AGGREKO, the temporary power supplier, gave its most downbeat assessment of the economy in several years yesterday as it confirmed that its capital expenditure is set to fall by more than a third in 2009.
Despite "very strong" trading in the last three months of the year, chief executive Rupert Soames said he expected the company's businesses in North America and Europe would soon begin to suffer, with trading in those markets declining next year as r
ecession continues.
The Glasgow-based company, which manufacturers its generators in Dumbarton, disclosed that it now expected to invest £170 million in capital expenditure in 2009, down from a record £260m this year, and roughly in line with its spending in 2007.
Soames said there was flexibility in how much the company would invest in its new equipment depending on demand, but warned that this could mean the final figure was even lower.
So far trading in Europe and North America is holding up better than Aggreko had expected, with the latter boosted by $30m (£20.1m) revenue from providing generators in the recent hurricane season.
"Even on an underlying basis North America has done well in the back end of this year, but how long that's going to last is hard to tell," Soames said yesterday. "We do not believe we are going to be immune to the economic cycle, I'm sure it will turn down (in Europe and the US] but we should be able to offset that with what is happening in other markets."
An expected, strong performance from its international power projects business – which caters to major projects in emerging markets – is expected to offset weakness in its European and North American business, leading to an increase in profits in the first half of 2009 at least.
Last week the company signed a deal to provide 30mW of capacity in Ethiopia, following a 40mW deal in Brazil signed in November.
Providing its final trading statement for the year to 31 December, Aggreko continued its trend of warning the market to raise its expectations, predicting full-year profits before tax of £190m, around £2m above the market's consensus and 53 per cent ahead of 2007.
Soames said European trading had been boosted towards the end of the year by record demand for ice rinks, with the company providing chillers for a record 450 sites across the continent. "In these difficult economic times, nobody likes to skate on thin ice."
Shares in Aggreko closed up 17.5p at 430.25p.
The full article contains 426 words and appears in The Scotsman newspaper.
