PJSC “Research and production corporation “United Wagon Company” (“UWC”, the Holding or the Company) (MOEX: UWGN), the leading builder of innovative railcars in the 1520 mm track gauge zone, reports its 2Q 2018 operating results.

In 2Q 2018, the Company manufactured a total of 4.8 thousand railcars, an increase of 4% over the 2Q 2017 result. The 1H production reduced by 3% to 9 thousand railcars due to reconfiguration of one of TVSZ’s assembly lines which affected production figures in 1Q. UWC maintains its annual production plan at a level of 19 to 20 thousand railcars.

The Holding has substantially diversified its railcar production. In 2Q, there was a year-over-year upswing of 434% in the production of hopper cars, while in 1H the increase was 140% to 1.1 thousand and 2.2 thousand units, respectively. The production of other specialised railcars (flat cars and box cars) grew by 188% in 2Q and by 175% in 1H, reaching 611 and 1,072 railcars, respectively. The production of tank cars gained 21% in 2Q and 1% in 1H, to 291 and 445 units, respectively. However, in light of the market trend of gradual demand shift to specialized railcars, the Company opted to reduce its production of gondola cars by 30% to 2.7 thousand in 2Q and 30% to 5.3 thousand in 1H.

UWC’s product line was expanded to include a total 55 railcar models and modifications. In the reporting quarter, the Company’s 120-m3 hopper was certified.

97% of newly produced railcars were sold under direct contracts to third parties. The largest supplies were made to GTLK (gondola and hopper cars), Rusagrotrans (hopper cars), Uralkali (hopper cars), Akron (hopper cars), and MKB-Leasing for subsequent export far abroad (gondola cars). In 1H, these companies acquired a total of 6.4 thousand railcars from the Holding. The Company also supplied its railcars to an international logistics company Operail (timber flat cars), Phosagro (hopper cars), wood firm Krasny Oktyabr (timber flat cars), international operator Rhenus Logistics (container flat cars), Eurosib Spb-TS (container flat cars) and other customers from various sectors.

In the reporting period, upon agreement of Mitsui and UWC the 330-railcar fleet of MRC 1520, their joint venture, comprised of both standard and 23.5 tf railcars with enhanced features was fully replaced with 254 newly built gondola cars mounted on a 25-tf bogie made by TVSZ. The old railcars were sold to a third party.

The Company’s own fleet decreased by 2% to 13.0 thousand units at the end of 1H compared to 2017 end due to reduction of the amount of standard railcars and consequently their share in the fleet 3 pp to 16%.

UNICON 1520’s tank-container fleet grew by 17% in the reporting period and by 43% compared to 2017 end, reaching 908 units, while the growth in its fleet under management stood at 44% and 89%, respectively, to 560 units (including flat cars and tank cars). Shipments over the quarter totalled 64.3 thousand tons, being an increase of 30% compared to 1Q 2017. Over 1H, the Company shipped an aggregate of 113.8 thousand tons of freight.

In 2Q, UWC set up another two service centres (Category I) to provide maintenance to new generation railcars running on Zabaikalskaya and Eastern Syberian Railways, raising the total number of its service centres to 70. Notably, other two service centres were upgraded to Category I, so that, as at the end of the quarter, the Company’s service centre network included a total of 12 service centres authorised to perform repairs of any kind.