Vestas Surges With Unexpected Quarterly Profit

Vestas Wind Systems A/S rose to its highest in more than three years after unexpectedly posting a profit in the first quarter, building on a turnaround that the world’s biggest wind-turbine maker completed last year.

Vestas had net income of 2 million euros ($2.8 million) in the first three months of the year after losing 151 million euros during the same period a year ago. That compares with the average forecast of seven analysts surveyed by Bloomberg for a net loss of 17.1 million euros.

The manufacturer snapped nine straight losses last quarter after cutting almost a third of its workforce and selling or closing 12 of its factories to eliminate 484 million euros in fixed costs. Revenue rose 17 percent to 1.28 billion euros. The shares rose as much as 8.5 percent in Copenhagen.

“To become predictable and stable is the aim,” Chief Executive Officer Anders Runevad, who took over from Ditlev Engel in September, said in a phone interview today. “That’s also why we work on being more flexible. You have to recognize the fact that the market we are in is a volatile market.”

Competitors including Nordex SE and Gamesa Corp. Tecnologica SA are also rebounding. Germany’s Nordex returned to an annual profit last year after two consecutive losses, while Spain’s Gamesa returned to profit after posting its first annual loss as a public company in 2012. Those companies’ shares have both more than doubled in the past year.

Industry Rebounding

Gamesa late yesterday also beat analysts’ forecasts, with its first-quarter profit more than doubling. The company’s shares today rose as much as 4.8 percent in Madrid.

Vestas reiterated forecasts made in February for revenue of at least 6 billion euros in 2014, a margin on earnings before interest, taxes and special items of at least 5 percent and a minimum of 300 million euros of free cash flow.

Runevad declined to be drawn on whether Vestas is likely this year to pay out its first dividend since 2003, saying only that “it’s up to the board to assess.”

In its annual report in February, Vestas signaled a “general intention” in the future to recommend a dividend of 25 percent to 30 percent of the year’s net result, so long as targets for net debt and solvency are met. It also takes into account “growth and liquidity requirements.” Runevad said he has “no plans” to grow through acquisitions.

Dividend Policy

“Of course we monitor the markets to see what is happening, but we have no plans in that respect,” Runevad said today on a conference call with analysts when asked for his stance on “acquisitive growth.”

Vestas shares were up 6.6 percent to 262.4 kroner at 10:40 a.m. in Copenhagen trading. Earlier, they rose as much as 8.5 percent to their highest since August 2010.

The stock increased fivefold in 2013 and is up another 64 percent this year, even after the company on Feb. 4 sold an additional 20.4 million shares, equivalent to almost 10 percent of existing stock.

It received a total of 3.3 billion kroner for the shares, which it sold at 162 kroner each. The stock yesterday rose to 246.2 kroner, more than 10 times the low of 24.07 kroner it reached in a November 2012 close.

The company has also extended its loan facilities in February, and will see “how the market looks” when it comes to refinancing 600 million euros of bonds and 275 million of loans that fall due early next year, Runevad said.

Credit Lines

“We did a big new banking agreement on the back of the capital increase and we are happy with the strong financial situation we have,” the CEO said.

Earnings before interest, taxes and special items rose to 40 million euros from a loss of 108 million euros a year ago. The operating margin before special items rose to 3.1 percent from minus 9.9 percent a year earlier.

Sales rose 17 percent to 1.28 billion euros, higher than the average analyst forecast of 1.14 billion euros. Orders in the quarter rose 84 percent to 1,188 megawatts. Shipments gained 83 percent to 1,124 megawatts.

The quarter “showed improvements in all major areas,” Runevad said in the statement. “This is a result of a lot of hard work from my colleagues, and we remain focused on executing on our strategy.”

Runevad also declined to comment on the possibility of the company’s joint venture into offshore wind with Mitsubishi Heavy Industries Ltd. opening a factory in the U.K., the biggest market for turbines at sea. The venture began operations on April 1, and owns the technology for Vestas’s V164 8-megawatt offshore machine.

‘Strong Interest’

“We see lots of strong interest from customers when it comes to orders” for the V164, Runevad said.

Vestas in June 2012 shelved plans to build an offshore turbine factory in southeast England as awaited clarity on U.K. subsidy programs. The company had intended to develop the V164 machine at the plant in Sheerness, Kent, creating 2,000 jobs.

Runevad said Vestas is seeing interest in markets that are opening up in South Africa, the Middle East and parts of Asia outside China and India, such as the Philippines and Vietnam.

“There are quite a lot of these markets coming up with good wind reserve and they have the benefit that energy consumption is increasing,” Runevad said. “If you have a global footprint, you have a better opportunity to hedge the volatility of single markets.”

Before it's here, it's on the Bloomberg Terminal.