GATX sees railcar leasing stall

Chicago-based railcar leasing company GATX Corporation has blamed overcapacity and a slow start to the year for a drop in income during Q1 2017.

It reported first quarter net income of $57.5 million, compared to $69.3 million in the first quarter of 2016.

Brian Kenney, president and chief executive officer of GATX, said: “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 North America reported segment profit of $93 million in the first quarter of 2017, compared to $108.7 million in the first quarter of 2016.

Kenney described the company’s Rail International division as producing “solid operating results”, with $13.4 million profit in the first quarter of 2017, compared to $12.6 million in the first quarter of 2016.

He said: “GATX Rail Europe maintained high fleet utilization of 95% 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.”

American Steamship Company (ASC) reported a segment loss of $0.2 million in the first quarter of 2017, compared to a segment profit of $0.9 million in the first quarter of 2016. Kenney pointed out that ASC’s operations are limited during the first quarter as the vessels are in winter lay-up from mid-January through late-March.

GATX’s first-quarter 2016 results included a net gain of approximately $1.5 million associated with the planned exit of the majority of Portfolio Management’s marine investments.

Kenney concluded: “The Rolls-Royce and Partners Finance affiliates continue to perform very well. Demand for spare aircraft engines remains solid across the fleet, and 2017 investment prospects are positive. The year is progressing as we expected, and therefore at this time our 2017 full-year earnings estimate is unchanged.”