Analysis - Manufacturers see cost cutting pay off in Q3

WORLDWIDE: It was a largely positive quarter for manufacturers, with cost cutting, rather than dramatically increased revenues, leading to an increase in earnings for Gamesa, Siemens Nordex and Vestas. Even Suzlon saw their losses narrow.

A strong third quarter from Gamesa led the Spanish manufacturer to assert that it expects to hit the upper end of its full-year targets for sales and margin.

The bullish report showed the company returning to a slim net profit of EUR 31 million in the first nine months of the year, compared with a loss of EUR 67 million in the corresponding period last year.

Crucially, Gamesa also managed to recover its margin for earnings before interest and tax (EBIT) to 5.2% over the period, up from a measly 0.2% a year earlier. But the improved margin comes on the back of deep cuts in its workforce and the closure of factories rather than a rise in revenue.

There was a EUR 99 million reduction in fixed cash costs, while sales took a 20% fall to EUR 1.7 billion.

With Siemens' fourth quarter finishing at the end of September, the German company saw profits in its wind division jump 34% in its fourth quarter also on the back of reduced costs. But the business saw its profits climb 10% as well to EUR 1.6 billion, leading to a profit of EUR 179 million for the manufacturer, compared with EUR 134 million in Q4 2012.

In the first nine months of the year, the company saw its profits slide by 26%. This resulted in a 2013 profit increase of just 1%, taking it to EUR 306 million.

While Vestas' revenue took a 27% dive in the third quarter, the company insisted that its turnaround strategy is on track.

Speaking about the Q3 results, new Vestas CEO Anders Runevad highlighted an increase in EBIT by EUR 54 million to EUR 67 million. This was due to lower costs and increased project margins.

Cash flow has also been raised by EUR 198 million to EUR 56 million. Unconditional orders for the period were at 1,547MW. In Q3 last year, the order intake for the period (unconditional and firm) was 401MW, with the order backlog from 30 September valued at EUR 8.3 billion.

Nordex also struck a positive note, posting upbeat results for the first nine months of the year, with the company moving back into the black thanks to resurgent sales.

The German turbine manufacturer banked a slim net profit of EUR 5.3 million in the first three quarters, following a loss of EUR 15.6 million last year. This came on the back of a 47% leap in sales to EUR 1.1 billion, with the company pointing to strong growth in its core European markets and South Africa.

Overall, production was up 64% to 1GW, with the volume of new installations climbing by 61% to 924MW. Nordex said that "disproportionately low" staff costs also played apart in the swing back into profit, with a small fall in the number of employees worldwide.

Suzlon managed to reduce its costs and bring its losses somewhat under control in the three months to the end of September. The Indian company, which also owns Repower, saw its revenue decline to INR 47.7 billion ($760 million) from INR 57.6 billion a year before.

But a 17% fall in expenses meant that the Indian firm managed to rein in its net loss to INR 7.7 billion, from INR 8.1 billion in the same period last year.

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