Kryukiv Railcar must repair 800 railcars to get access to Russian market

Kryukiv Railcar (KVBZ UK) was informed by the Russian government that it will have to change casting details at about 800 freight railcars earlier supplied to Russia, the Kommersant-Ukraine newspaper reported on October 1, citing the company’s CFO. Last week, the Russian government canceled the certificates of Kryukiv Railcar that permitted them delivery to their Russian clients.

Alexander Paraschiy: The costs of re-equipping the 800 railcars is about USD 15 mln, we estimate, which is comparable to the profit that the company can generate from selling the same amount of new railcars to Russia by the end of 2013. With its railcar production capacity of 1,000 units per month, the company can, technically, repair the units in just one month, but it’s unlikely to have enough working capital to do such a project.

Even if it tries to do it, we see time-consuming logistical issues in returning all the railcars to Ukraine for re-equipment, order and delivery of new casting parts. Therefore, we see that Kryukiv will unlikely to receive a green light for the export of its railcars till the year end, barring any other solutions reached.