Rental leaders from the US, Europe and China offered valuable advice and rental lessons at the International Rental Conference (IRC) in Shanghai.
In his keynote address to more than 450 delegates at the International Rental Conference, Tetsuo Kanamoto, president and CEO of Kanamoto, said markets outside of Japan would be key to the company’s future growth; “In future we will enter more Asian countries…The overseas market is our future market – the future growth engine for our company.”
Kanamoto is one of the top four rental companies in Japan and already operates in seven other Asian markets, including China. In September this year it established Kanamoto (China) Investments Co, located in Shanghai, and also has a joint venture business in the country.
Mr Kanamoto told delegates at the Shanghai New International Expo Centre (SNIEC) – where the conference was held alongside the new APEX Asia exhibition – that the company would also pursue growth in its domestic market, with a particular focus on regional markets such as Kanto Koshinetsu region and Kansai central region.
He gave an intriguing glimpse into the future of rental, including the use of new technology such as drones and intelligent construction machinery. He cited the company’s DOKA ROBO3 device that allows an operator to control an excavator or other machine from a safe, remote location.
How much leverage?
Afternoon keynote speaker Bill Plummer, chief financial officer of United Rentals in the US, outlined the company’s approach to capital allocation and debt levels, describing how it aimed to limit its leverage – as defined by the ratio of net debt to EBITDA – to between 2.5 and 3.5, with the lower limit used at the peak of the cycle and the higher limit in the trough.
He said United had a philosophy of investing in growth only if it was within its leverage limits, with decisions, first, on organic growth and, second, on mergers and acquisitions, made on the basis of their impact on leverage.
Plummer also urged rental companies to think ahead of market conditions and not get sucked in to over-investing during boom times. “In the mid-point of the cycle, that’s where you want to be investing in the business…You don’t want to go too far. That’s the art, and that’s been the challenge for the industry in the past.”
He said United tried to work “one step ahead of the market trend”, adding that “no one really knows where we are in the cycle – that’s the difficult part.” His own current view is that the North American rental market “still has some time to grow before it hits peak.”
Plummer also responded to a question about whether United Rentals was interested in entering the Chinese market, or other foreign countries. He said United was looking at opportunities outside North America; “It’s not a matter of if, it’s a matter of when”.
Peter Schrader, managing director and COO of Zeppelin Rental, described some of the company’s digital strategies, including its online rentals platform launched last year. Schrader said there had been a cautious take-up of the service so far; “We launched online rentals last year, but some customers didn’t like it”, he said, “Many still want to call the people in the branch.”
However he said he was convinced that online rentals would take off, and forecast that by 2025 as much as 50% of rentals will be handled online.
One aspect of the Zeppelin Rental business emphasised by Schrader was its strategy to offer ‘asset rentals’ (equipment) alongside ‘site solutions’ (services such as training, waste management and logistics planning.) He explained that these two types of rental service complemented each other during the cycle of a project, giving rental companies a way of remaining active on a job from start to finish.
Elsewhere, Alexandre Saubot, COO of Haulotte, said that the competitive pressures now facing access rental companies in China were a common feature of fast-growing, emerging markets. He warned that manufacturers could not drive the price of equipment down as fast as rental companies reduced rental rates; “This approach is not sustainable in the long term – there is always someone who will undercut your rate.” He argued that rental companies could resist prices on pressure by going beyond a ‘commodity’ sell, and really trying to understand in detail the needs of their customers, and offering solutions beyond a simple product. He made a plea for rental companies to share the feedback they get from end users as it would help OEMs to develop the right products.
Zhang Yan Na, president of the rental branch of the China Construction Industry Association (CCIA), offered statistical evidence of the rental market growth described by Saubot. She reported that the access rental fleet in China had grown by 60% from 2015 to 2016 and that access rental revenues were up by more than 50% in the same period.
Also reporting new research was Off-Highway Research, whose director in China, SHI Yang, said sales of access platforms had doubled in the last three years in China, with more than 100,000 units expected in rental fleets in five years’ time, up from the current 40,000.
“Between 2012 and 2016 there was a dive in China’s construction market but powered access grew in defiance of this downward trend,” he said. (Off-Highway Research has published a new report on the Chinese powered access market – see www.offhighwayresearch.com for details.)