The invasion of Ukraine has created “tremendous opportunities” in Europe and North America for bulk commodities such as grain and fertilizer, executives with Oregon-based railcar manufacturer The Greenbrier Companies said on an earnings call for its second fiscal quarter that ended on Feb. 28.
“The tragedy in Ukraine and its impact on commodity prices are likely to have far-reaching consequences to the global railcar industry, including growth in rail freight in many sectors,” Executive Chairman Bill Furman said in Greenbrier’s release announcing quarterly results.
While Greenbrier (NYSE: GBX) hasn’t experienced any significant effects on its business as a result of the invasion, the company anticipates the global market for food and fertilizers to be impacted because Ukraine and Russia are major producers of fertilizer, wheat and grain, Furman told investors during the earnings call on Wednesday.
Although Greenbrier has facilities in Romania and Poland, they’re in NATO countries and the company doesn’t anticipate the war in Ukraine to extend westward for now, Furman told investors.
Meanwhile, most of Greenbrier’s European customers are from Western Europe, and so while there are impacts to the supply chain because the bulk of materials — iron and steel — come out of Russia and Ukraine, Greenbrier’s sourcing teams are “determining areas where we can source commodities and the appropriate components in other areas,” said President and CEO Lorie Tekorius.
“We are focused on maintaining our production, making certain that we’ve got the right inventory on the ground to build the wagon and satisfy our customers’ needs,” Tekorius said on the earnings call.
Besides grain and fertilizer, changing energy policies in North America and Western Europe could create opportunities for rail transport of crude oil, ethanol and other products, Furman said in prepared remarks during the call.
“The commodity markets are traditionally leading indicators for expansion into rail freight. Most commodities shipped by rail are experiencing upward pricing pressure from demand constraints due to either sanctions on Russia or reduced production from Russia and in the Ukraine,” Furman said. “We expect rising global commodity prices and shifting trade patterns to elevate rail car demand in North America and Brazil and elsewhere in the world.”
Second fiscal quarter financial results
Greenbrier saw a net second fiscal quarter profit of $12.8 million, or 38 cents per diluted share, compared with a net loss of $9.1 million, or a loss of 28 cents per diluted share, in the second fiscal quarter that ended on Feb. 28, 2021.
Higher revenues helped boost quarterly profits. Overall revenues were $682.8 million, compared with $295.6 million in the prior year.
Cost of revenue was $628 million, compared with $278 million, while selling and administrative expenses were $54.7 million, compared with $43.4 million.
In the second fiscal quarter, Greenbrier delivered 4,800 railcar units. The deliveries are up 17% from the prior quarter and “driven by our core North American market,” Tekorius said. Lease fleet utilization increased to 98%, while the railcar backlog as of Feb. 28 was at 32,100 units with a value of $3.6 billion. New railcar orders totaled 8,500 and were valued at $930 million,
“There’s no doubt that the market backdrop will remain dynamic, particularly with the war in Europe, inflation, supply chain issues and the continuing human impact of the pandemic [persisting] for some time,” Tekorius said in prepared remarks during the earnings call. “We are managing the business accordingly and maintain our optimistic market outlook. We expect our operating metrics to continue to improve as we move through the next several quarters and beyond.”