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Business: Vestas good news surprises market - Above budget and on track

Vestas took both market analysts and the business press by surprise with a financial report for the third quarter of the year that exceeded budget, maintained expectations for the company's end-year result, forecast a doubling of turnover by 2015 and lifted the veil on a forthcoming 6 MW offshore turbine.

Prior to publication of the results on October 27, market analysts had been loudly warning that Vestas would miss its sales targets, forcing the company to downgrade revenue and profit forecasts for 2009.

Publication of the third-quarter results by the global giant was also anticipated as an indication of the state of the global wind power industry one year after the financial crisis took hold. Maintaining or increasing market share is no longer one of Vestas' primary goals, although at one time the aim was for 30% of global wind turbine sales. The company now stresses that is no longer the case. Profit, working capital and turnover are the current priorities.

Increased revenues

The financial clouds are continuing to clear, believes Vestas. Compared with the same July-to-September period last year, the company increased its revenue by 3% to EUR1.8 billion and profit by 53% to EUR244 million. While some projects have been delayed due to financial market constraints, no orders have been cancelled and Vestas has suffered no losses from unpaid bills. The flow of orders has eased, but Vestas reports expected orders in the coming months that will secure its budget projections for 2010 of a 10-12% profit on annual revenue of EUR7-8 million. Revenue for 2015 is budgeted at EUR15 billion and profit at 15%.

For this year, Vestas maintains its EUR7.2 billion revenue forecast and expected profit margin of 11-13%. Of that, Vestas had reached EUR4.13 billion at the end of September and must now achieve the remaining 33% of its annual forecast in the last three months of the year. Last year Vestas achieved 44% of its revenue for 2008 in the final quarter, which traditionally is the best period of the year for the wind power industry. At the end of this year's third quarter, the company had a total of 3 GW in turbines on order. Compared with 1.6 GW shipped in the previous three months for EUR1.8 million, this indicates that the EUR3.9 billion required in the final quarter is contractually secure. Given that down payments with orders have long been the norm in the wind industry, that should help put to rest any doubts some analysts may still harbour about Vestas' ability to reach its 2009 financial projections.

Expansion slowed

The financial crisis has resulted in an over-capacity in wind turbine manufacturing generally and Vestas is not increasing its workforce in the US as fast as expected, but in pace with a slower market. Only 270 MW of the 1.6 GW shipped in the third quarter went to North America and Latin America. Europe received 978 MW and the Asia-Pacific region 387 MW. Vestas president and CEO Ditlev Engel, when announcing the third-quarter results in New York, stressed that he regards the slowed growth in the US as temporary and the company is preparing for fast growth once the market returns. For that reason Vestas will maintain its current over-capacity in the US, but only take on new staff as orders roll in.

A 6 MW offshore wind turbine is under development, but Vestas declines to say when it will be ready. The company intends to employ 600 new workers in its research department in 2010, which means technology development staff will make up 10% of Vestas' 20,852 total workforce.

The stock market reacted positively to the good news from Vestas, with the company's share price rising 7.6%, the biggest jump in four months, immediately after publication of the results. That increase stabilised at 4-5% in the following period.

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