20.10.2011

Strong profit growth at United

US based rental company United Rentals has reported a very strong third quarter with revenues up over 18 percent and profits up 250 percent.

Total revenues for the nine months to the end of September were $1.87 billion, 17 percent higher than a year ago, with rental revenues rising by a similar percentage level to $1.56 billion. The strong recovery converted last year’s pre-tax loss of $23 million, into a pre-tax profit of $108 million.

Looking at the third quarter, revenues grew by 18 percent to $713 million of which rental was $604 million – 19 percent higher than a year ago. This was driven by a 7.5 percent improvement in rental rates and a 15 percent increase in volume. Utilisation was a record 73.5 percent on a larger fleet than last year. This translated into a pre-tax profit of $96 million compared to $38 million in the same quarter last year.

United says that it has raised its anticipated capital expenditure levels for this year to $775 million which will net out at $575 million after allowing for disposals of older equipment. In the third quarter the company sold $42 million worth of used equipment helping reduce the average age of its fleet from 47.7 months at the start of the year to 46.6 months at the end of September.

Michael Kneeland, chief executive officer said, “Our strong performance is evidence of a strategy that has become deeply rooted in our operations. The benefits of customer segmentation, price optimization, customer service differentiation and cost efficiency have begun to mesh in all areas of the business. This has put us in a position to act decisively on growth opportunities, such as the $219 million we invested in fleet in the quarter. Not only did this help to strengthen customer relationships and drive revenues, we also realized a historic high adjusted EBITDA margin of 39.6 percent.”

“While our customers remain bullish about construction activity next year and there is a deepening belief in rental penetration, our business model provides us with the flexibility to respond, as we have in the past, to anything we may experience in 2012.”

Vertikal Comment

An excellent result from United and a refreshing alternative to the economic doom and gloom of the general news media. United is clearly bullish about next year and is gearing up to reap its share of the benefits – or more.

The company generally likes to keep its fleet average at around 36 months, in order to provide its customers with the latest equipment and keep repair and maintenance costs down. It also provides the ability to age the fleet during tough downturns, without ending up with a totally decrepit collection of machines at the end of it. It looks as though it is now aiming to ease the current 3.9 years back towards three.

It is also encouraging to see a large market leader set the pace with rental rate improvements. Hopefully the larger European companies such as Loxam, Rami Rent, Riwal, Cramo and Lavendon to name a few, will take note if they are not doing so already.