07.11.2016

Further declines for Mills

Brazilian rental company Mills has reported another steep fall in revenues and higher losses as the economic situation continues to hit the business.

Total revenues for the nine months to the end of September fell over 21 percent to R174.1 million ($54.2 million) as utilisation continued to decline along with rental rates. The pre-tax loss for the Rental division, which is almost entirely made of aerial lifts and telehandlers was R11.1 million ($3.45 million) compared to a profit of R11.05 million last year.

Looking at the third quarter revenues declined 37 percent to R43.4 million ($13.5 million) while pre-tax losses almost doubled to R7 million ($2.2 million). Capital expenditure remained at zero as the division looked to reduce the fleet size by selling equipment off wherever possible.

The Mills group as a whole reported nine month revenues of R321.6 million ($100.2 million) while pre- tax losses more than doubled to R90.5 million ($28.2 million).

A company statement said: “The quarter's performance reflects the current economic environment, which continues to negatively impact our rental revenues and our margins. Since the company does not believe in the recovery of its results in medium term, it has several initiatives underway to adapt its structure to this new reality.”

“Regarding aerial work platforms, this equipment is exposed to different sectors
of the economy. With the resumption of the Industrial and Construction GDP, the aerial work platform rental market should resume gradually, reflecting primarily in the equipment utilisation rate and later in price.”

Vertikal Comment

The ongoing fall in the Mills fortunes and the Brazilian market, reflects the heights it soared to when it seemed you rental as much equipment as you could get your hands on. No one invested more heavily in aerial work platforms than Mills, expanding at a breakneck pace and clearly outpacing the underlying market development and penetration. The longer it went on the bigger the bubble grew.

It is going to take some time for market penetration and demand to catch up with the current supply levels. But it will do eventually and will then also benefit from improvements in the overall economy which will of course come along sooner or later. While Mills is paying down the substantial debt it had accumulated it is questionable whether it will be the company to benefit most when the powered access rental market comes back.