行吗？ 与此相关的是，也许对于Nadeem来说，自由现金流量转换如净收入转为自由现金流量转换仅为我过去几年平均的55％左右。 当你进入接下来的2到3年时，你能谈谈你所拥有的杠杆，以便改善这种杠杆。 我知道显然有一些改善，但是在资本支出方面还有其他任何可以突出显示可以帮助改善现金流表现的独特之处。
Okay. Fadi, if I can, I'll take the capital question. I'll let Nadeem expand on free cash flow. So when it comes to our capital envelope, the answer is no creeping. The same discipline in running the railways. It's the same disciplined approach on managing capital. So as we talk about the formula, what's the art of the possible? How do you get sustainable, low-cost growth. You create capacity. You sell to the strength of your network. You selling to the worth of capacity you have. And when you sign up new customers to grow the book revenue, you're in lockstep with the capacity or the capital that's required to create that capacity to be able to deliver the business. Because if you don't, you jeopardize the entire operating model and success across every line of business. So the business that we signed up for '20 and 2021, the assets we need be it in locomotive being remodeled, remanufactured. The surgical, starting here, starting there. CTC here there, CTC there. Inspection truck here, Inspection truck there. All that's in the plan. It's all phased into the plan. So you will not see a big swing in our capital envelope as we bring on this additional business in '20 and 2021. And in fact after '21 you'll start to see our need for capital based on what we see today. Taking into account the growth, actually the diminishing comes down, not go up.
A perfect segue to your second question about what we did, where we invested, where we continue to invest the opportunities right now on the covered hoppers, on locomotive monetization, or what we did with [indiscernible] and will do in Minneapolis as well to support our service, to support our growth agenda? Those things are trailing off. And I think the next leg of the story is going to be a very positive one from a free cash conversion point of view. So if you look in the -- once we get past the investment covered hoppers in that '20-'22 kind of timeframe, you'll start seeing free cash conversion and more in the 75% to 80% kind of levels.
And so I think that, that is something that's somewhat overlooked. And I think that's going to be a very impactful story to CP in what we can deliver. So I think you're right on in terms of what we can achieve and where there's next opportunity.
关于我们做了什么，我们投资的地方，我们现在继续在有盖料斗上投资的机会，机车货币化，或者我们用[音频不清晰]所做的事情，以及我们在明尼阿波利斯做的事情，你的第二个问题是完美的第二个问题。 支持我们的服务，支持我们的增长议程？ 那些事情正在结束。 我认为从自由现金转换的角度来看，故事的下一步将是非常积极的。 因此，如果你看一下 - 一旦我们在'20 -'22那种时间框架内超过投资覆盖的料斗，你将开始看到自由现金转换以及75％到80％的水平。
所以我认为，这有点被忽视了。 而且我认为这对CP来说将是一个非常有影响力的故事。 所以我认为你在我们可以实现的目标和下一次机会的位置上是正确的。
Your next question comes from Allison Landry of Crédit Suisse.
I just want to go back to the question on the RTM guidance and ask in a little bit of a different way. But if I'm just doing the math to get to, call it, 4% to 5% for the full year.
I mean basically on a sequential basis. Second half RTMs need to increase somewhere in the low double-digit range versus the first half. That's a much bigger sequential increase than we've really seen historically. So maybe putting the tough year-over-year comps aside, how can we think about the sequential ramp-up for may be based on the commodities that you've talked about earlier in your response to, I think Chris asked the question, potash, grain, crude, et cetera.
我的意思是基本上是顺序的。 与上半年相比，下半年RTM需要在低两位数范围内增加。 这比历史上我们真正看到的要大得多。 所以也许把年复一年的艰难比较放在一边，我们怎么能想到顺序提升可能是基于你在回答中早些时候谈过的商品，我想克里斯问了这个问题，钾肥 ，谷物，原油等。
I mean, Allison, we're up 2.7% year-to-date already. I don't think we need double digits to get to mid-single digit. So I'm not...
我的意思是，Allison，我们今年已经上涨了2.7％。 我认为我们不需要两位数才能达到中位数。 所以我不是......
Sequentially, I meant. Not year-over-year.
Sequentially, right. We use the back -- the tough comps in the back half. So I'd point out to John's comments on the strength in bulk areas, like potash. you're going to see a ramp up in crude, which is going to support a strong sequential RTM growth so...
顺序，正确。 我们使用背部 - 后半部分的强硬组合。 所以我要指出约翰关于散装区域力量的评论，比如钾肥。 您将看到原油价格上涨，这将支持强劲的顺序RTM增长，因此......
You're going to see a pickup in tech, coal. I mean the coal itself, month-to-date. We're talking about some of the softest we see. The growth that we experienced in the second quarter, Allison, was in spite of actually shipping less coal due to some supply chain challenges. It's not a demand issue. It's just working out some noises in the supply chain, which is working itself out. We're realizing the third quarter. We've shipped month-to-date more than we did last year. So all those things with the 3% -- 3.5% year-to-date number. The second half sequentially, you can be at a little bit north of the mid-single digit, and you're going to come to the math that we're coming to. Then it's not hard to get there.
你会看到技术，煤炭的回升。 我的意思是煤炭本身，从今天到目前为止。 我们谈论的是我们看到的最柔软的一些。 由于一些供应链挑战，我们在第二季度实现的增长，尽管实际上运输的煤炭减少了。 这不是需求问题。 它只是在供应链中制造出一些噪音，这种噪音正在自行解决。 我们正在意识到第三季度。 我们今年的发货量比去年增加了很多。 所有那些具有3％ - 3.5％年初至今数字的东西。 下半场顺序，你可以在中位数的一点点以北，你将会得到我们要来的数学。 然后到达那里并不难。
Okay. All right. It sounds like you guys are pretty confident there. Keith, I think in your prepared remarks, you talked about, basically, hitting a record for workload in terms of GTMs on the networks. Where do you think you are from a capacity or resource standpoint, obviously, they've really strong incrementals in Q2. It seems like the network's in great shape. But if volumes and workload growth persists, at what point might you need to layer back in some resources specifically on the headcount side?
好的。 行。 听起来你们在那里非常自信。 Keith，我认为在你准备好的评论中，你谈到了，基本上，他们在网络上的GTM方面创造了工作量记录。 从容量或资源的角度来看，你认为自己在哪里，显然，他们在第二季度确实有很强的增量。 这似乎是网络的良好状态。 但是，如果数量和工作负载增长持续存在，您可能需要在什么时候专门针对人员方面的某些资源进行分层？
Well, the only place that we're not capacity-constraint, we're capacity-contained. We're trying to be on lock stealth [ph] in locomotives. I mean we've said that all along. We've got more than adequate track capacity, terminal capacity. We've made some strategic investments in Calgary that we'll realize this year into the fourth quarter. We just converted what was an old hump yard into a very productive switching yard, and we didn't finish that until first week of January. So we haven't even realized the benefit of that in the fourth quarter.
But again, locomotives, that's it. We're training, we're hiring in large steps with our demand to make sure we've got the Running Trades employees ready to pull then operate the locomotives. And we're bringing the locomotives online as we remanufacture them in large step with the demand as well.
So the game is not to be long on asset. We've got the right things, the right parts moving in the pipeline to be just on spot with assets. So when it comes to track and terminals, we're not there at all. And in fact, our capacity, our flexibility, our ability to handle surges is drastically improved. We've got more capacity than we've ever had in partnership with GCT at Deltaport. Our South Shore is working extremely well. We're hitting records with our grain partners there, creating capacity. It demonstrates the fluidity of the network. We're talking about record volumes. We've put more stress on this network than has ever been put on this network in its history, in its 138-year history. And year-over-year, we increased train speed by 5%.
That just tells you there's resiliency in this network. And if you're an investor, you don't need to get worried about this company getting into a trap, or we're playing a catch-up capital gain, or we're overcommitting. It's a surgical execution of a strategic plan we developed two years ago in [indiscernible] in partnership with our customers. Protecting our customer service, protecting our investors' trust and our employees' trust. That's what we're doing day in and day out and that's why we have so much conviction and confidence in our guidance.
And your next question comes from Ken Hoexter of Bank of America Merrill Lynch.
Congrats on a solid quarter, Keith and team. Just the employees, how do you think about the trends as you grow and read costs. Should it stay mid -- low mid-single digits with volumes, and your thoughts on the impact to the BOR with the employee base.
恭喜一个稳固的季度，基思和团队。 只是员工，您在成长和阅读成本时如何看待趋势。 它是否应保持中低位数的中位数，以及您对员工基础对BOR影响的想法。
Yes. On the employee base, like this year, mid-single-digit RTM is 1% to 2% headcount. We're up a little bit right now with capital work at its peak. That will come down sequentially, and we'll be that 1% or 2% on the mid-single-digit RTM. That's the best way to gauge it.
是。 在员工基础上，与今年一样，中等单位数RTM的员工人数为1％至2％。 我们现在有点正确，资本工作达到顶峰。 这将按顺序降低，我们将在中等单位数RTM上降低1％或2％。 这是衡量它的最好方法。
We were kind of pre-hiring and getting our people up in anticipation of the crude contract the Alberta government has started June -- in July. So we've kind of pre-hired for that. So that was already in the cost base, as we speak.
我们有点预先招聘并让我们的员工期待阿尔伯塔省政府6月份开始的原油合约 - 7月份。 所以我们有点预先雇用了。 正如我们所说，这已经在成本基础上了。
So you're ahead on employees then because of that?
Okay. And then my second one is on the crude-by-rail. Just given what you were just highlighting, Nadeem, on Alberta's commitment and the shift to that potential. So I know that wasn't in your commitment for volumes but maybe talk about what you expect to be the outcome, or what you're seeing so far with negotiations? And where do you see crude-by-rail volumes trending going forward?
好的。 然后我的第二个是逐个粗略的。 只是给出了你刚才强调的内容，Nadeem，关于艾伯塔省的承诺以及向这种潜力的转变。 所以我知道这不是你对数量的承诺，而是谈论你期望的结果，或者你到目前为止谈判的内容？ 您认为未来的原油价格走势如何？
Yes. So you know what, I'm pleased with the progression of those discussions with the Alberta government. And we're seeing a good expression of interest from a number of shippers in terms of commercializing, if that's the right term, that capacity. There's efforts underway with major producers in the government that try to find a workable solution. You've probably read about it, I'm sure, around the production levels matching curtailment. And if they can prove that, that's going into a railcar, they would give that sort of equal relief.
So those discussions are ongoing. My guess, it's probably at least another couple months, maybe more of a Q4 story if -- in terms of resolution in getting ramped up. But all that being said, we did about 25,000 carloads in Q2. I can see that jumping up to 30,000 carloads with potential for upside as we look at Q3. So we've got a fairly steady ramp-up of stats coming online as we move forward here.
是。 所以你知道什么，我对与艾伯塔省政府的讨论的进展感到高兴。 我们看到很多托运人在商业化方面表现出很好的兴趣，如果这是正确的术语，那就是能力。 政府的主要生产者正在努力寻找可行的解决方案。 你可能已经读过它了，我敢肯定，在生产水平上与缩减相匹配。 如果他们能够证明这一点，那将进入一辆铁路车，他们会给予那种平等的解脱。
所以那些讨论正在进行中。 我的猜测，这可能是至少另外几个月，也许更多的是Q4故事，如果 - 在提高分辨率方面。 但话说回来，我们在第二季度完成了大约25,000次载重。 我们可以看到，当我们看到第三季度时，可能会有多达3万辆的载重量。 因此，随着我们向前迈进，我们已经有了相当稳定的在线数据。
Yes. I think the only thing I'd add, Ken, is listen, this is a space where [indiscernible], it's been volatile, it's been unpredictable. But I would agree with John, I'm cautiously optimistic, and I see the parts moving in a favorable direction for a favorable resolution. I mean the fundamentals are we've got a lot more oil being produced in the pipeline capacity to take it away. And there's a demand forward in the market. We just got to work through this, and we'll continue to work and lockstep with the government to get this issue resolved. And I think you'll see fourth quarter in robust demand. It's just going to be in the marketplace, which will represent some upside. If all other things work for us and all other things line up right and mother nature is good to us, then there's a bit of optimism in the fourth quarter. But all those things had to happen. But again, there's more force lining, acting against as far as trying to get this resolved in the crude space.
是。 我认为我唯一要补充的是，肯，是听，这是一个[音频不清晰]的空间，它是不稳定的，它是无法预测的。 但我同意约翰的观点，我谨慎乐观，并且我认为这些部分朝着有利的方向发展，以获得有利的解决方案。 我的意思是基本面是我们在管道容量方面产生了更多的石油来将其带走。 并且市场需求向前发展。 我们只需要解决这个问题，我们将继续与政府合作，以解决这个问题。 而且我认为你会看到第四季度需求旺盛。 它只是在市场上，这将代表一些上升空间。 如果所有其他事情对我们有用，而所有其他事情都正确排列，而且大自然对我们有益，那么第四季度就会有一些乐观。 但所有这些事情都必须发生。 但同样，在原油空间试图解决这个问题时，还有更多的力量。
And your next question comes from Tom Wadewitz of UBS.
Congratulations on a strong execution in the quarter. I wanted to ask you if you could give me kind of a high-level frame, perhaps, John or Keith, on share gains this year? And how you might -- I don't know if share gain's the right term, but new business, let say? And what the revenue contribution is if you kind of put it together for this year? May be the high level on how we think about that in 2020? Whether that revenue contribution from new business would be larger or similar? Or just kind of some high-level frame on the new business impact?
祝贺本季度强势执行。 我想问你是否可以给我一个高级别的框架，也许是John或Keith今年的股票涨幅？ 你怎么可能 - 我不知道分享收益是正确的，但新业务，比方说？ 如果你今年把它汇总到一起，那么收入贡献是多少？ 可能是我们在2020年如何看待这个问题的高水平？ 新业务的收入贡献是否会更大或类似？ 或者只是对新业务影响的某种高级框架？
I think it's a good indication of, Tom, why you see what we've been able to do in Q2 and our confidence as we look into Q3 and Q4. We've got a -- we've had a Dollarama. We've built an auto compound. We've seen significant upside with K+S as they continue to ramp up. Potash, the bulk remains strong and that, albeit, not new, but I think we're performing well in terms of our share in those spaces also. We've talked, and I've talked quite a bit about wanting to further develop and grow our transload business.
I can tell you, we've had quite a bit of success as you look at in the Eastern markets with refined fuel, business going strong through transload. Our Hamilton steel facility has grown double digits in terms of that throughput. You start adding all those things up. I just looked the other day, we've added about $35 million of annualized new business with our short line partners so far this year. That's sort of low hanging fruit that's been out there for quite some time and you put a little focus to it. And that, sort of, singles and doubles start to adding up. So I think those are some of the things that are helping propel us today. As I look in the next year, in 2020, of course we've got the Yang Ming and the further auto opportunities that we've spoken about.
As GLOVIS hasn't even fully ramped up yet. You got the G3 terminal opening up next year. We've got project for refined fuels with Suncor that we spoke about publicly that will start up next year. And again, you got -- we forget about this business but K+S is really ramped up well. And they expect another big step function of growth as we look into 2020. You start putting all that into a blender and it becomes pretty compelling story.
我认为这是一个很好的迹象，汤姆，为什么你看到我们在第二季度能够做到的以及我们对第三季度和第四季度的信心。我们有一个 - 我们有一个Dollarama。我们建造了一个汽车化合物。随着K S继续增长，我们已经看到了显着的上行空间。钾肥，大部分仍然很强劲，虽然不是新的，但我认为我们在这些空间的份额也表现良好。我们已经谈过了，我已经谈了很多想要进一步发展和发展我们的转载业务。
由于GLOVIS尚未完全提升。你明年将开放G3终端。我们已经与Suncor合作开发了精炼燃料项目，我们将在明年公开谈论。而且，你得到了 - 我们忘记了这项业务，但K S确实很好。当我们展望2020年时，他们期待增长的另一个重要的增长功能。你开始将所有这些放入搅拌机中，它变成了非常引人注目的故事。
Well, let me ask you a little bit differently. So just do you think it's a bigger impact this year in terms of the revenue contribution from new business or a bigger impact this year than next year? Is it kind of similar next year? Or how do you just frame the magnitude?
好吧，让我问你一点点不同。 因此，您认为今年新业务的收入贡献或今年比明年产生更大影响的影响更大吗？ 明年有类似的吗？ 或者你如何构建幅度？
I think it frames the magnitude in mid-single-digit RTM growth and double-digit earnings confidence, Tom. That's probably the best way to summarize it.
And I guess the second one, just on -- Keith, can you add a little more to your comment on Hyundai in terms of what that means if they are changing, and is there kind of new business for you on the volume side with Hyundai? Or that's primarily efficiency or just maybe build a little bit on your comment that you started at beginning of the call.
而且我想第二个，就在 - 基思，如果他们正在改变的话，你可以在你对现代汽车的评论中添加更多一点，并且在现货量方面为你提供了一些新的业务吗？？ 或者这主要是效率，或者只是建立你在评论开始时的评论。
Yes. I think it's both. I think it's growth and volume for Hyundai. I think it's also efficiencies. And I'll say this and explain it. So they're served us in turn. All the consolidation or the shipping industry over the last several years, where they landed with their partners, they weren't benefited. They haven't realized the same cost synergies that some of their competitors have. And although, we followed all of their business out of Vancouver, the size of the pie has been reduced because they've been at a cost disadvantage.
So move forward to 2020. They sign up with the alliance. They're enjoying industry-best service. They're going to enjoy industry-best cost. They won't be at a disadvantage anymore. And we firmly believe that as a result of the cost advantage and the service improvements, they're going to grow in the marketplace. And when their ships get fuller then our trains get fuller.
So it's a quality revenue problem or opportunity for us at the same time. Any time we can take and [indiscernible] precision scheduled railroading, you minimize the moving parts, the remaining parts moving faster. The dwell on the dock is going to be lower. The trains are going to discharge larger and on time more frequently. It allows me to move my assets faster. My crew cost is going to be optimized. My equipment cost is going to be optimized, and my velocity is going to be optimized. It creates capacity, and it just hits you across every business unit incrementally because it's moving in some of our highest density corridors. So it's a positive, positive, positive. That I get just as excited operationally because not only does it allow us to enjoy the benefit now. It allows us to sustain constant improvement as we go forward and as we become better railroaders and as we get better. Through our investments and through our execution -- executing operating model day in and day out. It's a win-win, not just for intermodal but for CP and for all of our business lines that go through Vancouver, given it's such a key corridor for this railway.
因此，这对我们来说是一个高质量的收入问题或机会。任何时候我们都可以采用[音频不清晰]精确定轨铁路，最大限度地减少运动部件，其余部件移动得更快。码头上的停留时间会更低。火车将更频繁地按时排放。它允许我更快地移动我的资产。我的船员成本将得到优化。我的设备成本将得到优化，我的速度将得到优化。它创造了容量，它只是逐步打击每个业务部门，因为它正在我们一些最高密度的走廊中移动。所以这是积极的，积极的，积极的。我在操作上同样兴奋，因为它不仅让我们现在享受到这种好处。随着我们前进和随着我们变得更好而成为更好的铁路运输者，它使我们能够保持持续改进。通过我们的投资和执行 - 日复一日地执行运营模式。这是双赢的，不仅仅是为了多式联运，而且对于CP以及我们通过温哥华的所有业务线，因为它是这条铁路的关键走廊。
And your next question comes from Scott Group of Wolfe Research.
Nadeem, wanted to ask a follow-up on the guidance. Do you think that we maintained double-digit earnings growth in third and fourth quarter?
Yes. I didn't hear the last part. In what?
是。 我没听到最后一部分。 在什么？
Do you think we maintained double-digit earnings growth in third and fourth quarter? I understand, full year, we don't want to get into the double digit versus strong double digits. I'm just trying to isolate second half of the year.
您认为我们在第三和第四季度实现了两位数的收益增长吗？ 据我所知，全年，我们不想进入两位数而非两位数。 我只想在今年下半年分开。
I certainly expect that, that's a fair representation in Q3, Q4. It maybe a little bit difficult. I'm not going to give you a quarterly guidance on EPS but looking at what Q4 was -- that was an all-time record EPS number for the company.
我当然希望这是第四季度第四季度的公平代表。 这可能有点困难。 我不打算给你关于EPS的季度指导但是看看Q4是什么 - 这是公司的历史最高记录。
Okay. That make sense. And then, Keith, I don't know if I'm a little early to ask this but I think the 10-year tech contract comes up next year. It's the first time, sort of, this management team has an opportunity to take a look at that contract. Do you think there's big opportunities, either from an operating or pricing, or just philosophically. Opportunities with that contracts since it's been 10 years.
好的。 有道理。 然后，基思，我不知道我是否有点早就问这个问题，但我认为明年的10年技术合同将会出现。 这是第一次，这个管理团队有机会看一下这份合同。 你认为有很大的机会，无论是来自经营还是定价，还是仅仅是哲学上的。 合同的机会，因为它已经10年了。
It comes up in 2021. So you're a little bit early, Scott but rest assured it's not something that we're not thinking about. Listen, here's the strategy of this company. It's our objective to become integral into the companies that we partner with. Their success, because when they do well we do well. We want to be part of their supply chains. We're part of the reason that tech is able to enjoy reliability in the supply chain and lower-cost producers in market share and in real markets. We're part of the following list. As long as we continue to play that role, we continue to be good supply chain partners. We originate the coal. We have access to Neptune. Access to Westshore.
We're going to continue to be a key player, strategic player in -- create compelling value that's going to be hard to walk away. So when you talk about huge opportunities. To me the opportunity is to strengthen the partnership and help them grow in the market space, quantum leaps and productivity. Listen, we're always going to push to move things better, and if we can knock out some of that noise, making the supply chain more a lability in partnership with the terminals at the coast as well as in partnership with the terminals that load the coal. And we do our part in the middle, then yes, there's opportunities. But as far as quantum leaps, no; as far as improving and protecting that revenue stream and helping them succeed in the world marketplace I think we're very confident in our ability to be able to do that. And that's what gives us confidence at the negotiating table. We just got to make sense. When you make sense and you're a partner with -- it helps the company succeed in the marketplace. It's hard to walk away from that.
我们将继续成为一个关键的参与者，战略参与者 - 创造令人难以忘怀的价值。所以当你谈论巨大的机会时。对我而言，机会是加强合作伙伴关系，帮助他们在市场空间，量子飞跃和生产力方面实现增长。听着，我们总是会努力推动事情变得更好，如果我们能够消除一些噪音，使供应链与海岸码头合作更加不稳定，并与负载的终端合作煤炭。我们在中间做我们的一部分，然后是的，有机会。但就量子跳跃而言，没有;就改善和保护这一收入来源并帮助他们在世界市场取得成功而言，我认为我们对能够做到这一点的能力非常有信心。这就是让我们对谈判桌充满信心的原因。我们必须有意义。当你有意义并且你是合作伙伴时 - 它有助于公司在市场上取得成功。很难摆脱这一点。
And your next question comes from Brian Ossenbeck of JPMorgan.
John, I just want to come back to your comment on the mix, crude, it's been strong this quarter. Couple of points as you mentioned. Can you just elaborate a little bit on what's was driving that? It sounded like crude was a significant source but also may be a mix of new business. So if you can elaborate on what do you expect to maintain that sort of clip in the back half of the year? And how much of that is reliant on continued ramp-up in crude?
约翰，我只想回到你对混合物的评论，原油，本季度表现强劲。 你提到的几点。 你能详细说明一下那是什么驱动了吗？ 这听起来像原油是一个重要的来源，但也可能是新业务的混合。 那么，如果你能详细说明你希望在今年下半年保留那种剪辑？ 其中有多少依赖于原油的持续增长？
Yes. So we definitely saw less long-haul crude in Kansas City, more shorter haul over some of our Western gateways and noise that had a material impact on some of the new business. And the crude-by-rail space that we brought on has also come on, as I mentioned, at very strong pricing level. Though I look at it like this, Brian. As I look at Q3 and Q4. I think that moderates -- I'm not sure we see that mix tailwind like we had in Q2 at some of this other longer-haul crude ramps up backup.
是。 因此，我们肯定看到堪萨斯城的长途原油减少，对我们的一些西方门户的短途运输和对一些新业务产生重大影响的噪音。 正如我所提到的那样，我们带来的原油与铁路空间的价格也非常强劲。 虽然我这样看，但布莱恩。 当我看到Q3和Q4时。 我认为温和派 - 我不确定我们是否会看到像第二季度那样的混合顺风，其他一些长途原油加速备用。
Okay. So crude is the biggest...
And just another question for you, John, on the Canadian EOP [ph] mandates now, and effective June 2021, a little bit later than expected. I think you've typically referred to that as sort of upside outside of the guidance but now it's been delayed a bit, even past the 2020 outlook. Do you think actually having that in place will create any sort of shift as people start to get ready for that may be assessment that maybe actually means for the business whether we had something improved in spite of. Or is it still too early to think about any impact from that?
还有另一个问题，约翰，现在加拿大EOP [ph]强制要求，并且在2021年6月生效，比预期稍晚。 我认为你通常认为这是指引之外的一些好处，但现在已经推迟了一些，甚至超过了2020年的展望。 你是否认为实际拥有这一点会产生任何形式的转变，因为人们开始为此做好准备可能是评估，这可能实际上意味着业务，无论我们是否有改进的东西，尽管如此。 或者考虑一下这种影响还为时尚早？
No. I think having that certainty in the marketplace now is that. We expect it to be somewhat of a capacity, sort of, crunch driver when it is applied. And now that we know, sort of, a locked in date, we can have those strength discussions on when we get into the renewals, and what our pricing looks like between now and then? And with the expectation that when ELDs do come about, how that's going to change and impact the marketplace. So all in all, I think putting a line in the sand now and having clarity, actually that's sort of helping us out.
不，我认为现在市场上有那种确定性。 我们期望它在应用时有点像容量，类型，紧缩驱动程序。 而现在我们知道了一个锁定的日期，我们可以在进行续订时进行那些力量讨论，以及我们的定价在现在和未来之间的情况如何？ 并且期望当ELD出现时，它将如何改变并影响市场。 总而言之，我认为现在在沙滩上划一条线并且清晰，实际上这有点帮助我们。
Your next question comes from Seldon Clarke of Deutsche Bank.
Just getting back to the outlook for margins in the back half of this year. You called that incremental margin of 90% in the quarter, which is well above your long-term.
I wasn't on.
Please take that if you can. You got locked on a little bit somehow.
I apologize. So just wanted to ask about the outlook for margins in the back half of the year in a little bit of a different way. You called out incrementals of 90% in the quarter, which is, obviously, well above your kind of longer-term range of 65%. And you talked about pre-hiring employees and you had some tailwinds or mix in the quarters. So just kind of given all those moving pieces, how should we think about your core incremental margins in the back half of the year?
我道歉。 所以只是想以一种不同的方式询问今年下半年的利润率前景。 你在本季度调出了90％的增量，这显然远高于65％的长期范围。 你谈到了雇用员工的前期，你们有一些顺风或混合在一起。 所以，考虑到所有那些动人的作品，我们应该如何看待今年下半年的核心增量利润？
I mean when we guide the incremental margins, we talk about 70% or 75% level. We're comfortable with that. I mean quarter-to-quarter, could it change? Could it be a little bit lower and a little bit higher? Yes, somewhat dependent on the mix business as well and just how things are operating. So I think, on the whole, we're still confident with that 70% to 75% level.
我的意思是，当我们引导增量利润时，我们谈论的是70％或75％的水平。 我们对此很满意。 我的意思是季度，它会改变吗？ 可能会有点低一点点吗？ 是的，在某种程度上依赖于混合业务以及事情的运作方式。 所以我认为，总的来说，我们仍然对70％到75％的水平充满信心。
And okay. So even with the headwinds from the pre-hiring in the second quarter, you still expect that to kind of step down? And there's enough -- there are enough positives to get up to 90?
好吧 因此，即使在第二季度招聘前的不利因素中，您仍然希望能够下台吗？ 而且足够 - 有足够的积极因素可以达到90？
I mean, yes. If you take up the pre-hiring, it will be closer to 100%. So that pre-hiring was done in Q2. That was in the numbers we just reported, right?
我的意思是，是的。 如果你接受预招聘，它将接近100％。 因此，预租在第二季度完成。 那是我们刚刚报道的数字，对吗？
Right. Yes. It's kind of what I was asking why it was a step back down again or just...
对。 是。 这就是我所问的为什么它再次退回或只是......
Well, again, it depends on the quarter-to-quarter. There's other cost and other things that vary between quarter-to-quarter, right? So if you hit 100% one quarter, doesn't mean it's going to be sustainable forever. So that's why we guide on a full year basis, not quarterly.
那么，再次，这取决于季度与季度。 还有其他成本和其他因素在季度与季度之间有所不同，对吧？ 因此，如果你在一个季度达到100％，并不意味着它将永远持续下去。 所以这就是为什么我们指导全年，而不是每季度。
Got it. Okay. And then just kind of a longer-term question on OR. Just given everything that's going on in the industry as well as the PSR, it feels like the theoretical for that management team is they're willing to put out their kind of high 50s for OR. But just given like what you guys have done last several quarters. Your incremental margins are at 90% range and your quarter incremental margins at 70% to 75%. What do you think the ultimate floor is for rail ORs over the next several years?
得到它了。 好的。 然后就OR而言，这只是一个长期问题。 刚刚给出了行业和PSR中发生的所有事情，感觉管理团队的理论是他们愿意为OR提供他们的高50。 但就像你们过去几个季度所做的一样。 您的增量利润率为90％，季度增量利润率为70％至75％。 您认为未来几年铁路OR的最终楼层是什么？
I'd say this, I'm going to speak to what -- I've got good line of sight to and what I know, and obviously, I can't control it all and some things get be a little shorter or actually overachieved. But I see an ability annually to improve with our business mix and the growth if we're going to bring it online with cheer and with partnerships, organic and inorganic growth, appointing year for the next 2 to 3 years. So I'll say this going annually from sub- 60 part of the possible mid-60s
我会说这个，我会说什么 - 我有很好的视线和我所知道的，很明显，我无法控制所有这些，有些事情会变得更短或实际上超额完成。 但我认为，如果我们要通过合作，有机和无机增长，在未来2到3年内任命一年，我们的业务组合和增长将会提升。 所以我会说这可能是每年从60年代中期的60岁以下
And your next question comes from Ben Poirier from Desjardins Capital.
你的下一个问题来自Desjardins Capital的Ben Poirier。
Congratulations for the good quarter. John, just in terms of forest product. Obviously, a very good performance when we look at the revenues up 8%. It seemed a big discrepancy versus the industry. Could you maybe talk about what are the key drivers here in terms of forest product? And what you see kind of for the second half?
祝贺好季度。 约翰，就森林产品而言。 显然，当我们看到收入增长8％时，表现非常好。 与行业相比，这似乎是一个很大的差异。 您可以谈谈森林产品方面的关键驱动因素吗？ 你看到下半场有什么样的？
Yes. You know what, we've actually seen quite a bit of success in 2 areas. One is our pulp business has been quite strong. So that's sort of a derivative of our growth in our international business that has allowed us to grow the pulp business for export back out of Canada. So we've seen good success in that space, and then our team has been focused really on asset utilization of our center beam fleet. So the lumber market has no doubt been challenged. But I think we've targeted into the market places that we do see sustainable business. And then really focus on asset utilization with our partners into those marketplaces. It is no doubt, as I look into Q3 and Q4, there's going to be some headwinds in that space certainly as we got the sawmill curtailment that are somewhat ongoing in B.C. The good thing is that has less impact on us than and frankly because big part of our network in the West is transload origin transload, it gives us -- we've actually got a bit of insulation from some of that impact. So I do expect that Q3 and Q4 in the forest product space will certainly be more challenged in the lumber space. But we'll certainly going to try to sustain it as we look at into our pulp business.
是。你知道吗，我们在两个领域看到了相当多的成功。一个是我们的纸浆业务一直很强大。因此，这是我们国际业务增长的衍生品，使我们能够将出口纸浆业务从加拿大发展回来。所以我们在这个领域看到了很好的成功，然后我们的团队一直专注于我们的中心梁船队的资产利用。因此木材市场无疑受到了挑战。但我认为我们的目标是进入可持续发展业务的市场。然后真正关注与我们的合作伙伴进入这些市场的资产利用率。毫无疑问，当我调查第三季度和第四季度时，在那个空间中肯定会出现一些不利因素，因为我们得到的锯木厂削减量在公元前有所持续。好消息是，对我们的影响要小于坦率，因为我们在西方的大部分网络都是转载源转换，它给了我们 - 实际上我们已经从一些影响中获得了一些隔离。所以我确实预计森林产品空间中的Q3和Q4肯定会在木材领域受到更多挑战。但是，当我们研究纸浆业务时，我们肯定会尝试维持它。
Okay. That's great color. And may be a high-level question for Keith. When we look at the strength of the Canadian dollar, obviously, right now it's 130. Still in line with the guidance -- your assumption for the year so no material impact on the bottom line but does it influence the way some of your customer think about their business strategy? And is there a certain level where the Canadian companies could become, let's say, having more difficulty or more competitive issues, Keith?
好的。 那是很棒的颜色。 对于基思来说可能是一个高级别的问题。 当我们看看加元的强势时，显然，现在是130.仍然符合指引 - 您对年度的假设因此对底线没有实质性影响，但它是否会影响您的一些客户的想法 关于他们的经营策略？ Keith说，加拿大公司在某种程度上可以成为更难或更具竞争力的问题吗？
It's the same fundamental that exists. A lower Canadian dollar generally is going to favor the Canadian producer because it gives them a little bit advantage in reaching the marketplace on exports. As long as that is there, I don't see a whole lot of change. If the Canadian dollar were to get remarkably stronger than could you see any impact? may be. But I just don't see that as a possibility or probability in the immediate future.
它与存在的基本原理相同。 较低的加元通常会有利于加拿大的生产商，因为它使他们在进入市场方面有一点优势。 只要那样，我就没有看到很多变化。 如果加元明显强于你能看到任何影响吗？ 也许。 但我不认为这是近期的可能性或可能性。
And your next question comes from Ravi Shanker of Morgan Stanley.
I am a lot of focus on crude-by-rail in the near term if I ask a longer-term question terms of the conversation you have with your customers and the constant delays you're seeing in new pipeline projects. Is this still viewed as a, like, a 3-year opportunity or are you having constructive conversations for longer-term contracts and seen those volumes extend beyond that initial window?
Well, I'll let John add color if he'll like to, Ravi. But discussions when this all started would have been 2 to 3 years is based on pipelines that those expectations have been far missed. There's so much uncertainty with the pipelines 3 to 4 to 5-year discussion is possible. So I think it extends the tail a bit. I still believe the pipelines will be built. There's too much of a critical need. There's just a lot of noise and a lot of hoops and hops to build but they will come. So there's a bit of a tail to our 2 to 3 when we started this thing, but it's not going to be for ever tail, which I continue to remind John and the commercial team, we're making 30, 40-year asset decisions at this company. Certainly not that kind of tail. And we're not going to overextend our capital -- overextend our company based on 4 or 5-year opportunity on a 30 year to 40 year decision.
好吧，如果他愿意，我会让约翰增添色彩，拉维。 但是，当这一切开始时的讨论将持续2至3年，这是基于那些期望远未错过的管道。 管道有很多不确定性，可以进行3到4到5年的讨论。 所以我认为它延长了一点尾巴。 我仍然相信管道将会建成。 有太多的关键需求。 只有很多噪音和很多箍和啤酒花可以建造，但它们会来。 所以当我们开始做这件事时，我们的2到3有一点尾巴，但它不会永远拖尾，我继续提醒约翰和商业团队，我们做出30年，40年的资产决定 在这家公司。 当然不是那种尾巴。 而且我们不会过度扩张我们的资本 - 根据30年到40年的决定，基于4年或5年的机会过度扩张我们的公司。
Ravi. Keith, bang on. Our discussion is just frankly with the producers. These contract lengths are lining up in a 3 to 5 year range.
拉维。 基思，砰的一声。 我们的讨论只是与制片人坦诚相关。 这些合同长度排在3至5年的范围内。
Got it. Kind of -- when you kind of imagine that long-term outlook, I think your peer maybe looking at some growth opportunities beyond just the coal railroad business for acquisitions and such. Can you give us an update on what your M&A pipeline or non-real growth pipeline looks like and if there's any additional activity there?
得到它了。 有点 - 当你想象长期前景时，我认为你的同行可能会考虑除了煤炭铁路业务之外的一些增长机会，以进行收购等。 您能否告诉我们您的并购管道或非实际增长管道的最新情况以及是否还有其他活动？
The shortest update is, given our opportunities, our own unique story that CP we're not interested in pursuing a strategy to buy trucking companies or railroaders. We're going to continue to play to our core strength. Does that mean we want to get partnerships? Does that mean we won't take strategic steps to make sure that our customers have a level playing field that can do to win market share based on the strength of our service? We'll do that but as far as mine trucking companies. We're not the market.
鉴于我们的机会，最短的更新是我们自己独特的故事，CP我们对寻求购买货运公司或铁路运输公司的策略不感兴趣。 我们将继续发挥我们的核心力量。 这是否意味着我们想要建立伙伴关系？ 这是否意味着我们不会采取战略措施来确保我们的客户有一个公平的竞争环境，可以根据我们的服务实力赢得市场份额？ 我们会做到这一点，但就我的货运公司而言。 我们不是市场。
And we have no further questions at this time. So I will turn the call back over to Mr. Keith Creel for closing remarks.
我们目前没有其他问题。 所以我将把这个电话转回Keith Creel先生的闭幕词。
Okay. Want to wrap this up. I will thank everyone for their time this morning, for their interest and shareholders for the quarter trust and your vote of confidence. We had a phenomenal quarter. It's behind us now it's in the past. We're looking forward. We are focused on our convictions to make sure that we continue to meet or exceed our customers' expectations in the second half of this year as well as our shareholders. So with that being said, we look forward to sharing our third quarter results later in the year. Thank you.
好的。 想要把它包起来。 我将感谢大家今天上午的时间，感谢他们对季度信任和你的信任投票的兴趣和股东。 我们有一个惊人的季度。 它现在已经过去了。 我们期待着。 我们专注于我们的信念，以确保我们在今年下半年以及我们的股东继续满足或超越客户的期望。 因此，我们期待在今年晚些时候分享我们的第三季度业绩。 谢谢。
And this does conclude today's conference call. You may now disconnect.
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