H&E Equipment downgrades outlook

By Helen Wright30 October 2015

US rental company H&E Equipment has reported a slight slip in its nine month results and downgraded its full-year outlook.

The company said revenues for the nine months ended 30 September stood at US$767 million (€697 million), down from US$793 million (€721 million) for the same period in 2015. This included a year-on-year drop in new equipment sales of US$65 million (€59 million) to US$175 million (€159 million).

However, revenues from equipment rentals - the largest business division by revenues - grew year-on-year for the nine months to US$328 million (€298 million), from US$293 million (€266 million) last year.

H&E said rental revenues from aerial work platforms increased by US$18.3 million (€16.6 million), while rental revenues from earthmoving equipment increased US$14.1 million (€12.8 million). Rental revenues from other equipment increased US$1.4 million (€1.4 million) and rental revenues from cranes increased US$0.9 million (€0.8 million).

Our average, the company said rental rates for the nine month period ended September 30, 2015 increased 1.5% compared to the same nine month period last year.

It added that rental equipment time utilisation as a percentage of original equipment cost was 70.5% for the nine month period, compared to approximately 72.1% last year.

The company said the decrease in utilisation was largely down to extreme winter weather in the first quarter of 2015, and unusually inclement weather conditions in the second quarter of 2015 in many of its regions.

It said these adverse conditions combined with decreased rental activity among the company’s customers operating in the oil and gas markets during the first three quarters of 2015.

Net income stood at US$32 million (€29 million), compared to US$38 million (€35 million) for the nine months to 30 September, 2014.

CEO John Engquist said, “Demand in our industrial markets remains solid and we expect this momentum will continue into 2016, driven primarily by the vast number of significant capital projects planned along the Gulf Coast. In terms of our oil patch exposure, activity in our markets has stabilized and no significant fleet transfers were required during the quarter.”

But Mr Engquist warned that while H&E performed well overall, it continued to have limited visibility into its distribution business.

“Our new equipment sales remain soft, primarily as a result of low demand for cranes. We do not expect the normal ramp-up in crane sales during the fourth quarter as we have experienced in previous years. With the weakness and lack of visibility in the distribution business, we now expect revenues to range from US$1.03 billion (€936 million) to US$1.04 billion (€945 million) and EBITDA in the range of US$315 million (€286 million) to US$320 million (€291 million).”

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