On 9 November 2011, in connection with the reporting of the third-quarter accounts for 2011, Vestas announced that it would undertake a strategic reorganisation to allocate more resources to direct customer-oriented activities in individual markets and reduce its capacity to reflect market demand.
Fundamental assumptions and focus points
As explained in the interim financial report for the third quarter of 2011, Vestas has spent the years since 2006 to build a strong, global organisation, with the objective of securing competitiveness by producing at low local costs, reducing transport costs both financially and in terms of environmental footprint, improving relations with politicians, and, not least, improving relations with regional and international customers.
The new organisation has been designed on the basis of the following focus points:
- Vestas wants to further increase proximity to its customers, allowing the company to operate under market conditions characterised by reduced growth and fierce competition in the best possible way and to meet the interests of shareholders, employees and other stakeholders by working still more inclusively;
- Vestas’ fixed cost base must be reduced to lower the company’s break-even level in order to allow for a situation where, for instance, the US market may be reduced considerably in case the PTC is not extended;
- Vestas needs to increase economies of scale to a greater extent than previously in order to reduce its cost base to a level that supports a high single digit EBIT margin in the medium-term with a normalised US market;
- High-margin segments in the Vestas business model, such as aftermarket services, need to attract a larger share of total investments and management attention, enabling an even faster introduction of new services and solutions to support both the customers and the return on invested capital at Vestas;
- Vestas shall be able to take advantage of an industry supply chain that has improved significantly in recent years, in order for Vestas to reduce its inventories and its need for further investments;
- Vestas has to deliver solutions and product upgrades to the market faster and with lower risk;
- Vestas is developing a potentially leading offshore platform, V164, and will react proactively to enquiries from strategic partners in the offshore segment;
- Financial performance management needs to be further embedded throughout all parts of the Vestas value chain to strengthen cost discipline and controls while simultaneously implementing clear areas of responsibilities.
As mentioned in the company announcement No. 1/2012 of 3 January 2012, input from a number of the company’s larger shareholders have been included in the organisational design process.
