07.08.2008

H&E rises 20%

H&E – formerly Head & Engquist, the Baton Rouge, Louisiana, based cranes and access sales and rental company, has reported first half revenues up almost 20 percent, with increases in all sectors – rental, sales, parts and services – rental was 10 percentg higher than 2007.

Much, but not all, of the increased revenue came from the addition of JW Burress acquired towards the end of 2007.

Gross profits increased 12 percent to $153.3 million, but higher SG&A costs along with higher interest cost depressed pre-tax profits by nine percent to $41.8 million.

The company says that it expects 2008 revenue in the range of $1.094 billion to $1.108 billion, however it is planning to reduce its capital expenditure and the size of its rental fleet in order to boost utilisation.

John Engquist, H&E president and chief executive officer said: "We are pleased with our performance during the second quarter given the increasing macro economic challenges and the trickle down effects on the non-residential construction markets. Despite very uncertain economic conditions, we achieved solid growth in revenues, EBITDA and net income. Our results this quarter clearly reflect the strength of our integrated business model and strong presence in geographic regions that give us tremendous exposure to the high growth oil and gas, petrochemical, energy and mining sectors."

"With a continuing credit crisis and skyrocketing construction costs, we believe the non-residential construction markets may be negatively impacted during the second half of this year. We are taking the necessary steps now to ensure that we continue to deliver solid results. These steps include a measured reduction in our fleet to adjust to current demands and further cost reductions. We intend to use excess cash for general business purposes, which may include the repayment of debt and/or the repurchase of shares."

Leslie Magee, H&E’s chief financial officer added: "Florida, Southern California and the Mid-Atlantic regions continue to be our most challenging markets. However, we are beginning to realize improved financial performance in these markets from our past and continuing efforts to adjust to current market conditions. While we expect near-term economic conditions to continue to be challenging, we remain committed to generating solid cash-on-cash returns and free cash flow."

"We have not benefited from the increase in demand in our rental business that we normally see this time of the year. As a result, our time utilization is running below expected levels. In addition, we continue to see rental rate pressures in our softer markets and the rate pressures are beginning to affect other markets within our footprint.”

Prognosis for full year.

“Some manufacturers have announced higher than desired inventory levels and significant workforce reductions. Based on these and other factors, we expect to slow our capital spending and reduce our rental fleet between now and the end of the year. This fleet reduction is a significant change from our original plan. A smaller fleet, lower time utilization and continued rate pressures are the primary drivers of the revision to our 2008 estimates. Accordingly, we are lowering our 2008 outlook," said Engquist.