Russia write-downs and offshore wind plunge Vestas into massive loss
Danish sector giant changes financial guidance and now expects likely full-year operational loss
Disrupted supply chains in the wake of the Covid-19 pandemic, as well as one-offs such as write-downs related to Russia’s invasion of Ukraine have led to a massively widened loss at global wind power giant Vestas.
The company due to the losses and a highly uncertain outlook for the remainder of the year also lowered its 2022 guidance, a move not taken lightly by investors. Vestas shares fell by 5.39% to DKr172.96 ($24.46) per share in Monday morning trading in Copenhagen.
Revenue rose by 26.7% to €2.49bn ($2.62bn) in the first quarter of this year compared to the year-ago period, driven by service and onshore wind installations.
But earnings before interest, taxes, amortisation and depreciation (Ebitda) turned into a loss of €585m, compared to a positive Ebitda of €128m during the first quarter of 2021. The OEM’s net loss widened to €765m in the period, from €64m a year earlier.
Group chief executive Henrik Andersen pointed to the solid increase in revenue, and said Vestas managed to increase its average selling price to €1.01 per megawatt (from €0.86/MW in Q4), but acknowledged that “profitability was heavily impacted by highly disrupted supply chains and one-offs.”
“In the quarter, we made one-time write-downs related to the Russian invasion of Ukraine and legacy offshore activities.”
Impairments and provisions related to the V164/V174 offshore wind platform cost Vestas another €176m.
“To address the current business environment, we also made a strategic re-prioritisation of select markets and plans to adjust our manufacturing footprint, which together with the write-downs on Russia, Ukraine and Offshore impacted our results negatively,” Andersen said.
Based on these decisions and the uncertain business environment, Vestas has also adjusted its financial guidance for the full year.
The manufacturer now expects full-year 2022 revenue of €14.5-16.0bn, compared to a range of €15.0-16.5bn seen earlier. Vestas expects to achieve an earnings before interest and taxes (Ebit) margin before special items of -5% to 0%, compared to 0-4% expected previously. The Ebit margin is a measure of operational profitability.
"The world is a different place today than what it was before," chief financial officer Hans Martin Smith said at an earnings conference call, commenting on the change in guidance and worsened outlook.
"There is a lot of uncertainty, and there is a high degree of disruption seen right now linked to China, linked to ripple effects from the Chinese lock-downs, and linked also to the Russia-Ukraine situation, which continues to impact trade markets and all kinds of raw material markets."
Despite the deteriorated outlook for the full year, Andersen stressed that the growing energy crisis has also led to stronger political support for renewables to enhance energy independence and keep energy prices low.
“We are strengthening our foundation to support governments and customers achieve these goals.”