Vestas drops after results; managers leave
Wind power giant in turmoil as managers quit, company swings to loss
www.marketwatch.com/story/vestas-drops-after-results-managers-leave-2012-02-08?link=MW_latest_newsLONDON (MarketWatch) — Shares of Danish wind power giant Vestas Wind Systems A/S posted their biggest drop in a month Wednesday, after the company reported a 2011 loss four times bigger than analyst estimates and cast doubt on its profitability in 2012.
Vestas DK:VWS -13.86% VWDRY -11.99% shares closed in Copenhagen 13.9% lower at 57.50 kroner, a 92% drop from their all-time high of 692 kroner in August 2008. Vestas U.S.-listed shares also suffered a double-digit percentage drop.
The world’s largest wind-turbine manufacturer is riding through a storm of bad news with two profit warnings, shipment delays and management turmoil, and Wednesday reported that it swung to a loss last year. The company reported a net loss for 2011 of 166 million euros ($218.4 million), compared with a €156 million profit in 2012. Before interest and taxes the results came in at a €60 million loss, significantly below the target it set in early January of an EBIT around zero.“Vestas continues to disappoint and can’t be turned around with this management,” said Martin Prozesky, analyst at Sanford C. Bernstein & Co., who covers the stock.
Compounding Vestas’s problems, some members of the management team left the company after the results. CFO and deputy CEO Henrik Norremark resigned following two profit warnings on his watch. On Wednesday, head of Vestas Offshore Hans Jorn Rieks was fired after just one month in his position, according to Danish media.
Since Vesta’s latest profit warning in early January five top managers have left the company, along with its head of investor relations and its corporate spokesman, leaving Chief Executive Ditlev Engel a lonely figure in charge. But as long as Engel is leading the company, the share price will stay low, Prozesky said.
“Many investors don’t see him as the right guy to turn around the company,” he said. “The board should have replaced the management and given the managers a mandate to restructure the firm.”
Further, the chairman of the board Bent Erik Carlsen and two other board members said they would resign and not run for reelection at the company’s annual general meeting in March, after pressure from a group of shareholders.
“The chairman presided over an 80% drop in the share price,” Prozesky said.
Vestas’ loss in 2011 was caused by internal issues such as production problems at a new generator factory and delayed shipments, as well as underlying challenges in the industry. Demand for wind power has weakened on regulatory uncertainty in Europe and the U.S., which makes it less compelling for wind farm developers to invest in wind turbines.
The industry also suffers from overcapacity and price competition from Chinese manufacturers. CEO Engel said on a conference call on Wednesday that the pricing level in China was unacceptable and prevented the company from bidding on orders.
Prozesky said the next half year doesn’t look as bleak in terms of revenue because the company has a good backlog of orders.
“But the question is what will happen beyond that. The backlog for 2013 is weak,” he said.
Vestas said in its earnings release that it expects revenue to come in between €6.5 billion and €8 billion, with an EBIT margin between 0% and 4%.
Sara Sjolin is a MarketWatch reporter, based in New York.
