Vestas Posts Mixed Results Despite Increased Intake

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Danish wind turbine manufacturer Vestas posted a mixed financial position against 2017 levels thanks in part to strong demand increasing the company’s order intake to 14.2 gigawatts (GW) for the year.

Vestas HQ in Aarhus, DenmarkRevenue for Vestas’ full-year 2018 amounted to €10.1 billion, in line with the company’s expectations of revenue in the range of €10 to €10.5 billion and one of the only financial markers which saw any growth in 2018, up 2% from €9.95 billion in 2017. The company’s operating profit (EBIT) before special items amounted to €959 million in 2018, down from €1,230 million in 2017 and equivalent to an EBIT margin before special items of 9.5%, which was within the company’s guidance range. Gross profit was also down for the year.

However, despite a lackluster financial performance, the company saw the results of strong wind energy demand and increased its order intake from 11,176 megawatts (MW) in 2017 to 14,214 MW in 2018 with the value of the company’s service order backlog increasing from €2.2 billion to €14.3 billion.

“In 2018, wind energy manifested its position as the cheapest source of electricity in many parts of the world, creating a tremendous long-term growth outlook for the industry and a highly competitive environment short-term,” said Anders Runevad, Group President & CEO. “As the industry continued to mature and became mainstream, Vestas met its 2018 guidance and clearly led the industry on all key parameters, including highest ever order intake of 14.2 GW across 43 countries, all-time high order backlog of more than EUR 26bn, and record-high service revenue and margins.

“Together with the continued underlying stabilisation in pricing and our strong focus on efficiency and cost management, we sustained and strengthened the foundation that enables us to execute a very busy 2019 as well as develop the sustainable energy solutions of the future.”

Looking forward, Vestas expects revenue for 2019 to be in the range of €10.75 billion to €12.25 billion — including service revenue, which the company expects to grow by approximately 10% this year. Total investments for the year are expected to amount to approximately €700 million and Vestas expects to achieve an EBIT margin before special items of between 8% to 10%, with a service EBIT margin of approximately 24%.

“Vestas’ surging turbine order intake and robust service margins lend confidence to our view that a record top-line performance is possible in 2019, even in a price-constrained operating environment,” said James Evans from Bloomberg Intelligence who spoke to me via email. “Competitive auctions continued to squeeze the company in 4Q, with gross margin below expectations, at less than 15%. However, a strong order intake of 5.5 gigawatts will support operational leverage, in our view. A record order book will allow Vestas to select profitable opportunities and keep stabilizing prices.

“New full-year sales guidance of €10.75-€12.25 billion reflects significant activity as the US tax credit phase-out continues, yet an 8-10% EBIT margin range demonstrates the need to optimize costs, and the new standardized EnVentus product platform can provide support.”

Vestas also provided news about its joint venture MHI Vestas Offshore Wind (run in conjunction with Mitsubishi Heavy Industries), which recorded its first-ever annual profit of €26 million with revenue of €1,112 million, as it secured order intake of 3,180 MW for the year, bringing the company’s order backlog up to 3,838 MW.

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Joshua S Hill

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