Wind turbines blow joy Vestas’ way
Copenhagen — Wind turbine maker Vestas’ sales, orders and profit surpassed analysts expectations in the third quarter as the Danish firm enjoys one of its busiest periods on record, lifting its shares nearly 11% on Thursday.
Demand for renewable power sources has been growing in tandem with global efforts to combat climate change, boosting Vestas’ orders for new turbines and its service business, where it now maintains roughly 43,000 turbines.
“The industry we’re representing is on very high demand with all the focus on the environment and we see a strong message from most governments,” CFO Marika Fredriksson said.
Operating profit before special items rose 55% to €429m (R7bn), topping the €351m forecast in a Refinitiv poll. Its adjusted EBIT margin improved to 11.8% from 9.8% a year earlier.
Shares in Vestas jumped 10.7% at 9.45am GMT as Vestas’ order intake in the third quarter came in at 4,738MW, well above the 3,412MW expected by analysts.
But Vestas is also grappling with higher costs and falling prices for its products. Its earnings are under pressure from higher prices for steel, imported components and transportation amid global trade tensions.
Group production costs were seen increasing by about 1.5 percentage points in 2019 which was higher than the previous estimate of one percentage point, Fredriksson said.
The wind industry has seen a steep decline in prices and increased competition as governments move away from guaranteeing generous fixed, subsidised tariffs for power towards a competitive auction-based system that favours the lowest bidders.
The average selling price was €0.75m per megawatt, slightly below a forecast of €0.76m, but Frederiksson said underlying prices had stabilised despite the competitive environment.
Vestas still expects revenue of €11bn-€12.25bn in 2019 and an earnings before interest and tax (ebit) margin before special items of 8%-9%.
It now expects service revenue to grow at a “minimum of 10%” up from “approximately 10%”.
“While the debate on 2020 will remain until Vestas initiates 2020 guidance in February, we see these results as very reassuring, especially after recent results from peers,” said Citi analysts.
On Tuesday Vestas’ main rival Siemens Gamesa delayed its 2020 outlook for an operating profit (ebit) margin of 8%-10% by two years, blaming lower prices for its turbines.