Bloomberg News

Vestas Falls After 2011 Loss Widens, CFO Quits: Copenhagen Mover

February 09, 2012

Feb. 8 (Bloomberg) -- Vestas Wind Systems A/S fell the most in a month after the world’s biggest wind-turbine maker reported a loss four times wider than analyst forecasts and Chief Financial Officer Henrik Norremark resigned.

Norremark quit late yesterday, less than a month after being promoted and hours before Aarhus, Denmark-based Vestas’s announcement of a 166 million-euro ($220 million) loss in 2011. Sales and margins missed guidance given in January when Vestas issued a second profit warning in three months. The shares today slid as much as 15 percent in Copenhagen.

Vestas last month said it was dismissing 10 percent of its workers. It attributed profit warnings in October and January to production delays at a new generator factory and higher-than- expected costs developing its V112 turbine. Profits have been squeezed by Chinese competition and may be hurt further in the U.S. should federal subsidies expire.

“It’s chaotic and 2012 looks bleak also,” Jacob Pedersen, an analyst in Aabenraa, Denmark, at Sydbank A/S, said today in a phone interview. “It’s a bad signal for the industry. You have the player that has won by far the most orders over the past two years, the company probably with the best products in the industry and they’re not able to deliver just a little profit.”

Chairman Bent Erik Carlsen, Deputy Chairman Torsten Erik Rasmussen and board member Freddy Frandsen won’t stand for re- election at the annual general meeting on March 29, according to a Vestas filing today.

‘Very Busy Year’

The company expects 2012 revenue of 6.5 billion euros to 8 billion euros and shipments to rise to about 7 gigawatts from 5 gigawatts in 2011, Vestas said without providing a forecast for its order intake.

“The guidance is disappointing to investors because more than 1 billion euros of sales and about 340 million euros of EBIT were deferred from last year, which means that 2012 should have been an unusually strong year,” Maurice Rosenthal, an analyst at ING Groep NV in Brussels, said in a phone interview. “That’s not the case.”

Chief Executive Officer Ditlev Engel said in a telephone interview from Aarhus that while he expects 2012 to be a “very, very busy year” with activity 40 percent higher than last, next year may be tougher.

“We have to prepare Vestas for what can be a very challenging 2013,” Engel said, referring to the U.S. market where a tax credit is due to expire at year-end.

Engel said Jan. 12 that it would be “unnatural” for him to leave the company while it was still facing challenges.

With a new chairman coming in, “everything is open” concerning Engel’s position though he’s likely to stay, according to Sydbank’s Pedersen. “If you want a spark of continuity in the company I don’t see who is going to provide that if it’s not Ditlev Engel.”

‘Brings Accountability’

The resignation of Norremark, 45, came almost four weeks after he was promoted to deputy chief executive and chief operating officer. He remained CFO while a successor was sought.

“The departure brings accountability to the poor developments last year, and brings potential that the company will see a strong CFO join that has experience dealing with financial markets,” Rupesh Madlani, an analyst in London at Barclays Capital, said today in a note to investors.

Last year’s loss compared with a 156 million-euro profit a year earlier, Vestas records show. Analysts expected a loss of 40.3 million euros, according to the average of 16 estimates compiled by Bloomberg.

Not Canceled, Postponed

Free cash flow rose more than 800 million euros to 79 million euros, the first positive free cash flow in four years. Revenue was 5.8 billion euros in 2011, short of the company’s initial 7 billion-euro target and missing guidance a month ago of 6 billion euros. Fourth-quarter sales declined 35 percent to 2 billion euros. The margin before interest and tax was minus 0.7 percent, lower than guidance of 0 percent issued on Jan. 3. The company attributed the misses to project delays.

“The projects in question have not been canceled but postponed,” Vestas said. “They are expected to be handed over and recognized as income in 2012, however, at a lower contribution margin due to higher costs than originally anticipated.”

U.S. Jobs

Weather delays and difficulties connecting wind farms to the grid previously forced the company to defer 1 billion euros of revenue to 2012 from 2011.

Norremark was promoted as part of a Jan. 12 restructuring plan that included cutting 2,335 employees and halting factory production to save 150 million euros by year-end. The costs of that plan will total about 50 million euros, Vestas said today. Engel said another 1,600 jobs are at risk in the U.S. if lawmakers don’t extend a tax credit for the industry beyond year-end.

Vestas fell as much as 15 percent, the biggest decline since Jan. 4. The stock closed down 14 percent at 57.50 kroner.

--With assistance from Ehren Goossens, Justin Doom and Christopher Martin in New York. Editors: Randall Hackley, Reed Landberg

To contact the reporters on this story: Alex Morales in London at; Natalie Obiko Pearson in Mumbai at

To contact the editor responsible for this story: Reed Landberg at

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