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05.11.2012

Solid gains for H&E

Crane and access company H&E Equipment of Baton Rouge, Louisiana has reported solid revenue and profit growth for the third quarter.

Looking first at the nine months to the end of September revenues improved almost 17 percent to $587.2 million with growth in all sectors of the business lead by the rental business followed by new equipment sales – boosted by strong crane sales- with used equipment, parts sales and service revenues all positive.

Pre-tax profits were $27.7 million compared to $1.5 million last year, the difference would have been even more substantial, had it not been for the cost of early retirement on a substantial part of its debt.

Moving on to the third quarter, revenues were up 11 percent, with all sectors growing except used equipment sales which were down on the same period last year. Pre-tax profits fell from $7.97 million last year to $5.3 million this year, due entirely to a charge of over $10 million to retire its long term debt in favour of a new longer term lower costs credit line.

Rental utilisation improved to 72.9 percent from 71.8 percent last year, while rental rates were up 10.2 percent on the year. The average age of the fleet was reduced from 40.4 months to 38.6 months.

Chief executive John Engquist said: “Our rental business remained very strong in the third quarter and we believe this is indicative of a secular shift occurring in the market that will continue into 2013. As a result of increasing demand across all our end user markets, we invested more than $60 million in our fleet, which marked the second consecutive quarter of record levels of fleet investment in our company. Our fleet was approximately 18 percent larger at the end of the third quarter than at the end of 2011. Despite our record fleet investment this year, utilisation is strong and rental rate gains are robust.”

“The distribution side of our business continues to perform solidly as well, with new equipment sales up 5.3 percent from a year ago. As we move into year end, there is the possibility we could experience increased demand as our customers may look to take advantage of tax incentives before the end of the year.”

“Based on the current trends in our business, our outlook for the fourth quarter and 2013 remains positive. All segments of our business are performing well and the industrial segments our business serves remain strong. We are also experiencing solid improvement in our markets that were hit the hardest during the recession. With our significant fleet investment and integrated, full-service strategy, we are well positioned to benefit from improvements in market conditions. Lastly, we are pleased to have completed our successful notes offering which allowed us to pay a $246 million dividend to our shareholders, extend our long-term debt maturity profile until 2022 and enhance our liquidity under the senior credit facility for future investment in our business.”

Vertikal Comment

A first class set of numbers from H&A which gives a good across the board picture of how the equipment business is going. While the company does do well with the energy sector it is now almost a national business with a wide spread of business sectors among its customer base.

The most encouraging factor is how new equipment sales continue to grow. The timing for the retirement of the old 8.3/8% notes and new 10 year 7% notes also looks good – a portion of the proceeds were used to pay a dividend.

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