06.11.2013

Essex continues to struggle

Essex Crane rental in the USA has reported further falls in revenue, although losses continue to decline.

The company achieved total revenues for the nine months to the end of September of $73.1 million just over five percent lower than this time last year. The fall is largely due to lower sales of used cranes from the fleet and lower spare parts sales - partly offset by distribution (sales) revenues which more than doubled. Pre-tax losses were cut from $14.6 million last year to $9.6 million this year.

Looking at the third quarter revenues slipped almost six percent to $22.8 million driven by lower rental and used equipment sales. Rental was hit by lower utilisation of mobile cranes and tower cranes, while crawler crane utilisation improved to over 70 percent for its newer models – older mechanical crawlers languish at around 30 percent.

Chief executive Ron Schad said: "While our year-to-date results display an on-going economic recovery, our third quarter results reflect a softening in demand for certain end markets and customers that we serve."

"Despite decreases in utilization on some of our lighter lifting equipment, crawler crane utilization 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. Within our crawler crane fleet, utilization of our heavy lift hydraulic crawler crane class was 70.9 percent, which is the highest level this class has achieved since 2008. 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."

"Despite the softening in demand for some of our rental assets and parts and service business we experienced in the third quarter of 2013, we believe the construction market will continue its gradual recovery in 2014. The uncertainty within our government has slowed progress somewhat, but we are confident that the recovery will accelerate once we are provided more clarity. We continue to manage overhead in order to maximize the return on our invested capital. Selling, general and administrative expenses excluding non-cash compensation was down 10.5 percent in the third quarter of 2013 compared to the prior year."

"Although our crawler crane fleet has achieved year over year improvements in utilisation for the past six quarters, we have experienced a decline in utilisation in the beginning of the fourth quarter, partially due to the delay in some project starts. Given the delay in the key drivers of our business and the fact that our fourth quarter is normally impacted by seasonality, we anticipate that 2013 EBITDA before non-cash compensation and non-recurring expenses will be in the range of $18 million to $21 million, which is lower than the earnings guidance that we provided at the beginning of this fiscal year, which was between $21 million to $26 million."

Vertikal Comment

It is good to see the distribution business – acquired with the Coast Crane acquisition – bounce back, however what the numbers clearly reflect is that the Essex Crane strength remains with the rental of crawler cranes. This is where its heart is, and one has to wonder if it should focus more on this market and dispense with mobile crane rental – the problem is that this then destroys the whole point of the Coast Crane purchase.

But that’s the way many acquisitions turn out… Indications are that the business will be back in the black for 2014… but ideally it ought to be further along at this stage of the economic cycle.