Vestas sees red as Covid-19 hits balance sheet

The Covid-19 crisis made little impact on new installation work on Vestas-supplied projects in Q1 2020, but the challenges caused by the pandemic saw profits slip into losses.

Deliveries grew in Q1, but Vestas felt the Covid-19 impact on its profit margins (pic: Tilt Renewables)
Deliveries grew in Q1, but Vestas felt the Covid-19 impact on its profit margins (pic: Tilt Renewables)

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Revenue at the world’s leading turbine-maker actually increased in the period to €2.2 billion from €1.7 billion a year ago. This was supported by a 10% growth in turbine orders to 3,311MW and deliveries were up in all regions.

Q1 2020Q1 2019
Revenue€2,235 million€1,730 million
Operating profit (Ebit)- €112 million€43 million

However, with the current global issues affecting nearly all aspects of business, Vestas was forced to alter its own projections.

In late-April, the Danish firm announced plans to lay off approximately 400 staff and end production of its V138-3MW turbine to reduce costs during the period of uncertainty. It also suspended its guidance for the year due to the “poor visibility”.

These changes contributed to €58 million of special items on its balance sheet this quarter.

Vestas' executive management team has agreed to a 10% pay cut until the end of 2020.

Further afield, while deliveries increased year on year, the company suffered from lower project margins as a result of “logistical challenges and supply chain bottlenecks”. Additionally, the commissioning of delayed projects from 2019 and other Covid-19 outlays resulted in “increased cost levels”.

“Furthermore, the first quarter of 2020 reflected a negative impact from a higher level of warranty provisions made,” the company said in its interim financial report.

Vestas has therefore reported an operating loss (Ebit) after special items of €112 million in the quarter, down from an Ebit of €43 million in the same period of 2019.

The company made an overall loss of €80 million, down from €25 million profit in 2019.

“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,” said Vestas CEO Henrik Andersen.

“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.

“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 in restarting the global economy,” Andersen added.

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