Greenbrier bargains with sand car customers

OREANDA-NEWS. July 07, 2016. Railcar maker Greenbrier is negotiating with customers who have firm orders for 5,000 covered hoppers designed to transport sand, a market that has soured amid a slowdown in North American hydraulic fracturing.

"I think we are halfway through a cycle of dealing with things," chief executive Bill Furman said on a conference call today. "First we saw it with oil-by-rail [tank] cars. We see the light at the end of the tunnel there, I hope it is not a train."

Furman added that sand car demand could recover quickly on an oil price rebound because of producers' large backlog of drilled-but-uncompleted wells that are waiting to be fractured, and that requires sand.

"These cars, while a little long today, could suddenly become a lot more attractive," he said.

Greenbrier, whose fiscal third quarter ended on 31 May, delivered 4,300 railcars during the period and received 1,700 orders, reducing its backlog to 31,200 from 34,100 at the end February. About 25pc of new orders stemmed from its European business, where demand is for smaller, cheaper types of cars.

"The order environment [in North America] is a bit tepid, so there is not a lot of activity going on there," chief financial officer Lorie Tekorius said, adding that only about 20pc of its backlog is energy-related and that Greenbrier has no energy-focused tank cars in its backlog.

GBW Railcar Services, a joint venture with Watco originally formulated to deal with an anticipated rush of tank car retrofits to meet new US and Canadian standards, is anticipating growing business in US-mandated tank car recertifications, Tekorius said.

Owners of older cars so far have not rushed to retrofit tank cars, and conventional wisdom is that few pre-October 2011 DOT-111 cars — particularly unjacketed varieties — will be retrofitted.

Greenbrier reported a \\$35.4mn profit in its fiscal third quarter, down from \\$42.8mn in the prior-year period.