Windicator: Manufacturers end year in high spirits

WORLDWIDE: Wind-turbine manufacturers ended the year in good spirits on the back of largely positive third-quarter earnings figures and growing signs of optimism for 2014.

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Although revenues clearly remain an area of concern for a number of companies, cost-cutting measures resulted in improved figures further down the income statement. Four out of the five companies tracked by Windicator had seen strong share price rises for the year to 22 November, with the three European firms - Vestas, Gamesa and Nordex - benefiting from triple-digit increases in value.

Analysts were also slightly more upbeat: the overall number (as tracked by Reuters) posting "buy" recommendations remained largely unchanged from last quarter. But those recommending investors hold the stock rose from 30.8% to 41.5%, and there was a corresponding reduction in sell recommendations.

gamesa resultsGamesa enjoyed a particularly strong quarter. Although sales were slightly down on the third quarter of last year, its Q3 profit in earnings before interest and tax (EBIT, or operating profit) of EUR24 million ($32.5 million) represented a major turnaround from its EUR 10 million operating loss in Q3 2012. Its EBIT margin for the quarter was 4.5%, compared to -1.7% last year, while its net profit of EUR 9 million compared to a net loss of EUR 16 million in the third quarter of 2012.

The company's turnaround in fortunes can be attributed to its extensive programme of cost reduction, which included redundancies and factory closures. In announcing the results, Gamesa said it expected to reach the "upper end of its objectives for profitability and sales" for the year. By 22 November, Gamesa's share price had climbed just over 300% since the beginning of January. Analysts, however, remained pessimistic, with nearly two-thirds of those tracked offering negative guidance on the company's stock.

vestas resultsDenmark's Vestas posted a 27.5% decline in revenues for the third quarter but a significant improvement in operating profits and a reduction in net losses, which the firm said was evidence that its turnaround plan was working. Its 415% EBIT increase on the same quarter last year resulted in an improvement of EBIT margin from 0.6% to 4.6%, while its Q3 net loss of EUR 87 million was half that of the same quarter last year.

The company upgraded its 2013 EBIT margin from a minimum 1% to a minimum 2%, and its free cash flow from a minimum EUR 200 million to a minimum EUR 500-700 million. Group president and CEO Anders Runevad said: "The improved EBIT, despite a 27% drop in revenue and another quarter of debt reduction, are important results of the ongoing turnaround, and we remain focused on delivering according to plan in the last part of the year."

Vestas' share price had risen almost 350% for the year by 22 November, at which time analysts had become slightly more bullish on the company: 38.9% were positive on the stock's prospects, compared with 27.5% the previous quarter.

nordex resultsGerman manufacturer Nordex reported higher-than-expected sales and operating profits, which it attributed to strong demand in Germany, Sweden and the UK. Third quarter revenues rose by almost a third to EUR 390 million, in marked contrast to European rivals Vestas and Gamesa, while EBIT increased 4% to EUR 16 million.

According to Bloomberg, analysts had, on average, expected sales of $363 million and EBIT of EUR 14.7 million. Nordex's Q3 net profit of EUR4 million was, however, down from EUR7.7 million a year earlier.

"We owe (the profit) mainly to our strong position in our core European markets, where Nordex is seen as being a reliable and potent supplier offering efficient products and customer-centric solutions," chief executive Jurgen Zeschky wrote in a letter to shareholders.

The group confirmed its outlook for 2013, which it had raised in August. It expects sales of between EUR 1.3-1.4 billion and an EBIT margin of 2.5-3.5%. Shares in Nordex had risen by almost 270% for the year to 22 November, but analysts remained cautious on the company's stock, with only 12.5% posting a "buy" recommendation.

suzlon resultsIndia's Suzlon posted a 16.5% decline in revenue but showed it had made progress in cutting costs as operating and net losses were both reduced. Its EBIT loss of INR 2.17 billion ($34.7 million) was an improvement on its INR 2.74 billion EBIT loss in Q3 2012, while its net loss of INR 7.8 billion compared to one of INR 8.1 billion in the same period last year. The improvement in EBIT and net profits came on the back of a 16.8% drop in costs.

The company slashed travel and consulting expenses and reduced office and factory space to rein in spending. This has helped it to make turbines more cost-effectively, according to Kirti Vagadia, group chief financial officer.

"While we continue to progress on the operational front, we reported a significant net loss primarily driven by lower volumes, the impact of the depreciating rupee and restructuring costs," he added.

Suzlon was alone among the five companies tracked by Windicator to see a fall in its share price over the period under review, registering a decline of 48.4%. None of the analysts recommended investors to buy the company's stock at that time - the same as the previous quarter.

goldwind resultsGoldwind predicted a doubling of full-year profits after posting very strong third-quarter figures, including a 57.3% increase in sales - the strongest top-line figure of all companies surveyed.

The Chinese manufacturer maintained its impressive performance further down the income statement, which showed operating and net profits where there had been losses last year: the company's EBIT gain of CNY 94 million ($15.4 million) compares very favourably with an EBIT loss of CNY 57 million in Q3 2012, while its CNY 91.2 million net profit compared with a net loss of CNY 32.4 million last year.

Goldwind chairman Wu Gang said: "Despite the challenges in the current development stage of China's wind-power industry, the support from China's government in general for the wind industry remains undiminished, and the market conditions in China continue to improve at a somewhat increasing rate. Both factors are playing important roles in accelerating the development of the wind-power industry, including in its equipment manufacturing sector."

Looking to its full-year results, Goldwind predicted a profit of up to CNY 459 million, well up on last year's CNY 207 million. The company's share price had risen 87.6% for the year to 22 November, with analysts' views remaining largely unchanged from the same time last year.

Goldwind's improving fortunes were in sharp contrast to those of its fellow Chinese manufacturer Sinovel, which posted a CNY 699 million loss for the first nine months of the year. This led the manufacturer to announce that it expects to make a full-year loss. Widening losses came on the back of a 45% fall in sales to CNY 2.01 billion.

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