HERC "hovering near the bottom" says Hertz

By Murray Pollok04 August 2009

Revenues at Hertz Equipment Rental Corp (HERC) fell 37.5% to US$277.0 million for the three months to 30 June (a 34.6% decrease in constant currency). The company said the equipment rental business was "hovering near the bottom" of the recession.

The company made a pre-tax profit of $24.7 million, a 71.1% decrease over the same quarter in 2008. Hertz said business volumes at HERC were down 30% compared to the same quarter in 2008, while pricing was 7% lower.

Mark Frissora, Hertz Corp chairman and chief executive officer, in the company's results conference call, said of HERC, "we believe we're hovering near the bottom [of the downturn], although only time will tell." He added that some of HERC's competitors "continue to be highly irrational on pricing."

Gerry Plescia, HERC president, also speaking at the conference call, said the company was seeing utilisation levels between 8% and 10% lower than the same period in 2008, and that it would take several more quarters of industry de-fleeting before utilisation levels crept up again.

Business volumes are stabilising, and Mr Plescia said he thought it unlikely that HERC would see continued significant deterioration on pricing.

Meanwhile, Mr Frissora said that HERC had opened its second rental location in China during the second quarter. The new branch is in Chengdu, Sichuan Province, which is one of the largest industrial cities in south western China. HERC already has a depot in Shanghai. Mr Frissora said HERC was also looking at rental opportunities in India and the Middle East.

Mr Frissora said; "The equipment rental business remains challenging, but HERC continues to generate corporate EBITDA margins exceeding 40%, which we expect will continue throughout 2009. We were especially pleased to generate incremental total net cash flow of approximately $1.65 billion for the first six months of this year."

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