Wind energy Vestas announces a change of the organisation

Earlier today, Vestas released a company announcement with the financial results for the third quarter of 2011.

At 11:00 am today, Ditlev Engel, President and CEO, will inform Vestas’ employees about the company’s future focus areas. In the short term, these focus areas will be marked by difficult market conditions and uncertainty, but in the longer term Vestas will remain strongly positioned as the only truly global supplier of turnkey wind power systems solutions.

As mentioned in the company announcement, Vestas aims to reduce its fixed costs globally by at least 150 million euros annually by the end of 2012, and the ‘Triple15’ growth target is abandoned. Instead, Vestas will refocus its business to become even attentive to its four principal stakeholders: customers, shareholders, employees and politicians.

“The Board of Directors unanimously shares the view that Vestas must develop its business in the coming years and at the same time be in a position to address the deteriorating global economic outlook, so the Board fully supports this strategy. This does not change the Board’s view that wind power remains a fundamentally attractive sector in the long term,” said Bent Erik Carlsen, Chairman of the Board of Directors of Vestas Wind Systems A/S.

In spite of unsatisfactory earnings in 2011, Vestas retains a strong financial and market position in a world of economic hardship. This is confirmed by the fact that Vestas’ free cash flow for the first nine months of 2011 improved by 660 million euros relative to the same period of last year.

“We have satisfied customers, all of our production units are extremely busy, and we recorded a strong order intake in October. However, we believe that at least the Western economies are heading for even more economic difficulties in the years ahead. This will affect Vestas and the rest of the wind turbines industry,” said Ditlev Engel, President and CEO.

“We will inform our employees that we will present and implement a whole new Vestas organisation on 8 February 2012. Our new organisation must be even more customer-focused and scalable, allowing us to swiftly and effectively realign our operations to the extensive market fluctuations that are likely to characterise the wind farm market going forward,” Ditlev Engel said.

“Vestas is the world’s largest renewable energy company, and we intend to emerge stronger from the financial crisis. Consequently, in addition to adjusting our organisation, we also need to substantially reduce our fixed costs. In a number of markets, our fixed costs are too high relative to the market situation that is likely to develop,” Ditlev Engel said.

“Unfortunately, this will lead to redundancies across Vestas in 2012. Our cost level is too high – especially in a number of the markets currently seeing the weakest growth rates. Furthermore, Vestas overall must improve its ability to absorb adverse events, for example if the PTC tax scheme in the USA is not extended after the end of 2012,” Ditlev Engel said.

Vestas generated revenue of EUR 3,798m in the first nine months of 2011, which was in line with the year-earlier period. EBIT declined by EUR 136m to EUR (84)m. The EBIT margin was (2.2) per cent. The free cash flow improved significantly to EUR (218)m from EUR (878)m in the first nine months of 2010. The net debt at 30 September 2011 amounted to EUR 834m; a decline of EUR 237m during the quarter. The intake of firm and unconditional orders was 4,211 MW in the first nine months of 2011 and the backlog of firm and unconditional orders amounted to EUR 8.0bn at 30 September 2011. Safety at Vestas’ workplaces improved once again, and the share of renewable energy amounted to 35 per cent.

Vestas retains the guidance for 2011 announced on 30 October 2011. Due to the expected weak economic growth in the OECD area, Vestas does not expect to be able to reach the earlier announced Triple15 ambition of EUR 15bn in revenue and an EBIT margin of 15 per cent in 2015. In the medium term, Vestas aims to realise a high single-digit EBIT margin with a normalised US market and at the same time, increase its market share. Revenue in the service business is expected to grow faster than the sale of wind power plants.

In connection with the presentation of the annual report for 2011, Vestas will change and adjust its organisation in order to reduce fixed costs and allocate more resources to direct customer-oriented activities in individual markets. A still more global Vestas will contribute to boost Vestas’ competitive strength in 2012 and, especially, in 2013, which could prove a very challenging year due to the potential expiry of the Production Tax Credit (PTC) scheme in the USA.