January blues

Vestas hasn't escaped the January blues. Shares of the Danish wind turbine manufacturer fell 19% on Wednesday following the company’s second profit warning in three months. The business is now expecting to break even in 2011, rather than the €250 million profit originally anticipated. A fact that might come as a surprise to analysts over at Bryan, Garnier & Co. following their 'buy' reccomendation, at the start of the week.

You could say that the firm has been hit by a perfect storm – strong winds delayed European installations in December, Chinese demand was overestimated (and the competition underestimated), questions remained regarding the extension of North American PTCs and then development costs of the new V112 – 3.0MW turbine over ran to the tune of €125million.

While the rationale for all of this is thoroughly plausible, it won’t stop a number of voices in the City questioning whether the current Chief Executive Officer, Ditlev Engel is the right person to pilot the business through this difficult period in the market.

Mr Engel will of course always feel the heat when times are tough – partly because he has a very public image and also because, at nearly seven years service, he has been at the top for what is considered a fair amount of time.

And, as is often the way, the market is littered with examples of pioneering businesses that have dominated the sector, only later to fall short. A condition usually brought about through over confidence, an expectation that the status quo will continue and an underestimation of the competition – see Research in Motion or GM for more details.

Dwelling on the specifics though is largely academic – the litmus test for Vestas is in what happens next. Whether that results in having to fight off the acquisitive advances of a competitor (stranger tings have happened – particularly given that US PE fund Blackrock has a five per cent stake, and by Vestas’s own admission 57% of its shareholders are based outside Denmark) – or a strategic overhaul to slash costs - the markets need to see some quick results.

The current global economic climate and relative political uncertainty surrounding renewables was always going to make 2012 a tough year, for Vestas, it remains to be seen just how tough...

Vestas hasn't escaped the January blues. Shares of the Danish wind turbine manufacturer fell 19% on Wednesday following the company’s second profit warning in three months. The business is now expecting to break even in 2011, rather than the €250 million profit originally anticipated. A fact that might come as a surprise to analysts over at Bryan, Garnier & Co. following their 'buy' reccomendation, at the start of the week.

You could say that the firm has been hit by a perfect storm – strong winds delayed European installations in December, Chinese demand was overestimated (and the competition underestimated), questions remained regarding the extension of North American PTCs and then development costs of the new V112 – 3.0MW turbine over ran to the tune of €125million.

While the rationale for all of this is thoroughly plausible, it won’t stop a number of voices in the City questioning whether the current Chief Executive Officer, Ditlev Engel is the right person to pilot the business through this difficult period in the market.

Mr Engel will of course always feel the heat when times are tough – partly because he has a very public image and also because, at nearly seven years service, he has been at the top for what is considered a fair amount of time.

And, as is often the way, the market is littered with examples of pioneering businesses that have dominated the sector, only later to fall short. A condition usually brought about through over confidence, an expectation that the status quo will continue and an underestimation of the competition – see Research in Motion or GM for more details.

Dwelling on the specifics though is largely academic – the litmus test for Vestas is in what happens next. Whether that results in having to fight off the acquisitive advances of a competitor (stranger tings have happened – particularly given that US PE fund Blackrock has a five per cent stake, and by Vestas’s own admission 57% of its shareholders are based outside Denmark) – or a strategic overhaul to slash costs - the markets need to see some quick results.

The current global economic climate and relative political uncertainty surrounding renewables was always going to make 2012 a tough year, for Vestas, it remains to be seen just how tough...

Vestas hasn't escaped the January blues. Shares of the Danish wind turbine manufacturer fell 19% on Wednesday following the company’s second profit warning in three months. The business is now expecting to break even in 2011, rather than the €250 million profit originally anticipated. A fact that might come as a surprise to analysts over at Bryan, Garnier & Co. following their 'buy' reccomendation, at the start of the week.

You could say that the firm has been hit by a perfect storm – strong winds delayed European installations in December, Chinese demand was overestimated (and the competition underestimated), questions remained regarding the extension of North American PTCs and then development costs of the new V112 – 3.0MW turbine over ran to the tune of €125million.

While the rationale for all of this is thoroughly plausible, it won’t stop a number of voices in the City questioning whether the current Chief Executive Officer, Ditlev Engel is the right person to pilot the business through this difficult period in the market.

Mr Engel will of course always feel the heat when times are tough – partly because he has a very public image and also because, at nearly seven years service, he has been at the top for what is considered a fair amount of time.

And, as is often the way, the market is littered with examples of pioneering businesses that have dominated the sector, only later to fall short. A condition usually brought about through over confidence, an expectation that the status quo will continue and an underestimation of the competition – see Research in Motion or GM for more details.

Dwelling on the specifics though is largely academic – the litmus test for Vestas is in what happens next. Whether that results in having to fight off the acquisitive advances of a competitor (stranger tings have happened – particularly given that US PE fund Blackrock has a five per cent stake, and by Vestas’s own admission 57% of its shareholders are based outside Denmark) – or a strategic overhaul to slash costs - the markets need to see some quick results.

The current global economic climate and relative political uncertainty surrounding renewables was always going to make 2012 a tough year, for Vestas, it remains to be seen just how tough...