Kelso sees upswing in business activity in 2018

Kelso sees upswing in business activity in 2018

After a prolonged recession in the rail tank industry Kelso is beginning to see an upswing in business activity in 2018.

The company has recorded an increase in revenues for the first quarter of 2018, $2.5m up from $1.5m in the comparable period of the prior year. Gross profit climbed from $699,934 to $889,229.

Kelso has many reasons to be optimistic about the future growth of the company. Canadian crude-by-rail exports are likely to grow from 2017 levels of 150,000 barrels per day to an implied 250,000 barrels per day in 2018 and rising to approximately 590,000 barrels per day in 2019. “There is a lot of scheduled production capability growing in Alberta and limited ways to transport it as pipelines are at full capacity. Political battles over new pipeline construction continue in Canada and new pipeline transmission capability may be a long way from utilisation. This situation is expected to drive healthier rail tank car market opportunities for Kelso in the coming years,” the company states.

This stimulus in crude oil has rail tank car analysts expecting average production rates to settle between 12,000 and 20,000 new rail tank cars annually for the next three years, the company explained. Based on these predictions, it expects to participate on approximately 5,000 to 7,000 rail tank cars annually. A key business dynamic is getting more pieces of Kelso’s tank car equipment adopted by the hazmat shippers. Once this adoption trend is established and customers begin to specify its PRV with the One-Bolt Manway, VRV or BOV, sales can range from approximately $1,400 to in excess of $10,000 per tank car.

AAR approvals continue to be a serious barrier for customer confidence and adoption, it explains. “The AAR is historically slow to respond to submitted applications for new products and corresponding completed service trials. Although customers have expressed their interest in our technologies they are reluctant to specify and use products that are under field service trial until full AAR approvals are received.  This is beyond our control and is the primary challenge for the future growth of our rail tank car equipment revenues.”

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14th May 2018