Announced yesterday, Danish wind company Vestas plans to cut 3,000 jobs (13% of workforce) and shut down five plants. The reduction at the world’s largest turbine maker stems from shrinking power demands and U.S. policy uncertainty.
Denmark is home to four of the five plants being shutdown with Sweden hosting the other.
Vestas and alternative energy have not been helped by indebted European governments, which have been avoiding investments in new energy projects--leading to a delayed recovery in the market. In turn, Vestas saw its EBIT drop almost 100 million euros in this year’s third quarter compared to last year’s.
With competition heating up in the alternative energy market, the wind energy equipment market has been struggling since late 2008. The financial crisis has not helped the power sector in the least bit, and renewables are following suit due to uncertain regulations.
Due to the anticipation of the European wind market to fall short of expectations next year, Vestas’ shares have taken a hit of over 10%.
Aside form Vestas, GE saw a bigger drop than expected in revenue on October 15th, partially due to the 32% fall in wind turbine sales and a 15% drop in wind orders.
As the bad news compiles for Vestas and the wind energy market as a whole, it’s topped off by rising component costs, which have been hurting the profitability of new projects. Regardless, Vestas is still planning to stick to its previous 2010 direction for sales of 6 billion euros and an EBIT margin of 5-6%.
With this evidence of a bearish market for wind energy and a bullish market for solar energy, investors should see be able to easily see the short-term pattern taking shape.
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