Vestas Faces Suit From Former Finance Chief

Discussion in 'General Discussion' started by Quigley_Sharps, Oct 3, 2012.

  1. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member


    COPENHAGEN—Vestas Wind Systems A/S, VWS.KO -5.16% which announced new restructuring measures Wednesday, faces threats of a lawsuit from its former chief financial officer over allegations that he conducted unauthorized transactions during his tenure that led to millions of euros in potential losses.
    Henrik Norremark, the former CFO, was let go from the Danish wind-turbine manufacturer earlier this year after it issued two profit warnings that severely hurt Vestas's share price. The company has declined in value as it became increasingly apparent that Vestas had outgrown demand and needed to slash capacity, costs and staff.
    Vestas Tuesday revealed it had canceled severance payments to Mr. Norremark after an investigation found he concluded two transactions with Indian companies in the fall of 2011. The deals—with a total volume of €18 million ($23.3 million)—took place without necessary authorization from the chief executive and supervisory board, it said.
    Mr. Norremark's attorney said his client rejects the allegations. The company said the allegations had nothing to do with Mr. Norremark's firing.
    The spat between Vestas and its former CFO comes as the world's largest manufacturer of wind turbines is in an increasingly tight financial situation. Deep losses are mounting as a wider industry downturn could be on the horizon. In a presentation at the company's capital-markets day Wednesday, current CFO Dag Andresen said Vestas will focus strictly on profitable projects going forward.
    In order to accomplish this, the company plans to initiate a deeper restructuring of the business to ensure a return to high-single-digit margin on earnings before interest and tax in the medium term. Mr. Andresen said the planned measures will help Vestas reach its full-year target of an EBIT margin of between 0% and 4% in 2012 and also ensure profitability in 2013.
    Vestas said in August it was in talks about forming a strategic partnership with Japan'sMitsubishi Heavy Industries Ltd. 7011.TO +0.88% as it looks for a partner to help finance the development of a seven-megawatt offshore wind turbine that could help the company maintain its status as the world's leading wind-turbine maker by sales.
    Vestas already announced plans earlier this year to cut costs by an annual €250 million, reduce staff by 3,700 people to 19,000, shutter unprofitable projects and look at ways to scale back production.
    For Vestas, the road to recovery has been difficult. In the first half of 2012, it posted a net loss of €170 million and reported cash outflows of €633 million.
    The profit warnings in late 2011 were caused mainly by stark budget overruns in the development of a new wind turbine and internal problems with the execution of orders. As a result of the problems, Vestas had dramatically lowered its full-year sales guidance and went from expecting a 7% profit margin to a break-even position.
    The profit warnings were followed by an management shakeup in which Mr. Norremark was named chief operating officer, while Chief Executive Ditlev Engel assumed the financial responsibility on an interim basis. Mr. Norremark was fired one month into his new role.
    Vestas said it has already lost €4 million on the Indian contracts that Mr. Norremark allegedly authorized without proper approval, and it has written down the entire value of the €18 million in contracts—although it will attempt to reverse €14 million of that. The write-downs will have no material influence on its full-year guidance, Vestas said.
    Vestas declined to specify the purpose or nature of the transactions, and Morten Albaek, the company's communications director, said the details of the transactions are of little relevance. "It's not about India, and it's not about the amount," he said. "Mr. Norremark has violated Vestas's rules and principles. We have stopped his severance deal because he has acted outside of his mandate as CFO, that is the decisive point."
    Morten Samuelsen, Mr. Norremark's lawyer, said on Wednesday his client is filing a lawsuit this week with the purpose of rehabilitating Mr. Norremark's reputation. He said both transactions in question were carried out while abiding by the rules of the company and under the supervision of appropriate parties.
    "My client vehemently rejects the allegations, which he finds insulting and deeply damaging," Mr. Samuelsen said. "He finds it incomprehensible that this case has been raised."
    Vestas is still in the process of investigating the nuances of the case and hasn't yet been able to determine whether there are grounds for legal claims against Mr. Norremark, Mr. Albaek said. Mr. Samuelsen said company officials, including Mr. Engel, the CEO, will be called upon to present the case in court.
    "The case will now have to take its course in the legal system. We believe the results of our investigation are so conclusive that we feel convinced we will be able to prove our case in a court of law," Mr. Albaek said.
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