Spain

Spain

Wind Business: Sales outlook unchanged - Gamesa maintains status quo

Spanish wind turbine supplier Gamesa reports a net profit in the first half of EUR65 million, down 67% on the same period last year.

The 2008 figure, however, includes extraordinary profit from selling Gamesa's solar division. Factoring out extraordinary items, core business profits in first-half 2009 were EUR80 million, the same as last year. Sales, almost all from turbines, totalled EUR1.6 billion, also nearly the same as last year. With 1.6 GW of turbine capacity sold by end-June, 11% down year-on-year, CEO Guillemo Ulacia maintains last year's forecast of 3.3-3.6 GW for year-end 2009.

Ulacia highlights Gamesa's earnings before interest and tax (EBIT), which finished the period at EUR119 million, 6% up year-on-year. The margin of EBIT over sales was 7.4%, up from 6.7% in 2008. Gamesa says it has identified over 130 areas for reducing cost and expects an EBIT margin of 11% in 2011. Earnings before interest, taxes, depreciation and amortisation (EBITDA) were EUR219 million, 2% higher, translating to a 13.6% EBITDA margin, up from 12.9%.

Mixed signals

After the announcement, Gamesa's share price dropped by around 2.8% by day end, to EUR14. The following day, however, shares shot up 8%. "With such a complex mix of signals, Gamesa's long-term solidity probably took time to sink in," says Luis Merino of renewables consultants and publishers, Energias Renovables.

Looking ahead, Ulacia says the company is able to clearly forecast sales because of relationships with reliable long-term clients, particularly in the world's top two growth markets: the United States and China. Gamesa has factories in both. In the US, Gamesa installed 278 MW - 17% less than the same period in 2008. But Ulacia said he is reassured by the recent federal call for wind project grant applications. Gamesa's largest client, Iberdrola, hopes to put up 800 MW this year with grant aid, while Gamesa itself has 400 MW at an advanced stage.

In China, where Gamesa has a 1 GW turbine factory, the company recently clinched agreements to jointly develop 453 MW of wind capacity to 2011 with local energy groups Huadian and Guangdong Nuclear. It plans 200 MW with Huadian and 253 MW with Guangdong Nuclear, of which it has already begun building 45 MW. This already boosted Gamesa's share price in mid-July. Another upward notch followed Gamesa confirmation that a 4.5 MW prototype turbine is now up and running in Zaragoza and that it plans to mass produce the machine by 2011 in Navarra, "a key to the long-term future," says Ulacia.

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