Global wind turbine manufacturer Vestas has reinstated its 2020 guidance as the outlook for the year begins to solidify.
The full-year revenue guidance is the same as it was prior to its suspension in April, though its forecast earnings before interest and taxes (EBIT) margin has been cut from 7 to 9 percent to 5 to 7 percent.
While the reinstated guidance was a bright spot in Vestas' quarterly report, it was overshadowed somewhat by a €175 million ($206 million) warranty charge for repairing and upgrading blades on existing projects. Still, the Danish firm’s share price was up 8 percent compared to yesterday’s closing price, reaching a record high of DKK 915 ($145) per share.
CEO Henrik Andersen said the full-year guidance was provided with a number of uncertainties remaining.
“The important note here is that the basic assumptions right now come with higher uncertainty than normal because we are still in the middle of [the pandemic],” Andersen told analysts on Tuesday.
Revenue for the quarter was up 67 percent from the same time last year to €3.5 billion. Order intake hit 4,148 megawatts. Despite this, Vestas' EBIT fell from €94 million to €34 million, dented by the COVID-19 pandemic and the warranty charge.
Andersen said the figure for the warranty charge was high because it affected so many blades. With the root of the problem identified, he assured analysts that there would not be any additional charges.
Vestas moving quickly to beat U.S. tax credit deadlines
With manufacturing operations confirmed as being back to normal, the discussion turned to project delays. This is a particularly acute problem in the U.S., where tax credit deadlines add extra pressure.
“Our U.S. customers, anyone who works with us, we all have the same interest in getting things done as quickly as possible. We’re trying to get as much executed in 2020” as possible, Andersen said, adding that some projects could be brought forward to fills the gaps created by those experiencing delays.
In March, market research firm Wood Mackenzie trimmed 6.5 percent, or 4.9 gigawatts, from its 2020 global wind installation forecast, leaving it at 73 gigawatts. Vestas is the world's leading supplier of wind turbines, with an 18 percent market share in 2019.
The importance of good service
While Vestas' turbine manufacturing operations are central to its business, the picture is changing as the wind industry matures. More than half of Vestas' €35.1 billion order backlog, or €18.9 billion, is tied to future service contract revenue. The service division’s EBIT for the quarter was a massive 28.5 percent versus the companywide underlying EBIT of 5.9 percent.
Andersen said the repowering market is growing as a decade of technology development and improvements help make the case to project owners in the U.S. in Europe to upgrade their wind farms.
On Tuesday, Vestas announced two orders from Chinese customers totaling 251 megawatts, bringing its Chinese orders past 1 gigawatt for the year. Wood Mackenzie Power & Renewables research expects China to add 251 gigawatts of wind capacity between 2020 and 2029.