Turbine Maker Sticks to Revenue Forecast, But Earnings Decline
By SELINA WILLIAMS
In a surprise move Tuesday, the world's biggest wind-turbine supplier, Vestas Wind Systems A/S, said it still expects its revenue to increase by nearly 20% this year as order flow has begun to pick up -- a sign the sector could be starting to unfreeze.
Analysts had expected Denmark-based Vestas to lower its full-year revenue target of €7.2 billion ($10.14 billion) because tight credit markets have hit funding for the multibillion-dollar wind-power industry.
Vestas Chief Executive Ditlev Engel said the company sees signs of renewed interest in wind projects from financial institutions as government stimulus plans, particularly in the U.S. and U.K., are kicking in.
"We're seeing the activity level starting to move again despite the fact that the first six months have been challenging in terms of the orders," Mr. Engel said in an interview.
The wind-power industry, which has boomed in the past 10 years -- growing almost 30% from 2007 to 2008, for example -- has been in the doldrums for most of 2009. Some investment banks that were big lenders to renewables projects, such as Lehman Brothers, have collapsed, while others have severely restricted lending.
Vestas, which had ridden the boom, has felt the impact of the downturn. The company said Tuesday that its second-quarter net profit decreased to €43 million from €65 million a year earlier, partly because of higher costs and reduced gross margins. Revenue rose 11% to €1.21 billion from €1.09 billion.
The company is coping with the slowdown by cutting costs, closing its Isle of Wight wind-turbine blade factory in England last week.
Citing weaker demand in northern Europe, one of the regions hardest hit by the credit crisis, Vestas said it was shifting its geographical focus to China and the U.S. China is expected to become the largest market for new installed wind turbines this year, ahead of the U.S., according to the Global Wind Energy Council.
Still, Vestas said it is encouraged by signs the market could be turning.
Although it had a tough first half, the company said it had received orders of €700 million since the end of the second quarter. The company's corporate review board is also set to evaluate several new contracts, valued at more than €4.4 billion in total, Mr. Engel said, without elaborating.
"We've said all along that it was important to differentiate between a financial crisis and a demand crisis, and the bottom line is we're seeing a lot of interest," Mr. Engel said.
The chief executive also cited Vestas's recent 165-megawatt turbine order for the Bligh Bank offshore wind farm off the coast of Zeebrugge in Belgium as another indicator the market is again opening up. Bligh Bank, run by Belwind NV, a consortium of Belgian and Dutch investors, is the first offshore transaction to receive project finance since the financial crisis started.
Lower steel and energy prices this year, improving technology, and good wind-power prices due to national subsidies and stimulus money could also help get the sector moving again. Binding European Union targets on renewable energy use are also supporting the sector.
However, some analysts said there were still risks that could derail the turnaround, both for the sector as well as for Vestas.
Write to Selina Williams at selina.williams@dowjones.com
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