UWC Operational Results for 3Q 2017

PJSC “Research and production corporation “United Wagon Company” (“UWC”, the Company or the Holding) (MOEX: UWGN), the leading builder of innovative railcars in the 1520 mm track gauge zone, announces its 3Q 2017 operational results.

The overall 3Q 2017 production of the Holding’s companies totalled 4.4 thousand railcars, a 6% increase compared to the same period of 2016. The first nine months saw the production grow by 24% to 13.6 thousand units. The positive dynamics was due to a steadily growing demand for UWC’s railcars propped up by growing cargo base and their advantages over the rolling stock produced by other manufacturers.

UWC continued to diversify its product line in the reporting period. The shares of tank cars and other rolling stock including flat cars and box cars in the 9-month production grew to 4% and 5% percent, respectively.

Company’s product line was expanded to include a total 49 railcar models and modifications. In 3Q, 4 following railcar models were certified: the ethanol tank car with a tank of 88 m3, container flat car allowing to carry tank containers for dangerous freight, 120 m3 grain hopper car with an aluminium alloy roof and timber flat car with a 60-feet loading length.

Over the first 9 months of 2017, 70% of newly produced railcars were sold under direct contracts to third parties. The Holding's major buyer was State Transportation Leasing Company (GTLK) which acquired more than 10 thousand railcars whereof 5.5 thousand railcars were produced in 2017. In 3Q, the Company also started to supply its railcars to “Alfa-Leasing”, having delivered to the customer a total of 1.3 thousand railcars over the reporting period.

The Holding also contracted to supply 267 timber flat cars to Kronospan and 20 box cars to Kuchukterminal. Railway operator UNICON 1520, a subsidiary of UWC, entered into contracts with RZD Logistics, URALCHEM-TRANS, and Avestra Group.

30% of railcars were sold to RAIL1520, UWC’s leasing subsidiary. The Company purchased these railcars to substitute 4.9 thousand standard railcars sold from its own fleet to Federal Freight in 1H. As a result of the sale, the share of new generation railcars in UWC’s leased fleet grew to 82%. As at the end of the reporting period, UWC had a total of 14.1 thousand railcars in its fleet1.

In 3Q UWC continued expanding its service centre network in the Baltic states. The Company inaugurated a service centre at the railcar repair facility of Daugavpils, Latvia, aimed at servicing innovative railcars. The new service centre is authorised to perform current uncoupling repairs. As at the end of the period, the Holding’s service network included a total of 65 centres.

— The fleet excluding railcars intended for sale in the future periods amounts 14 thousand railcars.