LM Wind Power delivered its best ever financial performance in 2016. Sales increased by 41% to EUR 1,059 million, due to higher volumes driven by strong demand, plus the inclusion of Brazil (which was not consolidated for 11.5 months of 2015 during the period when it was a joint venture). At constant exchange rates, sales grew by 45%, with double-digit growth in all regions.
EBITDA increased by 69% to EUR 174 million, due mainly to revenue growth and the consolidation of Brazil. At constant exchange rates, EBITDA growth was 79%. The EBITDA margin increased from 13.8% in 2015 to 16.5% in 2016, thanks to tight cost control and operational leverage, with higher volumes over a cost base which is partly fixed.
Depreciation and amortization increased from EUR 51 million to EUR 74 million, following higher capital expenditure in both 2015 and 2016 to increase manufacturing capacity to meet customer demand. Despite this, EBIT (Results from operating activities before special items) increased 93% to EUR 100 million, with the EBIT margin increasing from 6.9% to 9.5%.
Net finance costs increased from EUR 9 million in 2015 to EUR 21 million in 2016, primarily due to the new green bond issued in Q4 2015, together with increased discounting of receivables due from customers.
The Group’s tax charge increased to EUR 28 million in 2016 compared with EUR 16 million in 2015 due to the significantly improved profitability. However, the effective tax rate reduced from 73% in 2015 to 35% in 2016, largely due to the consolidation of Brazil and greater recognition of deferred tax assets, as a result of the envisaged improved financial performance of certain entities.
The Group’s net profit increased by EUR 46 million from EUR 6 million in 2015 to EUR 52 million in 2016, thanks to sales growth and improved operational performance.
Low leverage and high liquidity
As at 31 December 2016, net debt was EUR 101 million, with leverage (net debt / EBITDA) of only 0.6x, leaving the Group very conservatively geared. This compares with net debt of EUR 95 million and leverage of 0.9x as at 31 December 2015. Net cash and cash equivalents were EUR 93 million (2015: EUR 87 million), which together with unutilised credit facilities of EUR 46 million resulted in liquidity of EUR 139 million (2015: EUR 129 million).
Cash flows from operating activities increased from EUR 72 million in 2015 to EUR 146 million in 2016, largely due to improved profitability. This is despite an increase in working capital of EUR 61 million due to growth, paying suppliers more quickly (particularly in Brazil) and higher customer downpayments.
In order to meet increasing demand from customers, the Group continued to invest strongly in the business with capital expenditure increasing to 142 million, from EUR 86 million in 2015. This included the completion of a second factory in India, the start of construction of a new plant in Turkey, extensions of existing production facilities, and new moulds and equipment for longer blades. Furthermore, capital expenditure on development projects also increased, which reflected the Group’s commitment to develop innovative products to meet customer demands and market growth. A substantial proportion of this year-on-year increase in capital expenditure was supported by downpayments from customers.
Sale to GE
On 11 October 2016, LM Group Holding A/S announced that Doughty Hanson, the European private equity firm, had agreed to sell its stakes in LM Wind Power Holding A/S to GE for an enterprise value of EUR 1.5 billion. The transaction is expected to close in the second quarter of 2017, subject to regulatory approvals. LM Wind Power Holding A/S is the parent company of LM Group Holding A/S. The closing of the transaction would constitute a change of control under LM Group Holding A/S’s EUR 130 million fixed rate notes due 2019 and NOK 475 million floating rate notes due 2020. Contingent upon the conditions precedent to the acquisition being met, including antitrust approvals, and the continuing intention of the parties with regard to LM Group Holding A/S’s capital structure, LM Group Holding A/S intends to redeem both the EUR 130 million fixed rate notes due 2019 and NOK 475 million floating rate notes due 2020 at the same time as the closing of GE’s acquisition of LM Wind Power Holding A/S.
LM Wind Power outperformed the expectations included in last year’s Annual Report for 2016, with sales growth at constant exchange rates of 45% (2016 Outlook was “in excess of 20%”) and an EBITDA margin of 16.5% (2016 Outlook was “at least 13%”). In 2017, LM Wind Power expects sales growth (at constant exchange rates) of at least 15%, thanks to continued strong market demand, capacity expansions in several plants and the start-up of operations in Turkey in H2 2017. LM Wind Power expects to maintain an EBITDA margin of at least 16.5%.
Download the full 2016 Annual Report
Want to go beyond the highlights? Explore our full annual report.
Sustainability is firmly embedded in the foundation of our corporate strategy.
Our non-financial ambitions have evolved with the growth and improved performance of the business. Explore highlights from 2016 here.
Marc de Jong, CEO, reflects on our fantastic 2016 performance.
"2016 can be justifiably described as a truly outstanding year which continued the trend of consistently improving performance across the whole company."