25.08.2016

Essex Crane sale imminent

Essex Rental Corp has announced that it is close to divesting its Essex Crane Rental business, to the point where it has not included the results in its half year numbers.

It expects the Essex crawler crane business to be sold off before the end of September leaving it with the Coast Crane sales and rental business that it acquired in 2010.

Half year revenues - which only cover Coast Crane - were $21.7 million, 24 percent lower than last year, due almost entirely to lower sales of new and used equipment which dropped from $8.3 to $2.8 million. Rental revenues slipped from $11.9 to $11.1 million, due to lower Rough Terrain utilisation, offset by a solid improvement with tower cranes. Parts and service revenues dropped $500,000 to $7.8 million. The operating loss for this part of the business was reduced slightly to $3.1 million.

In the second quarter it was very much the same story, with overall revenues falling 32 percent to $10.2 million again due to lower sales by the distribution division, which fell from $4.7 to $1 million. Rental revenues slipped 10 percent to $5.4 million, while parts and service dropped 11 percent to $3.8 million. The operating loss for the quarter increased from a loss of $1.1 million last year to $1.7 million this year. All comparisons are with last year’s numbers minus Essex Crane Rental.

Chief executive Nick Matthews said: "The continued softness in the oil and gas end markets has negatively impacted the industry and has resulted in a decline in business results. In order to align operating expenses with business conditions, we implemented cost savings initiatives in October 2015 and continue to investigate strategies to improve profitability."

"Assuming that Essex Crane will no longer be part of the company in the future, our focus will be on maintaining strong levels of utilisation on our tower crane fleet, increasing utilisation on our other assets and improving our parts and service segment. We now have concrete evidence supporting the market value of the Coast Crane subsidiary. As we work through refinancing that subsidiary, we are dedicated to reducing leverage and are excited by the opportunities to unlock the equity value of this company to increase shareholder value through growth and improving market conditions."

Vertikal Comment

It looks as though the long tortuous and sad death of Essex Crane is finally coming to a conclusion. The rot began eight to 10 years ago with the company piling up losses and debt almost ever since. The current management is just dealing with the effects of years of bad management possibly kicked off by the 're-capitalisation' by Kirtland Capital Partners in 2007 when it stripped out $50 million in cash replacing it with debt, followed by the sale to Hyde Park Acquisition Corp in early 2008. While the first 12 months looked positive it all began to come crashing down after that and the poor handling of the Coast Crane acquisition in 2010 simply compounded the situation.

Since then it has been pretty bad news all the way. Efforts by the current management to turn the business around were always going to be a challenge, but the fall in the oil price and its knock-on effect in the oil & gas sector has made that challenge substantially more difficult.

Hopefully the move will help take Coast Crane back to its glory days.