Vestas Fails To Dispel Cloud
Lionel Laurent, 08.18.09, 11:30 AM EDT
Wind-turbine company promises a pick-up, but investors back off
Is Vestas Wind Systems’ guidance just a lot of hot air? Despite a set of weak second-quarter results on Tuesday, with profits down 34% over the year, the Danish wind-turbine company maintained its full-year guidance of an 11%-13% pre-tax, pre-interest profit margin on sales of 7.2 billion euros ($10.2 billion). The company backed this up with talk of green shoots, as well as the promise of 4.4 billion euros ($6.2 billion) in upcoming orders, but not everyone was convinced.
“Vestas didn’t really say anything new,” said Hakon Levy, an analyst with Fondfinans, who said that it was impossible to tell how much of Vestas’ incoming 4.4 billion-euro order batch would be delivered–and therefore booked as revenue–before the end of this year. “I don’t think they will make it,” he said.
Shares of Vestas Wind Systems ( VWSYF – news – people ) were down 2.4%, to 9.50 Danish kroner ($1.80), after the company reported a slight increase in second-quarter sales and a drop in earnings to 43 million euros ($60.7 million), from 65 million euros, over the year. The company does not break down its order backlog by expected year of delivery, but Levy said Vestas would need to fulfil around 1-1.5 billion euros’ ($1.4-$2.1 billion) worth of orders to meet its 2009 guidance; an “ambitious” task.
Should anyone care? Maybe not. An order fulfilled in 2010 is as good as one fulfilled this year, for long-term investors at least, and other analysts were positive on the company’s prospects. Nordea analyst Patrik Setterberg said that national stimulus packages launched to combat the financial crisis would prop up demand for renewable energy and coax financing out of banks, and said that the United States under Obama would be a “very important” market going into 2010.
Comparisons with other energy sources may not always work in wind’s favor: Oil may be back at $70 per barrel, but gas prices, which lag oil by about six months, are still relatively cheap, says Peter Rothausen of Danske Markets. But political will is what counts, and Obama’s drive for energy independence will hopefully work its magic on Vestas going forward.