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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In downtrodden sectors, any hint that the wind is turning is greeted with strong enthusiasm. So it has proved at Vestas. After almost two years of losses, the Danish wind turbine manufacturer made a sliver of profit in the third quarter. Shares blew 9 per cent higher on Wednesday.
There are signs that business at the €21.5bn company is finally picking up. It led the pack in raising prices for new turbines after 2021. That is starting to bear fruit. Revenues in the third quarter were 11 per cent higher year on year on stable volumes.
Importantly, its pricing power outpaced cost inflation. Fewer supply chain snafus helped. Costs to mitigate delays and disturbances fell to their lowest level in two years. Gross margin doubled to 8.1 per cent.
There may be more to come. Vestas believes the average selling price it achieved this quarter was up 5 per cent compared with the previous three months. The second quarter pricing was itself stronger than last year. Meanwhile, both steel and logistics costs are trending down.
There are a number of reasons why Vestas might have seen the worst. For one, it appears to have avoided self-inflicted wounds. Rival Siemens Energy is experiencing product failures that have resulted in a spate of profit warnings after its acquisition of Gamesa. Also, its focus on land-based turbines means less exposure to offshore wind project cancellations, such as that which recently triggered a $4bn impairment at developer Ørsted.
One breezy quarter does not a summer make. Yet Vestas’s results should give the industry hope. As an equipment provider, it was first to feel the pain of cost rises. It is now first to feel the benefit of cooling inflation and commercial discipline.
There are also signs that buyers of renewable electricity, who ultimately determine the industry’s profitability, may later reprice auctions and contracts to ensure projects go ahead. Sustained evidence of this evolution is required before the industry can fully recover.
