Dniprovahonmash net income drops 76% yoy in 1H13

Freight railcar producer Dniprovahonmash (DNVM UK) reported its net income slumped 76% yoy to UAH 127 mln in 1H13, according to its July 24 statement. The company’s revenue declined 56% yoy to UAH 1.04 bln in 1H13, while EBITDA fell 75% yoy to UAH 164 mln. Freight railcar output fell 66% yoy to 1,375 units in 1H13, including a 57% yoy decline to 783 units in 2Q13. Exports account for 81% of the company’s total sales.

Roman Dmytrenko: Since the quality certificate of Dniprovahonmash’s major supplier – Kremenchuk Steel Casting – was reinstated in the beginning of April, the 57% yoy drop in 2Q13 output is not likely to be related to the bogie castings shortage that existed until then. In our view, this is an industry-wide trend indicating CIS freight railcar demand is cooling down. We expect Dniprovahonmash to report a 52% yoy drop in freight car output for 2013 (vs. its guided 20% yoy drop) and to decline offering dividends for the year.