Despite Rush of Orders, Vestas Reveals Disappointing 2011 Financial Results

January 4th, 2012 by Ravinder Casley Gera

Vestas HQ in Aarhus, Denmark

Danish wind energy giant Vestas enjoyed a busy 2011, with over 6 GW of wind power capacity ordered by customers in France, Germany, Spain, Italy, Sweden, the UK, Pakistan, and Brazil — the latter two orders thanks to the Durban agreement, which commited developing countries to enter talks over joining a successor to the Kyoto Protocol.

But despite all this business, Vestas’ profitability seems to be on the wane. The company announced its preliminary financial results for 2011 yesterday and downgraded its revenue predictions, from €6.4 billion to €6.0 billion. This is the second time the company has been forced to adjust its revenue predictions downwards recently. In October, it downgraded its estimated 2011 revenue from €7 billion to €6.4 billion, leaving a total of €1 billion of revenue up in the air.

The company blames delays to a range of projects because of weather problems, issues with connecting to electricity supply grids, and problems with the construction of a new factory. Yes, their projects have been delayed because one of their projects has been delayed.

Vestas also said that their newest turbines — the V112, which can churn out up to 3 MW of energy, and the GridStreamer turbine, which can provide 2 MW — have proven surprisingly expensive to develop, meaning R&D costs have been €125 million more than expected.

“We are looking at very carefully how come we have experienced these kind of challenges when taking new technologies to the market,” CEO Ditlev Engel said on a conference call [sic]. (Engel, incidentally, is rated one of the world’s ‘100 Best-performing CEOs in the world’ by Harvard Business Review. Make of that what you will.)

It wasn’t meant to be this way. At the beginning of 2011, Vestas was determined to shake off what it described as a “tough” 2010, which had seen three thousand layoffs, with a strong 2011. The poor performance can be mostly blamed on the aforementioned delays and the overall economic situation, and increased competition from Asian rivals.

In an interview with the Australian website ClimateSpectator in November, Engel downplayed the threat of Chinese competition, saying: “We have to remember that Vestas has 3000 colleagues in China and we went into China in 2006 and we built a number of plants there. That means that if the rules of the game going forward, for instance, are that everything should be used in China and shipped around the world, Vestas can definitely do that as well.”

Now, the signs are that Vestas is set for another round of layoffs. It’s announced an event on 12 January to “adjust the company’s organisation… with a view to reducing overhead costs.” Plans for this “significant change of the whole organisation” have been afoot for a while, but Vestas says it’s been able to get them ready for implementation faster than expected.

It seems that with wind, as with solar, the growth of the industry doesn’t mean it’s easy to make sustained profits. Hopefully, the additional interest in renewables from developing countries, in the wake of Durban, will help Vestas have a better 2012.

For more on Vestas, see Vestas Receives Massive Wind Order from Brazil.

Source: BusinessGreen | More: Bloomberg

Picture: Vestas

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Tags: Vestas, Vestas jobs, Vestas profit, vestas profit warning, wind energy demand down

About the Author

Ravinder Casley Gera is a London-based freelance journalist passionate about climate change, development and technology. He has written for the Daily Express, Excite.co.uk, and the Fly. He blogs at ravcasleygera.wordpress.com.

Anonymous

Vestas has positioned itself at the high end of the market more dependent on business from developed countries particularly the EU, so it’s not really surprising they saw declines this year. Since you are based in London I’m curious how you view recent changed in UK renewables policy affecting wind, which I understand is dominated by large, offshore projects.
- http://ravcasleygera.com/ Rav Casley Gera
  
  xiaozi, so sorry for the (ridiculous!) delay in getting back to you: i hope you see this. You’re right, wind is largely offshore in the UK, though that’s really more a result of political opposition to onshore projects than anything else.
  
  Like solar subsidies, wind subsidies are on the verge of being cut here. Here’s the Guardian’s story:
  
  http://www.guardian.co.uk/environment/damian-carrington-blog/2012/jul/11/wind-power-turbine-subsidy?INTCMP=SRCH
  
  I may try to write something about this for CT in the next few days if I have time.