12.11.2012

Essex halves losses

US based Essex Crane has posted its third quarter results with a substantial reduction in pre-tax losses.

Looking first at the nine months to the end of September, total revenues were up over 12 percent to $75.1 million, while the company’s pre-tax losses were cut from $20.6 million last year to $14.6 million this year.

Moving to the third quarter, revenues edged up just 3.5 percent to $24.1 million, but the pre-tax loss was almost halved from $6.1 million last year to $3.3 million this year.

Rental revenues in the quarter were up over 17 percent, while new equipment sales continued the same downward trend as the first half falling from $4.8 to $1.2 million and used equipment sales continued their upward trend almost tripling to $3.1 million.

Chief executive Ron Schad said: "Improvements in equipment utilisation, better rental pricing and the operating initiatives that we have initiated throughout 2012 are contributing to the improvement in our operating results. We believe that these results validate our decision in late 2010 to broaden our equipment portfolio to include Rough Terrain cranes, boom trucks and tower cranes as well as to add predictable business lines such as third party aftermarket parts and service sales."

"Approximately 67 percent of the year over year improvement in our earnings is attributable to higher utilisation and rental rates, while the remainder is attributable to the operating improvements that have been implemented throughout the year.”

"We are continuing to experience gradual improvement in utilisation in the equipment categories where we have the majority of our capital employed. Utilisation rates on our hydraulic heavy lift crawler cranes have increased sequentially in each of the last six months and in the third quarter of 2012 were in excess of 64 percent. The hydraulic heavy lift crawler cranes have higher dollar rental rates and account for approximately 70 percent of the orderly liquidation value of our crawler cranes and approximately 50 percent of the orderly liquidation value of the total fleet."

"We are now selectively increasing rental rates on this sub-category of assets. In addition, lease durations on new orders received during the past two quarters for this asset sub-category have averaged approximately 6.3 months as compared to an average expected duration of approximately 4.8 months for the same time period in 2011.”

"Demand for our equipment continues to improve, particularly for infrastructure and maintenance related energy projects. The expected duration of new crawler crane orders year to date through October has increased 10.8 percent compared to the prior year's orders. The increased average crawler crane lease duration is providing greater visibility, and if this trend continues, is likely to have a positive impact on utilisation for the remainder of 2012 and 2013.”

“Utilisation trends for our entire fleet have remained strong thus far in the fourth quarter and we have been selectively increasing rental rates on certain asset classes. Assuming no change to the economic environment, we anticipate that these rate increases will gradually become more apparent over the next several quarters.”

"We continue to identify opportunities to sell rental fleet assets and use the proceeds to reduce outstanding debt. The rental assets being actively marketed for sale are non-core assets such as aerial work platforms and forklifts, where we lack a competitive advantage and do not leverage our crane expertise, and crawler cranes that were underutilised during historic peak demand periods. During the first nine months of 2012, we have sold $15.8 million of non-core and excess rental fleet."

Vertikal Comment

Essex still has some way to go to return to profitability a part of its current improvement is down to fleet sales as it exits its non-crane rental business. The lower new crane sales suggest that the merged Coast Crane operation is leaving this part of its business to die as it integrates into Essex Crane, which is a pure rental business.