Windicator: Good news for four out of five manufacturers

WORLDWIDE: Efforts by wind-turbine manufacturers to cut costs and improve efficiency are continuing to pay off, second-quarter earnings figures show.

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Two of the five listed companies followed by Windpower Monthly posted increases in quarterly revenues and three reported overall net profits for the quarter, an improvement on Q1 performance. Denmark's Vestas, along with German rival Nordex, are both forecast to post their first pre-tax profits since 2010 this year. Spain's Gamesa is set to make a net profit for 2013 after posting a net loss last year.

Surging investor confidence helped to push the share prices of these three companies to an average rise of 215.1% for the first eight months of the year. China's Goldwind also fared well on the stock market, while India's Suzlon suffered a decline in market value over the period. However, analysts' views on the sector remained largely unchanged from the first quarter, with 21.2% positive on wind turbine stocks, 30.8% neutral and 48.1% negative.

Vestas chose the day of the publication of its Q2 results to announce the sacking of long-standing CEO Ditlev Engel. Under Engel's eight-year stewardship, the group had been overtaken by GE as the world's biggest wind-turbine manufacturer, had issued five profit warnings and parted company with two chief financial officers and one chairman. Engel's replacement, Anders Runevad, joins the firm from Swedish telecoms company Ericsson.

The results themselves showed an improvement in Vestas's performance over Q1 but were below analysts' expectations. Revenues were down 26.4% on the same period last year, while operating profits (EBIT) were down 70%. The firm's Q2 net loss of EUR 62 million ($81.6 million) significantly exceeded its Q2 2012 loss of EUR 8 million, although it was a marked improvement on its net loss of EUR 151 million for the first quarter of this year.

Vestas' share price slumped in the days following the joint announcement but recovered to end August 231% up on the year. At that time, 27.8% of analysts rated Vestas a "buy", 33.3% had it as a "hold" and 38.9% urged investors to sell the stock.

Spanish rival Gamesa followed its strong first-quarter performance by posting a good set of first-half results. Despite being hit by a 28.2% decline in sales for the first half of the year, the firm posted a net profit of EUR 22 million for the first six months of 2013, including a EUR 15 million net gain during the second quarter.

CEO Ignacio Martin put the result down largely to Gamesa's austerity plan, combined with a sharper focus on its operation and maintenance division, which contributed 16% of sales for the first half of the year - a rise of 18% on H1 2012. Gamesa has announced 2,600 job cuts and will shut 24 offices to save EUR 100 million a year. It has also invested in emerging markets such as Brazil and India as expansion in Europe and the US has been held back by government subsidy cuts and slowing demand.

These efforts were reflected in operating performance, as the company posted a 376.2% gain in first-half EBIT, approximately 50% of which was achieved during the second quarter. Gamesa's share price rallied on publication of the results and continued to rise during August, before falling back at the end of the month. On 30 August, the stock was up 219.3% for the year.

Nordex's 64.7% jump in second-quarter sales contributed heavily to an impressive overall first-half revenue gain of 57% to EUR 661 million. Its second-quarter EBIT of EUR 15.6 million was a significant improvement on its EUR 4.2 million EBIT loss in the second quarter of last year and helped push operating profits for the first half of the year to just over EUR 15 million.

The company's net consolidated Q1 profit of EUR9.6 million reversed a EUR 9.1 million loss for Q1 2012 and helped to turn last year's EUR 23.3 million H1 loss into a EUR 1.3 million gain for the first half of this year. Nordex said it had decided in the second quarter of 2013 to discontinue production at its plants in the US and China on account of having low capacity utilisation. The associated costs had already been included in 2012.

The figures prompted Nordex to raise its revenue forecast for 2013 to between EUR1.3 billion and EUR 1.4 billion — compared with the EUR 1.2 billion to EUR 1.3 billion envisaged earlier this year. EBIT will amount to 2.5-3% of 2013 sales, up slightly on a previous margin of 2-3%, the company said in a statement. Nordex sold 93% of its turbines in the Europe, Middle East and Africa market in the first half, against 80% a year earlier.

In line with major share gains made by rivals Vestas and Gamesa, Nordex's value jumped almost 200% for the year to 30 August. However, analysts' views on the company's prospects remained unchanged.

Once again, Suzlon stood out as the worst-performing company of those surveyed. Its INR 10.6 billion ($157.6 million) second-quarter loss was worse than the INR 8.4 billion loss it posted in Q2 2012 and represented its seventh straight quarterly net deficit. The loss came on the back of an 18.3% decline in sales and a 31.5% slump in EBIT over Q2 2012.

Suzlon continues to struggle to pay down debt accumulated through overseas acquisitions, which include German turbine manufacturer Repower Systems. Falling turbine prices also forced Suzlon to close some facilities in Germany and cut staff. Those one-off costs, combined with a depreciating rupee, depressed earnings.

As at the end of August Suzlon remained the only company among those surveyed whose stock price had declined since the beginning of the year, by a painful 69.4%.

Analysts remain uniformly gloomy about the company's prospects, with none of those surveyed by Reuters rating its stock a "buy".

Goldwind's second-quarter revenues were up 29.9% on the same period last year, a significant turnaround from the 44% decline in sales it posted in the first quarter. Its overall net profit of CNY 60.2 million ($9.8 million) was also well up on its Q1 CNY 32.4 million profit and the CNY 11.6 million gain it achieved in Q2 2012.

Along with other firms, Goldwind has reduced expenses to counter the slower growth that has slashed margins across the industry. According to Bloomberg New Energy Finance estimates, China may install 12GW of wind power this year, 6% less than a year earlier. On 30 August, Goldwind's shares had increased 44% for the year.

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