Gamesa H1 2013 results: improved profitability, 5.9% EBIT margin and €22M profit

• In a context of lower activity, group margins outstripped 2013 guidance as a result of optimising variable costs and reducing fixed expenses
• Operating and maintenance services contributed 16% of revenues and enhanced profitability
• Net financial debt amounted to 620 million euro, after the group generated 109 million euro in net free cash flow in 2Q 2013

26-7-2013 — /EuropaWire/ — Gamesa obtained 22 million euro in net income in the first half of 2013, compared with a loss of 33 million euro in the same period last year, despite the complex economic and sector situation. This positive result, together with growth in margins, continues the trend to improved profitability that commenced in the first quarter of 2013, in line with the commitments established in the Business Plan 2013-2015 and with the 2015 vision.Key financial figures 1H 2013 (vs. 1H 2012)¹: 

• Sales: 1,116 million (-26.4%)
• Sales in MW: 950 MWe (-16.6%)
• EBIT: 66 million (vs. 14 million, +376.2%) and EBIT margin: 5.9% (vs. 0.9%, +5 p.p.)
• Net Income²: 22 million (vs. -33 million)
• Net financial debt: 620 million (-33.9%)
• NFD/EBITDA: 2.2x (vs. 3.0x)
• Working capital/sales: 22% (vs. 31%, -9 p.p.)

Sales and order intake: Gamesa obtained 1,116 million euro in sales in the first half of 2013, reflecting the company’s strategy to control working capital by aligning manufacturing to deliveries in a context of lower demand.

Activity was 950 MWe, in line with 2013 guidance (1,800 MW-2,000 MW). Latin America+Southern Cone is still the main growth driver, accounting for 48% of sales, followed by Europe+Rest of the World (32%) and India (16%). The contribution by the US (4%) and China (1%) declined in 1H 2013.

Order intake rebounded strongly in the second quarter (612 MW), tripling the figure in the first quarter of 2013, driven by Latin America+Southern Cone and India and enabling the group to cover 90% of sales guidance for 2013. The order book amounted to 1,547 MW at the end of June 2013.

Operation & Maintenance (O&M) revenues (16% of the total) expanded by 18% in 1H 2013, to 180 million euro, i.e. far outstripping growth in MW under maintenance (+7%, 19,450 MW at 30 June), as the company is prioritising value over volume.

Sound financial position and growing profitability. Gamesa obtained 66 million euro in EBIT in the first half of 2013, providing an EBIT margin of 5.9% (vs. 0.9% in 1H 2012), i.e. above the guidance range for the year (3%-5%). Despite slower sales, profitability continues to increase based on the sales mix, increased productivity, sound execution of the fixed costs savings plan (-22% vs. 1H 2012) and the strong contribution by the services division (EBIT margin: 12.9%).

This improvement in profitability, together with the strategy to control working capital and capital expenditure (51 million euro, 48% less than in 1H 2012) reinforced the balance sheet and enabled net financial debt to be reduced by 33.9% in 1H 2013, to 620 million euro (2.2x EBITDA). Indebtedness plus non-recourse discounting declined to 706 million euro (vs. 944 million euro at 2012 year-end), after the company generated 109 million euro in net free cash flow in the second quarter of 2013.

Strict controls enabled Gamesa to end June with 494 million euro in working capital (down 50.5% year-on-year), i.e. 22% of revenues (compared with 31% last year).Gamesa expects lower seasonal fluctuations in sales volume and a faster pace of deliveries in the remainder of the year, which will enable it to reduce working capital and net financial debt in the second half.

As a result, Gamesa ended the first half of 2013 with results that are in line with the business plan and with 2013 guidance under a business model that is advancing towards the 2015 vision by cutting fixed costs, optimising variable costs, and focusing capex.

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