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.

The Spanish decease

Mariano Rajoy en Bilbao. Imagen tomada por Ike...

Mariano Rajoy en Bilbao. Imagen tomada por Iker Parriza (Photo credit: Wikipedia)

What has the Spanish government done until now? Well on the 11th of July prime minister Rajoy announced the following steps with the endorsement of the IMF.

  • The standard VAT rate was raised from 18 to 21 percent and the reduced rate from 8 to 10 (the super-reduced rate was left unchanged at 4 percent). A number of products have also been moved from lower to higher rates. Other indirect taxes will also be raised.
  • The extra payment in December to civil servants was suspended for 2012 – equivalent to nearly a monthly wage.
  • The mortgage income tax deduction will be removed.
  • Unemployment benefit was reduced (with the replacement rate after six months falling from 60 to 50 percent).
  • Social security contributions are reduced by one percentage point in 2013 and a further point in 2014.

With a unemployment rate of 25% and 50% among the young there are plenty of issues to be confronted. However. There are little signs in the Spanish governments actions to suggest any efforts to stimulate new job creation or any investment that will take the country out of recession. It would seem that they only thing that they are capable of is digging the hole even deeper.

China in for a soft landing

After years of two digit growth figures in China the economy is about to slow a bit down for what IMF believes will be a soft landing. The main drive for this change is the situation in Europe, which does not seem to improve anytime soon. However, the domestic Chinese market seems to be a driver.

Institutional investors will put 60 billion into Danish Infrastructure

The Öresund Bridge from underneath

The Öresund Bridge from underneath (Photo credit: Wikipedia)

It is quite amazing to see and hear what Institutional investors are communicating at the moment. For a long time it was their job to create more wealth for the people who had trusted their hard earned money into a few very well of funds. They invested freely in all kinds of projects and had portfolios that were very diversified (and some would say to diversified).

The first came the raise of the consumer activist who forced these huge investors to put in ethical screens that ensured that there was some form of consistency between the individual wishes and the investment targets. These pension funds have now taken a further step in the direction of creating a more sustainable investment platform by looking into projects that benefit the very society and people own them.

The financial and economic crisis means that public construction projects are on a diet, but now there are signs that there may be a tremendous boost on the way to the Danish infrastructure. A telephone survey done by a independent think tank, shows that the country’s ten largest pension and the state owned, ATP, are willing to invest nearly 60 billion kroner in the Danish infrastructure such as a harbour tunnel in Copenhagen, sewers or a large bridge between some of the main island of the country. According to calculations this will create 7,200 new Danish jobs annually over a period of 10 years when billions are invested in public works projects.

This means that there is cash then the government just need to provide the projects and vision needed to make it a reality.

Maersk fires 400

Logo of A.P. Moller – Maersk Group

Logo of A.P. Moller – Maersk Group (Photo credit: Wikipedia)

The worst CSR performer in the Maersk empire is forced to fire some 400 employees some really poor economic performance. While there is no direct link between their focus on sustainable business solutions and their bottom line, it is interesting to note that the this part of the business have not been able to adapt to the environment that they are operating in fast enough in order to avoid these colossal looses.
The company presented their first quarter results a few weeks ago and the Line devision was a overall looser draging the stock down for the whole company. One of the main contributors have been the price war on freight rates and very high fuel prices. These factors have subsequently send the container shipping line down with a deficit in the first quarter of 3.4 billion against a profit during the same period a year earlier to 2.5 billion. Maersk Line has already set the price to transport containers between Europe and Asia up but this will not mean that the shipping devision will present black numbers this year. Maersk Line is the world’s largest container shipping company and is responsible for 42 percent of revenue in the conglomerate AP Moller-Maersk.

http://www.maerskpress.com/Latest-Press-Releases/maersk-announces-q1-financial-results/s/447853ae-13af-42d3-b231-2a2acdf06544