05.08.2019

Soft exit for Ramirent

Ramirent has reported lower first half revenues and step fall in profits in what is likely to be its final results prior to its acquisition by Loxam.

Total revenues for the six months were €333.6 million, down 3.1 percent on the same period last year, mostly due to a drop of more than 17 percent in Sweden, its largest market. Pre-tax profits plummeted more than 33 percent to €28.1 million.

In the second quarter revenues were 3.6 percent lower at €170.6 million, while pre-tax profits were almost 44 percent lower at €13.2 million. Swedish revenues were more than 19 percent percent lower, while other regions apart from Finland showed small declines. And posted lower operating profits.

Capital expenditure for the six months was 1.1 percent higher at €111.9 million, while net debt jumped 25 percent to €498.8 million, following the acquisition of Stavdal at the end of the period.

Chief executive Tapio Kolunsarka said: “Our performance in the second quarter was twofold. Market conditions, as well as our profitability, remained solid in Finland, Norway and Eastern Europe, whereas in Sweden, we saw continued weak demand and our profitability was consequently low. For the quarter, our growth was 2.4 percent lower at comparable exchange rates, affected also by fewer rental days in the quarter. Our second quarter comparable EBIT decreased to €20.3 million, representing 11.9 percent of net sales. It is noteworthy that our comparable EBIT in Q2 was higher than in Q2 2017, which signals the strength of our underlying geographical mix.”

“In Sweden, sales and EBIT decreased due to slow sales in larger non residential projects, the divestment of the Temporary Space business as well as due to demand decline in the residential sector in the Stockholm region. Our underlying rental sales decreased by high single-digit percentages, affected by fewer working days in the quarter. Despite the negative sales trend in first half of 2019, our sales pipeline of new projects remains still active and our view of the medium-term development of the market remains optimistic. After the review period, we completed the acquisition of Stavdal AB. Based on Stavdal’s solid first half-year performance, the acquisition is estimated to be accretive to our profitability in the second half of 2019.”

“In Finland, I am proud of our team’s accomplishments as strong sales development continued and profitability improved despite tough price competition. In Norway, the sales development was stable and profitability improvement continued. In Eastern Europe, the performance was stable although affected by increasing price competition in some markets.”

“During the quarter, we also successfully continued to pursue our other key strategic targets. I am proud that our rolling 12 months’ accident frequency (LTIFR) reached a record low level of 5.2 (9.2), which is very close to our long-term target of being below 5.”

“For the second half of the year, we focus on generating strong cash flow enabled by clearly lower investments and improved working capital management. We will also focus on improving our performance in Sweden, where the market conditions are in the short term weaker than we anticipated. Helped by the Stavdal acquisition, we have unique opportunities to raise our competitiveness to new levels and create a new market leader in Sweden. In our other markets, we continue to pursue profit improvement as the market conditions are expected to remain favourable.”

“Going forward, Ramirent will, as a result of the successful tender offer, be delisted and transfer under the ownership of Loxam. Loxam possesses a long term track record of strong growth, and with our exceptionally engaged employees, I am confident that Ramirent has the possibility to further accelerate its growth and development adding an important Nordic and Eastern European dimension to Loxam's international presence. I want to thank all our colleagues for their tireless commitment in improving Ramirent’s performance in the past years. I also wish to extend a special thank you to all of Ramirent’s shareholders over the years, who have believed in us during the past two decades of being a publicly listed company.”

Vertikal Comment

Ramirent has been showing signs of struggling for some time, having come through the 2008 recession in relatively good form. The Stavdal acquisition might have helped but looks like a strategy often used by large rental companies, that look to cover up underlying issues, with regular compensatory acquisitions. There is no tangible evidence that this is the case with Ramirent, although gut feel suggests that this could be the case here.

Ramirent may well do better under the management of a large privately owned and focused group, freed of the quarterly reporting schedule with a chance to make changes with a longer term outcome? Loxam may well have paid ‘over the odds’ for the business, but if managed well it will still be a better and probably less risky and expensive way to become a leading player in the region than organic expansion.