RSC cash flows strong as revenues fall sharply

RSC Equipment Rental posted a first quarter net loss of US$14 million on total revenues on $351 million, which were down 16.8% on the same three months in 2008. Rental revenues fell by 23% to $287 million and RSC said it expected a 35-40% decline in the second quarter compared to the same period in 2008.

The company said markets were down "sharply" compared to a year ago and had continued to decline moderately since the start of 2009. Rental rates are 4.1% lower than a year ago and fleet utilisation was 57.8% compared to 68.6%.

However, RSC CEO and president Erik Olsson, said the company was succeeding in generating good cash flows; "We delivered an impressive $112 million of free cash flow in the first quarter of 2009, clearly demonstrating the counter-cyclicality of our business model.

"In a difficult economic environment, our focus remains on maximizing cash flow generation. We now expect to deliver free cash flow of $340 - $370 million for the full year, which is $20 million above our previous estimate."

RSC continues to reduce its costs. It closed 14 locations and layed off 422 staff during the quarter - the company has now closed 57 depots (12% of the total) and shed 905 staff (17% of the total) in the12 months to 31 March this year. However, it opened seven new locations in the first quarter and 29 over the past year, "primarily in locations that presented industrial growth opportunities". The proportion of industrial/non-construction revenues increased to 55% in the first quarter, said RSC.

"The actions we took in the past 12 months to address our cost structure and optimize free cash flow are delivering the expected results and more", said Mr Olsson, "For the full year 2009, we are targeting a reduction in our cost of rental and SG&A expenses by $150 million or more. At the same time we will continue our focus on the industrial markets and serving our existing customers."