Vestas, Facing Component Snafus, Thrives Anyway

It’s just a matter of time now before someone writes another one of those “wind in its sales” headlines, this time about Vestas Wind Systems. It is just the kind of bottom-branch fruit that looks appetizing to an editor starved for inspiration.

Here’s why: Vestas, the Danish wind-turbine maker, had a great financial report for the June quarter — the rare kind where a company misses analysts’ estimates for its net profit but looks so strong according to many other metrics that investors forgive it anyway.

According to the International Herald Tribune, Vestas shares rose 6 percent on Friday (following a 5 percent rally a day earlier amid hope for strong numbers) in Copenhagen because of revenue that grew (despite a shortage of some key components) and an impressive order book — 67 percent larger than it was a year earlier — that suggests more revenue is coming. As Sydbank analyst, Jacob Pedersen put it:

“I think there are some very strong growth signals in these results, stronger than I can ever remember seeing in Vestas… In particular I want to highlight the order book of €7.2 billion ($10.6 billion), I might have bid €5.5 billion ($8.1 billion) if I had been optimistic.”

Vestas’ net profit rose to €65 million from €51 million a year earlier, but came in shy of the the €69 million consensus of analysts polled by Bloomberg. Revenue grew only 3 percent to €1.1 billion. That’s not bad considering that, earlier this year, Vestas said a shortage of components was delaying deliveries. Vestas President and CEO Ditlev Engel told the BBC:

When you make a car, you have something like 3,000 components. We have 9,000 components in a turbine, so if you miss one it doesn’t matter if you have all the other 8,999. Making sure you have the supply chain under order is very important … We are working very hard with our suppliers to get this in balance.

Engel’s analogy to the auto industry is interesting. In the early days, U.S. automakers made all their parts in house to ensure that the entire production was working smoothly. It took years for them to rely on outside suppliers for many of the parts.

None of this is slowing Vestas’ plans to expand its factories to answer the demand for wind power that took off as oil soared to $140 earlier this summer. Vestas said it’s opening two new factories in Colorado, as well as expanding an existing facility in China.