A mega contract in Egypt caused a hole in the accounts of the Hungarian Mavag

Talgo, the Hungarian group that launched a takeover bid for Ganz-Mavag, is experiencing serious financial difficulties due to a mega contract with Egypt. The company ended 2023 with a loss of 11.9 million euros, which, in addition to the losses recorded in 2022, amounted to another 37.6 million euros. Thus, the group’s share capital decreased by 10.8 million euros, which will now force shareholders to recapitalize.

In the absence of data for 2023, the group had revenue of 254.7 million euros in fiscal year 2022, which came from several entities – MAV Wagon, DJJ and Ganz-MagV International. This means that Spanish manufacturer’s revenue nearly tripled of the Hungarian group, since it closed last year with a figure of 652 million euros.

Contract in Egypt

The train supply contract for Egypt, developed by Ganz-Mavag International, the subsidiary in charge of foreign activity, specifically contemplates the manufacture of 1,350 wagons for the state railway unit of the North African country, ENR. According to the Hungarian press, the problem is that although the income from this business last year was around 125 million euros, Production costs were high, reaching 129.5 million euros.

The convoys were built by DJJ, which agreed to fulfill the order with help from Russian manufacturer Transmashholding (TMH), which ceased operations shortly after due to the invasion of Ukraine. DJJ’s income saw a decline last year after privatization As part of the Viktor Orbán government’s plan to establish a large railway company in 2022, which is being acquired Andras Tombor, A former colleague and now the head of offers at Talgo. According to the Hungarian Commercial Register accounts, DJJ saw its profit drop substantially last year, from 850,000 euros to just 130,000 euros.

But if your situation is complicated, even more so by Ganz-Mawag International, which is obliged to provide the owners with the funds necessary to maintain the activity due to the economic difficulties generated by the contract in Egypt. The Egyptian contract was secured with a white loan from the Hungarian foreign bank Eximbank, which has also financed the Talgo operation.

The third company that makes up the group, Magyar Vágon, which brings together the bulk of the businesses, is also in the red. Last year it recorded a loss of 3,647 million forints (9.77 million euros), while the previous year the red number was 5,855 million forints (14.8 million euros).

Losses aside, if the Spanish government had accepted the Hungarian group’s takeover bid for the Spanish manufacturer, Magyar Vágon would have solved one of its main problems. Talgo, which does not have sufficient production capacity to cope with the workload. Thus, the Hungarian company would have contributed to Talgo’s industrial capacity with 8 factories located in Hungary with a combined area of ​​over 510,000 square meters and a total workforce of 2,500 employees.