Growing order book unable to stop Vestas profit slump

Vestas recorded 3GW of new turbine orders in Q1, nearly double that of a year ago, resulting in an order backlog of 17.2GW. But this failed to stop Vestas' pre-tax profit slipping 75% to €34 million.

by David Weston 8 May 2019

Vestas received 3,004MW of orders in Q1 2019 -- the fourth consecutive quarter of over 3GW of order intake

Revenue at the world’s leading manufacturer increased 2% year-on-year to €1.73 billion during the January-March reporting period, but was only around half the figure recorded in Q4 2018.

The fall in turbine prices witnessed over the past two years has now had a knock-on effect to the accounts as projects booked during that period are executed.

Vestas said the average selling price of its Q1 orders was €0.81 million/MW, up 11% year-on-year but this was partly due to location of orders and turbine models selected. Underlying turbine prices, it said, were "fairly stable".

The firm did record 3,004MW of orders, and Q1 was the fourth consecutive quarter of orders over 3GW for the Danish manufacturer.

Lower project margins, and higher capital costs were also blamed for operating profit falling 65% to €43 million, resulting in pre-tax profit of just €34 million, the company said.

The firm’s 50:50 offshore wind joint venture, MHI Vestas, contributed €5 million to the company’s net profit.

Vestas said some of the fall was offset by growth in its servicing business, which saw revenue increase to €424 million, up from €366 million in Q1 2018.

Outlook for 2019 was maintained at an expected revenue of €10.75 billion to €12.25 billion — up on the €10.13 billion in the whole of 2018.

Vestas CEO Anders Runevad, who is stepping down from the post in the summer, said the manufacturer was gearing up for a busy second half of the year.

"While underlying prices remain fairly stable and our service business continues to grow in both revenue and profit, our results were as expected negatively impacted by orders received during the price decline in 2017," he said.

"Furthermore, external factors such as tariffs and raw material prices increased costs as projected in the quarter.

"With activity levels planned to be significantly higher in the second half of 2019, we leverage our market-leading position to ramp up for executing an extraordinarily busy 2019, while introducing new solutions that accelerate the energy transition."