Gamesa to Lose $861 Million in 2012 After Restructuring

Gamesa Corp. Tecnologica SA, Spain’s biggest wind turbine-maker, expects a net loss of about 640 million ($861 million) euros in 2012 after one-time expenses of 585 million euros from its cost-cutting program.

Profit was about 7 million euros before interest, tax and restructuring expenses from cost cuts and writedowns, Chief Executive Officer Ignacio Martin said yesterday in a conference call. That compares with about 131 million euros in 2011.

“Very few of these writedowns are cash-related,” Martin said. “Most are accounting issues. It means that the balance sheet of Gamesa when looking to the future is a very solid one.”

The estimates are the first update of progress on a program announced in October to eliminate 1,800 jobs amounting to 20 percent of the workforce by the end of the first quarter. About 800 workers had already been let go before that decision.

Gamesa’s shares jumped as much 8.2 percent in Madrid and traded at 2.11 euros, up 5.9 percent, as of 9:35 a.m. local time. The 1.6 million shares traded in the first 35 minutes were more than half of its average daily volume in the past three months.

“The balance sheet clean-up undoubtedly puts Gamesa at a better position to face the industry’s challenges,” Banco BPI analyst Flora Trindade wrote in an e-mailed report today. The restructuring measures “set the basis for the group’s targeted profitability improvements.”

Costs Reduction

The manufacturer intends to close more than a third of its offices, reduce debt and expand its turbine-servicing unit under a strategy stretching through 2015.

It’s targeting a 100 million-euro reduction in fixed costs and has already reached 90 percent of that goal, Martin said. Gamesa in 2012 generated 214 million euros of cash and reduced its net debt to 496 million euros, staying in “full compliance” with its loan covenants, Gamesa said on its website. Martin said the company doesn’t plan to pay a dividend for 2012.

The company has also decided to sell U.S. wind farm assets valued at 104 million euros, according to a presentation posted yesterday on its website.

Gamesa has reported three consecutive quarters of net losses, including its first half-year loss since 2000. In a Feb. 7 presentation, it blamed its slump on a drop in electricity demand, changing clean-energy regulations in Spain and an excess of industrial capacity.

Profit Margin

It’s seeking to raise its profit margin before tax and interest to 3 percent to 5 percent this year and as much as 10 percent in 2015. Martin yesterday reiterated the company’s 2013 margin guidance.

Gamesa is due to announce fourth-quarter earnings on Feb. 28. Yesterday’s announcement was made after the close of Madrid trading. Shares yesterday rose 1.6 percent in Madrid to 2 euros. The stock has gained 20 percent this year.

In October, Gamesa forecast 2013 sales totaling 1,800 to 2,000 megawatts, rising to as much as 2,400 megawatts in 2015. The manufacturer plans to develop two new turbine models, rated at 2.5 megawatts and 5.5 megawatts, the latter for use at sea.

Last year, Gamesa dropped out of the top five turbine makers by market share, according to preliminary data from Navigant Consulting Inc.’s BTM Consult unit.

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