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Wind turbine maker Vestas says price power improving, shares jump
Global Banking & Finance Review®
Company
By Nikolaj Skydsgaard
COPENHAGEN (Reuters) -Wind turbine maker Vestas expects to deliver more positive results next year, its chief executive said on Wednesday, as high costs from raw materials and transport, which hit second-quarter results, are passed on to customers.
Shares in Vestas rose 4% after the firm said it raised its prices in the second quarter by 22% compared to the same period last year, a sign that the company’s hard-hit profit margins could improve.
Heightened competition, supply disruptions due to the COVID-19 pandemic and soaring metals prices exacerbated by the war in Ukraine have made it difficult for wind turbine makers to generate positive margins, despite solid demand.
The Danish firm reported a quarterly loss of 182 million euros ($185.73 million) before interest and tax (EBIT) before special items, wider than the loss of 143 million forecast by analysts in a Refinitiv poll.
That resulted in an EBIT margin of minus 5.5%.
But the average cost of onshore products in the second quarter, known as the average selling price, had increased to 960,000 euros per megawatt, Vestas said.
“The price on the orders they get is simply significantly higher than what we expected, and that makes it less bad that the total order intake is lower than expected,” Sydbank analyst Jacob Pedersen told Reuters.
“We have taken in orders at the highest price level in ten years,” Chief Executive Henrik Andersen told Reuters. “Our price development will lead to a more positive 2023,” he added.
Andersen also said a new energy bill passed in the U.S. Senate on Monday was “very supportive of renewable energy in the United States over the next ten years.” If passed in the House of Representatives, it would strengthen Vestas’ order intake next year and in 2024, he added.
In May, Vestas slashed its 2022 margin forecast due to the war in Ukraine and writedowns in its offshore business. Rival Siemens Gamesa last week lowered its 2022 outlook and said earnings would remain negative through 2023.
“With guidance retained and onshore pricing on new onshore orders better than expected, we see two key positives to indicate improving momentum on profitability into H2 and 2023,” Citi analysts said in a note.
($1 = 0.9799 euros)
(Reporting by Nikolaj Skydsgaard; editing by Terje Solsvik, Jason Neely and Kim Coghill)
A quarterly loss occurs when a company's expenses exceed its revenues during a specific three-month period, indicating financial challenges.
Pricing power refers to a company's ability to raise prices without losing customers, often indicating strong demand and market position.
EBIT margin is a measure of a company's profitability, calculated as earnings before interest and taxes divided by total revenue.
A renewable energy bill is legislation aimed at promoting the use of renewable energy sources, often providing incentives for companies in the sector.
Profit margins are financial metrics that indicate the percentage of revenue that exceeds the costs of goods sold, reflecting a company's profitability.
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