23.10.2011

RSC back in the black

US based rental company RSC has reported a strong third quarter with a strong upturn in profitability.

Total revenues for the nine months to the end of September were $1.1 billion 23 percent up in the same period last year. Of this rental revenues were $948 million a 22.5 percent increase. Pre-tax loss for the nine months was cut from $106.2 million to $53.3 million.

Looking at the third quarter, revenues rose 22 percent to $407 million of which rental was $360 million 23.6 percent up on last year. The company also managed to move back into the black with a pre-tax profit of $26.1 million, compared to a loss of $9.86 million in 2010.

Utilisation in the third quarter was 72 percent, up from 68.7 percent in the same quarter last year, while rates improve one percent in the quarter but are up 4.6 percent on a year ago.

As a result of the improving situation RSC is investing in renewing its fleet, capital expenditure for the nine months was $543 million compared to $266 million last year. The company also sold off 113 million of older equipment which helped reduce the average age of the fleet from 43 to 41 months.

Chief executive Erik Olsson said: "The third quarter was another very strong quarter and we have once again significantly outpaced the growth of our end markets. We see the current economic environment with low GDP growth playing perfectly into the value proposition of renting and to RSC, in particular. As a result, we produced an impressive 19 percent volume growth, while at the same time generating positive year-over-year pricing of 4.6 percent. This growth, in combination with strong cost management, resulted in a 38 percent year-over-year increase in adjusted EBITDA. Furthermore, improved results were widespread with all regions delivering double-digit
revenue growth and significant increases in utilisation."

"We expect favourable year-over-year comparisons in the fourth quarter and a strong finish to 2011. We see continued growing demand from our end markets and are benefiting from the consistent execution of our business model with market share gains as well as increasing outsourcing of equipment needs. As a result, we believe an economic environment with low to medium rate GDP growth will be favourable to renting equipment and provide significant growth opportunities also in the coming year."

Vertikal Comment

A solid set of results from another big American ‘consolidator’ is very encouraging, both in terms of revenue and utilisation improvements, but also the fact that it has also managed to raise prices to more sustainable levels.

It is also encouraging to see this flow through to the fleet with increased capital expenditure. Most important of all though is that RSC, like United Rentals, see the improvements carrying on into the new year, when in spite of the gloomy economic predictions we might just being to see a little more stability than in this past quarter.