Fitch highlights deteriorating rental environment

Fitch Ratings’ said the 2023 outlook for the equipment rental sector in Europe, Middle East and Africa was deteriorating as companies faced less certain funding access and reduced economic activity.

The agency said the economic slowdown “could weigh on the demand for renters’ equipment, and so impact revenues.” It said they were also exposed to higher interest costs, along with inflation pressures.

Boels' sanitation services Boels Rental is one of the European companies covered by Fitch Ratings.

Fitch, which issues ratings for companies including Boels, Renta, Ashtead Group and Modulaire, said consolidation of the sector was likely to continue as companies seek larger market share “and could be accellerated if smaller operators are disproportionately affected by the challenging economic environment.”

It added that some equipment fleets will now need replacement after CapEx was lowered during the pandemic, and as a result debt-funded investment was likely to increase sector indebtedness from recent low levels.

David Pierce, Director of Fitch Ratings, said; “EMEA developed markets finance and leasing companies face less supportive funding markets in 2023, alongside pressure on profitability from cost-base inflation and potential impairments.

“However, the impact on stronger-rated names is mitigated by their proactive hedging and management of debt maturity profiles in recent years, limiting near-term refinancing risks.”

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