GATX Reports Q1 Earnings Slip on Railcar Oversupply, Backlog


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GATX reported Q1/17 net income of $57.5 million compared to net income of $69.3 million in Q1/16. The results included a net gain of approximately $1.5 million associated with the planned exit of the majority of Portfolio Management’s marine investments.

Brian A. Kenney, president and chief executive officer of GATX, stated, “For the second consecutive quarter, North American car loadings increased and railroad velocity decreased on a year-over-year basis. However, continued railcar oversupply, a large railcar manufacturing backlog, and low fleet utilization among certain competitors combined to prevent general lease rate improvement in the first quarter.

“Consequently, while GATX’s fleet utilization increased to 99.1% in the quarter, the renewal lease rate change of GATX’s Lease Price Index decreased by 32.6%, with an average renewal term of 29 months. Our renewal success rate was excellent at 72.4%. Our commercial team effectively deployed railcars and displaced competitors’ railcars despite the idle capacity in the industry.

“Rail International continues to produce solid operating results. GATX Rail Europe maintained high fleet utilization of 95.0% despite railcar oversupply in the petroleum market. We continue to upgrade customers’ fleets with new railcars, while successfully assigning displaced, older cars to new customers.

Rail North America reported a segment profit of $93.0 million in Q1/17, compared to $108.7 million in Q1/16. Higher gains on asset dispositions in the first quarter of 2017 were more than offset by lower lease revenue and higher maintenance expense, resulting in lower segment profit in 2017.

At March 31, 2017, Rail North America’s wholly owned fleet comprised approximately 121,000 railcars, including approximately 17,400 boxcars. The following fleet statistics and performance discussion exclude the boxcar fleet.

Fleet utilization was 99.1% at the end of Q1/17, compared to 98.9% at the end of the prior quarter and 98.9% at the end of Q1/16. During the first quarter of 2017, the GATX Lease Price Index (LPI), a weighted-average lease renewal rate for a group of railcars representative of Rail North America’s fleet, decreased 32.6% over the weighted-average expiring lease rate. This compares to a 36.2% decrease in the prior quarter and a 6.4% increase in Q1/16. The average lease renewal term for cars included in the LPI during the first quarter was 29 months, compared to 29 months in the prior quarter and 34 months in Q1/16. Rail North America’s investment volume during the first quarter was approximately $103 million.

Rail International’s segment profit was $13.4 million in Q1/17, compared to $12.6 million in Q1/16. The improvement in segment profit was primarily driven by lower maintenance expenses, including fewer wheelset replacements.

At March 31, 2017, GATX Rail Europe’s (GRE) fleet consisted of approximately 23,100 cars and utilization was 95.0%, compared to 95.6% at the end of the prior quarter and 95.1% at the end of Q1/16.

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Terry Mulreany
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