UPDATE 1-Vestas stops non-profitable projects in recovery hunt

Wed Oct 3, 2012 11:08am EDT

* Reiterates that 2013 will be worse than this year

* Sees medium term EBIT margin in high single digits

* Says to increase focus on selected emerging markets

* To transfer sales staff from South Europe to South America (Adds details, background, quotes)

AARHUS, Denmark, Oct 3 (Reuters) - Ailing Danish wind turbine manufacturer Vestas said on Wednesday it is stopping all non-profitable projects as it battles worsening prospects by slashing costs and jobs to lift medium-term operating margins to high single digit levels.

Vestas said at its capital markets day it would also focus on emerging markets in a bid to regain growth and offset cooling demand in mature Europe and United States markets as government austerity measures hurt.

The company's chief financial officer, Dag Andresen, said Vestas would stop and close down all non-profitable projects in areas such as research and development.

Products which cannot reach the market within 18 months or will not be profitable for the firm within 24 months will be put on the chopping block, he said.

Vestas, which is repeatedly the subject of takeover speculation and has already announced steep job cuts, has been hammered by a demand slump, with austerity measures reducing support for renewable energy and financing for projects drying up.

Rising costs and fierce competition, including from Asian rivals, have added to its problems.

Vestas on Wednesday reiterated its expectation that 2013 would be even tougher than this year, a factor which pushed down its share price by over 5.0 percent by 1500 GMT.

The company's order intake in the first half of the year is already 24 percent down on the corresponding period a year earlier.

Vestas said it hoped to achieve a medium-term operating margin in the high single digits, and that focus on cost cutting and emerging markets would help it achieve its target.

"We are on track in taking costs out of our products," said head of sales, Juan Araluce.

In August, the company forecast an operating profit margin of between 0 and 4 percent for the year 2012.

The company has already closed a range of factories worldwide and will be transferring sales staff from South Europe to South America.

In the large United States market, where an important tax credit on renewable energy is set to expire at year-end, Vestas is also considering how many factories it should have.

It has previously said that if the credit is not extended, it could be forced to lay off 1,600 employees.

The group plans to increasingly turn its focus to Brazil, Mexico, South Africa, Ukraine, Philippines, Romania and Vietnam, it said.

"Emerging markets are expected to see double-digit growth - these markets still come from a small installation base," said Araluce.

The International Energy Agency has estimated that 90 percent of the growth in energy demand over the next 25 years will come from China as well as emerging markets. (Reporting by Mette Fraende and Shida Chayesteh; Editing by Mia Shanley and David Cowell)

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