06.11.2014

Profits slip at Mills

The access rental division of Brazilian rental and infrastructure company Mills has reported a fall in revenues and profits for the third quarter.

Revenues for the business - which rents out aerial work platforms and telehandlers – over the first nine months were R286.9 million ($113.6 million) 10.3 percent higher than at this point last year. Pre-tax profits though slipped 12 percent to R78 million ($30.9 million).

Looking at the third quarter revenues fell 3.1 percent to R91 million ($36 million) due to fewer machines out on rent, lower utilisation and lower prices. This had a substantial impact on pre-tax profits which fell 32 percent to R20.2 million ($8 million).
As a result capital expenditure during the quarter was just over R3 million ($1.9 million) compared to $75.4 million ($30 million) in the same quarter last year. Year to date expenditure is R104.8 million ($41.5 million) vs a budget of R169 million ($67 million).

The company said: “We will proceed with our geographic expansion plan, taking advantage of the idle equipment in our current fleet, without new investments, until utilisation rates and prices return to historical levels. We believe in the strong growth potential of the motorised access equipment market in Brazil due to the increased penetration of its use and by the increased security and productivity that it offers” It also added that the market appeared to be picking up as the quarter progressed, having hit a low spot in July.

Looking at the group as a whole, Mills reported total revenues year to date of R612.3 million ($243 million) just over one percent down on last year. Pre-tax profits for the period dropped 65 percent to R60 million ($23.8 million)

Vertikal Comment

This less than positive response is not surprising and we have been warning for some time that the pace of growth Mills and the Brazilian market could not be maintained. It is in fact no bad thing that the market has taken a breather at this stage. If the growth trend had continued for too much longer we would have faced a much longer harder slump.

Hopefully the current slowing is just a pause as underlying demand catches up with the incredible increase in supply that has occurred over the last three years or so. If anyone is in any doubt about the dangers of rapid growth over a long period that shoots way beyond underlying demand, just speak to a few people in Spain!

Brazil is a big fast growing country with a lot of natural resources and a great deal to do when it comes to infrastructure and development, and the access market still has a huge amount of growth and market penetration to go through. Manufacturers though will need to write down their 2015, shipment forecasts, which most probably have already done.

The fourth quarter numbers will provide the next indication of what might happen to the Brazilian market, We expect it to be fairly similar to the third quarter, hopefully stabilising at current levels for a while - rather than going into decline. If on the other hand rapid growth picks up again – fasten your seatbelts.