RSC halves spending and reduces full-year outlook

RSC Equipment Rental in the US has reacted to economic uncertainty by halving its capital investment in new equipment in the first half of 2008 and has revised downwards its revenue growth estimates for the full year from 4-7% to 3-5%.

RSC said it was focused on maintaining rental rates and utilisation rather than growing volume, as well as on trimming costs, with ten stores closed or merged and 95 job losses during the quarter to 30 June. It said it expected more store closures and job losses in the remainder of the year.

The company reported a 5.3% rise in rental revenues to US$405 million, while operating profits increased by 13.4% to $114 million. Total revenues, including sales of new and used equipment, rose by 1.4% to $449, with used equipment sales falling by a third. RSC said the industrial sector was its best performer.

Erik Olsson, RSC's president and chief executive officer, said the company had put in a strong performance in the quarter; "We are operating in an environment of economic uncertainty and are running the company with a strong focus on fleet utilisation and optimizing capital expenditures in order to maximise free cash flow and maintain our industry leading profit margins. We continue to review all aspects of our business to improve efficiency including ongoing reviews of underperforming stores.

"While we are not immune to a downturn in our markets, we believe this focus in combination with our proactive and highly flexible business model, geographic reach and growing industrial business, position us to deliver another strong year," said Mr Olsson.

Capital expenditure in the second quarter was $63 million, down 68% from $195 million a year ago. For the first six months, net capital expenditures of $115 million were down 56% from $261 million in the same period of 2007.