21.10.2010

United continues positve trend

US based United Rentals, the world’s largest equipment rental company, has posted another positive quarter.

Total revenues for the quarter were $605 million up two percent on a year ago, however rental revenues climbed six percent to $507 million. The company also posted a pre-tax profit of $23 million compared to break even last year.

For the nine months to the end of September revenues were $1.64 billion, down nine percent on the same period in 2009. However the pre-tax loss for the period was $23 million compared to a loss last year of $58 million.

Physical utilisation in the third quarter rose by more than seven percent to 71.3 percent, a record high for the company. This was somewhat offset though by a fall in rental rates, which declined 1.4 percent year on year. Rates were though up two percent on the second quarter of this year. Financial utilisation increased 2.9 percentage points to 51.6 percent compared to the same period last year.

As a result of the improving market the company has raised its planned rental capital expenditures (defined as purchases of rental equipment less the proceeds from sales of rental equipment) to between $180 and $200 million, from its previous estimate of $160 to $180 million.

During the quarter United sold $74 million of used equipment compared with $100 million in the same period last year. Interestingly the margin made on the sales was up increased from seven percent to 31 percent – suggesting used prices have improved

United’s chief executive Michael Kneeland, said: "While the recovery is progressing slowly, business conditions have improved in all of our operating regions. Rental is a very attractive alternative to buying equipment right now, aided by tight credit markets and cautious customer behaviour. As a result, we are seeing increased demand despite the weakness in construction spending. We view record time utilisation and sequential quarterly rate improvement as two very positive indicators of profitable growth.”

“Our results also show that we are clearly delivering on our strategic priorities. Because of the operating leverage we’ve built into the business, our growth in operating income and adjusted EBITDA surpassed our rental revenue growth. We increased our fleet investment to better meet demand and to further strengthen relationships with our key customers. This is exactly where we want to take the company -- toward better earnings in our core business, with stronger margins and sustainable fixed cost savings. Current trends suggest that our year over year rate performance should be flat to slightly positive in the fourth quarter, with further improvement in 2011.”

Vertikal Comment

More good news, this time form the ‘coal face’, given the immense spread of United’s operations in the USA, this is as good an indicator of the improving market as any.

The fact that rates have already started to firm up a little is also good news, and shows that it can be done.

All in all an encouraging set of results all round.