MONTREAL- CN (TSX: CNR) (NYSE: CNI) is proud to announce that its diluted earnings per share (EPS) grew 17 per cent, and 14 per cent on an adjusted basis in the fourth quarter, while free cash flow for the full-year 2020 reached a record of over C$3.2 billion. (1)

'2020 was a year like no other and thanks to our colleagues, who are essential workers, we got through it together and kept the economy moving while setting impressive new volume records in key markets. Our operations remained very nimble in the fourth quarter as we right-sized to meet the increased demand while we maintained industry leading fuel efficiency. We continue to actively implement our long-term strategy, focusing on sustainable growth and deploying advanced technology to generate value for all of our stakeholders.'

JJ Ruest, President and Chief Executive Officer, CN

Financial results highlights

Fourth-quarter 2020 compared to fourth-quarter 2019

Revenues of C$3,656 million, an increase of C$72 million or two per cent.

Diluted EPS of C$1.43, an increase of 17 per cent, or 14 per cent on an adjusted basis. (1)

Operating ratio of 61.4 per cent, a decrease of 4.6 points, or 3.8 points on an adjusted basis. (1)

Operating income of C$1,411 million, an increase of 16 per cent, or 13 per cent on an adjusted basis. (1)

Full-year 2020 compared to full-year 2019

Revenues of C$13,819 million, a decrease of C$1,098 million or seven per cent.

Diluted EPS of C$5.00, a decrease of 14 per cent, and adjusted diluted EPS of C$5.31, a decrease of eight per cent. (1)

Operating ratio of 65.4 per cent, an increase of 2.9 points, and adjusted operating ratio of 61.9 per cent, an increase of 0.2 points. (1)

Operating income of C$4,777 million, a decrease of 15 per cent, and adjusted operating income of C$5,263 million, a decrease of eight per cent. (1)

Free cash flow was C$3,227 million, an increase of C$1,235 million. (1)

Adjusted return on invested capital (adjusted ROIC) of 13.4 per cent, a decrease of 1.7 points. (1)

2021 outlook and shareholder distributions (2)

'While the recovery remains uneven across the markets we serve, we are pleased by the momentum in volume demand that grew during the fourth quarter and continues to grow. We are increasingly optimistic about 2021 and we are reinstating our full-year financial outlook. We are also pleased to be announcing our plans for C$3.0 billion of capital investments to stay ahead of the demand and keep meeting our customers' needs through safe and efficient operations,' added Ruest.

CN is targeting to deliver EPS growth in the high single-digit range this year compared to adjusted diluted EPS of C$5.31 in 2020. (1)

CN is also targeting free cash flow in the range of C$3.0 billion to C$3.3 billion in 2021 compared to C$3.2 billion in 2020. (1)

The Company assumes mid-single digit volume growth in 2021 in terms of revenue ton miles (RTMs) as it sees growth opportunities, despite continued weakness in sectors of the broad freight environment.

The Company's Board of Directors approved a seven per cent increase to CN's 2021 quarterly cash dividend, effective for the first quarter of 2021. This is the 25th 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 14 million common shares, starting on February 1, 2021, and ending no later than January 31, 2022. The Company expects to resume its share repurchases in the first quarter of 2021 under the new NCIB.

Fourth-quarter 2020 revenues, traffic volumes and expenses

Revenues for the quarter increased by two per cent to C$3,656 million, when compared to the same period in 2019. The increase in revenues was mainly attributable to record shipments of Canadian grain, increased shipments of U.S. grain, higher international container traffic via the Port of Vancouver and freight rate increases; partly offset by lower applicable fuel surcharge rates and lower volumes of petroleum crude.

RTMs, measuring the weight and distance of freight transported by CN, increased by 10 per cent. Freight revenue per RTM decreased by six per cent, mainly driven by an increase in the average length of haul, changes in business mix and lower applicable fuel surcharge rates; partly offset by freight rate increases.

Operating expenses for the quarter decreased by five per cent to C$2,245 million, when compared to the same period in 2019. The decrease was mainly due to lower fuel costs as well as lower purchased services and materials expense.

Full-year 2020 revenues, traffic volumes and expenses

Revenues for 2020 decreased by seven per cent to C$13,819 million, when compared to 2019. The decrease in revenues was mainly attributable to lower volumes across most commodity groups, primarily in the second and third quarter, caused by the ongoing effects of the COVID-19 pandemic and lower applicable fuel surcharge rates, partly offset by freight rate increases as well as record shipments of Canadian grain.

RTMs declined by five per cent. Freight revenue per RTM decreased by two per cent, mainly driven by lower applicable fuel surcharge rates, partly offset by freight rate increases.

Operating expenses decreased by three per cent to C$9,042 million, mainly due to lower fuel and labor costs and decreased purchased services and material expense; partly offset by a loss on assets held for sale, resulting from the Company's decision to market for sale for on-going rail operations, certain non-core lines.

(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, such as adjusted performance measures. 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. However, management cannot individually quantify on a forward-looking basis the impact of these items on its EPS because these items, which could be significant, 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. By their nature, forward-looking statements involve risks, uncertainties and assumptions. The Company 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 by their nature address matters that are, to different degrees, uncertain, such as statements about the impacts of the COVID-19 pandemic on the business operations, financial results and financial position and on the global supply chain, and statements about the economic recovery and its future impact on CN. Forward-looking statements may be identified by the use of terminology such as 'believes,' 'expects,' 'anticipates,' 'assumes,' 'outlook,' 'plans,' 'targets' or other similar words.

2021 key assumptions

CN has made a number of economic and market assumptions in preparing its 2021 outlook. The Company assumes that North American industrial production for the year will increase in the mid single-digit range, and assumes U.S. housing starts of approximately 1.45 million units and U.S. motor vehicle sales of approximately 16 million units. For the 2020/2021 crop year, the grain crop in Canada was above its three-year average and the U.S. grain crop was in line with its three-year average. The Company assumes that the 2021/2022 grain crops in both Canada and the U.S. will be in line with their respective three-year averages. CN assumes total RTMs in 2021 will increase in the mid single-digit range versus 2020. CN assumes continued pricing above rail inflation. CN assumes that in 2021, the value of the Canadian dollar in U.S. currency will be approximately $0.80, and assumes that in 2021 the average price of crude oil (West Texas Intermediate) will be approximately US$50 per barrel. In 2021, CN plans to invest approximately C$3.0 billion in its capital program, of which C$1.6 billion is targeted toward track and railway infrastructure maintenance.

Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors which may cause the actual results or performance of the Company to be materially different from the outlook or any future results or performance 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, the duration and effects of the COVID-19 pandemic; general economic and business conditions, particularly in the context of the COVID-19 pandemic; 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 be made to Management's Discussion and Analysis 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.

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.

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. As the only railroad connecting Canada's Eastern and Western coasts with the U.S. South through a 19,500-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.

Selected Railroad Statistics - unaudited

See full release at: https://www.cn.ca/en/news/2021/01/solid-quarterly-performance-on-volumes-drives-results/

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