Railcar manufacturer FreightCar America narrowed its second-quarter loss to $1.3 million from $3.3 million a year earlier and said, while recent car orders were weak, other market conditions are improving for future coal car production.
FCA’s revenue of $30.9 million was down 70 percent from the same 2009 period, when sales topped $104 million. But the top line in the April-June quarter of 2010 was also improved from this year’s first quarter, when revenue was $19.5 million.
Ed Whalen, president and CEO, said “the continuing low level of demand for coal-carrying railcars” dampened financial results for FCA, which specializes in building equipment to haul coal.
By The Numbers: Freight Cars in Storage.
But he also said “we have begun to see some initial signs of improvement in the market that we believe could lead to increased demand for coal-carrying railcars. Year-over-year electricity generation and coal loadings continue to improve, coal stockpiles are down compared to the prior year and railcars continue to come out of storage.”
Those hopeful signs did not translate into second-quarter activity for FCA’s order books, as customers ordered up only 14 more railcars. A year earlier it booked 694 new-build orders, and in this year’s first quarter orders were placed for 3,656 units.
That helped power output for the company, as it delivered 160 new cars in the second quarter, along with 440 used railcars and 14 it supplied to customers through leases, That 614-car delivery pace was up from 321 in this year’s first quarter but down from the 1,109 it delivered in the 2009 second quarter.
As of June 30, FCA’s production backlog totaled 3,000 units, down from 3,600 at the end of March.
Despite hopeful recent signs in coal shipments, Whalen said that as of Aug. 5, “demand has not yet improved and customers continue to remain cautious, which gives us little visibility regarding the timing of an industry recovery and a return to more normalized levels of demand.” As a result, FCA expects “railcar pricing to continue to be very competitive, keeping downward pressure on margins until volume recovers to more normalized levels,” he said.
That combination leaves FCA, like many other rail suppliers, hunkered down. Whalen said “We will continue to focus on the factors within our control: maintaining operational efficiency, strict cost management, preservation of our strong liquidity position and financial flexibility. At the same time, we are continually evaluating strategic opportunities to ensure we emerge from the recession as a stronger company.”
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