Vestas Wind Systems A/S is seeking to sell a stake of as much as 20 percent and said it’s reducing headcount by 3,000 to raise the staff cuts by the biggest wind turbine maker to almost a third over two years.
The shares fell the most in 10 months after the Danish manufacturer reported a third-quarter loss of 175 million euros ($225 million). That compares with the average forecast for a 20 million-euro profit in a Bloomberg survey of 13 analysts. Vestas is looking for an investor to help it weather falling turbine prices, Chief Financial Officer Dag Andresen said.
“What’s important is that we have investors who understand the company, the segment that we are working in and also have a longer-term view,” Andresen said in an interview from Vestas’s headquarters in Aarhus, Denmark. He and Chief Executive Officer Ditlev Engel declined to discuss talks announced in August about a potential “strategic cooperation” with Mitsubishi Heavy Industries Ltd.
Vestas is struggling to return to profit after last year posting its first loss since 2005 as overcapacity in the industry squeezed margins. The stock had surged after lenders waived loan covenants in July and the Mitsubishi talks were disclosed the next month.
Andresen said he expects Vestas to meet its loan covenants by year-end. Asked about the possibility of a rights offer or another move to raise equity from existing shareholders, Andresen said, “I do not rule out anything.”
Vestas shares tumbled 13 percent to 26.65 kroner at the close of Copenhagen trading, a three-month low, after falling as much as 17 percent, the biggest intraday drop since Jan. 4. The yield on Vestas bonds due in 2015 jumped to 20 percent as their price dropped to the lowest since Aug. 14.
The finance director’s remarks confirmed comments made in August by Chairman Bert Nordberg to the Berlingske Business newspaper that he’s seeking a single major shareholder. Andresen said executives would consider a lesser stake sale. He declined to say when an announcement might be made about the Mitsubishi Heavy talks.
Asked about his comments to Bloomberg in an analyst call later in the day, and whether Vestas is actively seeking an investor, Andresen said Nordberg’s remarks remain “valid.”
“I cannot imagine that he would say one thing and then just sit still and not do anything with it,” Andresen said.
Vestas said it no longer expects positive free cash flow this year, guiding for zero to 500 million euros of cash losses.
“The restructuring efforts are clearly directionally positive but the cash evolution over the coming quarters remains the single most important issue, and it is unclear,” Martin Prozesky, an analyst with Sanford C. Bernstein Ltd. in London, wrote today in a note.
Vestas kept guidance for a full-year margin before interest and tax of zero to 4 percent, and for 6.3 gigawatts of turbine shipments this year and 5 gigawatts next year.
Engel said he’s bracing for a decline in orders next year in the U.S. as a tax credit supporting wind power expires.
“We have back in November 2011 said we had to deal with a tough 2012 and tougher 2013, and that is what we have been adjusting to all along,” Engel said today in a Bloomberg Television interview. “We are preparing for it to be a very tough U.S. market in 2013.”
The production tax credit provides an incentive of 2.2 cents a kilowatt-hour for wind power. When it was allowed to lapse at the end of 2003, U.S. wind installations declined to 397 megawatts in 2004 from 1,670 megawatts in 2003. U.S. President Barack Obama, elected yesterday to serve a second term, has said he supports extending the credit.
“We hope that what the president has said will materialize,” Engel said. “Our hope is that it will happen.” He didn’t provide a regional breakdown of the new reductions though the company earlier guided that 1,600 jobs in the U.S. were at risk because of the expiring credit.
Vestas will reduce its headcount to 16,000 by the end of 2013 from 22,721 in 2011, according to today’s statement, taking the annual fixed cost savings to 400 million euros by the end of 2013 from 2011 levels, the company said.
The total includes about 3,700 already-announced job cuts and 3,000 reductions announced today. Engel said some staff reductions will come through the selling of facilities, meaning Vestas workers may retain jobs by working for another company. Others will come from not filling vacant positions, he said.
The manufacturing workforce at Vestas’s four Colorado factories has been slashed to about 1,200 this year from 1,700. That includes the firing of about 18 percent of workers at two blade factories last month in Brighton and Windsor.
Revenue rose to 1.988 billion euros in the third quarter, 49 percent higher than a year ago, Vestas reported today.
Before the inclusion of 153 million euros of special items, Vestas posted earnings before interest and tax of 13 million euros. That compares with a 20-million euro profit forecast, according to analysts surveyed. Special items included the writedown of research and development projects, scaling back work in India and firing employees, Vestas said.
“Vestas is evaluating its manufacturing footprint including identification of outsourcing and divestment opportunities,” the company said.