12.03.2009

Tough start to the year for Rami

Ramirent, the Finnish based international rental company has reversed its previous decision to pay a dividend for 2008 and is implementing further cuts following a poor start to the year.

The company says that revenues in January and February were down 26 percent on the same period last year. As a result it is looking to make further cost savings, including cutting a further 150 jobs and suspension of the planned and announced dividend payment.

Ramirent has also revised its outlook for 2009 in the face of a drop in demand in the Baltic states, Russia and Ukraine. January and February were a disaster for Ramirent Europe East, with sales plunging 60 percent compared to 2008. In addition to “a marked contraction in the Nordic markets.”

The situation is exasperated by a further weakening of the Nordic currencies as well the Polish zloty against the Euro.

In December a €50 million cost saving plan was laid out, which will now be augmented by further cutbacks.

Ramirent's new chief executive, Magnus Rosén said: “2009 will be a challenging year and we are now launching additional actions. As part of these actions, we estimate to further reduce our personnel by at least 150 persons, adding to a total reduction of 750 persons or 20 percent of the Group's workforce compared to 2008.”

“Investments in new capacity have already been halted and we will continue to right-size our fleet to optimise utilisation, defend price levels and strengthen our cash flow in order to amortise debt”.

Ramirent chairman Peter Hofvenstam added: “We understand the disappointment of our shareholders, but in this extraordinary market situation everyone needs to contribute. The group is taking forceful actions to adapt to the rapid market decline, and 2009 will be difficult for the rental industry. However, the equipment rental business is structurally attractive in the long-term, and we are prepared to weather this downturn and continue our strategy of profitable
growth.”

Vertikal Comment

One assumes that Ramirent is seeing a continuing downward trend in March in order to have made such a drastic decision as rescinding an already announced dividend.

The key to understanding the results from Rami will be to compare the first quarter numbers from Cramo, which has a business that closely mirrors that or Ramirent. The question is bound to be how much of this fall is due to poor performance and competitive pressure and how much to the economy?

Ramirent has suffered some set backs in the Baltic states last year with key staff departures and face some tough local competition in Russia, at a time when the market had been hit hard. Add to this some slow down in activity along with the currency factor as well as some harsh weather conditions in the first tow months of the year and it is easy to understand the drop.

If Cramo comes in with a significantly better result, the pressure will be back on Ramirent. Magnus Rosén might have hoped for a slightly more gentle honeymoon period than this.