Vestas
Wind Systems (VWDRY, $8.35): “A Blow Over”
By:
Hannah Cehaic, AIM Student at Marquette University
Summary:
- Vestas Wind Systems, AS ADR.
(OTCMKTS:)VWDRY is the market leader of renewable energy
which install, manufacture, and service onshore and offshore wind
turbines.
- Vestas
2021 outlook has decreased again for the second time this year, making
their shares decrease as much as 14%.
- Vestas’
business and manufacturing has not responded well to the current supply
and shipping constraints.
- There
is a pending management change of CFO’s.
- New
wind farm contract in Estonia.
Key
points:
Vestas Wind Systems has undergone
a lot of stress since mid 2021 up until now. With supply chain issues and lack
of resources, Vestas has been under attack. The stock price has taken a hit
since then and has yet to increase from their high price of $17.23.
Recently, current CFO of Vestas,
Marika Fredriksson has handed over the financial reigns to new upcoming CFO
Hans Martin Smith. Hans Martin has many years of experiences as CFO of Vestas
Northern & Central Europe. This change will be implemented on March 1st,
2022.
Even though new management seems
promising, Vestas is still under water in terms of the industry. Costs of steel
and other materials are skyrocketing. Additionally, supply chain issues and
COVID have still led to slow delivery scheduled which has delayed many
operations. This has halted the completion of wind farms which has resulted in
firms not wanted to purchase these wind turbines due to volatile pricing and
unreliable shipping.
Though there a few setbacks with
the company, Vestas has recently won an Estonia turbine contract. This allows
Vestas to contract and supply turbines for Enefit Green’s Purtse wind project
in Estonia. This will allow the creation of electricity in Purtse using
renewable turbines. The construction of these new wind farms in Estonia will
begin early next year.
Recent
Performance:
Vestas’s
stock has been decreasing since middle of last year after the rise of material
costs and supply chain issues. From January of 2022 to February of 2022, the
stock alone has plummeted a whopping -17.55%. Additionally, Vestas has had a
negative average one month return of -6.87%. The new Estonia contract and new
management are needed to help pick up the stock’s pace.
Past
Year Performance:
Vestas
has decreased -47.50% in value over the past year. Vesta’s YTD returns are
-18.68 compared to the benchmark of -8.57. It is evident that geopolitics have
impacted Vestas in a very negative way.
My
Takeaway:
The new
contract in Estonia shows very promising returns of creating more wind farms,
specifically green wind farms. However, the building contract does not start
until early next year which still leaves almost a full year of Vestas to keep
up with changing geopolitical risks such as supply chain issues and increase
material costs. Vestas will need to complete another contract this year to keep
up with lost revenue despite changing geopolitical risks.
