February 6, 2013 / 9:51 AM / in 4 years

UPDATE 2-Wind turbine maker Vestas flags improved profitability

4 Min Read

* Q4 revenue 2.51 bln euros vs avg fcast 2.26 bln euros

* Q4 EBIT 155 mln euros vs 191 mln euros forecast

* Sees underlying EBIT margin at least 1 pct

* Sees 2013 turbine shipments of 4-5 GW

* Shares rise 5.7 percent (Adds details, background, comments, updates share price)

By Mette Fraende

COPENHAGEN, Feb 6 (Reuters) - Danish wind turbine maker Vestas on Wednesday offered some hope its turnaround plan is beginning to bear fruit, after it flagged an improvement in profitability this year and reported a rise in fourth quarter profits and revenue.

The wind power sector has been hit hard by overcapacity, a faltering global economy and a cut in subsidies for renewable energy by cash-strapped governments, prompting Vestas to axe jobs, stop non-profitable projects and shut factories.

Battling to restore investor confidence after profit warnings, Vestas forecast a positive free cash flow for this year, as well as an underlying EBIT margin of at least 1 percent - putting a floor under previous guidance for a positive margin.

"The 2013 guidance was better than feared and that drives the share up," said Nordea analyst Patrik Setterberg.

"That can increase the belief that Vestas's restructuring plan is beginning to work," Setterberg said.

Vestas shares traded up 5.7 percent at 1145 GMT, against a 0.8 percent increase in the Copenhagen stock exchange's benchmark index.

Investors have worried in particular about the company's free cashflow.

In the fourth quarter, Vestas returned to positive free cash flow after reporting negative cash flow in the first three quarters of 2012.

At an investor briefing following the results, the group said it was not currently considering raising capital.

Vestas has been the subject of takeover speculation for months as it became clear it needed funding.

It announced last month it had secured final approval for credit facilities totalling 1.8 billion euros, loans it initially agreed with banks in November, ending speculation it might need to issue shares and winning more time to adjust to plunging demand.

The company is also in talks with Japan's Mitsubishi Heavy Industries about some kind of cooperation, on which it offered no update on Wednesday.

Fighting Headwind

Compared with the same period of a very depressed 2011, fourth quarter earnings before interest and tax (EBIT), excluding one-off items, more than tripled to 155 million euros ($210 million). This missed analysts' average forecast of 191 million euros in a Reuters poll.

However, fourth-quarter revenue climbed 23 percent to 2.51 billion euros, beating analysts' forecasts for 2.26 billion.

The group forecast 4-5 gigawatts of turbine shipments in 2013, compared with its previous guidance of 5 gigawatts.

Warning 2013 would still be a tough year, Chief Executive Ditlev Engel told an investor briefing he believed the turbine price level was likely to have reached bottom.

"We are actually seeing in the market that the price level is starting to bottom out," Engel said.

Vestas launched its restructuring plan at the end of 2011 in a bid to restore investor confidence after a profit warning in October that year. Another warning was issued in January 2012 following manufacturing problems that wiped out its 2011 earnings.

Its shares remain down about 95 percent from their highs of 2008.

Spanish rival Gamesa last year unveiled plans to cut 20 percent of global staff and slash output as part of a drive to break even in 2013.

Part of Vestas's plan is to bring down the number of employees to 16,000 by the end of 2013, compared to 22,721 by the end of 2011, to cut costs and reduce investments.

The group has also closed factories worldwide and transferred sales staff from southern Europe to South America.

$1 = 0.7392 euro Additional reporting by Johan Ahlander; Editing by Stephen Nisbet

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