LM Wind Power improved its profit ratio and also strengthened its cash position despite a significant, temporary reduction in earnings due to continued economic and political headwinds facing the wind energy sector in 2013. Excluding Svendborg Brakes, full year revenue was EUR 488 million versus EUR 687 million in 2012. EBITDA before impairment and special items was EUR 64 million versus EUR 69 million in the prior year.
While the year was dominated by a reduction in sales volume, LM Wind Power came out with an improved overall profit margin ratio at 13% compared to 10% in 2012. Tough cost containment and cash management measures maintained the company’s profitability and somewhat improved its cash generation in a difficult environment, where the wind market for the first time in 14 years experienced its first year of contraction in absolute terms. The fundamentals of the industry remain solid for the longer term however.
Despite the challenging market, LM Wind Power remained the leading supplier of wind turbine blades worldwide as measured by megawatts installed. The group maintained a 14% market share, approximately twice that of its nearest competitor (as measured by megawatts installed), ahead of independent companies and those which manufacture their own blades in house. A new commercial strategy was developed, agreed and implemented forging closer relationships with customers, and already shows successful increases in share of wallet with key players, underpinning a positive outlook.
LM Wind Power’s status as a global leader in wind turbine blade manufacturing technology was strengthened further in 2013 by the considerable portfolio of longer blades in prototype and serial production and the demonstrated ability to grow and adapt the manufacturing footprint to seize opportunities in emerging markets. A notable example is the opening of the new joint-venture factory in Suape, Brazil.
Resilience and the ability to flex its cost structure, have resulted in savings at EUR 89 million in cumulative cuts over the past three years, indicating the company’s ability to weather market shifts but also reflecting the drive of the industry as a whole to reduce the total cost of wind energy. Responding to the requirement for accelerated time to market, LM Wind Power has invented and introduced new manufacturing technologies which are already boosting productivity.
Anticipating a challenging year, the management took swift action to implement controls to ensure financial exposure was limited to the maximum extent possible. Receivables remained high but proactive negotiations with customers gave some further visibility on revenue flow. Some payments were secured in advance and others were agreed to contracted schedules. Insurance cover provided for eventualities and stock was actively managed as before.
Cash flow from operations before financial items and tax was EUR 74 million, versus 44 million in 2012. Extraordinary items at EUR 3 million, including restructuring costs, were materially lower than planned.
Capital spending was also reduced along with widespread cost control measures in 2013. Capital expenditure of EUR 38 million was EUR 5 million lower than the previous year. The reduction came from properties, plant and equipment as a result of active management of the investments to focus on positioning the company strategically for future revenue gains. Capital expenditure on development projects was kept at a similar level as the previous year due to strong commitment to research and development of innovative, new products. It was imperative to continue to manage cash in the business and maintain liquidity with cash and undrawn facilities of more than EUR 83 million at the year end. Cash flow before financing was significantly better than it was in 2012 both including and excluding the contribution of Svendborg Brakes.
LM Wind Power CEO, Leo Schot, said:
“LM Wind Power maintained profitability despite enduring significant commercial impacts reflecting the challenges in the wind sector and the wider global economy. This was thanks in large part to careful cash management and a disciplined and systematic cost-cutting regime. The constant focus on cash, required pressing for continuous control of overdue payments, while ensuring we provided continued support to measures preparing the company for the future. A set of clearly-defined initiatives on the procurement side also delivered results with scaled cost reductions across the board. Meanwhile the management was also able to focus on strengthening the business for the longer term in many areas, to capture the predicted return to growth. Clear indications of a more positive outlook began to show by the year end as evidenced by a much improved order book.”
Note to Editors:
Before closing the 2013 financial year, the company initiated a refinancing process, successfully completing a tender to raise EUR 130 million through issue of a high yield bond. As the issuer of the bond, LM Group Holding A/S is the entity required to report the financial results and in future, it will do so at fixed intervals. Therefore, the annual results will be published by LM Group Holding A/S in the 2013 report and in future.
The Annual Report 2013 is available for download at 2013report.lmwindpower.com
For additional information please contact LM Wind Power Group:
Manager, Global Communications
Lene Mi Ran Kristiansen
+45 51 38 82 36
VP, Global Communication & HR
+31 20 3043 704