30.04.2019

Weak start for Ramirent

Finnish international rental company Ramirent has reported lower first quarter sales and profits.

Total revenues for the period dipped 2.7 percent to €163 million, due to a 15 percent drop in Sweden, the company’s largest market. All other regions were positive, with Finland improving more than 10 percent, Norway almost six percent, while Eastern Europe came in just above last year. Pre-tax profits at the company declined more than 20 percent to €14.88 million, this due to lower profit levels in all markets except for Norway, some of the decline is due to the financial reporting/treatment of leases, and some has been blamed on the sales of the temporary space business in Sweden last July.

Capital expenditure fell almost 19 percent to €43.3 million, of which €41.1 million was spent on new equipment. Net debt at the end of the quarter was 20.5 percent higher than this time last year at €423.6 million.

Chief executive Tapio Kolunsarka said: “Ramirent’s performance continued to be solid in the first quarter of 2019, despite the strong comparable figures of the previous year. Performance in Norway, Eastern Europe and Finland remained good. However, that was not enough to fully compensate for the weakness in Sweden. Cash flow after investments improved to €32 million, driven by the completed divestment of our Danish rental operations as well as lower investments. Our comparable ROCE improved to 15.9 percent.”

“Net sales decreased in Sweden mainly due to the divestment of the Temporary Space business. Also strong activity in large projects in the first quarter of 2018 negatively impacted the change in net sales. Our underlying equipment rental sales decreased by low single digit percentages in the quarter, mainly in Stockholm. We continue to have a solid pipeline of large projects in Sweden and remain optimistic about the medium to long-term growth prospects of the Swedish equipment rental market.”

“Net sales increased strongly in Finland, partly due to the acquisition of SRV Kalusto. Performance was good in our rental operations, but profitability was negatively affected by the scaffolding business. In Norway, both sales and profit growth were solid, and the previously announced restructuring has progressed as planned. Eastern European performance was stable, despite a slow January.”

“In March, we completed the divestment of our Danish equipment rental business. After this divestment, Ramirent has four operating segments and it operates in nine countries. We also operate in Russia and Ukraine through a 50 percent owned joint venture, Fortrent.”
“After the review period, we announced the acquisition of Stavdal, a general equipment rental company operating in Sweden and in the Oslo area in Norway with an enterprise value of approximately €158 million. The acquisition is expected to be strongly synergistic and cash-generative. We will now redeploy funds from earlier completed divestments and strengthen our position in the Swedish equipment rental market, particularly in the growing metropolitan areas of Gothenburg and Stockholm. Our business is in solid shape, and we continue to have opportunities for performance improvement in 2019. With our strong balance sheet and strengthening cash flow we are ready to accelerate our growth through synergistic acquisitions.”

Vertikal Comment

This is not a great start to the year from Ramirent. The company has all manner of reasons why things are not going as well as it might have hoped, but there appears to be a little less clarity of direction or vision from the company at the moment, which can so easily seep through to the operational side of the business.

The company has experienced a fair few changes in the past year or so, from exiting the Swedish cabin business to quitting the Danish rental market. It is now increasing its exposure in Sweden, which it has to be said is the most dynamic equipment rental market in the region, but at a time when the market is struggling a little and a market that until this latest quarter made up more than 41 percent of its revenues and more than half of its profits (35 percent of revenues and a third of its profits in the latest quarter). It is true that the best time to buy is usually when a market is down, but it is entirely possible that the Swedish market is closer to the top? Whether Rami paid too much for Stavdal, or grabbed a bargain remains to be seen. We should have a better indication by the third or fourth quarter.

The acquisition of Stavdal could however, easily herald a turn around the company’s fortunes as it recaptures the mojo that it seems to have lost over the past year? Let’s hope so.