Azovmash Rolls On As Production, Sales Increase

Azovmash, holding company for Mariupol Heavy Machinery (MZVM: BUY) and Azovzahalmash (AZGM: HOLD), increased its production of railcars by 1.2% yoy in 2006 to 8,464 units, according to the company’s press service. The holding also announced plans to lift that number to 9,000 units in 2007. Additionally, Azovmash reported January 2007 sales figures that featured a yoy increase of 23.8% as it brought in USD 52 mln. Inna Perepelytsya: Actual production was slightly above our estimate of 8,248 units. Despite an insignificant increase in production by units in 2006, we estimate sales growth of 14% to USD 496 mln for MZVM and 19% to USD 282 mln for AZGM (including ~20% intra-group sales for each company), as Azovmash has begun shifting from gondola cars to producing more expensive tank-cars. In 2007 we expect they will reach their production target and continue to focus production on more profitable tank-cars, capitalizing on their acquisition of Poltavakhimmash, a chemical engineering plant.