Tiresome year for blade supplier -- LM's Spanish woes

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Delayed expansion of LM Glasfiber's Spanish factories hit production and cost the blade supplier EUR 93 million last year. As a result the entire Spanish management has been replaced and production procedures improved. Quality, production and construction of new factories is now controlled from the company's Danish headquarters.

The "significant growing pains in connection with the ramp-up of Spanish operations" resulted in LM making blades for the Spanish market in other factories in Europe, North America and Asia, a decision which involved "substantial costs." Transport costs alone equalled the cost of one out of every third blade delivered, with the result that LM barely turned a profit on these Spanish deliveries. The company's blade production in Spain is its largest from a single country and by the end of the year was back on track.

The good news for the British owner of LM, investment fund Doughty Hanson, is that orders at the start of this year amounted to EUR 2.4 billion, more than four times 2007's revenue at EUR 577 million. The operational loss for 2007 was EUR 40 million, compared with a profit of EUR 53 million in 2006.

LM invested EUR 78 million last year, primarily in three new factories in Spain, India and China and further production capacity expansion at existing works in Spain and the US. It now operates 12 factories with the capacity to equip 5 GW of wind turbines a year. Of these, Denmark, the US, China and India host two factories each, three are in Spain and one is in Canada. By the end of this year the company expects to have boosted production capacity by another 2 GW, with a third US factory being built and a sixth in Europe, in Poland. If the same rate of capacity expansion continues, LM is on track to beat Vestas' projection that it will supply blades for 10 GW a year by 2012.

LM headed to Poland for its next European factory because of space restrictions at its Danish sites and the inconvenience of Spain for supplying northern Europe's offshore industry. Poland is central for key markets in north, central and eastern Europe, says LM's Steen Broust Nielsen.

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