17.02.2014

Ramirent profit crash

Finnish international rental company Ramirent has published its full year results with lower revenues and a collapse in profits.

As anticipated - thanks to its previous profit warning - the company has revealed a sharp fall in profits for 2013. Total revenues for the year were down over nine percent to €647.3 million, although over half the drop is due to hiving off its Russian business into a joint venture with Cramo and the sale of its Hungarian business. Pre-tax profits fell 23 percent to €63.9 million.

Looking at the fourth quarter total revenues slipped 13.7 percent to €167.5 million, while pre-tax profits plunged 48 percent to €12.8 million.

Capital expenditure remained stable at €125.5 million, marginally higher than in 2012, while cash flow improved significantly and net debt was cut by over 13 percent to €206.9 million, strengthening the group’s balance sheet.

Chief executive Magnus Rosén said: “In 2013, against a background of challenging conditions in a number of our key markets, we continued to develop the fundamentals for our future growth ambitions for the business. In such conditions a focus on cash is always paramount and we are pleased to report a substantial increase in cash flow. At the end of 2013, Ramirent held one of the strongest balance sheets in equipment rental.”

“In the fourth quarter of 2013, the demand for equipment rental weakened in Finland and Norway due to slower activity especially in the construction sector and we were unable to reduce costs to match the lower demand. We have intensified measures to strengthen profitability in these segments. The market situation in Sweden remained healthy and we continued measures to improve our operational efficiency. In Denmark, construction activity picked up, although from low levels, and we continued to restructure operations to increase profitability.”

“In Europe Central market development was still weak but showed signs of stabilisation. Our business performed well in the Baltic States, where our capacity utilisation increased supported by high industrial activity. Integration of the Fortrent joint venture operations was successfully completed on 15 January 2014.”

“Entering 2014, economic growth is expected to be modest and construction market demand remains mixed in our core markets. We will maintain strict cost control and capital expenditure is expected to be around the same level as in 2013. Ramirent is well prepared to manage fluctuations in market conditions and capture growth opportunities.”

“As our operational fundamentals have come a long way and we have balanced the risk level, growth strategy returns into focus in 2014. We have set up a clear growth strategy which includes pursuing outsourcing opportunities and selected small− to mid−sized acquisitions as well as evaluating entry to new sectors and geographies. Accelerated growth will be sought from defined growth pockets such as energy, oil and gas and the public sector.”

Vertikal Comment

Ramirent has been a strong performer over many years and steered a solid path through the recession out-performing its main competitors. One of the reasons for that was its strong focus on the business, rather than on what analysts might think of its year end numbers.

The latest results are full of jargon and third party views of the market- always a bad sign that management might be focusing more on the results than on the business that created them, while looking to justify any slow-down in the business - past present or future – by citing full details of construction industry forecasts in their annual reports.

Hopefully this is not actually the case with Ramirent, and the fact that it has not axed items such as capital expenditure as it heads towards an upward economic cycle is a good sign that it has not completely lost its underlying business focus.