Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TPI Composites Inc (TPIC, Financial) reported a 23% sequential sales growth over the second quarter and a 3% increase over the third quarter of last year.
- The company achieved positive adjusted EBITDA and operating cash flows in the third quarter, marking an improvement over the first half of the year.
- TPI Composites Inc (TPIC) has secured additional US manufacturing capacity and plans to reopen its Iowa plant in mid-2025 to support GE Vernova's 2-megawatt platform.
- The company is investing in a 24/7 schedule at its Mexico facilities to increase production volume without significant capital expenditure.
- TPI Composites Inc (TPIC) expects the fourth quarter to be its strongest free cash flow generation quarter of the year, with all regions anticipated to be EBITDA positive.
Negative Points
- Adjusted EBITDA was lower than expected due to extended start-up and transition timelines, resulting in about $15 million in lower sales and impacting EBITDA by approximately $5 million.
- Inflation in Turkey negatively impacted the company's financials by $4 million.
- A $7 million change in estimate for legacy warranty matters was recorded, affecting the quarter's results.
- The company reduced its adjusted EBITDA outlook for the year to a loss of approximately 2% due to challenges experienced in the third quarter.
- TPI Composites Inc (TPIC) faces a 40% expected volume decline in Turkey for 2025, primarily due to inflation and reduced demand from Nordex.
Q & A Highlights
Q: Can you explain how potential new tariffs might affect your contracts with facilities in Mexico, and are there contingency plans to move production to the US?
A: William Siwek, President and CEO, explained that the impact of tariffs would depend on the specific contract terms, generally being included in the product cost. He noted that TPI is monitoring the situation but does not anticipate significant issues. Additionally, TPI has secured additional capacity in the US and will continue to explore US production options.
Q: With the expected 40% lower demand in Turkey, is the $100 million EBITDA target for 2025 still achievable?
A: Ryan Miller, CFO, stated that while they expect growth in the US market to offset some of the decline in Turkey, it is too early to confirm the $100 million EBITDA target for 2025. They are currently assessing the situation and will provide updates during the fourth-quarter earnings call.
Q: What factors are contributing to the lower demand in Turkey and Europe?
A: William Siwek noted that the lower demand is partly due to a shift to Chinese suppliers and broader market challenges in Europe, including regulatory issues such as permitting and transmission, which are causing delays despite the demand for wind energy.
Q: Can you provide details on the Iowa facility expansion, including the number of lines and expected revenue impact?
A: William Siwek confirmed that two lines are planned for the Iowa facility, with ramp-up expected in the second half of the year. The CapEx and start-up costs are minimal, and the facility is expected to reach full production by the fourth quarter, contributing to breakeven EBITDA for the year.
Q: Is TPI's service operations and maintenance business unit EBITDA positive, and what are the growth expectations?
A: William Siwek indicated that the service business was close to breakeven recently but is expected to be EBITDA positive moving forward. The company anticipates healthy growth in this segment in both the US and Europe.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
