Vestas Forecast to Return to Profit After Two Years of Cost Cuts

Feb 02, 2014 8:39 pm ET

Feb. 3 (Bloomberg) -- Vestas Wind Systems A/S, the biggest wind turbine maker, may report its first quarterly profit in 2 1/2 years following a turnaround plan that aimed to reduce costs and slash 30 percent of its workforce.

Vestas tomorrow may post earnings for the final three months of 2013 of 159 million euros ($215 million), according to the average of eight analyst forecasts on Bloomberg. That follows nine successive quarters of losses, and compares with the 618 million euros lost in the same period in 2012.

The rebound would be the culmination of a two-year effort by the manufacturer based in Aarhus, Denmark, to reduce fixed costs by 400 million euros. It’s recovering from a slump that prompted its shares to tumble by more than 96 percent from June 2008 to November 2012.

“Vestas has moved away from being a company that everyone feared wouldn’t be able to dictate its own future,” Jacob Pedersen, an analyst at Sydbank A/S who has a buy rating on the stock, said in a phone interview from Aabenraa, Denmark. “It’s brought down its debt and created a future for itself. It’s had a massive comeback when you look at orders.”

Vestas doesn’t comment on analyst forecasts, Michael Zarin, a spokesman for the company, said in an e-mail. Vestas is slated to publish its annual report at 7:30 a.m. Copenhagen time tomorrow.

Orders Surge

Orders for wind turbines have rebounded to at least 5,341 megawatts in 2013 from 3,738 megawatts in 2012. That sum doesn’t include unannounced orders from the final quarter. The company’s shares quintupled in 2013 as Vestas pared thousands of workers, sold factories and brought in Chief Executive Officer Anders Runevad to replace Ditlev Engel. The stock has gained another 15 percent so far in 2014.

Vestas plans to provide forecasts for 2014 in tomorrow’s announcement. Pedersen said the predictions may be limited to free cash flow, revenue and the margin on earnings before interest and tax. The company may also signal a new strategy leading to dividend payments “a couple of years ahead,” he said. Vestas last paid a cash dividend to shareholders in 2003.

“Ever since Anders Runevad took over, we’ve heard the word stability, stability, stability,” Pedersen said. “We’ve heard it so many times, that would be the ultimate measure of him having created stability around Vestas, the fact that the company would be able to pay out a dividend.”

At the beginning of 2013, Vestas was predicting 4 to 5 gigawatts of shipments in the year, an Ebit margin before special items of at least 1 percent, and positive free cashflow. Since then, it three times upgraded guidance for free cash flow, most recently on Jan. 6, when it said it now expects 1 billion euros. The manufacturer in November upgraded the Ebit margin forecast to at least 2 percent.

While the company may have ended the year profitably, the average analyst forecast is for Vestas to have lost 109 million euros over the full year in 2013, its third successive annual loss. That’s based on the mean of 13 analysts on Bloomberg.

--Editors: Reed Landberg, Randall Hackley