Wind Giant Vestas Plunges as Commodities Rally Bites

(Bloomberg) -- Shares in Vestas Wind Systems A/S fell the most in three months after the wind giant cut its outlook for the year, citing surging commodity costs and supply-chain disruptions.

The Danish company, one of the top makers of wind turbines, now expects full year revenue to be about 3% lower this year. The revised outlook comes as the renewable energy developers continue to face rising costs for raw materials like copper and steel, metals that are essential for the wind industry.

Commodities have rallied this year as global economies rebound from the pandemic, boosting the price of everything from oil to natural gas and steel. Higher costs had already forced Spanish turbine rival Siemens Gamesa Renewable Energy SA to report a loss earlier this year.

”Inflation is here,” Chief Executive Officer Henrik Andersen said in an interview on Bloomberg TV.

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Vestas shares, down almost 18% this year, plunged as much as 7.7%, the most since May.

The company now expects full-year revenue of 15.5 billion euros ($18.2 billion) to 16.5 billion euros ($19.3 billion), down from previous forecast of 16 billion euros to 17 billion euros, it said in an earnings statement Wednesday. It also cut expected margin on earnings before interest and taxes to between 5% and 7%. That compares with a previous forecast for 6% to 8%.

Reduced returns for renewable energy companies comes just as the world needs wind and solar farms the most. The industry needs to invest at least $92 trillion by 2050 to cut emissions fast enough to prevent the worst effects of climate change, according to BloombergNEF.

Surging prices for key metals and higher shipping rates had already spurred a loss for Vestas in the first quarter. Steel prices in the U.S. surged more than 80% this year. The metal is the single biggest input for manufacturers like Vestas, making up about 84% of a turbine’s weight.

The revised guidance shows that the situation is more challenging than executives first thought. Vestas said earlier this year that despite a slow start, it would be able to recover for the full year and maintained its guidance after the first quarter.

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