Herc Rentals, Bonita Springs, Fla., reported equipment rental revenue of $327.6 million for the second quarter ended June 30, 2020, which is down 19.6 percent from last year. However, the company said fleet on rent increased in May and June compared to the low point in April.
The company now estimates the volume of fleet on rent in the second half of the year is likely to decline about 8 to 13 percent compared to last year with equipment rental revenue in the second half to be down about 10 to 15 percent year-over-year.
Larry Silber, president and CEO, said Herc Rentals, despite the economic conditions, was able to maintain rates and control costs in a challenging quarter.
“Our business, like all businesses in North America, had to deal with the impact to economic activity in the second quarter resulting from the mandated shutdowns to mitigate the impact of the COVID-19 pandemic. The immediacy of the impact on our business as most major metropolitan areas were shut down was unlike any downturn any of us have previously experienced,” Silber said during a conference call with analysts on July 23.
“As an essential service provider, our locations remained open for business and we were able to provide our customers with rental equipment as and where needed. We are proud of how our team responded to the sudden and unprecedented challenges that we overcame together,” he said.
Silber said the company’s highest priority remains the safety of employees and customers and that Herc Rentals continues to follow the Centers for Disease Control and Prevention (CDC) guidelines across all of its operations and reinforced hand washing, social distancing and infection control in frequent communications and in contact with customers and communities.
Herc Rentals also has restricted non-essential travel and much of the company’s field support and office staff continued to work remotely during the second quarter.
“While we enhanced our operational and safety procedures to operate in this challenging environment, all of our regions continue to report at least 89 percent Perfect Days and an average of 94 percent Perfect Days for the six months year-to-date,” Silber said.
In addition, he said the strategy to diversify customers and fleet through specialty services has partially offset the overall impact of the pandemic on rental revenue.
“We are very pleased with the performance of our ProSolutions® team in particular, as they continued to generate strong year-over-year growth during this health care crisis. Our specialty fleet grew 4 percent year-over-year to nearly $850 million of OEC (original equipment cost), representing approximately 23 percent of our total rental fleet,” he said.
For the first half of the year, equipment rental revenue declined 9.1 percent to $714.1 million, compared to $785.2 million in the first half of 2019. The company said lower volume due to the impact of the coronavirus (COVID-19) impacted the year-over-year results.
The company also reported net fleet capital expenditures of $93.6 million for the first half of 2020 with gross fleet capital expenditures of $161.5 million compared to $257.1 million last year. Net fleet capital expenditures for the year are expected to be between $190 to $210 million, about half of what it was in 2019 anticipating the decline in fleet on rent and total equipment rental revenue.
“Coming off the worst quarter in modern economic history, the forecast is still a bit fluid and subject to more than the usual amount of estimation and supposition. The updated American Rental Association (ARA) forecast for North American rental revenues is probably the best estimation of rental revenue trends, taking into account the current macroeconomic environment and forecasting forward 2020 North American rental revenues to be down by 15 percent to $49 billion,” Silber said.
“This looks reasonable based on what we have experienced so far in 2020, assuming there are no further economy wide shutdowns in the back half of the year. This would reset rental industry revenues back to 2016 levels and to 2017 levels in 2021 before returning to 2019 levels in 2022. Now 2016 and 2017 were certainly not the worst years to be in the rental industry and there will be plenty of rental activity for Herc to target, although there will be a certain amount of fleet reduction required to adjust to the new environment,” he said.
“Our industry is resilient and tends to benefit in some ways in recessionary times such as these when the secular trends of ownership to rental accelerate as customers can serve capital. Our industry is also not dependent on any one end market and the fleet can move freely to where the demand is both geographically and by end market. Throughout this challenging period, we will stick to our purpose. And that is to equip our customers and communities, to build a brighter future. We intend to support our customers in this challenging environment, with a team that is committed and dedicated, in a safe and healthy environment,” he said.
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