12.08.2009

Ramirent drops 28%

Finnish based international rental company Ramirent, has reported first half revenues of €246.8 million, a decline of 28 percent on last year, at the same time pre-tax profits fell 78 percent to €12.3 million.

The Second quarter showed similar levels of year on year declines, with revenues down 31 percent to €124 million and profits down just over 62 percent to €11.2 million.

The largest declines came in Eastern Europe – with includes Russia, Ukraine and the Baltic states where revenues plunged 51 percent. Revenues from the rest of the groups regions were as follows: Finland - 14%, Sweden - 26%, Norway -29%, Denmark – 20% and Central Europe down 19 percent.

The company has taken a tough approach to cost cutting with capital expenditure down over 95 percent to just €7.3 million for the first half, mostly for replacement equipment, at the same time it disposed of €8.7 million worth of older equipment.

At the same time headcount has been reduced by 21 percent year on year, equating to a loss of almost 900 employees.

The benefit has been to remain in profit and allowed the company to slash its debt burden, cutting almost €120 million or 31 percent to €255 million.

Chief executive Magnus Rosén, said: "Market conditions are challenging in most of our markets, and the decline in net sales continued in the second quarter of the year. Our current priority to safeguard profitability and cash flow has proved successful. By maintaining a restrictive capital expenditure regime and taking actions to adjust our cost base to lower sales volumes, the Group was able to deliver a healthy cash flow and a resilient EBIT margin also for the second quarter.”

“The cost savings program is progressing according to plan. At the end of the second quarter our workforce had decreased by 772 persons since the program was initiated. The Group headcount is expected to decrease further to around 3,100 by year-end 2009. The market environment remains however difficult. We will maintain our focus on implementing cost saving actions, continuing to right-size our fleet and re-allocating fleet capacity between markets to support utilisation. Contingency plans are in place to address the risk of further market decline and we are ready to take further actions if necessary."

Vertikal Comment

This is an extremely positive set of numbers, given the markets that Rami works in and is well ahead of its peers. What they do not show is what the effect of such deep cuts might have created at the operational/customer level.

Some of the cuts were needed as part of the company’s consolidation and integration of all the acquisitions it has made over the past few years. These changes and cutbacks would have been hard to have made if the market and the company had continued to grow at the frenetic pace of 2006 to 2008.

It could be that this period will allow the company to prepare itself for further revenue and profit growth as the European economy recovers. What Rami will have to watch out for though is the age of its fleet.

Rami Rent is a child of the last major recession of the late 1980’s to early 1990’s when several failed rental companies were merged by the various shareholders to create a single strong business. The company spent almost nothing on new equipment for nearly five years and then struggled for a further five year or more to correct the fleet imbalance.

The company can not afford that luxury this time round, it has some strong large competitors as well as good smaller operators who will take market share and the some of its most profitable customers, if it allowed its fleet to become too old.

Given the speed it has cut its debt load this does not look as though it will be necessary or a likely strategy.