12.08.2008

Cramo rises 25.5%

Finnish based rental company, Cramo, has reported first half revenues up by 25.5 percent to €280.8 million. Underlying rental revenues grew by 30 percent (2008 numbers exclude Cramo Netherlands sold in 2007) – 22.6 percent of which was organic growth with the balance from acquisitions.

Pre-Tax profits grew by a far more modest 15 percent to €34.4 million, due says Cramo to higher costs in Finland, slower business in the Baltic States, the effect of a substantial fleet increase and investment in the Russian market.

Capital investment during the first half was €134 million almost 45 percent up on the same period of 2007. Cramo says that its spending on equipment will “normalise” in its Nordic markets while continuing to grow in Central/Eastern Europe.

Cramo is forecasting growth of around 18 percent in both revenues and profits for the year as a whole. The company says that it experienced faster growth in the second quarter than the first. Some of this due to its first quarter acquisitions beginning to kick in.

It says that it is experiencing continuing growth in most of its markets, while it is also seeing an increase in rental penetration as more contractors look to outsource in light of uncertain economic news. It adds that 2009 also looks positive – although at slower rates with construction continuing to grow in Sweden, Central/Eastern Europe and Russia, flat or uncertain growth in other Nordic countries while the Baltic States are expected to decline.

The Geographical breakdown of revenues is as follows:
Finland €63.7 million - 21.8 percent of the total
Sweden €136.7 million - 46.7percent of total
Western Europe €56.5 million - 19.3 percent of total
Central/Eastern Europe €35.9 million - 12.3 percent of total.

Vertikal Comment

Overall a strong set of results from Cramo, with its recent acquisitions improving its market coverage in Norway and Denmark and adding more balance to its overall geographical spread.

Almost 60 percent of Cramo’s revenues currently come from Sweden and Central Europe both of which are expected to continue to post strong growth in terms of construction over the next two years.

The fall in profitability will need to be addressed, the overall numbers include some one-off gains in property sales without which the profit growth would have been even lower, although 2007 also included one-off gains on the sale of the Dutch business.

Cramo’s main competitor Ramirent reports later this week, it has already issued a profits warning, it will be interesting to compare its results with Cramo.

So far no one is blaming rates or utilisation for the lower profitability, which suggests that it is cost led, the big question will be whether the market will bear an increase in rental rates to cover these costs or will these two rental giants need to start cutting costs in their home market?