'Outlook hampered' | Vestas 2021 profit down on inflation and installation delays

Revenues reached record levels but operating profit declined last year at Vestas, pushed lower by cost inflation and delays in the installation of some onshore projects.

The Danish wind turbine giant on Wednesday issued cautious profitability guidance as it expects the global business environment for wind to remain volatile this year.

Revenue according to preliminary figures rose to €15.6bn ($17.6bn) in 2021, up from €14.8bn in 2020 and at the lower end of the company’s guidance of €15.5-16.5bn, while earnings before interest and taxes (Ebit) before special items fell to €461m last year, from €750m a year earlier.

That equalled an Ebit margin (pre-tax measure of profitability) of 3.0%, lower than the ‘around’ 4% expected in the company’s latest guidance for 2021.

“Supply chain instability and rising energy prices as well as accelerated cost inflation from raw materials, transport, and turbine components, … , continued to amplify costs throughout the year, which severely impacted visibility and profitability,” chief executive Henrik Andersen said.

“We remain focused on executing our strategy and driving the energy transition forward with our customers but expect the current challenging business environment to continue throughout 2022, which hampers our outlook for 2022.”

To protect its profitability and address the external cost inflation, Vestas admitted it is increasing prices on wind turbines amid prolonged negotiations with customers.

The average selling price increased to €0.83m per megawatt for 2021, and €0.86m/MW in the fourth quarter of last year, the company acknowledged. That pushed down its order intake to 13.9GW last year with a value of €11.6bn, down from 17.3GW with a value of €12.7bn a year earlier.

The supply chain instability caused by the Covid-19 pandemic and the resulting higher transportation and logistics costs, are expected to continue throughout 2022, Vestas said in its guidance. That likely will be coupled with continued cost inflation for raw materials, wind turbine components and energy prices – all impacting expectations for this year.

The company nevertheless still sees 2022 revenues of €15.0-16.5bn, but now expects an Ebit margin before special items of only 0-4%, and total investments of about €1bn.