Hertz Equipment Rental Corp. posted $1.11 billion in worldwide equipment rental revenues for 2009, a 33-percent decrease compared with 2008, when total revenue was $1.658 billion. Worldwide equipment rental revenues were $274 million for the fourth quarter of 2009, a 26.1-percent decrease compared with the fourth quarter of 2008 when the company posted $370.7 million in the fourth quarter.
Adjusted pre-tax income for the fourth quarter of 2009 was $25.8 million, a 43.9-percent decrease from the same period in 2008, primarily the result of the effects of reduced volume and pricing, although the decline was partially offset by management’s cost-cutting initiatives. HERC achieved an adjusted pre-tax margin, based on revenues, of 9.4 percent, and a corporate EBITDA margin, based on revenues, of 40.5 percent for the quarter.
The average acquisition cost of rental equipment operated during the fourth quarter of 2009 decreased by 10 percent year over year, compared with a 10.8-percent decrease in the fourth quarter of 2008 from the same period in 2007.
However, Hertz Corp. chairman Mark Frissora was bullish about future prospects for HERC. “In our equipment rental business, the volume decline is moderating,” Frissora told an investors’ conference. “In the fourth quarter, equipment rental volume was down 24.2 percent, an improvement from 2009’s third quarter’s negative 28.7 percent. Pricing is still a concern, declining 9.5 percent in the fourth quarter. We were optimistic at the end of the year when we saw a long-awaited sign of rational pricing behavior in the market.”
Frissora added that while the first quarter of 2010 will likely be the most challenging for the company since the recession began, he said the company expected HERC volumes “to improve on a sequential quarterly basis throughout the year with the potential for year-over-year growth in the second half.”
Frissora said geographically there are pockets of recovery. “For example, in Florida, one of the first markets to enter the recession, equipment rental volume is beginning to actually turn positive year over year. And in Canada, we are benefitting from stable oil prices and the resumption of various plant refurbishment projects. As a balance to pursuing new top line strategies in industrial and entertainment markets, we are further tightening Hertz’s cost structure by rationalizing locations and implementing long-term process improvements. Through this two-pronged approach, we achieved a corporate EBITDA margin of 40.5 percent for equipment rental in the fourth quarter. Adjusted pre-tax profit margin was 9.4 percent. This business is typically the strongest contributor to total company profit.”
Frissora added that the equipment rental division has the ability to create a dramatic change in the company’s profitability on just a small amount of revenue growth. “As today’s negative volumes continue moving in the right direction, we could see some of that growth by the second half of 2010 as year-over-year comparison gets much easier and the industrial market continues its recovery.”
HERC recently announced plans to expand its equipment rental operations in 2010, expecting to open about 10 new branches as part of a companywide strategy to tap into markets emerging from the recession as well as to provide onsite support to key industries such as the petrochemical industry. The Park Ridge, N.J.-based company is No. 4 on the RER 100. It has more than 330 locations in the United States, Canada, China and Europe and recently announced plans for a joint venture in Saudi Arabia.
