Major OEMs facing huge losses as impact of Covid-19 pandemic hits hard

All four major western manufacturers recorded losses for the second quarter as the coronavirus outbreak continued to play havoc with the global economy and supply chains.

Nordex’s service sales rose 15% in the first half of 2020, but the firm’s net debt tripled in the period
Nordex’s service sales rose 15% in the first half of 2020, but the firm’s net debt tripled in the period

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Things were made worse for some by problems with hardware or markets that had already been slowing down before the outbreak.

Vestas

Vestas swung to a €5 million loss in the second quarter of the year, down from a €90 million profit from one year earlier, with its earnings hampered by blade repair costs.

It reported a €85 million loss for first half of 2020 — 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 — 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 firm explained.

CEO Henrik Andersen remained tight-lipped on the issue in a conference call with reporters, but said it was related to "high-intensity lightning". In its Q2 report, the OEM 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".

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 revenues of €14-15 billion, but updated the Ebit margin before special items of 5-7% — down from 7-9% previously. It had withdrawn its outlook for 2020 in April due to the "poor visibility" caused by the coronavirus pandemic.

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.

Siemens Gamesa

Siemens Gamesa Renewable Energy (SGRE) recorded net losses of €466 million in the third quarter of its financial year. It said the Covid-19 pandemic accounted for €93 million of the quarter’s losses. It also faced difficulties in executing projects in northern Europe and with market slowdowns in India and Mexico.

However, the company remained confident in its ability to recover due to its order backlog rising to a record €31.5 billion by the end of June, plus having strong liquidity with €4 billion in funding lines, from which it has drawn only €1.2 billion.

SGRE’s revenues in April to June fell 8% year on year to €2.4 billion. The manufacturer stated that its offshore and service units showed strong performance, and now accounted for the majority (78%) of its order backlog.

In June, SGRE replaced CEO Markus Tacke with former offshore chief Andreas Nauen.

Siemens Gamesa had withdrawn its financial guidance for its fiscal year — ending 30 September — due to uncertainty caused by the pandemic. But it has now stated that it expects full-year revenues of €9.5-10 billion — €200-250 million less than in previous guidance.

Nordex

"Major production stops" and site interruptions pushed up costs and drove Nordex to an operating loss of €70.8 million in the first half of the year, down from an operating profit of €17.1 million a year earlier.

This came despite the company’s sales more than doubling to €1.8 billion year on year — in line with installations nearly doubling to just under 2.3GW in 21 countries — while sales in its service segment rose 15.4% to €209.6 million.

Nordex received 2,532MW of turbine orders in the first half of the year, with a combined value of €1.8 billion. Europe accounted for 80% of this order intake and Latin America the other 20%.

Meanwhile, the firm’s net debt tripled to €241.4 million during the six-month period.

The German manufacturer said the impacts of the coronavirus pandemic had become "clearly noticeable" in the second quarter of the year, with "major production stops" and site interruptions causing heavy cost increases.

However, Nordex stated that it has a "strong financial structure for medium-term", having secured a €350 million government loan, refinanced payments due in April 2021, extended a €1.2 billion guarantee credit facility for three years, and agreed to sell its European development pipeline to RWE.

At the end of H1, the company had a total order book of €8.1 billion — up 6.5% year on year. Its project segment accounted for €5.4 billion — up 1.8% — of this, and its service segment for €2.7 billion — up 17.3%.

Nordex had scrapped its 2020 guidance due to the coronavirus pandemic in May, and in its Q2 earnings report reiterated that it can not assess the full-year impact of Covid-19.

GE Renewable Energy

With the pandemic hitting its supply chain and hindering project execution, GE Renewable Energy’s losses widened to $498 million in the first half of 2020.

The US conglomerate reported a $195 million loss for its renewable-energy segment in the second quarter of 2020 — down 6% from the same period a year earlier.

It also recorded a $498 million loss in the segment for the first half of the year — down 34% year on year.

This loss came as its order book and revenue decreased in the second quarter: orders fell 19% to just under $3 billion, while revenue dropped 3% to $3.5 billion.

But GE Renewable Energy’s first-half revenue rose 9% to $6.7 billion, while its orders in the first six months of 2020 fell 16% year on year to just over $6 billion.

The firm said its Q2 orders had shrunk due to slowing US onshore and grid orders during the pandemic.

Meanwhile, its revenues in the second quarter were mainly driven by onshore wind, with the manufacturer delivering 830 new turbines and 357 turbines for repowering projects between 1 April and 30 June.

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