Vestas shares fall after margin guidance update
Vestas said its annual EBIT margin before special items is likely to land at the low end of its 4% to 5% range.
By Sarah Jenkins · Chief Macro Economics Correspondent
· 2 min read
Vestas Wind Systems shares fell 9% in early trading after the wind-turbine manufacturer said its annual EBIT margin before special items is more likely to come in at the lower end of its 4% to 5% guidance range. The company also lowered its expectations for net investments and service EBIT, according to figures released by Vestas.
The update places greater focus on operating profitability at a manufacturer exposed to capital-intensive production, project timing and service performance. EBIT margin before special items measures earnings before interest and tax as a share of revenue, excluding items the company classifies as special, so a move toward the bottom of a guided range signals less operating profit for each euro of sales than investors may have expected at the midpoint.
Vestas said net investments are now expected to be approximately €1 billion, compared with the previous figure of €1.2 billion. Lower net investment guidance can reflect a smaller expected cash outlay for assets and related investment activity, though Vestas did not provide additional detail in the reported update.
The company also said service EBIT is expected to be €450 million, down from an earlier expectation of around €500 million. Service EBIT is a measure of operating profit from the company’s service activities before interest and tax, and it is watched because service contracts can be an ongoing earnings contributor after turbines are installed.
For the third quarter, Vestas reported an EBIT margin of 4.5% on revenue of €5.18 billion. That quarterly margin sits within the annual guidance range the company cited, while the guidance update indicates Vestas now sees the full-year outcome closer to the lower end of that band.
The share-price decline reflected investors’ immediate response to the guidance revisions rather than a change in the company’s reported third-quarter revenue figure. MarketWatch reported that Vestas stock, traded under the VWS ticker, was down 9% in early trade following the announcement.
Vestas did not provide, in the reported figures, a new annual EBIT margin range beyond the existing 4% to 5% band. The company’s statement instead narrowed expectations within that range by indicating the result is more likely to be nearer its lower boundary.
This story draws on original reporting from MarketWatch.
