07.08.2016

Decline continues at Mills

The access rental division of Brazilian company Mills saw further steep declines in the second quarter to the end of June.

Year to date revenues were over 15 percent lower at R130.8 million ($41.3 million) while operating profit dropped 85 percent to R4.8 million ($1.5 million). Utilisation edged up marginally to 60.9 percent, but was obviously at the costs of lower rental rates. Capital expenditure remains at zero, with further machines form the fleet being sold. The company said that a total of only 93 aerial work platforms were imported into Brazil during the first half, less than half the already low levels of last year.

In the second quarter revenues dipped 27 percent to R54.4 million ($17.2 million) with an operating loss of R3.3 million ($1 million) vs an operating profit in the same period last year of R18.6 million ($5.9 million.)Utilisation for the quarter was down two percent to 57 percent.

The company as a whole had total first half revenues of R235.5 million ($74.2 million - almost 25 percent lower than in 2015. This year's pre-tax loss of $57.4 million ($18.1 million) compares to a loss for the first half of 2015 of R21.5 million ($6.8 million)

The company said: “The strong deterioration in Brazil’s economic activities resulted in continued pressure on the price and volume of our business units. The company has several initiatives aiming for its continuing cash generation, such as a rationalisation of branches and equipment to adapt to the new market reality, an intensification of initiatives to enter the non-construction market with the utilisation of the equipment of the Rental business unit and pursuit of overall operational efficiency.”

Vertikal Comment

This is not a good result at all as the business continues to fall quarter on quarter, this is no great surprise given the incredible speed that the market grew, led by Mills which expanded its fleet at a pace that was never going to be sustainable. As we commented during the glory years a bubble was building and the bigger that bubble got, the greater the drop when it burst as it was bound to do.

Eventually the supply of aerial lifts will reach a level that fits with the underlying penetration levels, that will bring rates and utilisation back helping more sensible and sustainable growth to take off. The big question is when will that be?