Thursday, 6 February 2020

Vestas Wind - Full Year Results


Vestas is one of the world's leading players in wind turbines - it designs, makes, installs and services both onshore and offshore turbines and holds the record of providing more turbines throughout 80 countries than any other company. The core of the business is providing sustainable, clean and affordable energy to people all around the world.

They are the global leader in onshore wind - over 100 GW installed and also onshore servicing. They are #2 in offshore wind (behind Orsted) with 5 GW installed and plans to double this by 2022. It's market cap. is currently 143bn DKK (approx £16bn).

The shares were added to my ISA portfolio last October at the price of 535 DKK.

Results

The company have this week released results for the full year to end December 2019 (link via Company website).

Orders have increased by 25% to a record 17.9MW. Revenues increased to 12.15bn EUR (10.13bn in 2018) with the bulk of this provided by their Power Solutions sector - 10.3bn and a further 1.9bn from servicing.

They propose a 6.6% hike in the dividend to 7.93 DKK which equates to just over 1.1% at current share price.

Commenting on the results, group CEO, Henrik Andersen said :
“Wind energy manifested its position as a leading global energy source in 2019, driving Vestas’ order intake to a record 17.9 GW, 20 percent growth in revenue and expected high activity levels in the coming years. In an extraordinarily busy year, Vestas extended its industry leadership, met its guidance on all parameters and scaled the company to deliver on our highest-ever order backlog of EUR 34bn.

Once again, our Service business delivered year-on-year growth and improved profitability, underlining its strategic importance in a tough market. In 2019, the industry thus faced challenges from trade wars and tariffs, causing execution costs to increase, which we expect to continue in an even busier 2020.

Together with our customers and partners, everyone at Vestas worked vigorously to create the momentum to finish 2019 strongly, and we must continue this momentum to achieve our goals for 2020. As we continue to lead the transition towards a world powered by sustainable energy, we remain focused on executing our strategy and pushing the industry to higher levels on technology, profitability and sustainability,” 

The results have been well received with the share price rising 5% to 721 DKK on Wednesday.

12m share price chart  (click to enlarge)


Outlook

The company expects strong growth in the renewables sector over the coming decade. They forecast that global renewable capacity for electricity will increase from 10% to 35% by 2035 with annual investment in wind power to double to $200bn during this time frame.

Vestas has launched a seriously ambitious sustainablity drive throughout their own business and entire value chain. The company aims to become carbon neutral by 2030 and produce zero-waste turbines by 2040.

As with Orsted, I am more than happy with my acquisition and may look for an opportunity to top up my holding over the coming few months.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation. Holding individual shares always carries more risk than collective investments - always DYOR!

7 comments:

  1. Ciao DIY,
    I was looking at them myself, but what is stopping me from entering into this company is the fact that it's traded in DKK and I don't like the idea to have to manage yet another currency in the portfolio... Do you hedge currency risk or you take it as it goes? Always a pleasure to read your blog, lots of good insights! Ciao ciao
    Stal

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    1. Thanks Stal and good to hear from you - hope your son is now fully recovered.

      No, I don't hedge but just go with the flow, it can work both ways and as most of my investments are UK based, it does no harm to hold some shares listed in Denmark or France.

      I believe the Vestas shares are also listed in the US so it would be worth exploring - the ADR ticker is VWDRY.

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  2. Son is fully recovered (actually they take incredibly little time to recover from illness, unlike us adults...).
    Thanks for the heads up on the US ticker, I'll check it out, the issue there will be taxation on dividends, I never really understood how ADRs are managed (do they get home country+US+your country of residence tax?)...

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    1. It may well be different in Italy but for UK there is agreement to avoid double taxation by holding in pension wrapper or complete form W-8BEN and 30% withholding tax on dividends is reduced to 15%.

      The dividend is a small percentage so should not be much of an issue. I hold for capital appreciation (hopefully) and to support the renewable energy sector in preference to fossil fuels.

      Be interested to hear how you get on if you decide to purchase.

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    2. Unfortunately here we do not get back anything from the state, but as you mentioned dividends account for such a small percentage...The investment thesis here is different. I have come very close with buying TERP, and I have a small position in NEE and WY in the states, but either than that I wanted to bump up my exposure to renewable/green energy. My problem are prices, right now they are stellar all over the board... :(

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    3. I was thinking prices were high last year when I acquired Orsted and Vestas but both have climbed higher - 45% and 35% respectively. I am sure renewable energy stocks will continue to outperform over the coming decade...no advice obviously!

      I see TeraForm has been subject to a takeover from Brookfield Renewable.

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    4. Exactly the problem with TERP... I was just about to get it at 15 dollars and it shot at 18 in 2 days... :( BEP it's untouchable. Fact is, interest rates are very low, this is great for Utilities, market last year was buoyant for everyone, but Utilities got a strong push above other stocks. So now it's not the time in my opinion. I was hoping for some market pullback in 2020, so far NOT so good...

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