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Vestas chairman sidesteps CEO confidence question
January 4, 2012 / 9:40 AM / 6 years ago

Vestas chairman sidesteps CEO confidence question

COPENHAGEN (Reuters) - The chairman of wind turbine maker Vestas sidestepped questions about the future of its chief executive on Wednesday after the company’s second profit warning in three months and ahead of a reorganization plan due to be revealed next week.

Tuesday’s shock news that development costs would eat further into earnings sent Vestas shares tumbling to 8-1/2 year lows. Asked whether he had confidence in top management, chairman Bent Carlsen would only say that CEO Ditlev Engel would present next week’s planned organizational changes.

“The fact that Ditlev will present (the new structure) next week should be some kind of sign for you,” Carlsen told Reuters in an interview. “If the CEO presents the changes, he is still CEO next week.”

Pressed further on whether Engel would stay or leave, Carlsen said; “You cannot conclude anything.”

Vestas said profits for 2011 would be hit by higher-than-expected development costs linked to its V112-3.0 MW wind turbine and by delayed revenues.

“It is quite unfortunate and not really what we expected,” Carlsen said.

In a statement issued after markets closed, Vestas cut guidance for full-year 2011 revenue to about 6 billion euros ($7.8 billion)from an estimate of 6.4 billion given at the end of October, and cut its 2011 EBIT margin to nil from about 4 percent.

It said some revenue had been delayed into 2012 and costs of ramping up manufacturing of its V112 turbine had exceeded expectations, but it reached its guidance for 2011 order intake with orders for turbines with total capacity of 7,400 megawatts.

That was within the guidance for an order intake of 7,000-8,000 MW.

“We are disappointed ourselves, but the fact that we have received the number of orders we had expected earlier in the year is a positive sign, which means that our customers are pretty happy with the turbines,” Carlsen said.

“So that is quite important for the company going forward.”


Vestas shares were down 14.7 percent at 59.35 crowns by 1300 GMT after earlier losing more than 20 percent. The stock, which lost two thirds of its value in 2011, is now at its lowest levels since June 2003, when equity markets were still limping from the collapse of the bubble.

Several brokerages said that confidence had been badly shaken by the guidance downgrade.

“This will damage the already weak investor confidence,” broker Nordea said in a note to clients.

Sydbank senior analyst Jacob Pedersen said: “The downgrade knocks investor confidence to the floor, (and) the production problems must be solved for investors to regain faith in Vestas’ ability to earn money from the record high order backlog.”

The renewable energy industry has been hit by a general slowdown in investment in energy infrastructure during the global economic downturn.

Furthermore, solar and wind power are facing possible subsidy cuts as many of their mature markets are weighed down by swelling public deficits and weak economies.

Some analysts have said they feared that the cost problems that hit Vestas with its V112 turbine could affect orders for other new turbines now on order or coming into the orderbook.

“We see an ongoing risk to our estimates owing to potential extra cost overruns and overcapacity in the turbine industry,” Nordea said.

CEO Engel told Reuters he did not expect to see the same kind of cost problems from the development of the company’s new 7 MW turbine as it saw with the V112.

“If one looks at the other development in Vestas, then things have gone quite reasonably,” Engel said.

Engel said Vestas would consider in the fourth quarter what to do with its U.S. manufacturing operations if a U.S. tax credit that benefits investors in green energy is not renewed.

The Production Tax Credit (PTC) is due to expire at the end of 2012, and Vestas reiterated on Tuesday that 2013 would be a “very challenging year for the wind industry due to a significantly reduced U.S. market if the PTC is not extended.”

“The whole Vestas organization is already now taking such development into consideration, in spite of an expected high level of activity in the U.S. market in 2012,” it said.

($1 = 0.7661 euros)

Editing by Jodie Ginsberg and Andrew Callus

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