24.07.2010

Utilisation up at RSC as profits fall

RSC, one of America’s largest rental companies has reported its first half numbers which show an improving trend in the second quarter.

Total revenues for the half year fell 17 percent to $561.7 million, however the drop in the second quarter was just eight percent, with rental revenues falling four percent.

In spite of the slow up in the rate of decline, the company posted a pre-tax loss for the half year of $96.2 million compared to a loss of $37.7 million in the same period last year. The second quarter was similar with a loss of $22 million compared to an $11 million loss in 2009.

In addition to the lower volume, interest costs were up significantly in spite of a small reduction in net debt during the period.

The company remains positive and spent $147 million on its rental fleet in the first half, compared to only $18 million last year. At the same time is sold off $55 million worth of used equipment compared to $92 million last year. The average age of the fleet at the end of June was 42 months, compared to 36 months last year.

Utilisation for the six months increased from 57.6 percent to 59.2 percent, while in the second quarter it climbed from 57.5 percent to 63.5 percent. However rental rates for the first half were down eight percent although, in the second quarter they increased over those of the first quarter this year.

Chief executive Erik Olsson said: "We are seeing 2010 play out in the way we expected, with the positive momentum from the first quarter continuing and strengthening throughout the second quarter. The market was mixed in the first half of the year but steadily improving. We correctly identified early signs of improving customer demand and responded with increased sales activities, and by investing in our rental fleet and rental staff. This resulted in year-to-date fleet on rent growth of 35 percent.”

“Our leading position in serving the industrial end market enabled us to meet or exceed our second quarter revenue, adjusted EBITDA, and free cash flow expectations. In addition, our strong operating model and focus on service allow us to continue to exceed customer expectations, as demonstrated by world class customer loyalty scores."

Outlook

The company expects the positive trend to continue in the second half of the year, but says that industry wide fleet levels will continue to exceed demand and as a result rental rates will remain under pressure.

In spite of this it expects utilisation to build in the third quarter resulting in positive year-over-year volume growth and rental revenues for the third quarter are expected to be up on the same period last year although rates will continue to hurt profitability.