Stakhaniv Wagon 1Q12 output down 35% yoy

Stakhaniv Wagon (SVGZ UK) cut 1Q12 freight wagon production 35% yoy to 1,300, blaming a bottleneck in bogie casting supplies, according to Interfax. Stakhaniv purchased casting sets for about 1,350 wagons from related Kutna Hora plant (Czech Republic) last quarter, implying no purchases from Ukraine’s Kremenchuk Steel Casting (the largest wagon casting supplier in the CIS). Based on its order book, the company had expected to produce 8,100 wagons in 2012 (+19% yoy). Stakhaniv expects to return to its 700-wagon monthly output plan in April.

Roman Dmytrenko: We attribute the weak 1Q to pricing issues at Kremenchuk, which reportedly hiked prices for bogie castings (25% of wagon production costs) more than 1.5x as of December 2011. Kutna Hora can supply no more than 500 bogie casting sets per month to Stakhaniv, and the latter’s 700-unit target suggests it will buy at least 200 sets in Kremenchuk each month. However, even that number does not look safe: Russia twice banned temporarily Kremenchuk-made castings over the last year, which puts the plan under question.  All in, we forecast Stakhaniv will produce 7,150 freight cars in 2012, (+4% yoy), or 650 units monthly over the remainder of 2012.