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HERC39s growth in new accounts and specialty equipment areas is offsetting the decline in oil and gasrelated revenue CEO Silber said
HERC's growth in new accounts and specialty equipment areas is offsetting the decline in oil- and gas-related revenue, CEO Silber said.

HERC’s New Account Growth Offsets Oil-and-Gas Revenue Decrease in Q1

First quarter 2016 worldwide equipment rental revenues totaled $328 million for Hertz Equipment Rental Corp., compared to $355 million in the first quarter of 2015, an 8-percent decrease. The revenue total was negatively affected by continuing weakness in upstream oil and gas markets as well as HERC’s sale of equipment rental operations in France and Spain in October.

Excluding those factors, on a constant currency basis, revenues increased 12 percent, Hertz said, primarily because of new account growth, while pricing improved 1 percent in non-oil and gas markets.

The separation of HERC from Hertz Global remains on track for mid-2016 and the company affirmed its worldwide equipment rental segment full-year adjusted corporate EBITDA guidance between $600 million and $650 million.

Addressing an investors’ conference call, HERC CEO Larry Silber said the company’s staff in Alberta has been participating in providing support and assistance to employees and constituents in the local area. Silber said all HERC’s people are safe and accounted for in the region.

Regarding the company’s first quarter performance, Silber said the company is making headway in new sales initiatives that expand and diversify HERC’s revenue base and improved key operating metrics relating to increasing fleet available for rent and reducing maintenance costs.

“We also focused our capital expenditures on investments to support our Specialty Solutions and ProContractor tool initiatives which, I’m pleased to say, are being enthusiastically received by our customers,” Silber said.

Silber said new account growth is offsetting the decline of oil and gas revenues. “Revenues from new customers increased approximately 20 percent and the volume of new accounts improved approximately 41 percent over the first quarter of 2015,” he said. “New customer-focused programs such as rental protection and other ancillary offerings also began to take hold and contributed positively for the quarter. Worldwide volumes excluding France and Spain increased approximately 1 percent due to new account growth.”

Silber said HERC opened three new branches to improve density by providing additional coverage in strong growth urban markets.

Because of the slowdown in Canada, HERC closed five branches there and reduced workforce 13 percent to right size the fleet and workforce related to oil exploration, Silber noted. The company is considering closing a few U.S. branches for similar reasons.

“The average fleet in our upstream oil and gas markets declined nearly 20 percent in the quarter,” Silber said. “And while we increased fleet in our non-oil and gas markets by approximately 12 percent compared to the same period last year, we have also been able to achieve a price lift of just over 1 percent in the same period.”

Silber said HERC has been disciplined with fleet CapEx in the first quarter, purchasing $88 million of fleet in the first quarter compared to $199 million in the year-ago quarter. The purchases were for equipment in Specialty Solutions categories such as climate control, HVAC, building maintenance, and remediation and restoration, as well as ProContractor tools. Silber said the company expects net CapEx spending to be in the range of $375 million to $425 million for the full year.

Silber also added that the company reduced fleet unavailable for rent (FUR), its metric for measuring the availability of our fleet. “This chart shows the progress we are making from nearly 20 percent a year ago, we are now currently running at a 12 percent rate,” he said. “Since we have $3.5 billion in fleet, for every 1 percent improvement in FUR, we have $35 million more fleet available for rent.”

TAGS: Rental News
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