COPENHAGEN (Reuters) - Danish wind turbine maker Vestas VWS.CO posted weaker than expected earnings on Thursday and warned of growing price pressures, sending its shares down more than 7 percent.
Governments from Europe to Latin America are replacing guaranteed set payments from green power sources, known as feed-in tariffs, with competitive tenders, putting downward pressure on prices throughout the supply chain.
“We definitely see a very competitive market ... driven by the fact that the market is transforming to market-based auctions and competitive tendering,” Vestas Chief Executive Anders Runevad told Reuters.
“What’s different now is that we see it in all markets ... The change is that it’s starting to be the new normal and that is putting additional competitive pressure into the market,” Runevad added.
Vestas’s revenue and profit both fell more than forecast despite higher-than-expected orders. But the company would defend its margins by developing more efficient turbines and making cost savings, Runevad said.
Its operating margin fell 20 percent in the past three months to 12.6 percent compared with the previous quarter. It kept its outlook for an operating margin of between 12 and 14 percent in 2017 as a whole.
The shares were down 7.2 percent at 578 Danish crowns by 0856 GMT, after falling as low as 574.5 crowns, their lowest in nearly two months.
“Prices seems to be lower and that is the big fear in the market, that the lower prices we see announced by the developers in the auctions (to set up wind farms) would flow to the manufacturers,” said Michael Friis Jorgensen, analyst at Denmark’s Alm. Brand Markets.
Second-quarter operating profit before special items fell 30 percent to 279 million euros ($328 million) compared with last year, below an average 322 million forecast in a Reuters poll. [nL8N1L12GU]
Revenue fell to 2.2 billion euros, below a 2.4 billion forecast, while the order intake came in at 2,667 megawatts, above the 2,501 MW expected.
Runevad saw the transformation of the market as having some positives. “I think it’s a sound development of the market and a sign of the increased competitiveness of wind”.
Runevad is part of a Swedish trio, also including Chairman Bert Nordberg and CFO Marika Frederiksson, who have turned the group around and lifted its operating margin through cost-cutting measures to levels unprecedented in the industry.
Many analysts had forecast an upgrade of Vestas’s revenue guidance due to the strong order intake in the first half of the year. But the company said it was still forecasting 2017 sales of between 9.25 billion euros and 10.25 billion.
($1 = 0.8509 euros)
Additional reporting by Julie Astrid Thomsen; Editing by Edmund Blair and David Holmes
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