In its financial report last week, Greenbrier had record revenues of $914 million for its fiscal fourth quarter and $3 billion for the 2019 fiscal year ending Sept. 30.
Car deliveries were 7,300 for the quarter and 23,400 for the fiscal year.
Greenbrier bought American Railcar in July [See Greenbrier completes purchase of American Railcar’s manufacturing arm, Trains News Wire, July 29, 2019] and it provided Greenbrier with new customers, including major railcar lessor GATX, William Furman Greenbrier CEO reported in an earnings call Friday.
“ARI also brings us a diverse mix of talent along with increased engineering designs and capabilities,” says Furman. “As a result of increased scale, we are the dominant provider of railcars in our North American market, while we also enjoyed better than a 50% market share in Europe and market share exceeding 70% in Brazil.”
Adding ARI helps Greenbrier achieve three of its four elements in overall strategy which Furman says is the strengthening its North American market, developing of talent, and growing its business to a larger scale. The fourth element is enhancing its international operations
Included in the ARI purchase is an order backlog of 10,600 railcars, bringing Greenbrier’s backlog to 30,300 units estimated at $3.3 billion, according Lorie Tekorius, Greenbrier’s chief operating officer.
While demand for railcars decreased in North America “amid global economic and geopolitical uncertainty,” Greenbrier increased tank car production over the past year, says Tekorius, “We do see strong demand for tank cars as well as plastic pellets, which is possibly more growth oriented than just replacement,” she says, adding that most current car production is to replace existing units.
Also, Greenbrier is optimistic regarding the market for boxcars, Furman says.
“An aging boxcar fleet — something has to give there, especially in some of these international markets: quite a lot of replacement demand. That would be true in North America as well,” he says.
The U.S. economy is “sound,” Furman says, “even though the effects of PSR and trade [barriers] have affected — have manifest — in loadings on the rail network and improved velocity, much can be changed if the trade uncertainties are removed.”
Regarding PSR, “I think the railroads recognize they have to be very careful or they’re going to get reregulated. Shippers are very unhappy.”
“But the effects of that have not been as great as the effects of trade,” Furman says. “Frankly speaking, in an election year, if the trade situation doesn’t improve, many people would be very surprised.”
Furman says trade issues are dampening intermodal, including Greenbrier’s market in it, “But we have been gravitating away from all of that and we still are strong, with a strong market share in intermodal, but that’s not where we are expecting demand to be in the next year.”
For fiscal 2020, Greenbrier expects to deliver 26,000 to 28,000 cars and have $3.5 billion in revenue, says Adrian Downs, chief financial officer.
Net earnings were $35.1 million for the fourth quarter and $71.1 million for the fiscal year.
In addition to building and leasing railcars, Greenbrier also manufacturers barges and is involved in railcar management and maintenance.
Will the box cars built 30 to 40 years ago be replaced when they hit 50 years old or will they be replaced sooner with new designs?