COPENHAGEN (Reuters) - Wind turbine maker Vestas (VWS.CO) is gearing up for its busiest half-year on record, it said after reporting lower than expected profit attributed to rising costs stemming from the U.S.-China trade war and orders received when prices had plunged in 2017
The Danish company recently hired Henrik Andersen as chief executive, taking the helm at a crucial juncture for a company battling to remain competitive in a maturing market that is being weaned off the generous state subsidies on which the industry was built.
Vestas earnings are under pressure this year from a drop in prices for wind turbines ordered in 2017 and from higher prices for steel, imported components and transportation in the wake of the escalating trade tensions between the United States and China.
“We are of course trying to mitigate that through our supply chain, but it is not possible to mitigate all of that so there is a negative deviation,” Andersen, who took the reins on Aug. 1, told Reuters.
He said that Vestas is looking to source goods from places with either low or no tariffs even though this would push up transportation costs for the huge turbine towers and blades.
Vestas has manufacturing operations in Denmark and as far afield as the United States, Brazil, India and China.
Demand for wind and other renewable power sources, meanwhile, has continued to grow as efforts to implement the international 2015 Paris Agreement aimed at avoiding climate breakdown.
Vestas now faces its busiest half-year on record in terms of building and delivering its turbines, Andersen said.
The company’s wind turbine order backlog at the end of the second quarter was 20.8 GW, equating to 15.9 billion euros ($17.7 billion), up 56% percent from a year ago.
Second-quarter operating profit before special items fell roughly 50% to 128 million euros, below a 143 million euro forecast. Its EBIT margin fell to 6% from 11.5% a year ago.
Vestas now expects revenue of 11 billion to 12.25 billion euros this year, compared with a previous forecast of 10.75 billion to 12.25 billion euros. Its EBIT margin before special items is now forecast at 8-9%, down from a previous 8-10%.
Shares in Vestas were down 3.8% at 0955 GMT.
Rival Siemens Gamesa (SGREN.MC) trimmed its full-year profitability guidance last month and reported a quarterly margin well below its target range, citing low wind power prices.
“I’m not scared of the competition,” Andersen said, adding that the industry as a whole is in a position of strength.
Reporting by Stine Jacobsen; Editing by David Goodman