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Windicator quarterly update: industry share price performance

The wind power industry's miserable start to 2010 continued into the second quarter as a slew of weak earnings figures meant that stocks continued to haemorrhage value.

Virtually all companies were affected as revenue and profit figures were well down on the previous year, apparently leading to a mass migration of investors away from wind power stocks - although some companies will have taken comfort from the fact that their figures were marginally less bad than those of the first quarter.

Matters were certainly not helped by the push-me pull-you state of the global economy, which continued to exhibit the level of volatility to be expected in an environment in which nobody really knows what will happen next. During the second quarter, the structural issues that first caught the attention of investors at the beginning of the year moved sharply up the agenda, with European fiscal deficits and associated sovereign debt coming under intense scrutiny, resulting in bouts of extreme risk aversion. In July, there was a rally across most major equity markets as soft US economic data was offset by stronger data elsewhere and good corporate news generally. However, in August equities sold off again as continued weak economic data and negative statements by policy makers triggered a change in investor sentiment. As autumn arrives, the indications are that investors have begun to accept that slow growth will be a feature of the macro landscape for some time to come.


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The performance of wind turbine giant Vestas typified that of the industry as a whole. In mid-August the company posted a surprise Q2 loss of EUR119 million, massively underperforming compared to its EUR43 million profit in the same quarter last year. The result prompted Vestas to revise down its 2010 earnings forecast, sending panic across the markets and slicing 25% off the company's stock price in one day.

Vestas said it expected a 2010 operating profit margin of 5-6% and revenue of EUR6 billion, well below its previous forecast of 10-11% and EUR7 billion. It blamed the downgrade on the fact that expected orders from the US, Germany and Spain had not been signed, so they could not be booked as income this year. Two weeks after the announcement, Vestas sought to allay investor concerns by insisting that it was more interested in spreading risk and keeping customers than maintaining its world number one spot, and said it would not indulge in price wars - which senior vice-president for quality Bob Fritz described as a "desperation" strategy. From the beginning of the year to the end of August, the company's share price was down 41.3%.

Vestas' earnings downgrade had been foreshadowed a few weeks before when rival Gamesa revised down its turbine sales forecast for 2010 to 2.4-2.5GW from its original projection of 2.7-3GW. The downgrade came as Gamesa announced a massive slump in profits: its net result for Q2 2010 was EUR6 million, down from EUR43 million in Q2 2009. The company's share price plummeted 36.8% during the quarter, and was down 62.2% for the year to 31 August, reaching its lowest level since it was listed in 2001.

In addition to its downward revision for 2010, Gamesa also sounded a cautious note for 2011, targeting 2.7-3.3GW of turbine sales next year, compared with its previous target of more than 3.6GW, issued in February. "There have been certain events totally out of our control that have had a temporary - and let me stress it is temporary - impact in our industry," chairman Jorge Calvet told investors.

Despite being hit by further falls in revenue, Nordex bucked the general industry trend by announcing slightly improved profits of EUR3 million in Q2 2010, up from EUR1.9 million for the same period last year. The company attributed its strong bottom-line performance to a heightening in the profitability of individual projects combined with a reduction in structural costs. However, the result did little to impress investors: Nordex's share price fell 19.9% during the second quarter and was down 46% for the year as on 31 August.

Nordex is projecting a slight increase in full-year revenues of EUR1.2 billion for 2010, and says that three-quarters of this target had already been reached by the end of the second quarter. But some analysts have questioned the company's projection, pointing out that the company would still require strong orders in the second half of 2010 in a highly challenging market to achieve its full-year guidance. As of June 30, Nordex had an order backlog of EUR2.3 billion, with firmly-financed contracts of EUR481 million.

Suzlon's share price also took a severe beating after it announced a second consecutive quarter of dire results. Its consolidated Q2 2010 results showed a 42.2% fall in sales from the same period in 2009 and an overall net loss of INR 9.12 billion ($196 million), almost double the loss of INR 4.53 billion ($97.2 million) for Q2 2009. The price of the company's stock fell 49.6% from the beginning of January to the end of August, including a 19.5% decline in value during the second quarter.

Analysts blamed a combination of declining orders and foreign exchange losses for the continued poor performance of Suzlon, which is heavily dependent on demand from Europe and the US. Sovereign debt problems in Europe also hurt the prospects of Suzlon's German unit Repower, in which it holds a stake of more than 90%. Repower recorded sales of EUR213.1 million in Q2, down from EUR300.7 million in Q2 2009 - a decline of 29.1%. The firm's net profit fell by 20.3% quarter-on-quarter.

For the second quarter running, Goldwind recorded by far the most impressive figures among the listed wind power companies. Its Q2 results showed a 67.2% increase in revenues quarter-on-quarter and a 55.7% rise in net profits. Despite a 27.9% fall in the second quarter, Goldwind's share price remained up 5.3% for the year at the end of August - a notable performance given that China's benchmark Shanghai Composite index declined by around 19% over the same period.

In early September rumours surfaced that Goldwind was to seek to raise $800 million by reviving a Hong Kong share offering that was postponed in June. Goldwind was one of several companies whose share sales in Hong Kong were withdrawn in the summer amid concerns over the global economy and its impact on risk appetite.

Clipper has not published any results since its annual report for 2009, released in March. It is expected to publish interim figures for 2010 this autumn. Its share price fell 74.6% for the year to August 31, incorporating a decline of 45.2% during the second quarter.

VESTAS
Revenues -16.8%
Ebit -289.7%
Q2 2010 compared to Q2 2009
Stock price -41.3%
Change Jan-Aug 2010
Q2 profit/loss -$153.19m

GAMESA
Revenues -28.6%
Ebit -68.6%
Q2 2010 compared to Q2 2009
Stock price -62.2%
Change Jan-Aug 2010
Q2 profit/loss +$7.72m

NORDEX
Revenues -28.6%
Ebit -28.6%
Q2 2010 compared to Q2 2009
Stock price -46.0%
Change Jan-Aug 2010
Q2 profit/loss +$3.84m

SUZLON
Revenues -42.2%
Ebit -403.1%
Q2 2010 compared to Q2 2009
Stock price -49.6%
Change Jan-Aug 2010
Q2 profit/loss -$196.0m

REPOWER
Revenues -29.1%
Ebit -86.0%
Q2 2010 compared to Q2 2009
Stock price -6.5%
Change Jan-Aug 2010
Q2 profit/loss +$2.24m

GOLDWIND
Revenues +67.2%
Ebit +47.3%
Q2 2010 compared to Q2 2009
Stock price +5.3%
Change Jan-Aug 2010
Q2 profit/loss +$81.86m

CLIPPER
Revenues n/a
Ebit n/a
Q2 2010 compared to Q2 2009
Stock price -74.6%
Change Jan-Aug 2010
Q2 profit/loss n/a

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