Gamesa back in the black

Gamesa ended 2013 with attributable net income of €45 million in 2013, compared with a loss of -€659 million in 2012, which was due mainly to writedowns.

This positive result, together with the improvement in margins, reinforces the company’s return to profitability that began early in the year and confirms the sound progress attained with the steps taken to make it more flexible and profitable and reduce its funding needs, exceeding the guidance for 2013 set out in the Business Plan.

Key figures 2013 (vs. 2012)2 and fulfilment of 2013 guidance
2013 Guidance
Sales2,336 million (-12.6%)
Sales MW: 1,953 MWe (-7.8%) 1,800-2,000 MWe
Recurring EBIT: 129 million (vs. 47 million, +175%)
Recurring EBIT margin: 5.5% (vs. 1.7%, +3.8 p.p) 3%-5%
 Net income: 45 million (vs. –659 million)
Net financial debt: 420 million (-15.2%)
NFD/EBITDA c. 1,5x  <2,5x
Working capital sales: 8.3% (vs.16.3%) c.15%

Activity: sales and order book.

Gamesa obtained €2,336 million in sales in the year, reflecting lower activity (-7.8%) and the impact of devaluation of the Brazilian real and the Indian rupee. However, despite this decline, the company increased margins.

In spite of the deceleration in China and the US, sales volume (1,953 MWe) is still at the high end of guidance under the Business Plan (1,800-2,000 MWe in 2013). Latin America is still the main sales growth driver, accounting for 49%, followed by Europe and the Rest of the World (24%) and India (22%). Activity stabilised during the year, with growth in the fourth quarter, a trend that is expected to continue in 2014.

The order book also improved during the year, expanding by 54% in the fourth quarter (878 MW) to end the year at 1,802 MWe, enabling the company to begin 2014 having covered 60%3 of projected sales volume for 2014 (2,200-2,400 MWe).

Operating and maintenance services contributed €365 million in revenues, i.e. 16% of the total. The average fleet under maintenance amounted to 19,657 MW in 2013.

Profitability and a sound balance sheet. Operating break-even point at 1,300 MW

Gamesa obtained €129 million in recurring EBIT in 2013, providing a recurring EBIT margin of 5.5% (vs. 1.7% in 2012), i.e. above the guidance range for the year (3%-5%).

Profitability continues to rise based on the project mix, sound execution of the plan to save on fixed costs (savings of €119 million vs. 2011), optimization of variable costs, and the contribution from the services division, whose EBIT margin was 11.7%. As a result of these measures, the operating break-even point was reduced by 35% with respect to December 2012, to 1,300 MW, enabling the company to be profitable throughout the entire cycle.

This improvement in profitability, together with control of working capital (8.3% of revenues, vs. 16% in 2012) plus focused operating capex (€110 million) and the new wind farm business strategy, strengthened the balance sheet and enabled Gamesa to reduce its funding needs.

Gamesa ended 2013 with net interest-bearing debt of €420 million (-15%), equivalent to 1.5 times EBITDA, i.e. well below the guidance ratio of 2.5x.

All of these initiatives, together with the free cash flow (€275 million) in 20131, enable Gamesa to fund its business plan organically and pay off the first tranche of the syndicated loan without have to refinance it in the capital markets.

2014 outlook and guidance

Gamesa expects onshore demand to expand by 20% worldwide in 2014, supported by improvements in wind energy’s competitiveness, energy needs in the emerging economies, and the recovery by the US market.

Gamesa projects a sales volume of 2,200–2,400 MWe in 2014, in view of the greater visibility on manufacturing and sales, the positive outlook for O&M, good positioning, diversification in sales and product, and the trend in the order book.

This recovery in activity and ongoing optimisation measures will enable Gamesa to attain an EBIT margin of over 7% at constant exchange rates.

Gamesa will continue to strengthen the balance sheet in 2014. The company projects capex in line with 2013 (<€110 million), adapting investment to market needs but maintaining competitiveness.

Growth in volume and profitability will enable the company to continue to create value for shareholders and to be profitable throughout the cycle.

In addition to the organic implementation of the Business Plan, Gamesa advanced in its offshore strategy through an outline agreement with Areva, which will give rise to a global leader in the offshore wind industry.

Guidance 2014

Sales: 2,200-2,400 MWe
Ebit Margin: >7%4
Working capital / sales: <10%
NFD/Ebitda: <1.5x
Net free cash flow: >0

1 Reduction in total net interest-bearing debt plus discounting without recourse vs. 2012.
2 EBIT and EBIT margin exclude non-recurring items amounting to -€5.6 million (mainly asset impairments due to the new electricity regulation in Spain). The year-on-year changes are calculated with respect to pro forma 2012 numbers, excluding €550 million of non-recurring items EBIT and with Energía USA classified under discontinued operations.
3 Coverage based on orders in December 2013 for production in 2014 with respect to mid-point of volume guidance for 2014 (2,200-2,400 MWe)
4 Margin using previous year’s average exchange rate