Dollar strength powers Aggreko

Published on Tuesday 25 August 2009 21:33

AGGREKO shares surged to an 11-month high yesterday after the group said this year's profits would be "substantially" ahead of 2008 providing the US dollar remains strong.

The Glasgow-based group, which provides temporary power generators on a large scale, said demand had fallen sharply in the second quarter of the year in some countries, but that its international power projects business remained strong, enjoying a 40 per cent rise in first-half revenues.

Pre-tax profits rose 56 per cent to 106.9 million in the six months to 30 June, on revenue up 22.6 per cent at 499.8m. The figures were boosted by a stronger dollar, with Aggreko's revenue at constant currency rates dipping 1 per cent.

Chief executive Rupert Soames said demand in Europe and the US fell by up to 25 per cent in the second quarter, but there were signs that the territories might at least be stabilising.

"In Europe and the US the third quarter has been the same as the second quarter, but at least it hasn't got any worse," he said.

While the international power projects business, which operates large-scale contracts in the developing world, is taking longer to secure new deals, the business continues to grow, Soames noted.

He said: "This is a rather large beast, it needs feeding with new contracts fairly regularly, but it's still growing, and any business that's still growing in this environment is very valuable."

Last week Aggreko signed a new 140-megawatt contract in Kenya, two months after announcing a 100MW deal in Saudi Arabia.

The group said that, while at constant currency its full-year profits are likely to be flat compared with last year, the strength of the dollar meant its reported profit should exceed 2008's.

Shares rose 56p, or 9.1 per cent, to 670p – Aggreko's highest closing price since last September.