Wind Turbine Maker Vestas’ Revenue Surges 29% YoY in Q1 2020 Amid COVID-19

The revenue generation was influenced by order backlogs and service agreements

May 13, 2020

/ Wind

Vestas Wind System, a wind turbine manufacturer, revealed that in the first quarter of 2020, the company generated a revenue of €2.235 billion (~$2.42 billion), showing a year-over-year increase of 29% compared to €1.73 billion (~$1.88 billion).

The increase in revenue was mainly driven by wind turbine deliveries in the United States, Australia, Brazil, and Russia.  The revenue grew despite the negative impact of approximately  €75 million ($81.3 million) from foreign exchange rate fluctuations.

However, the Denmark-based company stated that its earnings before interest and tax (EBIT) decreased before special items to €54 million (~$58.50 million). Special items comprise income and costs related to significant organizational restructuring and adjustments to production capacity.

The company reported that 3,311 MW of new wind turbine orders were received in the first quarter compared to the 3,004 MW in Q1 2019. Vestas added that the value of the wind turbine order backlog was €15.9 billion (~$17.22 billion) as on March 31, 2020.

The average price per MW was €720,000 ($781,063) in Q1 2020, compared to €810,00 ($878,696) in Q1 2019 and €770,000 ($835,303) for full-year 2019. The lower average pricing was mainly due to a huge rise in supply-only orders in China. Excluding the order intake in China, the average price per MW was  €770,000 ($835,303), according to the company’s financial statement.

In addition to the wind turbine order backlog, at the end of March 2020, Vestas had service agreements with expected contractual future revenue of €18.2 billion (~$19.72 billion).

“The value of combined backlog of wind turbine orders and service agreements stood at €34.1 billion (~$36.94 billion), an increase of €5.8 billion (~$6.28 billion) compared to the year-earlier period,” the company stated.

It also highlights that as the focus is on cost savings, the total investments are currently assessed to be below €700 million (~$758.31 million).

Henrik Andersen, group president, and CEO said, “In the first quarter of 2020, the global demand for wind energy remained strong despite the COVID-19 pandemic’s continuing impact on societies and operations across all continents. In this environment, Vestas delivered increased revenue and order intake year-on-year, continued strong service performance, and a record-high order backlog of more than €34 billion (~$36.83 billion) that provides us with stability in the current period of high uncertainty.”

He stated that the company’s EBIT margin in the first quarter of 2020 was negatively impacted due to low-margin projects. The company also witnessed an increase in the execution of costs from logistical challenges and supply chain bottlenecks, which were further aggravated by the pandemic.

Recently, Mercom reported that Siemens Gamesa Renewable Energy (SGRE), a wind turbine maker, witnessed a 7.7% fall in revenue in the January-March period as a result of the ongoing pandemic on its operations and commercial activity.

The wind energy supply chain is globally interconnected. According to the International Energy Agency’s (IEA) recently released report, in March 2020, some production facilities in Europe, India, and various parts of the U.S. were either closed or reduced their activities.

Previously, the Global Wind Energy Council (GWEC) had released a report which analyzed how COVID-19 impacted the global wind industry, including India. The report stated that when the COVID-19 crisis was first reported in China, disrupting China’s wind supply chain, large western turbine producers began shifting their supply chain by using their Indian facilities as a solution to mitigate the expected damages caused by COVID-19 at their production facilities in China. But when India called for a countrywide lockdown, western turbine original equipment manufacturers (OEMs) also started facing the supply chain disruption challenge in Europe.