United doing OK

US based United Rentals has published its first half and second quarter results, showing that the company has fared relatively well in the second quarter.

Total revenues for the six months to the end of June were 4.06 billion, eight percent down on the same period in 2019. Pre-tax profits for the period were 16.5 percent lower at $477 million.

In the second quarter, all of which was impacted by the Covid-19 pandemic, revenues were 16 percent lower, almost entirely due to a 16 percent drop in rental revenues. Pre-tax profits declined almost 28.5 percent to $251 million.

Gross capital expenditure for the six months was just $353 million, compared to $1.13 billion in the same period last year. Yes sales of used equipment from the fleet remained very close to those of last year at $384 million.

The company has now published its full year forecasts again, and now expects to achieve revenues of between $8 billion and $8.45 billion, roughly 10 to 15 percent lower than the 9.35 billion achieved in 2019. At the same time it expects to spend between $800 and $900 million on new rental equipment, well under half the $2.13 billion it spent in 2019.

Chief executive Matthew Flannery said: “We are pleased with our second quarter results, which reflect both the flexibility and resiliency of our business model. Our employees did an outstanding job of executing our cost initiatives, while helping our customers operate safely in the midst of the pandemic. I am inspired by our team’s commitment to our company and the communities we serve.”

“We saw a steady recovery in volume beginning in mid April, which gave us good momentum into the start of our busy season. While visibility is still limited, near term indicators suggest that the second half of 2020 may track to seasonal patterns in the majority of our markets. Based on this, we have reintroduced guidance. Should things change, our continued focus on cost and capital discipline, along with our strong balance sheet and robust cash generation, will allow us to respond swiftly.”

Following the results release, United announced the launch of a public offering of $1.1 billion worth of Senior Notes with a maturity date of 2031. The proceeds will be used to redeem $1.1 billion worth of notes due in 2026.

Vertikal Comment

As with many other companies in the rental sector, this is a pretty good set of numbers from United given the challenges of the pandemic.

It is disappointing to see it cutting its capital expenditure as deeply as it has, given its almost certainly aging fleet. We were in fact unable to find the average age of the fleet in the statement, United used to be proud to provide this information stating that part of its strategy was to maintain the average age of the fleet below 36 months, in order to keep repair and maintenance costs down, while offering customers the latest technology. The average age is almost certainly well above 36 months now and likely to age further this year, which will cause issues in the longer term, when it will be obliged to play catch up.

Manufacturers are seeing revenue falls of more than 50 percent and could certainly do with support from major fleet owners like United. Hopefully small to medium rental companies will see an opportunity to compete with United with younger more advanced machines?

Having said all that a very good result, placing it in good stead to come through the crisis in good shape.


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