Vestas six-month revenues fall but has record backlog

DENMARK: In line with its rivals, Vestas has seen revenues fall in H1 2018 as price pressures continue to hit the industry.

Vestas saw revenues fall 3.5% year-on-year across the first six months of 2018
Vestas saw revenues fall 3.5% year-on-year across the first six months of 2018

Revenue for the first six months of the year was €3.95 billion, down 3.5% from €4.1 billion in the same period of 2017.

The result was primarily the result of a slower Q1, as second quarter revenues actually increased slightly year-on-year from €2.21 billion to €2.26 billion in 2018.

The Danish firm is bullish on the next year, however, with an order intake of 3.8GW in Q2, which, following the 1,629MW in Q1, means Vestas’ order backlog is 13.5GW – worth a company record €10.2 billion.

Despite the increase in orders, Vestas has seen a continued decline in the average selling price (ASP) for turbines in Q2.

ASP fell to €710,000/MW in Q2, down from €810,000/MW a year ago and €730,000/MW in Q1 2018.

Rival Siemens Gamesa Renewable Energy also witnessed a fall in onshore turbine ASP. It noted an average price of €700,000/MW in the period April to June 2018, down from €740,000/MW in the previous quarter.

"In the second quarter, price per MW stabilised around the levels in recent quarters, but continues to impact short-term results," said CEO Anders Runevad.

As a result of the results, Vestas adjusted its guidance for 2018. The expected revenue range was narrowed from €10-11bn to €10-10.5 billion, while its Ebit margin was also changed from 9-11% to 9.5-10.5%.

Ebit margin for H1 was 9.7%. Ebit itself fell from €490 million to €385 million in the first six months of the year.

Following the results announcement, Vestas launched a €200 million share buyback programme, which will run until the end of the year

Trade tariffs

Vestas added it was monitoring the tariff situation in the US closely.

The US’s protectionist president indicated a desire to start a trade war with many major economies, particularly on steel imports which has piqued the interest of the wind industry.

Runevad said it was a "fluid environment" and changing regularly, but added it was "creating some uncertainty". Vestas is considering its options to mitigate any changes by "utilising our global footprint and full value chain".

In a call with analysts, Runevad said the changes to tariffs in the US could increase turbine production costs by "up to 1.5%" for the group as a whole.

Runevad was keen to stress that this was a loose prediction of what might happen if tariffs are introduced.

Across the Americas region, Vestas saw deliveries fall 41% in the first six months of the year.

However, order intake doubled, with continued high level of activity in the US and Argentina, as well as the addition of orders in Mexico, Bolivia and Panama.

SGRE also noted the impact of tariff changes in its results presentation last month, and said it was "monitoring the situation and analysing the impact on product costs and on supply chain decisions". 

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