Businesses

Equipment Rental – Shaping from inside out

In 2018, we placed special focus on exploiting and further developing our digital platform. From talking, planning and implementing, we moved to using our digital platform on an everyday basis to share information about equipment rental and services. As a result, we improved our equipment utilisation rate and people interaction.

Cramo’s Equipment Rental division provides trouble-free renting services from fleet management at construction sites to machinery, on-site services and smart concepts for optimising work processes. The construction industry is slowly starting to re-shape its business models, and all our markets show signs of the industry shifting its focus from purchasing to a sharing economy. At Cramo, we share not just our equipment with our customers, but also our expertise on optimised, safe and sustainable equipment usage. Our digital solutions are shaped to meet market-specific demands.

Equipment and solutions

A modern, comprehensive fleet of construction equipment, such as machines, tools and site huts for any type of assignments, from major road projects to small-scale and industrial projects.

Logistics and on-site services

Rental-related services ranging from transport, delivery, maintenance and on-site service to solutions for dust and humidity control, heating, temporary electricity and weather sheltering.

Management and planning

Trouble-free renting services, such as fleet management and proactive site monitoring, recommendations for alternative methods and equipment or capacity needs, user and safety instructions, and advice on applicable health, safety and environment (HSE) regulations and standards.

Smart concepts

Smart concepts for optimising work processes, such as clean house, dry construction, smart energy and security.

In 2018, the demand for equipment rental developed favourably. Our sales grew throughout the year and demand was positive in most markets, accelerating more rapidly in some smaller market areas. Profitability improved in Scandinavia, Central and Eastern Europe.

In Sweden due to regional market differences resources were shifted more into high demand areas and customer segments during 2018. Sales grew by 5% in local currencies and profitability remained on a good level.

In Finland, profitability was weighed down by increased direct costs due to high capacity utilisation and fierce competition, which affected prices. Actions to improve profitability in Finland were launched during the summer. These actions include cost base reductions and more strict pricing process.

In Germany, sales were positively affected by the acquisition of a German construction site logistics company, KBS Infra GmbH, which supported segment profit and profitability during 2018. However, the underlying performance of Germany has not reached our targets and improvement actions continue in order to increase the profitability of the business

Sales by customer group, MEUR

Sales and comparable EBIT, MEUR

Comparable return on capital employed, %

Long-term targets 2017-2020 and outcome 2018

Organic sales growth¹

Target

>Market²

Outcome

5.4%

Comparable ROCE³

Target

14.5%

Outcome

14.4%

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 Cramo changed the calculation method of ROCE’s capital employed component into 12 months average in 2018 reporting period

Stable market growth continues

The estimated rental market size in the countries where the Equipment Rental division operates totalled about EUR 8.8 billion in 2017. Based on market studies the market is expected to grow annually by about 4% during 2017–2020.

Market overview and our position
  Market size estimate 2018, BEUR1 Market position estimate 20181 Market CAGR 2017 – 2023, %1
Finland 0.5 #2 4.4
Sweden 1.7 #1 2.4
Norway 0.8 #4 3.7
Central Europe2 5.0 #4, #24 3.8
Eastern Europe3 0.8 #1, #35 5.6

1 Management estimate based on ERA European Rental Industry 2018 Market Report and Forecon estimates, January 2019
2 Germany, Austria, Czech Republic and Slovakia
3 Estonia, Lithuania and Poland
4 #4 total rental provider in Germany, #2 in Austria and one of the leading rental companies in Czech Republic and Slovakia
5 #1 in the Baltics and #3 in Poland

 

KBS Infra acquisition expands service offering in Central Europe

In January 2018, we announced the acquisition of a high-quality construction site logistics company in Germany, KBS Infra GmbH. KBS Infra’s service offering is built around extensive construction site planning and logistics provided by 180 experts. The KBS Infra acquisition bolstered our German operations with a fleet of some 6,000 containers, an extensive range of on-site electricity equipment and other equipment related to construction site usage.

In Central Europe, the supply chain resulting from the addition of KBS Infra gives a whole new perspective to serving mid-sized customers that need solutions ranging from installing construction site fencing to finalising their project. We see significant cross-selling potential with our current equipment rental offering since we will be able to gain access to construction sites early on. Furthermore, we can now offer our customers on-site electricity and site logistics services. Site huts are now available to our customers throughout Germany.

KBS Infra contributed positively to the Central Europe segment’s profit and profitability.

Global sharing economy trend boosts demand for rental

We offer fleet management tools that help customers save on costs while optimising the availability of appropriate machinery and services right when they are needed. In general, demand for rental equipment is affected by construction and renovation volumes in each market. We were able to capture this volume potential in many of our markets. In Finland, we were able to capture volume potential, but capturing revenue potential lagged behind due to tougher competition.

During the year, we continued to develop methods for improving capacity utilisation. By optimising equipment usage, more customers can be served, and the carbon footprint produced by each piece of equipment manufactured can be reduced to the greatest extent possible.

One particular business growth driver – the demand for total solutions and service concepts – offers greater sales prospects, especially in Scandinavia and Central Europe. There, our traditional customers groups – large companies – still have in-house production of services, while mid-sized companies look to partnerships for equipment rental solutions and service concepts. Going forward, we will start offering mid-sized businesses in Scandinavia and Central Europe logistics and on-site services, management and planning services as well as smart concepts. Our acquisition of KBS Infra in Germany presents additional opportunities to serve this customer group.

In Finland, the market is shaped differently. Large companies have outsourced their on-site services, fleet planning and smart concepts and have relied on our rental-related services for years. One example of a large project where Cramo supplied most of the contractors with rental equipment was the bioproduct mill built in Äänekoski, Finland, completed in 2017. A similar project in Sweden was the Östrand pulp mill in Timrå, completed in 2018, where we supplied a wide range of on-site services for all contractors on the construction site.

Megatrends provide impetus for our game-changing offerings

We have set ourselves a challenging target of responding to market megatrends by supplying game-changing offerings in the area of responsible sharing of resources. Each of our markets has made positive moves towards this target. In Finland and Sweden, we have worked on providing game-changing offerings and looked at our delivery platform. In Central Europe, we are moving to a whole new level through our acquisition of the German-based KBS Infra GmbH. In Norway, we have focused on sales and supported this change through re-organisations and by starting to work with newer solutions such as building information modelling (BIM).

BIM was first launched as a service in Norway in 2018 and will be available to customers in other markets in the year ahead. BIM is a well-established 3D model-based method for the design, construction and maintenance of buildings and infrastructure in the construction industry. This method supports the value chain in planning, visualising, monitoring and optimising the work of all stakeholders in the construction process as well as their need for equipment, tools and other solutions offered by Cramo. We want to give our customers trouble-free services, and simplifying our customers’ work flow can benefit both us and them so that we truly become an integral part of their construction projects. Take a look at what Cramo’s service process could look like for customers using BIM in practice here.

Working from inside out in digitalisation

Cramo has 301 equipment rental depots. At each depot, there are normally peak times between 7–9 a.m. and 2–4 p.m., when rental equipment is either delivered to the customer or returned. Customers are already supported by 24/7 service on our digital platform, but at the depots, Cramo’s experts have traditionally spent a lot of time calling each other during these peak hours and checking the availability of rental items.

In 2018, we took a crucial step forward in enabling real-time data availability and facilitating communication between depots. All depots have adopted digital purchasing and logistics platforms. Cramo has clearly moved from talking, planning and implementing to using digital platforms on an everyday basis to share equipment rental information between depots. As a result, we have improved our equipment utilisation rate and people interaction.

The construction industry and the public sector still use conventional methods in many aspects of planning and advancing their construction and renovation projects. As they take big steps and small towards smarter methods and digitalisation, we are at the forefront in supporting them every step of the way. For us, digitalisation is also a tool to brand ourselves and differentiate us from the competition.

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