Danish wind turbine maker Vestas said its full-year results will be lower than the outlook after the fourth quarter results were negatively impacted by additional challenges.
The negative impact in the fourth quarter has caused the full-year results to be lower than the outlook, primarily driven by a confined number of project delays, an impairment on the company’s V174-9.5 MW turbine, and additional warranty provisions to the tune of EUR 210 million.
The higher warranties primarily relate to increased repair and upgrade costs and a few select cases. As a result of an expected challenged profitability and lower order intake for offshore projects utilising the V174 turbine, an impairment of EUR 95 million has been made on that platform in the quarter, Vestas said.
The company’s preliminary and unaudited 2022 results show a total revenue of EUR 14.486 billion. The outlook projected a revenue of between EUR 14.5 billion and EUR 15.5 billion.
Vestas said the company made strategic and commercial progress in terms of strengthening operations and substantially raising prices that indicates Vestas will deliver improved financial results in 2023. Activity levels in 2023 are expected to be lower than in 2022 followed by a step up in 2024 where installations in key markets are projected to increase, the company said.
Increasing the price of wind turbines is and has been a necessity to address the external cost inflation and ensure the industry’s long-term value creation, the company said.
Order intake in the fourth quarter was 4.2 GW with an average selling price of EUR 1.15 million per MW, a sequential increase of eight percent. For the full year 2022, this resulted in an average selling price of EUR 1.07 million per MW.
Free cash flow amounted to EUR 1.283 billion in the fourth quarter but was negative EUR 953 million for the full year compared to EUR 183 million in 2021. This development was primarily a reflection of the lower profitability and resulted in a net debt position of EUR (46) million.
Looking Ahead
In 2023, Vestas expects high inflation levels throughout the supply chain and reduced wind power installations to impact revenue and profitability negatively. The lower level of installations is caused by slow permitting processes in Europe as well as dampened activity levels in the USA due to a steep ramp-up ahead of a busy 2024 driven by the Inflation Reduction Act.
Increasing prices on the company’s order intake is an offsetting factor, but still leaves the company challenged on profitability in 2023.
Revenue for full-year 2023 is expected to range between EUR 14 billion and EUR 15.5 billion. Vestas expects to achieve an EBIT margin before special items of (2)-3 percent. Total investments are expected to amount to approximately EUR 1 billion in 2023.