Kryukivsky Wagon Works To Create JV In Iran.

By the end of 2006 the company plans to sign an agreement, and start operations in 2007. The JV will produce 2 ths carriages, mostly – boxcars and cisterns. At first stage of cooperation Kryukivsky (KVBZ) plans to deliver parts for minor assembly operations, and afterwards production will be localized in Iran to larger degree. Concorde Capital: The Iranian market is attractive for Ukraine’s carriage-building due to the country’s plans for massive renovation of its park of railway carriages. Kryukivsky will compete with Azovmash, the managing company for Mariupol Heavy Machinery (MZVM: BUY), and Azovzahalmash (AZGM: BUY) which signed a long-term contract with Iranian Railways last year. Kryukivsky has already received a large batch of orders from Ukrzaliznytsya (UZ), Ukraine’s state-owned railway carrier (for 2.5 ths carriages in 2006). Its financing has been postponed due to delays in the adoption of UZ’s financial plan, which, in our opinion, caused worsening of KVBZ financials in 1Q06. Kryukovsky Wagon posted a decrease in net revenues in 1Q06 by 45% to USD 39.6 mln, EBITDA fell by 56% to USD 5.9 mln, net income decreased by 60% to USD 5.1 mln. We expect the company to catch-up in the following quarters.