Gamesa Posts Profit on Lower Costs, Emerging Market Boom

Gamesa Corp. Tecnologica SA (GAM)’s cost reduction program may yield further gains to earnings after the Spanish wind turbine maker said its turnaround plan produced a profit in the third quarter and brought a sales target closer.

“Gamesa’s cost-saving actions, including both fixed and variable costs, will continue into 2014,” Jose Arroyas, an analyst at Grupo Santander, wrote in a note sent by e-mail today. “This is positive as our belief was that management’s fixed-cost-savings actions would be substantially completed in 2013.”

The Spanish manufacturer yesterday said it had a margin on earnings before interest and tax of 5.4 percent for the first nine months, above its guidance for the year and exceeding the 0.2 percent margin for the same period last year. Its 31 million-euro ($41.6 million) profit for the period compared with a 67 million-euro loss for the same period in 2012.

The company said it expects Ebit margin for the year of least 5 percent, a “slight upgrade” that indicates “confidence,” according to Arroyas. It also expects to reach the upper end of a sales objective by selling 2,000 megawatts this year after signing 470 megawatts of orders in October.

Turbine makers including Vestas Wind Systems A/S (VWS), Gamesa and Nordex SE (NDX1) have been cutting staff and closing factories to reduce fixed costs after governments in some of Europe’s biggest wind markets reined in renewables support. Gamesa has announced 2,600 job cuts and will shut 24 offices to save 100 million euros a year. It’s seeking more sales in emerging markets.

“Our fundamental markets are going to be the emerging markets,” where power demand is growing more quickly than in Europe, Xabier Etxeberria, chief executive officer for business, said on a conference call with analysts yesterday. The company will focus “much more” on Brazil and India, and China also offers an opportunity, he said.

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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