NKT Cables Positions for Offshore Windfarm Growth

Danish power cable maker NKT Cables expects its business of delivering underwater cables to offshore wind farms to grow rapidly in the coming years, its chief executive said on Wednesday.

The company, which is part of NKT Holding, has more than 20 percent of the market for offshore cables, accounting for 18 percent of its sales. It expects market volumes to grow on average by some 28 percent per year from 2016 to 2020.

"We clearly want to be part of that growth," Oliver Schlodder, executive vice president for Strategy & Specialties, said when presenting the company's strategy to investors.

NKT could increase its production capacity for offshore cables by 45 percent through a relatively small investment of about 250 million crowns ($37 million).

"The step to adding more than the 45 percent is not just yet around the corner for us," Chief Executive Officer Michael Hedegaard Lyng said, when asked if the increase would be enough to keep pace with the strong market growth.

"If that means we would have to go down to 18 percent market share from 20 percent, then that is fine," he said.

The bet on offshore cables is part of a new strategy which should bring NKT Cables' return on capital employed (RoCE) up to over 15 percent in 2020 from an expected 7 percent this year.

NKT Cables ranks 16th in the global market for power cables, where Italy's Prysmian and France's Nexans (NXS.MU) are market leaders. However, it leads in the offshore market, as well as for railway cables.

In a bid to lift margins in recent years, it has moved away from the highly competitive market for low and medium voltage cables and into high margin niche markets.

Denmark has a strong offshore wind hub including the world's largest offshore wind farm developer DONG Energy, the world's top wind turbine maker Vestas Wind Systems (VWS.F), and the wind power division of Germany's Siemens (SIEMENS.NS).

(By Teis Jensen)