Vestas'Q3 earnings woed by supply chain hurdles, revenues grow

Danish wind turbine manufacturer Vestas Wind Systems A/S (CPH:VWS) achieved record-high revenues of EUR 5.54 billion (EUR 6.42bn) in the third quarter but faced supply chain constraints that impacted its operating profit and margin, its financial report showed on Wednesday.

As a result of the supply chain hurdles and accelerated cost inflation caused by the COVID-19 pandemic, the manufacturer lowered its full-year earnings before interest and taxes (EBIT) margin before special items to around 4%, after trimming it in August to 5-7% from 6-8%.

Revenues are still seen at EUR 15.5 billion-16.5 billion and the investment forecast remains unchanged, at below EUR 1 billion. The company noted it will make warranty provisions of higher than 3% of revenue due to the increased costs.

Vestas closed the third quarter with EBIT before special items of EUR 325 million, falling from EUR 412 million a year before, and EBIT margin before special items that decreased from 8.6% to 5.9% due to inflation and high warranty provisions. “The quarter was thus characterised by supply chain instability and rising energy prices as well as accelerated cost inflation from raw materials, transport, and turbine components, which severely impacted profitability and limits visibility,” commented CEO Henrik Andersen.

Revenues improved by 16% on the year thanks to the incorporation of the offshore business and higher service revenue.

Further details about the Danish firm’s financial performance are available in the table below.

Wind turbine deliveries to customers in the quarter amounted to 6,020 MW, up from 5,991 MW a year ago. The increase was mainly fuelled by deliveries for offshore wind projects in the UK.

Vestas’ quarterly intake of firm and unconditional wind turbine orders amounted to 3,727 MW and at end-September, the company had a wind turbine order backlog with a combined value of EUR 19.3 billion. Additionally, it had service agreements with expected contractual future revenue of EUR 28 billion as of the same date.

At the end of September, Vestas’ combined backlog of wind turbine orders and service agreements stood at EUR 47.3 billion, up by EUR 13.4 billion from end-September 2020.

Looking ahead, CEO Andersen said: “With supply chain instability and high component, material and transport costs expected to last throughout 2022 as well as the growing climate and energy crises making our solutions ever more important, our full focus is to mitigate impact from external factors to protect profitability and execute on our strategy without compromising on safety or quality.”

(EUR 1.0 = USD 1.159)

Choose your newsletter by Renewables Now. Join for free!