Against the background of recent developments, and pending release of results for Q1/2022, the Nordex Group (ISIN: DE000A0D6554) today updated its full-year guidance for 2022. The company now expects to generate consolidated sales of EUR 5.2 to 5.7 billion and to record an operating (EBITDA) margin of minus 4 to 0 percent. The updated guidance takes into account direct as well indirect effects expected as of today of the war in Ukraine and one-off expenses for reconfiguration in the production footprint that for lack of sufficient visibility could not be included in the forecast published at the end of March. In addition, the updated guidance also includes anticipated effects from supply chain disruptions coming from China and additional costs and impacts on the company’s business in connection with the cyber security incident of 31 March 2022. Originally, the Nordex Group had guided consolidated sales of EUR 5.4 to 6.0 billion and an EBITDA-margin of plus 1.0 to 3.5 percent before any costs related to footprint reconfiguration and geopolitical events. Expectations for capital expenditure at around EUR 180 million and the working capital ratio of below minus 7 percent remain unchanged.
This assessment is based on the knowledge gained and impacts identified to date in the context of the preparation of the results for Q1/2022. The report for the first quarter 2022 is expected to be published on 20 June 2022.
External events impacting the industry and the company:
The direct impact of the war in Ukraine on Nordex Group’s business can now be discerned more precisely: the company expects to lose sales of around EUR 200 million and corresponding margins in Ukraine. Further working capital write-downs due to projects that are stopped or will not be carried out have to be anticipated. The total direct effect of this could amount up to 1 percentage point on the EBITDA-margin in FY2022.
Still, high volatility and ongoing disruptions in supply chain and logistics, especially in sea freight bookings, as well as substantial bottlenecks in steel and other critical components are proving to weigh heavily on projects in execution, partly as indirect consequences of the military conflict. Scope and extent of such impacts are difficult to gauge and even less so to predict. But, overall, the company expects these factors to have a negative impact on EBITDA-margin in FY2022 of around 2.0-2.5 percentage points.
The Company’s announced reconfiguration of the production footprint on the other hand is taking shape – the planned closure of one of the Spanish production facilities for nacelles has now been completed and negotiations for the cessation of production of rotor blades in Germany are well advanced. The Nordex Group anticipates that one-off costs in this context will reduce the EBITDA-margin by up to 1.5 percentage points; this impact on the EBITDA-margin should be recovered in two to three years from savings in the production costs.
However, in addition to the above, the sector and the Nordex Group specifically encountered another two headwinds that further deteriorate originally anticipated margins this year: (i) The lockdown in Shanghai and other municipalities in China is an aggravating factor for the supply chain disruptions and mounting component availability issues, which are already affecting our European assemblies and projects worldwide. (ii) The cyber security incident at the end of March 2022, which forced the company to shut down various IT systems in different business areas as a matter of precaution, had constrained operations. Albeit there being no indication that wind farms and third-party systems have been affected, the company’s corporate IT infrastructure has had to be recovered. The resulting delays and follow-up costs add to the direct costs incurred in connection with the recovery and the measures taken to strengthen the Nordex Group’s IT infrastructure. Management today expects the supply chain delays and the cyber incident to have an impact on the EBITDA-margin in FY2022 of up to 1 percentage point.
“Due to these numerous and unexpected upheavals, the year 2022 will be much more difficult than we had originally expected. The impact of the Ukraine war and lockdowns in China on the global economy and supply chains are affecting the wind industry and also weigh on our sales and margin development. We have to expect that some of these effects could accompany us into next year,” says José Luis Blanco, CEO of the Nordex Group. “For the medium term, we maintain that the global momentum for renewables with ever more ambitious goals to counter climate change will accelerate and also lead to a significant expansion of onshore wind.”
Profile of the Nordex Group
The Nordex Group has installed over 39 GW of wind energy capacity in over 40 markets and generated sales of approximately EUR 5.4 billion in 2021. The company currently employs over 8,600 people. The production network includes plants in Germany, Spain, Brazil, the USA, India and Mexico. The product range focuses on onshore turbines, especially in the 4 to 6.X MW class, which are designed to meet the market requirements of countries with limited expansion areas and regions with limited grid capacities.