MONTREAL, QUEBEC, CANADA – After coming up short in a protracted battle with rival rail carrier Canadian Pacific Ltd. (CP) to acquire Kansas City Southern (KCS), Canadian National (CN) on Sept. 17 unveiled a strategic plan that it said will allow it to “continue delivering high-quality service to customers while generating profitable growth and enhanced returns to shareholders.”

CN, which calls the plan “Full Speed Ahead — Redefining Railroading,” said it builds upon its January 2021 strategy to lead on safety, customer value, operational excellence, sustainability and social inclusion, while also delivering industry-leading shareholder returns.

“CN’s ambition is to build the premier railway of the 21st century by methodically investing in technologies to deliver high-quality service to customers, improve safety and sustainability, create capacity and reduce costs and delays,” said JJ Ruest, president and chief executive officer of CN. “Just as CN pioneered the industry’s focus on efficiency to increase reliability, we are now well-positioned to lead the industry through its next transformation by investing in the success of our customers, workforce and communities while delivering enhanced financial results.”

CN said it has conducted an extensive review of all revenue and cost levers and has targeted C$700 million of operating income improvements to drive future growth. To achieve these improvements in 2022, CN intends to use a balanced approach that includes a strategic review of non-rail businesses and an optimization of labor productivity.

For 2022, CN expects to grow operating income and earnings per share (EPS) by approximately 20% and improve its operating ratio to 57%. Additionally, CN is reviewing its capital structure and financial leverage with a view to increasing total shareholder distributions.

CN said it is committed to operational excellence and delivering value for its shareholders by:

  • Recommencing share repurchases under the plan previously approved by CN’s board of directors in January 2021 and completing the remaining C$1.1 billion of share repurchases by the end of January 2022.
  • Reviewing its capital structure and financial leverage with a view to increase total shareholder distributions, including share repurchases in the range of C$5 billion for 2022.
  • Reducing capex to 17% of revenue in 2022 as a result of the current good condition of its network and the company’s commitment to safety and customer service. CN expects to maintain capex at 17% of revenue for 2023-24 unless there are significant market shifts.
  • Driving top-quartile Total Shareholder Return (TSR), leading the industry in organic revenue growth driven by CN’s intermodal business and showing continuous improvement on its operating margin.

CN also unveiled the company’s plan to excel in the areas of sustainability, safety and social inclusion. They include:

  • Setting a science-based target of 43% carbon emission intensity reduction by 2030 based on 2019 levels.
  • Becoming the North American rail industry leader in fuel efficiency, consuming approximately 15% less locomotive fuel per gross ton mile.
  • Introducing an annual advisory vote on CN’s climate change action plan.
  • Aligning executive compensation with ESG objectives, including safety and fuel efficiency.
  • Reducing the mandatory retirement age and confirmed term limits for the board of directors.
  • Adding two new directors in 2021, along with a March 2021 announcement that CN’s board chairman will not be seeking re-election when his term expires in 2022.
  • Setting a target of at least 50% of non-management directors coming from diverse groups, including gender parity, by the end of 2022


“We spent the last several years making strategic and important customer-centric investments in our network, technology, sustainability and people,” said Robert Pace, chairman of CN. “These investments have allowed us to deliver high-quality service to our customers and position us well to drive more sustainable returns to shareholders over the long term. I am confident that CN’s senior management, a team of world-class railroaders who are focused on redefining the rail industry, have the skills and determination to lead the company into this exciting next phase.”

As part of its recently terminated transaction with KCS, CN said it secured an incremental $700 million in break-up fees.

While CN said it continues to believe that a CN-KCS combination would have enhanced competition and delivered many other compelling benefits for stakeholders, there have been significant changes to the US regulatory landscape since CN launched its initial proposal, which have made completing any Class I merger much less certain, including an Executive Order focused on competition issued by President Joe Biden in July.

CN has 19,500 miles of railroad network connecting Canada’s eastern and western coasts with the southern US.