Dneprovagonmash reduces production of railcars 35% in 2023, sales drop 40%

MOSCOW. May 6 (Interfax) - The major Ukrainian railcar-building enterprise Dneprovagonmash, controlled by Sergei Tigipko's TAS financial and industrial group, produced 378 freight cars in 2023, 199 units, or 34.5% less than in 2022, the company's annual report said.

"The reason for the decline in railcar production was the decline in demand for them," the report says. Last year, grain cars and container platforms were what was mainly produced. Production capacity of 15% was used, while equipment capacity saw 18% of its capacity occupied.

Sales totaled 370 cars (a 253-unit, or 40.6% decrease versus 2022), and the average selling price of one freight car was UAH 2.4 million.

Meanwhile, net income from the sale of cars and other products decreased just 2.8% to UAH 1.077 billion, while net profit increased 1.1% to UAH 49.2 million. Operating profit decreased 1.8% to UAH 50.24 million, while gross profit dropped 12% to UAH 114.6 million.

The company exported UAH 4.9 million worth of products (0.5% of its sales volume). Last year, the plant shipped its first batch of MultiBOX modular cars to Austria (as part of the TransANT innovative project).

The cost of concluded but not yet completed contracts in 2023 totaled UAH 445.62 million, and the expected profit from them is estimated at UAH 5.2 million, the report said.

The report also states that the situation in the country "has radically changed the cargo base of railway logistics in Ukraine, and, as a result, cargo transportation has decreased more than half; the largest share of reductions was in cargo from the mining and metallurgical, fuel and energy complexes and construction." Demand for railcars continued to decline in the railcar building market in 2023 due primarily to a decrease in the volume of the loading base of 46%; a drop in freight turnover for goods with the highest specific gravity, and an increase in the circulation period of rolling stock due to a lack of equipment at Ukrainian Railways.

The share of Dneprovagonmash in the total production of freight cars in Ukraine was 20% last year; the report named Kryukov Carriage Works, DMZ Karpaty, and Ukrainian Railways (Ukrzaliznytsia) among its main competitors.

Meanwhile, the company said that it had entered into a new model of cooperation with the Austrian Voestalpine and OBB RailCargo Group in 2023 and already has a full line of freight flatcars for the EU market, which have received all the approvals required to run within the European Union and the UK. "The release of the first item of this line to the market is planned starting in the second quarter of 2024," the report says.

Dneprovagonmash plans to invest UAH 100.2 million in the development of European-bound traffic (for the purchase of equipment). It also plans to invest UAH 15 million in energy saving technologies. Other investments (certification, testing, and development of documentation) will amount to UAH 20 million, and leasing payments under the investment program will total UAH 13.1 million. Investments will be financed from own and borrowed funds.

The average number of plant employees in 2023 was 766 people.

Dneprovagonmash did not pay dividends to shareholders for the previous year in 2023 in accordance with the decision adopted by the general meeting of its shareholders, the report says.

This year, the plant intends to increase the volume of production and sales of railcars by expanding its customer base, improving production lines to increase productivity, quality and the competitiveness of its products, and modernizing equipment in accordance with European technical processes.

As reported, Cypriot T.A.S. Overseas Investments Limited received 40.03% in the joint venture TransANT GmbH, from the Ukrainian TAS group in February 2023. The JV was created by the Austrian OBB Rail Cargo Group and Voestalpine Stahl GmbH to produce innovative and cost-effective railway freight cars. As a result, Voestalpine Stahl's share in the joint venture decreased from 80.2% to 48.1%, and OBB Rail Cargo's share dropped from 19.8% to 11.87%.

Dneprovagonmash is one of the leading Ukrainian designers and manufacturers of freight cars. The company's annual production capacity is 9,000 cars.

The official exchange rate as of May 6 is 39.4 UAH/$1.