PHILADELPHIA, PA — Enviri Corporation (NYSE: NVRI) has ended work on two troubled European rail-equipment contracts, triggering an approximately $75 million noncash impairment and $133 million incremental liability as the company moves to eliminate future cash demands and earnings volatility tied to its legacy engineered-to-order business.
Harsco Rail Europe ceased activities on its contract to design and supply utility track vehicles for Deutsche Bahn, while Harsco Rail Limited stopped work on a contract to manufacture stoneblower rail-maintenance vehicles for Britain’s Network Rail earlier this month.
Enviri said the exits are intended to eliminate future performance risk, financial-statement volatility and cash outflows associated with the two contracts. The actions are expected to conclude the company’s exposure to legacy engineered-to-order, or ETO, contract risks.
For the Deutsche Bahn program, Harsco Rail Europe reached a definitive agreement to sell related inventory, intellectual property and other contract assets to Gleisbaumechanik Brandenburg GmbH, or GBM, a subsidiary of General Atomics.
GBM has served as the manufacturing partner on the project and is expected to complete the utility track vehicles. Any cash Enviri receives from the asset transfer will be recognized as income when received later this year and in early 2027.
Enviri did not disclose the potential proceeds from the transaction.
Harsco Rail Limited separately notified Network Rail that it had ceased manufacturing stoneblower vehicles and closed the facilities associated with that contract.
The company has proposed extending the operating life of Network Rail’s existing stoneblower fleet as an alternative to completing the new vehicles. Harsco Rail would continue operating and maintaining the existing machines under its current multiyear service contract if the proposal is accepted.
Discussions with Network Rail over that plan remain underway.
The contract exits will result in a combined approximately $208 million balance-sheet impact from the impairment and additional liability, though only the $75 million impairment was characterized as noncash. Enviri said its opening capital structure following its recent spin-off included sufficient cash to address the liabilities without increasing leverage.
“This is an important milestone in fulfilling our commitment to de-risk Enviri of these challenged ETO contracts,” Chief Executive Officer Russell Hochman stated.
Hochman indicated that Harsco Rail will shift greater attention toward its maintenance-of-way operations, which the company expects to produce more consistent returns than the engineered-to-order contracts.
Enviri isn’t exiting all of Harsco Rail’s ETO work. Its remaining contract to supply wagons and utility track vehicles to Swiss Federal Railways remains on schedule.
Final deliveries under that program are expected in 2027, when Enviri also anticipates significant cash payments and positive cash flow from the contract.
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