The invasion of Ukraine has provided “tremendous potential” for bulk commodities such as grain and fertilizer in Europe and North America, officials with Oregon-based railcar manufacturer The Greenbrier Companies said during an earnings call for its second fiscal quarter, which ended on Feb. 28.
“The tragedy in Ukraine and its impact on commodity prices are likely to have far-reaching ramifications for the global railcar business, including growth in rail freight in many industries,” said Greenbrier’s Executive Chairman Bill Furman in the company’s quarterly results announcement.
While Greenbrier (NYSE: GBX) has not seen any significant effects from the invasion, the company expects the global market for food and fertilizers to be impacted because Ukraine and Russia are major producers of fertilizer, wheat, and grain, Furman said during the company’s earnings call on Wednesday.
Although Greenbrier has operations in Romania and Poland, they are in NATO nations, and Furman told investors that the business does not expect the war in Ukraine to spread westward for the time being.
Meanwhile, the majority of Greenbrier’s European customers are from Western Europe, so while there are supply chain impacts because the majority of materials — iron and steel — come from Russia and Ukraine, Greenbrier’s sourcing teams are “determining areas where we can source commodities and the appropriate components in other areas,” according to President and CEO Lorie Tekorius.
“We are focusing on maintaining our products, ensuring that we have the right inventory on the ground to build the wagon and meet the needs of our clients,” Tekorius said during the results call.
Aside from grain and fertilizer, shifting energy policy in North America and Western Europe may open up prospects for rail transport of crude oil, ethanol, and other products, Furman said during the call in prepared remarks.
“Historically, commodity markets have been leading indications for rail freight expansion.” “Most commodities delivered by rail are seeing price increases due to demand limitations caused by either sanction against Russia or reduced production from Russia and Ukraine,” Furman added. “We anticipate that growing global commodity prices and evolving trade patterns will boost rail car demand in North America, Brazil, and other parts of the world.”
Financial Results for the second fiscal quarter
Greenbrier reported a net profit of $12.8 million, or 38 cents per diluted share, in the second fiscal quarter that ended on Feb. 28, 2021, compared to a net loss of $9.1 million, or 28 cents per diluted share, in the previous fiscal quarter that ended on Feb. 28, 2021.
Higher revenues aided in increasing quarterly profitability. Overall revenue was $682.8 million, up from $295.6 million the previous year.
The revenue cost $628 million, up from $278 million, while selling and administrative expenses were $54.7 million, up from $43.4 million.
Greenbrier supplied 4,800 railcar units in the second fiscal quarter. Tekorius stated that the deliveries are up 17 percent from the previous quarter and are “led by our core North American market.” Lease fleet utilization improved to 98 percent, with a railcar backlog of 32,100 units valued at $3.6 billion as of Feb. 28. Orders for new railcars totaled 8,500 and were worth $930 million. “There’s no doubt that the market environment will remain dynamic, particularly with the war in Europe, inflation, supply chain challenges, and the lingering human effect of the pandemic [remaining] for some time,” Tekorius said during the results call, according to prepared remarks. “We are managing the business correctly and remain hopeful about the market.” We anticipate that our operating indicators will continue to improve over the next several quarters and beyond.”
