26.01.2017

Profits slip at United

The world’s largest equipment rental company US based United Rentals has reported its full year results, with slightly lower revenues and a fall in profits.

Total revenues for the year were $5.76 billion almost one percent lower than last year due to lower sales revenues for both new and used equipment. Rental revenues were roughly flat. Pre-tax profit for the year was six percent lower at $963 million. Rental rates fell 2.2 percent over the year while equipment on rent increased by more than three percent, with utilisation for the whole year at 67.9 percent.

In the fourth quarter revenues came in at the same level as the year before at $1.52 billion, with a small increase in rental revenues offset by lower sales of used equipment from the fleet. Pre-tax profits however fell seven percent to $242 million. Rental utilisation in the quarter edged up a little to 69.3 percent while were rates were 1.8 percent lower than in the same period a year earlier.

Capital investment for the year was $1.25 billion with $496 million of used equipment sold for a net investment of $750 million. This compares to $1.5 billion gross and $996 net spent the year before. The company has indicated that spending on the fleet is likely to rise this year by around $200 million, returning to 2015 levels- although this is likely to include the NES spend.

Chief executive Michael Kneeland said: "We were very pleased with our fourth quarter results, which benefited from broad-based demand. While rental rates remained a year-on-year headwind, our sequential rate performance was somewhat better than expected, and OEC volumes were robust through the end of the quarter. These factors helped us exceed the upper-band of guidance on total revenue, adjusted EBITDA and free cash flow for the full year."

"2017 should be a year of notable growth for us on several fronts. We expect to close the NES acquisition early in the second quarter and immediately embark on our integration plan. The transaction should be accretive to earnings, revenue, EBITDA and free cash flow this year. Once the acquisition is complete, we will issue new 2017 guidance to reflect the combined operations."

“In addition to M&A investment, we expect our performance to be driven by broad-based market opportunities and growing demand. Our confidence in the cycle is supported by internal data, customer sentiment, and the strength of key leading indicators. Longer-term, we expect our 2017 strategic investments in increased capital spending, sales and marketing, digital and Project XL to extend our market position and enhance future profitability."

Vertikal Comment

This is a lacklustre set of number from United, however in perspective the company has generated a good deal of cash and is in strong financial shape. The addition of NES could help re-invigorate the whole business at a time when the market is showing some positive signs. With a fair wind 2017 ought to be a very positive year for United.