Oliver

Oliver from Morgan Stanley inquired about the impact of recent large orders on Wabtec's opportunity pipeline, particularly regarding potential narrowing, and sought color on pipeline growth across different regions and end markets. He also asked about potential offsets in the components business for the expected decline in North American railcar deliveries.

Answer

Wabtec President and CEO Rafael Santana confirmed a very strong and growing international pipeline, especially in Australia, Brazil, East Asia, Africa, and the CIS region, driven by customer commitment to improved reliability and lower operating costs. He highlighted North America's aging fleet as a significant tailwind. For the components business, Santana noted decisive actions to adjust cost structure and the positive performance of investments in the heat exchanger and industrial businesses, which are offsetting the decline in North American railcar builds.

Oliver asked about the impact of recent significant orders on Wabtec's pipeline of opportunities, inquiring if it narrows or continues to grow across different regions and end markets. He also questioned potential offsets in the components business, such as industrial or heat transfer, given the expected decline in railcar deliveries for 2026.

Answer

President and CEO Rafael Santana confirmed a very strong and growing international pipeline, particularly in Australia, Brazil, East Asia, Africa, and the CIS region, driven by customer commitment to fleet investment and reduced obsolescence. For the components business, Mr. Santana noted decisive actions to adjust cost structure and highlighted the strong performance of investments in the heat exchanger and industrial businesses as key offsets to declining North American railcar builds.

Oliver asked about the drivers behind the year-over-year improvement in fleet productivity in Q4 2025 and the directional outlook for rate and time components in 2026. He also inquired about competitive dynamics, specifically if a recent competitor IPO had any positive or negative impact on the ground.

Answer

Matthew Flannery, President and Chief Executive Officer, explained that Q4's 0.5% fleet productivity was driven by positive rate, slightly less positive time, and a significant negative mix impact from the matting business's bulk assets. He expects positive fleet productivity for the full year 2026. Regarding competitive dynamics, Mr. Flannery stated that a competitor's IPO doesn't change 'Main Street' dynamics, emphasizing the industry's need for discipline in utilization and rate improvement to offset fleet price increases.

Oliver inquired about the drivers behind the 0.5% fleet productivity in Q4 2025 compared to the full-year 2.2%, specifically asking about the directional outlook for rate and time in 2026. He also asked about competitive dynamics on the ground following a competitor's recent IPO and its potential impact.

Answer

CEO Matthew Flannery explained that Q4 fleet productivity was significantly impacted by mix, specifically the lumpiness and bulk nature of the matting business, which alone accounted for a one-point drag. Rate was positive and similar to Q3, while time was slightly less positive. He stated that the competitor's IPO doesn't change street-level dynamics, emphasizing the industry's need for discipline in utilization and rate improvement to offset fleet price increases.