05.08.2015

Slow down continues at Mills

The rental division of Brazilian scaffold and infrastructure group Mills has reported further declines in its fortunes.

The company saw revenues in the first six months drop by around 22 percent to R154.1 million ($44.3 million) as utilisation of its largely aerial lift and telehandler fleet fell to just over 60 percent and rates softened. Pre-tax profits for the period were R14.1 million ($4 million) roughly a quarter of what they were this time last year.

In the second quarter revenues fell almost 25 percent to R74.5 million, while pre-tax profits were R9.9 million ($2.8 million) roughly a third of the level achieved last year when the company was already in decline. The company which had been on a massive buying spree in recent years is now looking to sell some of its relatively new fleet. It also opened two new locations in the period, in Maceió, in the state of Alagoas, and in Pouso Alegre, in the state of Minas Gerais, bringing
the total network to 32 branches by the end of June.

The group as a whole reported total half year revenues of R311.8 million ($89.6 million) down 26 percent on the same period in 2014. Last year’s pre-tax profit if R88.7 million ($25.5 million) was transformed into a loss of R21.4 million ($6 million) this year. The company continued to refrain from any new capital expenditure in the division, something that has lasted for over 16 months so far.

The company said: “In this quarter, we signed new contracts related to important construction jobs in the Heavy Construction business unit, started having reversals of allowance for doubtful debt, and a new variable compensation program was launched, aiming at greater engagement of our employees. However, uncertainties remain in the markets in which we operate. Therefore, we will continue our efforts to reduce costs, improve operational productivity and synergies among the business units, as well as focus on cash preservation and assets resizing, through sale of equipment”.

Vertikal Comment

As we sadly predicted the pace at which Mills was expending its aerial lift rental, business at was unsustainable and surely outpacing underlying market penetration of the concept. This has been further affected by the dire economic downturn in the country and then the oil & gas challenges.

However in spite of all this the company /division continues to make a profit and still maintains a substantial revenues. While we may still have some time to go before the Brazilian economy picks up again, If it can stabilise the situation at current levels it could come through the recession in good shape ready for another period of growth, perhaps a slightly more gentle rate.