The rental division of Brazil-based Mills saw a 24.5% drop in net revenue for the second quarter of its financial year as it plans to reduce its fleet by 10% over a three year period.
Rental revenue for the quarter was R$65.3 million, compared to the same period last year, amounting to a drop of R$4 million, or 5.8%. Downward rental rates were responsible for R$3.5 million of that figure, while lower rental volumes accounted for the remainder.
The utilization rate average for the twelve months ending 30 June, 2015 was 60.6%. Returns from the Oil&Gas sector, which started in December 2014, continue to contribute negatively as this industry requires the use of larger equipment, generally more expensive, and difficult to relocate to other industrial sectors, explained the company.
As a result of the market conditions, Mills is continuing its policy of selling semi-new machines, reaching a value of R$4.5 million in the second quarter, a 16.4%rise on last year. Planned sales for the second half are set to reach R$40 million, and will rise to a total of R$808 million, based on acquisition cost, or10% over a three year period.
During the quarter, the rental division opened two new branches: one at Maceió, in the state of Alagoas, and another at Pouso Alegre, in the state of Minas Gerais, totalling 32 branches.
Operating profit came to R$18.7 million in the quarter, 37.4% higher when measured quarter-on-quarter but 46.2% lower year-on-year. Overall, this contributed to a lower return on invested capital (ROIC), from 8.8% in the first quarter of 2015 to 7.4% in the second.
Mills Estruturas e Serviços de Engenharia group net revenue reached R$ 147.9 million in the quarter, with a 9.8% drop quarter-over-quarter, negatively impacted by a reduction of R$9.5 million, or 30.3%, of revenues from sales, technical assistance and others. The Heavy Construction segment was mainly responsible for the reduction, since its revenues from sales, technical assistance and others returned to historical levels, compared to the first quarter when revenue was almost double the 2014 quarterly average.