Vacon reduces its guidance for 2011 and now estimates that revenues in 2011 will increase by 10-15% and the operating profit margin will be about 6-7%. Earnings per share are expected to decline from 2010.
Previously Vacon estimated that revenues in 2011 would increase by 10-20% and the operating profit margin would rise from 2010. Earnings per share were expected to improve considerably from 2010.
The weakening of Vacon's earnings in 2011 is influenced by two risks, and changes in the AC drive market. Firstly, one of Vacon's solar energy clients is still arranging financing to pay a major debt to Vacon that is past its due date. Vacon will continue actions to secure its receivables but prepares for possible credit losses. Secondly, legal proceedings are in progress at the subsidiary in China relating to the company's customs clearance procedures. Vacon has made in total a MEUR 10 provision related to these risks. The company has informed of the above mentioned risks already earlier in its interim reports.
Additionally, reasons for revising the guidance are the weak order intake of renewable energy products during the second half of the year and the weakening of the demand for its motor control products during the fourth quarter.
"The demand for wind power products in China started to decline already in June this year, and, for the time being, it has not shown any sign of recovery. Additionally, during the fourth quarter, the demand for motor control products has weakened. The reason for the weakened demand is in the prolongation and escalation of the European finance crisis. At the moment, it is particularly difficult to estimate how the markets will develop," Vesa Laisi, Vacon's President and CEO concludes.
Vacon will initiate measures to save cost and to secure profitability in its global operations. Vacon maintains its long-term financial targets according to which the company's goal is to achieve revenues of EUR 500 million in 2014. Its long-term profitability target is an operating profit of 14% and a return on equity of more than 30%.
Vacon Plc