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UPDATE 2-Vestas turnaround kicks in as wind turbine orders surge
November 6, 2013 / 8:26 AM / 4 years ago

UPDATE 2-Vestas turnaround kicks in as wind turbine orders surge

* Raises operating margin, cashflow forecasts

* Q3 EBIT before special items 67 mln euros

* Shares jump 13 percent (Adds detail, background, analyst, CEO comments, share price)

By Mette Fraende and Shida Chayesteh

COPENHAGEN, Nov 6 (Reuters) - Denmark’s Vestas Wind Systems raised its 2013 profit margin forecast on Wednesday and said its orders surged, suggesting a turnaround drive to restore its status as the world’s biggest wind turbine maker is starting to pay off.

Quarterly profit rose more than expected at Vestas, which replaced its chief executive two months ago after a string of profit warnings bruised investor confidence.

The company has shed nearly 5,500 jobs since the end of 2011, slashed costs, dropped unprofitable business lines and halted several research and development projects.

In a sign that the restructuring is helping Vestas make the most of a pick-up in demand for wind power, the company reported a surge in order intake in the third quarter to 1,547 megawatts, far above the 401 megawatts in the same quarter a year ago.

It beat forecasts with a more than five-fold increase in third-quarter earnings before interest and tax (EBIT).

Vestas shares jumped 13 percent to their highest in two and a half years.

“It is an absolutely great result, particularly the upgrade of the cashflow and EBIT margin,” said Sydbank analyst Jacob Pedersen.

The wind power industry has been hit by overcapacity that has slashed profitability. A push by Chinese rivals such as Goldwind and United Power to expand beyond a saturated home market has led to fierce competition for new business, forcing established players such as Vestas, U.S. giant General Electric, Spain’s Gamesa and Germany’s Siemens to raise their game.

While demand in southern Europe remains weak after the subsidy cuts, is has picked up in the United States, where a tax credit scheme has been extended.


Vestas ousted its chief executive Ditlev Engel in August after eight years of service following a string of profit warnings, replacing him the following month with Swede Anders Runevad.

Shortly after taking up the job, Runevad told Reuters his biggest challenge was to return the company to profit and secure its position as world market leader.

Market research this year suggested Vestas had lost the top spot on some measures, with some putting General Electric ahead in terms of delivered capacity in 2012.

“We have worked relentlessly on capital efficiency,” Runevad said. There was a lot more to be done, he said, and a new strategy would be announced in February. “I feel we can do even more going forward on the service side.”

The company reported third-quarter EBIT of 67 million euros, up from 13 million in the same quarter last year and exceeding an average 61.3 million forecast in a Reuters poll of analysts, aided by lower fixed costs and improved project margins.

It forecast free cashflow for 2013 in a range of 500 million to 700 million euros, up from a previous forecast of at least 200 million.

“It indicates that the restructuring of Vestas is running as planned,” said Handelsbanken in a note to clients.

Vestas shares were up 13 percent by 0943 GMT, outpacing a 1.0 percent rise in the Copenhagen stock exchange’s benchmark index.

The shares have risen more than five-fold since the start of the year but are still down about 77 percent from a 2008 peak.

Vestas third-quarter revenue fell 27 percent in the third quarter to 1.44 billion euros, lagging forecasts, but its free cash flow improved to 56 million euros in the quarter from a negative 142 million in the same quarter a year ago.

It managed to cut its net debt to 728 million euros at the end of the third quarter from 1.28 billion euros a year earlier.

The company also raised its 2013 forecast for its operating margin before special items to a minimum of 2 percent from a minimum of 1 percent. That compares to 0.1 percent in 2012.

Runevad dismissed past speculation that the company might seek to raise funds with a capital increase. (Writing by Mette Fraende; editing by Jason Neely and Tom Pfeiffer)

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