Nordex fights with a headwind

Project delays, margin pressure, adjusted forecast: Although the business of the wind turbine builder Nordex is still running well, investors and experts are increasingly doubting the medium-term targets. This is also due to Donald Trump.

DUSSELDORF - From the perspective of Nordex boss Lars Bondo Krogsgaard everything is going "as planned". Sales are increasing, profit are up and the annual goals of the Hamburg wind power group are still "readily in reach", said the native Dane on Thursday with the submission of the quarterly figures. But the investors of Germany's third-largest producer of wind turbines are far less optimistic than Krogsgaard.

The Nordex share dropped on Thursday by some nine percent. Since the beginning of the year, the price has fallen by more than 40 percent. When Nordex was still listed on the stock exchange at the end of 2015 it was valued at more than 2.6 billion euros. Today, it is not even 1.9 billion euros. The reason: Nordex adjusted its sales and earnings forecast to the lower end of the targeted range.

Instead of a return on sales (EBITDA margin) of up to 8.7 per cent, Krogsgaard considers a margin before tax, interest and depreciation of at least 8.3 per cent to be realistic for 2016. At the same time, sales in the year as a whole will not be much higher than EUR 3.35 billion as individual projects are delayed. The subsequent beginning of the construction of the windmills would lead to a "shift in sales realization". However, investors and industry buyers are even more concerned about whether Nordex will actually be able to meet its medium-term targets.

"Nordex has identified three markets -- Germany, India and the United States -- in which the Group wants to grow particularly strongly. But I am skeptical as to whether Nordex can suceed to grow further in the German market, "said Sven Diermeier to Handelsblatt. The analyst of Independent Research points out that the political framework for wind energy is deteriorating.

Instead of state-guaranteed remuneration, wind farm operators will have to compete for the amount of subsidies from 2018 onwards. The company content to earn the least amount of money is awarded. Through this tender model and an overall strengthened competitive pressure, Diermeier expects that the German market, in which Nordex will generate the bulk of its sales, will shrink by 2018 at the latest.

"The medium-term targets of Nordex to increase sales to 4.2 billion by 2018 are very ambitious," explained Diermeier. In addition, the analyst sees the election of Donald Trump as an increased risk for all companies involved in solar and wind power technology. After all, China is the second largest market for renewable energies worldwide.

Translated from German to English via Google Translate


NOV 10 2016
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