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No despondency from market leader -- Vestas annual results

Revenues up by 24%, profit up by 51%, and an unaltered forecast for growth despite the financial crisis are the headlines from Vestas in its financial results for 2008. With turbine supply set to grow to 10 GW in 2010, from 6.16 GW last year, Vestas has no plans to reduce its workforce, but intake of new staff will be at a slower tempo until certainty again returns to world markets. Of the forecast revenues of EUR 7.2 billion for 2009, orders for EUR 5.2 billion are already being executed. Orders stood at 4,806 MW at the end of 2008, a 9% increase on orders at the close of 2007.

Vestas has given up on an earlier primary aim: to increase its share of the world market. At one time the goal was a market share of 30%, but Vestas closed 2007 at 23%. In this year's report, the company merely says it expects its market share to be revealed by BTM Consult's annual World Market Update, due for publication next month.

In its report for 2008, Vestas puts most emphasis on revenues for the year of EUR 6 billion and a profit of EUR 668 million, putting the margin for earnings before interest and tax (EBIT) at 11.1%, up from 9.1% in 2007. The improved performance was achieved at a time when demand for wind turbines was outstripping supply, providing Vestas with the opportunity to raise product prices and tighten conditions in sales contracts without losing orders.

"Because of the financial crisis, 2009 will not turn out quite as we originally planned," say chairman Bent Erik Carlsen and CEO Ditlev Engel. "Some wind power projects have been postponed while others are discontinued altogether because funding has become too expensive or impossible to raise." No indication is given on how the changed circumstances might affect company strategy for product pricing, order pre-payment and other commercial conditions, though Carlsen and Engel acknowledge "the financial crisis has sharpened the market's critical senses." Vestas, they believe, is in a good position to withstand such scrutiny, though the increasing competition from new companies in Asia and established players in America and Europe is noted. Vestas has received no notice of cancelled or postponed turbine orders.

Planned investment in new factories and research and development centres amounts to EUR 1.2 billion this year, compared with EUR 600 million in 2008, although that expenditure may be "adjusted" if the flow of new orders received in the first quarter of 2009 does not improve to forecast levels before April 28. The adjustment does not apply to the size of the workforce, which at 20,829 employees is at 15% over capacity after last year's staff intake. The long term growth prospects are such that Vestas says retaining its staff is economically defensible. That decision may be reflected in the result for 2009. Vestas is expecting a 20% increase in revenues, but an EBIT margin not far removed from that achieved this year: 11-13%.

Service of Vestas turbines in 2009 is once again expected to be one of the company's most lucrative business areas, with revenues of EUR 550 million and an EBIT margin of 15%. Customer satisfaction is not rising as sharply. In a survey resulting in 381 responses, customer loyalty increased on Vestas' index from 46 to 52, against a goal of 60.

At the same time as releasing its annual results, Vestas also reported record earnings for the final quarter of 2008 of EUR 2.4 billion and an EBIT margin of 15.4%.

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