RSC expects continued pricing pressures over winter

By Murray Pollok02 November 2009

Erik Olsson, president and CEO of Mobile Mini Inc.

Erik Olsson, president and CEO of Mobile Mini Inc.

RSC Equipment Rental said the seasonal upturn in rentals did not materialise in its third quarter to 30 September but that rental pricing and utilisation rates were stable from the second quarter.

The company's revenues were 32.4% down to US$316 million compared to the third quarter in 2008, with rental revenues 35.1% lower at $272 million. Operating profit was $25 million giving an operating margin of 8.0%, compared to $110 million and a 23.6% margin in the same three months of 2008. The company made a net loss in the quarter of $6 million.

Rental rates are almost 10% lower than those of a year ago, said the company, although much more positive was the news that, sequentially, rental prices had risen by 0.2% compared to the second quarter of the year. Average fleet utilisation was 58.9% compared to 72.3% a year ago.

Although there are signs of stablisation in the market, RSC said demand was "expected to decline sequentially during the seasonal slowdown of the winter months and industry-wide fleet levels will continue to exceed demand. As a result rental rates are expected to remain under pressure."

Erik Olsson, RSC's president and chief executive officer, said the company remained on track to reach more than $150 million in operating cost reductions this year and that its targeting of the industrial sector was ongoing; "We continue to allocate resources to the industrial markets, expanding and improving our service offering for new and existing customers alike. Since the beginning of 2008 we have opened 43 new locations and deployed industrial business development managers throughout our regions.

"By proactively industrialising our business and thereby reducing our exposure to commercial construction, we are positioning the company to emerge stronger when the industrial cycle turns", said Mr Olsson. RSC said 55% of its third quarter revenues were from industrial or non-construction sources.

During the third quarter the company's employee headcount reduced by 186 employees and one location was closed, although two new locations were opened. Since the beginning of 2008, the company has closed 59 of its locations and reduced its headcount by 1215 or 22%.

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