Vestas swung to a €5 million loss in the second quarter of the year, with its earnings hampered by blade repair costs, but the company reintroduced its full-year guidance as visibility has improved.
Its €5 million loss was down from a €90 million profit from one year earlier, and a €85 million loss for first half of 2020 is an even starker contrast to the €115 million profit in the first half of 2019.
The Danish manufacturer’s Ebit margin before special items was squeezed to 1% in Q2 2020 – down five percentage points from one year earlier – as its earnings fell 73% year on year to €34 million.
This was despite revenue increasing 67% to €3.5 billion in Q2 and was primarily due to €175 million of extraordinary warranty provisions for the “specific repair and upgrade of already-installed blades”, the company explained.
CEO Henrik Andersen remained tight-lipped on the issue in a conference call with reporters,but described the issue as being related to "high intensity lightning". Meanwhile the manufacturer stated the provisions "are not related to current or future production but cover a specific repair and upgrade of a confined, albeit considerable number of blades that are already installed" in its Q2 report.
A spokesman for the manufacturer added that the issue relates to a “confined number of sites across specific parts of the world, experiencing high-intensity lightning”.
Without these provisions, Vestas’ underlying margin would have been 5.9%, which Henrik Andersen said “showcases good execution that gives us confidence to deliver improving results throughout the remainder of the year.
Vestas reintroduced its full-year guidance with an unchanged outlook for revenue of €14-15 billion and an updated the Ebit margin before special items of 5-7% – down from 7-9% previously.
Vestas’ free cash flow before acquisitions and financial investments of negative €78 million in Q2 2020 was on par with the negative €75 million from one year ago. Similarly, its free cash flow for the first half of 2020 of negative €997 million was on a par with the negative €951 million from H1 2019, and was mainly due to the build-up of inventory for deliveries during the rest of 2020.
Vestas recorded firm and unconditional orders of 4,148MW in the second quarter of 2020, down 27% from the same period in 2019.
Meanwhile, its wind turbine order backlog grew 1.8% to €16.2 billion by the end of June, and its service order backlog grew 21% to €18.9 billion.
The manufacturer expects its total investments for 2020 to be below €700 million, the figure it had initially forecast for spending this year.