COPENHAGEN/LONDON World No.1 wind turbine maker Vestas posted a surprise second-quarter loss and unexpectedly cut its 2010 earnings outlook as customers delayed orders in the wake of the credit crisis.
Vestas shares slid 21 percent by 1341 GMT on Wednesday, against a 2.1 percent decline for the FTSE cleantech energy index. Turnover in the stock exceeded 3 billion Danish crowns ($518.9 million) -- a fair day's trade for the whole Copenhagen bourse.
Vestas said it downgraded its forecast because the inking of expected orders in the United States, Spain and Germany had been delayed and could thus not be booked as income this year.
Chief Executive Ditlev Engel told Reuters he was "pretty confident, as much as one can be in this world" that the firm would get the orders, and the delays were partly due to permission and regulatory issues in the three countries.
In Spain, notably, clients held back, awaiting signals from the government on future regulation for visibility on pricing structures, he said.
Vestas sank to an operating loss of 148 million euros ($190 million) from a profit of 78 million a year earlier and against a mean forecast in a Reuters poll for an 8.1 million profit. Turnover shrank 17 percent to 1.01 billion.
"The decline in revenue and earnings reflects the very low level of activity in the wake of the credit crisis and Vestas' decision not to adjust its capacity further," Vestas said.
The credit crisis knocked energy infrastructure projects around the globe in 2009, as financing dried up, also hitting the wind turbine industry.
Analysts said the earnings report indicated a much bigger fall in price per megawatt in the quarter than expected.
"Some analysts interpret this as Vestas trying to undercut rivals but this is also due to larger framework orders with better profitability (which usually have lower prices per MW)," said Alm. Brand analyst Michael Friis Jorgensen.
He expected Vestas, which had a 12 percent market share last year, to be overtaken this year by rivals GE, Siemens and Chinese Goldwind, but to regain the top spot in 2011.
GE was already close last year to knocking Vestas off the top, and some Chinese manufacturers are catching up rapidly.
"It's clear the global competition is heating up, but ... if I look at the progress on order intake, our impression is Vestas is standing in a good position," Engel told Reuters.
Vestas said it expected a 2010 operating profit margin of 5 to 6 percent and revenue of 6 billion euros, as it downgraded a previous forecast of 10 to 11 percent and 7 billion euros.
Vestas shares were down 20 percent at 249 crowns by 1251 GMT while the FTSE cleantech energy index fell 2 percent.
"The result confirms that turbine prices ... are under pressure," Nordea said in a note to clients. "The 2010 guidance is downgraded below current consensus estimates. Even a strong order intake will not compensate for the weak result."
Vestas said 2010 prices would probably stay at 2009 levels -- roughly around 1 million euros per MW.
In April, Vestas said deliveries would pick up later in the year, after a surprise first-quarter loss.
Vestas sees 2010 order intake of 8,000 to 9,000 megawatts (MW) of turbines, against a weak 3,702 MW in 2009.
Order intake in the quarter was a record high 3,031 MW, roughly matching expectations. "We are getting close to the 6,000 MW order intake year to date, so we are on a good track to get 8,000-9,000 MW for the year," Engel said.
Alm. Brand's Jorgensen said the outlook cut was substantial and a surprise, and questioned why the firm had not issued a profit warning. "They will not deliver a strong result this year. But some of it ... will come in 2011," Jorgensen said.
Although the financial market collapse in 2009 has abated and major industry players are signing new supply contracts, demand has not returned to levels seen in 2008.
Still, new demands for renewable energy sources, support from the U.S. federal government and a looming threat of carbon curbs have kept wind power at the forefront, though it remains more expensive than electricity from fossil fuel-based plants.
The firm, which is in the midst of expanding group capacity to 10,000 MW to by end-2010, said it expected to recruit around 3,000 employees this year, down from previous plans for 3,400.
Shares in Hansen Transmissions, of which Vestas is a key client, fell 7.8 percent.
(Additional reporting by Teis Jensen; Editing by Sharon Lindores and Jon Loades-Carter)