Wednesday, October 20, 2010

What's Wrong With Wind? (GE; VESTY; FLR; HSN.L; SI)

A little alliteration.
[or Elmer Fudd -ed]

It started in August/September with a series of stories on Vestas:
Clobbered in Copenhagen: "Vestas Wind shares slump up to 26% after group slashes outlook" (VWS.CO) 
Wind: "Vestas May Cut Forecasts a Third Time, Top-Ranked Investor Says" (VWS.CO) 
Wind: Vestas will not chase market share at any price; Stock Down Another 4% (VWS.CO)
Then last Friday GE reported earnings:
General Electric Lays an Egg (stock down 5%) GE
and in the Q&A portion of the analyst call transcript we see Vice-chair and CFO Keith Sherin use the word "Collapsed":
...Steve Tusa - JP Morgan
Just wanted to touch on energy for a second. So wind was obviously pretty bad, but I think you said the thermal deliveries were up nicely, yet, you know, the revenues were still pretty light. Can you just maybe talk about what else happened in the segment there, and then secondly on the margins, you know, pretty good margins on the revenue performance, yet, your value gap closed relative to last quarter. So is there something in the mix there that you know, that drove that margin that we should be aware of going forward?
Keith Sherin
Well, I’d say on revenues if you look again the biggest item was renewables, and if you look with the wind volume, it was down -- wind turbines were down 300 units, it’s down $600 million of revenue in the quarter. And we had $300 million of balance, you know, when we do a large power plant, a lot of the times we source material, and just include it in the project, but it’s not GE material, $300 million less. There are a lot of categories [ph] in it obviously, margin categories for us, so that, you know, it’s almost $1 billion of the revenue decline and those were the biggest factors I’d say. You know, we had some lower steam turbine units, we had a couple lower generators, but the biggest were those two items.

You know, in terms of margins in energy, the team is doing a tremendous job. You know, they’re really working on protecting the price in the backlog. They’re doing a great job on sourcing and getting deflation. You know, they’re working their way through a wind market that has really collapsed in the US, and we’ve got a very attractive position there, and they’re adding value by putting new products in place to give customers a little more value into the 1.6, instead of the 1.5 on the wind turbines and things like that.
So they’ve done a good job working their way through this. I think you know, services margins have helped in all the infrastructure segments. They stay strong. I don’t have one specific mix item, you know, with the revenue down and we’re continuing to provide higher-margin equipment in the places like the gas turbines, and the wind margin backlog, wind margin that’s in backlog is very high. You know, these guys have done a good job combined with the sourcing benefits we’re getting.
Jeff Immelt
The other thing I would say Steve, is you know, the power gen [ph] units are being used right now in the customers’ fleets, and that bodes well I think for energy services and the rest of this year and into the next year.
Steve Tusa - JP Morgan
So you use the term collapse in the wind market, how was renewables down modestly next year in the face of you know, what looks to be pretty hard environment from an order perspective in wind?
Jeff Immelt
A lot of that is going to come globally, Steve, you know, like Canada, Brazil, Turkey places like that. You know, I think are where a lot of the demand is going to be. I’d say probably lower margins you know, the ones we booked a year or so ago in the US, but that’s where the demand will be....
On Monday it was the turn of hulking huge engineering firm Fluor:
Fluor takes $163 mln hit on wind farm; shares down 
Fluor cuts '10 EPS view on delays 
Which led to:

Fluor: Goldman Cuts To Neutral, Gabbard Costs To Continue
Today it's:
Wind-Turbine Gearbox-Maker Hansen Falls Most in 11 Months on Sale Forecast
Siemens is reporting their fourth quarter and year end results on November 11.

If you prefer to read the blog in Fuddian (yes, I saw the comment) use the Dialectizer. It's all set up, just hit the dialectize button. It comes out something like this:

A wittwe awwitewation, uh-hah-hah-hah.
[ow Ewmew Fudd -ed]

It stawted in August/Septembew wif a sewies of stowies on Vestas:
Cwobbewed in Copenhagen: "Vestas Wind shawes swump up to 26% aftew gwoup swashes outwook" (VWS. Oh, dat scwewy wabbit! CO)
Wind: "Vestas May Cut Fowecasts a Diwd Time, Top-Wanked Investow Says"
Wind: Vestas wiww not chase mawket shawe at any pwice; Stock Down Anothew 4% (VWS. CO) 
Den wast Fwiday GE wepowted eawnings:
Genewaw Ewectwic Ways an Egg (stock down 5%) GE
and in the Q&A powtion of the anawyst caww twanscwipt we see Vice-chaiw and CFO Keif Shewin use the wowd "Cowwapsed":
...Steve Tusa - JP Mowgan Just wanted to touch on enewgy fow a second. So wind was obviouswy pwetty bad, but I think you said the thewmaw dewivewies wewe up nicewy, yet, you know, the wevenues wewe stiww pwetty wight. Can you just maybe tawk about what ewse happened in the segment thewe, and then secondwy on the mawgins, you know, pwetty good mawgins on the wevenue pewfowmance, yet, youw vawue gap cwosed wewative to wast qwawtew. So is thewe something in the mix thewe that you know, that dwove that mawgin that we shouwd be awawe of going fowwawd?...
Kinda lightens the mood if you're in a meeting when some blowhard (Immelt) is droning on and on and...