The company said that the results were slightly below its expectations for the quarter and explained that weather conditions had played a part in reducing the figures. In Canada weather conditions can have extreme effects on rental firms operating in the region. Entrec said that the second quarter typically gets off to a slower start due to the spring snow melt and wet conditions often make the ground less capable of supporting vehicles with heavy loads. Activity levels normally increase in May and June as conditions improve. However, during the second quarter of this year, the country experienced heavy rains and flooding in several of the regions where the company is based. Heavy rains and flooding in Northern Alberta in late May and early June hampered its ability to access customer sites and resulted in temporary road closures limiting their ability to reach customer destinations.
Entrec said that it had continued to experience steady demand in the second quarter for both its crane and heavy haul transportation services in the Alberta oil sands region and Northwest BC. However offsetting this performance was continued lower demand for its services in the conventional oil and natural gas sector compared to the prior year.
To help meet the demand for its services Entrec said that it had continued to complement its owned crane and trailer fleet with shorter-term rentals. But while these rentals provided greater financial flexibility, they provided lower cash flow returns because of the rental costs involved. If equipment rental costs were excluded from Entrec’s second quarter results, revenues would have increased by a further $1.4m to $14.1m, or an increase of $0.6m to $8.7 million during the same period in 2012.
Most of the equipment Entrec rents come with purchase options, which include a provision that allows the firm to apply much of its previous rental payments against the purchase price. During the first half of 2013, Entrec bought-out $4.3m of rental equipment and it plans to acquire an additional $4.1m of rental crane and specialised trailer units in the second half of 2013 as part of its revised capital expenditure program. The buy-out of this additional equipment is expected to reduce annual rental expense by approximately $1.9m.
Describing the outlook, Entrec said that customers were gradually becoming more aware of the company’s expanded scale and operating capabilities and that during the first half of 2013 it was granted a number of heavy haul transportation contracts extending into 2014 and 2015, which the company said it would not have had the scale of operations to execute a year ago. The firm is also successfully cross selling its crane and heavy haul transportation services to existing and new customers. Several key customers have now also expanded their master service agreements with Entrec to include crane services. Based on expected schedules for future projects, Entrec believes demand for its crane and heavy haul transportation services could grow further the next two years.
John M Stevens, Entrec’s president and COO said: "We continued to grow revenues and respond to customer demand during the second quarter, even while contending with poor weather conditions in some of our key operating areas. We also further expanded our business with an agreement to acquire GT’s Crane and Transportation Services. The transaction, brings us an additional 45 cranes, 130 trailers and 50 tractors, and positions Entrec as a leading heavy lift and heavy haul company in Northeast BC and Northwest Alberta."
