Wabtec looks to international locomotive market, related businesses

In quarterly earnings call, CEO highlights orders, related business outside North America
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PITTSBURGH – Wabtec’s domestic locomotive segment is being affected by decreased rail traffic, but company officials are optimistic about other rail-oriented aspects of their business.

Following the February absorbing of GE Transportation, Wabtec officials in an investor’s earnings call last week painted a fairly positive picture.

“We're certainly feeling the impact of both carloads being down over 3% in the year; also, the elements of locomotive parkings,“ says CEO Rafael Santana. “What I'm happy to say is we've seen strength in our business in both transactional [locomotive] parts, [and] multiyear service agreements, especially in the international markets, where our locomotive fleets continue to grow.”

Two-thirds of Wabtec’s locomotive manufacturing is focused on India and Southeast Asia, and going into 2020 the company envisions half of its GE revenue from international markets, according to Santana.

“Across our international installed base, we continue to see strong opportunities for growth, including regions like India, where we will be delivering over 100 locomotives this year as part of our 1,000-locomotive contract,” he says.

A new 6,000-hp WDG-6G locomotive for India is in testing and is expected to soon be in revenue service, according to Santana. (See video here.)

Wabtec also is beginning what Santana sees as substantial international business in locomotive upgrades.

In response to analysts’ question, Santana doubts a 1% to 2% increase in domestic freight business in 2020 would affect Wabtec’s locomotive business.

Even with a modest domestic increase in railroad freight activity, he says there would be a lag time before orders for new locomotives came in, especially with so many units currently in storage.

Wabtec’s transit segment remains healthy due to increased ridership and urban growth.

“Aging [transit] fleets across Europe and U.S. need to be upgraded, presenting unique opportunities for growth,” Santana says. “And increased growth and infrastructure spending in emerging economies, like India, is driving tremendous growth opportunities for our business.”

Since the GE merger, Wabtec has reduced real estate occupancy by a million square feet, including 84 locations, plus an expected closing of 100 offices by the end of the year, he says.

An announced closing this year was of the Boise, Idaho, plant of Motive Power Industries, a former Morrison Knudsen facility in the Wabtec fold since 1999. [See: “Wabtec closing Idaho-based Motive Power; shifting jobs and work to Pennsylvania,” Trains News Wire, Sept. 19, 2019.]

GE’s famed Erie locomotive plant was threatened by a 2017 GE announcement of its planned closure, however, workers there gained a 4-year contract with Wabtec following a strike earlier this year.

Wabtec overall third-quarter 2019 sales were $2 billion, with about $1.3 billion from the locomotive segment and about $700 million from the transit segment.

Overall corporate net income for the quarter was $90 million.

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