TPI Composites (TPIC) 8 Aug 24 2024 Q2 Earnings call transcript

TPI Composites, a global leader in composite wind blades, held its second quarter 2024 earnings call, providing insight into the company's financial performance and strategic plans. The call, led by CEO William Siwek, highlighted the company's journey through a challenging first half of the year, with a focus on the promising prospects for the second half and beyond.

A Year of Transition and Recovery

TPI Composites faced a tumultuous first half of the year, with a decrease in net sales and adjusted EBITDA due to several factors. The company's emphasis on quality, driven by new blade models, slowed down start-ups and transitions at two of its facilities, impacting sales by approximately $20 million. Additionally, the unexpected cancellation of purchase orders from Nordex for the Matamoros facility led to significant losses and operational inefficiencies. Despite these challenges, TPI Composites remains optimistic about the second half of the year, anticipating a profitable period after the challenging initial months.

Strategic Shifts and Market Outlook

The company's strategic shifts, including the divestiture of its automotive business, are expected to contribute to a more focused and profitable future. TPI Composites' blade facilities in India and Turkey continue to perform well, with 257 blade sets representing 1.2 gigawatts of capacity in the second quarter. The company expects all regions to be profitable in the second half, setting the stage for a strong launch into 2025, with a targeted adjusted EBITDA of at least $100 million and positive free cash flow.

Market Prospects and Financial Guidance

TPI Composites remains confident in the long-term prospects of the wind energy sector, despite short-term challenges. The global demand for clean energy continues to rise, driven by factors such as data centers, semiconductor chip manufacturers, the adoption of electric vehicles, and the electrification of various industries. The company anticipates a significant recovery in onshore wind installations, excluding China, beginning in 2025, with the U.S. market expected to reach 15 gigawatts annually by the end of the decade.

Financial Performance and Outlook

In the second quarter of 2024, TPI Composites reported a net sales decrease of 17% compared to the previous year, primarily due to the impact of start-ups and transitions, canceled orders, and unfavorable foreign currency fluctuations. The company's adjusted EBITDA for the quarter was a loss of $24.9 million, reflecting the impact of the Nordex Matamoros plant shutdown. However, TPI Composites anticipates mid-single-digit adjusted EBITDA margins in the second half of the year, with the loss-making operations behind them and factory utilization approaching 90%.

Investor Questions and Future Plans

During the Q&A session, investors and analysts raised questions about the company's future plans, including the potential for expansion into offshore wind markets and the impact of transitions on production capacity. TPI Composites expressed interest in exploring opportunities in offshore wind markets, particularly in Europe, but stressed the importance of cost-effective solutions and strategic partnerships. The company also addressed concerns about capacity utilization, highlighting the importance of efficient transitions and a focus on quality to maximize production and meet customer demands.

Conclusion

TPI Composites' second quarter earnings call underscored the company's resilience in the face of challenges, with a clear focus on strategic shifts and operational improvements to drive future growth. The company's optimism about the wind energy sector and its financial guidance for the second half of 2024 and beyond highlight TPI Composites' commitment to decarbonizing and electrifying the world, positioning it as a key player in the global transition to renewable energy.