New Contracts for Harsco Rail

Harsco Corporation ( HSC - Snapshot Report ) recently received a contract from Network Rail for an estimated value of $50 million. This is a renewal contract with an extended tenure of four years.

Under the contract, the company’s Rail segment will continue to provide railway switch grinding services to Network Rail in the UK rail system. Harsco will operate and maintain a fleet of up to five switch grinding units, performing regular rail grinding of switch and crossing trackwork.

Rail grinding services re-profiles railhead contours enabling enhanced rail life and smoother operation. Consequently, there was a decline in fuel consumption, operating costs and noise. Further, these services correct surface damage, which protects rail track from rail fractures.

Since 1997, Harsco has been providing railway track services to Network Rail and its predecessor Railtrack.

Harsco also secured a railway track maintenance and related equipment contract from Saudi Arabia for $15 million. Deliveries would be completed by the end of this year.

As per the contract, the company will support the Kingdom's new North-South Railway system project of constructing a 2,300 kilometer rail line to connect Saudi Arabia's rich phosphate and bauxite reserves with its processing facilities in Jubail. Furthermore, it will facilitate a new rail route for freight and passenger traffic.

The project will enable new opportunities for the Harsco Infrastructure group operating in Saudi Arabia through a joint venture partnership with Jeddah-based Al-Baroom Group. Additionally, it will encourage new customer relationships and provide market opportunities for Harsco Rail.

Harsco is a diversified, multinational provider of market- leading industrial services and engineered products to a variety of industries that are fundamental to the world’s economic growth and progress.

The company’s Rail segment reported revenues of $63 million in the first quarter of fiscal 2011, down 34% from the year-earlier quarter. Operating margins of the segment decreased to 13% from 21.4% in the year-earlier quarter.

For the second quarter of fiscal 2011, management expects an overall EPS of 34 cents-39 cents from continuing operations. The company apprehends that EPS growth in the second quarter of fiscal 2011 will be impeded, due to the timing of shipments in the Harsco Rail segment.