Kryukiv Wagon to load capacity in full in April

Kryukiv Wagon (KVBZ UK) cut its production outlook for March to 700 freight railcars vs. an initial plan of 1,000 units per month, the company’s CEO said yesterday via Interfax. The main cause of the monthly target adjustment was damage from a fire at a painting workshop on February 22. The company expects to work at planned monthly output (1,000 wagons) from April. The company’s CEO also noted that February output was below the target as well, citing the aforementioned damage and Russia’s temporary suspension of the quality certificate for casting parts made by Kremenchuk Casting, Kryukiv’s key spare parts supplier.

Roman Dmytrenko: The news looks encouraging for Kryukiv Wagon as the CEO’s statements suggest the suspension of the quality certificate for Kremenchuk Casting will not affect the wagon producer’s plans for March/April. With no apparent information about a reinstatement of the quality certificate, we interpret the statements as assurance that the suspension will soon be cancelled. The message is potentially positive for other wagon makers that have also been affected by the casting shortage, including Stakhaniv Wagon (SVGZ UK). The drop in output in February and March is of no surprise for the aforementioned reasons, and, we believe, is already priced in: Kryukiv Wagon shares lost 10% since the first news appeared in early February, vs. UX Index’s decline of 5% over the period.