29.11.2016

Decline continues at Essex/Coast Crane

The remaining part of Essex Rental - Coast Crane has reported further declines in both revenues and profitability during the third quarter.

Revenues for the nine months to the end of September were $41.99 million 26 percent lower thank at this time last year, due to lower rentals of both Rough Terrain and tower cranes. and lower sales of both new and used cranes. The pre-tax loss was roughly the same as last year at$3.7 million.

In the third quarter revenues declined 12 percent to $11.9 million with higher new equipment sales offset by lower used sales from the fleet. Last year’s pre-tax losses increased 75 percent to $943 million.

Chief executive Nick Matthews said: "We continue to operate in a challenging market that has been negatively impacted by reduced activity in the energy sector, particularly related to oil and gas. Our rental and equipment sales lines of business were most impacted by this softer demand, specifically in the Gulf, Alaska and Southern California. The year over year declines in dollar utilisation were primarily attributable to a decline in time utilisation, which was driven by the softer demand and the timing of tower crane project starts and ends. As a result, we are being more aggressive with respect to rental rates in an effort to increase utilisation in some of our asset classes."

"We also believe that our business at Coast Crane was negatively affected by the protracted foreclosure process at Essex Crane. Despite our proactive communication with customers, the public nature of the foreclosure process naturally led to concerns for end-users as to the future of Coast Crane, and we believe that our competitors sought to gain a competitive advantage by fueling these customer concerns. We continue to provide assurances to our customers about Coast Crane's ongoing business which, together with a rebranding process at the Company to focus on the Coast Crane brand, has begun to resonate within the industry."

"Consistent with the typical impact of seasonality, we expect rental demand for most classes of rental assets in our fleet to begin to soften as we approach the holiday season. We anticipate, however, that utilisation of our tower crane assets will improve during the fourth quarter based on expected orders, pending tower crane rental starts and our view of the continued strength in tower crane demand. While utilization of this asset class is expected to improve, we do not expect utilisation to match levels we experienced in the fourth quarter of 2015."

"With the divestiture of Essex Crane, we continue to investigate ways to reduce our cost structure to align it with the size of the remaining organization and current business levels. We are optimistic about the 2017 crane rental market with most third-party industry estimates at or around middle-single digit growth for construction spending. We are also optimistic about the impact that the new presidential administration may have on infrastructure spending. Due to the operating leverage within our rental model, an increase in construction activity should result in considerable incremental rental revenue and profit based on rental assets currently in the fleet."

"We continue to work on refinancing the Coast Crane Revolving Credit Facility, which matures in March 2017, with the goal of completing a refinancing this calendar year or in early 2017. In the meantime, the lenders under the Coast Crane Revolving Credit Facility have increased reserve levels within the facility, the effects of which have reduced our borrowing availability and liquidity. While we believe that we will have sufficient liquidity to operate until a refinancing of the facility, there can be no assurance as to what additional actions the lenders under the facility may take in light of their perception of market conditions and Coast Crane's financial performance."

Vertikal Comment

There is very little to say about this, except that there is a lot to do and it will be a challenge to return the company to profit in the current environment. With the mid-term prospects for oil & gas and infrastructure spending looking more optimistic encouraging, the best outcome might be for a sale as a going concern?
One thing is for sure, the company is more nimble now that it was, with a better fleet profile. Time will tell how this pans out.