Europe’s RKO Posts Large First Half of 2006

Finland-based multi-national rental company Rakentajain Konevuokraamo Oyj, which operates in Finland, Sweden, Norway, Denmark, the Netherlands, Estonia, Latvia, Lithuania, Poland, the Czech Republic and Russia last week released second quarter and first six month results, showing significant revenue and profit gains. The company posted a 397.7-percent year-over-year volume increase in the second quarter, rising from EUR 19.4 million (about U.S. $24.8 million) to EUR 96.4 (about U.S. $23 million). Volume for the first half of 2006 rose 395.3 percent from EUR 36.4 million (about U.S. $46.4 million) to EUR 180.3 (about U.S. $230 million).

The dramatic increase is the result of the inclusion of volume of the Cramo Holding Group, which RKO acquired during the first quarter.

Still second-quarter volume rose 13.9 percent on a pro forma basis, while January to June volume jumped 18.5 percent on a pro forma basis.

First-half operating profit (EBIT) increased 243.1 percent to EUR $22.8 million (about U.S. $29.1 million), representing an operating margin of 12.6 percent. Healthy demand and growth in rental equipment utilization rates contributed to the profitability improvement.

RKO expects construction volume to grow in all its operating regions for the remainder of 2006. In June, Euroconstruct, an international construction business research group, forecast that the Nordic construction market would expand by about 4 percent in 2006, but the growth rate is expected to cool slightly during 2007-2008. The construction investment growth rate in Central and Eastern Europe is currently running higher than in the Nordic countries, and in Russia, the growing middle class will boost housing construction in major cities, the report said.

RKO estimates that equipment rental services in all its market areas will grow at a faster rate than the total growth in the construction market, because of a rising penetration rate. Demand for modular space — in which the company is particularly active in Finland and Sweden — is also projected to grow at a faster rate than construction.

RKO has more than 250 branches. It has a stated goal of becoming one of the three largest rental service companies in Europe. Fifty-one percent of the company’s rental revenue comes from Sweden, with 18.3 percent from Finland, 19.9 percent from Western Europe and 10.1 percent from the rest of Europe, including Estonia, Latvia, Lithuania, Poland, the Czech Republic and the St. Petersburg region in Russia.

Pon Holdings, which is the parent company of Waco, Texas-based Equipment Depot, is a 28-percent shareholder in RKO.

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