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Vestas Wind Systems‘s
stock hit record highs on Tuesday as strong demand in the US for wind turbines in the second quarter drove upward sales.
The world’s largest wind turbine manufacturer restored its lead year-on-year as sales rose to € 3.5 billion – a 67% increase over the same period in 2019 – driven by higher volume of wind turbine deliveries in the US
The company’s combined backlog – for wind turbines and service contracts – climbed to a record high of € 35.1 billion at the end of June, as high demand for renewable energy continued. Chief Executive Henrik Andersen said its service segment “played an important role in ensuring stable and sustainable energy supply during lockdowns around the world,” growing 6% with high margins in the quarter.
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The Danish company restored the lead over the entire year it kicked off in the wake of the pandemic in April, and expected revenue of € 14 billion to € 15 billion. However, it expected a profit before interest and tax margin of 5-7%, down from a previous forecast of 7-9%, and total investment would now be lower than the initial target of € 700 million in 2020.
Vestas swung after a quarterly net loss of € 7 million, from a profit of € 90 million a year earlier, and below the FactSet consensus of a profit of € 75 million. Earnings were hit by a one-time cost of € 175 million to repair and upgrade older wind turbine blades, while logistics costs were also increased by the coronavirus pandemic.
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Despite the loss, the rising sales and reintroduction of unchanged guidance for whole years investors invested as the share rose 8.4% to 918.6 Danish kroner – it is now 36% up year-to-date.
Looking forward. Unusual guidance for year-round restoration is an impressive achievement, considering the disruption caused by the coronavirus pandemic. What is more impressive, however, is the sales performance and overdue order of record € 35 billion. Looking at the longer term, the global movement towards a lower carbon economy seems to be picking up pace, with governments adopting it in the Covid-19 recovery era, which is also good for business.
Analysts at Danish bank Sydbank said that the strength of Vestas and the fact that sustainable investments were high on the wish list for investors, meant that despite the stressed valuation, the stock had room to move higher.
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