Essex achieved utilisation rates of 35.1% in the second quarter of 2010, a significant fall from 43.9% in the second quarter of 2009, but a marked rise on rates of 30% in the first quarter of this year. The rise in utilisation is the first the company has seen since the fourth quarter of 2008. The company noted that utilisation has in fact risen continually in the five months through June.
Essex has released figures for rental rates, utilisation and rental related revenue, going back to Q4 2007. The three sets of figures have trended in the same direction since that time. This quarter, however, while utilisation was up markedly, monthly rental rates fell to $16,372 from $17,562 in the first quarter. Over the past year, monthly rental rates have fallen from $21,633.
The company attributed the decline in rental rates to anemic demand, driven by the weak economy and difficult credit environment. It noted that the problem had been exacerbated by the expiration of rental agreements made in better times.
Rental related revenue for the quarter was $7.3m, the same as in Q1 2010, and $4.6m down from Q2 2009. Looking at the figures optimistically, they represent the first time rental related revenues have not fallen since Q3 2008.
President and CEO Ron Schad did see cause for optimism: “We are beginning to see signs of recovery from the recession and a very soft construction cycle. Business is trending upwards, and we expect to generate improved operating results during the second half of 2010 as compared to the first six months of this year. Longer term, we believe that the investments we have made in our fleet during 2009 and the beginning of 2010 position us to surpass historic high profitability marks when the construction market recovers.
“We expect the second half of 2010 to generate higher revenue and have improved operating results as compared to the first half of 2010. Infrastructure related projects, including levee reconstruction, continue to be the largest contributor to increasing utilisation, but we have seen small increases in utilisation rates in almost all sub-markets in which we operate. We believe that wind power projects will provide good opportunities for growth in the future, but we don’t believe that we will see significant increases to business levels in this niche sub-market until 2011.
“In the short-term, our business is benefiting from the early stages of a recovery and we believe that we have weathered the worst of the challenges that this recent downturn presented. As we have said in the past, operating results will not return to historical levels until utilisation rates significantly increase, enabling rental rates to rise. We remain confident in the long-term growth of the infrastructure and energy markets in which we operate, and believe that there will be significant demand for our assets for many years to come.
“Our assets have retained their value well. We continue to sell our lower utilised units, which represent excess capacity, for amounts in excess of 120% of orderly liquidation value, we are focusing on maintaining the quality of our fleet, and our capital structure and liquidity are sound, as evidenced by more than $39m of available borrowing capacity under our revolving credit facility. We will continue to focus on cash flow management and opportunities to strengthen our earning potential, while maintaining a prudent management posture through a still challenging, but improving, business climate.”
The company’s losses from operations were $1.69m, down from income of $2.45m in the second quarter of 2009. Total costs of revenues were down, at $7.89m, from $9.15m.
