05.11.2014

Profits fall at Essex Crane

US based crawler crane rental specialist Essex Crane has reported a strong pick up in revenues, combined with greater losses.

Total revenues for the nine months to the end of September were $75.2 million, an increase of around 2.5 percent on the same period last year thanks to higher rental and transportation revenues offset by lower new crane sales. Pre-tax losses for the period increased from a loss of $9.6 million last year to $13.6 million this year.

Looking at the third quarter total revenues increased 27.5 percent to $29.1 million, thanks to a strong pick up in crawler crane rentals and the sale of six conventional crawler cranes pushing used crane sales from $1.26 to over $6 million. Pre-tax losses increased almost 60 percent though from $2.4 to $3.8 million. This was largely made up of a $771,000 impairment on cranes up for sale and higher interest costs.

Chief executive Nick Matthews said: "As anticipated in the original guidance given for 2014, we have experienced sequential improvement in Adjusted EBITDA throughout the first three quarters of 2014 and are now experiencing year over year improvement. We have been successful in increasing demand for our rental offerings based on the effectiveness of our customer focused initiatives as well as an improved economic environment. Additionally, we have increased the pace of selling excess rental fleet, particularly our traditional crawler cranes."

"We are continuing to experience utilisation and rental revenue improvement from the hydraulic crawler, rough terrain and tower crane fleets, which make up over 70 percent of the orderly liquidation value of our rental fleet, and we believe that there remains significant potential to increase earnings and cash flow. The quality improvement initiatives and customer-centric service-oriented strategies that the company has adopted over the last six months has resulted in a material increase in our asset utilisation but has also resulted in higher costs to get previously unutilised equipment into rent ready condition and maximize equipment up time while on rent. While we are incurring higher upfront costs, management anticipates these rentals will display improved overall profitability over the duration of the lease term and will yield enhanced customer satisfaction.”

“We remain focused on these initiatives along with maximising utilisation in our core asset classes and continuing to market and sell excess rental fleet to reshape our asset portfolio and improve our return on invested capital. We are still in the early stages of implementing these strategic initiatives and are encouraged by the progress we made during the third quarter."

Vertikal Comment

Essex is certainly making improvements in its crawler crane rental business, but the new crane distribution business appears to be continuing to slip away, a trend that began not too long after it acquired Coast Crane. While the core business is certainly heading in the right direction it still has a long way to go in terms of defraying its high overhead and debt service costs.

From a simplistic outsiders point of view the company’s break-even point looks to be too high and unlikely to change unless it can push tower crane, boom truck and Rough Terrain crane utilisation to over 70 percent sometime soon.

Utilisation on its more recently acquired crawler cranes is almost as high as it will go at 79 percent, while several of the other crane categories languish below 50 percent, although to be fair they are all well up on this time last year, but then again this does not appear to be reflected in the bottom line.