By Yadarisa Shabong
(Reuters) -Ashtead Group forecast annual results ahead of its own estimates and raised capital spend outlook for the next year as the equipment rental giant bets that the Inflation Reduction Act (IRA) will boost construction in the U.S., its largest market.
The Biden administration's $430-billion IRA, a green energy subsidy package, and the $52-billion chips law, for subsidising U.S. chip manufacturing and expanding research funding, are set to boost investments in the world's largest economy and attract capital from abroad.
Ashtead (LON:AHT)'s shares rose 4.6% in morning trade on Tuesday, making it the top gainer on London's bluechip index.
"Our business is performing well with clear momentum in strong end markets, which are enhanced by the increasing number of mega projects and recent U.S. legislative acts," Chief Executive Officer Brendan Horgan said.
Ashtead, which has operations in the U.S., the UK and Canada, rents out a wide range of construction and industrial equipment across several sectors.
The London-listed company, trading under the name Sunbelt Rentals, said its initial plans for fiscal 2023/24 are for gross capital expenditure of $4 billion to $4.4 billion, with the U.S. accounting for $3 billion to $3.3 billion.
"The recent CHIPS Act and Inflation Reduction Act enhance and add clarity to an already strong construction market, flush with mega projects," Ashtead said in a presentation.
Elevated levels of inflation, supply chain and labour constraints also tend to benefit rental companies such as Ashtead as firms cut back on capital spending and opt to rent instead of buy equipment to protect finances.
Ashtead's third-quarter revenue rose 23% to $2.43 billion.