Vestas third-quarter profit falls as credit crunch cuts orders

Vestas Wind Systems A/S, the world’s largest maker of wind turbines, fell the most in nine weeks in Copenhagen trading after saying orders will decline next year and that it will cut 3,000 jobs because of reduced demand.

The Danish manufacturer forecast 7,000 megawatts to 8,000 megawatts of orders, compared with its estimate of 8,000 megawatts to 9,000 megawatts for 2010. The Randers-based company postponed giving revenue and profitability forecasts for 2011 until February citing “high market uncertainty.”

The credit crisis has prompted banks to restrict loans to wind-park developers that buy turbines from Vestas and rivals such as Germany’s Siemens AG and General Electric Co. At the same time, Europe’s sovereign debt crisis has limited prospects for economic growth in the region. The 3,000 job cuts will come mainly in Denmark where costs are highest, and some factories will be shut because of lower European demand, Vestas said.

“The limited information that the company provides for its 2011 guidance doesn’t bode well,” Christian Nagstrup, an analyst with Silkeborg, Denmark-based Jyske Bank A/S, said today in a note to investors. He has a “buy” rating on the shares.

Net income in the third quarter fell to 126 million euros ($176 million) from 165 million euros a year earlier. Sales declined 5.1 percent to 1.72 billion euros.

The stock fell as much as 9.8 percent, the most since Aug. 18. It traded at 190.4 kroner, down 4.8 percent, at 12:21 p.m. local time, bringing its annual decline to 40 percent compared with a 5.7 percent gain in the Bloomberg European 500 Index.

‘Too Optimistic’

“I and the other members of management held on to an optimistic view for too long,” Chief Executive Officer Ditlev Engel said today at a press conference in Copenhagen. “I can understand if some people believe that I was wrong.”

The 126 million-euro profit beat the average estimate of 80 million euros in a Bloomberg survey of 13 analysts. The shares earlier rose as much as 8.8 percent, the most since April 26.

Vestas, which employed 23,443 people at the end of September, said it expects to complete most job reduction negotiations by Nov. 21. It plans to close a blade production factory in Nakskov, Denmark, and plants that make nacelles in the Danish cities of Skagen and Viborg and in Sweden’s Lidkoeping, as well as a turbine tower factory in Rudkoebing, Denmark. The company will also reduce production and administrative staff outside its homeland, it said.

China Vs Denmark

Engel said it costs as much for Vestas to produce a turbine in China and ship it to Sweden than it does to make the machine in Denmark and transport it to the neighboring Scandinavian country.

GE, Vestas’ biggest rival in the U.S. market, said on Oct. 15 that wind-turbine revenue dropped 32 percent and orders fell by 60 units in the third quarter. Hansen Transmissions International NV, the maker of wind-turbine gearboxes, said on Oct. 20 that revenue for the 12 months through March will fall about 10 percent compared with its 2010 fiscal year.

Vestas kept unchanged its 2010 revenue forecast of 6 billion euros and a margin for Ebit in a range of 5 percent to 6 percent. The company reported losses in the first two quarters of 2010, the first in four years.