Vestas' earnings squeezed in 'fierce' market

DENMARK: Vestas posted reduced revenues and profits amid "fierce competition" in the wind power industry.

Turbine sales were up but Vestas' revenues dipped in 2017 reflecting 'fierce competition' in global markets
Turbine sales were up but Vestas' revenues dipped in 2017 reflecting 'fierce competition' in global markets

The world’s largest turbine manufacturer’s revenue for the year was €9.95 billion ($12.31 billion), down 2.8% from €10.23 billion the previous year.

Gross profit fell from €2.12 billion in 2016 to €1.96 billion last year, while operating profit (EBITDA) was €1.65 billion, down 9.6% from €1.82 billion in 2016.

The company ended the year with a free cash flow of €1.21 billion, which was down from €1.36 billion the previous year.

Vestas described its revenue, earnings and free cash flow as being at "a healthy level, despite highly competitive markets".

CEO Anders Runevad, meanwhile, added that the reductions were due to "fierce competition, price pressure and the continued maturity" of the sector, and hailed Vestas’ "strong performance" in 2017.

The Danish company’s order intake increased from 10,494MW in 2016 to 11,716MW last year, but this generated a smaller amount of revenue — €8.9 billion in 2017 compared to €9.5 billion the previous year.

Its service order backlog, however, increased by 11.6% year-on-year, rising from €10.7 billion to €12.1 billion. The company said it expects earnings from its service division to grow even further in 2018.

Vestas’s EBIT margin for the year was 12.4%, down from 13.9% in 2016.

Runevad added: "2017 was a year that saw fierce competition, price pressure and the continued maturity of the wind energy sector.

"In this environment, Vestas’ 2017 performance was strong, as we once again led the industry on profit margins and produced solid revenue, free cash flow, record order intake, and growing and profitable service business.

"We demonstrated that even in such challenging conditions, we can control costs and use our global presence and technology leadership to remain the industry leader."

For 2018, Vestas expects revenue of €10-11 billion, and to achieve an EBIT margin of 9-11%.

In an interview with Windpower Monthly regarding the results, Vestas’ senior vice president for communication Morten Dyrholm added:

  • A "rapid move towards auctions" was creating markets in which subsidies were being phased out.
  • To be successful in auction-based markets, manufacturers need to ensure they achieve the lowest cost of energy and highest energy production levels.
  • The company believes Europe faces a "stagnation period", but "not a massive slowdown".
  • Vestas predicts emerging markets, such as China and India, will see the highest rates of growth over the next year or so.
  • Auctions provided greater visibility for developers and provided a "clear path towards a fully renewables-based electricity system".
  • In the long-term, the transition to auctions-based systems would be a "really positive thing" for the wind industry".
  • Manufacturers also need to consider the wider energy system: hybrid projects, and increased digitisation, for example, are both areas Vestas intends to explore further. "These should be focuses for our industry." Vestas would unveil projects within these areas in 2018.
  • "Services showed very healthy growth for 2017, and that is something we will continue to focus on."
  • Increased competition had forced down the price of turbines, meaning revenue from turbine sales was "not corresponding" with the growth in Vestas’ sales capacity.

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