Vestas is moving dangerously close to the edge

The crisis in Vestas is now so deep that the group existing only because of their banks want the too. According to a local Danish newspaper Jyllandsposten has Vestas has signed an agreement with banks to ensure that the company has enough money to continue operations. Otherwise they would have to close down operation.

The information has been disclosed in an interim financial statement for the second quarter of 2012.Which follows several years of poor financial performance and inability to change its strategy when the financial crisis hit in 2008.

The situation is now that Vestas has been unable to live up to the loan agreements made with its bank connections a significant step down from just a few years ago when the company was one of the fastest growing companies in Denmark.

Danger in the horizon

“Despite this, financial covenants testing is affected by the disappointing results realised by Vestas in the second half year of 2011 and the first quarter of 2012, which mainly related to the cost overruns in relation to the introduction of new technology” says the statement from Vestas to add: “Vestas has therefore agreed with its lenders to defer the half-year 2012 testing of the financial covenants contained in Vestas’ banking facilities and the lenders have allowed drawings, which in the opinion of Vestas are sufficient for the continued operation of Vestas on usual terms since the company expects to test on normal terms in the future.

According to Frank Jensen from the Danish Stock Analysis information that Jyllandsposten talked to is;

“The fact that banks are easing the requirements shows that the Vestas simply can not live up to them. There is only one explanation, and it is that they do not get the money in the Treasury, as required,” said Frank Jensen epn.dk.

This should be seen in the light that Vestas lost 338 million. euro in the first quarter and during the first two quarters the total is now nearing a total of 633 million euros.

Deficit of despite good figures for renevue

Revenue increased to 1.6 million. Euro. and is increase from 931 million. euros from the same quarter last year. However, the increased revenue is not impressive in the light that it bottom line showed a deficit of 8 million. euros after tax, compared with a profit of 55 million. euro in the second quarter of 2011.

Vestas considers this to be a temporary issue and in the light of the company’s positive results in the second quarter of 2012 combined with the large backlog of firm and unconditional orders, Vestas expects to meet the financial covenants contained in its current banking facilities in the near-term future.

With this in mind it becomes increasingly difficult to believe that Vestas will be able to live up to its financial commitment even after massive layoffs and changes on board level.

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One thought on “Vestas is moving dangerously close to the edge

  1. Vestas posted a net loss of eight million euros ($9.8 million) for the second quarter of 2012, compared with a year-earlier net profit of EUR55 million. Earnings before interest and taxes, or EBIT, after special items fell 77% to EUR18 million from EUR77 million a year earlier, while sales rose 52% to EUR2.16 billion from EUR1.42 billion.

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