Reports from the ERA's 2011 annual concention in Amsterdam, and the adjoining IRE exhibition
By Murray Pollok11 November 2011
The IRE exhibition and ERA convention in Amsterdam was a meeting place for debating rental, seeing new equipment and networking. Murray Pollok and Helen Wright report on the three day event.
ERA president warns of
slow exit from crisis
Gérard Déprez, president of the European Rental Association (ERA), warned that a return to growth in the rental industry after the deep financial crisis is not guaranteed.
Speaking at the ERA convention, Mr Déprez said the industry needed to share ideas both formally and informally and embrace changes in order to succeed in the future.
"We all thought that 2010 should have signalled the end of the crisis. But we are only just coming out, and the recovery will be lengthy and erratic," Mr Déprez said, adding, "We are not experiencing a genuine recovery yet, but the indicators for 2012 show that rental investment will rise."
"If, for most rental operators, the low point of the crisis has definitely passed, we nonetheless acknowledge that recovery is not taking place everywhere and that it is still highly uncertain, even bearing risks of relapse."
Indeed, managing the recovery will be a special challenge for the rental industry."Current rental rates may not allow the revenues necessary for fleet renewal without additional funding. For those who were able to face ‘the debt wall', they will now have to face ‘the equipment renewal wall'."
Addressing the industry's approach to profitability should be a key focus for the future, Mr Déprez said. He highlighted the introduction of anti-theft technology and new fleet management software as well as innovative devices such as iPads as potentially transforming efficiency in the rental industry.
Mr Déprez added that rental companies had made advancements in terms of forecasting in the wake of the crisis. "There has been progress made with statistics and economics - more companies have found a major advantage in being able to forecast orders. Statistically, rental companies were far superior to manufacturers in terms of accurately predicting fleet sizes this year. This is the reason why we genuinely fear equipment shortages for the upcoming year".
The full text of Mr Deprez address to the ERA's general assembly can be read on page xx.
Japanese president reports
on emergency response
Yoshitoshi Kadogushi, president of the Japanese Rental Association (JRA), gave a moving account of the rental industry's response to the Japanese earthquake and tsunami disaster at the ERA conference in Amsterdam.
Mr Kadogushi said the rental industry was quick to respond to the 11 March disaster. In the immediate aftermath, the JRA set up an emergency headquarters to coordinate help to victims. Mr Kadogushi, who owns the Kinan Co rental company, was one of many in the industry who provided assistance, driving more than 1000 km to the emergency site to provide equipment.
Working with the Japanese Ministry of Infrastructure, member companies donated generators and helped transport support to affected regions.
"The disaster, for better or worse, highlighted that we [the rental industry] could use our national network to be a reliable partner to the Japanese people," Mr Kadogushi said. His presentation included a video showing the extent of the devastation.
The JRA also requested that Japan's exhaust gas regulations were suspended for a short while, ensuring that all machines available could be used in the clean-up effort.
Gérard Déprez, ERA president, called for a minute's silence in the conference hall during the opening session of the ERA conference as a mark of respect for the victims of the disaster. "We express our deepest condolences to our Japanese colleagues", he said.
The reconstruction efforts have inevitably had a significant impact on the rental market in Japan. Rental prices, for example, have risen between 20% and 30% since March as demand for construction machinery increases to aid reconstruction.
Mr Kadogushi, said that pre-disaster, the Japanese rental industry had been "in a kind of chaos", with price competition at unsustainable levels. The situation has been made more complex by the supply chain difficulties affecting Japan. Many manufacturing facilities were damaged or destroyed, making it hard for rental companies themselves to source new machines.
IRN conducted a series of interviews with IRE exhibitors and senior rental industry figures during IRE and these can be found at the VideoZone on the www.khl.com website.
The interviews were with Jean-Christophe Girou (CEO, Manitou) and Alexandre Saubot (CEO, Haulotte), as well as with representatives from Lawson Software and Atlas Copco, focusing on the new products they were launching at the show.
More visibility important
say rental figures
European Rental Association (ERA) convention delegates heard senior industry figures call for increased visibility and cooperation between manufacturers and rental companies to better manage lead times and meet demand.
Michael Kneeland, CEO of United Rentals, and Alan Blake, CEO of JCB, joined senior representatives from Loxam, Manitou, Boels Verhuur, Haulotte, Volvo and Cramo to discuss the prospects for recovery in the manufacturing and rental sectors.
Speakers were united that supply chain issues are affecting the industry as demand increases, with long lead times a recurring theme.
Alan Blake said, "JCB is highly vertically integrated and lead times have been most affected by the contraction in the supply base, as many of these companies did not make it through the recession. This, in turn, is having an impact on lead times."
CEO of Manitou, Jean-Christophe Girou, said his company had introduced a two-speed manufacturing process to tackle the problem of long lead times. Customers can choose to wait up to 30 weeks for an individually configured machine, or could opt for delivery of a 'standard' model that is being more intensively produced within eight to 10 weeks."
The panellists called for greater visibility between rental companies and manufacturers to tackle the problem as demand increases. Mr Kneeland said United Rentals had changed tactics from being adversorial with manufacturers to seeing the relationship as more of a partnership.
"If we understand some of the challenges that they have, then they have to understand our challenges. We're working with manufacturers in thinking in terms of between 12 and 24 months ahead. We know our fleet is ageing, we know that there is going to be a certain period of placement."
Others reiterated this message for a new relationship between rental companies and manufacturers. Jean-Christophe Girou at Manitou said the situation was unstable for everyone, but a better understanding of volume forecasting, without necessarily placing firm orders and causing over-production, would benefit both sides.
"Today, our biggest problem as a manufacturer is to get the visibility from customers that we can pass on to our suppliers. I support the motion for better visibility for better from the rental sector," Mr Girou said.
The issue of pricing in the rental market was also a hot topic at the ERA convention. Panellists agreed that pricing had slipped as a result of the recession, and it was proving difficult to push through increases.
From the manufacturers' point of view, Mr Blake highlighted the increased cost of the Tier IV Interim / Stage IIB emissions regulations in the US and Europe as a potential indirect driver of rental pricing.
"It's difficult for rental companies to get their rates up and therefore it is difficult for them to accept increased pricing from us. We could work together to help highlight that the latest machines for hire are much more fuel efficient, cleaner and have a smaller footprint. I do think there may be a more sophisticated way of selling the benefits of the products that are going on hire," Mr Blake said.
The rental members on the panel reported steadily improving conditions. Michael Kneeland said United Rentals had seen the first signs of growth in the US in the second quarter of 2010 - a trend that has continued through to the first quarter of this year.
"We see people taking the risk away of buying equipment and shifting towards rental. We have been working very closely with our manufacturers to better understand how we can improve and to look at forecasting our needs so they can meet these needs for our customers," Mr Kneeland said.
And vice president of fleet management at Cramo, Martin Holmgren, echoed this view, "Last Autumn, we caught up to fairly good levels again. Moving into 2011, we are expecting more growth and are prepared to move ahead into this upturn."
Mr Durval Gasparetti, president of the Brazilian rental association (ALEC), told ERA convention delegates that he was confident that Brazil's very buoyant construction sector would continue to grow for the foreseeable future, providing rental companies with great opportunities. "We are going to invest in infrastructure construction and airports necessary to enable the growth of Brazil and to host the 2014 World Cup and the 2016 Olympics. We foresee that growth in construction in the next couple of years will continue." Since 2008, the number of rental companies in the country has increased by 30% to 2400 and employment in the rental sector has more than doubled to 42000. There are now 480 rental companies in the country with over 50 employees.
"The recovery is underway", said Ms Chris Wehrman, chief executive of the American Rental Association (ARA). "We're finding that as conditions slowly start to improve, rental is the answer to those contractors who have de-fleeted. Also we are finding that capital expenditure increases are strong, and not just in the national rental companies." Ms Wehrman said ARA was forecasting a 6.7% increase in construction and general tool rentals by the end of 2011, with rental revenues forecast to exceed the record 2007 levels by 2015. She said ARA held a "very hopeful, optimistic outlook given the complexity of the recovery...the ARA remains extremely bullish - we have a great opportunity to increase rental penetration."
Riwal's mergers and acquisitions specialist, Jeff Eisenberg, told ERA delegates that they should prepare for new IFRS accounting rules that will shift operating leases on equipment or properties onto balance sheets, with a potentially dramatic impact on a their debt to equity ratios. Currently, operating leases can be kept off balance sheet. The new rules are now being finalised by the IFRS. "Today's banks may not require it, but tomorrow's banks may", said Mr Eisenberg, who added that IFRS rules, though not adopted everywhere, could be used by financial institutions, banks and others to assess company accounts. "It really will matter, even if your country doesn't adopt IFRS standards."
News from the IRE Exhibition, Amsterdam 2011
El-Björn shows power
Swedish power distribution, lighting and climate control manufacturer El-Björn showcased its new e3 technology at the International Rental Exhibition (IRE) - a system which can control power usage on construction sites remotely and calculate efficiency improvements.
The e3 system connects up to El-Björn's temporary electricity power distribution centres via wireless technology. It measures energy consumption and offers contractors better control over factors such as lighting and heating.
El-Björn CEO Lars-Owe Kron said a great deal of energy consumption on construction sites is unnecessary. "No-one controls the total energy consumption. Lighting, heating and construction fans are permanently left on, just because someone forgets, or cannot be bothered to turn them off," he said.
El-Björn compared two construction sites - one using e3 technology, and one without the system - and found that the contractor could save up to 50% on energy costs over a three-month period using the new technology.
"The greatest saving will be made when everyone within a construction site is fully aware that consumption at each individual power outlet can be measured and controlled," Mr Kron said.
The company also introduced a new dehumidifier at IRE - the A65, which is capable of circulating 600 m3 of air per hour. Designed for heavy-duty use, the A65 has a powerful, high capacity fan for fast drying, but its compact size and light weight make it easy to transport and stack.
on online auctions
Online auctioneer IronPlanet expects to produce global revenues of between US$550 million and US$600 million for 2011 amid a positive global reaction to its business model.
Speaking to IRN at IRE in Amsterdam, IronPlanet managing director for Europe, the Middle East and Africa, Tom Cornell, said the company had recorded annual growth rates of around 35% since it completed its first sale in January, 2009.
"Our guaranteed inspection is a big draw, and companies also like the fact that every sale has a global buyer base. Our business model has been well accepted ¬- buying used equipment online is becoming the norm," Mr Cornell said.
"Rental is a key area of IronPlanet's business - we are in business with some of the biggest rental companies in Europe. Rental companies can see the benefits of our business model - they can sell little and often giving them a quicker return than a single auction and enabling them to track the market more closely," Mr Cornell said.
"In some categories we are seeing the price of used equipment increase, particularly in the five-year old equipment category, while there is only limited demand for end-of-life machines (10 years old or more). The issue is that companies can still make a profit at low rental prices, whereas if they buy new machinery to rent at current rates, they will be bleeding," Mr Cornell explained.
Developer of anti-theft and machine identification technology, Datatag, is growing its business throughout Europe after successes in the UK.
Chris Harrison, national sales manager at Datatag, told IRN at IRE that the company had received strong support from equipment manufacturers, insurers and authorities after the success of the Construction Equipment Security Registration Scheme (CESAR) in the UK.
"€4.5 billion worth of construction equipment is stolen across Europe each year," Mr Harrison said. "Organised criminals are targeting this sector, but we have found that they now are avoiding machines that carry Datatag's tamper-resistant number plates and tags. Indeed, UK authorities have had a 100% success rate when using Datatag's evidence in court."
Datatag partnered with the CESAR scheme in 2007, and over 40000 items of plant machinery have now been registered under the programme. From 1 October, 2008, to 1 January, 2011, a total of 12541 machines were stolen in the UK. Of these, 286 were registered under the CESAR scheme, and 31.1% of the stolen CESAR machines were recovered, compared to 8% of the total.
Datatag's anti-theft and identification system involves both visible and hidden technology. On the outside of a machine, the company fixes unique, tamper-proof plates with identification numbers which ensure that the equipment can be identified and tracked.
"The company has received support from the Ministry of Justice in the Netherlands together with authorities and manufactures in Belgium, Italy, France and Germany," Mr Harrison said.
The company has held discussions with the Association of Equipment Manufacturers in the US and the American Rental Association and is meeting with police and insurers in the US later this year to discuss its products.
Pictured at IRE are three representatives from Bluecycle Plant, a new used equipment auction business owned by insurance giant Aviva. Guy Spence (managing director) is at the front, flanked by Peter Harris (business development director) on the left and Stuart Atkinson (digital brand manager). Bluecycle Plant is the new construction equipment sister business to Aviva's Bluecycle company, an online car auction company that sells accident damaged and end-of-fleet cars. Mr Spence said Bluecycle was at the show to market the auction business to European rental companies. He said the auction would run a low commission model (5% of sale price and a £3000 ceiling per item) and that buyers anywhere in the world will be able to bid and sell equipment from the site 24 hours a day, seven days a week, said Mr Spence.
Dutch independent research institute TNO has found that quartz dust emissions from an ALMI battery driven block splitter are within safe limits, even when the equipment is in constant use over an eight hour duty cycle. Netherlands supplier ALMI exhibited its AL43SH21 block splitter for cutting natural stone such as cobblestones, thick slabs and clinkers, at the IRE show in Amsterdam. An ALMI spokesman said, "The outcome is very positive. You can work a full day with our machines without any problems and without any further safety measures". TNO awarded the cutter its highest quality logo after demonstrating that ALMI's manual and hydraulic block splitters meet the public limits set for respirable quartz (0.075 mg/m3) for a maximum duty cycle at 100% operational use.
Terex Construction showcased its new TC16 Twin Drive mini excavator at the IRE show ¬- a twin drive machine that is powered by both a diesel and an electric engine. "We developed the TC16 Twin Drive with the rental market firmly in mind," Terex sales manager for Germany and Switzerland, Andreas Hactergal, told IRN. "It features all the same components as a regular TC16 but we fitted an extra electric engine so the machine can be used in closed environments. The diesel engine produces 13.1 kW and can drive the excavator from trailer to jobsite, then the electrical system, which produces 11 kW, can be switched on for a safe and quite working environment on jobs such as renovation on buildings, demolition works and green houses with no emissions," Mr Hactergal said. Terex unveiled a prototype of the model - which weighs 1.9 t and can dig to 2.2 m - at last year's Bauma China exhibition in Shanghai, China.