RSC forecasts 20% fall in first quarter
By Murray Pollok26 February 2009
RSC, which reported rental revenues down 6.9% to US$371 million for the fourth quarter and operating profits down 32% to $82 million, said it had closed 43 depots last year and opened 27 new locations targeting the industrial and non-construction markets that now account for a half of revenues.
The company shed over 500 jobs in 2008 of which 315 were in the final quarter, and it said it expected to make further depot closures and employee lay-offs during the year.
Total revenues in 2008 were $1765 million, almost identical to 2007, with operating profits down 16% to $398 million. RSC said its industrial revenues grew by 7% while construction related sales declined. The company expects the US stimulus package to have a beneficial impact on construction, but said it could not predict when or how significant these benefits would be.
Erik Olsson, president and chief executive officer, said; "We know 2009 will be a challenging year...We are taking aggressive action to generate free cash flow and to address our cost structure and minimize capital expenditures.
"In the full year 2009, we expect to generate in excess of $100 million in cost savings from actions taken cumulatively to the end of the first quarter. At the same time we will seek to expand our business in industrial markets and among our existing customers through our superior service."
Mr Olsson said RSC had responded aggressively when the market started to deteriorate in late 2008, by reducing headcount, store locations, fleet size, and capital expenditures; "As a result we generated a strong $78 million of free cash flow in the fourth quarter. Overall, our results re-affirmed our business model of maximizing free cash flow in times of difficult markets."
Rental rates were down 1.7% from the third quarter and 2.1% down year-on-year. Fleet utilisation fell to 67.8% from 72.3% in the third quarter and from 72.0% in the final quarter of 2007.
In its financial statements for the final quarter, RSC said non-residential construction activity "has turned down sharply and management anticipates this trend to continue throughout 2009. Industrial activity has declined as well, but to a lesser extent. The company anticipates that its focus on industrial markets will help to somewhat mitigate the broader decline in non-residential construction."