Vestas Rises as Narrower Loss Shows Turnaround on TrackAlex Morales
Vestas Wind Systems A/S, the wind-turbine maker that’s lost money the past two years, rose to a 13-month high in Copenhagen trading after first-quarter results showed its turnaround program is on schedule.
Vestas jumped as much as 14 percent to 60.35 kroner, the highest intraday price since March 27, 2012, and was at 60.25 kroner as of 12:28 p.m. local time. Trading volumes were already twice the three-month daily average.
The company’s net loss shrank to 151 million euros ($198 million) from 162 million euros a year earlier, it said. Profit margins, based on earnings before interest, tax and special items, improved to minus 9.9 percent from minus 18.5 percent.
“We are trending pretty well according to the plan that we have laid out,” Chief Executive Officer Ditlev Engel said by phone. “We made a lot of progress on cash flow in particular.”
The company is 14 months into a two-year program to return to profit following two years of losses caused by stronger competition that depressed prices in the industry. The stock has risen 90 percent this year and in the past two weeks had its biggest winning streak since the 1998 initial public offering.
Free cash flow rose by 235 million euros to a deficit of 60 million euros in the quarter, according to Aarhus, Denmark-based Vestas. Revenue was little changed at 1.1 billion euros.
“The turnaround seems to be going according to plan,” Jacob Pedersen, an analyst at Sydbank A/S in Aabenraa, Denmark, said by phone before the results were released.
Quarterly shipments declined by more than a third to 613 megawatts, Vestas said, citing a slower U.S. market. Orders totaled 644 megawatts, about half the 1,269 megawatts reported a year earlier.
U.S. demand has weakened following a rush in turbine installations last year, driven by the December expiry of a tax credit. Vestas expects North American orders to recover following clarification last month of new U.S. regulations related to the tax break, which wasn’t renewed until Jan. 1.
“We are hopeful we will see new positive momentum for getting orders placed, especially now we have the language confirmed,” Engel said. That “makes it look like things will start to move in the second half of 2013.”
Vestas kept guidance for 2013 shipments of 4,000 megawatts to 5,000 megawatts, down from 6,200 megawatts in 2012. It said revenue may fall to 5.5 billion euros from 7.2 billion euros.
The company’s cash boost was also reflected in its bonds as investors required a lower return. The yield on Vestas’s 600 million-euro 4.625 percent bond fell to as low as 8.14 percent and was heading for its lowest close since November 2011.
The company is seeking to regain its leading position in the wind-turbine market, having lost the top spot in 2012 after 12 years, according to Navigant Consulting Inc.’s BTM Consult unit, which gave General Electric Co. the lead. Make Consulting said the Danish company still ranked first, while Bloomberg New Energy Finance had Vestas and GE in a statistical tie.
Vestas expects to exceed its target for fixed cost savings of 400 million euros a year in 2013, according to today’s statement. It plans to cut its workforce by about 30 percent to 16,000 by year-end from 22,721 in 2011. A total of 582 jobs were lost in the first quarter, the company said today.
Former Chief Financial Officer Dag Gunnar Andresen, who left the post at the end of last month, had helped drive the turnaround. As well as overseeing cost cuts since August, he assisted in renegotiating debts with lenders. In November, Vestas persuaded a group of nine banks to provide a new 900 million-euro credit line, replacing a 1.3 million-euro facility.
Andresen has been replaced by Marika Fredriksson, a former employee of Gambro AB and Volvo Construction Equipment Corp.
Engel today declined to comment on the progress of talks with Mitsubishi Heavy Industries Ltd. to collaborate on the development of the 8-megawatt V164 offshore wind turbine. The discussions were announced in August.