Windicator: Year ends in buoyant mood following raised forecasts

WORLDWIDE: The wind turbine industry ended 2014 in a buoyant mood as better-than-expected performance and raised forecasts dominated the third-quarter earnings season.

All five companies tracked by Windpower Monthly posted strong results, with three adjusting their full-year forecasts upwards accordingly. The latest figures confirm that the growing sense of optimism in the industry over the past 12 months has been justified and provides the clearest signal yet that efforts to cut costs and improve efficiency have worked.

A global decline in stock markets during the late summer and early autumn dampened the share price performance of some companies, but analyst sentiment continued to improve steadily: on 28 November, 60% of the total number of analyst ratings on wind power stocks, as tracked by Reuters, were positive — the first time this figure has been above 50% since early 2010.

Denmark's Vestas raised its 2014 forecasts for sales, profit margins and cash flow on the back of stronger-than-expected Q3 performance. Revenues were up 25.7% on the same period last year, driving a 143.3% increase in earnings before interest and tax (EBIT, or operating profits).

The company's net profit of €102 million ($125.7 million) marks a dramatic turnaround from its Q3 2013 net loss of €87 million. It provides the clearest sign yet that the decision last year to appoint a new CEO is paying off. The average forecast of nine analysts compiled by Bloomberg was for a €71 million profit.

Anders Runevad was brought in as chief executive a year ago after the firm issued a string of profit warnings, sending its share price into a tailspin. Runevad replaced Ditlev Engel, who had struggled to turn the company around as the wind industry was hit by overcapacity, falling state subsidies and fierce competition.

On the back of the latest figures, Vestas raised its 2014 revenue forecast from €6 billion to €6.4-7 billion, its EBIT before special items from a minimum of 6% to 7-8%, and its free cash flow from €300 million to €400-700 million.

Having shed a quarter of its workforce since starting a restructuring process in 2011, Vestas is now hiring again. Analysts have become more bullish on the company's stock, with 41.2% recommending a "buy", compared with 27.8% last quarter. At 28 November the company's stock was up 25.2% for the year, having slumped significantly from its June high-point of +74% after stock markets plummeted globally in early autumn.

Gamesa said it may beat its own guidance for full-year sales after posting strong results for a third consecutive quarter. The Spanish company grew revenues by 26.3% in the quarter to €680 million, with operating profits up 67.4% to €41 million. At €22 million, Gamesa's net income was well up on its Q3 2013 net profit of €9 million, though slightly down on last quarter's profit of €25 million.

Consistently strong performance over the first three quarters of 2014 led to Gamesa more than doubling its revenues over the same period last year, from €31 million to €64 million. The company said by the end of September it had taken orders for 2.167GW and was poised to meet or exceed its 2014 target sales range of 2.2GW-2.4GW. Gamesa repeated its earlier claim that its position of strength in key growth markets such as Brazil, India and Mexico leave it well placed for the future.

Gamesa's stock was up just 4.1% for the year to 28 November after it too was hit by a steep decline in September and October that virtually wiped out gains made earlier in the year. Half the analysts tracked by Reuters are currently posting a "buy" rating for the company's stock, up from one-third a quarter ago.

Nordex raised its full-year guidance for the second time during 2014 on the back of strong demand for its turbines in the US and Europe. The company said it expected sales of €1.65-1.75 billion, up from a previous target range of €1.5-1.6 billion.

Its third quarter revenues were up 27.7% — closely mirroring gains made by rivals Vestas and Gamesa — while its EBIT of €22.9 million was up 42.8% on last year, beating the €20.4 million average analyst forecast in a Reuters poll. Net profits of €8.1 million were double those of Q3 2013.

Nordex also now expects its EBIT margin to be 4.5-5%, compared with a previous target range of 4-5%. It said that performance has been particularly driven by a doubling of business in the Americas, while also pointing to an increase in sales in the EMEA region.

The company's stock fell sharply during the autumn sell-off but, unlike that of Vestas or Gamesa, recovered nearly all its losses by the end of November, when it was up 60.8% for the year. At that time, 72.7% of analysts followed by Reuters were posting a "buy" rating on the company's stock, compared with 55.6% three months earlier.

Suzlon is the only company of those followed by the Windicator to post a net loss in the third quarter, but at INR 6.34 billion ($102.6 million) this was 18.6% lower than the INR 7.5 billion net loss it posted in Q3 2013. The Indian company was even more successful in cutting its EBIT losses, which fell 76.5% from INR 2.2 billion to INR 511.7 million.

The improved performance came on the back of an 11.8% rise in revenues over the period, which the company said results from the launch of a new generation of products with better margins, a change in the market mix and better execution of orders. Its EBITDA (earnings before interest, tax, depreciation and amortisation) was positive for the third consecutive quarter.

Suzlon's continued progress means that the company ended 2014 in much better shape than in end 2013, when the company's ongoing difficulties prompted auditors to raise a red flag over its ability to generate adequate cash flow to support operations. At the end of November its stock was up 33.9% for the year, having been 220% up in mid-June.

Goldwind saw profits surge in the third quarter as orders increased and power revenue began to flow in from its own wind farms. Revenues reached CNY 6.15 billion ($1 billion) in the July-September period, 59% higher than in the same quarter of 2013. The Chinese company's Q3 net profit came in at CNY 864.2 million ($140.5 million) — more than 800% higher than for the same quarter a year ago.

The firm said the increased income is due to "a year-on-year increase in the group's sales of wind-turbine generators and revenue from power generation of wind farms".

Like other Chinese firms, Goldwind is benefitting from a renewed surge in its domestic onshore wind sector after several years of retrenchment. By 28 November its stock was up 51.9% for the year, while analysts' forecasts remained largely unchanged at just under 60% positive.