Supply-chain disruption and lockdowns trigger OEM losses

As lockdowns and travel restrictions forced factory closures and paralysed the supply chain, the lack of visibility of the ongoing Covid-19 pandemic caused Vestas, Siemens Gamesa Renewable Energy (SGRE), and Nordex to suspend their full-year guidance.

Grounded… Problems getting project teams to sites amid travel restrictions contributed to delays (pic: Vestas/Frank Boutrup Schmidt)
Grounded… Problems getting project teams to sites amid travel restrictions contributed to delays (pic: Vestas/Frank Boutrup Schmidt)

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Q1 results showed the full effect of the global health crisis, with little grounds for optimism for the rest of the year.

SGRE sees credit rating downgraded

SGRE posted a €165 million net loss in Q2 of its financial year, due to the ongoing impact of the Covid-19 pandemic, down from a €49 million profit in the same period a year earlier.

Its revenue fell by 8% year on year to €2.2 billion due to lower sales of turbines, while reported Ebit came in at a loss of €118 million, down from a €90 million profit a year earlier.

The manufacturer suffered supply-chain disruptions due to factory closures, while difficulties in moving project installation teams caused delays to project executions, CEO Markus Tacke said.

The ongoing pandemic intensified challenges for its onshore business in northern Europe and India between January and March 2020.

SGRE rerouted supply chains, optimised remote monitoring to guarantee service operations, and extended periods of maintenance for teams working at sea to shield its employees and operations from the pandemic.

The Q2 loss contributed to a €339 million net loss in the first half of SGRE’s financial year, which runs from October to September. Tacke said the impact of the pandemic will last for the rest of the year.

The OEM believes it is well-guarded against the impacts of the virus, though, as it has credit lines worth €4 billion, of which it said it had drawn €1.1 billion. The company’s order book rose to €28.6 billion by the end of Q2 — up 21% from a year earlier. It reduced net debt to €295 million during the quarter — from €724 million — having paid for Senvion’s service assets.

However, financial-service company Fitch Ratings downgraded SGRE’s credit outlook from "stable" to "negative" in mid-May due to concerns over the virus’ impact.

A negative outlook indicates that SGRE’s credit rating — currently at BBB, suggesting it can repay issued debt — is likely to worsen over a one- or two-year period.

Vestas sees red despite rise in profit

Despite an increase in Q1 in revenue to €2.2 billion from €1.7 billion a year ago and a 10% rise in turbine orders to 3,311MW, the challenges caused by the pandemic pushed Vestas into the red.

With the current global issues affecting nearly all aspects of business, the world’s leading turbine maker was forced to alter its own projections.

In late April, Vestas set out plans to lay off around 400 staff and end production of its V138-3MW turbine to cut 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 in Q1. Vestas’ executive management team has agreed to a 10% pay cut until the end of 2020.

While global deliveries increased year on year, the firm suffered from lower project margins due to "logistical challenges and supply-chain bottlenecks". Costs were also pushed up further by commissioning of delayed projects from 2019 and "a negative impact from a higher level of warranty provisions made", the company said.

Vestas reported an operating loss (Ebit) after special items of €112 million in the quarter, down from an €43 million profit in the same period of 2019. The company made an overall loss of €80 million, down from €25 million profit a year earlier.

Loss widens for GE

The supply chain disruption also dragged down GE Renewable Energy in Q1 as it remains in the red.

Despite a 26% increase in revenue, driven by turbine deliveries and repowering, it suffered a loss of $302 million, 61% greater than the same period in 2019.

Orders in the business unit were down 13% to $3 billion in the first quarter of 2020, although international orders were up 11%, indicating GE’s reliance on the US market is falling. The US OEM recorded orders from developers in Turkey, Sweden, India, and Vietnam in the period.

It also produced the first turbine from its Cypress platform at a factory in China ahead of being shipped to a site in Australia.

Nordex stays in the black

Nordex bucked the trend by increasing both its Q1 sales and operating profit for 2020: sales of €964.6 million were double the total for Q1 2019, while Ebitda nearly quadrupled to €13.1 million from €3.3 million. Its Ebitda margin rose 0.6 percentage points year on year to 1.4%.

However, the German firm joined Vestas and SGRE in scrapping financial guidance for 2020.

It had expected consolidated sales of €4.2-4.8 billion and Ebitda of €160-240 million, with most of the activity expected to take place in the second half of the year.

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