08.02.2019

Higher revenues lower profits for Cramo

Finnish international rental company Cramo has posted solid revenue growth for 2018, but lower profits.

Total revenues for the full year were 6.9 percent higher at €779.8 million, due to both acquisitions and organic growth. Pre-tax profits however were flat at €105.3 million. Capital expenditure for the year was €203.6 million, slightly lower than last year.

In total the Rental division saw a 4.5 percent increase in revenues to €629.5 million, while operating profit was flat at €103.7 million. This was made up of lower sales in Scandinavia, partly due to the disposal of the Danish rental business, but slightly higher profits for the year. Finland and Eastern Europe posted slightly higher revenues but lower profits, while Central Europe, which includes Germany saw revenues jump 42 percent to €114 million, thanks to the acquisition of KBS Infra which helped profits almost doubled to €8 million. The modular space division saw a 19 percent rise in revenues to €151 million, partly due to the acquisition of NMG.

In the fourth quarter total revenues were up 10.6 percent to €217.5 million, while pre-tax profits fell 13 percent to €24.9 million. The Rental division saw revenues improve almost six percent to €171.9 million, mostly due to Central Europe/Germany, operating profits, however were flat at €30.2 million, With a slight improvement in Central Europe offset by lower profits in Scandinavia and flat profits in Finland/Eastern Europe. Revenues in the modular space division increased almost 30 percent to €46.3 million, due mostly to the NMG acquisition.

Chief executive Leif Gustafsson said: “Cramo’s 2018 was a year of solid sales growth, acquisitions in both of our divisions and a successful performance improvement in Modular Space business. All group level financial targets were achieved in the financial year 2018. In addition, growth targets regarding the Equipment Rental division’s sales as well as Modular Space division’s rental sales were achieved. The market environment was good for both of our business divisions, which further supported the organic sales growth of 6.1 percent for the full year.”

“The Equipment Rental division’s performance varied between the countries in the last quarter of the year. Sales remained at the previous year’s level in Sweden. Norway continued on a profitable growth track. In most of our Eastern and Central European countries, sales and profitability improved, whereas the underlying performance in Germany continued to be not satisfying. In Finland, the result was still weighed down by a tightened competition, which affected prices and sales. However, Finland’s profitability improved from the previous quarter. Performance improvement measures continues in both Germany and Finland.”

"In the Modular Space division, the fourth quarter organic rental sales were 13.5 percent higher than in the previous year. Total rental sales increased by 37.3 percent and were supported by acquisitive growth as NMG was consolidated in the division’s figures for the first time from 31 October onwards.”

“The 2019 equipment rental market outlook remains still positive despite increased economic uncertainties. In Sweden and Finland, the rental market still shows growth due to growth outside new residential building construction. In the Eastern European countries market growth is expected to remain strong. The Modular Space outlook remains positive within all segment’s operating countries.”

Vertikal Comment

This looks like a fairly lack lustre set of numbers from Cramo, possibly due to all the reorganisation and acquisition activity that occurred in 2018? However the company now plans to demerge its modular space business and focus on rental operations which coudl be interesting. And when it comes to profitability Cramo is still doing very well compared to many of its peers, including Ramirent.

A key point going forward will be how the company manages the rental operations once the modular space business has gone. It seems odd that it chose to sell the Danish rental operation given its plans, although Rami followed its lead in December. Seems the Danish market is a tough one for outsiders to get to grips with.

A key aspect to Cramo's future success is turning the German/Central Europe operation around, the KBS acquisition certainly makes it a more substantial operation and if first results are any indication it looks as though the strategy to add a site logistics business makes good sense. It has certainly had a positive impact on the bottom line which always makes things easier. Perhaps it will try and follow a similar policy in its other markets?