The once-respected stock of the global leader in wind turbines fell 96% from its peak in 2008 to its nadir in 2012.
An almost-comedic series of managerial errors felled the stock.
Foremost among these was launching a dramatic expansion plan in the midst of the 2008-2009 financial crisis, which caused many governments to cut back on subsidies for alternative energy. In other words, Vestas expanded right when demand was collapsing.
By 2010, profit warnings were the norm for the Danish company, as stiff Chinese competition also began to bite. Vestas become an unwelcome poster child for the rise and fall of the global wind turbine industry.
But now, years later and with a new CEO (brought on in 2013), Vestas has the wind at its back once again. The industry, too, is growing rapidly again.
Comeback Kids
Vestas’ new CEO, Anders Runevad, cut about one-third of the company’s bloated workforce and closed one-third of its factories. Runevad, unlike his predecessor, is focused on cash flow, not market share.
He also had Vestas concentrate on improving three main areas: making their turbines more energy-efficient than the competitions’, growing it’s higher-margin services business, and pushing into offshore turbines (a big growth area for the industry).
Vestas is also moving into the offshore business in a joint venture with Japan’s Mitsubishi Heavy Industries (MHVYF).
So far, these moves have paid off.
On May 6, the company raised its profit guidance for 2015. It reported strong demand for its products in China, the United States, and, in particular, Brazil.
And, in the first quarter of this year, Vestas signed contracts to sell wind turbines with a total generating capacity of 1,750 megawatts. This pushed the company’s order backlog to a record €15 billion, and nearly half of that is from services contracts.
Revenue in the first quarter rose by 18% to €1.5 billion. Earnings before interest, tax, and exceptional items soared 98% to €79 million.
