08.02.2018

Solid pick up at Rami

Finnish international rental company Ramirent has reported a very strong fourth quarter and full year.

For the year as a whole revenues were up almost nine percent to €723.7 million, with increases in almost all markets. With only Norway and Denmark flat, but both fared much better in four quarter. Central Europe led the way ending the year up 26.6 percent. All markets remained in profit, with growth ranging from nine percent in Denmark to almost 22 percent in Central Europe, most regions posted high double digit profit growth. Pre-tax profits for the group almost tripled to €76.97 million. Capital expenditure fell 12.8 percent to €166.4 million, while net debt was 2.3 percent lower at €337.9 million.

In the fourth quarter revenues were 11 percent higher at €200.3 million, with all markets contributing to the positive result. Pre-tax profits were 20.5 percent higher at €19.45 million.

Chief executive Tapio Kolunsarka said: "Entering 2017, we had a single target for the year: to achieve a step change improvement in our financial performance in all our operating segments. With 2017 now behind us, I have every reason to be proud of the accomplishments of the Ramirent team. Our comparable EBITA grew by 45 percent, all segments improved their comparable financial performance and particularly gratifying was the strong profit comeback of Sweden and Europe Central. Successful turnaround in our low-performing units has been an important factor in improving our profitability. I would like to thank all Ramirenters for their focused and disciplined efforts in 2017.”

“We also achieved the fastest sales growth at comparable exchange rates, 9.3 percent, since 2012 and succeeded well in growing our key priority areas: rental sales and sales to small and medium sized customers. Demand conditions were favourable across our markets. There were clear improvements in market activity in the Baltics and Europe Central, taking their combined share of the group's total operating profit to one quarter.”

“During the fourth quarter, our execution remained strong despite temporarily higher fixed costs. I was particularly satisfied with the improved comparable EBITA and margin development in all segments, including also Denmark and Norway exceeding the 10 percent comparable EBITA margin level in the quarter. Cash flow after investments for the full year improved to €51.6 million from previous year's €20.7 million and our return on capital employed improved to 13.8 percent from 6.2 percent. Considering the fast sales growth in 2017, our strong cash generation underlines our ability to grow capital efficiently. We aim for capital efficient, profitable growth in our core construction equipment rental business, and we are determined to reach a 16 percent return on capital by 2020.”

“The demand outlook for the start of 2018 looks favourable across Ramirent's diverse customer base and geographies, and there is still much to be gained by improving our internal operations. Our new financial targets and the strategic focus on capital efficiency constitute our recipe for creating value for Ramirent shareholders in the coming years.”

Vertikal Comment

An excellent result from Rami, which appears to have really regained its momentum and it sounds like it is having a promising start to the new year. The group has plenty of room for further growth, both organically and via bolt on acquisitions, this plus the growing strength of the global economy bodes well for the strong growth over the next few years.

One warning bell though is the falling level of capital expenditure, which has been relatively modest for some time, suggesting that the average age of the fleet may well be rising? If so creating problems further down the line. The commentary also suggests that this is might be an intentional policy, given the core focus on pushing return on capital above other measures.

Hopefully this is not the case and the management is also focusing on the mid to long term viability of the fleet, in addition to short term financial ratios.
Overall an excellent set of numbers