Vestas Cuts More Jobs as US Wind Power Struggles
Shares in Danish wind turbine company Vestas fell as much as 11 percent in Wednesday morning trade after the company released disappointing third quarter earnings and announced further cost-cutting measures, including job cuts.
The company reported earnings before interest, tax and special items of 13 million euros ($16.7 million) for the third quarter, well below the average forecast of 53.2 million euros, according to analysts polled by Reuters.
The net figure for the third quarter came in at a loss of 175 million euros, compared with a net loss of 60 million euros for the same period 2011. Revenues increased to 1.99 billion euros compared with 1.34 billion euros a year ago.
Ditlev Engel, CEO of Vestas Wind Systems, defended the company's earnings in the face of growing competition from Chinese wind turbine manufacturers.
"In the third quarter this year, our revenues were actually up 49 percent compared to the third quarter last year. Our services businesses are growing quite a lot," he said.
"We changed our company organization earlier this year to have two focus points — installation of new turbines and the service business that is easier to predict how it goes."
"The market for new installation is very challenging but we still have a backlog of 13 million euros worth of business that we have to execute."
Vestas also announced further job cuts, aiming to bring down the number of employees to around 18,000 by the end of 2012 or early 2013, and to an expected 16,000 by the end of 2013.
Vestas already announced a 20 percent job cut in the U.S. ahead of the expiration of a production tax credit for renewable energy firms.
Engel told CNBC on Wednesday that the company expected challenges from the U.S. market but there could be a positive economic turnaround after Barack Obama was re-elected to the U.S... presidency.
"Let's see. We have planned for a very low activity level in the U.S next year," he said.
"After tonight's election hopefully we'll get some positive surprises that the production tax credit will be extended but we are planning for a very challenging market for new installation in 2013."
Critics of government subsidies for wind, solar and wave power companies operating in the U.S. have said that the renewable energy sector is not in its infancy anymore and thus does not require — or merit — government tax breaks.
Engel said that society would suffer when tax credits are withdrawn.
"The real calculation one has to make is what is the cost to society and what is the cost when climate change starts to impact the country. We need to make a transformation on our energy consumption and that does require that long-term planning is in place."
Engel added that if the company had seen long-term planning over the climate in the U.S., "there would have been more job creation."
"It's important to remember that the wind turbine business is an American business…we buy components from over 20 states. American wind turbine installation creates a lot of jobs across the country."