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Windicator: Stock price analysis

WORLDWIDE: Most companies' stocks seesawed over the period, with only one - Gamesa - displaying any consistency. The lack of consensus on the medium-term prospects for the wind sector as a whole clearly means stocks are more exposed to short-term vicissitudes in investor sentiment.

The global energy economy is in a period of extraordinary uncertainty, with political violence and instability in the Middle East raising the spectre of a looming oil crisis that will inevitably add pressure to already rising gas and coal prices. The price rises are being exacerbated by fears of widespread nuclear plant shutdowns in response to the reactor failures after the earthquake in Japan.

In the wind business, the first quarter of the year is traditionally dominated by company annual reports with little focus on quarterly data. Gamesa's results for the calendar year 2010 show a 16% fall in revenues on fiscal year 2009, with earnings before interest and tax (EBIT) and net income declining 43% and 56% respectively. Gamesa is the only company to benefit from a rising share price in both Q4 (15.9%) and the opening period of 2011 (12%), but the gains masked considerable intra-period volatility.

Vestas' annual results are blurred by a change in accounting practice (Windpower Monthly, March 2011), but reveal a huge 111.8% increase in revenues in the last quarter of 2010 compared with Q4 2009. Its EBIT margin for the period improved significantly, from -3.8% in Q4 2009 to 8.3% in Q4 2010. The better performance came amid a series of stringent cost-cutting measures, including factory closures and around 3,000 job losses, which resulted in a one-off expense of EUR148 million in Q4. Vestas' outlook for 2011 is revenue of around EUR7 billion and an EBIT margin of 7%. It has yet to provide guidance for the bottom line for 2011 following a change in accounting policies that will see supply-and-installation projects registered in the income statement only after delivery is complete. Vestas' share price fell by 16.9% during Q4 but had regained most of that loss by last month.

Suzlon is one of only three wind turbine manufacturers to publish full results for Q4. They do not make happy reading: the company recorded a 24.9% slump in revenues from Q4 2009 and an overall net loss of INR 2.5 billion ($56 million), compared with a net profit of INR 141 million a year earlier. The bottom line, however, is a marked improvement on Q3, when Suzlon suffered a net loss of INR 3.7 billion. Chief financial officer Robin Bannerjee says foreign-exchange losses, caused by volatility in the rupee/euro exchange rate, are exerting continued pressure on net performance. The share price slumped on announcement of the Q4 figures in early February, recovered sharply over the next few weeks before falling again in late February and recovering once more in early March.

The Q4 results of Suzlon's German offshoot, Repower, in which it holds a 90% stake, reveal that revenues fell 16.6% on Q4 2009 and operating profits declined 59.6% over the same period. Net profits were also well down, from EUR14.6 million in Q4 2009 to EUR4.4 million in Q4 2010; a drop of 69.9%. In response, Repower revised its outlook for the fiscal year 2010/11 forecasting annual performance of EUR1.25-1.35 billion, down from EUR1.5-1.6 billion, and a profit margin of 5-7%, down from 7.5-8.5%. Among other factors, Repower attributes the revision to order postponements, sluggish demand and excess industry capacity. Repower's share price fell steadily over Q4 but recovered sharply in early 2011, only to fall again on announcement of the Q4 figures in February. Still, the stock gained 1.1% up until March.

Goldwind's interim annual figures for 2010, published ahead of the official March 25 announcement, provide a broad picture of the company's astonishing growth: year-on-year revenue rose by 63.9%, revenues rose by 37.7% and net profits were 31.1% higher than fiscal year 2009. Owing largely to its HK$8.2 billion (US$1.05 billion) share flotation on the Hong Kong stock exchange in October, Goldwind increased net assets per share by 32.5% in 2010. The company's share price rose 15.8% in Q4 but fell 9.1% in the early period of 2011.

Nordex published preliminary figures for fiscal year 2010 at the end of February, registering an 11.7% decline in revenues on 2009. EBIT remained flat at EUR40 million, which meant the profit margin widened slightly, from 3.5% to 4%. Nordex's share price fell 18.8% in Q4 but had regained 4% by early March.

OPERATING WIND POWER CAPACITY AROUND THE WORLD (MW)
Start 2010 Start 2011 Extra MW Change %
EUROPE
Germany 25,777 27,126 1,349 5
Spain 19,149 20,674 1,525 8
Italy 4,850 5,798 948 20
France 4,538 5,686 1,148 25
UK 4,058 5,248 1,190 29
Portugal 3,535 3,898 363 10
Denmark 3,480 3,805 325 9
Netherlands 2,221 2,251 30 1
Sweden 1,560 2,163 603 39
Ireland 1,270 1,428 158 12
Turkey 807 1,278 471 58
Greece 1,087 1,205 118 11
Poland 866 1,180 314 36
Austria 995 1,011 16 2
Belgium 563 911 348 62
Romania 14 462 448 3,200
Norway 436 448 12 3
Bulgaria 177 375 198 112
Hungary 201 295 94 47
Czech Republic 192 215 23 12
Finland 146 197 51 35
Lithuania 92 154 62 67
Estonia 142 149 7 5
Ukraine 94 87 -7 -7
Cyprus 0 82 82 0
Croatia 27 69 42 156
Switzerland 18 44 26 144
Luxembourg 35 42 7 20
Latvia 29 31 2 7
Russia 11 11 0 0
Slovakia 3 5 2 67
total 76,373 86,328 9,955 13

MIDDLE EAST/AFRICA
Egypt 430 550 120 28
Morocco 253 287 34 13
Iran 67 91 24 36
Tunisia 54 54 0 0
South Africa 9 45 36 400
Reunion Island 10 10 0 0
Israel 6 6 0 0
Kenya 0 5 5 0
Cap Verde 12 2 -10 -83
Jordan 2 2 0 0
TOTAL 843 1,052 209 25

ASIA PACIFIC
China 25,805 38,280 12,475 48
India 10,926 13,066 2,140 20
Japan 2,056 2,304 248 12
Australia 1,877 1,880 3 0
New Zealand 497 506 9 2
Taiwan 436 436 0 0
South Korea 364 364 0 0
Philippines 33 33 0 0
Pacific Islands 24 33 9 38
Vietnam 0 30 30 0
Thailand 0 5 5 0
Sri Lanka 3 3 0 0
Bangladesh 1 1 0 0
TOTAL 42,022 56,941 14,919 36

LATIN AMERICA
Brazil 634 930 296 47
Mexico 415 717 302 73
Chile 164 168 4 2
Costa Rica 125 125 0 0
Caribbean 66 66 0 0
Argentina 30 55 25 83
Uruguay 18 40 22 122
Nicaragua 40 40 0 0
Colombia 20 20 0 0
Cuba 7 12 5 71
Falkland Islands 1 2 1 100
Ecuador 2 2 0 0
Peru 1 1 0 0
TOTAL 1,523 2,178 655 43

NORTH AMERICA
Texas 9,410 10,082 672 7
Iowa 3,669 3,672 3 0
California 2,797 3,252 455 16
Oregon 1,758 2,278 520 30
Minnesota 1,812 2,209 397 22
Washington 1,980 2,176 196 10
Illinois 1,546 1,862 316 20
Oklahoma 1,130 1,482 352 31
North Dakota 1,203 1,424 221 18
Wyoming 1,101 1,412 311 28
Colorado 1,246 1,299 53 4
New York 1,274 1,274 0 0
Indiana 1,036 1,250 214 21
Kansas 1,014 1,074 60 6
Pennsylvania 748 748 0 0
South Dakota 313 709 396 127
New Mexico 597 700 103 17
Wisconsin 449 469 20 4
Missouri 309 457 148 48
West Virginia 330 414 84 25
Montana 375 386 11 3
Idaho 147 353 206 140
Maine 174 266 92 53
Utah 223 223 0 0
Nebraska 152 213 61 40
Michigan 143 164 21 15
Arizona 63 128 65 103
Maryland 0 70 70 0
Hawaii 63 63 0 0
Tennessee 29 29 0 0
New Hampshire 25 25 0 0
Massachusetts 15 18 3 20
Ohio 7 10 3 43
Alaska 8 8 0 0
New Jersey 8 8 0 0
Vermont 6 6 0 0
Delaware 0 2 2 0
Rhode Island 1 1 0 0
United States 35,161 40,216 5,055 14
Canada 3,319 4,015 696 21
TOTAL 38,480 44,231 5,751 15
WORLD 159,241 190,730 31,489 20

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