May 8, 2019 / 7:02 AM / 15 days ago

UPDATE 2-Vestas' shares fall after profit disappoints and CEO departs

* Q1 profit well below forecasts

* Lower prices for turbines hit earnings

* Trade tariffs and higher raw materials prices drag

* CEO to step down later this year

* Keeps 2019 outlook (Adds CFO, share price, analyst)

By Stine Jacobsen

COPENHAGEN, May 8 (Reuters) - Shares in Vestas’ fell 3 percent on Wednesday as first-quarter profit fell well below forecasts and the wind turbine maker surprisingly announced the departure of its chief executive, known for an earlier turnaround of the company.

Operating profit before special items dropped 66 percent to 43 million euros, less than half of analysts’ average forecast, due to a fall in prices for wind turbines ordered in 2017, tariffs and higher raw material prices.

The wind industry has seen a steep decline in prices and increased competition as governments move away from guaranteeing generous fixed, subsidised tariffs for power towards a competitive auction-based system that favours the lowest bidders.

“We have a big chunk of orders that we took in 2017 where the prices were really low,” Chief Financial Officer Marika Fredriksson told Reuters, adding that most of the low-margin orders had been executed in the first quarter of 2019.

In addition tariffs stemming from U.S-China trade tensions and higher raw material prices had increased costs.

On a positive note, prices remained stable and Vestas reiterated that 2019 will be “extraordinarily busy” with activity levels speeding up in the second half of the year.

This echoed comments made by its main rival Siemens Gamesa which on Tuesday said it expects its project pipeline for new wind farms in the second half of the year to bolster faltering profitability.

Vestas shares fell around 3 percent with analysts citing disappointing earnings and the departure of chief executive Anders Runevad, announced after market close on Tuesday.

Runevad will step down in August and be replaced by Henrik Andersen, CEO of coatings company Hempel and already a board member at the Danish wind turbine maker, in what Vestas said was in keeping with the company’s long-term succession planning.

The outgoing CEO is part of a Swedish trio - along with Chairman Bert Nordberg and finance chief Fredriksson - that has turned Vestas around and cut costs to lift the company’s operating margin to industry-leading levels.

Shares in Vestas, which bounced back from the brink of bankruptcy in 2012, are up around 450 percent since Runevad took the helm in 2013.

“We were not expecting a change of guard at Vestas and are somewhat surprised with the announcement as we expected Mr Runevad to stay until the transition to competitive auction is fully over,” J.P. Morgan analysts wrote in a note.

Vestas still expects revenue of between 10.75 billion euros ($12.2 billion) and 12.25 billion euros and an EBIT margin before special items of 8-10 percent this year. In the quarter its EBIt margin fell to 2.5 percent from 7.4 percent a year ago.

Reporting by Stine Jacobsen; Editing by Jacob Gronholt-Pedersen and Alexandra Hudson

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