Equipment Rental – enhanced sharing through digitalisation
During our first year as a separate business division, our focus was on shaping our offering and operations as well as on taking the sharing of solutions, know-how and insights with our customers and other stakeholders to the next level through digitalisation. These developments will help us capture the growth opportunities inherent in the sharing economy.
The services offered in Cramo’s Equipment Rental division consist of construction machinery and equipment rentals and rental-related services. Through the Cramo Rental Concept, we supply our customers with anything from individual items to complete rental solutions.
In 2017, the demand for equipment rental and rental-related services developed favorably in most markets in which we operate, and our result as a division was stable. The growth in organic sales was strong in Sweden, Estonia, Lithuania, Poland, Austria, the Czech Republic and Slovakia, while results were more modest in Finland, Germany and Norway. Major actions were taken during the year in these markets to enable organic sales growth in the future.
Increasing demand for rental-related services
One of the main drivers in equipment rental is the volume of new construction and renovation. Changes in demand typically follow construction trends, albeit with a lag. In addition to construction volume, the demand for equipment rental services is affected by the demand for industrial maintenance and the market’s rental penetration rate. In Europe, the most advanced rental market by penetration rate is Sweden. Germany has the third largest market by volume, but the penetration rate is much lower and the competition landscape is fragmented.
Higher requirements for quality, safety and resource efficiency, more stringent laws and cost-cutting pressures increase the need for different types of rental-related services. We see this in the steadily growing demand for comprehensive services, especially in large construction and industrial projects.
IN RENTAL MARKET IN EUROPE
Shaping our operations and ways of sharing
We are one of the industry’s leading providers of equipment rental services in Europe and aim to have a lead position in our chosen markets. We continuously seek opportunities for inorganic growth. However, we are also ready to exit a market that we see as lacking a sound growth platform for us. During the year, we shaped our business by divesting our operations in Denmark, Latvia and Kaliningrad.
As part of the execution of our Shape and Share growth strategy, we also seek growth through new, game-changing offerings. One example of this is our new air-cleaning service.
We believe that digitalisation offers great opportunities to develop our business and have put a lot of emphasis on strengthening this area. Through digital solutions, we want to serve our customers better and offer solutions and services that meet their changing needs, such as the automation of routine tasks. Another example of digital services is our e-commerce solution, which makes equipment rental available to customers whenever and wherever they want.
Internally, digitalisation enables more seamless processes and operations as well as makes collaboration between us and our suppliers more efficient, thanks to a higher level of automation. During the year, we started several digitalisation-related development and pilot projects in these areas.
We believe that digitalisation offers great opportunities for developing our business, and have put a lot of emphasis on strengthening this area.
Megatrends and the sharing economy drive our business growth
Over the long term, the growing demand for rental services is supported by a number of megatrends, such as demographic changes, urbanisation, resource scarcity, sustainable development, digitalisation and the sharing economy. Equipment rental is dependent on the volume of construction and renovation, which in turn is affected by factors such as the general economic trend, urbanisation and energy efficiency requirements. Along with construction volume, the growth drivers for equipment rental include the benefits of sharing, technological advances that lead to a higher cost of ownership, and the need for total solutions and service concepts
Sustainability is embedded in everything we do and supports us in addressing some of the biggest challenges of our time. The rental industry is inherently environmentally sustainable since sharing equipment reduces the need for natural resources.
We offer solutions with pioneering environmental and safety features that meet today’s demands for energy efficiency and help our customers achieve their sustainability targets. We also share competences, best practices and insights with our customers and partners to ensure the safe, sustainable use of our equipment and the development of new, environmentally sound solutions. Around 12,000 of our rental items are now digitally connected (the Internet of Things or IoT) and provide us with information for further development.
DIGITALLY CONNECTED RENTAL ITEMS
Long-term targets 2017-2020 and outcome 2017
Organic rental sales growth1
1 Organic sales growth excludes the impact of acquisitions, divestments and exchange rate changes
2 According to ERA, in the markets where Cramo is present
3 ROCE = EBIT (rolling 12 months) / capital employed (average start and end of the period)
Creating new service concepts for current needs
Indoor air quality is sometimes a challenge, especially in schools and other public buildings. Cramo’s Air Cleaning Service, tailored for public sector facilities, starts with mapping indoor air quality.
“If there clearly is a need for our Air Cleaning Service, we can offer an optimal solution for that particular location,” says Cramo’s Project Manager Mika Kotro.
The air cleaning equipment itself comes from an outside contract supplier. It is installed on site, and the end users are trained to use it. The equipment is available in three sizes depending on the amount of floorspace.
Cramo meets customer needs throughout the service lifecycle. Regular maintenance every six months is included in the service concept, and when the building is finally renovated or dismantled, the equipment is removed.
The service has been available in Finland for about two years. Customers include different public sector entities. At the moment, there are hundreds of air cleaning units in daycare centres, schools and other public facilities.
“We have about 20 locations where we use Cramo’s Air Cleaning Service. The service is very reliable and flexible. After the order is placed, the equipment is typically installed and the end users are trained within a week. And when the service is not needed anymore, the air cleaning units are promptly removed. This service perfectly meets our needs,” says Mika Metsäalho, Indoor Air Quality expert for the City of Hämeenlinna.