09.05.2013

Light at the end of the tunnel for Essex

US based Essex Crane has released its first quarter results which show better revenues and a much reduced loss.

Total revenues for the quarter were $25.1 million, six percent higher than a year ago, while the pre-tax loss was reduced from $6.8 million in 2012 to $3.27 this year. Utilisation generally fell back from the fourth quarter 2012, but every sector improved in comparison to the same quarter last year.

Crawler crane utilisaiton was up 10 percentage points to 60.5 percent, while Rough Terrains were up almost four percentage points to 58.4 percent. Self-erecting tower crane utilisation almost doubled to 46.7 percent and finally regular tower cranes were up more than 10 points to 58.4 percent. The key crawler crane rental rates improved by 4.6 percent on the year.

Chief executive Ron Schad said: "While our results are encouraging, I believe that we are still in the early stages of what will be a gradual recovery in utilisation and rental rates for all of the assets that we rent. We are pleased with the year over year improvements we experienced in both our equipment rentals segment and our equipment distribution segment. As expected, the first quarter 2013 results were marginally negatively impacted by seasonality as our first quarter is generally our weakest quarter of our fiscal year."

"Utilisation and average monthly rental rates across all of our asset categories increased on a year over year basis in the first quarter of 2013. This marks the third consecutive quarter in which all of our asset categories have increased utilisation on a year over year basis. Within our crawler crane fleet, we are encouraged by the utilisation trends for our hydraulic heavy lift crawler cranes. These cranes have higher dollar rental rates and account for approximately 70 percent of the value of our crawler crane fleet and approximately 50 percent of the value of our total fleet. Utilisation for the quarter ended March 31, 2013 was 60.5% and has now been above 60 percent for the past three quarters. Furthermore, utilisation has increased in each month this year and is currently in excess of 69 percent.”

“While quoting activity related to contractors that have been awarded construction projects has been lower than our expectations thus far in 2013, our win rate on these quotes has been better than expected. We will continue to closely monitor quoting activity as we believe it is an important indicator of future business performance."

"As we have previously mentioned, we completed the refinancing of all of our operating company debt in the first quarter of 2013 and extended maturities to 2016 and beyond. We are extremely pleased with the long-term financial stability that the refinancing provides. During the first quarter of 2013, we also completed the divestiture of all aerial work platform equipment from our rental fleet. Our focus is now on selling excess core rental equipment to pay down debt or recycle our capital into asset classes where we are experiencing higher demand."

Vertikal Comment

Essex is clearly heading towards break-even, one has to wonder though what sort of utilisation it is going to take to make that happen and if that level of utilisation is sustainable. Although the dynamics of the rental business are such that it can switch quickly from a hopeless loss to a very substantial profit- with a little more utilisation and a few percent on the rate and the financials are transformed.

One wonders looking back - with the benefit of hindsight - if the Coast Crane acquisition made sense, it seems that the merged business has lost/closed down quite a bit of what it purchased and looks to be drifting slowly back towards a larger and slightly more varied version of what Essex was before the takeover. And that may well be the right strategy?