Vestas Predicts Rising 2009 Profitability on Demand

By Christian Wienberg

Nov. 6 (Bloomberg) -- Vestas Wind Systems A/S, the world's biggest maker of wind turbines, predicted higher profitability next year as third-quarter profit rose 47 percent on increased demand for alternative energy.

Net income rose to 97 million euros ($125 million) from 66 million euros a year earlier, the Randers, Denmark-based company said today. That missed the 117 million-euro median estimate of seven analysts surveyed by Bloomberg News. Sales rose 53 percent to 1.76 billion euros.

Government subsidies and incentives for wind-energy generation have spurred demand for turbines from Europe to China, pushing up prices by 74 percent in the past three years, according to BTM Consult APS, a Danish wind power consultant. Vestas said profitability will increase as overall strong demand outweighs project delays caused by the credit crunch.

``Vestas has had a relatively problem-free third quarter and is well-positioned to meet its 2008 target,'' Christian Nagstrup, an analyst at Jyske Bank A/S in Silkeborg, Denmark, said before the release. He has a ``sell'' rating.

Vestas rose 10 kroner, or 3.4 percent, to 307 kroner as of 9:42 a.m. in Copenhagen. The shares have dropped 44 percent this year, compared with a 39 percent decline in the Bloomberg European 500 Index of the continent's most highly capitalized companies.

Margin

Earnings before tax and interest will be between 11 percent and 13 percent of sales next year, compared with an expected margin of 10 percent to 12 percent, Vestas said. Sales will rise to 7.2 billion euros from 5.7 billion euros in 2008.

The credit crises would ``alleviate the demand pressure on the industry,'' as some wind park developers have difficulties securing financing for new projects, Vestas said. It also said it would suspend hiring of new workers because its projected 2009 production is 15 percent below its workforce capacity.

Gamesa Corp. Tecnologica SA, Spain's biggest turbine producer, said last month it will suspend production for an extra week over the Christmas holiday at two of its sites because it has filled orders.

Vestas, which estimates it will have 25 percent of the global market share this year, had an order backlog of turbines with a combined capacity of 5,848 megawatts at the end of September. Of those orders, 62 percent are in Europe, 24 percent in the Americas and 14 percent in Asia and the Pacific.

World Demand

Wind power will make up 3 percent of the world's electricity production in 2012, up from 1 percent in 2007, according to the Global Wind Energy Council.

The company, Denmark's fourth-largest measured in market value, also said warrant provisions will decline next year as its turbines have become more reliable. Provisions will be between 3 percent and 4 percent of 2009 revenue, compared with 4 percent to 5 percent this year, Vestas said.

Vestas, whose largest competitor is the wind division of General Electric Co., aims to increase annual turbine manufacturing to 10,000 megawatts by 2010.

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net