Vestas slashes 1,400 more jobs following huge loss

DENMARK: Vestas today announced it would be cutting a further 1,400 jobs in addition to the 2,335 job cuts revealed at the start of the year.

Vestas plans to make 1,400 redundancies
Vestas plans to make 1,400 redundancies

The change will see Vestas end the year with just 19,000 staff globally, rather than the 20,400 predicted when the turbine manufacturer announced its restructuring plan in January.

In total Vestas expects to make 3,700 staff redundant in 2012. Having let 1,000 of these staff go already, the firm says the remaining job losses will be split geographically as follows: 55% in Europe and Africa, 25% in Asia Pacific and 20% in Americas.

Vestas said it was making the additional job cuts in order to ensure it remained profitable in 2013, when it expects a significant drop in shipments to 5GW. Meanwhile, it has revised its full-year shipments expectation for 2012 down from 7GW to 6.3GW, blaming "a lower order intake in the first half year and delays of grid connections in China".

Chief executive Ditlev Engel said: "The further reduction in the workforce is part of the continued cost saving plans which Vestas has been working on since November 2011.

"It is always unfortunate to have to say goodbye to good colleagues, but we have said before that 2012 will be tough and 2013 will be even tougher for Vestas, and in order to reach our target of making 2013 profitable, it is unfortunately a necessity."

The revelation of further job cuts came as Vestas published its results for the second quarter and first half of 2012. While the firm’s Q2 revenue at €1.61 billion was up 15% compared to Q2 2011, its profits before tax and special items (one-off payments such as redundancy payouts) was down by 48% from €77 million in Q2 2011 to €40 million in Q2 2012.

For the half year, the firm’s earning before tax and special items are now running at a €164 million loss, compared to an €8 million profit in the first half of 2011. Taking into account special items, Vestas made a pre-tax loss in the first half of this year of €230 million. As a consequence of the intensified redundancy plan, Vestas special items at the end of the year are now expected to amount to €75-125m.

The firm’s free cash flow was negative, running at €338 million in the red at the end of H1 2012, €139 million worse than the first half of 2011.

Despite posting such poor results, Vestas said it expected to meet its full-year expectations announced at the beginning of the year, including a pre-tax profit margin of between 0% and 4%, revenue in the range of €6.5 billion to €8 billion, and a positive free cash flow.

However, it was not all bad news for the firm as the value of its orders amounted to €9.6bn at 30 June 2012. Combined with the future revenue of signed service agreements, Vestas now has work on its books totalling €14.4bn – the highest level ever recorded by a manufacturer.

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