Gap between rivals in Germany grows -- Mixed fortunes

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Reporting burgeoning profits for the first half of the year, German turbine manufacturer Nordex is pulling well ahead of its local rival, Repower, now controlled by Indian wind turbine supplier Suzlon. For both companies, sales for the first six months of 2007 were up on the same period last year, but while Repower's profits plummeted more than 50%, net profits increased substantially for Nordex.

At EUR 323 million, Nordex' revenue was up 28% (EUR 71 million) on the EUR 252 million reported for the six months of 2006, with exports accounting for almost 82% of business. Earnings before interest and tax (EBIT) doubled from EUR 7.6 million last year to EUR 15.3 million. The improved performance, says Nordex, is in part thanks to interest gained on existing bank balances combined with a decline in the tax rate to 7.7% following the capitalisation of loss carryforwards.

In contrast, Repower's Fritz Vahrenholt says supplier delays and rising costs are behind a fall in its profits. At EUR 200.3 million, sales were up EUR 21.7 million on the EUR 178.5 million reported for the same period last year, but EBIT dropped to just EUR 0.33 million for the first half of 2007, from EUR 2.4 million last year. Post-tax profits are just EUR 44,000, compared with EUR 940,000 in the first six months of 2006. "There were still delays on the part of our suppliers at the beginning of the second quarter so the number of installed turbines in the first half of 2007 was lower than we had expected and projected," says Vahrenholt. He adds: "We have now managed to get delivery problems under control."

Investments in growth

On the cost front, Repower's bill for materials increased 28% (EUR 42 million) to EUR 193.7 million, which the company notes is equivalent to 84% of total operating performance (sale of turbines and wind farms, and proceeds from service and licences). Staff costs increased by 60% to EUR 20 million from EUR 12.5 million in the same period of 2006. "Investments in the future growth of the group, especially expansion of production capacity and the offshore activities, result in higher fixed costs, whereas sales increases will take place later," says the company.

Vahrenholt is confident Repower will still reach its targets for the whole of 2007, including an increase in sales to EUR 650 million from EUR 459 million in 2006, along with an improved EBIT margin compared with the 2.6% achieved in 2006. The margin for the first half of 2007 is only 0.14%.

Nordex improved its EBIT margin to 4.6% for the first six months, up from 3% for the same period last year. It expects to improve the figure further to 6% for 2007 as a whole on forecast sales of EUR 760-770 million, compared with EUR 514 million in 2006. For 2011, Nordex is targeting sales of EUR 2.5-4 billion and an EBIT margin of 9-12%.

A change in the ownership of Nordex may be on the way. Goldman Sachs, which holds 16.7% in the company, and CMP Management Partners, with 25.6%, have retained the services of an investment bank to look into a possible sale of all or part of their shares. The other shareholders in Nordex are Nordvest with 3.9%, HSH Nordbank with 3.6%, Hypovereinsbank with 4.1% and a free float of 46.1%.

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