08.02.2019

A year of change for Rami

Finnish international rental company Ramirent has reported a modest rise in revenues but lower profits.

Looking at the full year total revenues were up 3.8 percent to €711.7 million, while pre-tax profits plunged 27 percent to €56.4 million, due almost entirely to the €32.3 million write off, mostly on the sale of its Temporary Space division which we previously covered. Without the write off, profits would have been €88.7 million more than 13 percent higher than in 2017.

Norwegian revenues were 2.5 percent higher, with a €10.1 million loss due to the write off, Eastern Europe posted a 7.8 percent revenue improvement, with a 31 percent jump in operating profit. Finland was flat in terms of revenues, but with lower profits due to the write down and Sweden posted a 4.5 percent increase in sales, but with lower profits also due to the write offs. Denmark is now shown as a discontinued operation due to its sale in December, although that has yet to complete.

The group’s gross capital expenditure was almost 20 percent higher at €199.5 million. Net debt at the end of the period was 3.7 percent higher at €350.6 million.

Looking at the fourth quarter total sales were 188.6 million slightly below what it was last year, while pre-tax profits dropped 48 percent, due to the reasons mentioned above. Norway had flat sales, with a loss, Eastern Europe was almost six percent higher, with a 32 percent jump in operating profits to €7.5 million, Finnish sales were flat as were profits and Swedish revenues were 4.5 percent lower while operating profit was 3.5 percent higher.

Chief executive Tapio Kolunsarka said: "Ramirent's performance continued solidly in the fourth quarter. Despite last year's high comparison figures and the sale of Temporary Space during the quarter, we managed to grow our top line in comparable currencies by 1.5 percent. Our comparable EBIT and comparable EBIT margin were slightly above the previous year's level and comparable ROCE reached 16.8 percent, already exceeding our 2020 target level. Our performance varied somewhat by segment. Our Eastern European business continued to grow its net sales and to further improve its profitability. Also in Norway, our profit improvement continued, and we saw strong growth in equipment rental. In Finland, our performance was stable with net sales and comparable EBIT being at the previous year's level. In Sweden, we continued to see positive sales development in our core equipment rental and service business albeit at slower rate than before. At comparable exchange rates, the net sales in Sweden were at the previous year's level. However, Sweden's comparable EBIT decreased mainly due to Temporary Space divestment as well as adverse currency translation effect.”

“In the quarter, we carried out several initiatives to improve and strengthen our business portfolio. In November, we closed the divestment of our Temporary Space business and in December, we announced the divestment of our Danish equipment rental business. These divestments enable us to better focus on our core business of equipment rental and related services and re-invest capital to areas where we see higher returns. An example of this was the signing of a long-term cooperation agreement with SRV Group and the acquisition of SRV Kalusto's entire share capital. The transactions with SRV further strengthens our leading position in the Finnish market. We also initiated a further performance improvement plan in Norway, where we continue to see further possibilities for profit improvement.”

“Looking back at the financial year 2018, I am proud of our organisation's achievements. We achieved solid sales growth with strong improvements in profitability in all of our operating segments and took several actions to shape our business portfolio to be more capital efficient. Despite the fast organic sales growth, we were able to deliver positive cash flow after investments for the second year in a row.”

“Entering into 2019, Ramirent's business is in an excellent position - we have a strong balance sheet and a clear, capital efficient strategy, which is geared towards generating high returns and positive cash flow after investments. I remain confident about our organisation's ability to execute and find further avenues to improve the performance of our core business. Growth in the Nordic construction markets is expected to be slower in 2019. However, we see opportunities for continued further growth in Eastern Europe, which became our second largest segment in terms of profits during 2018. As our execution and balance sheet are both in strong shape, we are also increasingly open for acquisitions to boost the growth of our rental business."

Vertikal Comment

While the headline numbers look poor, the underlying results are much better as we have highlighted, although apart from Eastern Europe - which only represents 17 percent of revenues and 12.5 percent of the operating profit - they do not make the most stimulating reading. However the company has implemented many radical changes during 2018 and is arguably in good shape to make progress in what could be a challenging year in many of the markets that it operates in. It may well surprise us though in the second half as it starts building on its new simplified business model?

For once Rami's ongoing strategy differs significantly from its fellow Finnish international rental company Cramo, so it will be very interesting so see how they both fare in 2019 and beyond.

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