29.07.2014

Ramirent slide continues

Finnish international rental group Ramirent has reported another quarter of declining revenues and profits.

Looking first of all at the half year, revenues dropped 7.7 percent to €289.3 million while pre-tax profits were more than halved, slumping almost 60 percent to €12.4 million. Capital expenditure on new equipment was up slightly at €76 million, and net debt rose 3.5 percent to €273.4 million.

Moving on to the second quarter revenues were €151.8 million 5.6 percent lower than in the same quarter last year. Pre-tax profits for the period were €9.1 million – 40 percent down on 2013. Capital expenditure on new equipment was €50.1 million almost double last year’s €28 million. Sales of use equipment was €5.8 million compared to €7.6 million last year.

Looking at the regions in the second quarter, only Finland and Eastern Europe (Baltic states and Fortrent in Russia) posted positive revenue growth – 7.3 and 8.4 percent respectively. The group’s largest market Sweden declined 8.4 percent, Norway by 12.8 percent and Central Europe (Poland Czech and Slovakia) by 5.5 percent.

Chief executive Magnus Rosén said: “Slower than expected sales of equipment rental continued in many of our markets in the second quarter with net sales decreasing by 2.1 percent at comparable exchange rates. EBITA margin was below the previous year levels at an unsatisfactory 10.7 percent."

"Lower than expected demand and slow progress in the start-up of new projects impacted negatively on sales in Sweden. Our profitability in Norway was impaired by low demand from residential construction, decreased fleet utilisation and increased pricing pressure. In Finland, acquisitions and recovering market demand supported sales growth. Demand picked up in the Baltic States and Poland and we have relocated fleet capacity to these markets during the first half of the year.”

“Softness in construction activity in Denmark, the Czech Republic and Slovakia continues to burden our operations in these countries. Cost reductions have and will be further reinforced to adapt the cost base to market demand in all low-performing segments. In both Sweden and Norway, cost reductions were insufficient to mitigate the impact on profitability from lower demand. In Denmark, activities to streamline operations and realise synergies with Sweden continue.”

"In the second quarter we took important steps in building on our capabilities to deliver More Than Machines. The acquisition of a majority stake in Safety Solutions Jonsereds supports our growing focus on safety and the acquisition of DCC reinforces our capabilities in the growing business sector of weather protection. We also strengthened our services for industrial customers by concluding an outsourcing agreement with Empower for significant parts of their equipment fleet in Finland.”

“In July, we signed a contract with German-based Zeppelin Rental to form a joint venture to serve the Fehmarnbelt tunnel construction project, subject to approval from relevant authorities. The partnership will enhance our position as a potential supplier for the project and by combining our complementary capacities we can present a unique offer for the entire lifecycle of the project on both the Danish and the German side.”

"We will continue to pursue efficiency improvements developing integrated solutions, pricing management, optimising customer centre network, improving fleet utilisation rates and the governance of sourcing operations.”

“Our industry is transforming with rental developing into two complementary business models, rental over-the-counter and provision of integrated solutions, creating an opportunity for Ramirent to leverage its know-how of both. As part of our efficiency measures, we are focusing on improving our competitive position and developing our offer to efficiently fulfil needs of our customers’ and earn their trust as a partner in both types of business.”

“Based on our continued solid financial position, we are well positioned to continue pursuing outsourcing opportunities and acquisitions.”

Vertikal Comment

A disappointing set of results from Ramirent with sharp revenue drops in markets that are really not that bad. The company looks to be struggling with the challenge of encouraging a dynamic entrepreneurial attitude at the local level, while maintaining the solid financial reporting disciplines and central controls that a publicly quoted company requires.

Perhaps it would benefit from looking at United Rentals and Ashtead/Sunbelt in the USA which appear to be managing this dilemma well.