Vestas Shares Rise After Boosting Margin Outlook for 2013
Vestas Wind Systems A/S (VWS) rose to a 2 1/2 year high in Copenhagen trading after the world’s biggest wind turbine maker boosted its outlook for 2013, saying its two-year program to revive profit is on track.
The manufacturer raised its forecasts for operating margins and free cash flow and posted a loss for the third quarter following a writedown reflecting the sale of six machining and casting factories. The shares rose as much as 14 percent to the highest interday price since May 2011.
“We are well on track on our turnaround plan, and it’s vital we continue to execute on that for the last quarter,” Chief Executive Officer Anders Runevad said today in a phone interview. “It’s been a busy first two months, but we are staying on course.”
Runevad is trying to guide Vestas back to profit after more than two years of losses. In the job now for just over two months, he’s already sealed an offshore wind partnership with Mitsubishi Heavy Industries Ltd. (7011) along with the sale of six factories and the closure of another.
The manufacturer based in Aarhus, Denmark, lost 87 million euros ($117 million) in the three months through Sept. 30, after deducting 64 million euros of special items. That compares with a 175 million-euro loss in the same period a year ago and the mean estimate of six analysts for a loss of 2.7 million euros.
The writedown completed a program of asset disposals. Vestas today raised its forecast for the margin on earnings before interest, tax and special items to a minimum of 2 percent from 1 percent previously. It also expects free cash flow for the year of 500 million euros to 700 million euros, more than double the previous estimate.
It’s the ninth quarterly loss in a row for Vestas, which has lost more money than analysts forecast in each of the three quarters this year.
Even so, the shares have risen on evidence the company’s turnaround program is on track. They’ve more than quadrupled since the beginning of the year. By comparison, the 96-member WilderHill New Energy Index of renewable-energy stocks has risen by about 56 percent in the same period.
The target for the turnaround is to slash fixed costs by 400 million euros and to reduce the workforce by more than 30 percent to 16,000 by the end of this year. Today, the company said it will have reduced fixed costs by more than 400 million euros by year end.
Vestas employed 17,237 workers at the end of the third quarter, a figure that will be reduced to about 16,200 when the factories it has already sold are reflected in the data, Vestas said.
Vestas today refined its full-year guidance for 2013 shipments to 4,500 megawatts from a range of 4,000 megawatts to 5,000 megawatts. That’s lower than the 6,200 megawatts shipped in 2012. It also kept a forecast that revenue may fall to 5.5 billion euros from 7.2 billion euros.
The operating profit before special items for the quarter rose by 54 million euros to 67 million euros, Vestas said. Free cash flow increased to 56 million euros, which was 198 million euros more than a year ago when there was a cash deficit.
The company took new orders in the quarter totaling 1,547 megawatts, and its order backlog is now valued at 7.3 billion euros. The company also said it has service contracts with a future revenue totaling 6.1 billion euros.
Vestas took 540 megawatts of U.S. orders in the third quarter, after no orders there in the first half. The U.S., where tax credit policies have created a boom-bust market, was its biggest destination for shipments in 2012.
“A healthy U.S. market is important for the wind industry and important for Vestas,” Runevad said. “We feel we have taken our fair share.”
Runevad also said that turbine prices appear to have stabilized, echoing remarks made by Suzlon Energy Ltd. (SUEL) Chairman Tulsi Tanti on an earnings call last week. The Vestas chief said he sees “long term growth” in the wind industry, though at a slower rate than in the past, and remaining volatile because of political decisions.
Vestas in the past 20 months has replaced its chairman, chief financial officer and chief executive. Bert Nordberg took over as chairman in March 2012. Marika Fredriksson assumed her role as finance chief in April, replacing Dag Gunnar Andresen after he had spent just eight months in the role. Runevad was named CEO on Aug. 21, replacing Ditlev Engel. Runevad started work on Sept. 1.
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