German turbine manufacturer Senvion has started a “transformation programme as a matter of urgency” to tackle issues that have led to a downgrading of the company’s forecast for its 2018 results.
The programme follows a review by the management board and aims to “stabilise the company, eliminate inefficiencies and improve execution to tackle the problems that caused loss of revenues and profits”, Senvion said.
Yves Rannou, who took over as Senvion chief executive at the start of the year, said the company has taken action to “fix execution weaknesses both in terms of the company’s project management as well as strengthening of regional teams in order to recover the lost revenues and profits as quickly as possible”.
The company said on 19 February that it expected 2018 revenue of €1.45bn, down from a previous expectation of €1.6bn. The adjusted EBITDA margin for last year will now be 3%, as opposed to 5%, it added.
Senvion said: “The revision of the EBITDA guidance is mainly driven by loss of profits due to delayed revenues, provisions for cost overruns in logistics and liquidated damages due to the delays in installations experienced in 2018.”
It is taking action “throughout the installation chain with the clear target to recover lost revenues and profits in the new financial year”.
The transformation programme will focus on four main areas.
Senvion will re-focus on what it calls the most attractive markets, increasing activity in growth areas, such as India and Latin America.
The company plans to streamline its product portfolio and “increase modularisation to reduce costs”.
It aims to increase competitiveness by “saving measures through special efforts on localisation and sourcing improvements”.
Senvion will also strengthen financially in cooperation with lenders to “stabilise the company through the transition period”.
Rannou said: “We have a strong firm order book of almost €5bn, a great market position and excellent products which our customers like.
“But we made operational mistakes in a challenging market environment and now need to focus on execution and on strengthening our customer focus.”
The company added that initial conversations with customers and suppliers have been positive.
Talks will continue with its lenders to establish a sound financial basis for the transition period.
The company said it has access to guarantee facilities that allow it to continue to secure its performance.
In order to support the process, Senvion has commissioned a restructuring opinion in line with the S6 standard of the German Institute of Certified Accountants, which is expected to be available in the second quarter of 2019.
Senvion has also decided to postpone the release of its annual financial statements for the fiscal year 2018 which was originally scheduled for 14 March 2019.
The new publication date will be announced in due course.
Rannou added: “We have a clear roadmap to get the company back on track in the medium-term.
“Our business is fundamentally solid, and we can build on competitive products, a committed workforce, and an installed basis of 18GW that gives us a strong and profitable service business with reliable and sustainable revenue flows.”
The company said its majority shareholder Centerbridge will continue to provide support.
Centerbridge said: “We fully support CEO Yves Rannou and the Senvion management team as they continue to implement the ongoing transformation process.
“Senvion has a competitive portfolio of products and strongly growing service activities, a solid order book and highly experienced workforce.
“As the largest shareholder, we stand by Yves and the team to execute their plan to enhance project execution and emerge as a stronger and more profitable company after a successful transformation period. We will continue to support this transformation.”