Vestas Q2 profits fall amid rising costs

Vestas' earnings and net profit were lower in the second quarter of the year as rising tariffs, raw material prices, and transport costs hit the manufacturer's gross margin.

Vestas received firm and unconditional wind turbine orders of 5,696MW in Q2
Vestas received firm and unconditional wind turbine orders of 5,696MW in Q2

The Danish company explained that a "back-end loaded activity profile" in its Power Solutions unit reduced its profitability in Q2 2019.

It posted a net profit of €90 million for the period, down 51% from a year ago.

Earnings before interest and taxation (Ebit) also tumbled 51% to €128 million, and its Ebit margin fell 5.5 percentage points to 6%.

Revenue was down 6% to €2.12 billion, and its gross margin fell 4.2 percentage points to 14.2%.

New CEO Henrik Andersen explained that while prices had remained stable — at about €750,000/MW — "further increases in tariffs, raw material prices and transport costs, continue to increase execution costs", forcing down the manufacturer’s margin.

Andersen added the company expects "high activity levels" in 2020, and an "extraordinarily busy" second half of 2019.

Vestas received firm and unconditional wind turbine orders of 5,696MW in Q2 — a 49% increase year on year.

The US, Brazil and Finland were the main contributors to its order intake, Vestas added.

By the end of the quarter, Vestas’ order backlog was worth €15.9 billion and its service backlog €15.6 billion. Together, its combined order backlog grew 37% year on year to an all-time high of €31.5 billion.

In its Q2 financial report, Vestas narrowed its guidance for 2019 revenue to €11-12.25 billion — compared to the €10.75-12.25 billion range forecast in Q1.

It also expects to invest about €800 million this year, the manufacturer added.


Meanwhile, revenue and profit from its offshore joint venture with Mitsubishi Heavy Industries, MHI Vestas, increased.

MHI Vestas’ revenue of €534 million reflected more than a 19-fold increase from a year ago, while its €22 million net profit was up from a €27 million loss in Q2 2018.

The increase was driven by deliveries for Vattenfall’s 406MW Horns Rev 3 and Eneco, Elicio and the Mitsubishi Corporation’s 370MW Norther wind farms, the manufacturer added.

Higher activity level for its V164 turbine improved the JV’s profitability, it added.

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