27 July 2016
GAMESA INCREASES GUIDANCE FOR 2016 AND ADVANCES WITH ITS LONG-TERM STRATEGY After the first quarter's strong commercial performance and profitable growth trends were sustained through the second quarter, Gamesa Corporación Tecnológica1 reached mid-year 2016 with record orders, sales and profitability. This performance in excess of projections made at the beginning of the year supports an upgrade of the 2016 guidance for volume (≥ 4.000 MWe) and operating profit (underlying EBIT ≥€430mn). Strong commercial activity arising from a growth-oriented competitive position resulted in record order intake in the second quarter:1,180 MW2, 16% more than in the same period of 2015, which raised order intake in the last twelve months to 4,259 MW. Total order intake in the first half was 2,211 MW and the order book stood at 3,228 MW at the end of June, exceeding 100% coverage3 of the initial low end guidance for volume in 2016 (3,800 MWe) which supports an upgrade to the full-year guidance (≥ 4,000 MWe). Financial performance in the first half was also strong, with revenues up 33% year-on-year to €2,192 million. Underlying EBIT amounted to €230 million4 in the first half, i.e. 70% year-on- year growth, and the EBIT margin was 10.5%, 2.3 percentage points more than in the same period of 2015. Underlying net profit4 pre-Adwen increased by 76% in H1 2016 to €151 million. Consolidating Adwen had a negative impact of €13.5 million on net profit; including this, net profit would have amounted to €138 million. This growth in profitability combined with focused investment in working capital, which was reduced by 53% y/y to 3.2% of revenues5, and in capex, which rose €30 million year-on-year, enabled Gamesa to achieve a 22% ROCE and maintain its commitment to a sound balance sheet, having ended the first half of 2016 with a net cash position of €287 million. Gamesa is advancing with its long-term strategy and has announced an agreement to merge with Siemens Wind Power to create a global leader in the wind power business. Main consolidated figures for H1 2016:- Revenues: €2,192 million (+32.8% y/y)
- Underlying EBIT pre-Adwen4: €230 million (+69.7% y/y)
- Underlying net profit pre-Adwen4: €151 million (+75.9% y/y)
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NFD (Cash)6: -€287 million (-0.5x EBITDA7 )
o MWe sold: 2,180 MWe (+47.1% y/y)
1 Gamesa Corporación Tecnológica engages in wind turbine manufacture, which includes the development, construction and sale of wind farms, as well as O&M services.
2 Firm orders and confirmation of framework agreements for delivery in the current and subsequent years, including 916 MW signed in Q2 16 and announced in Q3 16
3 Coverage based on total order intake through 30 June 2016 for activity in 2016 (>3,800 MWe in February 2016)
4 In the first half of 2016, underlying net profit pre-Adwen excludes items amounting to -€13,5 million relating
to Adwen (equity method). EBIT and underlying net profit pre-Adwen in the first half of 2015 are expressed net of items amounting to €29 million and €11.2 million, respectively. Year-on-year variations are calculated excluding those items in both years.
5 Ratio of working capital to revenues in the last twelve months.
6 Net financial debt means interest-bearing debt, including subsidised loans, derivatives and other current financial liabilities, less other current financial assets and cash.
7 Underlying EBITDA pre-Adwen in the last twelve months.
- Firm order intake: 2,211 MW (+20.5% vs. H1 2015)
8 Firm orders and confirmation of framework agreements for delivery in the current and subsequent years. Includes firm orders signed in Q2 2016 (916 MW) that were published individually in Q3 2016.
9 Book-to-bill ratio (MWe) in the last twelve months.
10 Coverage calculated as orders received for activity in 2016 with respect to the February 16 activity guidance for 2016 (> 3,800 MWe)
Order intake in the period included a strong contribution from new generations of products: the G114 2.0-2.5 MW, whose contribution rose from 45% of order intake in the first half of 2015 to 55% in the same period of 2016. Also, in geographical terms, Gamesa retains its leading position in developing markets while strengthening its presence in mature markets. India, China, the US and Brazil are the countries where order intake increased the most.
In this context of growing activity, Gamesa remained focused on controlling structural costs so as to maintain a low break-even point. As a result, at the end of June 2016, structural expenses11 amounted to 7.5% of revenues, i.e. within the objective for 2017 set in the business plan 2015-2017E.
Control of fixed costs, together with ongoing optimisation of variable costs and quality excellence programmes, enabled Gamesa to offset a lower relative contribution to group revenues from O&M (with profitability in excess of the manufacturing business) and steadily increasing total operating profitability. Additionally, during the first half of 2016, and particularly during the first quarter, profitability was boosted by a favourable project mix and scope. Meanwhile, performance by the currencies in which Gamesa operates had a negative exchange rate impact of 0.2 percentage points, in line with the 2016E guidance (± 0.5% p.p.). As a result, Gamesa ended the first half of 2016
with an underlying EBIT margin of 10.5%, over two percentage points higher (+2.3 p.p.) than in the same period of 201512, while underlying EBIT amounted to €230 million, 70% more than in the same period of 2015.
11 Fixed expenses with a cash impact, excluding depreciation and amortisation.
12 EBIT and EBIT margin in 2015 excluding non-recurring impact of capital gains from the creation of the Adwen joint venture, which amounted to €29 million in 1Q15 (no impact in the remainder of 2015).
As a result of firming growth in volume and revenues and of rising business profitability, Gamesa's underlying net profit (pre-Adwen) increased by 76% to €151 million13 in the first half of 2016.Adwen (equity method) had a negative impact of €13.5mn in the first half, taking reported net profit to
€138 million, i.e. 42% more than in H1 2015, when net profit included the positive impact of €29 million in gross capital gains on the creation of Adwen (€21 million net of taxes) and a negative impact of €10 million from consolidating Adwen.
In this environment of strong growth in activity and profitability, Gamesa continues to exert strict control over working capital, which stood at €129 million in the first half of 2016, equivalent to 3.2% of revenues, over 5 percentage points lower than in the same period of 2015. Average working capital has been reduced by €131 million in the last twelve months, to 4.1% of revenues, vs. 9.1% in June 2015.
Applying a modular capex policy tailored to growth needs, Gamesa invested €85 million in H1 2016,
i.e. 4.9%14 of LTM revenues, in line with the guidance for the year (4%-5% of revenues). Investments
in the first half were focused on new products (blade moulds and construction elements, plus appropriate logistics) in the regions in which Gamesa operates.
13 Underlying net profit pre-Adwen, excluding a -€13.5 million negative impact of Adwen in H1 2016. Impact of Adwen on net profit in H1 2015: +€11.2 million
14 Capex LTM / LTM revenues
Gamesa Corporación Tecnológica SA published this content on 27 July 2016 and is solely responsible for the information contained herein.
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