Vestas blamed inflation, project delays and “unacceptable” warranty provisions tied to repairs and upgrades as it flagged heavy losses for 2022.
It also highlighted continuing difficulties in 2023, which will make it “challenging” to turn a profit this year, forecasting an Ebit margin before special items between -2% and +3%.
The Danish turbine maker reported an Ebit margin before special items of -8% in its preliminary results for 2022, indicating a loss-making full year. This was below its outlook of -5%, and short of its initial guidance of between 0 and +4%. The loss also comes despite raising prices of its turbines, including an average selling price of its onshore models of €1.04 million/MW over the whole year.
It expects full-year revenue of €14.4 billion – just below its outlook of €14.5-15.5 billion.
A 27% year-on-year increase in service revenue to €3.1 billion offset unexpectedly low revenue from turbine sales, which was impacted by delays in execution, it explained.
Vestas also cited €210 million in fourth-quarter warranty provisions primarily related to increased repair and upgrade costs “and a few [unspecified] select cases” for its loss-making in 2022.
In an earnings call, CEO Henrik Andersen told investors: “It goes without saying we can't live with a warranty provision that is of this level in the longer term.
“So therefore part of improving towards not only 2023, but beyond, is also to get the warranty provision stemmed from the simple fact that it's our quality and it's our partners and suppliers quality into the turbine, and that has to be [from] better management.”
The wind giant also noted a €95 million impairment on its V174 offshore wind turbines, explaining that it expects limited business opportunities to dilute the platform’s profitability. Vestas’ V174 models – which have a power rating of up to 9.5MW – have been eclipsed by Windpower Monthly’s Offshore Wind Turbine of the Year for 2022, the V236-15.0MW.
Vestas expects to have made total investments of €758 million, on par with spending levels in 2021, but below its outlook of €850 million for the year.
It also reported free cash flow of negative €953 million in 2022. This was primarily a reflection of lower profitability, it explained, and resulted in a net debt position of -€46 million at the end of the year.
Challenging year ahead
Releasing its preliminary results, Vestas noted geopolitical uncertainty, the accelerating energy crisis, and high inflation levels as creating a difficult business environment.
Against this backdrop, it expects installation levels in 2023 to be lower than in 2022, followed by a step-up in 2024 when installations are projected to increase in key markets.
The turbine maker added that increasing its selling prices offsets difficulties, but it will still struggle to be profitable in 2023.
Its guidance for Ebit margin before special items of between -2% and +3% comes amid expectations of €14-15.5 billion in revenue for 2023.
Vestas is due to release its financial results for 2022 in full on 8 February.