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Vestas boardroom shake up intensifies

COPENHAGEN—Vestas Wind Systems A/S on Wednesday said its chairman and deputy chairman will step down in March, hard on the heels of the resignation of its financial chief late Tuesday, as the world’s biggest maker of wind turbines swung to a larger than forecast net loss in 2011 and warned it may not be profitable in 2012.

The departure of chairman Bent Erik Carlsen and his deputy Torsten Erik Rasmussen marks the culmination of an annus horribilis for the Danish company including the resignation late Tuesday of chief financial officer and deputy chief executive Henrik Nøerremark. Among Vestas’s top executives, only Chief Executive Ditlev Engel survives the boardroom shake up.

Mr. Nørremark resigned with immediate effect following a briefing to the supervisory board on the background and process that led to two stark profit warnings in late October and early January.

Despite restructuring efforts and a record-high order backlog of 9,552 megawatts of turbine capacity worth €9.6 billion, Vestas said Wednesday it may not break even in 2012.

Vestas said it expects 2012 sales to come in at between €6.5 billion and €8 billion, and earnings before interest and taxes to be in the range of 0% and 4% of revenue. In the medium term, it expects to return to a high single-digit EBIT margin but its 2011 performance was worse than it had indicated in preliminary figures released Jan. 3.

For 2011 Vestas posted a net loss of €166 million, from a year-earlier net profit of €156 million. It reported a loss before interest and tax of €60 million, compared with a year-earlier EBIT gain of €310 million.

This was worse than the indication given in the preliminary 2011 results issued in January, when Vestas said its EBIT would come in at around €1 million. Sales fell 16% to €5.84 billion, also short of the €6 billion originally indicated.

“Just one month after the company published preliminary results… the final EBIT still falls €61 million short of the initial indication. That’s very disappointing, and is testimony that the internal reporting process is still not functioning,” said Janne Vincent Kjaer, an analyst at Jyske Bank, adding that the 2012 guidance “clearly disappoints.”

Vestas’s share price plunged 12% in early trading in Copenhagen.

Vestas is grappling with a deteriorating market for wind turbines as extra supply and looming competition from Chinese makers have put downward pressure on prices, while pressure on government finances has put wind-energy subsidies at risk in Europe and the U.S.

But the failures to meet own targets, which Vestas has said resulted from problems with the start up of a factory in Germany, cost overruns in the development of a new turbine and postponed booking of income from a number of projects, have resulted in a reorganization of operations and the implementation of cost-cutting measures, as well as the overhaul of its management team. In addition to the heads of the supervisory board and the CFO, Vestas’s head of research and development, its head of investor relations and the corporate spokesman have also gone.

Job cuts have gone right across the organization. With weaker than initially assumed demand for turbines and downward pressure on prices, Vestas announced 2,335 lay-offs, or about 10% of its workforce, in mid-January.