Stakhaniv cuts railcar output 34% yoy in 1H12

Stakhaniv Wagon (SVGZ UK) reduced its freight railcar output 34% yoy to 2,701 units in 1H12, the company reported yesterday. At the same time, the company increased its share of specialized freight wagons from 1.4% of output in 1H11 to 35.9% in 1H12.

Roman Dmytrenko: The reported data implies Stakhaniv is currently producing 450 freight railcars per month, which equals the maximum production capacity of its related bogie casting supplier, Czech Kutna Hora. This suggests Stakhaniv fully stopped purchases of bogie casting from its traditional supplier, the CIS’s largest casting producer Kremenchuk Steel Casting, a negative surprise to us. With only in-group casting available to Stakhaniv, it can decrease wagon output 20% yoy to  5,400 units in 2012 to underperform our estimate by 23%. At the same time, the switch to production of higher value-added specialized freight railcars (vs. universal gondolas) should keep the company’s bottom line high even as production volumes decline.