LM Wind Power Group Announces Financial Results for 2010 (Denmark)
LM Wind Power Group showed significant resilience in the light of continuing difficult global market conditions with revenue of EUR 727.5 million, 6.4% lower than previous year. Profit margin of EUR 125.1 million is 9% lower than EUR 137.4 million achieved in 2009.
LM Wind Power’s revenues for the 12 months to 31 December 2010 were 727.5 million, a decline of 6.4% compared to 2009. Profit margin (EBITDA) on ordinary activities, before impairment and special items of EUR 125.1 million was also down 9% from the 137.4 million we achieved in 2009.
While the long-term dynamics of the wind market remain highly favorable, 2010 did not see the expected upturn in the European and North American markets. Continuing sovereign debt issues in key markets such as Spain and the ongoing lack of long-term financing constrained the development of new wind farm capacity. These difficult market conditions were partially offset by growth in both the Chinese and Indian markets, where we continue to add capacity, together with the full year impact of the 2009 restructuring of our European operations.
The geographic breakdown of turnover was:
* EUR 308.3 million for Europe (down 29% from EUR 434.9 million in 2009),
* EUR 182.8 million for North America, (down 19% from 226.0 million 2009).
* Declines in Europe and North America were balanced by increases in China and India. In the latter two countries, sales rose 103% to EUR 236.4 million (from EUR 116.5m 2009), with a stronger position in high growth markets offsetting continued sluggishness in our traditional markets.
Trading conditions in both Europe and North America continued to be difficult. In the US in particular, the lack of long-term government support held back the market. Despite this the company increased its market share in North America from 12% to 27%, while Europe saw a modest decline from 23% to 18% year on year.
To capitalize on the growth in demand in China and India we significantly expanded our capacity with the opening of three new facilities at Qinhuangdao (China), one new facility at Jiangyin (China) and expansion of our existing facilities in Tianjin, (China) and Dobespet, (India). In 2010, 32% (15% in 2009) of the company’s sales came from these critical growth markets and our estimated market share for blades is 11% in China (6% 2009) and 28% in India (38% 2009).
We view our strengthened position in these key growth markets as a critical competitive advantage. It validates our strategy of maximizing our international manufacturing footprint to benefit our global customers and future-proofs our facilities for longer blades needed for larger turbines.
Conditions in the brakes marketplace were particularly tough in the year with significant volume and price pressure in evidence. While Svendborg Brakes remains profitable and cash generative, the significant growth anticipated when the company was purchased is unlikely to materialize. This is despite the fact that many actions have been taken to improve performance. Management has consequently reconsidered the carrying value of the investment and has decided to write down the value of the company to EUR 142.3 million from EUR 525.6 million, an impairment of goodwill amounting to EUR 383.3 million.
During 2010, significant financial control issues were discovered with our Spanish operation. Following thorough investigation, discrepancies were discovered in the 2008 and 2009 audited results. The total amount involved was a net EUR 6.3 million adjustment to shareholders’ equity, of which EUR 0.3 million relates to 2008 and EUR 6 million to 2009. As a result, a decision has been taken to re-state the accounts to correctly reflect the results attributable to those years. Controls have been significantly strengthened to prevent any reoccurrence of these issues.
Roland Sundén, CEO of LM Wind Power, said:
“2010 proved our relative strong position in a continuing difficult global market and our partial success in compensating for the sudden geographic shift in demand and downward pricing pressure while we continued to strengthen our product offer and operational footprint for the future. LM Wind Power achieved EBITDA on ordinary activities before impairment and special items of EUR 125.1 million for the year. This represents a decline of less than 9% from the EUR 137.4 million earned in 2009. Sales were 6.4% lower at EUR 727.5 million (EUR 777.5 million in 2009).
In an industry that continues to consolidate, LM Wind Power has a strong competitive position thanks to our significant know-how, flexibility, innovation and service offering. These qualities afford us some degree of protection in our market niche. However, no player in this market was immune to margin erosion in 2010.
Fortunately, our relentless focus on safety, costs, quality and value meant we were able to withstand these pressures and position our company more firmly to capture future growth. In the past two years we have taken actions and steps designed to ensure our company is fit for the future. In 2010 our restructuring efforts yielded substantial gains.
To ensure we remain focused on efficiency going forward, we initiated further cost reduction programs which will yield further efficiency gains in 2011 and beyond, necessary to uphold our position in the highly competitive market.
Multiple factors are driving a more positive future in the wind industry including the continuing high prices of conventional energy sources, recent events in Japan and the consequent re-appraisal of nuclear energy, commitments to CO2 reduction targets and continued increasing energy demand globally.”
Source: lmwindpower, April 26, 2011; Image: make