Vestas Publishes Interim Financial Report (Denmark)

Vestas generated first-quarter revenue of EUR 1,060m, an increase of 25 per cent relative to the first quarter of 2010, and as announced realised a loss. The EBIT margin fell from (4.6) per cent to (6.5) per cent.

The development confirms that revenue and earnings may show major quarter-onquarter fluctuations depending on the capacity utilisation and the type of projects handed over. The first half year of 2011 is expected to break even against an EBIT loss of EUR 219m during the first half year of 2010. The free cash flow was improved compared to the first quarter of 2010 by EUR 116m to EUR (431)m. The first-quarter order intake of 630 MW was lower than expected. The backlog of firm and unconditional orders amounted to EUR 7.2bn at 31 March 2011. Safety at Vestas’ workplaces was improved further, and renewable energy accounted for 31 per cent of Vestas’ total energy consumption in the quarter. Vestas has launched its V164-7.0 MW offshore wind turbine, which, subject to a satisfactory order intake, will be put into serial production from 2015. The outlook for 2011 is retained; an intake of firm and unconditional orders of 7,000-8,000 MW, an EBIT margin of 7 per cent, a positive free cash flow and revenue of EUR 7bn in a market in recovery, but at the same time influenced by fierce competition.

Outlook for 2011

Of the expected intake of firm and unconditional orders of 7,000-8,000 MW, Europe and Africa are expected to contribute about 50 per cent, the Americas about 25 per cent and Asia Pacific about 25 per cent. As expected, competition remains quite tough, also in the USA, where Vestas now has established local production, which makes it possible to offer the most competitive solutions to the customers. Vestas expects that the majority of its orders in 2011 will also include short-term or longerterm service contracts with a varying scope. Shipments are expected to rise from 4,057 MW in 2010 to 6,000 MW in 2011.

In 2011, Vestas still expects to achieve an EBIT margin of 7 per cent and revenue of EUR 7bn.

Revenue in the service business is expected to amount to EUR 700m with an EBIT margin of 15 per cent. Vestas expects a positive free cash flow, equivalent to an improvement of more than EUR 700m compared to 2010. Reduction of inventories will contribute hereto. A large proportion of revenue and earnings are expected to be generated in the second half of the year because of the later timing of the year’s expected order intake for 7,000-8,000 MW, which increases the pressure on the entire organisation. Vestas previously expected revenue and earnings to be fairly evenly distributed between the first and the second half of the year. The first half year of 2011 is expected to break even against an EBIT loss of EUR 219m during the first half year of 2010.

Investments in property, plant and equipment and intangible assets are expected to amount to EUR 550m and EUR 300m, respectively. Investments in property, plant and equipment especially comprise the conversion of factories to the V112 platform, and more than half of the investments are expected to take place during the first half of 2011.

Financial expenses and the corporate tax rate are expected to be EUR (60)m and 28 per cent, respectively. Total warranty and product provisions are expected to account for less than 3 per cent of the expected revenue for the year, as the performance of the wind power plants is constantly improved to the benefit of customer earnings and Vestas’ costs.

The aim is to keep the incidence of industrial injuries at no more than 5.0 industrial injuries per one million working hours. The green proportion of Vestas’ energy consumption is expected to be 40 per cent. The decline relative to 2010 is due to the increase in production outside Europe, where access to green electricity is often limited. The target for the customer loyalty index is 72, and the Sigma level must be at least 5.

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Source: vestas, May 04, 2011