Announcement of financial results for 2007
Financial results for 2007 – 1 January 2007 – 31 December 2007
LM Glasfiber increases sales by 22%
LM Glasfiber’s sales continued its strong growth trend as we increased our capacity through new factories in key markets as well as through significant manufacturing throughput improvements. In terms of MW, sales rose to an all time high of 4,950MW from 4,100MW in 2006. The growth in sales however did not translate into increased profits as LM Glasfiber experienced significant growing pains in connection with the ramp-up of its Spanish operations.
- Sales in 2007 amounted to DKK 4,310 million up from DKK 3,539 million in 2006. The sales increase was driven by booming wind energy markets. All LM Glasfiber’s geographical segments contributed to the sales increase, but the North American and Chinese markets recorded especially strong growth.
- Earnings before interest, taxes, depreciation, amortisation and special items (EBITDA) amounted to DKK 559 million against DKK 796 million in 2006. In 2007 however, we incurred an operating loss (EBIT) amounting to DKK 297 million against an operating profit of DKK 401 million in 2006. The decline was mainly due to excessive operating and logistics cost as a result of delays in the capacity expansion programme in our Spanish operations.
- Investments, which in 2007 related primarily to new factories in China, India and Spain and additional capacity increases in North America and Spain were DKK 582 million compared with DKK 298 million in 2006. Total new capacity added in 2007 amounted to approximately 1,000MW.
- Free cash flow declined to DKK -527 million compared with DKK 217 million in 2006 due mainly to the decrease in operating profit.
- Financial reserves at the end of the year amounted to DKK 489 million compared with DKK 336 million at 31 December 2006.
- For 2008, LM Glasfiber forecasts a significant increase in sales and operating margins. Our outlook for 2008 is based on:
- Strong global demand for wind power
- The largest ever backlog of orders totalling approximately DKK 18 billion for 2008 and the years ahead
- Continued capacity expansion of 2,000MW in USA, Poland, Denmark and China
- Significant quality and throughput improvements achieved during 2007
- Continued high capacity utilisation and expected positive cost effects from our comprehensive corporate transformation programme REACH.
Roland Sundén, CEO of LM Glasfiber, said: “2007 was a year of great transformation in the face of difficult growth challenges for LM Glasfiber. Responding to fast growing demand we increased our sales by 22%, supplying more than 20 customers, including 8 of the top-10 wind turbine manufacturers.
Despite the tangible progress we achieved in 2007, we acknowledge that our results fell short of our expectations. This was mainly due to delays in the capacity expansion programme in our Spanish operations, resulting in excessive operating and logistics costs.
Fulfilling our commitments to our customers is always given top priority in LM Glasfiber. Unfortunately shipments to our customers were greatly delayed in the first half of 2007 due to significantly delayed start-ups.
To compensate, we manufactured blades for the Spanish market in several of our other factories in Europe, North America and Asia. These activities involved substantial costs, but were necessary for us to meet our obligations towards our customers.
The scheduled capacity increases in Spain have now been completed, and the factories reached their highest level of efficiency ever at the end of 2007.
In 2007, as a result we successfully deepened our strategic customer relations resulting in the largest ever backlog of orders at the end of 2007 totalling approximately DKK 18 billion for 2008 and the years ahead.
We brought three new factories online in 2007, expanded existing facilities and we significantly raised throughput in our existing plants.
Through our comprehensive corporate transformation programme REACH we have been building business excellence in all our processes – resulting in clear improvements across our business in quality, customer responsiveness, sourcing among others.
At the end of 2007 we had supplied more than 105,500 blades corresponding to blades for more than a third of all wind turbines world wide saving the world for 47 million tons of CO2 and we created mere end 2,200 new jobs, bringing the total number of employees to 5,905.
The market outlook for the wind power industry for the next few years is very positive. In addition LM Glasfiber expects outsourcing of blade production to further increase in importance on an aggregate industry level. This represents a strategic business opportunity that LM Glasfiber is in a good position to exploit going forward.
In order to sustain growth and fortify our position as the leading global independent supplier of advanced rotor blades, we are redoubling our efforts to build up production capacity in key markets, maximise throughput in our factories, and maintain an edge in innovation and development.
We are currently building new factories in the USA and Poland, in addition to expanding our existing capacity in Denmark and China, and additional factories are currently being considered. Scheduled capacity additions in 2008 amount to a total of more than 2,000 MW – a doubling on 2007.
This is the strong foundation we build on for 2008, when our progress in 2007 will allow us to grow faster and more profitably, bringing us closer to our target share of more than a third of the global market in 2012.”
The financial statements were adopted at LM Glasfiber Holding A/S’s Annual General Meeting earlier today.
The Annual Report 2007 for LM Glasfiber Holding A/S is available for download at www.lmglasfiber.com/investor and supporting imagery can be downloaded from www.lmglasfiber.com/images.
