Vestas’ Reorg Midpoint Report Card: Sales Rising, But Shipments Declining

Vestas Wind Systems A/S gained the most in more than a month in Copenhagen after sales beat forecasts and the world’s biggest wind turbine maker generated cash in the fourth quarter after three quarters of outflows.

Sales rose 25 percent in the fourth quarter to 2.5 billion euros ($3.4 billion) from 2 billion euros in the same period the previous year, Vestas said today. Analysts predicted 2.3 billion euros of revenue in the quarter, according to the average of 14 forecasts on Bloomberg. Vestas generated 416 million euros of free cash in the period, allowing it to cut net debt by 387 million euros.

The wind turbine maker is halfway through a two-year push to cut its workforce by about 30 percent to 16,000 as it seeks to return to profitability following two years of losses. It’s reduced its cost base by more than 250 million euros of the target for 400 million euros of cuts by the end of 2013.

“The cost initiatives we undertook are really starting to take effect,” Vestas Chief Executive Officer Ditlev Engel said today in a telephone interview. “In the fourth quarter, we made a significant rebound in terms of both earnings and free cash- flow.”

The shares, which have lost almost half their value over the past year, rose as much as 12 percent in Copenhagen trading, the most since Jan. 2. They were up 7.3 percent as of 10 a.m. local time.

Shipment Forecast

The Aarhus, Denmark-based manufacturer also lowered its shipments guidance for 2013 and posted a bigger full-year loss than estimates in 2012, saying it’s in the middle of two “extremely difficult years.”

The net loss of 963 million euros for the year exceeded the prediction of analysts for a shortfall of 228 million euros, according to the average of 15 forecasts on Bloomberg. It had 701 million euros of special items, including more than 500 million euros of write-downs.

“This is, among other things, due to the fact that we have chosen to put some factories up for sale as part of our new business mode,” Chairman Bert Nordberg said. “This is a long, steady haul, and Vestas is still some distance away from the finishing line.”

Engel said the company may sell some of its manufacturing plants this year, though he declined to say where.

Vestas reduced its shipments forecast for 2013 to 4 gigawatts to 5 gigawatts of turbines from previous guidance of about 5 gigawatts.

Mitsubishi Talks

Vestas gave no update in its annual report on the talks for a “strategic cooperation” with Mitsubishi Heavy Industries Ltd., which it announced in August. It did say it’s “received inquiries from potential partners” regarding the 8-megawatt V164 offshore wind turbine that it’s developing, reiterating past statements on the matter. Engel declined to comment on both the Mitsubishi Heavy talks and the approaches regarding the V164.

The annual loss compares with a 166 million-euro loss in 2011. Vestas posted a margin on earnings before interest and tax of 0.1 percent, which was at the low end of its guidance for a zero to 4-percent margin. It had free cash outflow of 359 million euros.

Revenue totaled 7.2 billion euros, around the middle of its guidance for 6.5 billion euros to 8 billion euros. Revenue for 2013 is likely to be at least 5.5 billion euros, the company said.

Orders received in 2012 declined 49 percent to 3,738 megawatts totaling 3.8 billion euros. The company had an order backlog at the end of the year of 7,156 megawatts. The year-end backlog of turbine and service contract orders totaled 12.4 billion euros.

Copyright 2013 Bloomberg

Lead image: Wind power turbine in forest, via Shutterstock

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