Vestas orders, profit show Western edge in wind

COPENHAGEN/LONDON Wed Aug 17, 2011 11:28am EDT

Blades for wind-turbines can be seen in the grounds of the Vestas Wind Technology company's factory, located in the northern Chinese city of Tianjin September 14, 2010. REUTERS/David Gray

Blades for wind-turbines can be seen in the grounds of the Vestas Wind Technology company's factory, located in the northern Chinese city of Tianjin September 14, 2010.

Credit: Reuters/David Gray

COPENHAGEN/LONDON (Reuters) - Danish wind turbine maker Vestas wrong-footed investors on Wednesday, affirming its expected 2011 profit margin despite wider weakness in equipment prices, suggesting a technology edge over Chinese and other rivals.

That contrasted with the situation in solar power, where cheap Chinese producers have undercut Western rivals, helping precipitate a bankruptcy filing this week by U.S.-based Evergreen Solar.

The statement from Vestas Wind Systems A/S drove its shares more than 25 percent above Tuesday's more than six-year low and lifted others in the sector. Shares in Germany's Nordex SE and Spain's Gamesa Corp SA both rose.

Nordex had last week said turbine prices fell in the first half of 2011, alongside a profit warning, raising concerns for margins across the industry.

Wind power depends on government support and on political support for reaching climate change targets, which some see as less of a priority against the backdrop of a grimmer economic outlook.

But Vestas, whose turbines are used worldwide and which is ramping up capacity in the emerging wind power market of Brazil,

said its order book was strong.

"Despite global uncertainty, we feel that Vestas is in a good position to get the order intake that we have outlined," Chief Executive Ditlev Engel told Reuters, referring to the company's forecast for between 7,000 MW and 8,000 MW of orders this year, down slightly on last year.

"In the first half year we had ... firm and unconditional orders of nearly 2,900 MW, and as a rule Vestas has always had a higher order intake in the second half of the year than in the first half," Engel said.

The company's technology and broader service offering helped it beat forecasts for second-quarter profit and maintain full-year guidance for a 7 percent margin on the basis of EBIT (earnings before interest and tax), said analysts.

BEATING EXPECTATIONS

The world's biggest turbine maker said EBIT reached 77 million euros ($111 million) in the three months through June, against a 180 million loss a year before.

The results beat all forecasts in a Reuters poll range of 12-75 million euros. Vestas shares were up 25.5 percent at 111.70 crowns by 1430 GMT.

China's inroads in solar power worldwide have helped push prices for panels down 30 percent in the first half of this year, contrasting with flatter wind turbine prices, said analyst Michael McNamara at advisory and research firm Matrix.

Other analysts saw wind turbine prices falling this year, and picking up in Europe next year while continuing to drop in Asia and the United States.

Western turbine makers have more successfully fended off cheaper Chinese rivals, compared with solar, partly because of more complex equipment and higher transport costs.

"We believe it's going to take the Chinese or Asian competition longer to make significant inroads into the global wind market, and that's what we've seen out of today's results," said Barclays Capital analyst Rupesh Madlani.

Vestas also stood by previous guidance for full-year revenues. "The expected revenue of 7 billion euros for 2011 has almost been secured by firm and unconditional orders," it said.

The company said the main risks to guidance were in the possibility of disruptions to production or in installations of new types of turbines in a year in which a big part of revenue and earnings will be generated in the latter part.

The backlog of orders totaled 8.0 billion euros at the end of June, it said. Shipments of turbines this year were expected to rise by a half to 6,000 MW.

(Editing by Hans-Juergen Peters and David Holmes)

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