H&E anticipates non-residential decline
08 August 2008
US equipment rental and sales company H&E Equipment Services is to reduce its fleet size and slow capital investment until the end of the year in response to an anticipated slowdown in non-residential construction in the remainder of 2008.
The company, which operates from 64 depots throughout the West Coast, Southwest, Gulf Coast, Mid-Atlantic and Southeast regions of the US, said it had not experienced the increase in rental demand that it normally sees at this time of year.
"With a continuing credit crisis and skyrocketing construction costs, we believe the non-residential construction markets may be negatively impacted during the second half of this year", said H&E's president and chief executive officer, John Engquist, announcing the company's second quarter results. "We are taking the necessary steps now to ensure that we continue to deliver solid results."
The company reduced its full year revenue forecast by around 4% to between $1.094 billion and $1.108 billion.
The company said its businesses in Florida, Southern California and the Mid-Atlantic regions were its most challenging, and that it was starting to see downward pressure on rental rates in its softer markets. Rental rates declined 2.9% on average in the period and dollar utilization - excluding the Mid-Atlantic region - was down 2.4% to 39.1%.
The company reported a 21.2% increase in total revenues to US$282.6 million for the three months to 30 June, with the increase including a more than $40 million contribution from an acquisition last year in the Mid-Atlantic region. Rental revenues increased 8.1% to $75.2 million. EBITDA (earnings before interest, taxation, depreciation and amortization) increased 12.2% to $64.6 million compared to $57.6 million in the same period a year ago.
"We are pleased with our performance during the second quarter given the increasing macro economic challenges and the trickle down effects on the non-residential construction markets," said Mr Engquist, "Despite very uncertain economic conditions, we achieved solid growth in revenues, EBITDA and net income. "