2022 Financial Results Released by CN

Montreal – Business – CN (TSX: CNR) (NYSE: CNI) today reported its financial and operating results for the fourth quarter and year ended December 31, 2022. Diluted earnings per share (EPS) of C$2.10 grew by 23% on an adjusted basis in the fourth quarter, and operating ratio remained flat at 57.9% on an adjusted basis. ⁽¹⁾ For the same period, the Company reported diluted EPS growth of 24%, while operating ratio improved 0.4 points.

“I am very proud of the work accomplished by our team in the fourth quarter and throughout the year. Our approach to scheduled railroading improved our service to our customers, drove operational efficiency, and built the resiliency that enabled a rapid recovery during the extreme winter conditions late in the quarter. As we look to 2023, we believe our back-to-basics strategy and disciplined operating model will continue to deliver despite the softening economy.”
– Tracy Robinson, President and Chief Executive Officer, CN

Financial results highlights
Fourth-quarter 2022 compared to fourth-quarter 2021

• Revenues of C$4,542 million, an increase of C$789 million or 21%.
• Operating income of C$1,912 million, an increase of 22%, or an increase of 21% on an adjusted basis. ⁽¹⁾
• Diluted EPS of C$2.10, an increase of 24%, or an increase of 23% on an adjusted basis. ⁽¹⁾
• Operating ratio, defined as operating expenses as a percentage of revenues, of 57.9%, an improvement of 0.4 points, or remained flat on an adjusted basis. ⁽¹⁾

Full-year 2022 compared to full-year 2021

• Revenues of C$17,107 million, an increase of C$2,630 million or 18%.
• Operating income of C$6,840 million, an increase of 22%, and adjusted operating income of C$6,862 million, an increase of 22%. ⁽¹⁾
• Diluted EPS of C$7.44, an increase of 8%, and adjusted diluted EPS of C$7.46, an increase of 25%. ⁽¹⁾
• Operating ratio of 60.0%, an improvement of 1.2 points, and adjusted operating ratio of 59.9%, an improvement of 1.3 points. ⁽¹⁾
• Free cash flow of C$4,259 million compared to C$3,296 million in 2021. ⁽¹⁾
• Return on invested capital (ROIC) of 15.8%, a decrease of 0.6 points, and adjusted ROIC of 15.9%, an increase of 1.8 points. ⁽¹⁾

Operating performance
Fourth-quarter 2022 compared to fourth-quarter 2021
Operating performance improved across most measures in the fourth quarter of 2022 when compared to the same period in 2021.

• Injury frequency rate ⁽³⁾ improved by 34% and the accident rate ⁽⁴⁾ improved by 13%.
• Fuel efficiency improved by 1% to 0.886 US gallons of locomotive fuel consumed per 1,000 gross ton miles (GTMs).
• Car velocity (car miles per day) improved by 10%.
• Through network train speed (mph) improved by 1%.
• Through dwell (entire railroad, hours) improved by 9%.
• Train length (in feet) decreased by 7%.

Full-year 2022 compared to full-year 2021
The Company’s focus on scheduled railroading has resulted in improvements in car velocity, through dwell and fuel efficiency, as well as a decrease in train length and train weight, despite negative impacts from the harsh winter in the first quarter of 2022.

• Injury frequency rate ⁽³⁾ improved by 19% and the accident rate ⁽⁴⁾ increased by 7%.
• Fuel efficiency improved by 2% to 0.867 US gallons of locomotive fuel consumed per 1,000 GTMs.
• Car velocity (car miles per day) improved by 1%.
• Through network train speed (mph) decreased by 2%.
• Through dwell (entire railroad, hours) improved by 4%.
• Train length (in feet) decreased by 5%.

2023 outlook and shareholder distributions⁽²⁾
CN expects to deliver EPS growth in the low single-digit range due to a softer economic outlook.

The Company’s Board of Directors approved an 8% increase to CN’s 2023 quarterly cash dividend, effective for the first quarter of 2023. This is the 27^th consecutive year of dividend increases, demonstrating our confidence in the long-term financial health of the Company. In addition, the Company’s Board of Directors also approved a new Normal course issuer bid (NCIB) that permits CN to purchase, for cancellation, over a 12-month period up to 32 million common shares, starting on February 1, 2023, and ending no later than January 31, 2024.

Fourth-quarter 2022 revenues, traffic volumes and expenses
Revenues for the quarter increased by 21% to C$4,542 million, when compared to the same period in 2021. The increase in revenues was mainly attributable to higher fuel surcharge revenue as a result of higher fuel prices, the positive translation impact of a weaker Canadian dollar, freight rate increases and higher volumes of Canadian grain.

RTMs, measuring the weight and distance of freight transported by CN, increased by 6%. Freight revenue per RTM increased by 15%, mainly driven by higher fuel surcharge revenue as a result of higher fuel prices, the positive translation impact of a weaker Canadian dollar and freight rate increases.

Operating expenses for the quarter increased by 20% to C$2,630 million, when compared to the same period in 2021. The increase was mainly as a result of higher fuel prices and the negative translation impact of a weaker Canadian dollar.

Full-year 2022 revenues, traffic volumes and expenses
Revenues for 2022 increased by 18% to C$17,107 million, when compared to 2021. The increase in revenues was mainly attributable to higher fuel surcharge revenue as a result of higher fuel prices, freight rate increases, the positive translation impact of a weaker Canadian dollar, higher Canadian export volumes of coal via west coast ports and higher volumes of U.S. grain; partly offset by lower international container traffic volumes via the port of Vancouver as a result of supply chain congestion and significantly lower export volumes of Canadian grain in the first half of 2022.

RTMs increased by 1%. Freight revenue per RTM increased by 18%, mainly driven by higher fuel surcharge revenue as a result of higher fuel prices, freight rate increases, a decrease in the average length of haul and the positive translation impact of a weaker Canadian dollar.

Operating expenses increased by 16% to C$10,267 million, mainly due to higher fuel prices and the negative translation impact of a weaker Canadian dollar.

^{(1) Non-GAAP Measures
CN reports its financial results in accordance with United States generally accepted accounting principles (GAAP). CN also uses non-GAAP measures in this news release that do not have any standardized meaning prescribed by GAAP, including adjusted net income, adjusted diluted earnings per share (EPS), adjusted operating income and adjusted operating ratio (referred to as adjusted performance measures), free cash flow, return on invested capital (ROIC) and adjusted ROIC. These non-GAAP measures may not be comparable to similar measures presented by other companies. For further details of these non-GAAP measures, including a reconciliation to the most directly comparable GAAP financial measures, refer to the attached supplementary schedule, Non-GAAP Measures.}

^{CN’s full-year adjusted diluted EPS outlook (2) excludes the expected impact of certain income and expense items, which are expected to be comparable to adjustments made in prior years. However, management cannot individually quantify on a forward-looking basis the impact of these adjustments, which could be significant, as they are difficult to predict and may be highly variable. As a result, CN does not provide a corresponding GAAP measure for, or reconciliation to, its adjusted diluted EPS outlook.}

_{(2) Forward-Looking Statements
Certain statements included in this news release constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws, including statements based on management’s assessment and assumptions and publicly available information with respect to CN. By their nature, forward-looking statements involve risks, uncertainties and assumptions. CN cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Forward-looking statements may be identified by the use of terminology such as “believes”, “expects”, “anticipates”, “assumes”, “outlook”, “plans”, “targets” or other similar words.}

_{2023 key assumptions
CN has made a number of economic and market assumptions in preparing its 2023 outlook. The Company assumes negative North American industrial production in 2023. For the 2022/2023 crop year, the grain crop in Canada was above its three-year average (or in line when excluding the significantly lower 2021/2022 crop year) and the U.S. grain crop was in line with its three-year average. The Company assumes that the 2023/2024 grain crops in Canada and the U.S. will be in line with their respective three-year averages (excluding the significantly lower 2021/2022 crop year in Canada). CN assumes continued pricing above rail inflation upon contract renewals. CN assumes that in 2023, the value of the Canadian dollar in U.S. currency will be approximately $0.75, and assumes that in 2023 the average price of crude oil (West Texas Intermediate) will be approximately in the US$75 – US$80 range per barrel.}

_{Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors which may cause actual results, performance or achievements of CN to be materially different from the outlook or any future results, performance or achievements implied by such statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements. Important risk factors that could affect the forward-looking statements include, but are not limited to, general economic and business conditions, including factors impacting global supply chains such as pandemics and geopolitical conflicts and tensions; industry competition; inflation, currency and interest rate fluctuations; changes in fuel prices; legislative and/or regulatory developments; compliance with environmental laws and regulations; actions by regulators; increases in maintenance and operating costs; security threats; reliance on technology and related cybersecurity risk; trade restrictions or other changes to international trade arrangements; transportation of hazardous materials; various events which could disrupt operations, including illegal blockades of rail networks, and natural events such as severe weather, droughts, fires, floods and earthquakes; climate change; labor negotiations and disruptions; environmental claims; uncertainties of investigations, proceedings or other types of claims and litigation; risks and liabilities arising from derailments; timing and completion of capital programs; and other risks detailed from time to time in reports filed by CN with securities regulators in Canada and the United States. Reference should also be made to Management’s Discussion and Analysis (MD&A) in CN’s annual and interim reports, Annual Information Form and Form 40-F, filed with Canadian and U.S. securities regulators and available on CN’s website, for a description of major risk factors relating to CN.}

_{Forward-looking statements reflect information as of the date on which they are made. CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities laws. In the event CN does update any forward-looking statement, no inference should be made that CN will make additional updates with respect to that statement, related matters, or any other forward-looking statement. Information contained on, or accessible through, our website is not a part of this news release.}

_{(3) Per 200,000 person hours, based on Federal Railroad Administration (FRA) reporting criteria.}

_{(4) Per million train miles, based on FRA reporting criteria.}

This earnings news release is available on the Company’s website at www.cn.ca/financial-results and on SEDAR at www.sedar.com as well as on the U.S. Securities and Exchange Commission’s website at www.sec.gov through EDGAR.

About CN
CN is a world-class transportation leader and trade-enabler. Essential to the economy, to the customers, and to the communities it serves, CN safely transports more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year. CN’s network connects Canada’s Eastern and Western coasts with the U.S. South through a 18,600-mile rail network. CN and its affiliates have been contributing to community prosperity and sustainable trade since 1919. CN is committed to programs supporting social responsibility and environmental stewardship.