08.02.2013

Profits rise at Cramo on flat revenues

Finnish international rental company Cramo has reported its results for 2012 which show revenues up 1.3 percent to €688.4 million. However pre-tax profits soared 36.9 percent to €44 million. Some of the stagnation in sales growth was down to the disposal if its Finnish modular space business - on a like for like basis revenues grew by 3.3 percent.

Looking at the fourth quarter things were a little less rosy, revenues declined by 4.3 percent, or two percent on a like for like basis, but pre-tax profits still improved by a healthy 15.2 percent to €11.8 million.

Capital expenditure on fleet and equipment for the year declined from €137.4 million to €124 million.

Looking at the individual region trends, Finland saw revenues decline by 12 percent, but profits improved 3.6 percent. Swedish revenues improved while profits were roughly flat slipping just under a percent from last year. Norway on the other hand saw a more than six fold improvement in operating profits to almost €5.3 million on the back of a modest rise in revenues. Denmark posted a respectable revenue improvement of over seven percent, but saw its operating loss more than double to over €5 million.

Outside of the Nordic countries Central Europe, which includes Germany and the old Thiesen business, saw revenues fall over six percent, while last year’s €3.7 million operating profit turned into a loss of €236,000. However the fourth quarter was a good deal more promising in terms of profitability but revenues declined almost 14 percent.

Eastern Europe on the other had saw revenues climb 5.5 percent while operating profits more than tripled.

Chief executive Vesa Koivula said: “The year 2012 started on a positive note but during the spring concern for the overall economic situation in Europe started to show. After strong growth, we decided to focus on profitability and our ability to achieve good results. Still, our aim is to grow faster than the market, which we have succeeded in doing in several markets during the past year. In addition, our profitability and return on equity improved, although they did not yet reach the targeted level. Our cash flow was strong and gearing decreased as planned.”

“Considering the market situation, we can be satisfied with our results. They indicate that at Cramo we have the skills and ability required for succeeding in difficult circumstances. The focus on ensuring profitability has meant that investments and personnel have been reduced in those markets where demand has declined most radically. The differences in market development have been striking. In our main markets of Finland and Sweden, construction activity turned negative, whereas in Norway, Russia and Estonia it grew quite strongly.”

I am especially satisfied with the good development of profitability in Finland, Norway and Eastern Europe. In Sweden, profitability also remained at a good level. In Central Europe, the theme for 2012 was still harmonisation of operations. However, we expect results in Central Europe to improve gradually. In Denmark, the significant streamlining of the cost structure offers an opportunity for profitability improvement.”

“When it comes to economy, construction or equipment rental, there is no strong growth in sight yet. Nevertheless, I believe that the efficiency improvements carried out in 2012 form a good foundation for succeeding in a challenging operating environment.”

Vertikal Comment

On the surface this is of course a good result, improving profits while revenues remain stable looks good, however unless margins we seriously off before it does not bode well if it continues.

Profits can be improved in the short term by all manner of things, but mid to long term growth needs to go hand in hand with revenue improvements. Cramo still has some issues in Central Europe and Denmark, but has had some remarkable successes in other markets such as Eastern Europe and Norway. Its biggest challenge will be to turn the Central European business around. It is a substantial business in a region where outsiders often struggle to make a decent return.

Other than that the company has a good deal more positives to talk about than negatives.