January-September 2016 Results

10 November 2016

9M 16 PERFORMANCE SUPPORTS NEW UPWARD ADJUSTMENT OF VOLUME AND PROFITABILITY COMMITMENTS

THE EXTRAORDINARY SHAREHOLDERS MEETING APPROVES THE MERGER AGREEMENT WITH SIEMENS WIND POWER.

After the first semester's strong commercial performance and profitable growth trends were sustained through the third quarter, Gamesa Corporación Tecnológica1 reached the first nine months of 2016 with record orders, sales and profitability. This performance in excess of projections made at the beginning of the year and in July supports a new upgrade of the 2016

guidance for volume (≥ 4.300 MWe) and operating profit (underlying EBIT range of €450mn-

€470mn).

Strong commercial activity arising from a growth-oriented competitive position resulted in record order intake in a third quarter:1,090 MW2, 8% more than in the same period of 2015, which raised order intake in the last twelve months to 4,343 MW. Total order intake in the first nine months was 3,301 MW and the order book stood at 3,242 MW at the end of September, reaching 100% coverage3 of the new guidance for volume in 2016 (≥4,300 MWe).

Financial performance in the nine months was also strong, with revenues up 32% year-on-year to €3,339 million. Underlying EBIT amounted to €340 million4 in the period, i.e. 65% year-on- year growth, and the EBIT margin was 10.2%, 2 percentage points more than in the same period of 2015. Underlying net profit4 pre-Adwen increased by 84% in 9M 2016 to €225 million. Consolidating Adwen had a negative impact of €18 million on net profit; including this, net profit would have amounted to €206 million.

This growth in profitability combined with focused investment in working capital, which was reduced by 31% y/y to 5.9% of revenues5, and in capex, which rose €57 million year-on-year, enabled Gamesa to achieve a 23% ROCE and maintain its commitment to a sound balance sheet, having ended September 2016 with a net cash position of €167 million.

Gamesa is advancing with its agreement to merge with Siemens Wind Power having reached the shareholders approval in the Extraordinary Shareholders' General Meeting held on October 25th.

Main consolidated figures for 9M 2016:

  • Revenues: €3,339 million (+31.8% y/y)

  • Underlying EBIT pre-Adwen4: €340 million (+64.9% y/y)

  • Underlying net profit pre-Adwen4: €225 million (+83.6% y/y)

    1 Gamesa Corporación Tecnológica engages in wind turbine manufacture, which includes the development, construction and sale of wind farms, as well as O&M services.

    2 Firm orders and confirmation of framework agreements for delivery in the current and subsequent years, including 498 MW signed in Q3 16 and announced in Q4 16

    3 Coverage based on total order intake through 30 September 2016 for activity in 2016 (≥4,300 MWe in November 2016)

    4 In the first 9 months of 2016, underlying net profit pre-Adwen excludes items amounting to -€18 million relating to Adwen (equity method). EBIT and underlying net profit pre-Adwen in the first 9 months of 2015 are

    expressed net of items amounting to €29 million and €4 million, respectively. Year-on-year variations are calculated excluding those items in both years.

    5 Ratio of working capital to revenues in the last twelve months.

  • NFD (Cash)6: -€167 million

    o MWe sold: 3,256 MWe (+41.5% y/y)

  • Firm order intake: 3,301 MW (+16.2% vs. 9M 2015)

Gamesa Corporación Tecnológica ended the first 9 months of 2016 with €3,339 million in revenues, 32% more than in the same period of 2015, due to strong growth in wind turbine manufacturing and sales. At constant exchange rates, revenues increased by 39% y/y to €3,525 million.

Revenues in the Wind Turbine Generator (WTG) division increased by 37% y/y, to €2,996 million, due to growth in activity volume to 3,256 MWe in the first 9 months, 42% more than in the same period of 2015. That growth was distributed over practically all regions: Europe/RoW, Latin America, the US and India. APAC (including China) was the only region that did not achieve double- digit growth in the first half, but it is expected to recover in the second half reaching a stable sales level y/y in the full year.

Revenues from O&M services amounted to €343 million, flat y/y and slightly higher at constant exchange rates, in line with the expected evolution for the full year 2016. During the third quarter the recovery trend in the fleet under maintenance, including the post-warranty fleet, that started in the first half of 2016 consolidates: fleet under maintenance grows 9.4% vs. December and 11.4% y/y to reach 22,954 MW while the post-warranty fleet grows 5.5% vs. December and 6.1% y/y to reach 16,099 MW. This trend is supported by growth in the fleet in emerging markets, in line with the projections of the business plan 15-17E.

Growth in sales volume in the period and the further improved outlook for 2016 are the result of the company's strong competitive positioning in markets with current and projected above- average growth rates, and of a positive general demand environment. 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.

As a result of that positioning, the company signed 1,090 MW7 of orders in the third quarter, 8% more than in the same period of 2015, which raised total order intake to 3.301 MW in the first 9 months of 2016 and to 4.3 GW in the last twelve months, i.e. exceeding the 4 GW projected for 2016 and equivalent to a book-to-bill ratio of 81.10. The order book at end-September 2016 stood

6 Net financial debt means interest-bearing debt, including subsidised loans, derivatives and other current financial liabilities, less other current financial assets and cash.

7 Firm orders and confirmation of framework agreements for delivery in the current and subsequent years. Includes firm orders signed in Q3 2016 (498 MW) that were published individually in Q4 2016.

8 Book-to-bill ratio (MWe) in the last twelve months.

at 3,242 MW, i.e. 7% more than at 30 September 2015, reaching 100% coverage9 of the minimum volume guided for the full year (≥ 4,300 MWe).

Order intake in the period included a strong contribution from new generations of products: the G114 2.0-2.5 MW, whose contribution rose from 47% of order intake in the first 9 months of 2015 to 59% in the same period of 2016. Also, in geographical terms, Gamesa retains its leading position in developing markets while strengthening its presence in mature markets. India, APAC and the US are the countries where order intake increased the most.

In this context of growing activity, Gamesa remained focused on controlling structural costs so as to maintain a low break-even point. As a result, at the end of September 2016, structural expenses10 amounted to 7.6% of revenues, i.e. within the objective for 2017 set in the business plan 2015-2017E.

9 Coverage calculated as orders received for activity in 2016 with to the activity guidance for 2016 (November

≥ 4,300 MWe)

10 Fixed expenses with a cash impact, excluding depreciation and amortisation.

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 profitability in excess of the manufacturing business) and steadily increase total operating profitability. Meanwhile, performance by the currencies in which Gamesa operates had a negative exchange rate impact of 0.2 percentage points, in line with the 2016E guidance (± 0.5% p.p.). As a result, Gamesa ended the first 9 months of 2016 with an underlying EBIT margin of 10.2%, two

percentage points higher (+2 p.p.) than in the same period of 201511, while underlying EBIT amounted to €340 million, 65% more than in the same period of 2015.

As a result of firming growth in volume and revenues and of rising business profitability, Gamesa doubled underlying net profit (pre-Adwen) for the period to €225 million12 in the first 9 months of 2016.

Adwen (equity method) had a negative impact of €18mn in the first 9 months, taking reported net profit to €206 million, i.e. 63% more than in 9M 2015, when net profit included the positive impact of

€29 million in gross capital gains on the creation of Adwen (€21 million net of taxes) and a negative impact of €17 million from consolidating Adwen.

In this environment of strong growth in activity and profitability, Gamesa continues to exert strict control over working capital, which stood at €253 million in September 2016, equivalent to 5.9% of revenues, 5 percentage points lower than in the same period of 2015. Average working capital has been reduced by €140 million in the last twelve months, to 3.2% of revenues, vs. 8% in September 2015.

11 EBIT and EBIT margin in 2015 excluding non-recurring impact of capital gains from the creation of the Adwen joint venture, which amounted to €29 million in 1Q15 (no impact in the remainder of 2015).

12 Underlying net profit pre-Adwen, excluding a €18 million negative impact of Adwen in 9M 2016. Impact of Adwen on net profit in 9M 2015: +€4 million

Gamesa Corporación Tecnológica SA published this content on 10 November 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 10 November 2016 16:59:06 UTC.

Original documenthttp://www.gamesacorp.com/recursos/hechosRelevantes/activity-report-9m-2016.pdf

Public permalinkhttp://www.publicnow.com/view/56138390080FC4FDB69FF43245EAD3970A3B63C7