United Rentals forecasts continued declines into 2010

03 August 2009

Michael Kneeland, chief executive officer of United Rentals

Michael Kneeland, chief executive officer of United Rentals

United Rentals saw total revenues fall by 26% to US$615 million and rental revenues by 28% to $454 million for the three months to 30 June. Operating profit was $5 million for the quarter, compared with $128 million for the same period last year.

United's chief executive officer, Michael Kneeland, said he expected the business environment to remain very challenging; "Our best estimate at this time is that non-residential construction activity will continue to decline on a year-over-year basis into 2010, although the rate of decline may moderate. Our infrastructure rentals should see the benefit of stimulus funds, while on a macro level we believe that our end markets will stabilise next year and begin a gradual recovery."

The company has been reducing the size of its fleet and reducing operating costs. During the quarter it closed 38 branches and made 800 employees redundant. It has also significantly reduced its capital expenditure, with total rental and non-rental capex of $164 million in the quarter compared to $469 in the same quarter in 2008.

Time utilisation decreased 2.4 percentage points to 61.3% in the quarter and rental rates declined by 14.0 percentage points compared with the second quarter last year. Dollar utilisation, which reflects the impact of both rental rates and time utilisation, decreased from 57.4% to 44.9%.

Mr Kneeland said; "Our company is bringing discipline to every area of our operations, while expanding the relationships that are vital to our strategic growth, particularly with larger customers. In the second quarter, we continued to proactively manage our capital structure, cash flow and costs to provide us with greater financial flexibility.

"Based on the success of these initiatives, we are comfortable increasing our full year estimates for both free cash flow and SG&A expense reduction."

Around 57% of United Rentals' revenues come from aerial platforms and telehandlers, with a further 10% from earthmoving equipment and the balance of 32% from trenching and other equipment.

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