FY12 results for the onshore turbine maker came in slightly better than our 2H12 forecast that was largely based on management guidance.
- Revenue was €1.1 billion against our €1.0 billion forecast on good growth in the EMEA region and an increase of “more than 20%” in the service business.
- Adjusted EBIT of €14 million against our forecast of €10 million, this is before the previously announced €75 million restructuring charges for cutting US and Chinese capacity.
- Significantly better working capital management than we anticipated.
FY13 outlook was raised with order intake up 14%. Guidance is now for €1.2-1.3 billion revenue and EBIT of €24-39 million. We are encouraged by several developments:
- The growth in the order book is impressive, showing that Nordex’s larger (2.4-2.5MW) low wind speed offering is competitive and attractive. We also hear from developers that Nordex has a much better responsiveness and customer service than several of its competitors. It looks to have won share.
- We view the 20+% service growth as an important driver in improving the quality of earnings as it represents recurring revenue typically at a better margin.
- While the preliminary announced gross margin is not fully comparable, fixed cost cutting looks impressive and sustainable as capacity and staff have been reduced.
- The working capital improvement is particularly impressive.
We have run our preliminary forecasts based on capturing only a c50% of BNEF’s Nov-12 onshore forecast installations thereby allowing for share declines to maintain pricing and payment terms as well as for Nordex’s lower penetration of Latin America and Asia.
The stock price reaction has been strong at +17% on the day but is exacerbated by short covering. We hope and expect this will now help support stock prices across the supply chain. There is good growth available outside of Southern Europe, especially in Emerging Markets. Additionally, we are hopeful for some upside on global turbine installation forecasts. Our favourite picks among the turbine makers remain Vestas and Gamesa.