Vestas Wind Rises Most in Month After Sales Beat Estimates

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

Sales rose 25 percent to 2.5 billion euros ($3.4 billion) from 2 billion euros in the fourth quarter of 2011, Vestas said today in its annual report. Analysts had predicted 2.3 billion euros of revenue, according to the average of 14 estimates 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 5.4 percent as of 12:28 p.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 analysts estimated 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.”

The company said it expects to get 131 million euros from the sale of unspecified assets, after writing down their value by 182 million euros and deducting the costs of the sales. Engel declined to say where the plants for sale are.

‘Fundamentally Challenged’

Additional cost reductions will come from reducing the workforce to 16,000 “or lower” during 2013, from 17,778 at the end of 2012, Chief Financial Officer Dag Andresen said today on a conference call with analysts.

He said the company has “no current plans for a rights issue,” after analysts at Sanford C. Bernstein Ltd., Sydbank A/S and SEB AB said in November that the company’s struggle to generate cash raised the risk of one.

“Vestas remains fundamentally challenged,” Martin Prozesky, an analyst in London at Bernstein who rates the stock underperform said today in a note to investors. “The company faces a cash crisis as payables and orders (pre-payments) are likely to squeeze cash requirements over the next 12 months.”

Vestas reduced its shipments forecast for 2013 to 4 gigawatts to 5 gigawatts of turbines from previous guidance of about 5 gigawatts. Revenue for 2013 is likely to be at least 5.5 billion euros, the company said, and it forecast positive free cash flow and a margin before interest, tax and special items of “at least 1 percent.”

Government Subsidy

“It was prudent to say with the regulatory uncertainty we need to be a little more cautious” on the outlook, Engel said, citing “noise” in countries including Germany and Romania suggesting government support for clean energy may drop.

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 said it’s “received inquiries from potential partners” about the 8-megawatt V164 offshore wind turbine that it’s developing. 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.

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.