Kryukiv Railcar to cut staff and shift to three-day work week

Kryukiv Railcar (KVBZ UK) will shift to a three-day work week in September due to a lack of orders for freight railcars, the company’s main product, Kryukiv’s Deputy CEO Serhiy Melnyk said on September 4, as reported by the Interfax news agency. To reduce costs, the company will also lay off 500 employees (5.5% of the company’s total workforce).

Kryukiv’s freight railcar production fell 32% yoy to 4,473 units in 7M13 (639 railcars per month), while passenger railcar output grew 22% yoy to 55 units in the same period.

Roman Dmytrenko: Kryukiv will produce 6,000 freight railcars in 2013, down 45% yoy, according to the company’s most recent guidance released last week. That implies the company will operate at 30% of its estimated full capacity, producing 1,530 freight railcars in August-December 2013 (305 railcars per month, half of 1H13 output). In this respect, the introduction of a three-day work week isn’t surprising.

At the same time, we remain cautiously optimistic on Kryukiv’s exposure to the passenger rail segment, which does not show signs of a slowdown. We expect Kryukiv to report USD 655 mln in revenue (a 22% yoy decline) and a 35% yoy drop in EBITDA to USD 82 mln for 2013.