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ARI earnings rise on tank car demand

Keywords: Tags  American Railcar Industries Inc., tank cars, coal cars, hopper cars, quaterly results, Jeff Hollister, Freightcar America Inc., Chevron Phillips Chemical Co. orders

LOS ANGELES — A jump of nearly 50 percent in American Railcar Industries Inc.’s (ARI’s) third-quarter earnings highlights the contrast between a robust market for tank rail cars and comparatively soft demand for new coal cars.

In contrast to FreightCar America Inc., whose reliance on coal cars helped lead to a loss for the Chicago-based rail car manufacturer (see related story, left), "continued strong tank rail car shipments along with a slight increase in hopper rail car shipments" helped boost ARI’s third-quarter net income 49.7 percent, according to Jeff Hollister, president and interim chief executive officer of the St. Charles, Mo.-based rail car builder.

Strong energy-related and chemical demand—along with a shortfall in pipeline capacity—has pushed up demand for tank cars, which are estimated to account for about 80 percent of new rail car bookings as well as backlogs (, Sept. 11).

Moreover, delays in some major new pipeline programs have resulted in demand for "thousands and thousands" of rail cars--and the steel plate to manufacture them--to transport petroleum products, a plate marketing executive for Chicago-based steelmaker ArcfelorMittal USA told the ASsociation of STeel Distributors earlier this year (, March 25).

Hollister also said that in October ARI received a "multi-year" order to supply 2,750 plastic pellet covered hopper rail cars from Chevron Phillips Chemical Co., The Woodlands, Texas, for delivery from 2014 through 2016. He didn’t give a value for the order.

ARI shipped about 1,640 cars in the third quarter, compared with 1,460 cars in the same period in 2012. Rail cars for the company’s lease fleet represented 17 percent of total third-quarter shipments compared with 21 percent of shipments a year earlier.

ARI’s backlog at the end of the third quarter was approximately 6,300 rail cars with an estimated market value of $814.5 million, including about 2,430 cars for lease with a value of some $331.5 million. This backlog is down from 7,630 cars at the same point a year earlier and 6,940 units in the second quarter.

ARI’s manufacturing segment had third-quarter operating earnings of $41.7 million on revenues of $205.8 million vs. operating income of $34.2 million on revenues of $185.4 million in the same period last year.

Hollister, who previously headed up ARI’s manufacturing group, took his present posts last month after the unexpected resignation of James Cowan. ARI is controlled by billionaire investor Carl C. Icahn, who has disclosed his intention of restructuring the company in order to expand his holdings in the rail car industry ( Oct. 14).

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