Nordex Cost Cuts Raise Prospects for Best Turnaround

German wind-turbine maker Nordex SE is set to achieve its cost-cutting program this year and has sold out of its newest-model machine, raising prospects for the biggest earnings comeback among renewable-energy companies.

The unprofitable manufacturer told analysts in Frankfurt it’s on target to cut product costs 15 percent over three years and will seek a further 4 percent cut in 2013, Ralf Peters, head of Nordex investor relations, confirmed after the closed-door meeting yesterday. The Hamburg-based company sold the 60-plus production run of its 2.4-megawatt turbine that debuted this year, he said. The stock rose to its highest in more than four months.

“The worst may be over for Nordex,” Wais Samadzada, an analyst at Montega AG who in May changed his sell rating to hold for the first time since he began covering the stock in September 2010, said by phone from Hamburg.

Nordex rose 2.65 percent, to 3.449 euros a share, the highest closing price in Frankfurt since April 27. The Bloomberg Global Wind Energy index was 1.6 percent higher.

Share Performance

Nordex and market leader Vestas Wind Systems A/S of Denmark have respectively dropped 13 percent and 41 percent in stock markets this year as they struggle with narrowing margins. Wind-turbine makers across the globe have reduced prices to compete for orders with their Asian peers as U.S. and European governments cut clean-energy incentives to curb budget deficits.

Nordex will break even on an adjusted basis this year, compared with a per-share loss of 67 euro cents in 2011, according to analysts’ estimates compiled by Bloomberg. The reversal represents 22 percent of its current share price, the largest percentage gain among clean-energy companies forecast to make money this year on the 95-member WilderHill New Energy Global Innovation Index.

Vestas Return

Vestas, which today said it won an order for 8 turbines in Italy, also will return to the black on an adjusted basis. That gain will represent 18 percent of its share price, even after the stock fell by more than a fifth this week.

Nordex’s firm orders for the first half were little changed at 522 million euros ($686 million), avoiding the 30 percent contraction in new business experienced in the wider turbine sector estimated by Danish wind-energy adviser MAKE Consulting.

“Nordex is underexposed to the weakest markets such as the U.S. or China, compared to leading manufacturers like Gamesa and Vestas,” Julien Desmaretz, an analyst at investment bank Bryan Garnier & Co., said before the meeting yesterday. Gamesa Corporacion Tecnologica SA is Spain’s biggest wind-turbine maker. “The U.S. market is set to halve next year and Nordex will be less impacted than its peers.”


While Nordex’ new strategy unveiled yesterday looks “appealing,” the uncertain global demand outlook is likely to provide near-term headwind, Lauren Licuanan, an analyst with Commerzbank AG in Frankfurt said today in an e-mailed note.

Nordex will focus on selling to smaller developers, mid-sized operators and private equity investors, boosting its services business which allows for greater profit and trying to develop new turbines faster.

The N117, a 2.4-megawatt windmill designed for locations with low wind speeds that Nordex started building in July, “can generate higher margins,” Oliver Kayser, a spokesman for the company, said Sept. 4. The company will unveil two related models for medium and high wind-speed locations next year, Peters said.

Nordex is right to ditch plans to sell turbines for offshore wind farms and focus on machines sized at about 2.5 megawatts, said Montega’s Samadzada.

It “has very good prerequisites to survive the consolidation process that should last another 18 months and emerge from it as one of the leading niche players for this turbine class.”

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