Vestas to cut more jobs as prospects darken
COPENHAGEN (Reuters) - Danish wind turbine maker Vestas (VWS.CO) unveiled plans on Wednesday for 1,400 more job cuts to save an extra 100 million euros ($125 million), as it battened down the hatches for another difficult year in 2013.
"2013, as it looks today, is probably going to be the toughest year that the wind industry has seen for a number of years," Chief Executive Ditlev Engel said.
Engel has been under intense pressure to avoid any further disappointments after profit-warnings in October last year and in January bruised investor confidence.
Production problems and delays in delivering projects wiped out profits last year and caused a shake-up in top management with the replacement of the chief financial officer and chairman and appointment in July of rationalization expert Jean-Marc Lechene as chief operating officer.
Vestas said on Wednesday it now expects to cut its workforce to around 19,000 by the end of 2012 instead of an earlier target of 20,400 and lowered its forecast for shipments of turbines this year to around 6.3 gigawatts from an earlier prediction of about 7 GW.
Vestas had previously announced the workforce would be reduced by 2,335 by the end of the year and said on Wednesday those reductions were ahead of schedule, while the additional cuts were needed "in order to prepare for 2013 which will be even tougher than 2012."
The extra job cuts would boost expected fixed cost reductions by 100 million euros to 250 million euros with those savings part of the effort "to reach target of making 2013 profitable," Engel said.
However, decisions still have to be made about whether job cuts will also be required at the company's plants in the United States, he added.
The expiry at the end of 201 of an important tax credit for renewable energy is seen hitting the U.S. market hard next year, with Engel warning in June that it was likely to drop by 80 percent in 2013.
Meanwhile Vestas maintained its broad forecasts for the current year's results, predicting an operating profit margin of between 0 and 4 percent, revenue of 6.5 billion to 8 billion euros and a positive free cash flow.
"We are as confident as we normally are," Engel told Reuters in a telephone interview when asked how confident he was about the reaffirmed guidance. "We have made good progress."
But he said the company was now preparing for turbine shipments to drop to around 5 GW in 2013 from the new lowered 2012 expectation of around 6.3 GW, although the forecast for 5 GW next year was "fairly conservative."
Vestas' share price was down 1.5 percent at 33.41 crowns by 1025 GMT, off an earlier high of 36.31 crowns.
"It is very volatile for the moment, and it's all about whether you believe in the story or not," said Ole Jensen, head of equity sales at Sydbank.
The company also confirmed second-quarter preliminary results published at the end of July, saying earnings before interest and tax before special items came to 40 million euros and revenues were 1.61 billion euros in the three months.
Vestas said a lower order intake in the first half of the year and delays to grid connections in China led it to downgrade its forecast for 2012 shipments.
But it said the value of its combined backlog of orders for turbines and services rose to a record high 14.4 billion euros at the end of the second quarter.
Vestas had said at the end of July that its banks had agreed to delay a mid-year test of compliance with its borrowing rules, but expected to satisfy those covenants in the near term.
Engel declined to give any new information about where it stands with its lenders. ($1=0.8013 euros)
(Additional reporting by Shida Chayesteh; Editing by Greg Mahlich)
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