Blowing in the wind – huge Vestas savings

A new savings plan from Vestas. The fixed costs will be reduced by at least EUR 150 million (DKK 1.1 billion) with full effect from 2013. The Vestas organization will be changed, the consequence being new dismissals.

The Vestas management will create a new organization which will be presented in connection with the annual accounts on February 8, 2012. The new organization and the annual billion kroner savings will result in more dismissal notices.

“Unfortunately, this will lead to redundancies across Vestas in 2012. Our cost level is too high – especially in a number of markets currently seeing the weakest growth rates,” CEO Ditlev Engel wrote in a press release.

Apart from reducing the costs considerably, the Vestas business must improve its ability to absorb adverse events, for example if the PTC tax scheme in the USA is not extended after the end of 2012, Ditlev Engel notes.

Due to uncertainty about the PTC, Vestas has received an extraordinarily large number of orders from the USA for installation by the end of 2012, and this situation will change for the worse if the tax credit lapses from 2013.

Vestas changes its organization precisely now because of the short-term difficult, uncertain market conditions. In the longer term Vestas will remain strongly positioned as the only truly global supplier of turnkey wind power systems solutions.

“Our new organization must be even more customer-focused and scalable, allowing us to swiftly and effectively realign our operations to the extensive market fluctuations that are likely to characterize the wind market going forward,” Ditlev Engel explains.

The Board of Directors fully supports this strategy, But this does not change the Board’s view that wind power remains a fundamentally attractive sector in the long term, said chairman of the Board of Directors of Vestas Wind Systems, Bent Erik Carlsen.

“The Board of Directors unanimously shares the view that Vestas must develop its business in the coming years and at the same time be in a position to address the deteriorating global economic outlook, so the board fully supports this strategy”, Bent Erik Carlsen said.

The new round of layoffs follows an announcement one year ago about the dismissal of 3000 workers mainly because of overcapacity in Europe which is Vestas’ largest market. 2000 of the fired workers work in Denmark.

With its third-quarter accounts Vestas has reaffirmed the downgrading which it surprisingly published last Sunday. In this downgrading it reduced the annual revenue by EUR 600 million to EUR 6.4 billion which nearly halved the profit margin to 4 per cent.
Ditlev Engel has abandoned his big strategy plan, Triple15, for revenue of EUR 15 billion and a profit margin of 15 per cent by 2015.

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