Vestas Wind Systems profit warning 'suggests energy transition is lower priority'

Vestas Wind Systems, the world's biggest wind-turbine maker, battened down its full-year outlook after onshore and offshore deliveries fell in the third quarter and losses were larger than expected.

A profit warning from Vestas Wind Systems will “provide a jolt to lots of managers running ESG-related funds as it has been a popular stock for green strategies," said AJ Bell investment director Russ Mould, who added that it also “suggests energy security is being prioritised over the energy transition.”

However, results from the Danish group indicated that delays due to transportation and specific project execution, as well as exits from Russia and Ukraine, were to blame rather than lower demand.

Underlying losses (EBIT) were worse than forecast at €127mln, compared to an average analyst forecast of €40mln, on revenues of €3.9bn, down 29% on a year ago and around 14% below consensus forecasts.

Order intake of 1.9 gigawatts (GW) worth of turbines was down 49% on this time last year and 23% lower than expected. The order backlog stood at €18.1bn at the end of September.

The equipment business was the issue, with revenues down 37% to €3.1bn, due to lower deliveries in Northern Europe and the US, delays due to transportation and project execution challenges, as well as exits from Russia and Ukraine.

Service revenues were up 32% at €817mln.

Guidance for full-year revenues was moved to €14.5-15.5bn, down from €14.5-16bn previously, while underlying EBIT margins are expected to fall 5%, the lower end of previous guidance for a range of -5% to 0%.

The company said it remains optimistic about achieving its medium-term EBIT margin target of 10% by 2025.

Chief executive Henrik Andersen highlighted that Vestas continued to increase the average selling price (ASP) of its turbines and "build further momentum" within offshore wind, "although geo-political uncertainty and high inflation impacted execution cost and activity levels in the wind industry".

He said growing offshore momentum was highlighted through preferred supplier agreements totaling 3.8 GW across the US, UK and Poland, while onshore order intake was 1.9 GW.

"The energy crisis incentivises a faster transition to an energy system built on renewables and ambitious political agreements such as the Inflation Reduction Act in USA strengthen the underlying demand for wind energy solutions, but project development and order intake remain impeded by energy market uncertainties and red tape."

Shares fell in early trading but by mid morning were up 7.6% to 161.46kr in Copenhagen and up 6.5% to €21.74 in Frankfurt.

Analysts at UBS said "the only positive in the quarter was onshore order intake pricing (ASP) coming in at a very strong level of €1.06m/MW", which was up 30% and circa 9% ahead of consensus forecasts.

"We expect an initial negative share price reaction on the back of the weak 3Q numbers, and lowered FY guidance (and potential cuts to consensus FY22 estimates)."

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