Nordex are out with guidance

All,

Nordex are out with guidance:

Conclusion: We cannot reconcile the increase in EBITDA and must assume that a fair share of it is due to another recognition in income from currency hedges or another one-off event.

The scantly reported 2018 numbers are difficult to interpret:

- Order Intake: on target. The published figure appears to relate to projects only (not services).  

- Sales: on target. E2.46bn vs. E2.48bn per model. Note that this number includes Change in Inventory.

- Working Capital: Has gone negative to -3.8%. When we only recently spoke to Nordex we agreed that that would be an unlikely prospect in the next two years, given the competitive nature of the market at present. March 2016 was the last time WC was negative. While Vestas continue to post negative WC, smaller players have to offer better payment terms to place their turbines. So this is unusual. However, it could be caused by a simple timing issue, where the company might have been paid approx. E100m for installations made, which we’ve still had as (change in) inventory.  We therefore think that this must be a temporary move. In the scheme of quarterly inventory movements, E100m is not particularly significant.

Astonishingly:

- EBITDA: significantly better than expected: at 4.1% = E101m vs. the 2.6% = E60m. 

- Gross Margin: Recent order intake does not suggest that an improvement in the gross margin is forthcoming. Our cost of sales are calculated bottom up, taking into account reported order prices from every region with their likely and observed lags. Thus we think the effect must have come in the Operating Income / Expenses section.

- Expenses: While we have certainly observed the company’s cost reduction program and factored it into our projections, savings vs 2017 range around E15m per quarter. That still leaves E40m of Q4 improvement unexplained - the 40 we seem to be missing. We have also not been told about any great new initiative that should save those E40m in Q4. 

- 2017: Other Operating Income of +E40m in Q4 2017 offset restructuring costs of -E41m in the same quarter. The former was due to income on currency hedges, while the latter related to cost reduction. So neither should reoccur and expenses should look very similar this year - except for the observed reduction in expenses following said program in Q417.

Our short on the name is suffering and we will review the position as we establish more clarity.

Wolfgang

Nordex: Nordex Group: Preliminary figures for 2018 confirm guidance

Nordex Group: Preliminary figures for 2018 confirm guidance

• Consolidated sales of EUR 2.46 billion reached

• EBITDA margin of 4.1 percent

• Working capital ratio improves significantly year-on-year from 5.3 percent to minus 3.8 percent

• Order intake in 2018 increased by 73 percent to 4.75 GW

Hamburg, 21 February 2019. The Nordex Group (ISIN: DE000A0D6554) today presented preliminary figures for financial year 2018. According to these figures, the company generated consolidated sales of EUR 2.46 billion (previous year: EUR 3.08 billion), which is within the guidance corridor of EUR 2.4 to 2.6 billion. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR 101.7 million (previous year: EUR 200.7 million). This represents an EBITDA margin of 4.1 percent (previous year: 6.5 percent), which is also within the expected range of four to five percent.

The company significantly improved its working capital ratio as a percentage of consolidated sales from 5.3 percent in the previous year to minus 3.8 percent, thus delivering on its guidance of coming in under 5 percent. This improvement was due to the continued successful implementation of the working capital program and the high order intake. In the reporting year, the Nordex Group invested EUR 112.9 million (previous year: EUR 144.3 million), thus meeting its guidance of around EUR 110 million.

In 2018, the Nordex Group lifted its order intake by 73 percent from 2.74 GW to 4.75 GW. Underscoring the company's global positioning, these orders are distributed across Europe (45.1 percent), North America (15.2 percent), Latin America (25.0 percent) and the rest of the world (14.7 percent).

The orders for the new turbine models N149/4.0-4.5 in Sweden (475 MW "Nysäter" project) and AW140 in India (300 MW "Mulanur" project) are especially noteworthy in this context.

"The year 2018 has shown that the measures initiated by us have been effective. Our new high-efficiency turbines have met with positive feedback from customers, and we continue to see strong demand. We started 2019 with a promising order book and have a solid financial structure, not least thanks to our successful working capital management," said José Luis Blanco, CEO of the Nordex Group, summarizing the situation.

The Nordex Group will present its audited figures for financial year 2018 including its guidance for 2019 on 26 March 2019.

About the Nordex Group
The Group has installed more than 25 GW of wind power capacity in over 40 markets and generated sales of around EUR 2.5 billion in 2018. The company currently has more than 5,500 employees. The Group's manufacturing network includes factories in Germany, Spain, Brazil, the USA, India, with plants in Argentina and Mexico to be added soon. The product portfolio is focused on onshore turbines in the 1.5 to 4.8 MW class which are designed to meet the market requirements of countries with limited available space and regions with limited grid capacity.