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Greenbrier Announces New Orders For 5,400 Railcars Valued At $575 Million

Stocks in this article: GBX

AUTOMOTIVE

"Automotive is an especially exciting part of our business today. Railroads carry approximately 70% of all new vehicles manufactured in North America.  Over the next three years, independent industry forecasts project that deliveries of automotive-related railcars will exceed 10,000 units in North America, with an equivalent number of racks being built.  This demand is being driven by growth in automotive traffic by rail as a result of growing auto sales and a geographic shift in production of autos.  Simultaneously, an aging fleet of automotive carrying railcars with an average age of approximately 20 years, and a 10% reduction in size of the automotive carrying railcar fleet in North America since 2009, is driving a railcar replacement cycle.  This fleet of automotive equipment consists of about 50,000 railcars, each equipped with racks, either unitized with the flatcar, as in the case of Auto-Max®, or with fully-enclosed, detachable racks.  Most conventional 89' cars for automotive service are owned by TTX, the national railroad-owned freight car pool operator.  Racks are owned predominantly by railroads, shippers or leasing companies," Furman continued.

Furman added, "Greenbrier is well-positioned to meet this growing demand.  We have the most comprehensive line of products for transport of finished vehicles by rail, with three distinct designs in North America:  Auto-Max, an articulated, fully integrated 2-unit railcar with flexible bi-level and tri-level configurations; Multi-Max, a new proprietary automotive rack with flexible bi-level and tri-level configurations; and a standard 89' flatcar for bi-level or tri-level rack service capable of taking either a conventional rack or Multi-Max.  Both Auto-Max and Multi-Max utilize important features of our innovative double-stack technology that offers superior versatility, flexibility, and increased load capacity.  Both also feature a proprietary sealed end-door that offers industry-leading cargo security and enhanced loading door edges for unmatched vehicle safety and protection in long-distance transit.  This is particularly important for service in Mexico.  We are pleased with our position in Europe, as well, where we are the leading automotive rail manufacturer from our Polish facility, having produced over 1,800 automotive railcars in the last five years."

Furman stated, "U.S. light vehicle sales increased by 13% in 2012 from 2011.  For the first time in five years, sales are forecast to exceed 15 million light vehicles in 2013, with continued sales growth forecast through 2016.  Mexico recently surpassed Japan as the largest exporter of light vehicles to the United States and is forecast to increase its share of North American light vehicle production substantially over the next decade.  This demographic shift will further support growth in automotive rail loadings, with rail as the preferred transportation method of light vehicles manufactured in Mexico.  Greenbrier's automotive line of products is also manufactured in Mexico, and we are uniquely equipped at our low-cost and flexible facilities to take advantage of this geographic shift.  At the same time, automotive rail loadings are up 16% from 2011 to 2012 in the United States and are forecast to increase in each of the next three years, all helping fuel demand for our automotive products."

ROBUST CAR LOADINGS TO DRIVE DEMAND FOR DIVERSIFIED PRODUCT OFFERINGS

Furman concluded by saying, "North American railroad loadings, excluding coal and agriculture and including intermodal, are up nearly 6% for the 11 weeks ending March 16, 2013 compared to the same period in 2012.  A number of sectors which Greenbrier serves, beyond automotive, are exhibiting robust traffic growth.  Chemical loadings which drive demand for tank cars and large covered hoppers increased 13% in the same period.  Loadings of non-metallic minerals and products, transported by small covered hoppers, were up 6% in the period.  Finally, 8% growth in intermodal container loadings, which drives demand for double-stack intermodal platforms, led to an order for double-stack wells.  Current rail traffic trends are favoring our strategy to be a supplier of diverse railcar types through an efficient and flexible manufacturing footprint."    

Mark Rittenbaum, chief financial officer noted, "We remain keenly focused on executing the core aspects of our integrated business model.  As management has previously stated, on April 4, 2013, concurrent with the release of our second quarter financial results, we expect to outline actions intended to improve gross margins and capital efficiency, with a view towards improving Greenbrier's return on invested capital and enhancing shareholder value."

Certain orders referenced in this release are subject to customary documentation and completion of terms. 

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