Vestas Reports Operating Loss for Q1 2020 Despite Strong Sales

Vestas has issued its interim financial report for Q1 2020, reporting increased order intake and a booming order backlog amid an operating loss of EUR 54 mn

Global wind turbine manufacturer Vestas has issued its interim financial report for the first quarter (Q1) of 2020. The firm has reported that its revenue increased compared to the same quarter 2019, with increased order intake and combined order backlog at an all-time high level. However, due to uncertainty around the full impact from COVID-19 the firm has maintained its suspension of full-year guidance which was announced in April.

In the first quarter of 2020, Vestas generated revenue of EUR 2,235 million – an increase of 29 percent compared to the year-earlier period. EBIT before special items decreased by EUR 97 million, resulting in an operating loss of EUR 54 million. This resulted in an EBIT margin before special items of -2.4 percent, compared to 2.5 percent in the first quarter of 2019. Furthermore, free cash flow amounted to EUR (919) million compared to EUR (876) million in the first quarter of 2019.

The quarterly intake of firm and unconditional wind turbine orders amounted to 3,311 MW. The value of the wind turbine order backlog was EUR 15.9 billion on March 31, 2020. In addition to the wind turbine order backlog, at the end of March 2020, the firm had service agreements with expected contractual future revenue of EUR 18.2 billion. Thus, the value of the combined backlog of wind turbine orders and service agreements stood at EUR 34.1 billion – an increase of EUR 5.8 billion compared to the year-earlier period.

Group President & CEO Henrik Andersen said “In the first quarter of 2020, the global demand for wind energy remained strong in spite of the COVID-19 pandemic’s continuing impact on societies and operations across all continents. In this environment, Vestas delivered increased revenue and order intake year on year, continued strong Service performance, and a record-high order backlog of more than EUR 34 billion that provides us with stability in the current period of high uncertainty.

“In line with our expectations, our EBIT margin in the first quarter was negatively impacted by the delivery of low-margin projects, while we also incurred increased execution costs from logistical challenges and supply chain bottlenecks, which were further amplified by the pandemic. Across the company, we have done well to ensure business continuity during the pandemic, but the uncertainty around the full-year impact prevails, and our guidance, therefore, remains suspended. As the global pandemic and economic crisis move into their next phase, Vestas continues to ensure business continuity and that renewables become a key part of restarting the global economy.”

The continuing uncertainty as regards the full impact of COVID-19 makes the firm maintain the suspension of the 2020 guidance.

According to Vestas’ current judgment, however, meeting the initial guidance on revenue and EBIT margin before special items are still possible. Further, with the current visibility for the rest of the year, Vestas assesses the revenue growth and EBIT margin before special items for a full year in Service to be able to meet the initial expectations of approximately 7 percent and approximately 25 percent, respectively. Additionally, as the focus on cost savings continues, total investments are currently assessed to be below EUR 700 million.

In April, the firm had revealed that the spread of the virus globally and the national measures implemented to contain it have eventually, however, caused disruptions to its manufacturing, supply chain, and installations. On the annual guidance, it had stated that from the limited impact on this quarter seen in isolation, achieving the outlook for 2020 is still realistic. However, there is no longer adequate visibility for the rest of the year. Hence, the company is at the moment not able to confidently give guidance on its full-year performance.