11.02.2009

Cramo up 17%

Finnish based international rental company Cramo has posted full year 2008 results which show revenues up 17 percent to €580 million while pre-tax profits slipped 16 percent to €63.7 million.

In constant currency levels revenues increased, by 19.5 percent, the largest differential being the Swedish Krona which was significantly down against the Euro. The company says that sales improved in all of its regions, led by Central and Eastern Europe where revenues increased by 33 percent and Western Europe up 30 percent.

Capital expenditure on the group’s rental fleet during the period was up 15 percent to €201 million. This will be reduced to negligible levels in 2009. Employment levels increased from a headcount of 2,070 to 2,617.

Outlook

Cramo says that it expects construction to fall in all Nordic countries and the Baltic countries while continuing to increase in Poland, the Czech Republic and Slovakia, albeit at lower levels. In Russia it says that the growing popularity of equipment rental will support an in crease in demand for rental services.

It also adds that public spending, especially on infrastructure construction is expected to grow during the year in most of its markets. The same being true for renovation work.

The company says: “As a result of investments made in recent years, the Group has a modern and competitive rental fleet and no investments are needed in 2009. Rather than investing in new equipment, we will focus on optimising the use of our fleet on a Group-wide basis in 2009. Furthermore, we will continue the
systematic cost adjustment measures to protect profitability and cash flow from operating activities in all situations. The cost reduction measures are expected to bring cost savings of at least €25 million in 2009.”

Vertikal Comment

This is a perfectly respectable set of results from Cramo with a reasonable outlook for the year ahead. The only dark patch is that the company has significantly increased its gearing due to the large number of acquisitions made over the past year.

It has taken several steps to ensure that its debt is secured, but just in case is cutting all capital expenditure in order to generate more cash and protect itself. The group has a reasonably modern fleet and can get away with this for a year or so.

The big test this year, which also applies to other international rental companies, is how well it does at moving equipment from market to market. The relocation of idle equipment to countries with more demand is the theory that drives such businesses.

In the real world this is not as easy as it sounds, and depends on the how well the new equipment was specified in the beginning and how well set up the company is to make the required modifications to suit different markets, ship efficiently and a how open and positive the workforce is to such moves.

Cramo is a well managed business and given its experience of moving equipment in and out of Russia, should have no problem in the mechanics of such movements. The challenge will be what equipment is moved, typically the worst dregs of a locations fleet are put forward for transfer, which then creates issues at the receiving location which can lead to all manner of internal strife.

Managing this successfully will be key to the company continuing to grow or maintain revenues without further capex.