09.08.2013

Essex cuts losses

Higher crane rentals and new crane sales helped boost revenues at USA based Essex Crane Rental in the first half reducing its pre-tax losses.

Total revenues for the six months were flat at $50.3 million – one percent lower than in the same period last year – but these include a rise of over 11 percent in crane rental revenues to $23.6 million, thanks to higher utilisation of most of its crane lines – with only Rough Terrain rentals falling. New crane sales more than doubled to $4.6 million – The increases were offset by a $4 million drop in sales of used equipment from its rental fleet, lower parts sales and lower transportation invoicing. Pre-tax losses for the period were cut from $11.3 million last year to $6.67 million this year.

Looking at the second quarter, revenues dropped seven percent to $25.2 million, due to lower fleet disposals and lower new crane sales. Pre-tax losses were reduced from $4.5 to 3.4 million.

Chief executive Ron Schad said: "The continued year over year improvement in our operating results in addition to the increased demand for our product offerings is encouraging. We are pleased to be reporting our highest quarterly EBITDA before non-cash compensation and non-recurring expenses since 2009."

"Particularly encouraging is crawler crane utilisation, which is at its highest level since the first quarter of 2009. Crawler cranes make up approximately 75 percent of the value of our rental fleet, and the increased utilisation was a key reason why equipment rental revenue increased by $1.1 million compared to the prior year. Utilisation of our heavy lift hydraulic crawler crane class was 67.6 percent for the quarter. Average rental rates have also increased on a model by model basis by an average of about six percent for these types of crawler cranes, compared to the second quarter of 2012. These hydraulic crawler cranes have high 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."

"The construction market is continuing its gradual recovery. Operating initiatives implemented throughout 2012 are yielding an improvement of both gross profit and EBITDA, in both dollars and percentage margin as compared to the prior year. We have outperformed prior year results in nine of the past ten quarters by an average of 61 percent and the past six consecutive quarters by an average of 78 percent. We expect this trend of quarter over quarter improvement to continue for the remainder of the year."

"Given the overall gradual recovery in the end markets that we serve, and while we have been experiencing year over year improvement in our operating results, we remain cautiously optimistic for the remainder of 2013. Based on our actual first half results and our visibility for the remainder of the year, we reaffirm that our full year 2013 EBITDA before non-cash compensation and non-recurring expenses is expected to be in the range of $21 million to $26 million, which is consistent with the earnings guidance that we provided at the beginning of this fiscal year."

Vertikal Comment

Essex Rental’s trek back to profit is a long and slow one, but it is getting there, the trouble is that it currently needs high utilisation levels to make even an operating profit. However the break even point within its distribution business – acquired with Coast Crane – has been significantly reduced which will help boost its fortunes as this side of the business picks up. Other than this it looks as though the rental fleet still needs some adjustment and expansion going forward.

However even based on current results the business could reach break even later this year, and will of course be hoping for a profitable 2014.