Due to continued distribution network instability and price inflation in the 3rd quarter of the year, wind industry giant Vestas has decreased its profitability estimates for 2022.
Despite raising the average retail price of its wind energy to €1 million/MW, the Danish manufacturer also reported a loss for the period.
In contrast to a €318 million profit a year earlier, it reported an operational loss (Ebit minus special items) of €127 million for the 3rd quarter. Additionally, it reported a third-quarter significant loss of €147 million after making a profit of €116 million the year prior.
The Q3 deficit was attributed by CEO Henrik Andersen on geopolitical uncertainties, rising inflation, and project delays that increased execution costs. He did, however, point out that Vestas’ service division had been stable during the period and that offshore wind had continued to gain pace, with Vestas winning preferred supplier status in the US, the UK, and Poland.
The manufacturer of turbines revised downward its financial prediction, now anticipating an operational loss for 2022 and an Ebit margin before exceptional items of roughly -5% as opposed to the -5% to 0 level it had earlier predicted.
“The energy crisis incentivizes a faster shift to an energy system built on renewables, and tangible result contracts like the US’s Inflation Reduction Act enhance the fundamental demand for renewable power solutions, but proposed project and order intake remain hampered by energy market uncertainties and red tape,” Andersen continued.
The third-quarter loss and projection revision from Vestas come amid ongoing supply chain issues and cost inflation pressures for manufacturers of wind turbines.
The third-quarter sales for the Danish powerhouse was €3.9 billion, a 29% decrease from the same period last year. According to CFO Hans Martin Smith, this decline in revenue was caused by fewer offshore installations, slower US activity, and “general delays.”
Between 1 July and 30 September, it received orders for roughly 1.9GW of turbines, providing the company with an order queue worth €18.1 billion at the conclusion of the time frame.
Vestas CEO Andersen remarked that in Q3 the average cost of its wind turbines increased to €1.07 million/MW, with the company charging €1.06 million/MW exclusively for onshore turbines. Vestas’ average selling cost per megawatt (MW) in the third quarter of 2021 was €810,000. According to CFO Smith, as previously announced price hikes for Vestas’ turbines went into effect, the company’s margin improved throughout the year.
As of September 30, 2022, Vestas additionally has service agreements with estimated contractual future income of €32.8 billion. The total backlog of orders, at €50.9 billion, is up 7.6% over last year.
However, Vestas revised its financial outlook for 2022 due to continued inflation, supply chain instability, and project delivery delays that increased expenses.
Vestas revised its prediction for sales from €14.5-16.0 billion to go along with its revised outlook for profit, now projecting an operating loss rather than the previous €14.5-16.0 billion.
Additionally, it now anticipates investing a total of around 850 million euros this year rather than the earlier expectation of about 1 billion.
Due to good performance and more repowering activities, the business now anticipates stronger revenue from service contracts – now projecting increase of at least 20%, versus 10% as previously announced. Andersen applauded Vestas’ service unit for delivering “stability” in the third quarter. It did, however, reduce the estimated Ebit profit before special items for service about 1%, to around 22%.
When something came to financial projections, Vestas conceded that there was “more uncertainty than usual.”