Vestas Wind ((VWDRY)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Vestas Wind presented a mixed sentiment, reflecting both achievements and challenges. The company reported significant revenue growth and accomplishments in onshore projects, yet faced difficulties with order intake, particularly in the U.S., and incurred costs related to offshore ramp-up. Despite a decline in service revenue due to currency headwinds and an increase in safety incidents, the positive outlook for future growth and sustainability achievements provided a balanced perspective.
Revenue Growth
Vestas Wind concluded the quarter with a revenue of EUR 3.7 billion, marking a 14% increase year-on-year. This growth is a testament to the company’s robust performance and strategic initiatives aimed at expanding its market presence.
Onshore Project Performance
The company reported improved performance in its onshore projects, which, along with lower warranty costs, contributed positively to the EBIT margin. This highlights Vestas’ operational efficiency and ability to manage project costs effectively.
Return on Capital Employed
Vestas achieved a return on capital employed of 11.5% over the past 12 months, the highest since 2020. This improvement underscores the company’s effective capital management and ability to generate returns from its investments.
Service Order Backlog
Despite foreign currency translation impacts, Vestas’ service order backlog increased to EUR 36 billion from EUR 35 billion a year ago. This growth indicates a strong demand for Vestas’ services and a solid pipeline for future revenue.
Sustainability Achievements
Vestas continues to emphasize its commitment to sustainability, with turbines produced and shipped in the last 12 months expected to avoid 480 million tonnes of greenhouse gas emissions over their lifetime. This achievement reinforces the company’s role in advancing renewable energy solutions.
Order Intake Decline
The order intake for Vestas ended at 2 gigawatts, down 44% compared to last year. This decline was mainly driven by a lack of orders in the Americas, especially in the U.S., as customers awaited policy clarity, highlighting the impact of external factors on business operations.
Offshore Ramp-Up Costs
The profitability of Vestas was impacted by offshore ramp-up costs, with ongoing investments in ramping up facilities in Poland. This indicates the company’s strategic focus on expanding its offshore capabilities despite short-term financial impacts.
Service Revenue Decline
Service revenue saw a 4% decline year-on-year, primarily due to a 3% currency headwind. This reflects the challenges faced by Vestas in maintaining service revenue amidst fluctuating currency rates.
ASP Decline
The average selling price (ASP) declined to EUR 1.11 million per megawatt in Q2 compared to EUR 1.24 million per megawatt in the prior quarter, indicating pricing pressures in the market.
Increased Safety Incidents
The number of recordable injuries per million working hours increased from 2.8 to 3.0 year-on-year, highlighting the need for enhanced safety measures within the company.
Forward-Looking Guidance
Looking ahead, Vestas maintained its 2025 outlook, projecting revenue between EUR 18 billion and EUR 20 billion and an EBIT margin of 4% to 7%. The company remains optimistic about improvements in onshore project execution, lower warranty costs, and ongoing manufacturing ramp-up efforts, particularly in offshore operations. Vestas also reiterated its commitment to sustainability, with significant greenhouse gas emissions reductions anticipated from its turbines.
In summary, the Vestas Wind earnings call reflected a balanced sentiment with notable achievements in revenue growth and sustainability, alongside challenges in order intake and offshore ramp-up costs. The company’s forward-looking guidance remains optimistic, with strategic initiatives aimed at sustaining growth and enhancing operational efficiency.