09.11.2009

Cramo slips 26%

Finnish based international rental company Cramo, has reported third quarter revenues of €115 million down 26 percent on the same period last year. The decline when currency translations are removed was a slightly more modest 22 percent.

Pre-Tax profits for the quarter were €2 million compared to €24.5 million in 2008. The company says that activity in most of its regions stabilised and even showed signs of picking up.

The nine month revenues were €331.3 million 24 percent down last year, while the company posted a pre tax loss of €6.7 million compared to a profit for the first nine months of 2008 of €58.9 million.

The third quarter saw strong free cash generation which has allowed Cramo to pay down its debt, reducing total debt from €533 million to €428 million at the end of September.

Capital expenditure for the first nine months was €24.9 million with the total for the year likely to be in the region of €30 to €35 million. Most of the expenditure has gone on additions to the group’s modular space division. However the reports seem to suggest that it has also spent €19 million on topping up other equipment areas, financed from sales of used equipment.

Cramo’s release stated: “During the third quarter, markets were seen stabilising, and there were some early signs of recovery. However, because of the cyclical nature of the construction industry and low investment levels in industry, we expect the
Group's economic operating environment to continue on a low level towards year end”.

“Government actions to stimulate economic recovery in the various sectors of construction - particularly in civil engineering - will balance some of the recessionary effects. In the modular space business, long-term agreements will moderate the cyclical fluctuations in Cramo's operations”.

“Having completed major restructurings, certain cost cuts will still continue. The reduction in headcount will be approximately 30 percent. Other actions aim at an efficiency increase and better rental
equipment fleet utilisation rates. The adjustments are expected to generate cost savings of approximately €35 million in 2009 and €50 million in 2010.

“The demand for equipment rental might continue to decrease in many markets in the first half of 2010. Recent reports on signs of early recovery and increasing residential construction, support a forecast according to which the demand might see an upswing in the second half of 2010. However, there are still significant uncertainties associated with 2010 forecasts”.

Vertikal Comment

This is actually not a bad set of results from Cramo given the current environment and the strength of the euro. And in spite of its final caveats, the outlook is finally looking a little bit positive.

The company has a strong base in both the Nordic region and Eastern Europe, both of which are likely to bounce back faster than many parts of southern Europe. The group’s strength outside of the Euro Zone is of course depressing its reported revenues.

With significant cost savings having been made (some of them a necessary consolidation of its network, following several years of rapid growth via numerous acquisitions) and yet having cut only 12 locations - reducing its network of depots to 286 - The company is well placed for a strong pick up in profitability next year, particularly if the Euro looses some of its current strength against the other currencies in which the company operates.

Cramo’s fellow Finnish international company Rami Rent, whose operations and geographical coverage are quite similar, reports later this week and all eyes will be on the lookout for variances between their third quarter results and outlooks for 2010.