Crane rental rate drop hits Essex during 2009

By Euan Youdale22 March 2010

Essex Rental Corp. experienced a difficult 2009 but expects utilization rates to increase through 2010.

The US-based company, which includes Essex Crane Rental Corp., reported 2009 fourth quarter rental-related revenue was US$8.7 million, compared to $19.8 million for the 2008 period.

The decline was primarily driven by lower utilization rates on cranes and attachments which represents 70% of total company revenue, or $6.4 million for the quarter ending 31 December. This compares to $15.9 million for the same quarter 2008.

Equipment rental income was also impacted by a 15.9% decrease in the average monthly crane rental rate to $19,181, compared to $22,805 for the comparable at the end of 2008.

"The decrease in the average crane rental rate was the result of excess market supply of rental equipment compared to the demand due to the weakening economy. [It was also due to] the difficult commercial credit environment compounded by the expiration of existing rental agreements executed at higher rental rates in the prior year and earlier," said a company spokesman.

The crane utilization rate (on a days method) for the fourth quarter 2009 equaled 34.8%, compared to 73% in the comparable period in 2008.

Rental EBITDA was $3.1 million for the quarter, compared to $5.7 million for the last quarter 2008, excluding the $23.9 million goodwill impairment charge recorded in the prior period.

Essex's total rental-related revenue for the whole of 2009 was $45.6 million, compared to $77.4 million for the 2008 period. As with the fourth quarter results, the figure includes equipment rentals, repair and maintenance, and transportation services, but excludes used rental equipment sales.

Rental EBITDA for the year was $19.0 million, compared to $36.5 million in 2008, excluding the $23.9 million goodwill impairment charge recorded in the prior period.

"Although we have begun 2010 with low levels of utilization, our expectation for improvement should result in 2010 average utilization near or above the average utilization experienced in 2009. Specifically," said Ron Schad, Essex president and CEO.

"We are encouraged that new order commitments, in both quantity of cranes and total dollar amount of bookings, through the first two months of 2010 have been greater than new order commitments received during the entire quarter ended 31 March, 2009," Schad continued.

"In addition, due to lower utilization levels, we are likely to reduce our investment in new crane purchases in 2010 to maximize the returns on the nearly $40 million investment in new rental equipment over the last 24 months. Opportunities for the sale of smaller capacity, older cranes continue to exist at values in excess of our appraised orderly liquidation value (OLV). We remain confident in the underlying value of our assets which have remained stable," Schad concluded.

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