04.11.2015

Red ink continues at Essex

US crane rental group Essex Crane Rental has reported another quarter of increased losses, but sees some 'light at the end of the tunnel'.

Total revenues for the nine months were $71.37 million, a fall of just over five percent, due to lower equipment rentals and sales, while parts and service revenues improved. Oerational costs have been reduced, however the lower revenues resulted in the pre-tax loss increasing from $13.7 million last year to a loss of $15.5 million this year.

Looking at the third quarter, revenues fell almost 19 percent to $24.1 million, with all areas of the business showing a drop off. This in spite of improving utilisation on the quarter, for all types of crane, topped by hydraulic crawler cranes at 79.2 percent. Although the results remain slightly lower than that achieved in the same quarter last year. The pre-tax loss for the period was just under $5 million, compared to $4.2 million in the same quarter last year. One bright sign was that the company did turn a small operating profit for the quarter in spite of higher sales costs.

Chief executive Nick Matthews said: "Despite a challenging equipment sales market, the company generated its highest adjusted EBITDA excluding non-cash compensation and non-recurring costs since the acquisition of Coast Crane in late 2010. The strategic initiatives put in place last year continue to benefit the company and it is encouraging to see the early results of the cost savings initiatives that were implemented during the third quarter of 2015. We anticipate the full impact of these initiatives will become more apparent as we move forward."

"As our core business continues to improve and become more efficient, the restructuring of the Essex Crane subsidiary is progressing. This collaborative process is aimed at strategically positioning the subsidiary to ultimately provide value for all of its stakeholders."

Vertikal Comment

Nick Mathews has his hands full with this turnaround, with utilisation of the core fleet remaining high it is reliant on cost cutting- some of which, such as ever rising interest costs – are outside of his day to day control.

With these sorts of losses coming from a business that is clearly keeping its equipment busy, it is hard to see how it can be turned around any time soon, without very radical restructuring to slash sales and admin costs - or better yet a conversion of debt into equity. It is hard to see how a company like this, generating quarterly revenues of $24 million, can cover a quarterly interest payment of $4.9 million.