15.11.2021

Mills Solaris on the up

The rental division of Brazilian rental and construction group Mills Solaris, has posted an upbeat set of numbers for the third quarter.

The rental division achieved revenues for the nine months to the end of September of R453 million ($83.6 million), an increase of 55 percent on the same period last year, with an operating profit of R107.7 million ($19.9 million) compared to a loss last year of R15.7 million ($2.9 million). Capital expenditure was negligable.

Looking at the third quarter, revenues jumped 67 percent to R169 million ($31.2 million) with an operating profit of 46.5 million ($8.6 million). The group as a whole - of which the rental division now makes up 87 percent - posted nine month revenues of R518.9 million ($95.7 million) with a pre-tax profit of R58.7 million ($10.8 million) compared to a loss last year of R12.4 million ($2.3 million).

Chief executive Sergio Kariya said: “The rental business unit set a record revenue, increased the volume of equipment on rent, and improved margins. We paid dividends and interest on equity, and repurchased shares, etc., showing that the company’s turnaround was successfully completed and that we are advancing on our path of growth and generation of value for shareholders.”

"Thus, in the third quarter rental produced 15.2 percent return on capital employed, reflecting, among other factors, efficient operational management and growing demand in various segments, showing an evolution in the equipment rental activity in Brazil. With a 63 percent utilisation in September, rental set a new record of net revenue.”

"Aiming to meet this growing demand, expand Mills' geographic footprint, increasingly improve customer service and adapt our fleet, as reported in 2021, the company's board of directors approved the purchase of up to 1,290 new aerial lifting platforms, which will arrive throughout 2022 and will represent a Capex of up to US$63.2 million, not considering the amounts to be earned by the company from the sales of used platforms. Therefore, we intend to close 2022 with approximately 50 branches, serving more than 1,200 cities in Brazil, a number fully aligned with Mills' organic growth plan.”

"On the inorganic front, where we seek to consolidate the fragmented market for lifting platforms in Brazil and maximise value creation for Mills, CADE approved, on November 4, 2021, the acquisition of all shares of SK Rental do Brasil, the rental company of lifting platforms with a strong presence in the southern region of the country, a customer base that stands out in their areas of activity, a fleet with over 300 pieces of equipment and certified in management, quality and occupational health and safety systems.”

Vertikal Comment

This is encouraging set of results from Mills, which finally appears to have overcome the disastrous over expansion following the global financial crisis. Some of the key errors back then was opening too many greenfield locations at the same time and ploughing too many new machines into the fleet, outpacing the underlying growth in market penetration. Then in late 2014 the economy hit a wall, just after the company had raised more debt and purchased yet more machines. Let’s hope it does not fall into the same trap this time around.

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