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Saturday, February 14, 2009
Vestas Wind Systems - 2008 Annual Report
Image: © 2009 Vestas Wind Systems

Vestas 2008 Earnings Up 24.2 % To EUR 6.035 Billion

RANDERS, DENMARK- If you listened to some of the recent media reports broadcast by some well known business channels, you might have erroneously concluded that wind energy was on the way out. But a quick review of the 2008 Vestas Wind Systems Annual Report, from the world's largest wind turbine company, makes you wonder whether some of these reporters and editors could be smoking something you can't buy at your local corner store.

The global financial climate is having its impact on all worldwide corporations, but for the wind turbine industry there continues to be an overall growth trend and huge long-term potential. Wind energy is an essential part of saving the Planet, and therefore there is clear predictable growth for the industry moving forward to as far as 2020 and beyond. Generally, for investments in 100% wind energy corporations, you won't go wrong if you take a long-term investment position at this time. The picture shows Vestas Wind Systems' very high technology V90-3.0 MW wind turbine, installed at a site in Bockingharde, Germany.

Vestas Wind Systems, headquartered in Randers, Denmark, is a 100% pure play wind turbine stock, and they are the largest global producer of electricity generating wind turbines with a 2007 market share of  23%. Vestas Wind Systems reported their 2008 annual results on February 11, 2009 and indicated that 2008 earnings were EUR 6.035 billion versus 2007's EUR 4.861 billion (24.2 % increase). We last reported on Vestas 3 months ago for their Q3 2008 report, and 2008 has ended up closing out very positively for them. After tax profit for 2008 was EUR 509 million versus an after tax profit of EUR 265 million in 2007 (+92.1% increase). It was a stellar set of financial and sales results from the Randers, Denmark based company, and the 2008 Annual Reporty gave credibility to their stated future growth projections.

At the World Future Energy Summit in Abu Dhabi last month, our Managing Director spoke briefly with Vestas CEO Ditlev Engel, which confirmed, much like the case of John Chambers for Cisco, that Engel is one of the primary drivers for the company's growth and its systemic strategic business approach. The Vestas company culture is to have steady continual improvement year after year, and they are consistent at outlining their future improvement areas within each year's annual report. A careful read will outline that the company embodies long-term planning as part of their successful strategy.

Vestas says that their 2009 growth will be impacted somewhat by the global financial crisis. They project 2009's revenue will come in at about EUR 7.2 billion, or a 19.3% increase from 2008. Our belief is that that confirmed wind turbine orders and options for wind turbines booked by Vestas's customers, will not be cancelled . Most of the large successful wind farm companies will not walk away from previous order commitments because the demand for wind turbines far exceeds the current overall industry manufacturing capability. You snooze you lose is the reality if you try to cancel and re-purchase wind turbines in this period of extremely high demand.

For calendar year 2008, Vestas Wind Sysytems shipped 6,160 MW of turbines versus 5,580 in 2007,which was a 24% increase in wind turbine units shipped over 2007 figures. The two largest worldwide growth markets for Vestas are China and the United States, with an estimate that the U.S. represents unimagined growth potential over the next three years with an estimated growth rate hitting in our opinion as much as 50% or even more.

The Vestas Wind Systems stock trades primarily on the Copenhagen Exchange and yesterday (February 13, 2009) it closed at 304 Krone which is 43.4% of the 700 Krone high that it hit on Jun 18, 2008. The 52 week low was 180 Krone (October 28, 2008), and the price decline was attributed to the sell-off of equities in general accross global markets. The current PE for Vestas is 14.7 which for a growth company is an excellent ratio for acquisition. We still recommend Vestas Wind Systems as a long term investment over a 15 year horizon. We estimate that stock price could have annualized growth of as much 20% or better over the next ten years.

The short-term risk in purchasing Vestas Wind Systems stock is that  the general equity markets could fall further, and this would take the price of Vestas stock down with the general decline. If you can stomach the potential of a possible short-term dip in the stock price, the long-term prognosis is that Vestas will continue to be a high growth stock and will deliver very consistent high investment returns with its increasing equity price valuation.

Investor Note: The author has no material interest whatsover with Vestas Wind Systems, nor is he associated in any manner with someone, an institution, or any other collective gathering of individuals that have associations with Vestas Wind Systems. Statements made are not intended to influence any decision making process, but are instead a perspective from the author about the investment type in question. The reader is encouraged to seek other opinions in order to build their own collective understanding about this investment type, and to use sound judgement and due dilligence in their choice of an equity trading and safe-keeping institution.

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