Stakhaniv Wagon cuts top, bottom line in 1Q12

Stakhaniv Wagon (SVGZ UK) cut its net income 4.8x yoy to USD 1.5 mln in 1Q12, the company reported in its financials yesterday. Revenues fell 29% yoy to USD 82.2 mln, gross profit dropped 6.6x you to USD 7.5 mln, and EBITDA slumped 2.6x yoy to USD 3.5 mln (EBITDA margin halved to 4%). The company cut wagon output to 1,320 units over the quarter (vs. 1,988 units a year ago), while diversifying its product mix. While in 1Q11 gondola cars accounted for 100% of its output, last quarter they accounted for only 2/3, with the rest consisting of hoppers, dumpcars and platforms, the prices of which are 9%-60% higher than for gondolas.

Roman Dmytrenko: The reported tightening in the company’s margins in 1Q12 suggests Stakhaniv has so far been unable to benefit from the acquisition of Czech casting producer Kutna Hora by its parent company this February. In turn, this might suggest the company’s parent group is employing transfer pricing. Another point of concern is that the company held 15% of its 1Q12 output as inventories of finished goods, though we hope this is a one-off logistics issue that will lift the company’s top line in the next quarter. A bright spot worth mentioning is the company’s visible success in diversification into new, specialized wagons amid fading demand for universal gondola cars.