US composite wind blades maker TPI Composites Inc (NASDAQ:TPIC) turned to a loss of USD 12.1 million (EUR 10.8m) in the first quarter of 2019 due to reductions to revenues related to contracts with Senvion SA (ETR:SEN), the loss of production because of labour issues in Mexico, and higher costs.
The year-ago result was a net profit of USD 8.6 million. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) shrank to USD 2.9 million but remained positive. Net sales grew by 18% to USD 299.8 million.
The events that hit first-quarter performance are expected to continue impacting TPI’s results in the following quarters. Because of that the company adjusted its full-year forecast at the start of May and it now expects to finish the year in the red. The quarterly results and updated forecast are in the table.
| Results in USD million |
Q1 2019 |
Q1 2018 |
New 2019 forecast |
Old 2019 forecast |
| Net sales |
299.8 |
254 |
1.45 to 1.5 billion |
1.5 to 1.6 billion |
| EBITDA (loss) |
(4.1) |
21 |
62to 66.5 million |
N/A |
| Adj. EBITDA |
2.9 |
27.4 |
80 to 85 million |
120 to 130 million |
| Net profit (loss) |
(12.1) |
8.6 |
(1)to (3) million |
N/A |
| Earnings (loss) per share in dollars |
(0.35) |
0.24 |
(0.03) to (0.09) |
1.34 to 1.45 |
TPI still reaffirmed its target for adjusted EBITDA of USD 170 million to USD 190 million in 2020 on revenues of USD 1.7 billion to USD 1.9 billion.
“From our perspective, the first quarter was a small setback in our longer-term vision which continues to be supported by an increasingly improving global wind market outlook,” said CEO Steve Lockard.
SENVION
TPI explained that struggling German wind turbine maker Senvion currently accounts for roughly 4% of its total blade production capacity globally. The US company is engaged in discussions with its customer and there is also the potential opportunity to sell some or all of the blades produced for Senvion directly to the wind farm owners. Still, TPI has determined certain assets were impaired and it adjusted the revenue recognised by the amount not probable of collection at this time. This development will lower adjusted EBITDA in 2019 by about USD 16 million, it calculates.
MEXICO
A labour strike in Matamoros, Mexico in February affected TPI’s performance in the first quarter and is expected to impact volumes in the second and third quarters of 2019 too, while also bringing significant liquidated damages charges during the balance of the year. The lost volume, liquidated damages and compensation costs related to the settlement of the strike are expected to reach USD 25 million of total impact for 2019.
OTHER EFFECTS
TPI intends to take a restructuring charge of about USD 12 million in the second quarter of 2019 related to the consolidation of certain of its manufacturing facilities. This move is seen to reduce costs on an annual basis by some USD 11 million. The company also said that a number of "upside opportunities" mentioned in the fourth quarter 2018 earnings call related to additional volumes from certain locations, will not materialise in 2019 mainly because of constraints on availability of key raw materials resulting from the significant demand growth in the global wind industry.
(USD 1 = EUR 0.89)
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Senvion's 3.4M104 turbine. Source: Senvion SE 2014. License: All rights reserved.
