Moving jobs and growth abroad -- LM annual report

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With a 32% increase in revenues and a 2004 profit of EUR 31 million, LM Glasfiber, the world's dominant manufacturer of rotor blades for wind turbines, is moving closer to the point when a flotation on the public markets -- a long term company goal -- can be a reality. Meantime, LM is expanding its production facilities the world over. This year it expects to log 25% growth, even though its share of the global rotor blade market is projected to fall from 33% in 2004 to 30% in 2005. In 2003, LM had a 22% market share.

xThe dollar exchange rate against the euro is among the reasons LM gives for not expecting revenues to keep pace with growth. With a weak dollar making it difficult to sell blades made in Europe on the dollar markets, LM is expecting to build new production facilities overseas or expand existing facilities. In India, LM has more than doubled its blade production and expanded its factory; in China production has more than tripled and the factory is being expanded; in the Canadian province of Quebec, LM expects its new factory to be ready by January 2006; in the early part of this year LM will decide where in Asia it will establish another production facility for large blades; and in Poland the company is preparing to construct a new facility to serve the north European market.

xLM is already reducing its production capacity in Denmark, partly due to the demand for larger blades requiring it to restructure and partly due to slower market growth in northern Europe. A week after releasing its annual report, the company announced it was cutting 170 jobs at its Danish headquarters, one of three production facilities in Denmark, in reaction to falling sales in Germany, although the country remains the company's largest market. Among its overseas facilities, LM has closed a factory in Toledo, Spain, because it was too small for making large blades. Staff at Toledo have been offered jobs at LM's other Spanish facilities.

xLM's decision to open a factory in Quebec follows an agreement with GE Energy, a major LM customer, for supply of blades for 2400 MW of wind plant over the next ten years for all of North America. Of these, 990 MW is to be installed in Quebec. LM is this year expecting its best year yet in the US.

xThe company currently has 14 customers on its books and is aware of the weakness represented by its dependency on relatively few key buyers. In its annual report, LM admits it has felt the effects of customers being taken over by companies with their own blade production, although it makes no specific mention of the takeover of NEG Micon by Vestas, or the sale of Bonus to Siemens.

xAs part of its efforts to adapt to the changing market, LM is increasing its service and maintenance of blades to meet the demands of utilities and other large customers for long term agreements aimed at limiting wind plant downtime and ensuring a long operational life.

xxon the rise

xLM reports revenues in 2004 of EUR 304 million and earnings before tax and interest (EBIT) of EUR 31 million, compared with a loss of EUR 9 million the previous year. Before tax profit was EUR 3 million, compared with a loss of EUR 40 million in 2003. In 2005 the company expects revenues to rise by 5% and a quadrupling of profit before tax to between EUR 13-14 million. During 2004, LM increased its workforce to 2388, up from 2137 in 2003. The bulk of these, nearly 1500, are in northern Europe.

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