02.11.2008

United announces more closures

United Rentals, the world’s largest rental company which also operates the world’s largest aerial lift fleet, is planning to close a further 30 locations as results continue to soften.

Last week the company announced nine months revenues down over 11 percent to $2.5 billion, although a good deal of the fall was due to slower sales of new equipment and supplies/consumables. Rental revenues for the nine months were down just under four percent at $1.87 billion.

Although the situation deteriorated in the past quarter as rental revenues dropped 5.7 percent compared to the same quarter last year. The drop in total revenues was marginally different from the nine months at 11.8 percent.

Pre tax profits for the nine months plummeted over 25 percent to $252 million, on higher depreciation, the $14 million charge for the SEC investigation and lower volumes.

Positive news included substantially improved cash flow due to a cut in capital expenditure with purchases of new rental equipment cut from $785 to $590 million, a cut of almost 25 percent.

At the end of September the size of the rental fleet, as measured by the original equipment cost, remained unchanged at $4.3 billion, while the average age of the fleet was 38 months compared with 37 months at the same point last year.

As a result of the softening construction market United also announced that it will close a further 30 locations during the fourth quarter, bring the total number of branch closures during the year to 61.

Michael Kneeland, United’s chief executive, said: "We are continuing to manage the business through the current environment with a steadfast strategy that drove our EBITDA margin higher for the third straight quarter, brought down our SG&A costs by $17 million, and improved our fleet management practices. At the same time we are taking the right actions to set the stage for long-term, profitable growth, such as our recent acquisition of a Texas-based rental company, which expanded our presence in the under- penetrated industrial sector."

"We are prepared for our operating environment to become steadily more challenging as economic pressures and the credit crisis combine to suppress construction spending. As we move through the fourth quarter and into 2009, we will continue to pull the many levers at our disposal, including fleet transfers, used equipment sales and the closing of approximately 30 more branches. Our 2008 outlook reflects both the reality of the current construction cycle and our ability to navigate through it by adjusting our operations and fleet."