Vestas Wind ((VWDRY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Vestas Wind presented a cautiously optimistic outlook, balancing significant achievements in revenue growth, order intake, and gross profit against challenges in the Service segment, safety metrics, and a decline in average selling prices (ASP). The company remains focused on navigating these opportunities and operational challenges effectively.
Revenue Growth
Vestas reported a 3% year-on-year increase in Q3 revenue, reaching EUR 5.3 billion. This growth was primarily driven by higher deliveries, although it was partially offset by negative foreign exchange impacts. The company’s ability to maintain revenue growth despite these challenges highlights its robust market position.
EBIT Margin Improvement
The EBIT margin improved to 7.8%, thanks to better Onshore project execution and reduced warranty costs. These gains were achieved despite the costs associated with manufacturing ramp-up, showcasing Vestas’ operational efficiency and strategic focus on cost management.
Order Intake Increase
Vestas saw a 4% year-on-year increase in order intake, totaling 4.6 gigawatts. The U.S. and Germany were significant contributors to this growth, with Onshore orders increasing by more than 60% quarter-on-quarter compared to last year, indicating strong demand in key markets.
Share Buyback Initiation
Reflecting a solid liquidity position and strategic capital management, Vestas announced a share buyback program worth EUR 150 million. This move underscores the company’s commitment to returning value to its shareholders.
Record-Breaking Gross Profit
Vestas achieved a record gross profit of EUR 772 million in Q3, the highest ever for the third quarter. This was driven by improved profitability in the Onshore segment and reduced warranty costs, marking a significant milestone for the company.
Net Working Capital Improvement
The company reported a significant decrease in net working capital by EUR 1.4 billion compared to Q3 last year. This improvement was due to high project deliveries and a strategic focus on working capital management, enhancing Vestas’ financial flexibility.
Service Segment Challenges
The Service segment faced a 3% decline in revenue year-on-year, attributed to lower transactional sales and a negative currency headwind. Additional costs are anticipated in Q4 related to specific Offshore sites, indicating ongoing challenges in this segment.
ASP Decline in Power Solutions
The average selling price in Power Solutions fell to EUR 1.01 million per megawatt in Q3 from EUR 1.11 million in the previous quarter. This decline was driven by a change in order mix, reflecting market dynamics that Vestas must navigate.
Safety Concerns
Safety remains a concern, with the number of recordable injuries per million working hours increasing from 2.8 to 3.3 year-on-year. Despite a focus on improvement, this highlights the ongoing challenges Vestas faces in ensuring a safe working environment.
Service Order Backlog Exchange Rate Headwind
Despite a EUR 1.5 billion headwind from foreign exchange rate movements, the Service order backlog increased to EUR 36.6 billion. This resilience in backlog growth demonstrates Vestas’ strong market demand and effective order management.
Forward-Looking Guidance
Looking ahead, Vestas has narrowed its full-year revenue outlook to EUR 18.5-19.5 billion and adjusted its EBIT margin forecast to 5-6%, driven by stronger Onshore execution and lower Service EBIT. The company also emphasized its sustainability efforts, expecting its turbines to avoid 461 million tonnes of greenhouse gas emissions over their lifetime.
In summary, Vestas Wind’s earnings call highlighted a cautiously optimistic sentiment, balancing achievements in revenue and order intake with challenges in the Service segment and safety metrics. The company’s strategic initiatives, such as the share buyback and focus on sustainability, position it well for future growth despite the operational hurdles it faces.