Vestas has reported a drop in its profitability margin for the third quarter of 2021 due to supply chain instability and cost inflation of materials.
EBIT before special items decreased by €87m to €325m, resulting in an EBIT margin before special items of 5.9%, compared to 8.6% in the third quarter of 2020.
Vestas said supply chain instability, rising energy prices and accelerated cost inflation from raw materials, transport, and turbine components, severely impacted profitability and limits visibility.
Based on the impact these are expected to have for the remainder of the year, Vestas is updating its full-year guidance on EBIT margin before special items, which is now expected to be around 4% (previously 5-7%).
Vestas still expects revenue of €15.5-16.5bn, including service, and total investments below €1,000m in 2021.
In the third quarter of 2021, Vestas generated revenue of €5,538m – an increase of 16% compared to the year-earlier period.
Free cash flow amounted to €300m compared to €547m in the third quarter of 2020.
The quarterly intake of firm and unconditional wind turbine orders amounted to 3727MW.
The value of the wind turbine order backlog was €19.3bn as at 30 September 2021.
In addition to the wind turbine order backlog, at the end of September 2021, Vestas had service agreements with expected contractual future revenue of €28bn.
Thus, the value of the combined backlog of wind turbine orders and service agreements stood at €47.3bn – an increase of €13.4bn compared to the year-earlier period.
Group president & chief executive Henrik Andersen (pictured) said: “During the third quarter of 2021, everyone at Vestas did an outstanding job to ensure record-high revenue and activity levels in spite of an increasingly challenging global business environment for renewables.
“The quarter was thus characterised by supply chain instability and rising energy prices as well as accelerated cost inflation from raw materials, transport, and turbine components, which severely impacted profitability and limits visibility.
“In this environment, and with additional warranty provisions of €50m to cover the execution of previously announced blade repairs and upgrades, we achieved revenue of €5.5bn, order intake of 3.7GW, 23% in Service, an EBIT margin of 5.9%, and the largest preferred supplier agreement in our history for a 2.1GW offshore project in the USA.
“Based on how 2021 has evolved and how we expect to finish the year, we are adjusting our EBIT margin guidance to around 4% with revenue expectations unchanged.
“With supply chain instability and high component, material and transport costs expected to last throughout 2022 as well as the growing climate and energy crises making our solutions ever more important, our full focus is to mitigate impact from external factors to protect profitability and execute on our strategy without compromising on safety or quality.”
Meanwhile, after almost nine years as chief financial officer of Vestas, Marika Fredriksson has decided to hand over the financial reigns to Hans Martin Smith, currently CFO Vestas Northern & Central Europe, by 1 March 2022.