Essex Crane Rental reduces costs, business stabilises

Parent company of Essex Crane Rental Corp, Essex Rental Corp, in the US has posted figures down more than 40% on the same period of 2008.

Second quarter 2009 rental related revenue (excluding used rental equipment sales) was US$11.9 million, a decrease of 41.2% from $20.2 million in Q2 2008. Essex attributed the decline primarily to lower utilisation rates on cranes and attachments, down from 72 to 44%. For the same reason, rental earnings before interest, tax, depreciation and amortisation (EBITDA) were down 50.4% to $5.1 million, from $10.3 million.

Ron Schad, Essex president and CEO, said, "Our performance in the second quarter reflects continued weakness in many of our end markets, which resulted in lower crane fleet utilisation and rental revenues. Many of our customers have delayed the start of their projects due to inability to access the credit markets, general economic uncertainty and diminished demand for large construction."

Schad has implemented cost cutting, including reducing headcount and outsourced services, reducing overtime hours and cutting salaries by between 30% and 10%. Schad projects that these actions will generate nearly $5 million in annualised savings.

Despite market conditions, Essex is repositioning its fleet towards higher capacity cranes that generate higher rental and utilisation rates. Nine used cranes were sold "at an average price that was in excess of 110% of orderly liquidation value. We have used these proceeds, in conjunction with our free cash flow, to fund the purchase of nine new larger lifting capacity cranes and attachments."

In outlook, Schad said, "...we believe that while our operating environment will remain challenging through the end of the fiscal year, the business has stabilised, as evidenced by the relative equalisation of rental starts and ends. We anticipate that these factors, in addition to increased federal stimulus spending subsequent to the end of the second quarter, specifically related to heavy highway work and other projects that target many of our end markets, will result in an increase of orders placed for the rental of crawler cranes in the next six to nine months."