H&E posts first quarter loss
US based crane and access rental and distribution company H&E Equipment Services has published its first quarter results.
Total revenues for the quarter were down nine percent on the same quarter last year at $285.9 million, mostly due to lower new equipment sales. Rental revenues declined less than one percent to $174.5 million. Physical utilisation dropped from 70 percent last year to 64.3 percent this year, while rates declined 0.4 percent. Capital expenditure was not included in the results announcement, but the average age of the fleet as of the end of March was 37.7 months, total debt was around 2.5 percent lower than last year at $1.14 billion.
While the company’s gross profit held up well it decided to take a $62 million goodwill impairment charge/write off which turned last year’s pre-tax profit of $19.4 million into a loss of $47.3 million this year.
Chief executive Brad Barber said: “Our results for the quarter were impacted by the ongoing rebalancing of supply and demand, seasonality and the Covid-19 outbreak. Demand in our end user non residential and other construction markets in January and February of this year was slightly softer than our expectations, pressuring physical utilisation. Wet weather was an added headwind during the quarter across a large portion of our operating footprint. In March, weather improved, but the economic realities of Covid-19 began to emerge, and additional pressure became evident in our end user markets.”
“Consequently, total revenues declined 8.8 percent, or $27.7 million, from a year ago. Most of this decline was attributable to a 47.8 percent, or $28.2 million, decrease in new equipment sales. Demand for new cranes and earthmoving equipment was down significantly from a year ago as customers began to delay large capital purchases due to the uncertainty surrounding the Covid-19 outbreak. Despite a 570 basis point decline in physical utilisation and pressure on rates, total rental revenue declined 0.9 percent, or $1.6 million, from a year ago.”
“While this year began like many other years, we are now dealing with the unprecedented realities of Covid-19. We care about our employees, customers and the communities we serve nationwide, so we took quick and strict action based on CDC and WHO recommendations to combat illness in our workforce and to lessen business interruption for our company and customers. We have been designated an essential business and our branches remain open to serve our customers. However, the economic impact of Covid-19 has been pervasive across the markets we serve, resulting in project delays and cancellations, which have created significant pressure on rental fleet utilization that has continued into the second quarter.”
“The ongoing and evolving pandemic and related governmental restrictions, such as stay at home orders, present unprecedented challenges for all of us in 2020. We remain focused on managing our business for long term success and driving value for our stockholders. We have a solid balance sheet and ample liquidity. We are confident in the talent we have at all levels in our company to see us through the difficulties presented by Covid-19.”
It is very hard to see a clear picture during this crisis, but it does seem that H&E has done well, all things considered, although it will have only seen a couple of weeks impact on its rental business. More worrying might be its geographic strength in the US Gulf states where the oil & gas industry is a major economic factor. The second quarter will of course be more indicative of how the year as a whole will look.