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UPDATE 3-Vestas Q3 earnings lag expectations, keeps outlook
November 6, 2008 / 8:54 AM / 9 years ago

UPDATE 3-Vestas Q3 earnings lag expectations, keeps outlook

* Q3 EBIT 160 mln euros vs mean of 173 mln in Reuters poll * Maintains 2008 earnings outlook * Sees 2009 EBIT margin of 11-13 pct on sales of 7.2 bln * Shares fall 13 pct after early gains

(Adds analyst, CEO, updates shares)

By Kim McLaughlin and Karin Jensen

COPENHAGEN, Nov 6 (Reuters) - Denmark’s Vestas, the world’s No. 1 wind turbine maker, posted a lower-than-expected 56 percent rise in third-quarter earnings but kept its 2008 outlook and said it saw higher 2009 margins and sales.

Vestas Wind Systems A/S (VWS.CO) is riding a surge in demand for renewable energy sources but its shares have lost 62 percent since the end of August on fears the financial crisis and lower oil prices will crimp growth.

After gaining as much as 6 percent in early trade, Vestas shares dropped as European shares tumbled and closed down 13.1 percent at 258 crowns, against a 6.2 percent drop in the Copenhagen bourse's top-20 OMX index .OMXC20.

Traders and analysts said the sharp fall in Vestas’ often volatile shares was the result of falling overall markets rather than company-specific news.

Earnings before interest and tax (EBIT) rose to 160 million euros ($206 million), compared with an average estimate in a Reuters poll of 173 million euros and 102 million in the corresponding period of 2007.

The group said it still expected an EBIT margin of 10 to 12 percent on sales of 5.7 billion euros this year and expects its market share to rise to 25 percent.

For 2009, it expects sales of 7.2 billion euros and an EBIT margin of 11 to 13 percent.

“Looking at the third quarter in isolation, the results don’t look particularly overwhelming,” said Sydbank analyst Jacob Pedersen.

“But the share price has halved over the last few months because of worry that people will simply stop buying turbines because of the crisis, and those are worries, I think, the results have put to shame,” he said.

RENEWABLE ENERGY PLAN

Vestas shares have recovered sharply over the last week from intraday lows of 180 crowns at the end of October, partly on assumptions that Barak Obama would win the U.S. presidential elections, analysts say.

Vestas Chief Executive Ditlev Engel called for a long-term U.S. renewable energy plan in order to exploit the potential of wind power.

“Thirty states have their own renewable portfolio standards, now a solution for the entire U.S. is needed. We need long-term targets and long-term energy plans,” he told Reuters.

The group said the credit squeeze would alleviate demand pressure in its industry and that prices for a number of key components had peaked.

Engel said as a result of the credit crisis, many of the group’s customers had lost funding for wind energy expansion. “Having said that, I also have to say that we haven’t had (a) customer cancel or wanted to cancel signed contracts.”

Vestas, which competes with Spain’s Gamesa GAM.MC, India’s Suzlon Energy (SUZL.BO) and units of global power generation giants Siemens (SIEGn.DE) and General Electric (GE.N), had an order backlog at the end of the quarter of 6.5 billion euros. This compares with 7.2 billion three months earlier, but is 59 percent up on the figure at end-September last year.

Vestas said its current organisation and cost base was geared to a level of activity more than 15 percent higher than its projected 2009 sales.

Next year it plans to invest 1.2 billion euros of which 1 billion will be invested in property, plant and equipment, primarily in the United States, Spain and China and in development centres in Denmark and Britain. (Editing by Will Waterman and David Holmes)

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