* Quarterly operating profit soars on strong demand
* Company upgrades forecasts for year
* Turbine makers helped by expansion of renewable energy (Adds quotes from CEO, analysts, background)
COPENHAGEN, Aug 18 (Reuters) - Wind turbine maker Vestas posted much higher than expected second-quarter results and lifted its 2016 revenue and profitability forecasts, showing it can exploit growing demand for renewable energy.
Wind turbine makers are benefiting from a new focus on renewables, encouraged by the Paris global climate summit last year and the extension of a key U.S. tax credit.
Vestas faces tougher competition from a planned merger of Gamesa and Siemens Wind Power, while China’s Xinjiang Goldwind Science & Technology Co Ltd is another rival for market leadership.
Vestas shares surged as much as 12 percent after second-quarter operating profit before special items increased 175 percent to 399 million euros ($451.4 million), more than double a forecast for 190 million in a Reuters poll of analysts.
“Volume had a big impact in the quarter as well as a very good execution,” Chief Executive Anders Runevad told Reuters, citing high levels of activity and solid margins on projects as primary drivers behind the 46 percent revenue growth.
“I think we have a shown a good track-record of scaling up production and we have a flexible production set-up,” Runevad told investors. He said turbine blades were the most critical point in production due to needing the most capital.
Vestas derived nearly 27 percent of its quarterly order intake from the United States, showing the upturn in the American wind power business since the country extended its Production Tax Credit (PTC) last December.
“We are very happy with the market share gained in the U.S. and we see it as a stable market midterm,” Runevad told Reuters.
On the backdrop of its strongest second-quarter results, the company upgraded its 2016 revenue forecast to at least 9.5 billion euros from a previous minimum of 9.0 billion. It also lifted its earnings before interest and tax (EBIT) margin to a minimum 12.5 percent from a previous minimum 11.0 percent.
After posting a record high order intake in the last quarter, Vestas’ capacity delivery rose 56 percent this quarter amounting to a total of 2,491 MW, testing its production limits.
“It doesn’t worry the investors, because Vestas has “delivered the goods” through so many quarters. They have an organization which works,” said Sydbank chief analyst Jacob Pedersen. Ahead of the report Sydbank had a “Buy” recommendation on the share.
The shares were also supported by the company launching a share buy-back programme of 400 million euros ($453 million). The company said its dividend policy would not be affected by the buy-back programme and would remain at 25-30 percent of the net result of the year.
Shares traded 9 percent higher at 531.5 Danish crowns by 1020 GMT. It has performed very strongly since it bottomed out in 23.25 crowns in November 2012 but remains a distance from its all-time high of 700 crowns reached in June 2008.
The industry has enjoyed a turnaround after overcapacity and the withdrawal of some government subsidies during the global economic downturn.
Britain on Tuesday approved plans to expand an offshore wind farm project that could ultimately have more than 600 turbines spread across an area of the North Sea more than twice the size of London.
Vestas ousted its CEO Ditlev Engel three years ago after a string of profit warnings, slashed its workforce and shut down some facilities. Engel was replaced by Anders Runevad who made turbines more price competitive. ($1 = 0.8839 euros)
Additional reporting Teis Jensen and Ole Mikkelsen,; editing by David Clarke/Keith Weir
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