23 February 2017

January-December 2016 Results AN EXTRAORDINARY YEAR IN WHICH GAMESA BEATS ITS GUIDANCE AND CONSOLIDATES THE FOUNDATIONS OF ITS LONG-TERM STRATEGY. Gamesa Corporación Tecnológicai ended 2016 with record orders, sales, profitability and cash flow generation, having beaten its guidance for the year - even after upgrading it twice. Strong commercial activity, the result of a growth-oriented competitive position, resulted in 1,386 MWii of new orders in Q4, 33% more than in the same period of 2015, which raised order intake in the last twelve months to 4,687 MW (+21% y/y). The order backlog stood at 3,552 MW (+11% y/y) at the end of the year. This strong commercial performance provides a high degree of visibility to this year's guidance (c. 5,000 MWe). Gamesa begins 2017 with orders covering 63% of its projected salesiii, similar to the position at the beginning of 2016. Revenues increased by 32% in 2016, to €4.612 billion. EBIT amounted to €477 million (+48% y/y), and the EBIT margin was 10.4%, 1.1 percentage points higher than in 2015. Finally, net profit rose by 77% y/y, to €301 million. Recognition of Adwen reduced 2016 net profit by €25 million. Higher profitability together with focused investment in working capital, which declined by €237 million to -4.9%iv of revenues, and in capex, which amounted to €211 million, enabled Gamesa to achieve 30% ROCE and €423 million net free cash flow while maintaining its commitment to a sound balance sheet and ending the year with a net cash position of €682 million. Gamesa is also advancing with its long-term value-creation strategy, having signed an agreement, approved by its shareholders on 25 October, to merge with Siemens Wind Power. Main consolidated figures for 2016
  • Revenues: €4,612 million (+31.6% y/y)
  • EBIT: €477 million (+47.9% y/y)
  • Net profit: €301 million (+77.0% y/y)
  • NFD (Cash)v: -€682 million

    o MWe sold: 4,332 MWe (+36.2% y/y)

  • Firm order intake: 4,687 MWvi (+20.7% vs. 2015)

Gamesa Corporación Tecnológica ended 2016 with €4,612 million in revenues, 32% more than in 2015, as a result of strong growth in wind turbine manufacturing and sales. At constant exchange rates, revenues increased by 38% y/y to €4,818 million.

Revenues in the Wind Turbine Generator (WTG) division increased by 37% y/y, to €4,141 million, due to growth in volume to 4,332 MWe, 36% more than in 2015. That growth was distributed over practically all regions: Europe/RoW, Latin America, the US and India. APAC (inc. China) was the only exception, due mainly to contraction of the Chinese market, where the pace of installations fell from 30.5 GW in 2015 to 23.3 GW in 2016, according to the latest figures from the Global Wind Energy Council (GWEC)vii.

O&M services revenues amounted to €471 million, i.e. stable in year-on-year terms and in line with expectations for 2016. The rising trend in the total fleet under maintenance and the post-warranty fleet was confirmed in 2016: +16% (to 24,331 MW) and +10% y/y to 16,827 MW), respectively. This growth was driven by expansion of the fleet in emerging markets, as envisaged in the business plan 15-17E, and by an improvement in the post-warranty renewal rate. Growth in sales volume in 2016 was the result of the company's strong competitive positioning and its presence in markets with above-average growth rates. Gamesa's strong competitive position is supported not only by a diversified geographic footprint (55 countries) but also by an extensive customer base, a portfolio of products and services focused on maximising the return on wind assets, and a presence throughout the wind value chain. In a year in which the pace of

installations ex-China came down from 32.5 GW in 2015 to 31.3 GW in 2016, according to the Global Wind Energy Council (GWEC)viii, Gamesa's strong performance enabled it to increase installations in the year by 27% to 4,262 MW, bringing its total accumulated figure to 38,875

MW by 2016 year-end, and positioning itself in the fourth position of the worldwideix wind ranking according to Bloomberg New Energy Finance. Also as a result of that positioning, the company signed 1,386 MWx of orders in the fourth quarter, 33% more than in the same period of 2015 and equivalent to a book-to-bill ratioxi of 1.3, exceeding the 1.2 ratio achieved in the same period of 2015. Total order intake amounted to 4,687 MW in 2016, equivalent to a book-to-bill ratio of 1.1xii, and the order backlog at 2016 year-end stood at 3,552 MW, 11% more than at the end of 2015. Strong commercial performance in 2016 enabled Gamesa to commence 2017 with a high degree of visibility with regard to its volume guidance, having attained 63% coveragexiii of the volume guided for 2017 (c. 5,000 MWe).

Order intake was very diversified in geographical terms, with a strong contribution from the new generations of products. In geographical terms, Gamesa retains its leading position in developing markets while strengthening its presence in mature markets. While India represents the highest volume orders in 2016, US and APAC, followed by Europe and Mexico lead the growth in new orders. As regards new product penetration, the G114 2.0-2.5 MW and G126 2.5MW platform's contribution rose from 50% of order intake in 2015 to 67% in 2016, and the first order for the G132-3.465 MW machine was signed in the fourth quarter of 2016, with the result that products with rotors larger than 100 metres accounted for over 70% of order intake in the year.

In this context of growing activity, Gamesa remains focused on controlling structural costs so as to maintain a low break-even point. As a result, structural expensesxiv amounted to 7% of revenues in 2016, i.e. below the target set in the business plan for 2015-17E, and 0.7 percentage points lower than in 2015. It should be noted that structural expenses increased in 2016 to support

the growth planned for 2017.

Control of fixed costs, together with ongoing optimisation of variable costs and quality excellence programmes, enabled Gamesa to offset a lower relative contribution to group revenues from O&M (with returns in excess of the manufacturing business) and steadily increase total operating profitability. Meanwhile, performance by the currencies in which Gamesa operates had a negative but limited impact of 0.1 percentage points, in line with the 2016 guidance (± 0.5 p.p.). As a result, Gamesa ended 2016 with an EBIT margin of 10.4%, 1.1 percentage points higher than in 2015, while EBIT amounted to €477 million 48% more than in 2015.

Growth in volume and revenues and rising profitability enabled Gamesa to increase net profit by 77% in 2016, to €301 million. Adwen (50% integrated in 2016 by the equity method) has had a negative impact in the amount of €25 million in 2016 and €4 million in 2015xv.

In this context of strong growth in activity and profitability, Gamesa continues to exert strict control over working capital, which stood at -€225 million at 2016 year-end, equivalent to -4.9% of revenues, i.e. 5 percentage points lower than in 2015. Average working capital has been reduced by €184 million in the last twelve months, to 1.7% of revenues, vs. 7.5% in 2015.

Gamesa Corporación Tecnológica SA published this content on 23 February 2017 and is solely responsible for the information contained herein.
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