Greenbrier Says Has Had No Oil Railcar Cancellations

One small customer has asked railcar manufacturer Greenbrier Companies about canceling an order for tank cars that carry crude as U.S. oil prices slid by more than half since last summer, Chief Executive William Furman told analysts on Wednesday.

 

However, he said orders "are not cancelable" and that the customer's order remains on track despite oil prices below $50 a barrel, down 55 percent since June.

 

He said that if necessary, Greenbrier can adjust the queue of orders, delivering some earlier than planned while deferring others for customers who want to put off paying the bill in the current crude price environment.

 

"We will be happy to talk about swapping car type or swapping positions with people who need cars faster than they were able to get before," Furman said during the company's quarterly earnings call. "Right now we just don't see it yet."

 

Oregon-based Greenbrier has benefited from surging demand for new tank cars as oil increasingly moves by rail. On Wednesday it reported net income of $32.8 million, or $1.01 per share, for the first fiscal quarter ended Nov. 30, more than double year-ago net earnings of $16 million, or 51 cents per share. The company's shares rose nearly 6 percent to $52.17 on the New York Stock Exchange.

 

Tank cars make up about a fourth of Greenbrier's manufacturing capacity. Furman said lower oil prices help boost demand for other types of railcars as the U.S. economy gains strength, such as those that carry automobiles, grains or other goods.

 

The company can make more of those other railcars and reduce tank car output if necessary, he said.

 

"Our broad-based business is well positioned to capitalize on the opportunities for either resumption of higher oil prices or a continued period of time of transition as we see these lower oil prices take place," Furman said.

 

He said the first area he would expect to see a slowdown if lower prices linger would be the market for railcars that carry sand used in hydraulic fracturing, which has fueled the boom in U.S. shale and tight oil production.

 

"We haven't seen any real evidence of that," he said. "We're still accepting orders for sand cars."