01.02.2021

Capex bounce back at United

United Rentals has released its full year results and is forecasting capital expenditure on its fleet will bounce back to 2019 levels or higher this year.

Total revenues for 2020 were $8.53 billion, down more than nine percent on 2019, while pre-tax profit slumped 36.5 percent to $249 million. Looking at the fourth quarter, total revenues were just seven percent lower, while pre-tax profits slipped less than five percent on the year at $90 million. Almost all of the decline in sales was down to lower rental revenue – and most of that general rentals which includes aerial lifts and telehandlers. Most other aspects of the business, such as used equipment sales etc.. held up well.

Capital expenditure nosedived from $2.13 billion in 2019 to just $961 last year. However the company is forecasting a spend of between $2.21 and 2.3 billion in 2021. Its revenue forecasts however are more conservative at $8.6 to nine billion so not returning to 2019 levels until 2022.

Chief executive Matthew Flannery said: “I want to thank our employees for safely supporting our customers in 2020 and delivering an exceptional performance despite unprecedented challenges. Results for the fourth quarter exceeded our expectations, driven by stronger rental volume and robust used equipment sales. We are encouraged by the momentum this gives us going into 2021.”

“Our guidance reflects an improvement in customer sentiment as the economy continues to heal, and our own confidence in our ability to execute. After lapping a challenging comp in the first quarter, we expect to pivot back to growth through the remainder of the year, which, together with continued cost discipline, will deliver strong profitability. We anticipate another robust year of free cash flow generation, after significantly increasing our capex to support growing demand.”

United ended the year with a fleet of 615,000 machines, operating from a total of 1,154 locations across North America - 1,018 in 49 states of the USA and 136 branches in Canada across all 10 provinces. The company also has 11 European branches in France, Germany, the United Kingdom and the Netherlands, from the Baker acquisition, with a total of 18,250 employees.

Vertikal Comment

This is a positive report from United Rentals and good to see the recovery in capital expenditure after the sharp drop this year. The company used the additional cash flow to substantially reduce its net debt and improve its balance sheet.

Given the fourth quarter numbers its forecasts look a little conservative but could well be a result of a slower January and the ongoing economic uncertainty.

All in all positive news for the sector and particularly encouraging for manufacturers.