Loxam revenues fall 17.7% in 2009 and expects difficult 2010
By Murray Pollok12 March 2010
Loxam saw its revenues fall by 17.7% to €697.6 million in 2009 and net profits dropped to €2.5 million from €37.1 million in 2008. The company - Europe's largest general rental firm - said it expected a further 5% reduction in sales this year.
Loxam's activities outside of France were worst hit, with revenues falling by 27% to €104.8 million - representing 15% of total revenues - while sales in France were down 17% to around €593 million.
The company is forecasting a further fall in the rental market in France this year, with group revenues likely to be around 5% lower than 2009.
"We are still in crisis", Loxam's chief executive, Gérard Déprez, told IRN, "We are not anticipating any recovery in the market [this year]. We are just managing a decrease that we expect to be less dramatic than last year." He said a similar level of profit to 2009 was a likely target.
Loxam's worst performing markets in 2009 were Spain, Denmark and Ireland. In Ireland the company reduced its network from four to one location. He said that while recovery in most of Loxam's markets was expected within the next few years, there was still a lack of visibility on the Spanish market; "We are confident of our position in Spain, but the dilemma is over the length of the crisis there."
The fall in overall sales is worse than the 5-15% decline forecast by the company in March 2009. Mr Déprez told IRN that the recession has required a major adjustment, particularly since it came after a 20 year period in which annual growth at the company had never been less than 5%. "Really it was more than our worse expectations; we were overcome by the crisis."
He says producing a net profit - even a tiny one - had been a major challenge. "Imagine where we were two years ago, so we cannot be satisfied [with the €2.5 million net profit]. But when I compare us with our peers, in the end the result comes as a relief."
Over the past year the company has reduced its fixed costs by €80 million, with the workforce cut by 11% to 3900 and the depot network reduced (modestly) from 543 to 528. The company's fleet has been cut by 11% (in terms of original cost).
More positive has been its EBITDA (earnings before interest, tax, depreciation and amortisation), which was €235.4 million in 2009, which is close to the 2007 and 2008 levels. EBITDA was €302.4 million in 2009.
Mr Déprez said the company would take a flexibly approach to capital expenditure this year, but was likely to be broadly similar to the €36.8 million in 2009. However, he said that there would be increased investment in some sector and less in others.
For example, Loxam believes that the access market was slower to enter the downturn that other areas, and that it is now suffering from the completion of building projects that had already started before the start of the crisis.
On the other hand, Loxam anticipates that some large state-funded infrastructure projects could well start in late 2010 or early 2011, and that this may lead the company to increase investment in earthmoving and compaction equipment.
Mr Déprez told IRN that the company's longer term strategy - to expand outside of its home market - remained in place. The effort to grow Loxam's market share in France - it now stands at 18% - is largely complete, and the next two priorities are to rebuild its profitability and expand further outside France.
"After 10 years [in external markets], we have settled, sound subsidiaries...we have the basis, now we have to grow", said Mr Déprez, "It is our strategy to reinforce our positions in these markets, and perhaps create subsidiaries in new countries." The last two years has seen company management focus entirely on managing the existing business through the downturn, said Mr Déprez.
Loxam's specialist divisions - power, access, accommodation, events and heavy equipment - accounted for 17% of total revenues in 2009, equivalent to €118.4 million.
Meanwhile, Loxam has become the latest large rental company in Europe to increase its commitment to green and sustainability issues.
All the company's French locations, with the exception of the Laho Equipement division, are now certified to the ISO 14001 environmental standard. Mr Déprez said Laho depots would be certified within a year with Loxam's foreign subsidiaries following on.