25.02.2010

Hertz Equipment drops 33%

Hertz Equipment Rental has reported full year revenues of $1.1 billion, a drop of 33 percent on 2008. Of this $990 million was rental income, a fall of 31 percent, the balance was made up of sales of equipment and services.

The Equipment business which is a subsidiary of the Car rental company, posted a pre tax loss of $21 million which is an improvement on last years loss of $629 million.

The equipment business represents just 15 percent of the group’s revenues and is a negative contributor in terms of profitability. The car business made a pre-tax profit for the year of $190 million.

Hertz carries a net debt of $10.4 billion, a five percent reduction on year end 2008.

Vertikal Comment

The problem for Hertz equipment is that it is a small and quite different business to the group’s core operations. The only thing it has in common with the car business is the word ‘rental’. As a small part of a massive business it will struggle to be much more than an afterthought.

With the car rental business now picking up, it will be a surprising if shareholders don’t start to ask why the company is in the equipment rental business. Given the current results and likely results for 2010 it is hard to find a good response to that question.

Hertz Equipment does have the benefit of a well recognised brand name which can help it sign up big partners as it has done in Saudi Arabia this year, but a big partner does not guarantee success on the ground in most countries, Saudi Arabia may be an exception.

The problem for Hertz is that it is unlikely to find a buyer for its Equipment business, even if it had decided to sell it and so must plough on regardless, at least until the equipment market really picks up and that may be some time off yet.

Watch this space.