Danish wind turbine maker Vestas Wind Systems A/S (VWDRY.PK, 0NMK.L) on Wednesday reported a much wider loss for the first quarter, amid higher costs and special items, despite a 4 percent growth in revenue. The stock is declining over 9 pecrent in Copenhagen.
The company attributed the "disappointing" first-quarter revenue and earnings to low level of deliveries, high turbine costs and additional unexpected warranty provisions of 40 million euros.
Loss for the quarter widened to 162 million euros ($214.3 million) from 85 million euros in the prior year. On a per share basis, quarterly loss amounted to 0.80 euros, compared to 0.42 euros in the previous year.
Monitoring data from Vestas' Performance and Diagnostics centres showned that 376 V90-3.0 MW gearboxes delivered to the company from June 2009 to September 2011 may potentially need additional maintenance, repair or replacement due to malfunctioning bearings. Thus, additional provisions of 40 million euros were made in the quarter.
Pre-tax loss was 225 million euros, compared to 118 million euros loss last year. Special items totaled 41 million euros in the quarter whereas there were no special items last year.
Revenue rose to 1.105 billion euros from 1.06 billion euros in the year-earlier period, but was lower-than-expected as the firm did not realize all of the deferred revenue from December 2011.
Europe and Africa accounted for 59 percent of quarterly revenue, whereas Americas and Asia pacific accounted for 31 percent and 10 percent, respectively.
Cost of sales climbed to 1.09 billion euros from 960 million euros.
Looking ahead, Vestas retained its full-year guidance of an EBIT margin of 0-4 percent, revenue of 6.5 billion euros to 8.0 billion euros, a positive free cash flow, shipments of about 7 GW and investments of 550 million euros.
Due to the additional provisions made for the V90-3.0 MW gearboxes, warranty provisions for the year are now expected to be around 3 per cent of the expected full-year revenue, compared to the previous guidance of less than 3 per cent of full-year revenue.
Vestas continues to expect the number of employees at year-end to be nearly 20,400, which would contribute to a fixed cost reduction of over 150 million euros with full effect from the end of the year.
During the third quarter of 2012, the company would decide on its future footprint in the US market in case the PTC scheme is not extended.
The company said it has received inquiries from potential partners on the development of the V164-7.0 MW turbine.
Vestas said it has reduced the pace of development of the potentially leading offshore platform, the V164-7.0 MW turbine. The prototype is now expected to be installed in Denmark during 2014.
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