Vestas saw its market capitalization rise by more than DKK 30bn yesterday following a surprisingly strong earnings report. The company appears to have turned a corner after several challenging years, not only generating solid profits but also delivering strong growth.
International investment banks were quick to raise their expectations for Vestas, with the company described as having been brought into the spotlight by major bank JPMorgan.
“This development may be the best the company has seen in several years and, in our view, provides clear confirmation that the company is out of the woods,” the bank noted, according to Bloomberg News.
Years of hard work to turn around a struggling business are now paying off, while the strong growth in energy demand is also benefiting Vestas in its target markets. Vestas has even come to be associated with the highly hyped AI industry, as the electricity generated by wind power helps enable the expansion of large data centers.
Enthusiasm
Vestas was able to bask in enthusiasm throughout Wednesday, making the transition to Thursday’s presentation of Ørsted’s quarterly results all the more striking.
Once again, we have a company focused on green electricity and based on the same form of generation—wind turbines as Vestas. Yet Ørsted is performing very differently on the stock market today.
For one, Ørsted continues to suffer from its significant investments in US power generation, which represents a major part of Vestas’ growth trajectory. For Ørsted, however, it is investments in offshore wind that are proving costly in the form of further write-downs.
The Trump administration has made phasing out offshore wind in the US a priority and is paying substantial sums to companies operating in the country to shut down their projects. Ørsted is simply so far along in the process that it is completing the projects.
This is taking a toll in the short term, with stop orders resulting in daily losses amounting to many millions.
Furthermore, Ørsted’s aggressive bidding strategy has left the company on the sidelines of Danish offshore wind projects. Rasmus Errboe takes this in stride in an interview with EnergiWatch today, making clear that the strategy of ensuring high margins on the projects the company bids for will continue.
Out of sync
It is paradoxical that this is yet another area where Vestas and Ørsted are out of sync. For years, Vestas has been striving to increase earnings from its wind turbines with a strict focus on profit margins. Ørsted shares that focus. The difference is simply that Vestas is on the other side of the curve, while Ørsted has only just begun.
As a result, we now have a Vestas that is in better shape than it has been in nearly a decade. On the other hand, there is the state-controlled project company, which is still far from being “out of the woods,” as the American analyst put it.
The future also holds major differences for the two companies. While Vestas can look at the US market with a certain degree of confidence, as demand for electricity continues to rise, Ørsted must acknowledge that its strategic focus—offshore wind—still has no foothold on US soil.