Vestas Wind Systems A/S (VWS.KO) Wednesday reported an 80% rise in fourth-quarter net profit, reflecting improved prices and conditions and better in-house processes and production, but said supply bottlenecks and poor quality components continued to dent results.
The Danish company posted net profit for the three-month period ended Dec. 31 of EUR157 million compared with EUR87 million a year earlier. A Dow Jones Newswires poll of five analysts had pointed to a net profit of EUR148.8 million.
In 2005, Vestas gave a severe profit warning and instigated a series of improvement programs to ameliorate its exposure to tight supply markets and rising costs.
It said Wednesday that the company is "a much more healthy business than it was just two years ago," but added that it's important it "doesn't confuse good times with good management" saying there's room for distinct improvements in a number of areas.
Vestas reiterated that it won't pay a dividend for 2007, as reported in the third quarter, despite having a stated aim to pay out 25% to 30% of its profit as a dividend, depending on growth plans and liquidity requirements.
Revenue for the period was EUR1.88 billion, in line with the company's upwardly revised expectations from Feb. 4, while operating profit for the period rose to EUR231 million from EUR127 million.
Analysts said the results were in line with expectations and contained few surprises given that upwardly revised guidance for full-year 2007 was issued by the company in February.
The company's order backlog rose to EUR4.8 billion at the end of 2007 from EUR4 billion at the start of the year, 49% of which is European accounts, the Americas for 40% and Asia-Pacific for 11%. Vestas' warranty provisions in 2007 totaled EUR242 million, or around 5% of annual revenue, which the company noted was in line with expectations, but "still highly unsatisfactory."
It said is has launched a number of initatives to enhance component quality through the supply chain and test components in order to reduce the need for warranty provisions.
Full-year 2008 targets remained unchanged from previous guidance, for revenue of EUR5.70 billion, an EBIT margin of 10%-12%, zero net financial items, a tax rate of 28% and net working capital of a maximum of 15%. In 2007, an operating profit of EUR443 million was equivalent to an EBIT margin of 9.1%, compared with 5.2% in 2006.
At 0846 GMT, Vestas traded down DKK16 or 2.9% at DKK531. Shares closed Tuesday closed at DKK547. With the exception of a couple of large dips as global stock market turbulence weighed on the stock, Vestas over the past 12 months has traded almost flat.