Nov 22, 2011 - As the financial and debt crises pushed banks to tighten up on credit and project finance for renewables became scarce, the wind industry dynamics began to change and after developers, now wind turbine manufacturers seem to be the next in line to feel the pressure of austerity measures.
by Mariyana Yaneva
The strong growth in the wind power industry over the 2005-2008 period led to bottlenecks in the supply chain. However, the credit crisis dried up project finance for renewable projects and order flow slowed to a trickle.
Coupled with the regulatory changes that are currently happening in the mature western European markets and the debt crisis unfolding in southern Europe, that certainly means one thing - tough times for European wind turbine manufacturers.
This month alone, several of the biggest wind turbine makers issued profit warnings or announced cost cutting measures.
VESTAS
Danish wind-turbine maker Vestas Wind Systems A/S (CPH:VWS) dropped its 'Triple15' growth target to achieve revenue of EUR 15 billion (USD 20.53bn) and operating margin of 15% by 2015 citing the weak economic development.
Dropping these ambitions, Vestas will as well launch a new company organisation and cut fixed costs by EUR 150 million by 2012. Further details on the changes, which will also comprise job cuts, will be announced on February 8, 2012, the company said.
Vestas plans a high single-digit operating margin in the medium term and a hike in market share. Revenue in the service segment is seen to rise faster than that in wind power, according to the firm.
Chief executive Ditlev Engel said, "Vestas is the world's largest renewable energy company, and we intend to emerge stronger from the financial crisis. Consequently, in addition to adjusting our organisation, we also need to substantially reduce our fixed costs. In a number of markets, our fixed costs are too high relative to the market situation that is likely to develop. Unfortunately, this will lead to redundancies across Vestas in 2012."
After releasing preliminary third-quarter figures on October 30, Vestas confirmed on November 9 a turnover of EUR 1.337 billion, down from EUR 1.916 billion in the same period last year, which led to an operating loss before one-off costs of EUR 92 million compared with a profit of EUR 271 million in the prior-year period. Pre-tax profits dropped by EUR 136 million to a EUR 84 million loss and the company slipped to a net loss of EUR 60 million from a profit of EUR 187 million a year earlier.
Vestas guides for full-year revenue of some EUR 6.4 billion, down from formerly forecast EUR 7 billion, and for operating margin of around 4%, down from 7%.
NORDEX
German wind-turbine maker Nordex (ETR:NDX1) also felt the chill of the sovereign debt crisis in Europe. Rising equity requirements imposed on banks led to the postponement of projects due to the difficulty in providing finance.
As a result, Nordex said it was lowering its sales target for 2011 to EUR 920 million from EUR 1 billion.
Sales are now expected to fall short of expectations by around EUR 80 million in the fourth quarter, cutting Nordex’s operating earnings by EUR 20 million and result in an operating loss before one-off costs of EUR 10 million.
Since summer 2011, Nordex has undertaken measures for returning to profitable growth next year. Last August, the company's management decided to cut the structural costs by EUR 50 million in the short term in order to safeguard profitability. The necessary measures have since been defined in full and will be implemented once consultations with the employee representative bodies are completed in December 2011. Savings will thus take full effect as of 2012. A further programme implemented in 2010 to lower product costs is also proceeding as planned and should make an additional contribution to earnings in 2012.
GAMESA
While situation looks gloomy for Vestas and Nordex, Spanish wind energy company Gamesa (MCE:GAM) cashed in on its exposure to emerging markets. The Spanish firm said it had already reached the lower end of its 2011 sales guidance of 2.8-3.1 GW, hitting 2.805 GW at end-September.
Gamesa said sales in India nearly tripled, representing 20% of the total. China accounted for 21%. In Latin America, sales increased fivefold, accounting for 16% of the total, and eastern Europe contributed 13%. Gamesa now holds a share of 10% of the fast-growing Indian market, and began manufacturing in Brazil three months ago, the Spanish company said.
Despite the macroeconomic situation and the short-term impact on demand of regulatory uncertainty in some wind markets, Gamesa expects to sell between 3,000-3,500 MW in 2012. In November, the company already has orders for 1,000 MW for 2012, more than the comparable figure twelve months earlier for delivery in 2011.
The company attributes the positive sales performance to its diversified sales and industrial operations in emerging markets as well as to cost optimisation and presence throughout the value chain.
So, Gamesa may truly be the evidence that despite volatility in the markets in the short term, wind power's long-term growth fundamentals remain solid.
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