Vestas Wind Systems A/S, the world’s biggest wind-turbine maker, may reduce earnings and margins targets for 2015 under its so-called “Triple15” plan after slashing annual forecasts three times in two years.
The Danish manufacturer today is due to publish full third- quarter earnings after making a surprise announcement of unaudited figures on Oct. 30, when it reduced full-year revenue and margin forecasts for the third time in 21 months. It also will give an “update” on Triple15 plans, said Vestas spokesman Michael Holm, who declined to be more specific.
Vestas in October 2009 said it aimed to lift its margin on earnings before interest and tax to 15 percent and post 15 billion euros ($21 billion) of revenue no later than 2015. Since then, the company’s market value has fallen by half as Asian competitors forced turbine prices down and European governments cut subsidies to renewable energy.
The 2015 targets “appear to be very unrealistic now,” Simon Gottelier, a fund manager in London at Impax Asset Management Group Plc, which owns Vestas shares, said in a telephone interview. “It’s an opportune moment to come out and reset expectations.” Impax owns about $2.7 million of Vestas shares, according to holdings data on Bloomberg.
Vestas is due to make its announcement at 8:30 a.m. today Copenhagen time.
Vestas shares on Oct. 31 plunged 24 percent, the most in eight years after it slashed its revenue forecast for 2011 by 9 percent and said the ebit margin will be 4 percent rather than the 7 percent it predicted in August. Delays in ramping up production at a generator factory in Travemuende, Germany, forced Aarhus-based Vestas to postpone deliveries to 2012.
The profit warning “increases the focus for management to deliver a credible and well-received strategy update on Nov. 9,” said Rupesh Madlani, an analyst in London at Barclays Capital who rates the stock “equalweight/positive.” He said, “they should articulate a clear self-help plan to improve profitability.”
Madlani said management led by Chief Executive Officer Ditlev Engel “suffers a credibility deficit” and that Vestas should aim to reach an ebit margin of 8 percent to 10 percent within about two years.
Vestas on Oct. 30 said it made a loss after tax of 60 million euros in the third quarter, when the ebit margin before one-time costs was minus 6.9 percent for the period. Revenue was 1.3 billion euros for the three months to Sept. 30. Vestas also said further production delays are possible.
“Vestas never will be able to go back to the profitability it had about five years ago,” said John Segrich, who manages about $120 million of green investments at Gabelli & Co.’s funds. “This is not the end of the problems for Vestas. They have continued to disappoint the market and they have often done so massively.”
Segrich’s New York-based funds are considering increasing short positions in Vestas, which bet on a price decline, Segrich said, declining to be more specific.
Short sellers borrow stocks and sell them in the hope of profiting by repurchasing the securities later at a lower price. Short positions in Vestas have increased to 14.8 percent from 10.6 percent two months ago, according to figures on Bloomberg compiled by Data Explorers Inc.
Vestas shares have now fallen almost 90 percent since their 2008 record, and closed at 82.25 kroner in Copenhagen. That makes the company a “takeover target,” according to Gerard Reid, an analyst at Jefferies International Ltd. in London who also said Engel should step down.
“The company’s got technology, it’s got a global footprint, it’s got a very good product, it’s got servicing ability,” said Reid, who cut his rating on the stock to “hold” from “buy” after the latest profit warning. “There’s no doubt about it that it’s a takeover target.”
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