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Greenbrier optimistic for back-half recovery

Railcar manufacturer sustains $9.1 million net loss in second fiscal quarter

Railcar manufacturer Greenbrier (NYSE: GBX) is eyeing improving market conditions in the second half of this year, which the company hopes will boost production rates and sales levels at the end of its fiscal year 2021 and into 2022.

Greenbrier on Tuesday reported a net loss of $9.1 million, or 28 cents per share, in the second quarter of its 2021 fiscal year, compared with a net loss of $10 million, or 30 cents per share, in the first quarter of the 2021 fiscal year (see below).

Greenbrier CEO Bill Furman pointed to several U.S. economic indicators that reflect a growing optimism for the second half of 2021, such as a revised forecast for gross domestic product growth, strong consumer demand boosted, federal stimulus measures and low interest rates. Meanwhile, the federal infrastructure bill shows support for infrastructure spending in 2022 and beyond. 

Furthermore, North American rail traffic is also increasing, particularly for grain and intermodal, which in turn is presenting growth opportunities for boxcars and cars that carry certain chemicals and agricultural products. 

“We reactivated a number of North American production lines in March and several of our production lines are already booked well into or through fiscal 2022,” Furman said during Greenbrier’s earnings call with investors. “The inquiry rate for new manufacturing business has picked up dramatically. We expect the continued high rate of commercial activity to continue in April, May and beyond, consistent with our earlier forecasts that the second half of calendar 2021 would be the time of a V-shaped recovery.” 

The company has a $2.5 billion order backlog of about 24,900 units, which Greenbrier said supports continuous production lines.

Greenbrier also received 3,800 railcar orders in the quarter and another 1,700 orders worth approximately $190 million came in after the quarter closed in March. Combined, that equals about 5,500 car orders worth about $630 million in the span of four months.

In addition to announcing its quarterly results on Tuesday, Greenbrier said it completed the formation of GBX Leasing, a subsidiary that will own and manage a portfolio of leased railcars built primarily by Greenbrier. The arrangement entails GBX Leasing acquiring approximately $200 million per annum of newly built and leased railcars from Greenbrier.

“GBX Leasing creates a new annuity stream of tax-advantaged cash flows while reducing Greenbrier’s exposure to the new railcar order and delivery cycle,” Furman said in a release. “From a commercial standpoint, it is a strong complement to our integrated business model of railcar manufacturing and services that further enhances our distribution strategies to direct customers, operating lessors, industrial shippers and syndication partners. We expect that the joint venture will help Greenbrier continue to grow its diversified customer portfolio with a focus on industrial shipper customers and small batch production to leverage long-standing customer relationships and capabilities gained through the acquisition of ARI.”

Second-quarter financial results

Although Greenbrier still encountered an overall net loss between the first and second quarters, the second quarter saw a narrowing of that loss.


The extreme winter weather and weak demand environment dampened Greenbrier’s second-quarter revenue, which was down to $295.6 million compared with $403 million in the first quarter. Greenbrier’s second fiscal quarter ended Feb. 28.


“We believe that our Q2 just completed in February will be the most challenging quarter of our fiscal year, particularly affected by very bad weather in North America. There’s good reason to be optimistic as vaccines expand in the United States,” Furman said. “Vaccinations will bolster already accelerating infection and mortality rates and allow America to turn the corner on the pandemic at last.”

However, “globally, we are prepared for the pandemic to take a longer course toward resolution,” he added. 

Double-digit volume increases for grain and intermodal loadings helped drive the quarter’s year-to-date rail velocity down by nearly 6% compared with the same period in 2020. This translates into a decrease of about 2 miles per hour.

The lower velocity comes as more North American railcars are coming out of storage, with in-storage numbers falling by more than 148,000 units from the 2020 peak storage level. More new cars could also be built amid higher scrap prices and tax benefits for the construction of new, more efficient and environmentally friendly equipment, Furman said.

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.