Economic uncertainty overall has increased since mid-September. The Group sees a negative development in construction volumes particularly in the Nordic region and the Baltic countries in 2009. Cramo anticipates, however, that the impact on the demand for rental services will not be as severe as it is feared to be in construction in general. This is related to increasing penetration rates, increased equipment outsourcing, and growth in the demand for rental-related services. Continued growth is also anticipated in the demand for modular space, supported by relocations, demographic changes and the industry’s and public administration’s needs for increasingly flexible space solutions.
In a cyclical downturn, rental services provide an attractive alternative to purchasing new equipment. With its relatively high utilisation rates, rental is more cost-efficient compared to owned equipment. It also releases investment funds for other usage. The modular space business, on the other hand, is less cyclical than equipment rental. Cramo believes that a portion of the construction projects cancelled or postponed due to lack of funding, will be offset by the rental of modular space. In spite of an overall slowdown in construction, the modular space market is believed to continue to grow. At the same time, there is a permanent pent-up demand for construction in Central and Eastern Europe.
Expansion has required the Group to maintain a high level of capital expenditure up to 2008. As a consequence, a growing percentage of the Group´s business will be generated in the emerging markets in the future. The high investments have also produced a modern and competitive fleet. Now, however, Cramo Group has embarked on an “investment holiday” for the balance of 2008 and total 2009. Instead of investing in new equipment, the Group will focus on optimising the use of its existing fleet throughout the whole Group. The Group will also continue its systematic cost adjustment measures, defending the Group’s profitability and cash flow from operations at a good level in the new market situation.
Several European currencies have weakened in relation to the Euro. If current exchange rates stay, there will be a negative translational impact on the Group’s Euro-based consolidated figures.
The Group reconfirms its sales growth guidance at above 18% and an EBITA above 18% of sales in 2008, in line with the Group’s financial targets. However, the risk level has increased.
In 2009, in a volatile environment, the Group expects to achieve a positive cash flow after investments and a lower gearing.