Vestas sees profits fall despite higher revenues in 2020

Vestas’ profits were squeezed in 2020 amid the coronavirus pandemic, but all of the manufacturer’s key financial metrics were in line with expectations

Vestas reported 17.4GW of orders in 2020, down 3% from the previous year

Vestas’ operating profit and margin were squeezed in 2020 due to the highly competitive nature of the market and increased execution costs during the coronavirus pandemic

Its operating profit (Ebit) before special items dropped 25% to €750 million for 2020, as increased cost levels and Covid-19 amplified logistical challenges and supply chain bottlenecks.

The manufacturer’s revenue rose 22% year on year to €14.8 billion, primarily due to the Americas region.

But increased execution costs due to Covid-19 and €693 million of warranty provisions – including repairing and upgrading turbine blades in Q2 and halting 150 of its V150 turbines in Q4 – pushed profits down 10% to €771 million.

These factors also pushed Vestas' Ebit margin before special items down 3.2 percentage points to 5.1% in 2020. Special items can be large one-time expenses that the company does not expect to recur in future years.

All of these metrics were still within Vestas’ financial guidance for 2020.

The company reported 17.4GW of orders in 2020, down 3% from the previous year. 

However, the value of its combined order backlog increased from €34 billion to €43 billion as the offshore business is now included. The backlog consists of €15 billion of onshore turbines, €4 billion of offshore turbines and €23.9 billion of service contracts, split between onshore (€20.5 billion) and offshore (€3.4 billion).

It produced and shipped 17.1GW of turbines in 2020, up 35% year on year, after ramping up manufacturing and supply chain activities, with notable increases in India, China and Brazil.

Last year, Vestas agreed a deal – now completed – to buy out Mitsubishi Heavy Industries from their offshore wind joint venture, set up a new business development investment unit – Vestas Ventures – and expanded its wind farm development activities by entering into a strategic partnership with Copenhagen Infrastructure Partners.

Subject to change

Vestas expects revenue of €16-17 billion, including service revenue, in 2021. It anticipates an overall Ebit margin before special items of 6-8%, but higher (24%) for the service division, and expects to invest €1 billion in this year.

Chief financial officer Marika Frederiksson told reporters this guidance was subject to change due to the ongoing impacts of the coronavirus pandemic, including lockdowns and social distancing.

"I struggle to see an easing up (in 2021). We saw a step-up in Q4 of Covid challenges," she said.

"We have been fairly prudent in not allowing Covid-19 to be an obstacle in delivering, but there are more and more lockdowns and more and more challenges to travel between countries. That will have an impact on the overall guidance through 2021."