Railcar Companies Climb Back

Posted on June 7, 1999

Two railcar builders showed profits this past year while the remaining companies showed smaller losses (e.g., Siemens Transportation Systems) than they suffered in the previous year. In addition, two of the other three have either merged (i.e., Ansaldobreda) or secured new ownership (i.e., Adtranz, now wholly owned by DaimlerChrysler), reflecting a much stronger situation than railcar builders experienced earlier in the decade. All five companies made comments on their own and the industry’s situation at presentations in Toronto, Paris and Copenhagen at various industry events. Alstom posted the strongest profitability and sales numbers in railway transport in the 1998-99 period. It received orders amounting to Euro 15,845 million (US$15 billion). This represents a six percent increase on the high order intake recorded in 1997/98. Sales remained stable at Euro 14,069 million (nearly $14 billion), the company reported. Specifically, Alstom’s Transport Group enjoyed a 14 percent increase in orders received on top of the 72 percent increase of the year before. Recent orders include 53 tilting trainsets to be supplied in consortium with Fiat Ferroviaria to Virgin Rail for the UK West Coast Main Line, 25 six-car trainsets for the Singapore metro with maintenance options extending up to 30 years, 108 metro cars for the Warsaw metro system (Poland), a turnkey transport system for the Fortaleza Metro in Brazil, and light rail vehicles for the French cities of St Etienne, Montpellier and Lyons. The company also received an order for 40 double-deck coaches from Amtrak for the San Diegan Corridor in Southern California and signaling contracts in Singapore, New York, Italy, Morocco, Turkey and Brazil. The high growth in Transport sales (+15%) includes the effect of the addition of recent acquisitions, notably Sasib (Italy/USA), Wessex Traincare (UK) and De Dietrich (France). In line with Transport's strategy to penetrate new geographic markets, sales increased strongly in USA and Brazil. The operating margin in Transport rose from 5.3 percent in 1997/98 to 6.0% in 1998/99. This was a result of the continuing effect of cost-reduction efforts and the first deliveries of standard trainsets, as well as the Company's focus on higher margin activities such as signaling and customer service. Meanwhile, Bombardier took up the number two position in rail transport profitability in the world. It posted sales of almost C$3 billion (US$2 billion) for the fiscal year ended January 31, 1999, up sharply from C$1.69 billion (US$1 billion) a year earlier, and a record order backlog of some C$9.3 billion (US$6 billion). Representatives of these companies also gave their world outlook. The future for the North American market is particularly strong, with anticipated growth of 50 percent in demand for rolling stock over the next five years in Canada and the United States. Mexico and Latin America also offer a number of avenues for expansion, including vehicle maintenance and increased demand for freight cars resulting from the privatization of railways. Growth of almost 20 percent is anticipated over the next five years in Western Europe, various analysts said. Germany remains the world's single largest rail market, and Eastern Europe has strong pent-up demand, which eventually is expected to create significant opportunities over the longer term. Bombardier Transportation already had landed what was its biggest-ever project, the C$2.6-billion Virgin Rail contract. Bombardier points to this project to illustrate the flexibility and capabilities of its global network of 24 plants. Engineering work on the Virgin Rail project is being performed at four different European locations, which will also share the manufacturing of the 78 trainsets involved. Elsewhere, a recent joint-venture initiative for the manufacture of passenger-rail vehicles in China represents an important milestone in further penetration of key Asian markets. And Bombardier Transportation sees excellent growth possibilities in the supply of turnkey urban transit systems, such as the just-completed ART (Advanced Rapid Transit) project in Kuala Lumpur, Malaysia. It currently is tracking more than 200 such potential projects worldwide, amidst encouraging signs that the worst of the economic uncertainties that put a damper on transport markets in some regions now are behind us. Bombardier intends to pursue continued growth in rail transportation and is committed to doubling its worldwide sales in this sector within the next five years, says Jean-Yves Leblanc, President and Chief Operating Officer of Bombardier Transportation. He said Bombardier Transportation will continue building on its core expertise in passenger-rail rolling stock, while expanding into new geographic markets. The Long Island Rail Road contract which was announced last week and could amount to C$2.7 billion (US$1.8 billion) if all options were exercised, is a strong confirmation of Bombardier Transportation's intent and ability to achieve its objectives. The company is also leading the team that is building the AIRTRAIN automated rapid transit system at New York's JFK International Airport, which includes provisions for long-term maintenance.

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