Vestas Wind Systems A/S fell the most in almost four months after executives issued a cautious outlook for 2015, blunting the impact of a recovery in the wind energy industry that allowed its first dividend since 2003.
The Danish manufacturer expects sales of at least 6.5 billion euros ($7.4 billion) this year, less than the 6.9 billion euros it generated in 2014. It also sees a margin of at least 7 percent on earnings before interest and taxes before special items, which compared with 8.1 percent last year.
After slashing 3,000 jobs since 2011 and closing a third of its factories to survive a plunge in turbine prices, Vestas today reported its first full-year profit since 2010. The guidance for this year raised concerns about the valuation of Vestas shares, which have gained more than 56 percent since the middle of October.
“This is a very conservative guidance,” Jeffrey Vonk, an analyst at Morningstar Investment Service Inc., said by phone. “While Vestas does have a history of being very cautious on its outlook, a revenue decline is not what I had expected for 2015.”
Turbine makers led by Vestas, General Electric Co. and Siemens AG are enjoying record installations and an outlook for further growth this year. They’re also having to cope with increased competition from regional manufactures such as Xinjiang Goldwind Science & Technology Co. Ltd. in China and Suzlon Energy Ltd. in India, which may keep turbine prices falling this year.
Shares of Vestas fell as much as 8.5 percent, or the most since August 2013, and were recently down 6.9 percent at 267 kroner in Copenhagen trading. Chief Executive Officer Anders Runevad said it’s too early to be certain about how the year will shape up for Vestas, although the long-term outlook is sound.
“We are very early into the year,” and orders and installations usually pick up in the second half, Runevad said today in a phone interview. “It’s an early estimate. That doesn’t mean we don’t have an ambition to improve that, much the contrary.”
He brushed off concerns that a slump in oil prices might hurt the industry saying in an interview on Bloomberg Television that “if you look at the direct link between electricity and oil prices, it’s fairly insignificant” and “positive things” can come from oil’s slump in the form of lower raw materials and transport costs.
“The market knew that Vestas would be conservative, but it still had been hoping for more,” Janne Vincent Kjaer, an analyst with Jyske Bank AS, said today by phone. “The share price movement today should also be seen in light of the strong share performance of the past days and weeks. And I do see clear upside to the minimum guidance.”
Vestas generated net income of 392 million euros last year, beating the 374 million-euro average of 11 analyst estimates compiled by Bloomberg. The company proposed paying a 3.9 Danish kroner dividend, the first since a string of payouts it ended in 2003 when competition started heating up in the industry. Orders rose 9.7 percent last year to 6.54 gigawatts.
Worldwide, wind installations may hit a record 64 gigawatts this year, though prices will fall as much as 4.6 percent in the first half compared with the same period a year ago, according to Bloomberg New Energy Finance. Installations grew 44 percent to 51 gigawatts last year as costs of the technology rivaled fossil fuels, the Global Wind Energy Council estimates.
“Wind is a rapidly maturing technology,” Steve Sawyer, secretary general of GWEC, said yesterday. “Not only the low prices but also the cost stability of wind power makes it a very attractive option for utilities.”
Vestas benefited last year from surging sales in the U.S., where developers took advantage of an expiring federal tax credit.
“Vestas, today, is a leaner and more flexible and scalable company, and we are prepared for the future challenges of an increasingly dynamic and competitive wind power industry,” Runevad said in a statement. “We will intensify our focus on ensuring that our products and services become even more competitive across markets, both within the wind power industry and compared to other energy sources.”
The company has been bolstering its efforts to obtain and renew servicing contracts where profit margins are higher, while also managing to sell turbines in China and teaming up with Mitsubishi Heavy Industries Ltd. to make machines designed to work offshore.