10.02.2015

Higher revenues lower profits at Cramo

Finnish international rental company Cramo has reported an improved fourth quarter with revenues on the rise again, while profits tumbled due to restructuring and other write-downs.

Total revenue for the year was €651.8 million, almost one percent down on 2013, while pre-tax profits plummeted 59 percent to €21.5 million, mostly due to fourth quarter adjustments. Fourth quarter revenue increased by over three percent year on year, but the previous years profit of €16.3 million turned into a loss of €7.5 million in 2014. This was entirely due to goodwill and restructuring costs at its Central Europe division – previously Thiesen - where the company wrote-off €25.5 million, while challenges at its Russian joint venture Fortrent took a further half a million.

Regionally the company reported a good result in Finland, Sweden and Eastern Europe, offset by weaker performances from Norway and Denmark as well as the Fortrent problems in Russia and the Ukraine. Central Europe picked up from the third quarter on, but the full year result was still dogged by a poor first half. The company says that significant progress has been made with the German based division, but that there is still room for significant improvement in fleet utilisation, rates and profitability.

Chief executive Vesa Koivula said: “Economic development was weaker than expected in Europe in 2014, which slowed down construction in many locations and also affected demand for equipment rental services. However, public sector demand for the modular space business remained stable. Our sales performance actions and the more favourable market conditions improved our sales towards the end of the year. Fourth quarter sales grew in local currencies by 6.1 percent, as the market situation strengthened particularly in Sweden”.

“Our result improved towards the end of the year due to performance improvement actions. During the year, we cut fixed costs and improved operational efficiency. In the second half of the year, the group’s comparable fixed costs decreased by €13.2 million compared to first half. More generally, we continue the group’s performance improvement actions especially related to direct costs”.

“The improvement efforts and investments completed in our Central European operations provide a good platform going forward. However, there is still room for significant improvement in fleet utilisation rates and it will take time before we reach a good level of profitability in Central Europe. In the fourth quarter, we made a non-recurring impairment after which there is no goodwill or acquisition-related intangible assets left related to our Central European operations”.

“Although the first half of the year was challenging for Cramo, I am reasonably satisfied with our performance in the second half of 2014. In the fourth quarter, our result before non-recurring items improved year-on-year. I am particularly satisfied with the clear improvement of profitability in Sweden during the last quarter of the year, the good performance in Finland in 2014 as well as the profitable growth and expansion to new markets achieved in the modular space business”.

Vertikal Comment

Overall this looks like a reasonable result from Cramo, allowing it to go into 2015 with a clean slate having written off the last of its goodwill and intangible assets associated with the Thiesen acquisition. Its general rental business however continues to struggle, and is being covered by an upturn in the modular space business.

Having said this it does looks as though the company will do well in the year ahead as it returns to revenue growth, which should now flow through the bottom line. 2015 could prove to be the company's best year in some time.