Denmark: Vestas Wind Systems A/S Announces Outlook 2010 And First Quarter Results

Vestas generated first-quarter revenue of EUR 755m, a drop of 32 per cent, achieving an EBIT of EUR (96)m, against EUR 76m in the first quarter of 2009. The EBIT margin thus declined from 6.9 per cent to (12.7) per cent due to the expected very low capacity utilisation.

Net working capital stood at 21 per cent of expected annual revenue, against 8 per cent the year before. The first-quarter order intake was 1,258 MW, and the value of the backlog of firm and unconditional orders amounted to EUR 2.9bn at 31 March 2010. From 31 March to 27 April 2010, Vestas’ announced order intake amounted to 2,014 MW inclusive of the firm and unconditional order of 1,500 MW from EDP Renováveis. Safety at Vestas’ work places improved further, and renewable energy accounted for 43 per cent of Vestas’ total energy consumption in the quarter. The forecast for 2010 is retained; an intake of firm and unconditional orders for 8,000-9,000 MW, an EBIT margin of 10-11 per cent, a net working capital of 15 per cent and revenue of EUR 7bn. Based on the order intake and market momentum, Vestas will now be launching full staffing in the USA, which contributes to Vestas expecting to employ a total of 3,400 employees in 2010. Furthermore, Vestas will also invest funds in a service and maintenance centre in Colorado, USA, and combined with the sales release of the V112-3.0 MW turbine for both onshore and offshore at the end of August, this represents a EUR 400m increase for the 2010 investment programme to EUR 1.0bn.

Q1 2010 at a glance (against Q1 2009)

– 64% Vestas shipped a total of 178 wind turbines

– a decrease of 64 per cent

– 56% Vestas shipped wind power systems with an aggregate capacity of 387 MW

– a decrease of 56 per cent

– 32% Vestas generated revenue of EUR 755m

– a decrease of 32 per cent

– EUR 172m EBIT amounted to EUR (96)m

– a decrease of EUR 172m

– EUR 138m Profit after tax amounted to EUR (82)m

– a decrease of EUR 138m

– 3% The number of employees fell to 20,693

– a decrease of 3 per cent

– 66% Industrial injuries per one million working hours was reduced to 4.4

– a reduction of 66 per cent + 4 % points The share of renewable energy increased to 43 per cent

– an increase of 4 percentage points

Revenue declined by 32 per cent in the first quarter of 2010 to EUR 755m in line with expectations. The EBIT margin therefore fell to (12.7) per cent. The decline in revenue and earnings reflects the much lower level of activity and Vestas’ decision not to adjust its capacity further because of short-term market developments. Vestas’ capacity at year-end 2010 will be 10,000 MW. Having shipped only 387 MW in the first quarter, Vestas was as expected thus far from utilising its capacity.

Outlook for 2010

Of the expected intake of firm and unconditional orders of 8,000-9,000 MW, Europe is still expected to contribute nearly 50 per cent, the Americas about 30 per cent and Asia/Pacific approx 20 per cent. Adjusted for input prices, in general Vestas expects that prices and conditions remain unchanged in 2010 relative to 2009. In 2010, Vestas expects to achieve an EBIT margin of 10-11 per cent and revenue of EUR 7bn. The lower EBIT margin relative to 2009 is due to Vestas’ excess capacity and the fact that the far majority of revenue, and especially earnings, will be generated at the end of the second half of the year, which will have a material impact on the margin. Revenue in the service business is expected to remain unchanged at EUR 600m with an EBIT margin of 15 per cent. Net working capital will continue to fluctuate heavily in 2010 and is expected to amount to 15 per cent of annual revenue at the end of the year. Investments in property, plant and equipment and intangible assets are now expected to amount to EUR 650m and EUR 350m, respectively. The revised expectations for capital expenditure are due primarily to the V112-3.0 MW turbine being launched sooner and in greater volumes than previously planned. The additional investments will be allocated to, among other things, new blade moulds. Furthermore, a service and maintenance centre will be established adjacent to the blade and nacelle factory in Brighton, Colorado, USA. Financial items are still expected to amount to EUR (25)m. The effective tax rate is expected to be 28 per cent. Warranty provisions are expected to represent 3 per cent in 2010. Vestas now expects to recruit 3,400 employees, net, in 2010 against 1,300 as previously expected. The number of staff at year-end 2010, will thus amount to around 24,000. The accelerated build-up of human resources is primarily attributable to the launch of production in the USA. Vestas Technology R&D is still expected to increase its employee headcount by a total of 500 to approx 2,000 during 2010.

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Source: vestas, April 28, 2010;