Essex drops AWPs, focuses on recovering crawlers22 March 2013
US rental firm Essex Rental Corp has sold off its aerial work platform and forklift assets, focussing on its core business of crane rental, which showed gradual recovery in 2012 results.
Crawler crane utilization increased in every quarter of 2012 and in the final period stood at 44.8%, up from 38.3% in 2011.
Earnings for the fourth quarter were also positive. The company posted EBITDA earnings of $5m, in contrast to $2.1m in 2011. Yearly earnings totalled $17.2m, up from $9m.
The results demonstrated how the large tower cranes sector of the business had grown over the past two years. Larger tower cranes and elevator lift utilisation increased to 56% for the fourth quarter, compared to 54.7% in the previous quarter (ending 30 September 2012) and 37.3% in the fourth quarter in 2011. Self-erecting tower crane utilization also saw an improvement, hitting 41.6% over the three-month period up from 33.1% in the third quarter of 2012. Rough terrain crane utilization on the other hand was down to 61.9% from its historic high of 69.3% for the three-month period ended September 30, 2012.
The company said that it had seen increases in activity in most of its year-end period, with particular increases coming in the power and petrochemical sectors. The company announced that in January 2013 it sold the remaining aerial work platforms and forklifts from its rental fleet. Essex Rental Corp has now exited this market, where it believed it lacked a competitive advantage and was not able to leverage its crane expertise.
The business said it will continue to identify opportunities to sell rental fleet assets that were underused during historic peak demand periods and use the proceeds to reduce outstanding debt. During 2012, it sold $17.3m of non-core and excess rental fleet assets at approximately 109.3% of appraised orderly liquidation value. This reduced the total indebtedness by $10.9m.
Over the next year the company said it intended to focus on disposing of excess assets and using excess free cash flow to reduce debt. The blended cost of debt based on recent Libor rates was approximately 4.51%. Essex Rental Corp expected to consolidate interest expense in 2013 to approximately $10m.
Ron Schad, president and CEO of Essex said, "We are selectively increasing rental rates for certain categories of our heavy lift crawler fleet. Utilisation across many of our remaining asset categories increased on both a quarter-over-quarter basis and on a sequential quarter basis.
"The improvement on a sequential quarter basis is particularly encouraging as our fourth quarter has historically been a soft seasonal period. While our results are encouraging, I believe that we are still in the very early stages of what will be a gradual recovery for crawler crane utilisation and rental rates. Besides an improving environment for our rental equipment, we are pleased with the results from many of the operating initiatives that we announced in the first half of 2012."
"The expected duration of new crawler crane orders year to date through December has increased by 9.6% compared to the prior year's orders. The increased duration is providing greater revenue visibility and if this trend continues, is likely to have a positive impact on utilization. Utilization on our hydraulic heavy lift crawler cranes, which represent approximately 70% of the value of our crawler crane fleet and 50% of our entire fleet, equaled 63.8%"