United Wagon : UWC Operational Results for 4Q and 12M 2017

25.01.2018

PJSC 'Research and production corporation 'United Wagon Company' ('UWC', the Company or the Holding) (MOEX: UWGN), the leading builder of innovative railway rolling stock in the 1520 mm track gauge zone, announces the results of its operations for the fourth quarter and twelve months of 2017.

The overall 4Q 2017 production of the Holding's entities totalled 5.4 thousand railcars, a 9% increase compared to the same period of 2016. The annual railcar production grew by 20% to 19.1 thousand units: the Company successfully met its 2017 production target. The dynamics was positive due to a steadily growing demand for UWC's railcars propped up by growing cargo base and the advantages of these railcars over the rolling stock produced by other manufacturers. The Company's management estimates 2018 production to be at 19-20 thousand railcars.

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 annual production pattern grew to 4% and 7%, respectively, and will be increased further throughout 2018.

UWC's product line was expanded to include a total 51 railcar models and modifications. In the reporting quarter, the Company has certified the following 2 railcar models: a conventional flat car with a carrying capacity of 77.5 ton fit to carry hazardous cargo tank containers and a tank car for concentrated nitric acid with a capacity of 75 ton and tank made of aluminum alloy. A total of 11 models and modifications have been certified by the Company over the year.

In 2017, 76% of newly produced railcars were sold to third parties. The Holding's major buyer was State Transportation Leasing Company which acquired more 8.2 thousand gondola railcars (a total of 13 thousand railcars were distributed since 2016). The Company also delivered 1.4 railcars of various types to Alfa-Leasing. The third largest customer was United Grain Company acquiring 649 hopper cars ― the last batch delivered under the contract for the supply of 1,500 railcars. Large-size deliveries were made to Locotrans (more than 500 timber flat cars and box cars) and Rusagrotrans (500 hopper railcars).

In 4Q, the Company entered into a contract for the supply of 500 hopper cars to Gazprombank Leasing until the end of January 2018. The railcars are to be subsequently leased to PhosAgro. Over 1Q 2018, the Holding will also deliver more than 200 timber flat cars to 5 industrial and transport companies (DV Real Trans Group, ARKHBUM Sibirsky Krai, Mondi and VIK).

24% railcars produced in 2017 were sold to RAIL1520, UWC's leasing subsidiary, acquiring them to substitute the rolling stock sold earlier from its own fleet. The Company sold a total of 7.8 thousand used railcars (4.9 thousand standard gondola cars to Federal Freight and 2.2 thousand innovative hopper cars to Rusagrotrans) from its fleet. As at the end of the year, UWC's fleet totaled 13.3 thousand railcars.

As at the end of the reporting period, the fleet of UNICON 1520 consisted of 637 tank containers and 297 railcars including flat cars and tank cars. In 4Q, a total of 46 thousand ton of chemicals were shipped, a three-time increase compared to 3Q. Over 9 months of operation in 2017 (UNICON 1520 was established in April), the company shipped a total of 63.2 thousand ton of freight. The operator deals with Russia's leading chemical manufacturers: PhosAgro, Uralchem, KuibyshevAzot and Sibur.

In 4Q, UWC continued expanding its service centre network. The Company entered into strategic partnership with LDZ Rolling Stock Service, Ltd., a Latvian company specializing in repair, modernization and maintenance of railway rolling stock.

In 2017, six service centres were awarded Category I which enables them to perform scheduled maintenance of railcars manufactured by UWC. The Holding intends to increase further the number of its Category I service centres conformably to the need for scheduled maintenance of UWC's railcars.

Over the year, the Company opened eight new service centres, raising their total amount to 66.