TRENDLINES
CHARLES YENGST
www.yengstassociates.com — cyengst@yengstassociates.com
Brazil’s Rental Equipment
Market Is Small, But Growing
Late last year, we looked at the growth of Brazil’s machinery mar- kets in 2010 and the outlook for
this year. What we didn’t talk about was
Brazil’s rental equipment industry. It’s a
part of the machinery market that gets
very little attention, yet is an important and
growing aspect of the overall market.
Just three years ago, there were
three primary companies vying for the
lion’s share of the rental market in Brazil — Mills Estruturas e Serviços de En-genharia S.A., Cat Rental Stores and
Solaris Equipamentos e Servicos Ltda.
Several newcomers have been added
in the past year or so, including Brasif
Rental, SKC Rental of Chile and Rohr
Estrutura Tubulares.
Like the rental industry everywhere,
there are many “mom and pop” companies in Brazil along with contractors renting under-utilized machinery from their
fleets and, of course, machinery dealers.
The rental industry in Brazil is still
young compared to the bigger markets in
North America, Europe and Japan. We
estimate that 2010 total rental revenues
for Brazil were roughly in the range of
$250 million to $280 million and growing.
That’s small compared to the billions in
rental in the U.S. and Canada.
The industry is experiencing competitive trends typically expected in the early stages of development. With strong
demand for machinery last year and this
year, utilization rates have been running
high, above 80% for the bigger companies in 2010 and 2011. The downside
is that rental rates are lower because of
competition from new players.
Looking in detail at some of the top
CHARLES R. YENGST IS
PRESIDENT OF
YENGST ASSOCIATES,
WILTON, CONN.
companies, in 2010, revenues from the
Mills Rental Division were $53 million,
up from $34 million in 2009. Mills was
founded in 1952 as a scaffold and formwork supply company and from 1974 to
1986 it was partly owned by GKN of the
U.K. Mills formed a joint venture with
JLG in 1997 to rent access equipment
in Brazil. JLG’s holding was acquired
by Sullair Argentina in 2001, which later
acquired the entire rental operation in
2003. Sullair ran the business under
the Mills Rental name for several years,
which changed in 2007 when a noncom-pete clause expired between the two
companies and Sullair Argentina had to
pick a new name for its business, which
became Solaris Equipamentos.
The Mills Group restarted Mills Rental
in March 2008 and moved back into the
equipment rental industry. By the end of
2010 it had 14 branches, up from five in
2009, and the company plans to add an
additional five sites in 2011. Fleet capital
expenditures are expected to hit $81 million in 2011 versus $81 million in 2010
and $19 million in 2009.
Solaris, owned by Sullair Argentina,
the largest rental equipment business in
Argentina and privately held, does not reveal its revenues. We view Solaris as the
largest of the rental companies with estimated rental revenues in 2009 of roughly
$90 million, rising to $110 million in 2010.
It has generally focused on work platforms, generator sets and compressors.
Management started buying earthmoving machines in 2009 and it is expected
to shift as much as 40% of its $70 million
spending in 2011 toward earthmoving.
Solaris has 11 branches in Brazil with
plans for expansion to 15 sites.
Cat Rental is well known throughout
the world and in Brazil is owned and oper-
ated by the Caterpillar dealers. There are
currently 17 rental operations in the coun-
try today. Rental revenues are not made
public, but I estimate that they fell near
$90 million in 2010, up from an estimated
$60 million in 2008.
