Vestas: New CEO Taking over Amid Widening Loss

Vestas Wind Systems (CPH:VWS) today announced that Anders Runevad will replace Ditlev Engel as group CEO. The Danish wind turbine manufacturer also published second quarter results showing a worse-than-expected net loss of €62 million.

Runevad, previously head of western and central Europe for Ericsson, will take over on September 1. He was chosen for the position by his former colleague – Vestas’ chairman Berg Nordberg, who had served as Ericsson executive prior to moving to Vestas. Following the announcement of the CEO replacement Vestas shares opened 12 percent higher this morning on the Copenhagen Stock Exchange.

Investors trading Vestas shares have long been unhappy with Engel’s performance at the helm of the company which has been unprofitable for two years, The group saw its shares lose 96 percent of their value between 2008 and 2012. Since the beginning of this year Vestas share price has tripled, but it is still standing at 85 percent of the 2008 peak value.

Wind turbine manufacturers have been experiencing difficulties due to a decline in government subsidies and increasing competition from Chinese manufacturers. Vestas’ troubles were further deepened by management mistakes attributed to Engel, who had chosen a bad time to expand the group. Following this expansion a third of Vestas’ employees were laid off in a sweeping restructuring programme. Engel is the last member of Vestas’ top management to be replaced.

Two-year turnaround continues according to plan. Free cash flow improved by EUR 535m and outlook upgraded to at least EUR 200m. Positive EBIT result despite 26 per cent lower revenue. Anders Runevad appointed as new Group President & CEO.

In the second quarter of 2013, Vestas generated revenue of EUR 1,185m – a decrease of 26 per cent to the year-earlier period. EBIT before special items decreased by EUR 28m to EUR 12m. The EBIT margin before special items was 1.0 per cent and the free cash flow increased by EUR 535m to EUR 197m.

The intake of firm and unconditional wind turbine orders was 1,641 MW in the second quarter of 2013. Due to uncertainty surrounding a few customers’ ability to comply with the contractual obligations, Vestas has resolved to lower the order backlog value by EUR 0.4bn. Including this adjustment, the value of the wind turbine backlog amounted to EUR 7.1bn at 30 June 2013. In addition to the wind turbine order backlog, Vestas had service agreements with contractual future revenue of EUR 5.9bn at the end of June 2013. Thus the value of the combined backlog of wind turbine orders and service agreements stood at EUR 13bn – an improvement of EUR 600m during the quarter.

Vestas has decided not to sell the tower factory in Pueblo, USA. Consequently, the factory has been reclassified to property, plant and equipment. Vestas’ machining and casting units are still expected to be divested; however, based on ongoing negotiations with potential buyers, the units have been further written down.