Key markets may be down but Aggreko still in power

Published on Thursday 16 April 2009 21:40

AGGREKO yesterday warned that demand is softening in many of its key markets, but assured investors it is on track to report stronger profits this year because of a boost in large international projects.

The Glasgow-based temporary power provider said revenue in the first three months of 2009 were 17 per cent ahead of last year on a constant currency basis, or 42 per cent stronger in sterling terms, due to favourable currency movements.

But the growth came almost entirely from providing generators to developing countries, with established markets weakening.

Excluding the contract to supply power to Barrack Obama's presidential inauguration and revenue related to storm damage, core business levels were flat or falling in both Aggreko's North American and Europe/Middle East businesses.

Chief executive Rupert Soames admitted that, in most markets, conditions were getting tougher, but described the overall performance as "quite robust".

He said: "The truth is that most other people would bite their hands off to get hold of a business that's flat at constant currency levels.

"Conditions out there are getting tougher and we've been harping on about that for some time, but the business is doing better than we expected."

Aggreko's international power projects business, which provides large-scale schemes mainly for developing countries, continues to show prolific growth, with revenue up 51 per cent compared with the start of 2007.

Most of this rise was down to the growth in Aggreko's fleet of generators, up about 30 per cent on a year ago.

However, margins also improved due to strong demand and an increased proportion of gas-fired generators, for which margins are higher than for diesel.

Aggreko predicted that, while the second half was likely to be weaker than a year earlier, the year as a whole should match 2008, on a constant currency basis, because of the stronger first half.

Soames said that as well as a general weakness in key markets, the second half of the year would face "some pretty tough comparatives", after the Beijing Olympics and higher-than-expected revenue from storm-related work helped Aggreko deliver a record H2 in 2008.

Assuming that the exchange rate between sterling and the dollar remains around its current level, Aggreko said profits would show "substantial" growth over last year.

Shares closed up 7p at 533.5p.