China's railway equipment export surges

CRCC seeks compensation for Mexico high-speed project by chinadaily.com.cn

China Railway Construction Corp Ltd (CRCC) said on Tuesday that Mexico high-speed project's "indefinite suspension" would not impact its overseas operation, adding that the company is negotiating with the government of Mexico on the project's compensation.

The government of Mexico cut its 2015 budget by nearly 3 percent last Friday after a drop in global oil prices hurt public finances, and decided to shelve a project to build the rail link between Mexico City and the central city of Queretaro.

CRCC shares fell 6.42 percent and 9.91 percent respectively on Jan 30 and Feb 2.

CRCC said the Mexico high-speed project's shelving is an individual case and wouldn't have an effect on its overseas operations, according to an official announcement. The company is negotiating with the Mexico government on the project's compensation.

The Chinese-led consortium, formed by CRCC, CSR and four other Mexican construction firms, won the bid last November to build a 210-km high-speed railway connecting Mexico City with the industrial hub of Queretaro to the north. However, the contract was revoked days later out of domestic issues.

Rail giants CNR, CSR look to calm clients with road show by Niu Yue,China Daily

Senior management at China's CNR Corp and CSR Corp - the country's largest train makers - are on a global tour to reassure investors as the two companies merge into what will be the world's largest train maker.

The road show, which will start in the week starting Jan 29, seeks to communicate with potential investors. The tour will include stops in New York, London, Singapore and Hong Kong. Road shows for the Chinese mainland have not yet been disclosed.

Analysts have been optimistic about the merged company, China Railway Rolling Stock Corp, which will go by the initials CRRC.

Guotai Junan Securities, one of the largest investment banks in China, maintained its buy rating on CSR, saying the benefits outweigh the risk.

Wu Jiangtao, analyst with Northeast Securities, said in a note that the merger will "further improve their competence overseas and reduce the negative impact of price wars" and maintained a buy rating on CNR.

CNR and CSR (on Jan 26 and Jan 27, respectively) released announcements on their latest contracts totaling $7.2 billion.

On Tuesday, CNR signed a $670 million contract to equip Boston, Massachusetts' Red and Orange subway lines, marking China's first step into the US railroad transit market.

The companies announced their merger on Dec 30. CSR will acquire CNR through a swap of shares in Shanghai and Hong Kong. One share of CNR would be exchanged for 1.1 shares of CSR, and CNR shares will cease trading eventually. Shareholders will vote on the plan March 9.

The merger is to "improve the scale of operations, increase profitability and construct a large, comprehensive, world-leading industrial group centered on rail-transportation equipment with multinational operations," CSR and CNR said in a joint statement on Jan 20.

If approved by shareholders and regulatory agencies, the new train maker will be the largest in the world, more than three times larger than Canada-based Bombardier, according to German-based consultancy SCI Verkehr.

After the merger, the company "would be a large and attractive corporation in international competition for the manufacturing of rolling stock," said Stan Feinsod, a rail consultant.

"Competition drives innovation, helps manage cost and provides options to buyers," he said. "So, I think this idea of a larger Chinese company can be seen as a good thing internationally."

The merger also will reduce overhead, including research and development costs, making the new entity "more efficient and more competitive", said Michael Gorman, professor of operations management at the University of Dayton School of Business.

Lu Huiquan in New York contributed to this story.

 

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