Vestas

Table of Contents

1. Introduction and Problem Statement 2

1.1 Introduction 2

1.2 Purpose and problem statement 2

1.3 Methodology and delimitations 3

2. Analysis 3

2.1 The DCF model 3

2.2 What are the key financial value drivers of financial value creation? 4

2.3 What are the scenarios for the value drivers? 5

2.3.1 Revenue growth 5

2.3.2 EBITDA margin 6

2.3.3 CAPEX 6

2.3.4 Net working capital (NWC) 7

2.3.5 Tax rate 7

2.3.6 WACC 7

2.4 Which performance targets should be set? 8

3.0 Conclusion 9

1. Introduction and Problem Statement

1.1 Introduction

Vestas Wind Systems A/S develops, manufactures, and markets wind turbines that generate electricity. The Company also installs the turbines and offers follow-up and maintenance services of the installations. Vestas produces the wind turbines and its components through subsidiaries and associated companies in many countries, and operates a worldwide sales and service network. Vestas is the world’s number 1 provider of wind turbines. Its global market share fell from 22.8% in 2007 to 12.5% in 2011.

Vestas net profit in 2011 was minus 166 Million Euros. Revenue decreased 15.6% versus 2010. The share price declined 71,8% from 186.4 at the start of 2011 to 52.5 at 4. April 2012. In 2011, Vestas downgraded its profit guidance two times and actual profit for the year still missed the latest guidance.

From Company Statement in Annual Report for 2011:

“Thank you to our owners. Everyone at Vestas knows that the shareholders confidence is pivotal to our future”

Understandable if shareholders would be very sceptical regarding their confidence to Vestas with the share price development in recent years.

1.2 Purpose and problem statement

A company’s value is generally driven by its ability to earn a healthy return on invested capital (ROIC) and by its ability to grow its revenue. Healthy rates of return and revenue growth result in high cash flows, the ultimate source of value.

The...