Wind Power Demand Drives Vestas to Profit
Date: 21-Mar-07
Country: DENMARK
Author: Kim McLaughlin
COPENHAGEN - Denmark's Vestas, the world's top wind turbine maker, swung back to a full-year profit last year as global warming concerns boosted demand for wind, wave and solar power.
Vestas, which started manufacturing wind turbines in 1979, unveiled a 2006 operating profit of 201 million euros (US$267.4 million) on Tuesday compared with a 2005 loss of 116 million euros before interest and taxes.
The company is benefiting from rising demand for renewable energy sources as climate change concerns prompt world leaders to put forward energy policies to combat greenhouse gas emissions.
Sales last year rose 7.5 percent to 3.85 billion euros (US$5.1 billion) but component shortages continued to hamper production. It said it would again face long and expensive key component delivery times this year.
"Vestas generally believes that it will take a few years before the wind power industry will be able to meet global demand," the company said.
Vestas Chief Executive Ditlev Engel told Reuters it was hard to say when component shortages would cease to stunt growth.
"We're taking this very seriously with our suppliers. No-one buys more (components) than we do. Our sub-suppliers have announced they are investing in capacity," he said.
The Jutland-based firm, with plants in Denmark, Germany, India, Italy, Britain, Spain, Sweden, Norway, Australia and China, maintained its 2007 sales and margin outlook, forecasting sales at about 4.5 billion euros with an operating margin of about 7 to 9 percent.
MASSIVE STEP
Scientists say average global temperatures will rise by between 1.8 and 4.0 degrees Celsius this century due to carbon gas emissions from burning fossil fuels for power and transport, putting millions of lives at risk from floods and famines.
Earlier this month the European Union's 27 leaders committed themselves to a target of reducing EU greenhouse gas emissions, blamed for heating the planet, by 20 percent by 2020 and offered to go to 30 percent if major nations such as the United States, Russia, China and India follow suit.
Engel applauded the EU's plans to reduce emissions saying Denmark was a shop window on how to achieve the targets.
"We were thrilled by the outcome of the EU summit. Europe is still our biggest market," he said. "Some European countries have zero percent (renewable energy). It will be a massive step."
Shares in Vestas have climbed more than 20 percent this year, boosted last month when the company raised its 2006 guidance and bolstered by a bidding war between Indian's Suzlon Energy Ltd. and France's Areva for German competitor REpower.
Engel said he had no plans to join the bidding for REpower adding he expected more competitors to enter the growing market to capitalise on the growth rather than further consolidation.
"The 2006 results are in line with the preliminary results in February and the outlook issued in November 2006 was also confirmed so on that point there were no surprises," said Dexia Bank analyst Peter van Assche.
By 1004 GMT Vestas shares were up 1.2 percent at 295 Danish crowns, easing off earlier gains of 2 percent which had pushed the share to an almost six-year high.
Vestas estimated it had a market share of 28 percent last year, unchanged from 2005 and has targeted 35 percent this year.
Its results were in line with the average forecasts in a Reuters' poll and last month's preliminary results.
(Additional reporting by Gerard Wynn in London)