Vestas rides favourable wind to €1 billion sales

London, 23 August: Danish wind turbine giant Vestas Wind Systems has reported a 19% surge in revenues in the second quarter, to just over €1 billion ($1.4 billion), as demand for renewable energy continues to hot up.

Gross profit jumped to €188 million for the quarter, compared to €86 million the year before.

Vestas shipped 629 turbines during the quarter, with a total output of 1,090MW – 8% up on the same period last year. At the end of June, the company had a backlog of 4,535MW of orders. Just over half of this backlog is destined for projects in Europe, with another 33% going to the Americas and 14% to the Asia/Pacific region.

The company warned that the log-jam is likely to continue some years into the future. "Vestas expects that it will take several years before supply will match demand given the present price and delivery conditions, because lifting quality and substantially expanding production output requires massive investments in facilities and training throughout the supply chain," it said.

Other risk factors for the company include warranties being exercised because of sub-standard quality, increasing raw material and transport costs and fluctuations in the exchange rate between dollars and euros.

Vestas also told investors to expect "substantial" quarter-on-quarter fluctuations, because of the increasing number of contracts for simply supplying, rather than installing turbines, disruption to installations and a change in timing of customer payments.

But the firm predicts revenues will rise to €4.5 billion over the year, with an increase in the margin of earnings before interest and tax (EBIT) from 5.2% in 2006 to 7-9% in 2007. In 2008, Vestas expects its margins to rise to between 10% and 12% and to increase market share to 35% from 28% in 2006. The company said: "The improved EBIT margin will primarily be the result of a better flow in production and enhanced manufacturing quality."

But despite its rapid expansion, Vestas also announced it will close a factory making turbine blades in Portland, Australia. It said: "The factory is not of a sufficient size to ensure satisfactory profitability, and the market outlook for Australia makes it impossible to expand the facility."