Interim financial report, third quarter 2010 - Adjustment of capacity, increasing order backlog, positive free cash flow

Summary: Vestas reported a third-quarter profit and a positive free cash flow following the loss in the first half year of 2010. Vestas generated third-quarter revenue of EUR 1,722m against EUR 1,814m in the year-earlier period. EBIT margin was 10.7 per cent, against 13.5 per cent in the third quarter of 2009. Net working capital stood at 25 per cent of expected annual revenue, and the free cash flow was EUR 180m against EUR (203)m in the third quarter of 2009. During the first nine months, Vestas' intake of firm and unconditional orders amounted to 6,567 MW, which is the highest level ever recorded. At the end of the quarter, the order backlog amounted to 5,884 MW with a value of EUR 5.7bn. Safety at Vestas' workplaces was improved further, and green energy accounted for 44 per cent of Vestas' total energy consumption. At the beginning of 2010, Vestas resolved to retain substantial excess capacity in Europe in expectation of an increased demand in 2010 and 2011.

In 2011, the European market growth will, however, not live up to Vestas' expectations, which is why Vestas is compelled to adjust its capacity in Europe. To ensure the most efficient production, Vestas has decided to initiate negotiations with the relevant parties in relation to closing down of a number of factories, primarily in Denmark, where costs are highest. In addition to this, a number of administrative functions will be adjusted at several locations in and outside Denmark. In total, around 3,000 jobs will be abolished in connection with the adjustments. In the fourth quarter of 2010, an amount of EUR 140-160m will be expensed as “one-off costs” (exceptional operating items) in the income statement, which primarily will consist of write-downs of property, plant and equipment and costs in relation to lay-offs of employees. Adjusted for the above, Vestas retains its expectations for 2010 as announced in August. For 2011, where market uncertainty and competition are still high, the intake of firm and unconditional orders is expected to amount to 7,000-8,000 MW. The
activity level measured in terms of produced and shipped MW is expected to amount to approx 6,000 MW. In 2011, Vestas expects to generate a positive free cash flow after investments of a total of EUR 650m.