07.05.2015

Mills goes into the red

Brazilian rental and scaffolding company Mills has posted a first quarter loss as revenues plummet.

The Mills Rental division, which rents out aerial lifts and telehandlers reported an 18.2 percent drop in first quarter revenues to R79.6 million ($26.1 million), due to lower utilisation thanks to a slowdown in the oil & gas sector, shipbuilding and the economy in general. Physical utilisation for the 12 months to the end of March was 61.3 percent. Operating income for the quarter was R34.4 ($11.3 million) 41 percent down on the same period last year.

Capital expenditure in the quarter was just R400,000 ($131,300) down from R73.3 million ($24 million) in the first quarter last year. Mills group as a whole saw revenues drop 21 percent to R163.9 million ($53.8 million), while last year’s pre-tax profit of R50.3 million ($16.5 million) was turned into a loss this year of R14.4 million ($4.7 million).

Vertikal Comment

This sort of correction was foreseeable for the Rental division, regardless of the state of the economy and the oil & gas market, due to the incredibly rapid pace of expansion the business has seen over the past few years, as it raced ahead of the natural market take up/concept adoption pace. It may actually prove to be a blessing in disguise, allowing the company to consolidate and refine its operations which have grown at breakneck speed and which therefore are almost certain to be precarious.

With any luck the current slow-down will not last too long and the company will eventually emerge in a stronger position, allowing it to grow at a healthier and more sustainable pace over the following 10 years or more.