Friday, November 13, 2009

Passenger rail business lifts Global revenue

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Global Railway Industries has reported total revenue of C$16.9 million (US$16.1 million) for this year's third quarter, compared to C$15.1 million in the third quarter of 2008. Terry McManaman, chairman, president, and CEO of London, Ontario-based Global, said the lift came from passenger rail sources.

"Global's rail product and service offering to passenger rail and transit operators was the catalyst to our overall revenue growth in Q3, rising 12%," said McManaman. "Global subsidiary Bach-Simpson, whose customers are mostly commuter- and passenger-rail related, has generated a year-to-date sales increase of 59% and continues to forecast strong growth throughout the remainder of the year. Approximately 40% of Global's total revenues are generated from passenger rail and transit operators."

Continued weakness in the freight segment kept Global from posting an operating profit, though McManaman did say: "On a positive note, some of the freight railroads are starting to see some signs that several market groups are stabilizing, and if that is the case we expect a pent-up demand for our products for 2010 as rail work and maintenance programs resume to more normalized levels."

The company reported a third-quarter net loss of C$532,000 (US$507,000) compared to C$542,000 of net income in the third quarter of 2008. For the first nine months of 2009, a net loss of C$3 million (US$2.86 million) compared to C$1.3 million of net income for the same period in 2008.

"Due to the economic recession in 2008 and 2009 year-to-date, railroads continue to store about 20% of their locomotive and railcar fleets and maintain tight control over operating and capital expenditures to address reduced freight revenues and operating income," said McManaman. "The railroads' reduced spending has materially impacted Global's financial results in 2009 due to reduced locomotive and railcar maintenance and component sales being substantially lower than in prior years."

He said he expects the company will return to profitability in 2010.

"Despite lower demand for track & signal and railgear products, Global subsidiary G&B Specialties' sales and gross margins met management's expectations in the third quarter of 2009," said McManaman. "In 2009, G&B has been able to maintain the same level of sales compared to 2008, aided by new international sales, new customer penetration in local markets, and a higher average U.S. dollar."

McManaman continued, "Diminishing sales volumes in the locomotive and component markets, combined with the learning curve impact on the VIA Rail Canada ("VIA") project's margins, continue to negatively impact Global's largest subsidiary, CAD Railway Industries ("CADRI"), operating results and Global's overall financial results during the third quarter of 2009."

Fausto Levy, president of CADRI, said that "to date CADRI has delivered five remanufactured locomotives to VIA. CADRI's gross profit margins for the units in production under the C$101.5 million [US$97 million] VIA project have improved during Q3 versus Q2 and are expected to continue to improve as production line improvements are implemented. During the third quarter, we successfully negotiated a revised delivery schedule for the VIA locomotives which took into consideration prototyping and learning curve delays. Under the revised delivery schedule CADRI will deliver 8 locomotives to VIA in 2009."

Levy said CADRI "continues to experience decreased sales for locomotive maintenance and component parts. Management expects this trend to extend into early 2010 as railroads continue to store substantial numbers of locomotives and railcars."