Company Results: Renewable Markets Still Unsettled

Although the latest quarterly results reveal that the renewables market remains a turbulent space with little by way of clear trends emerging, some players are beginning to see grounds for optimism.

For example, in the wind sector, Spanish manufacturer Gamesa recorded a 29 percent growth in net income and MW sold, a significant improvement on the first quarter of 2010 when the company’s net profit fell 75 percent. The company attributed this growth to progress in internationalisation — wind turbine sales were up to 1,292 MW, all outside Spain — together with efficiency in its business lines.

Turbine deliveries doubled in the period, to 1,106 MW, with the U.S. and India each accounting for over 200 MW. Furthermore, Gamesa claims a backlog for 2011 amounting to 2,270 MW in June, covering 77 percent of its sales guidance for the year (2,800-3,100 MW). In this quarter the company adds that it has received orders for 564 MW for delivery in the year — up 65 percent with respect to the same quarter in 2010 and up 93 percent with respect to the first quarter of this year.

In the first half of this year Gamesa’s consolidated revenues amounted to €1297 million ($1.76 billion), up 26 percent on the previous year’s figures with the Wind Farm Development and Sale unit ending the first half with an EBIT of €3 million ($4 million), contrasting with a €10 million ($13.6 million) loss in the first half of 2010.

Results from Vestas, meanwhile, show “a difficult” first quarter, followed with figures which report the company generated half-year revenue of €2461 million ($3.35 billion), an increase of 31 percent on the first half of 2010. However, although EBIT amounted to just €8 million ($10.9 million), against a loss of €219 million in the first half of 2010, Vestas seems to have turned things around. In the previous quarter Vestas posted a loss of €69 million ($94 million), causing its share price to immediately fall by eight percent.

The half-year intake of orders was 2,895 MW, and the backlog amounted to €8 billion ($10.9 billion) as at 30 June 2011. In the first half, the company delivered close to 2 GW of turbines, up 25 percent, on something over 1,000 machines, an increase of 38 percent.

Orders covering almost all the expected revenue of €7 billion ($9.54 billion) for 2011 have already been secured, and the outlook for revenue, EBIT margin and free cash flow is maintained. In spite of the macro-economic and financial uncertainty, Vestas still expects firm and unconditional orders of 7-8 GW in a market that it says remains fiercely competitive. According to the company, Europe and Africa are still expected to contribute about half of its orders, the Americas and Asia-Pacific about 25 percent each.

In a recent ad hoc bulletin, Nordex said that while it is still on track to achieve revenue of €1 billion ($1.36 billion) in 2011 its EBIT target is now not expected to be reached until 2012, with the company blaming structural costs and continued price pressure. This is despite a reported order intake up 59% to €522.4 million ($712.3 million). Nordex says its personnel and operating costs are to be cut by around €50 million ($68.1 million) and it is examining options for strategic alliances in Asia and offshore.

In the first half of 2011, revenues rose by 15 percent to €403.3 million ($549.9 million), compared with the previous year’s €349.8 million, underpinned by an expanding US business, which now accounts for 25 percent of revenues, more than double the previous year.

Even so, EBIT dropped to €1.6 million ($2.18 million), compared with the 2010 figure of €7.1 million ($9.68 million). The company reported a loss of €4.1 million, mainly due to net finance expenses of €7.4 million ($10 million), it says. In its outlook Nordex says that in view of the “intensive competition” it expects to report low, but positive, earnings for 2011.

For its first quarter report, Hamburg-based REpower Systems Group increased its sales by approximately 23 percent to €262.5 million ($357.9 million), compared to the previous year’s €213.1 million ($290.5 million), in the first quarter of the 2011/12 fiscal year. Total performance grew by nearly 22 percent from €204.0 million ($278 million) to €248.3 million ($338.5 million). Meanwhile EBIT was €10 million ($13.6 million), this compares with the €1.5 million ($2 million) in the equivalent quarter of 2010. After offsetting interest and other financing income and expenses, earnings before tax amounted to €7.6 million ($10.36 million), more then double the 2010 equivalent of €3.2 million ($4.36 million). REpower confirmed its forecast for significant sales and earnings growth in the 2011-2012 fiscal year.

Meanwhile, REpower parent group Suzlon Energy Ltd, reported its earnings for the quarter ending June by showing a significant turnaround. With its first quarter reportedly showing an 80 percent year-on-year growth in revenues to see Rs. 4326 crore ($980 million) and an EBITDA of Rs. 490 crore ($111 million) compared with a loss of Rs. 546 crore ($124 million) in the first quarter of the previous financial year.

In its market outlook, Suzlon says that despite the challenges in developed markets, the wind industry continues to grow with strong momentum in emerging markets and offshore. Recent policy developments, such as the planned phase out of nuclear in Germany and carbon pricing being introduced in Australia, have placed an increased emphasis on renewables, translating to a positive outlook even in developed markets over the mid-to long-term, they say.

Turning to the solar sector, First Solar, Inc., announcing its results for the second quarter of 2011 showed net sales of $533 million, down $34.5 million from the first quarter of 2011. It says this is primarily due to lower average selling prices (ASPs) as well as solar policy uncertainties in Italy, Germany and France, although the net income decrease was partially offset by higher volumes sold.

Rob Gillette, CEO, said: ‘We expect stronger performance in the second half of 2011 as we build projects from our systems pipeline, develop promising new markets, execute our cost reduction roadmaps and continue to improve module efficiencies.’

First Solar’s updated 2011 guidance shows net sales of $3.6 to $3.7 billion and an operating income of $900 to $960 million.

MEMC Electronic Materials, Inc. also reported second quarter 2011 results recently, reflecting year-on-year growth in revenue despite a sharp slowdown and weaker pricing in solar wafer markets.

Revenue for the second quarter was $745.6 million, including $149.4 million resulting from the resolution of a long-term wafer supply agreement with Suntech Power Holdings Co., Ltd. which included an unfulfilled take-or-pay arrangement. This represents an increase of 66% from $448.3 million in the second quarter of 2010 and an increase of 1% from the 2011 first quarter. Excluding the Suntech contract resolution, revenue was down 19%, which the company said was due to weaker solar wafer pricing and volumes. MEMC reported net income for the 2011 second quarter of $47.3 million, compared to a net loss of $4.5 million in the first quarter.

Solar Materials revenue was $323.1 million, a decrease of one percent from the 2011 first quarter and an increase of 92% from the 2010 second quarter. Excluding the Suntech contract resolution, revenue was down $152.6 million, driven by lower wafer volume and prices, but was up slightly year-over-year as a result of higher wafer volume.

Segment operating profit was $89.2 million, compared with $39.4 million in the 2011 first quarter.

Given the downturn in the solar upstream supply chain and the softening of semiconductor demand, MEMC said it is revising its guidance for 2011. The company now expects 2011 sales to be in the range of $2.7-$3.0 billion.

In the inverter sector Fronius recorded a 52 percent increase in sales, with a turnover of €499 million ($680.4 million), they proclaim it to be one of the most successful financial years in the company’s history. “This remarkable year is attributable to… the marked growth of many solar markets,” explained Otto Schuster, director of sales and marketing.

Looking ahead, the company believes a positive trend is set to continue in 2011. “We expect strong second half figures for the Solar Electronics division, as the governments in key markets such as Italy and Germany have given the green light for new photovoltaic funding models,” says Schuster.

SMA Solar Technology AG, announcing its first half figures, confirmed its sales and earnings forecast for 2011 and says it also anticipates a strong second half to the year.

For the first half of 2011, 3.1 GW of inverter output was sold, worth €715.0 million ($974 million), due to a significant upturn in business in the second quarter of the year, SMA says, when it doubled its inverter output sold compared with the first three months of the year.

Nonetheless, SMA believes installed PV capacity for the first half of 2011 to be below the previous year’s level. “The debate surrounding the expansion of photovoltaic energy has deeply unsettled end-customers in major solar markets and led to a reduction in their willingness to invest,” stated Pierre-Pascal Urbon, CEO and CFO. That said, fundamental data for the solar industry has improved over the last few months. “The broad social consensus that now surrounds the intensified expansion of photovoltaic energy, the favourable interest level and the significantly reduced specific costs of constructing a solar power plant compared with the beginning of the year are good conditions for a significant rise in global demand in the second half of the year,” observes Urbon.

In the first half of 2011, SMA generated an EBIT of €103.7 million compared with 2010’s €219.9 million ($299.8 million). Consolidated net profit was €73.5 million ($100.2 million), down on the previous 2010 figure of €158.2 million ($215.7 million).

All in all these results appear to show that while the renewables sector remains largely bouyant, it is far from plain sailing to be a success in an increasingly constrained market.

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