For RER’s January edition, we interviewed more than 50 rental companies and rental industry suppliers and will present several of them in RER Reports. Here Graham Hood, CEO of Miami-based Neff Rental shares his expectations for the coming year.
RER: How was 2012 for you in general terms?
Hood: 2012 was a good year for our company with broad-based revenue growth in all of our key customer segments and improvement in all of our key revenue metrics.
What do you expect for 2013?
Many of the key indicators that we look at are pointing to continued modest growth in most of our markets. Dodge is predicting 6-percent growth in overall construction, the ABI has been trending positively above 50 for several months and Global Insight is predicting continued growth performance for the rental industry, aided by the accelerated shift from equipment ownership to rental. These factors along with the ongoing strength of the energy sector and a slowly improving general economy indicate that we should see continued improvement in our business in 2013.
What are your customers telling you?
The feedback varies, but most of our customers indicate that things are slowly improving and most are cautiously optimistic about 2013 with planned work on the books. We are not seeing any significant projects being delayed.
What kind of projects look likely to happen in your areas?
We are seeing more commercial projects starting to materialize in many markets, which is encouraging.
How do you see various market segments for 2013, i.e., industrial, energy, nonresidential construction, residential, roads, bridges, schools, hospitals?
I am expecting to see more of the same that we saw in 2012 with most of the segments we deal with showing relative improvement and modest growth. The oil and gas sector should remain strong.
Will you plan to add to your inventory in 2013? Anything you can share about how much you want to spend or comparison with 2012?
We had an above-average capex spend in 2012 with three new branches, replacement capex to continue to manage fleet age and some fleet growth in many of our existing branches. 2013 is projected as a normal capex year for replacements along with conservative fleet growth. That could change based on increased customer demand as we move through the year.
Anything you can share about strategies you have planned for 2013?
We continue to focus primarily on our existing network of branches, managing the fleet to meet customer demand, increase operating leverage and margins; as well as continued improvement of our key metrics of rate and utilization. We have a couple of new branch openings planned, which will add synergies to and complement our existing footprint.
What potential concerns do you have – gridlock in D.C., European debt crisis, the cost of equipment, price of oil or other resources, etc.?
Obviously you have mentioned several other potential landmines out there for the economy, but any uncertainty should help the rental industry as customers contemplate the rental-versus-ownership decision. Equipment costs are increasing with Tier 4 technology and the industry will have some time to absorb those costs, but in order to maintain and increase industry returns, we all have to continue to be diligent in managing rental rates.
Anything else you’d like to add?
It is key that the companies within the industry remain disciplined in managing their fleet size and continue to focus on improving rates as a priority.