Less development but more sales -- Drop in profits

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Gamesa's share price dipped after the company reported a 21% drop in net profits for the first half of 2004 compared to the same period last year. The culprit was Gamesa Energía, the company's wind farm development business, which has reported a 59% drop in net profits.

In contrast, the wind turbine making business, Gamesa Eólica, reports a 54% rise in revenues to EUR 43 million, resulting from sales of 733 MW of wind power plant so far this year, up 60% on the first six months of 2003.

Shareholders were also made uneasy when investment bank Dresdner Kleinwort Wasserstein changed its rating of Gamesa to negative following the completion of the company's 1000 MW wind plant sale deal with utility Iberdrola. Gamesa shares fell 11.4% in the first week of August, recovering slightly -- up around 3% the following week -- with the announcement by Gamesa Eólica of contracts, valued at over EUR 16 million for 21 MW in Germany and Portugal. In Germany, it will supply ten 850 kW machines to developer Maka Windkraft for its Fuerstenau plant in Ostwetfalen, while 3 MW turbines have been ordered by EBV Management Holding, Gamesa Energía's German project development division, for its Kugleber wind farm in Holzminden. The Portuguese contract is for two 2 MW units and two 850 kW turbines for projects in Lisbon by developer Tecneira.

Gamesa says its year-end net profit forecast of EUR 230 million, 14% up on 2003, is still on track, arguing slower first-half growth "is reasonable considering that wind activity is concentrated in the second half of the year." It says the profit drop for Gamesa Energía is mainly due to "the extraordinary concentration of wind plant sales to Iberdrola (395 MW) and Japan's Marubeni (65 MW) in the first semester of 2003." The development business, it adds, is currently building 600 MW, including 200 MW across Italy and Portugal.

The Spanish financial newspaper Expansión notes Gamesa shares represent the year's best performance on the Spanish stock exchange with an overall increase in value of 31.65%.

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