Nordex nears full capacity

The German wind turbine maker faces the "the largest quarter in the company's history" at the end of this year's first nine months, when the OEM installed less than in the comparable period last period year. Up to 80 percent of the firm's annual expected revenue is yet to be realized.
Photo: Pascal Rossignol/Reuters/Ritzau Scanpix
Photo: Pascal Rossignol/Reuters/Ritzau Scanpix

Similar to many of its rivals, orders are pouring into Nordex. In this year's third quarter alone, a further 1.7 GW were added to the books, boosting intake in the first three quarters up to 4,742 MW -- a increase of almost 50 percent from last year.

On the other hand, completed installations in the first nine months were down by roughly 10 percent, or 85 fewer turbines, relative to the same period last year. Compared to how busy the sales team has been, this means the order book has surged 80 percent in one year, totaling to 5,621 MW.

This fact, to put it mildly, indicates that the German OEM is going to a have a busy late 2019 -- not least when considering the fact that the company's EUR 1.94 billion in revenue for Q1, Q2 and Q3 still needs a further 80 percent to make it into the upper end of 2019's guidance range for EUR 3.2-3.5 billion.

"We look forward to an extremely tightly packed quarter. Indeed, this is in fact the biggest quarter in the company's history," said Chief Financial Officer Christoph Burkhard during an investor teleconference following the presentation of the interim report.

Only one problem-stricken project

As a point of departure, this is, of course, a fine development. The opposite case would certainly not be preferable, as was recently illustrated by compatriot OEM Enercon, which announced 3,000 staff redundancies Friday due to the turbine maker's heavy reliance on the collapsing German market. However, such a historic business bustle toward the end of the year is hardy without potential issues.

"There is alway a certain chance of project delays at short notice, either caused by our customers, subsuppliers or even ourselves, and especially winter weather can lead to delays," the CFO said.

Nordex Chief Executive José Luis Blanco quickly noted, though, that everything is going according to plan. Since the quarter's end, the number of installed wind turbines has shot up from 476 to 700, Blanco asserted. Counting the more demanding turnkey orders Nordex is currently building, practically all projects are expected to reach completion on time.

"We are facing some problems in one project with limited significance for 2019 but with a potential impact in 2020. But that's only one of the ten projects we're executing," the CEO said.

Risks of scaling up

Without being specific to Nordex as such, rumors have also been stirring about projects in certain markets that might be hard pressed to erect their machines on schedule. This is seen as a combination of extreme haste in several markets as well as the firm's retooled manufacturing lines and implementation of new turbine types.

There's an upper limit to how much Nordex can produce, particularly concerning the Delta4000 model, which is becoming a more and more frequent entry in the order books. In the fist nine months of 2018, sales of the model N149-4.5 comprised 40 percent of the combined intake, while it was "close to 50 percent" of contracts for Q3 alone.

"The considerable growth in the Delta4000, let's say from 100 units to 6-700 units, is accompanied by typical ramp-up risks in getting the supply chain to keep pace. But we think we planned it all well, and we expect to deliver. There could be unplanned things that could influence or delay the the process of scaling up somewhat. But that's always a risk," Blanco said.

Cementing the inventory

In the course of this year, Nordex has felt the consequences of unforeseen risks. For instance, turbine tower maker Ambau went bankrupt in February, affecting Nordex both financially and in terms of supply.

Earlier this month, the OEM informed that it had secured supply for that at least that component. Nordex announced that it had produced its 1,000th cement tower and that an additional 1,000 units would be built before the end of next year.

Similarly, preparations to handle the company's largest quarter to date have left a mark on inventory levels, which in Q3 amassed freshly minted wares worth another EUR 175 million. The aggregate value of Nordex' stockpiles is now at EUR 1.56 billion -- more than twice last year's figure.

Room for more – in 2021

However, the upper limits of possibility are nearly reached for Nordex. This year, the manufacturer is planning to produce around 4 GW, while the goal for next year is 5 GW. Exactly how much of this will be installed during 2020 -- which is forecast to be at least as busy, due the OEM's US market comeback -- the company does not disclose. But the current fabrication setup leaves no room for added production.

"We have room to do more with limited capital expenditure. Unfortunately, however, not for 2020 deliveries. So, our capacity for 2020 deliveries, in terms of Delta400 products, is to a high degree right where it can be," Blanco acknowledged and continues:

"But with very limited investments, we can do considerably more in 2021, if the market wants this from us."

English Edit: Daniel Frank Christensen

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Recent years have mauled global turbine industry, and German Nordex also notes growing deficits. | Foto: Nordex

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