Luhanskteplovoz to cut workforce, arranges new RZD order

Luhansteplovoz (LTPL UK) is planning to strengthen discipline and quality control, and workforce optimization, newly appointed CEO Pavel Cesnek said in an interview this week. Cesnek stressed that improvement in discipline and quality control were the key priorities for the company. The company already agreed with its trade union to cut its workforce by up to 15% this year and by another 10% later. Among other plans for the near future, Cesnek outlined a possible contract with Russian Railways (RZD) for 24 sections of Luhanskteplovoz’ flagship 2TE116-U locomotive equipped with a General Electric diesel engine (instead of Russian one in standard model).

Alexander Paraschiy: While workforce optimization seems to be an important issue, we do not expect it will significantly improve the company’s profitability; total workforce and social costs are just about 12% of sales. Perhaps the main profit-driving factor for the company could be better pricing for locomotives: as the company’s history suggests, locomotives supplied to RZD (with which the company is indirectly affiliated) were priced up to 20% less than analogues supplied to Kazakhstan. The company’s locomotive prices are growing 5% each year, slower than production costs.  Meanwhile, an additional order from RZD looks encouraging for the company, as it could add up to 15% to the company’s USD 282 mln sales plan for 2012.