“Hire is firmly entrenched as a necessary service for the construction and related industries in Australia… We believe the market penetration here, like in the U.K., is greater than in the USA.”
“Larger companies will probably try to be present in the whole country. But will they be able to cope with the specific Belgian mentality and specifications, which can differ a lot from one district to another?”
“(The rental industry) is an OK business to be in, but our changing conditions in trading and our political climate make it horrific trying to run an honest business.”
ARGENTINA
Argentina Warms to Rental
With Carlos Mascetti
RentATool
Buenos Aires, Argentina
RER: How has the rental equipment industry evolved in Argentina? Has it been difficult to educate citizens on the concept of rental?
Mascetti: Over the last 50 years, the Argentine economy was closed or was charged extremely high prices to import machines and other goods because they were not manufactured locally.
Since 1991, RentATool has been the country's pioneers introducing equipment for rental or sale, including Multiquip, Edco and Honda Power Products. About 80 percent of our products are from the U.S., with the remainder from Japan, Germany and Spain.
Our job is still to introduce the culture of the rental business to contractors.
With the sale of water, gas and telephone companies, there has been a revolution of new technology most people here were familiar with such as compaction, vibration of concrete and diamond cutting. Contractors now find it necessary to use that equipment.
What are the most popular kinds of rental equipment? Do you see their popularity continuing in the future?
The most popular equipment is probably the air compressor, aerial lifts, generators and smaller items such as rammers, vibratory plates, trowels, vibratory screeds, concrete pumps, water pumps, electrical hammers, grinders, scarifiers and small pavement rollers.
What are some of the main issues and challenges ahead for rental companies both large and small?
The market can still be developed further, and it has a promising future. Private companies have plans to develop highways, airports, undergrounds, docks and other projects.
Regulations are soft on late equipment returns from renters.
To obtain local credit sometimes is not profitable, with interest charges wavering from 1 percent to 4 percent per month, depending on foreign currency changes and the local economy.
Are there many foreign rental companies in Argentina? Is there consolidation like in the United States?
There are “espontaneos” (“amateur bullfighters”) that emerge from the hardware industry and are dazzled by rental profits. They disturb the market but soon fall. There are other well-organized rental companies, too: Sullair (Argentine investors, partially sold to Neff), Macrosa Rents (associated with Caterpillar) and other small firms trying to learn the industry.
International rental companies are not buying small rental firms because the business is not administered by professional management and it is relatively new.
AUSTRALIA
Consolidating Down Under
With Andy Kennard
Kennards Hire
Burwood North, Australia
RER: During the past few years, consolidation has played a major role in shaping the U.S. rental industry, with the large national chains acquiring many family rental businesses. Is that happening in Australia, too?
Kennard: The industry in Australia has been made up of a small number of long-term “majors” who have had a reasonable share in the construction/trade/home improvers markets. Two companies dominated the large equipment and customer end of the market nationally — Coates Hire, a public company, and Wreckair Hire, a subsidiary of Brambles. The small equipment end for trades, subcontractors and home improvers has been dominated by one company in each major city.
Recently one larger company, A H Plant Hire, has joined the market — created from the sale of a state utilities business.
The industry in Australia has seen a major consolidation since 1992, not unlike in the USA. But a number of specialist independents have commenced in business or grown during the past five years of high economic growth.
The consolidations have been made mostly by two companies: Coates in the larger end and Kennards Hire in the smaller end.
Coates has acquired over 20 businesses, netting approximately 30 new outlets in portable accommodation, access, shoring and pumps, construction hoists and compaction.
Kennards has grown from 13 stores in two cities in 1992 to 63 today in 10 cities.
Even with acquisitions, family-run rental businesses still outnumber the large U.S. chains by about a 3-1 margin in terms of the number of stores. What is the ratio in Australia?
Australia is the same size as the continental USA but with a population of 19 million. This makes our market very different. We estimate there are 3,000 hire businesses (in the equipment area). The largest three have approximately 250 outlets.
What are the main assets of family-run businesses that perhaps give them an advantage over the larger players?
In a downturn such as we are experiencing now, a family business can adapt more quickly than one in public hands. Areas such as dividends and cost cutting are easier to implement.
What are some of the main issues and challenges ahead for Australian rental companies both large and small?
The three major issues for large hire companies are:
-
Manufacturers moving into hire;
-
Manufacturers dumping equipment into the hire market — such as providing ridiculous financing and repayment deals for new entrants;
-
Crazy pricing — many hire rates are below where they were in 1990.
For smaller hire companies, survival in tough times is the number-one issue. This applies particularly when growth was highly financed heading into the downturn.
Is the rental climate in Australia a good one? Will that continue in the future?
Hire is firmly entrenched as a necessary service for the construction and related industries in Australia. While we do not have any statistics, we believe the market penetration here, like in the U.K., is greater than in the USA. Growth has come from consolidation over the past eight years in a strong economy. Future growth will become more difficult as saturation approaches.
PQ: “Hire is firmly entrenched as a necessary service for the construction and related industries in Australia. & We believe the market penetration here, like in the U.K., is greater than in the USA.”
Personal Service Is Key to ‘Mom-and-Pop’ Success
Ð With Kris Coppens, Euro Rent, Antwerp, Belgium
RER: In many countries it is a battle convincing people rental is a smarter move financially than buying equipment. Has the general population in Belgium warmed to the advantages of rental?
Coppens: It is difficult to speak for the general population, certainly, because 85 percent of our turnover is B-to-B-oriented. But we started our rental activities in 1972, and since then we have seen that more and more companies and DIYers have found their way to the rental business. As the years went by, the rental market became more competitive, and all rental companies together did spread the message to rent instead of buy equipment. Nevertheless, compared with the U.S. or the U.K., we have still a long way to go.
There are far more small family-run rental centers in America than centers run by larger national chains. Is that the case in Belgium as well?
It is. In Belgium, rental centers have one or only a couple of branches. Belgium is a very small country but has also three different official languages and is divided in three districts with each having their own legislations. This makes it difficult to go nationwide. Having said that, we expect some national chains from France or the Netherlands to enter the Belgian market in the near future.
What is it that makes those family-run centers successful?
Family-run centers have more control over their activities and are better organized to enter niche markets. They are geographically limited but can offer a more personalized service to their customers than the larger national chains. We believe that family-run centers and national chains have both advantages and disadvan
BELGIUM
Belgium's Rental Melting Pot
With Kris Coppens
Euro Rent
Antwerp, Belgium
RER: In many countries it is a battle convincing people that rental is a smarter move financially than buying equipment. Has the general population in Belgium warmed to the advantages of rental?
Coppens: It is difficult to speak for the general population, certainly, because 85 percent of our turnover is B-to-B-oriented. But we started our rental activities in 1972, and since then we have seen that more and more companies and DIYers have found their way to the rental business. As the years went by, the rental market became more competitive, and all rental companies together did spread the message to rent instead of buy equipment. Nevertheless, compared with the U.S. or the U.K., we have still a long way to go.
There are far more small, family-run rental centers in America than centers run by larger national chains. Is that the case in Belgium as well?
It is. In Belgium, rental centers have one or only a couple of branches. Belgium is a very small country but has also three different official languages and is divided in three districts with each having their own legislations. This makes it difficult to go nationwide. Having said that, we expect some national chains from France or the Netherlands to enter the Belgian market in the near future.
What is it that makes those family-run centers successful?
Family-run centers have more control over their activities and are better organized to enter niche markets. They are geographically limited but can offer a more personalized service to their customers than the larger national chains. We believe that family-run centers and national chains have both advantages and disadvantages.
What are the most popular kinds of rental equipment? Do you see their popularity continuing in the future?
Since Euro Rent started in 1972, we have always had a very large range of equipment to offer. In the early days we mainly rented tools and small equipment. Over the years we enlarged our range of products. We now rent more than 25,000 machines, tools and equipment for the building and maintenance industry as well as for the DIYer.
What are some of the main issues and challenges ahead for rental companies both large and small?
The smaller companies have to work on quality-control systems and develop niche markets. They have the possibilities to rent specialized equipment, which demands more attention and special training.
Larger companies will probably try to be present in the whole country. But will they be able to cope with the specific Belgian mentality and specifications, which can differ a lot from one district to another? The future will probably tell us.
How does the rental business in Belgium integrate into the European rental industry? Is it similar/different? Is there a big difference between rental in surrounding countries?
Renting equipment in Belgium or another European country is rather similar, but what is different is the mentality, currencies, cultures, habits, legislations and languages.
The U.S. is one economic market, but despite all efforts, Europe is still an addition of many countries.
All countries have their own problems and needs. Their citizens want to keep their own identity and have their national pride. We believe in a united Europe, but it will always be a Europe with all kinds of nations, cultures and regulations.
In Europe, the rental industry in the U.K. is the most mature one. Also France and the Netherlands have some very important national chains. These national chains could become international chains in the near future. Some have already tried and found the conditions too difficult.
Is the rental climate in Belgium a good one? Will that continue in the future?
The rental climate is good. We expect the competition to be tougher in the future, but also the rental market will keep on growing. So in the end the market will be big enough for everybody with a good business plan.
BRAZIL
Optimism Abounds in Brazilian Rental
With Analice Carvallo
Montarte Indl. E Loc.
Sao Paolo, Brazil
RER: In many countries, it is difficult convincing people to rent equipment instead of buy it. Do Brazilians realize renting makes sense financially?
Carvallo: Yes, the great majority of people in Brazil after some years have realized that renting is a good decision.
What has been the toughest part about convincing people to rent? How have you done it?
I think it was the price. We had to convince people that quality and safety were more important than the lowest prices. We did it by making people compare equipment. The main challenge is to convince people to rent equipment at a good price while always emphasizing regular maintenance, quality and safety of the product.
What are the most popular kinds of rental equipment? Do you see their popularity continuing in the future?
In our area, that is scaffolding, hoists, concrete mixers and other construction equipment. I expect it to continue.
In the United States, the large national rental companies are expanding by buying the smaller family-run businesses. Is that happening in Brazil?
No, not yet.
Is the rental climate in Brazil a good one? Will that continue?
Yes, and it is getting better. It will certainly continue in the future.
CAYMAN ISLANDS
Small Islands, Large Challenges
With David Kirkaldy
Massive Equipment Rental and Sales
George Town, Cayman Islands
RER: The rental industry in the Cayman Islands is different in many respects to other rental businesses around the world. How so?
Kirkaldy: In a word, scale. The total population of the islands is only about 40,000, so this inherently limits the volume of business. In the past the only rental industry centered around heavy equipment rented with an operator. There are now three companies on Grand Cayman that compete as general rental centers offering small tools and construction equipment. Massive Equipment Rental and Sales is the only full-service rental center, offering a complete range of products from small hand tools through to backhoes and telescopic handlers.
Due to the limits to the volume of business, we have to be very selective on the equipment we stock and the depth of inventory we carry. We have also had to branch out into other areas to provide a better income picture than rental alone would provide. These other areas include portable toilet rental and servicing, parking-lot line striping and seal coating, and tool and equipment sales.
You mention smaller equipment more than larger equipment as being popular rental items. Is that because there isn't a lot of major development and construction on the islands, or are there other reasons?
There is a fair volume of development taking place on the island. The problem has been that the lack of rental centers in the past has led contractors to purchase much of their own construction equipment. We have had to work hard to demonstrate to our customers and others that renting saves over buying most of the time as theft is reduced, idle equipment is not lost between jobs and maintenance costs are nil.
Due to the fact that there is no income or corporate tax in the Cayman Islands, the tax advantages of renting do not apply here. While we have been successful with changing the mind-set to some extent with smaller equipment, there is still the commonly held view that it is better to buy the larger equipment rather than rent.
Do you see that changing during the next few years?
The main reason for companies continuing to buy their requirements for heavy equipment rather than renting is that these are available relatively inexpensively through the secondhand or auction market in Florida. When I buy equipment for rental, I buy new or very low-hour heavy equipment, knowing that the increased upfront cost will be offset by more modern features and lower maintenance costs. Companies buying from the auctions for a particular job, as opposed to renting, are looking for a price point and eventually end up paying for it on the back end in higher maintenance costs and capital tied up between jobs.
I do not see this cycle changing over the next few years except in the case of a downturn or tightening of the construction industry, or in the case of more specialized items such as cranes, manlifts and scissor lifts.
Is rental a profitable business? How many rental companies are there in the Cayman Islands?
Yes, rental is profitable, but on its own only marginally so. The small volume of business on the island necessitates adding allied business lines such as those previously mentioned in order to create a better net result. There are two other general rental centers on the island and several heavy equipment rental businesses on Grand Cayman.
ENGLAND
Discounters Slice English Rental Profits
With John Jennings
Clements Plant & Tool Hire
Coventry, England
RER: How has the equipment rental business in England changed during the last decade?
Jennings: A large number of family-owned rental outlets have been taken over by groups. In many areas there are now very few independent stores, but the branch networks of the larger corporations have expanded rapidly.
There has been a large impact by builders merchants, some of whom now have “in-store” rental counters in most of their branches. The largest merchant, Jewsen, has also moved to acquire stand-alone independents and small private groups as well as opening some greenfield purpose-built centers. The acquisition trail has come full circle recently with one of the oldest and most respected U.K. equipment rental groups, Hewden Stuart, itself being bought out by Caterpillar-owned Finning. Many commentators think it only time before the likes of Atlas Copco, Volvo and others get involved. There has been a traditional standoff in the U.K. in attitudes regarding a maker taking “a second bite of the cherry”; many rental companies will never buy from a maker who is also effectively a rental competitor. It was this situation that probably led to Upright selling off their U.K. rental fleet (to Hewden).
What are the most difficult parts of doing business as a rental company in England?
There is no doubt that the awesome regulatory burden placed on U.K. business by national and EEC regulation and the time needed to satisfy compliance with a myriad of new laws particularly in safety, social welfare, transport, environment and company law make business management a lot less fun for many small businesses, with many finding great difficulty in keeping up and spending less and less time on running their actual business.
Charge-out rates are too low, and even the executives of some of the worst discounters are now on record as saying that something must be done. The customer has reaped the short-term benefit of a number of the dominant players in the market driving rates down to acquire market share. Smaller businesses are discovering the value of their equipment and vehicles being hit by realignment of prices with much midrange compact equipment now costing less than it did three years ago. Residual values are dropping alarmingly, and the U.K. is awash with secondhand kits, some of it being dumped by financial institutions who have had their fingers burnt with early returns of leased machines or outright repossessions.
In America, several Web sites are devoted to equipment rental, although their success (or lack of) has been difficult to gauge. What role does the Internet play in equipment rental in England?
The majority of rental stores have some Web presence, although a lot use shared sites through small-business schemes. The general view of the Web is that it produces little hard business. Most customers have limited knowledge of machinery and its benefits; some will try to order the right type but choose the smallest size because it is cheapest.
If a machine that the customer ordered turns out to be unsuitable, he will demand it be changed free of charge, and up to now there have been many willing to be bullied by the customer in order to retain turnover. Ordering direct from the Web increases this type of unsatisfactory situation and underlines the case for well-trained staff giving informed but firm advice in order to filter out potentially expensive disputes.
SOUTH AFRICA
Politics Stunt South African Rental
With Rohan Lambson
Lambson's Hire
Johannesburg, South Africa
RER: How has the rental equipment industry in South Africa changed over the years?
Lambson: South Africa has changed and is changing dramatically from a Western business culture to an African and socialistic culture, but on the other hand I opened 10 branches in the ‘90s. The effect of the growth in the rental industry increased dramatically due to awareness of rental; availability of equipment due to the “new S.A.,” i.e., overseas acceptance; dramatic investment in business; business confidence; and the impact of the rand.
How has the declining value of the rand affected business?
With the drastic devaluation of the rand, product became expensive to purchase, and this assisted hire companies, but our rates did not increase by the same ratio. Utilization did increase.
Is equipment rental a good business in South Africa?
It is an OK business to be in, but our changing conditions in trading and our political climate makes it horrific trying to run an honest business.
Do you see the rental business strengthening in the future?
My glass ball is very clouded, and these are some of the things that are going to affect sub-Saharan Africa and South Africa: AIDS; cholera; exchange rates; the Western world and its attitude to Africa as far as loans are concerned; and our legal system with regard to debt collecting and fraudulent checks.
We will also be affected by the dishonesty of our own workers — stay-aways and sick leave; corruption at the government level, municipal level and in business; security — this has become a serious percentage cost in our trading accounts; and affirmative action — the enforcement by government again is hampering growth.
Do you follow what is going on in other countries, and how does that influence the way you do business?
I've modeled my business on the Australian industry and have known Andy Kennard of Kennards Hire in Sydney and Jim Brown of Coates for 22 years. I travel extensively and have attended rental conventions in the U.K., Australia and America.
I know I am one of the few in South Africa that does travel, but I believe a lot of my growth has been from communicating with people in the industry, and I can definitely thank Jim Brown for my venture in access.
