FEATURE: World Rental Report

This is a feature from the September/October 2016 issue of IRN. To read the full article, with extra images and information, subscribe to the magazine: http://www.khl.com/subscriptions/magazines/international-rental-news/

As the benefits of renting equipment rather than owning it continue to be recognised around the world, IRN caught up with senior figures from the global industry to get some perspective on the state of the market in different countries and regions.

Covering all four corners of the Earth, this report features interviews with Pierre Boels, CEO of Dutch rental company Boels Rental and president of the European Rental Association (ERA); as well as Kari Aulasmaa CEO of Renta Group, a new Finnish rental company; Mike Watts, chairman of US rental company Sunstate Equipment; and Kevin Fitzgerald, chairman of US equipment rental holding company Rental Equipment Investment Corp.

Also included in the report is an interview with James Oxenham, CEO of the Australian Hire and Rental Industry Association, together with Kanchu Kanamoto is president and CEO of Kanamoto, one of the largest rental companies in Japan.

John Monaghan, president of Atut Rental in Poland, also spoke to IRN for this feature, as did Fernando Zubero Perez, who is sales manager of Imcoinsa, a global manufacturer of construction equipment, based in Spain.

Also included as an interview with Nick Hubb, managing director of UK rental company Hubbway Hire, together with Hatim Jaadour, a director of Morocco-based cranes and access rental company Eurogrues. Vincent Albsini, CEO of Avesco Rent, a Caterpillar Rental Store headquartered in Puidoux, Switzerland, also contributed to this wide-ranging selection of interviews.

Drawing trends from all four corners of the earth is always going to be difficult, but in general it is fair to say that Interviewees were broadly positive on rental prospects in their regions, with reports of more stability in markets around the world helping to fuel confidence and growth.

However, the lack of skilled workforce emerged time and again as a key challenge facing the global rental industry, while fierce competition and pressure on rates also repeatedly being highlighted as continuing battlegrounds for this margin-intensive industry.

European energy

Pierre Boels, CEO of Dutch rental company Boels Rental and president of the European Rental Association (ERA), said the European rental market continued to grow, even though some markets in the southern countries were still facing difficult times.

“There are significant variations in market penetration estimates in different countries, which should allow good growth rates in certain markets, despite a low overall economic growth rate,” he said.
Looking ahead to 2017, Mr Boels said the European rental industry was in a good position.

“Fuelled by outsourcing, durability trends, and thoughts on the sharing economy, you can say that things are looking good for our industry.

“Of course, this is not equally so in all countries. In terms of these developments, I can see the UK or Scandinavia taking the lead compared to, for example, the German-speaking European countries or the southern European countries. But still, signs are looking good.

“After all, our sector is a cyclical one, late-cyclical even. Naturally, the downturn or upturn is not the same throughout the entirety of Europe at the same time. For a company like Boels, which is active in ten countries, this is an advantage.

"The economy in one country always thrives more than the other, or vice versa. This means we can shift our investments from one place to another.”

Political relationships

In his capacity as president of the ERA, Mr Boels said the association had started developing relationships with both the European Commission and the European Parliaments.

“Our main goal is to bring the rental concept
much closer to the attention of the representatives of these organisations and to seek together how rental can help in developing new paradigms such as the circular economy and the sharing economy. We notice a definite interest with all the benefits that rental can bring, especially in terms of sustainability,” he said.

Mr Boels replaced Vesa Koivula as ERA president after Mr Koivula completed his three-year term in the role. The rest of the new board consists of Armin Rappen, CEO of Mateco; Leif Gustafsson, president and CEO of Cramo; Luis Angel Salas Manrique, CEO of Hune; Mark Anderson, commercial director of Gap Group; Wolfgang Hahnenberg, chairman and managing director of Zeppelin Rental; and Xavier du Boÿs; CEO of Kiloutou

Mr Boels added that the new ERA board of directors would build on the achievements of its predecessors and work at making ERA an ever stronger organisation to serve the industry.

“In the past years, the ERA tried to get the south of Europe to become more involved with the association, it succeeded in doing so. Personally, I think a larger involvement of the UK is very important.

“Throughout my entire career, I have always considered the UK to be a large example in the rental business. In my twenties, I paid visits to HSS and Charles Wilson, and I visited Speedy Hire when it only had a few branches. Looking after a larger involvement of Great Britain is a decision I had already made before the Brexit vote happened.

“These developments make me even more eager to ensure that the hire companies in Britain become more involved with the ERA and more connected with the continent,” he explained.

Polish delay

John Monaghan is president of Atut Rental – a Polish rental company boasting 16 branches and 250 employees. It was founded in 1990 and is 50% owned by Malgorzata Felicka, president of the Polish Rental Association, and 50% owned by Mr Monaghan.

Mr Monaghan said the Polish rental market was in a generally healthy state, but progress was being hampered by delays.
“Ongoing infrastructure funding from EU has resulted in a huge number of awarded contracts, but due to delays in the design stages, which have to be undertaken by the contractor, the whole process is delayed.

“What should be a boom time market, on which large players in the rental world were counting on, has not materialised. We undertook a very large investment in our range, we opened new branches but we have in the second half of 2016 reviewed that and put further investment on hold until demand comes through.

“We expect revenues to be broadly the same as 2015 for the final year, but had expected and budgeted on a hefty increase.”
He said expansion in the next 12 months would see branch openings specifically catering for the large road projects which will pass major population centres.

“This is entirely dependent on those road projects being started,” he warned. “Although it is too early in Poland for us to consider specialist sector diversification we are strongly aware of potential in the rail sector. But the specialist contractors servicing that sector have up until now purchased their own equipment.

“We will continue to watch that sector for change. We will appoint a team to concentrate on developing rental requirement to the smaller construction business which is still in its infancy as again these companies still tend to own their own equipment. They are renting only to supplement their fleet or temporarily replace equipment needing maintenance.

“We hope for the above reasons that 2017 will see a huge increase in rental demand driven by infrastructure investment. Any new ranges will be determined by demand, but we see a trend towards larger excavators – so above the 1.5 - 2.5 tonne machines we currently offer.”

Mr Monaghan added that competition was always a challenge. “Poland is a very dynamic market we have to react quickly.
“There are new players acquiring established Polish rental companies and hungry for market share.

"We stand out as the largest independent rental company who after 26 years on the market are very much in tune with customer requirements and we have the ability to take decisions on investment expansion etc. in a much quicker time than multinational competition. Presently the most challenging part of our business is dealing with extreme pressure on rates.

“On one hand we have local small companies with lower costs and short term view on supplying dated machines forcing down rates. On the other major international players new to the market are keen to establish themselves at the expense of profitable rentals.

“Additionally as rental is still a relatively new concept in Poland, there is a huge shortage of trained and skilled personnel. It is only through our own training and schooling that we have been able to expand using our own people. All the rental companies have to share the available personnel so that is in itself a challenge.”

Polish rental association

Mr Monaghan helped form the Polish Rental Association in 2016, and said it now had 15 members covering a range of rental from access to accommodation, welfare units, fencing and general equipment.

“This coming together to exchange experiences, solve common problems, combat theft and encourage qualified individuals into our industry has to bear fruit. The next few years will be critical in Poland – for the rental industry as well as for construction in general," he explained, add that after EU Funding comes to an end, there was a question mark over whether the cash injection will ave been enough to sustain long-term growth in the construction sector.

"There is a lot of uncertainty in Poland and the world which results in delays in investment and caution, making forecasting extremely difficult," he said.

“However I believe that as a flexible and entrepreneurial business Atut Rental is fully capable of dealing with this situation and we will continue to expand with the Polish rental industry.”

Swiss update

Vincent Albsini is CEO of Avesco Rent, a Caterpillar Rental Store headquartered in Puidoux, Switzerland. As well as offering Caterpillar machinery, Avesco Group also buys equipment from a range of manufacturers including Yale, Thwaites and Ammann.

“Today, Caterpillar machines represent approximately 55% or our fleet by value, and in terms of units, the percentage is round about 50% of our total fleet. The remaining part is composed of different brands in conjunction with the Avesco group and other suppliers.”

The company has 20 branch offices, of which 12 are multi-specialist branches, four competence centres for the market events, industry and services, customised equipment and mobile construction, as well as four franchisers. The Avesco fleet is composed of 6000 units as well as around 3500 accessories.

Mr Albsini said the Swiss market in 2016 had slightly increased compared to 2015, in his view, with a similar level of growth expected for 2017.

“However, the start to 2016 was quite flat which added a significant pressure to the market in terms of prices, especially within the building and construction sector,” he explained. “Moreover, the competitive pressure on the rental market impacts pricing levels directly.”

Nevertheless, he said the Swiss rental market remained a promising one, despite the entrance of new players each year increasing the pressure on existing rental companies to reduce rates, further cutting into margins.

“Avesco Rent renews its fleet quickly with a roll-out of approximately 20-25% per year and an average investment of €25 to €30 million per year," he said, adding that the average age of its fleet was three years, and this young fleet represented a significant benefit compared to its competition.

“The positioning of being a multi-specialist company and supplier for renting solutions implies the capacity of a very short response time towards our customers and their specific demands.

“Our very broad product range offers 220 different product types and machines that cover the majority of our customers’ needs. However, we have dedicated a specific service department within our organisation that deals with particular needs and finds solutions for all machine types that are not part of our current range.

“Our slogan ‘We rent solutions’ is an important promise that we make to all our customers, and therefore nothing is impossible for us. We launch on average five new products per year,” Mr Albsini said.

The company started a mobile modular construction division in October 2014, including the opening of a new branch in Morat, central Switzerand. Mr Albsini said this expansion was part of the company’s diversification strategy that has seen it enter new specialist markets over the years. The idea is to continue to position the company as a multi-specialist Swiss market leader.

“Our expansion plans are concentrated on the development of new activities preserving our actual network, but it is conceivable that some new branches in peripheries or rural areas will open in the future” he said.

“In 2016 we launched a new offer of services specialised to highly specific machines for segments such as rail-road, tunnel or demolition and so forth," he explained.

"This branch is 100% virtual as it is built on the basis of our broad network of agencies. Its representatives are branch experts from the related activities. We call this new service Customized."

Mr Albsini added that Avesco Rent was convinced that Swiss culture required very specific comprehension of the different linguistic regions in the country (Italian, German, and French are the main languages). Furthermore, Swiss customers’ requirements
are quite sophisticated in terms of services and quality, he said.

“Particularly trust in the business partner is of high importance for them. Hence, to guarantee the development in Switzerland, we need to constantly question and improve ourselves and to listen actively to the needs and desires of our customers.

“Clearly, our competitive advantage is gained by the competences of our staff. We invest heavily in the training and development of our employees that are to us the source of our success.”

Mr Albsini said Avesco Group, as a Swiss Caterpillar dealer, received technical support from Caterpillar as well as support directly through training, consulting, share of best practices and experiences through the global network of the Cat Rental Stores.

The company also pioneered the FastRent business for Caterpillar and its German dealer Zeppelin – a 100% online rental company based on a system of dynamic pricing.

“In a highly competitive market, innovation is absolutely crucial in order to be able to continue the growth of our group as well as being recognised by our customers and partners as the market leader,” he said.

Emissions laws

On the theme of new off-highway machinery emissions legislation in Europe, Mr Albsini noted that Switzerland has been ahead of the curve in terms of exhaust emissions legislation for some time now, so the company has had to tackle the issue for a while.

“The Swiss legislation has always been in advance when it comes to the environment, particularly compared to our European neighbours,” he said.

“Since 2009, the emission legislation is brought into force and we have adapted our entire machinery park to retrofit all machines with particle filters. The economic impact was huge as the retrofitting of particle filters costs between €6000 and €15000 per machine.

“Moreover, we have not been able to charge this added value to the customer, especially with the increasing price pressure; it is evident that between 2009 and 2016 average renting prices are constantly dropping.”

But he said the company had seen strong growth despite these headwinds. “The enormous growth and development we have been experiencing the last 14 years is the result of the willingness of our stakeholders to take risks, to have a clear vision and an exemplarily behaviour and performance of our people.

“The renting environment is very different and special and requires an entrepreneurial spirit, and you need to love the business you are doing. Enjoy the business!” he concluded.

US drive

Mike Watts is chairman of Sunstate Equipment – a US rental company with around 60 depots spread around California, Nevada, Utah, Colorado, Arizona, New Mexico, Oklahoma, Texas and Tennessee.

“Business conditions continue to be strong in the southwestern part of the United States. Obviously, there were some fleet adjustments with all competition as a result of over-fleeting due to decline in activity in oil field related areas,” he said.

“Our business is not directly involved in upstream, so the impact to us has been insignificant. We continue to experience solid growth in all geographic regions with demands for requisitions of new fleet.

“Our revenue increase in 2016 will be positive, but a bit less than we experienced in 2015. Some regional geographic areas are continuing to experience very positive results and others have flattened out.”

Mr Watts said the company was shifting fleet to where there was a stronger demand in current markets where there is still a significant need for capital expenditure. But he said that while Sunstate had evaluated entering into specialty sectors for diversification, it had opted to capitalise on what it does well at the present time.

“We expect to see a continuation in 2017 to be consistent with 2016. Some regional softening, however, overall we still expect to see mild growth. Along these lines, our fleet mix continues to be consistent to be what it has been for some time.

"Over the last handful of years, we have broadened our percentage of aerial equipment in our fleet where it is approximately 40% of our overall fleet ownership today.

“Many of these competitors have developed into very solid competitors over the years, but we feel that Sunstate is still able to offer some advantages due to operating efficiencies and disciplines that have been in place for many years, and we continue to improve on these on a daily basis. We always sell our service based on value-added selling.

“We are not trying to win someone’s business by offering a lower price. We believe that once you earn someone’s business by giving them a service that is either unequalled or difficult to match, you have a far greater chance of retaining them over the years.

"We have over 32000 major pieces of equipment in our fleet and operate at about 70% utilisation on a continual basis. We anticipate about a 10% fleet growth this year with the type of fleet being consistent with current fleet mix.”

Mr Watts added that one of the most challenging aspects of running the business was the hiring and staffing of mechanics and truck drivers.

“It is a continual challenge because of the demand and lack of supply. We have experienced one competitor entering other competitor’s facilities handing out business cards and soliciting employees with job offers.

“That is unprofessional and it reflects on the character of that rental business. This demonstrates how difficult it is for all of us to hire and retain people. This practice is not common, however. In general, I believe the rental industry today offers the same challenges and opportunities that it did when we opened our doors 40 years ago.

"Those that focus on continual improvement and capitalise on opportunities will be rewarded for their efforts and Sunstate intends to remain in that group.”

Growth by acquisition

Elsewhere in the US, Kevin Fitzgerald is chairman of US equipment rental holding company Rental Equipment Investment Corp (REIC) – a start-up founded in 2014 by the former Neff Corp CEO and other private investors with the ambition of driving the next wave of consolidation in the North American rental market.

The company’s acquisition trail so far has focussed on the northwest of the country – its most recent purchase was Pro Rental and Sales, which has 13 depots in Idaho, Oregon and Montana.

As a result of the Pro Rental & Sales deal, REIC now has 20 locations in five states, including its Midway Rental depot in Montana, Reliable Equipment Rental in Wyoming, and Hillside Rental in Colorado.

Mr Fitzgerald said, “Current conditions are generally good in the five states that we operate in Of course, some states and locations are doing better than others, but overall we're on track for combined revenue growth of around 5% to 10% over last year.

“Our growth is being fuelled by additions to our product offering and by increased capital expenditure, while rates have been relatively flat.”

He said REIC planned to further expand its existing 20-store group in 2016 and 2017 through strategic acquisitions, and potentially also through some greenfield openings.

“We have purchased four companies in the past year and a half and we would expect to continue this type of activity over the next several years,” Mr Fitzgerald said. “We are cautiously optimistic that rental demand will continue in 2017 similar to that of 2016, and we will look to add a few new product offerings during the next 12 months.

“Generally speaking we have around 50%-60% of our fleet (in dollar cost invested) in aerial work platforms. The rest is in earthmoving equipment, industrial products such as generators and compressors, and some homeowner items.

“From what we have seen, most smaller independent rental companies are growing well but their balance sheets ultimately limit what they can do. The banks and commercial lending companies will provide funds to smaller companies but it is generally based on asset values and not on cash flow and as such it makes it difficult for these smaller companies to acquire other companies and expand.

"We are fortunate at our company to have a strong balance sheet and excellent capital partners that has allowed us to grow as we have.

“Yes, there is always competition, however since we have been in most of our locations for over five to ten years on average, we have an excellent local group of customers who know our personnel and our way of doing business.”

Mr Fitzgerald added that a key challenge from his perspective was attracting and maintaining quality personnel.

“Since our stores are generally in less populated areas of the country we do not have as many experienced people to choose from,” he explained.

Up and coming in Morocco

Morocco-based cranes and access rental company Eurogrues is aiming for big things with its policy to invest in new equipment as the aerial work platform market heads towards European levels. Hatim Jaadour, a director at the company, spoke to Euan Youdale, editor of IRN’s sister publication Access International, about the company’s plans.

Mr Jaadour said the country was breaking out of its reliance on used machines and with that there was an emphasis on quality and service. Eurogrues has been patiently gathering speed as a major player, not just in Morocco, but surrounding African countries.

The company originates from Spain-based Eurogruas, which is still very much in existence and set up the division Eurogruas Morocco in 2004. In 2011, Eurogrues cut ties with its Spanish parent company and became an independent company serving Morocco and the wider area.

Mr Jaadour said, “In terms of how the company positions itself it has always gone for the highest capacity cranes and the same is true for aerial work platforms, between 26m and 43m working heights.

“Aerial work platforms are coming to life; Morocco has many big projects underway like solar energy plants and wind farms. The need for the right safety and new machines is really something led by project managers themselves, although there is no a specific ruling set down by the Moroccan government or association.”

He added, “The market is exactly the same as Europe 15 years ago so it is continual progressing in fact at the moment there is a higher demand than there are the right machines to do the job.
“The great majority of machines in Morocco are old but big projects and even smaller local projects are beginning to refuse the use of machines that are above a certain age.”

AWPs in Morocco

According to Mr Jaadour there are around 15 to 20 rental companies providing aerial work platforms in Morocco, including much smaller ones, but not all of them are based in the country. Eurogrues represents around 35-40% of the AWP rental market, it says, but there are European–wide players who are also showing a keen interest. For example, Generalist rental giant Loxam and Spain-based Gam are also present in Morocco with a range of machines.

“There are big projects out and lots of potential business – the market with will mature gradually with new and recently-new machines,” Mr Jaadour said. “But the onus is on the manufacturer side, there is the demand but what the market needs is the after sales support to keep the machines up and running.”

“Eurogrues, like many rental companies in Morocco investing in news machines needs this support, although we do already have our own technicians trained by manufacturers, but generally, as technology evolves and machines become more sophisticated, it’s all very well investing in new equipment but you have to have the right machines out there and you need the skills to keep the machines up and working or else in a couple of years the newer machines won’t be good for anything.”

Another challenge facing this growth is the cost of new machines in the country, compared to mature markets in Europe. “To give a good idea the average cost of a machine is twice or three times more than the price charged in France, not only for new machines but for all machines.

“The demand is higher than the available machines, so the cost is very high and the customers don’t have a choice,” he said.
Looking further afield in Africa, South Africa is also a significant access equipment market, according to Mr Jaadour, while there are other emerging countries like Algeria, Tunisia, Mauritania and Senegal.

"To cater for this the company has set up a subsidiary Equatorial Guinea. “When market demand evolves in these countries we will be ready to provide the types of machines that
they need.”

A UK independent speaks

Nick Hubb is managing director of Hubbway Hire – a rental company based new Newcastle, UK. Mr Hubb took the reins from his father, George Hubb, in 2001, and has worked hard to build up the company's wide-ranging construction equipment fleet to over 490 pieces of equipment, from dumpers to fuel bowsers, telehandlers, lighting towers and much more.

In fact, the company says it now has one of the largest independently owned telehandler fleets in the North East of England.

Mr Hubb said business was progressing smoothly, and the company had no plans to give up its independence.

“Competition is tough, but we’re holding our own – rental is still a very localised market, but we are also prepared to travel throughout the UK, Europe and as far as the Falklands for business. We are very well diversified too and target many industries from agriculture to events, for instance, as well as construction. It’s all about relationships, and we have been in the market for a long time, since 1965 to be exact.

“We expect 2016 revenues to grow 10% year-on-year, and we’re expanding into a new 18 acre site because we’ve outgrown our current yard. We have been approached about being taken over numerous times, but we are staying independent.”

He said a challenge facing all rental companies and the wider construction industry was the lack of skilled workers.

“There simply aren’t enough good people in the industry,” he said. “We’ve taken on four apprentices this year, but I think the UK needs a Plant Hire Academy in order to really tackle this. “
Mr Hubb added that another potential challenge was the UK’s Brexit decision – the country’s referendum vote this summer to leave the EU.

“We buy many of the machines for our fleet from European suppliers,” Mr Hubb explained. “The weaker pound as a result of the vote has made these investments more expensive for us. That said, Brexit has also stimulated the used equipment market, which is an important revenue channel for us too.

“Expansion into our new site, which is just down the road, will also involve the addition of a lot of new specialist machinery too. We plan to move in next summer, and as well as a larger yard and purpose built workshop facilities which will be able to offer a one stop shop for servicing , repair, overhaul .

“There will also be shot blasting and paint spraying facilities at the new site. We aim to have the best workshop facilities in the UK - not only to keep our own fleet in A1 condition, but we also want to offer a service to other national rental businesses .

“We are also expanding in the digital age and have an in-house app now, so all orders can be taken on a mobile and are displayed on a screen in our yard. This has sped up our processes, and is a sign of things to come I think.”

A Spanish supplier’s overview

Imcoinsa is a global manufacturer of construction equipment, based in Spain. It produces compaction equipment, stationary compressors, concrete treatment equipment (including vibration, floor saws, drilling equipment, power trowels, etc.), and pneumatic hammers, among other machinery and tools.

“Approximately 80% of our sales in machinery and equipment for construction are directly sold to rental companies, the rest is sold through distributors,” said sales manager Fernando Zubero Perez, adding that the company had seen an increase in business activity and demand from rental companies over the last three years.

He said this had been fuelled by a degree of budgetary stability from the point of view of the public administrations, and an improvement in the availability of private funding.

Mr Zubero Perez also noted another, more intangible factor influencing the rental sector in Spain – confidence in the future prospects of the sector, which he said had improved. “Within this climate of confidence, most rental companies are in deep restructuring processes, given that it is necessary to note that the scenario is not and will never be the same,” he explained.

“However, some of the issues that the Spanish rental market must resolve include proper management of pricing and margins, payment deadlines and, especially the average size of companies.

“It’s a very fragmented market, with many small businesses, which will hardly get to be competitive in the new environment.

“The agents participating in the sector (manufacturers, construction companies, rental companies, manufacturers, etc.) want a stable environment in which we can develop our activity.”

As well as Spain, Imcoinsa is focussing its efforts in two geographic areas: Latin America (mainly Colombia and Peru), and North of Africa (Morocco and Algeria).

“In both cases we find cultures in which the rental sector is poorly consolidated. Some of our customers, such as GAM and Hune, have adapted their proposals in these countries to fit these realities. Faced with this situation, our approach is to position ourselves solidly in these markets, in which, sooner or later, the rental sector will reach its specific weight.

“In this regard, our compaction equipment, cutting and drilling, the concrete treatment, etc. is already being marketed in these countries. When rental firms offer our products, they will be recognised by users as robust and reliable equipment.”

He added that the company was also considering growing its market share in France in the coming years. Other growth initiatives have included the creation of a consumables programme to promote the profitability of this line of its products – discs, drill-bits, core-drills, etc.

Confidence in Japan

Kanchu Kanamoto is president and CEO of Kanamoto, one of the largest rental companies in Japan. Mr Kanamoto said the company was had a medium-term goal of deepening its business in Japan and East Asia, including the ASEAN countries both organically and through acquisitions.

At the moment, he said efforts to rebuild in Japan after a string of earthquakes – from the devastating earthquake and tsunami of 2011 to the more recent and highly damaging earthquakes in Kumamoto - were fuelling construction markets.

“While the public works budget in Japan is almost the same level as the previous year, there is also an extra JPY770 billion (€6.7 billion) reconstruction construction budget after the Kumamoto earthquake.”

But he said that while there was little doubt that general spending on construction for the stimulation of local economies was planned, there were significant delays in implementing this nationwide, aside from reconstruction efforts, and this was holding back rental growth in the country.

Meanwhile, January this year saw Kanamoto acquire a majority stake in Nishiken – a construction equipment and welfare rental company based in Kurume City, Fukuoka Prefecture. The deal saw Nishiken become a subsidiary of Kanamoto, strengthening the latter’s presence in the Kyushu Region and expanding its presence in welfare rental.

Mr Kanamoto said the deal was a factor in its strategy for the coming year. “Nishiken will be 100% consolidated into Kanamoto in 2017,” he explained. “It will form a new subsidiary for construction equipment rental in Kyushu with three branches, offering the full range of Kanamoto equipment.”

Other expansion is also on the cards in Tokyo, where Mr Kanamoto said the company’s market share had been sluggish. But he said he expected growth to appear in 2017 in this region thanks to the company’s active business development.

And Mr Kanamoto said the company was also targeting tunnelling as another growth area. “Tunnel construction is one of our specialties,” he said. “New orders in this business area is expected to be strong, thanks to a number of projects including the new Chuo Shinkansen maglev line.”

Japan is a highly competitive market, and Mr Kanamoto said the company was trying to edge ahead of the competition by pushing into well-established markets like Tokyo and dominating in specialist areas like telecommunications.

“Market share is of huge importance to us,” he said. “Above all, we are looking at how to capture a share of the large Tokyo market. This strategy of increasing market share also includes mergers and acquisitions.”

Ambitions in Finland

Meanwhile in Finland, Kari Aulasmaa is the CEO of Renta Group, a new rental company launched at the start of 2016. The company is backed by private equity investors Intera Partners and its advisor Erkki Norvio, who is a well-known figure in the international rental industry as he founded Finnish rental giant Ramirent, and was a board member for the ERA.

Mr Aulasmaa said the company had been set up on the back of acquisitions. “After a short planning period we started to scan potential acquisition targets to build a platform for Renta. At the end of 2015 we closed the first acquisition – Telinekymppi, the leading scaffolding and weather protection rental company in Helsinki region.

“That was followed by another deal for a small general rental company (Kehäkone) and then the acquisition of a portable site module rental business (Jasoca), both operating in the capital region as well.”

Georgaphical expansion

With a wide rental portfolio ready, Mr Aulasmaa said the next phase involved geographical expansion within Finland.

“As the Finnish rental market is quite consolidated by giants (Ramirent and Cramo) it was obvious that only way to grow would be organic,” he said. “Today Renta has ten depots in different regions up and running, and there will be three to five more by the end of the year.

“Our ambition is to keep up the same speed in 2017and 2018, with the target of creating a nation-wide general rental company with strong scaffolding, aerial working platforms and site module operations – first in Finland and further in countries around the Baltic Sea.

“The market in Northern Europe has become polarised as two major players have been dominant for a long time but we believe that there is room for innovative and modern newcomer. Renta is taken very well by clients and we will be attractive and serious alternative for them,” he explained.

He said the construction market was growing again in Finland after several flat years, and industrial investment also looked set for an upturn. Overall, the rental market in Finland is forecast to grow 4% in 2016 and 2% in 2017, he said, adding that as a new player, Renta was expected to grow much faster than the market rate.

“Within construction sector, renovation has shown stable growth for years and has been boosting for instance the scaffolding business which is important for Renta. The market is also badly lacking site modules, so the businesses Renta has acquired will grow significantly in 2016,” he explained.

“Sweden has done well during past years and is stable market. The Baltic Countries have recovered well after total collapse in 2009 and in spite of the small size market has positive trend.

Poland still owns a strong potential with its large population, strong industrial base, developing infrastructure, quite low rental penetration, etc.” Mr Aulasmaa added.

He said the main challenges his business faced were related to the expansion of its network - how get skilled people, how to find good facilities with good locations, how to ensure the availability of equipment from suppliers and finally how to get started successfully in each location.

“So far we have managed to get professional staff and good relationships with manufacturers,” he said.

“We have strong experience and background in the rental business – I spent myself 16 years in Ramirent being country manager and finally head of Finland and Eastern Europe (Baltics, Russia, Ukraine).

"We have a good and solid investor as controlling owner. All the key mangers get an opportunity to become a shareholder and so far everyone has followed the invitation – this makes Renta very entrepreneurial company with strong focus on clients.”

Rental down under

James Oxenham, CEO of the Australian Hire and Rental Industry Association (HRIA), said the downturn in mining was prompting the Australian rental industry to focus on construction and infrastructure for new business opportunities.

“Leading the country in terms of performance is New South Wales with a strong property market and demand for new housing driving investment,” he said. “States not performing as well include South Australia and Tasmania.

The Australian Capital Territory is picking up with some major projects underway, he explained. Parts of Queensland and the Northern Territory continue to show promise in the coal and gas sectors but Western Australia has suffered as a result of the low price of iron ore, reflected in a slowdown in demand from China’s and its steel industry.

“Victoria has some decent infrastructure projects including rail and road and a 30-year strategy for infrastructure. All States face the challenge of coping with a growing and ageing population and an economy that has shifted from manufacturing to more service and knowledge-based industries. The forecast depends upon which States and market sectors you are operating in.

“Australia has been churning through Prime Ministers and a settled term in office with no challenges to leadership is something all businesses would like to see. A period of political stability would increase investor confidence and lead to some good opportunities for our members," he said.

Mr Oxenham explained that surplus rental equipment was a problem in areas such as mine sites that have either completed their construction stage or closed operations all together.

“The other area we are seeing issues with equipment is the access industry. Australian Standards have a maintenance schedule which sees the machines requiring a major inspection ten years after the date of commissioning (or enhanced periodic inspections). 2005 and 2006 were big sales years for access equipment and now these machines are hitting their 10 year mark, major inspections are expensive.

“Some machines are being sold overseas where a major inspection is not required. Rental rates in the access industry are very competitive and companies need to consider their investment over time, plant utilisation, servicing and repairs before dropping their rates, which in some instances have proved to be an unsustainable level of return.”

The HRIA has about 20% of membership focussing on the events industry, while the rest of the membership focus on construction and infrastructure. He said some companies were expanding their offerings around servicing equipment, making that a point of difference between themselves and their competitors, while the uptake of technology was another trend in the industry.

Safety first

“There is currently a strong focus upon safety in the construction industry which is good to see. Enhanced safety features are making their way into various products and some of the major construction sites will only accept equipment with the latest specifications on their sites,” he said.

New online rental marketplaces such as ISeekPlant are also starting to make their presence felt, Mr Oxenham said. “When these companies first started to emerge we weren’t sure how accepting the market would be and the view was if you had a good business and website, you would not need to pay a middle man for a service you could manage yourself.

“However, a few years later we have seen some successful business models that have established themselves in the hire industry. We are seeing more and more ways companies are using technology to facilitate hire especially with the younger generation of customers who expect to be able to do most things (except picking up the equipment) via the phone in their pocket.

“Who knows what will be next, but whilst there is a demand we will see a few more players in this space before the next technological breakthrough.”

Meanwhile, Mr Oxenham said explained that one of the challenges facing Australia’s rental industry was succession planning.
“Many of our members are small to medium sized family businesses, where the next generation is coming through and taking on more senior roles. Handing over responsibility and stepping back is not an easy task when so many years and so much passion have been invested in the business.

“The HRIA is starting its version of the American Rental Association’s Young Persons Network. Our aim is to bring the younger generations together, to build on the skills of tomorrow’s business managers, encourage networking, the sharing of ideas and the confidence to take on new responsibilities. We look forward to launching this early in the new financial year.”