Vestas Boosts Guidance as More Orders Allow Share Buyback

Updated on
  • Earnings and revenue beat forecasts in second quarter
  • CEO says he has better visibility for earnings in rest of year

Vestas Wind Systems A/S jumped to its highest in almost eight years after it raised its guidance and allocated 400 million euros ($453 million) to a stock buyback, saying second-quarter shipments and revenue beat forecasts.

The Danish manufacturer of wind turbines boosted its outlook for revenue to 9.5 billion euros this year from 9 billion euros, driven by higher activity and above-average margins, according to a statement to the Copenhagen Stock Exchange. Earnings before interest, tax and special items, surged to 399 million euros from 145 million euros a year ago. That beat the median estimate of 11 analysts’ forecasts of 198 million euros. 

The period marked Vestas’ 11th consecutive profitable quarter, rebounding from a slump that started in 2011 that prompted it to eliminate 3,000 jobs and close a third of its factories. Wind turbine makers have been buoyed by favorable government policy on clean energy. Chief Executive Officer Anders Runevad said in a phone interview that this quarter saw a concentration of above-average projects and cautioned against over-optimism.

“When it comes to margins in the quarter, this is not the new normal,” Runevad said by phone from Denmark. “We had a very favorable project mix in the second quarter with good margin profiles joined, so to speak. Longer term, it is important to look at our full-year guidance, where we guide for margins with a minimum of 12.5 percent for EBIT, which are lower than this quarter’s margins.”

The shares surged to their highest since 2008, gaining as much as 9.3 percent in Copenhagen trading, the biggest jump since November 2014. The margin before special items rose to 15.6 percent, compared to 8.3 percent in last year’s second quarter.

Vestas is the largest wind turbine maker in terms of installed capacity, with almost 65 gigawatts of its turbines on the ground, according to Bloomberg New Energy Finance.

Net income more than doubled to 278 million euros from 125 million euros in the second quarter of 2015. Revenue climbed to 2.56 billion euros from 1.8 billion euros last year.

The U.S. has increasingly become a key market for the Danish manufacturer as the government extended its wind power incentive, known as the production tax credit, last December to 2020. Vestas obtained at least three large-scale contracts to supply projects in the U.S. in the second quarter.

It also entered into a preliminary agreement with a unit of Warren Buffett’s Berkshire Hathaway Energy Co. to supply 2 gigawatts of turbines to the Wind XI project in Iowa in June. The company also said in April it has signed a conditional agreement to sell 600 megawatts to Xcel Energy Inc. for the Rush Creek facility in Colorado.

Dividends Paid

The company paid its first dividend in 2015 and began a share buyback program that is being extended into this year. It canceled 2.5 million of it shares in April, which it had purchased in the autumn in a $170-million payout to shareholders. The most recent buyback starts Thursday and will be complete by Dec. 30, according to a separate statement on Globe Newswire.

Service agreements with contracted revenue will generate 9.9 billion euros this year. The combined backlog for 2016 including turbine sales is expected to be 1.2 billion euros more than last year. The company acquired operations and maintenance companies UpWind Solutions Inc. in the U.S. and Availon Holding GmbH in Germany last year for $156 million.

It has reported at least six major orders in July and August to supply projects in the U.S. Morocco and Norway. Its joint venture with Mitsubishi Heavy Industries, MHI Vestas Offshore Wind A/S, won a contract to supply the Horns Reef 3 offshore wind farm in Denmark, also in July.