Shares in Vestas Wind Systems A/S (VWS.KO) plummeted Monday after the world's largest manufacturer of wind turbines revised its profit guidance for 2011 and said it wouldn't complete some projects on time due to problems commissioning a new generator factory in Germany.
Shares in Vestas Wind Systems A/S (VWS.KO) plummeted Monday after the
world's largest manufacturer of wind turbines revised its profit guidance for
2011 and said it wouldn't complete some projects on time due to problems
commissioning a new generator factory in
Germany
.
The Denmark-based company said the delay in deliveries will hamper full-year
sales as well as its earnings margin; it now expects full-year sales to come in
at EUR6.4 billion, from previously expected EUR7 billion, and the margin on
earnings before interest and taxation, or EBIT, to arrive at 4% in the full
year, down from a previous target of 7%.
At 949 GMT Monday, Vestas' shares traded down 18.3%, at DKK91, after having
opened down as much as 24% an hour earlier.
The warning marks the latest unexpected twist for Vestas, whose shares have
often moved in large swings in either direction following earnings reports or
unplanned news. Company shares jumped 25% the day of its most recent earnings
report in August.
Vestas said the revision was needed because a new generator factory in
Travemunde
,
Germany
,
hasn't been progressing as planned. "In order not to compromise on safety
and quality in an already very busy fourth quarter, Vestas has chosen to
postpone the handing over of a number of projects, primarily in
Europe
,"
the company said.
The 3 percentage points EBIT margin cut corresponds to a full-year EBIT some
EUR234 million lower than previously guided, according to two analysts. The
company expects EUR35 million in fines and other costs connected to the
postponed deliveries.
The company also pre-released preliminary third-quarter numbers which show
revenue dipped to EUR1.34 billion, from EUR1.92 billion last year and a loss
after tax of EUR60 million for the third quarter from a profit of EUR187
million.
Jyske Bank analyst Janne Vincent Kjaer characterized the news as a "major
disappointment," noting that the "EBIT margin has been really hard
hit."
Credit Suisse said the disclosure revives questions about Vestas' execution.
"Given Vestas' overcapacity since 2008, investor and analyst concerns on
Vestas have centred more upon the top-line - on pricing, order flow and sales -
for the past three years. Now execution issues have once again come to the
fore, we believe perception of risk on Vestas stock moves up," said Credit
Suisse.
The negatives were mitigated somewhat by news that Vestas was maintaining its
target of a full-year order intake of between 7,000 and 8,000 megawatt of
installed electricity production capacity, analysts said.
Kjaer said Vestas has a promising projects pipeline for 2012 and sees no reason
to adjust her results estimates for next year.
Vestas Chief Executive Ditlev Engel said the delayed projects would be
completed in 2012 and that the earnings on the individual profits are
"still satisfactory." The decision to postpone deliveries was made
with great regret, but "safety and quality has top priority and a decision
to speed up the projects in question would have been irresponsible," Engel
said.
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