Published on November 10th, 2017 | by Joshua S Hill0
Vestas Shares Plummet On Poor Third Quarter & Uncertain Future
November 10th, 2017 by Joshua S Hill
Leading wind turbine manufacturer Vestas has seen its shares plummet nearly 20% on the back of a poor third quarter financial report which saw revenue and earnings decrease and the company cut its 2017 profit margin guidance.
Vestas Wind Systems A/S published its third-quarter financial report on Thursday and it was not good news, following in the wake of a lackluster second quarter in which earnings, and free cash flow all declining year-over-year. Things got worse in the third quarter, however, with revenue and earnings both decreasing for the quarter — though Vestas was quick to assuage investors, saying they “remain at a healthy level.”
However, it seems investors weren’t swayed, with the company’s share price dropping nearly 20% on the back of the news.
Vestas generated revenue of €2,743 for the quarter, a decrease of 6% year-over-year but up 19% on the prior quarter, continuing a 2017 trend of increasing revenue quarter-to-quarter. The company’s operating profit (EBIT) for the quarter was €355 million, down €78 million year-over-year but up 21% on the second quarter. EBIT margin for the quarter was 12.9%, down from 14.9% year-over-year and up slightly on the second quarter’s 12.6%.
The company took in 2,615 MW (megawatt) worth of firm and unconditional wind turbine orders for the quarter, compared to 2,667 MW in the second quarter, and a wind turbine order backlog value of €8.8 billion as of the end of the third quarter. On top of that, Vestas has services agreements worth an estimated €11.4 billion.
“In the third quarter, Vestas delivered increased order intake and healthy earnings in a market that is seeing accelerated competition and decreasing profitability,” said Group President & CEO Anders Runevad. “Our order backlog and service revenue both increased 18 percent year-on-year, while nine-month revenue is on par with 2016. As the market continues to evolve at a fast pace, we remain focused on continuing our leadership position by executing our strategy and increasing efficiency.”
Looking forward, Vestas shifted its 2017 guidance to account for the lackluster year so far and uncertainty around the United States commitment to wind energy, as being played out in the House and Senate as the country’s leaders try to pass a tax reform bill. Specifically, Vestas’ guidance for 2017 revenue has shifted from between €9.25 billion and €10.25 billion to between €9.50 billion to €10.25 billion; EBIT margin down from between 12-14% to between 12-13%; and free cash flow between €450 million to €900 million, down from a minimum of €700 million previously.
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