Danish wind-turbine maker Vestas Wind Systems A/S recorded an €894 million operating loss in the first quarter of 2022 and cut its full-year guidance due partly to the effects of Russia's invasion of Ukraine.
The Ukraine conflict led to €401 million in write-downs, impairments and provisions in the first three months, Vestas announced, following the company's decision to exit from the Russian market and halt construction work in Ukraine. This result compares with a €78 million loss in the first quarter of 2021.
CEO Henrik Andersen told analysts May 2 that the invasion is "causing negative ripple effects to global trade and also a cost inflation that seems to be in many areas unheard of previously."
Vestas' first-quarter earnings were further affected by its activities in China and India, where low local demand and high landed costs forced the company to register €183 million in impairments.
A further €176 million of adjustments, split equally between impairments and provisions, were made in Vestas' offshore wind business, where the success of the company's 15-MW V236 turbine — nicknamed Blue Marlin and launched in 2021 — is affecting demand for its older V164 and V174 platforms.
"We are ramping up on the Blue Marlin, and that's the positive of it, that the Blue Marlin will simply overtake everything else remaining," Andersen said.
CFO Hans Martin Smith added that costs along the supply chain have "gotten more expensive" in the first quarter, which contributed to Vestas' decision to make the adjustments in its offshore unit.
Vestas executives previously said disruption in the supply chain, such as delivery delays and higher transportation and logistics costs, would remain throughout 2022, even though shipping companies were pointing to gradual improvements.
"I think we feel today that, that is definitely right and even it has worsened throughout Q1," Andersen said May 2.
The higher cost environment pushed Vestas to further increase the price of its turbines in the first quarter, with the average selling price of its onshore turbines up to €890,000/MW compared with €800,000/MW in the corresponding period in 2021. The company's overall average selling price climbed to €1.01 million/MW in the first three months, contributing to an order backlog of €18.9 billion as of March 31.
First-quarter revenue at Vestas rose 26.7% year over year to €2.49 billion, driven by offshore installations and the company's service unit, and excluding the adjustments made in the offshore business. The result is 4.85% higher than the S&P Capital IQ consensus estimate.
As a result of the write-downs and impairments, Vestas adjusted downward its guidance for the full year, which Andersen said "comes with larger volatility, and it comes also with changes that are many and also suddenly arising to us."
Revenue is now expected to be in the range of €14.5 billion to €16 billion compared with a previous range of €15 billion to €16.5 billion. The company's EBIT margin was also adjusted downward to reflect the macro volatility and also the company's one-off items, with the new range coming in at negative 5% to 0% compared with 0% to 4% previously.
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