Danish Vestas Shares Soar as Wind Power Market Booms
Date: 23-Nov-06
Country: DENMARK
Author: Gelu Sulugiuc and Kim McLaughlin
Shares in the Danish company rose 23 percent after the company issued strong guidance for the next two years, even as third-quarter earnings and sales missed expectations.
Vestas said increasing global interest in wind energy had led to an overheating of the market, with delivery times lengthening to 12 to 15 months for important components.
The Jutland-based firm also said it would establish wind turbine blade production in the United States and Spain, due to heavy demand and improved earnings per turbine. It said it would increase its workforce by more than 16 percent next year, hiring 2,000 people to raise its total to about 14,000.
"Wind power has now really penetrated the American market, which has shown good progress for quite a long time," the company said in a statement.
It said it shipped wind power systems with an aggregate output of 1,060 MW in the third quarter, while turbine projects with a total output of 1,559 MW were under completion for delivery in the last three months of the year.
Vestas shares were up 23 percent at 215.25 Danish crowns at 1338 GMT, rising to their highest since June 2002. The stock has more than doubled in value in the year to date, while the Copenhagen top-20 index is up around 9 percent.
The company reported third-quarter earnings before interest and tax (EBIT) of 40 million euros (US$51.3 million), while a Reuters poll of 12 analysts gave an average forecast of 71.9 million. Third-quarter sales of 842 million euros were below market estimates of 1.02 billion.
SUPER EXPECTATIONS
"Results were a disappointment, but the expectations are super," said Stephen Rammer, an analyst at Alm. Brand Henton. "Their long-term goals have been upgraded and that's important."
For the full year, Vestas expects an operating margin of about 5 percent against its previous forecast of 4 to 7 percent. Sales are seen at about 3.7 billion euros, in line with a previous forecast of 3.6 billion to 3.8 billion euros.
For 2007, the firm foresees an operating margin of 7 to 9 percent on revenues of 4.5 billion euros, while for 2008 it said it would aim for an operating margin of 10 to 12 percent and a market share of at least 35 percent.
"It comes from our earnings and contracts and a more efficient operation," Vestas Chief Executive Ditlev Engel told Reuters. "We have the best global coverage of all our competitors. We have come well through the third quarter and the expectations we have for the full year are in line with what we said 12 months ago."
But analyst David Hallden at brokerage Cheuvreux said the market had embraced the new guidance too eagerly and should pay more attention to the fact that Vestas' third quarter results were weaker than expected.
"It is dangerous to get carried away," Hallden said. "I do not believe we will see such a quick rebound. The guidance is a bit overambitious. Component shortage is not something they can ignore or avoid."
Jyske Bank analysts also were sceptical even as they upgraded Vestas to "accumulate" from "sell".
"We will upgrade our expectations, but find it difficult to believe they will deliver in full in 2008," the bank said in a research note.
In a Reuters survey, six analysts on average estimated that Vestas would deliver power systems with a total output of 3,810 MW for the full year. The company declined to offer an estimate of its own.
(Additional reporting by Martin Burlund)
