Gamesa's Strategy

Mixed fortunes for Gamesa, in its first quarter results, announced yesterday.

Although revenues at the Spanish manufacturer are up, its profits fell by €21.7million over the period.

For a firm we’ve looked at previously, questioning some of its diversification strategies, the figures are broadly good news, particularly given the increased order intake the firm is seeing.

Indeed, this continued increase in orders, notably from India and South America, vindicates some of the business’s recent decisions.

Only last week, Gamesa announced that it would be spending a further 2 billion Rupees ($37million) for additional Indian factories, on top of the 5 billion Rupees it has invested in the country since January 2011.

Gamesa argues that India continues to make a lot of sense for its business, claiming that the margins found in Indian production now outweigh those found in China.

If this is the case, then Indian facilities naturally allow Gamesa to compete with the Chinese manufacturers on a more even footing. Compare this to fellow European manufacturer, Vestas, still looking to compete, in the words of Ditlev Engel with ‘Asia, plus freight’.

But it's not only India where Games is seeing strong growth. Orders from Latin America and the ‘Southern Cone’ (Argentina, Chile, Uruguay) provided 30% of MW sold – the highest across all regions. Given the commonalities in language, and the fact that the predominant South American wind market - Brazil - has started to reach over-capacity, it’s a first-mover advantage that should serve Gamesa well.

What’s crucial in the long run though, is whether these moves will enable Gamesa to meet the firm’s prediction that by the second half of 2012, profits will rise and costs will fall. Integral to this is not only having enough reserves to innovate for new designs, but also to secure ongoing operations and maintenance contracts for developments in new markets.

In the short term, investors will wear a decline in profits, providing the long-term strategy paves the way for future growth. We’ll know soon enough whether Gamesa has it right.

Mixed fortunes for Gamesa, in its first quarter results, announced yesterday.

Although revenues at the Spanish manufacturer are up, its profits fell by €21.7million over the period.

For a firm we’ve looked at previously, questioning some of its diversification strategies, the figures are broadly good news, particularly given the increased order intake the firm is seeing.

Indeed, this continued increase in orders, notably from India and South America, vindicates some of the business’s recent decisions.

Only last week, Gamesa announced that it would be spending a further 2 billion Rupees ($37million) for additional Indian factories, on top of the 5 billion Rupees it has invested in the country since January 2011.

Gamesa argues that India continues to make a lot of sense for its business, claiming that the margins found in Indian production now outweigh those found in China.

If this is the case, then Indian facilities naturally allow Gamesa to compete with the Chinese manufacturers on a more even footing. Compare this to fellow European manufacturer, Vestas, still looking to compete, in the words of Ditlev Engel with ‘Asia, plus freight’.

But it's not only India where Games is seeing strong growth. Orders from Latin America and the ‘Southern Cone’ (Argentina, Chile, Uruguay) provided 30% of MW sold – the highest across all regions. Given the commonalities in language, and the fact that the predominant South American wind market - Brazil - has started to reach over-capacity, it’s a first-mover advantage that should serve Gamesa well.

What’s crucial in the long run though, is whether these moves will enable Gamesa to meet the firm’s prediction that by the second half of 2012, profits will rise and costs will fall. Integral to this is not only having enough reserves to innovate for new designs, but also to secure ongoing operations and maintenance contracts for developments in new markets.

In the short term, investors will wear a decline in profits, providing the long-term strategy paves the way for future growth. We’ll know soon enough whether Gamesa has it right.

Mixed fortunes for Gamesa, in its first quarter results, announced yesterday.

Although revenues at the Spanish manufacturer are up, its profits fell by €21.7million over the period.

For a firm we’ve looked at previously, questioning some of its diversification strategies, the figures are broadly good news, particularly given the increased order intake the firm is seeing.

Indeed, this continued increase in orders, notably from India and South America, vindicates some of the business’s recent decisions.

Only last week, Gamesa announced that it would be spending a further 2 billion Rupees ($37million) for additional Indian factories, on top of the 5 billion Rupees it has invested in the country since January 2011.

Gamesa argues that India continues to make a lot of sense for its business, claiming that the margins found in Indian production now outweigh those found in China.

If this is the case, then Indian facilities naturally allow Gamesa to compete with the Chinese manufacturers on a more even footing. Compare this to fellow European manufacturer, Vestas, still looking to compete, in the words of Ditlev Engel with ‘Asia, plus freight’.

But it's not only India where Games is seeing strong growth. Orders from Latin America and the ‘Southern Cone’ (Argentina, Chile, Uruguay) provided 30% of MW sold – the highest across all regions. Given the commonalities in language, and the fact that the predominant South American wind market - Brazil - has started to reach over-capacity, it’s a first-mover advantage that should serve Gamesa well.

What’s crucial in the long run though, is whether these moves will enable Gamesa to meet the firm’s prediction that by the second half of 2012, profits will rise and costs will fall. Integral to this is not only having enough reserves to innovate for new designs, but also to secure ongoing operations and maintenance contracts for developments in new markets.

In the short term, investors will wear a decline in profits, providing the long-term strategy paves the way for future growth. We’ll know soon enough whether Gamesa has it right.