Vestas Logs Strong Q3 Despite Price Pressure and Trade Woes

Shares in Vestas, the world’s largest manufacturer of wind
turbines shot up 11 percent after the firm announced order, profits
and revenues were all up in the third quarter compared to last
year.

This came despite warnings of ongoing trade issues, a slowdown
in Asia and ongoing price pressures.

The order backlog climbed to a record of 3,646 million euros
(U.S. $4,039 million).

Group President and CEO Henrik Andersen said it was pleasing to
see the near 4 gigawatts of orders placed during the last three
months split across 20 markets.

“And just to mention a few here we have Finland, Greece,
Turkey and France, as main contributors to it, but it’s really nice
to see that that works across Europe,” he said on a call to
analysts before pointing to the potential for more activity in
Europe and beyond.

“We have an auction here in Poland, which is happening in Q4.
Italy has announced a 5-gigawatt technology neutral auction in
2021,” he said, adding that South Africa was developing an annual
program of 1.5 gigawatts annually.

Headwinds in Asia Pacific

Despite the strong showing the company also said it expects to
see trade tariffs weighing on profitability.

Marika Fredriksson, the company’s CFO said an impact of 1
percent of revenue had already been increased to 1.5 percent and
there was no expectation of that reducing in the near term. She
also said that fears around suppliers squeezing them as a result of
their increased order book were not valid saying heavy industry did
not enjoy the same high demand that Vestas currently did.

Geographically, Asia Pacific was relatively slow for the company
with deliveries down 16 percent so far this year compared to the
same period in 2018.

Asked about the weaker performance in Asia, Andersen said they
were being selective about the projects they worked on.

“It has to create value for shareholders and therefore if we
walk away from something, it’s generally because either the price
or the project margin was not sustainable for us to say yes.”

He pointed to strong prospects for new orders and said the firm
was talking to policymakers and customers in China about a
subsidy-free approach, and expected India to ramp-up to meet its
wind power target of 140 gigawatts of installed capacity by
2030.

Services prove to be a bright spot

The firm’s services business provided several bright spots in
Q3, with Andersen going as far as to herald a “stellar
performance”.

Competition and falling tender prices have put a squeeze on
turbines the revenue from service contracts is valued very highly.
Half of Vestas’ contracted future revenue is from service
contracts and half is from turbine orders.

Building up service contracts was a key factor in
Siemens Gamesa’s recent acquisition
of Senvion, according to
Shashi Barla, WoodMac’s principal analyst for global wind supply
chain and technology.

Vestas added another 5 gigawatts of services contracts taking
its tally to 91 gigawatts. The average duration of these contracts
is now 18 years. It also secured 25 contracts for turbine
upgrades.

On its offshore partnership with Mitsubishi Heavy Industries,
MHI Vestas, the company flagged a pipeline of 6.2 gigawatts and the
contract win for three turbines to be used for the Groix &
Belle-Ile floating project.

“It’s not necessarily the 29 megawatt of order that is the
takeaway here, it’s the innovation that goes in it and making an
effort to see the floating platform start working offshore,” said
Andersen. “That’s an important innovation and technology for
us.”

Earlier this week, the developer of the floating wind project,
Eolfi, was acquired by
oil major Shell
.

Source: FS – Transport 2
Vestas Logs Strong Q3 Despite Price Pressure and Trade Woes



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