04.11.2015

Third quarter profits slide at Rami

Finnish international rental company Ramirent has posted a sharp fall in profit for the third quarter on slightly higher revenues.

Revenues for the nine months to the end of September were up 2.7 percent to €465.2 million, however pre-tax profits slipped 5.3 percent to €34.1 million. Capital expenditure was €97.2 million around 23 percent lower than at the same point last year.

In the third quarter revenues increased just one percent to €165.1 million, while pre-tax profits dived 25.2 percent to €17.7 million, due largely to problems in Sweden and Norway. But also due to bad debt write offs and some one off costs associated with a previous acquisition.
Net Debt at the end of the period was up by more than 10 percent to €286.4 million. In spite of this the company is holding to its previous full year forecasts

Chief executive Magnus Rosén said:“The positive top line development that was observed at the end of the second quarter did not fully materialise in the third quarter, with weaker than expected performance in both Sweden and Norway. Combined with higher material and services costs and slower than expected realisation of the efficiency programme. Return on equity amounted to 9.9 percent (12 percent last year), measured over the last twelve months. Profitability was impaired by a higher share of service sales compared to the previous year, price pressure and internal reorganisations. We maintained good control over fixed costs, where rolling 12 months fixed costs decreased to €235.6 million from €239 million”.

“In the third quarter, it was particularly satisfying that despite challenging market conditions in the Finnish equipment rental market, our sales grew and profitability improved in Finland. Profitability strengthened clearly in Denmark where our restructuring measures combined with the improving underlying demand are producing better results. In Europe Central, our profitability continued to improve supported by successful implementation of efficiency actions, internal reorganisation and higher rental prices compared to the previous year. In Baltics, demand for equipment rental was stable”.

“In Sweden, the net sales growth was slightly lower than expected despite a strong market, with profitability being below previous year due to a higher share of service sales and internal restructuring. In Norway, slow underlying demand in the building construction sector and uncertainty in the oil and gas sector, resulted in lower sales and profitability. Corrective actions have been taken to improve profitability both in Sweden and Norway”.

“In the third quarter we signed an exclusive project agreement with NCC for the delivery of a Total Solution combining machines and planning with high focus on safety, for the expansion of Södra Cell Värö pulp mill in Sweden. The value of the order is approximately EUR 10 million with the project extending to autumn 2016. After the end of the review period, we signed a Letter of Intent with Hartela for outsourcing of equipment, machinery operations and personnel to Ramirent in Finland”.

“We continue to implement our efficiency programme to improve profitability and operational excellence, although realisation has been slower than expected. While the efficiency programme has been successful in lowering the fixed cost base, the expected margin improvement has not materialised due to less favourable market conditions and price pressure, primarily in Finland and Norway, and slower than planned adoption of the efficiency measures”.

“Based on our cash generation and continued solid financial position, we will continue to invest in sustainable profitable growth and to capture market share by strengthening the customer offering and widening the customer portfolio. We will also continue to pursue outsourcing deals, acquisitions and joint venture opportunities.”

Vertikal Comment

Ramirent has suffered a setback, in its efforts to pull out of a financially challenging period, with the third quarter profit numbers suggesting that it has yet to get some positive momentum going. It has made some progress, landing some large headline contracts, but some of this will have been the simple formalising or dare we say it - ‘contractualising’ – of existing business/revenues.

From an outsider’s view it does seem that the management is handling the company as if it is a business school project, rather than a real company with real employees and real customers who have a real choice and are not swayed by fine words, restructuring and other initiatives. But this is possibly unfair - it may be that the company only talks/thinks this way in its quarterly reports when it has the challenge of addressing analysts and bankers etc… whol like to hear this sort of stuff. And that it is more down to earth and specific in day to day operations?

Let’s hope so as Ramirent is an excellent company with a superb network across a large sway of Europe, with some fantastic people and tremendous opportunities. Perhaps the fourth quarter will be brighter, setting the business up for a sparkling 2016.