Vestas shares rose sharply in Copenhagen after the group unveiled a record order backlog, and signalled expectations for a busier 2019 and a levelling out of the decline in turbine prices that has squeezed it and other wind OEMs over the last few years.

Vestas shares were 7% higher in late Wednesday trading in Copenhagen, outperforming the wider OMX 20 index which rose by less than 2%.

The upward move came despite a profits fall at the Danish group – the world’s largest supplier of onshore wind turbines – during the third quarter of the year.

Vestas saw earnings before interest and tax (Ebit) fall to €276m in the July-September quarter, down by €79m on the same period a year earlier. Net profit fell to €178m from €253m.

Ebit margin before special items was 9.8%, down from 12.9% a year earlier.

The profits squeeze – a familiar trend among turbine OEMs in recent reporting rounds – came despite a 2% increase in revenues to €2.81bn.

Vestas said the picture on orders reflects ongoing demand for turbines and associated services. Order intake spiked to 3.26GW in the quarter, up from 2.61GW in Q3 2017. That helped the Danish group to a combined turbine and service order book of €23.7bn, up €3.5bn from a year ago.

The group's average selling price in the quarter was €0.78m/MW, up from €0.71m/MW in the prior quarter and €0.80m/MW in the same quarter a year earlier. CEO Anders Runevad said while ASPs will inevitably vary quarter by quarter on factors such as turbine type, the company was reassured to see three quarters in a row of stable pricing.

As recently as Q3 of 2015, Vestas' ASP was €0.96m/MW, reflecting the pinch on pricing seen by the entire wind sector as it moved away from subsidies and into a competitive era that put downwards pressure on cost-of-energy.

Chief financial officer Marika Fredriksson told Recharge the industry may continue to see “normal, single-digit downward pressures”, but should be spared a repeat of earlier double-digit declines “which no one coped with”. She said: “Prices in the industry have stabilised, historically now for the last four quarters, but also going forward we see a stable pricing picture.”

Fredriksson said Vestas expects to see “a higher activity level” in 2019 compared to 2018.

Runevad added that the group is continuing to take “mitigating” measures to offset the impact of trade tariffs in the US market, which he again put at up to 1.5% on group-wide production costs.

Runevad said: “With continued strong global demand for wind energy, Vestas delivered industry-leading results and profitability in the third quarter of 2018, including another all-time high order backlog and all regions contributing to a 25% increase in order intake year-on-year. Although the industry remains highly competitive, average selling price in the third quarter saw continued underlying stabilisation, which highlights Vestas’ ability to create value for customers.”

Vestas also hailed a €23m ($26.4m) contribution to net profit by MHI Vestas, its offshore wind joint venture with Mitsubishi Heavy Industries.

Runevad added that the profit contribution from MHI Vestas underlines “the strength of our three-legged business model”.

Vestas maintained its full-year guidance for revenue and Ebit margins – €10-10.5bn and 9.5-10.5% before special items – but revised its expected investments up by €100m to about €600m, and free cash flow to a minimum €100m from €400m.

Note: Update adds share price information and CFO comment

Wind

Vestas rises on signal of stabilising prices and busier 2019