Vestas Beats Profit Expectations, Maintains Guidance

 

The world's biggest wind turbine maker Vestas posted better than expected first-quarter operating profit on Friday, citing higher sales and tight cost control while sticking to its full-year revenue and profit margin guidance.

 

Deliveries were up nearly 30 percent year on year in the first quarter, with Chief Executive Anders Runevad pointing to a U.S. tax credit scheme that boosted orders last December.

 

In what is normally a weak quarter for the Danish company, operating profit rose to 211 million euros ($232 million), beating the consensus of 183 million forecast in a Reuters poll of analysts.

 

"This is really because the margins on delivered projects has been better than expected and they have managed to hold back on costs," said Sydbank (SYDB.CO) anlayst Jacob Pedersen.

 

The EBIT margin almost doubled to 11.2 percent from 5.8 percent in the first quarter of 2016.

 

"We have a very low fixed capacity cost base that has a big impact on the EBIT margin," said Vestas finance chief Marika Fredriksson.

 

The company jumped to the top of the U.S. wind market last year in terms of installed capacity, supplying 43 percent of the 8.2 gigawatts of capacity connected to the U.S. power grid.

 

However, Vestas expects fewer orders from its biggest market this year as a five-year extension of the PTC tax credit scheme in late-2015 could ease pressure on potential U.S. customers to land projects quickly.

 

"Last year a lot of PTC components came very late in the year. For natural reasons we see that the market takes a bit of a breather this year," Fredriksson said, adding that the company maintained its full-year guidance.

 

Vestas is forecasting 2017 sales of 9.25 billion euros to 10.25 billion euros and an EBIT margin of 12-14 percent.

 

"Given the solid start to the year and the higher than expected EBIT margin delivered in Q1, we see the low end of the guidance as conservative, leaving room for a positive revision later in the year," said Jyske Bank (JYS1.F) analyst Janne Kjaer.