Slow economic growth in the eurozone and the UK, coupled with low new construction volumes, particularly in the Nordic residential market, could lead to a decline in demand for equipment from lessors and negatively affect leasing companies’ revenue, according to Fitch Ratings’ latest peer report on European equipment lessors.
However, larger companies with extensive geographic and inventory diversification are better positioned to withstand these challenges.
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Fitch expects that, in the medium term, lessors will benefit from moderating interest rates, which will alleviate current pressures on profitability. Additionally, lessors’ credit profiles are bolstered by often fixed-rate or hedged funding structures and long-dated funding profiles.
The majority of assets were acquired before the recent surge in inflation, which supports return margins and maintains sector performance.
The report follows Fitch’s recent peer review of EMEA-based equipment leasing companies, including Ashtead Group plc (BBB/Stable), Boels Topholding BV (BB-/Positive), Ren10 Holding AB (Renta; B+/Stable), and European modular space lessor BCP V Modular Services Holdings III Limited (Modulaire; B/Stable).
As part of the peer review, Fitch maintained a Positive Outlook on Boels’ Long-Term Issuer Default Rating, driven by a growing EBITDA base that enables deleveraging. Continuous deleveraging, along with the successful integration of the recently acquired Riwal, could lead to an upgrade in the outlook.
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By GlobalDataThe resilience of lessors to macroeconomic challenges, supported by consistent EBITDA generation and increasing leasing preference over ownership by customers, underpins the Stable Outlooks of all other rated issuers.
Rating differences primarily reflect Fitch’s assessment of the issuers’ business profiles and leverage positions.
Companies with larger, newer, and more diverse fleets are less vulnerable to economic cycles, providing greater earnings stability and supporting higher ratings. Greater scale also offers purchasing power with manufacturers and allows lessors to relocate equipment more efficiently to optimise utilisation.
