Vestas, the world’s leading manufacturer of wind turbines, reported a big loss for the first quarter of 2020 on Tuesday — but that doesn't tell the full story, with many other metrics looking positive.
Costs, largely attributable to the indirect impact of coronavirus, dragged on what otherwise appears to be a solid quarter.
Vestas posted a net quarterly loss of €80 million ($87 million), compared to a €25 million profit in the same period last year.
More than 3.3 gigawatts of new orders came in, and quarterly revenue rose 29 percent to €2.2 billion. But a combination of challenges — notably logistics and transportation — burdened the company with additional costs that outweighed its top-line gains.
Several of Vestas' key markets, including the U.S., are in the middle of historic years for wind farm construction.
Chief Financial Officer Marika Fredriksson said Vestas has offered to pay for air freight to help keep deliveries on track. “Right now, there are not even flights available," she said on a conference call with analysts. "So the logistical part is extremely cumbersome."
“What we're trying to do is...honor the customer agreements, because if we don't, that will be even more costly for us in isolation, but also going forward in terms of customer trust,” Fredriksson said. “The good thing is we are a reliable customer and we're a reliable partner, and that obviously puts us in a good position with the supply chain.”
Fredriksson said none of Vestas' own suppliers have increased prices “unfairly,” but she acknowledged that shortages are increasing costs for the entire supply chain.
That said, the impact of COVID-19 on the manufacturing side of the global wind industry has proved weaker than initially feared. Vestas says none of its factories has closed for more than two weeks.
Thirty of the company's employees have tested positive for COVID-19 so far. That’s an infection rate half that of the U.K. per head of population, and Vestas expects to continue to be able to reinstate shuttered production in India (nacelles and blades) and Brazil (assembly) as soon as governments allow.
Thoughts turn to the recovery
While the company's 2020 financial guidance remains suspended, Vestas is continuing to use it internally and believes it is possible it could still reach those targets. For now, though, there is no clarity.
Vestas executives said the company is also preparing for a potential pivot to renewables as nations, institutions and the corporate world rally around the idea of a "green recovery."
"We have not met a country where it's not on the agenda,” said Vestas CEO Henrik Andersen.
Last month Vestas cut 400 jobs from its 25,000-strong workforce as part of a product restructuring. It is accelerating its move into modularization, leaving a few turbine models in the cold. The changes cost the company €58 million this quarter, but Vestas says it is more competitive as a result.
Vestas commanded nearly 18 percent of the global market for wind turbines last year, according to Wood Mackenzie data. In addition to its leading onshore turbine business, it is the joint owner of MHI Vestas, the world's second-largest offshore wind turbine supplier.
Vestas' investments in 2020 will not reach the €700 million figure previously presented in its guidance for the year, the company confirmed Tuesday.