Vestas Updates Financial Outlook for 2024 Amid Adjustments in Service Costs

Vestas Updates Financial Outlook for 2024 Amid Adjustments in Service Costs

(IN BRIEF) Vestas Wind Systems A/S has revised its financial outlook for 2024, now projecting revenue between EUR 16.5 billion and EUR 17.5 billion, down from EUR 16 billion to EUR 18 billion. The expected EBIT margin before special items has also been adjusted to 4% to 5%, compared to the previous guidance of 4% to 6%. These changes are primarily due to updated cost projections in the Service segment, where preliminary figures indicate a negative EBIT margin of (5.6) percent for Q2 2024, alongside revenue of EUR 3.3 billion. The adjustments are attributed to ongoing inflation and operational inefficiencies, but Vestas maintains that the Service business remains profitable. The company now expects the Service segment to generate approximately EUR 500 million in EBIT before special items, down from earlier estimates of EUR 800 million to EUR 880 million. The total investment outlook remains unchanged at around EUR 1.2 billion. A conference call to discuss these updates is scheduled for August 12, 2024, with the Interim Financial Report set for release on August 14, 2024.

(PRESS RELEASE) AARHUS, 13-Aug-2024 — /EuropaWire/ — Vestas Wind Systems A/S has revised its financial outlook for 2024, narrowing its revenue forecast to between EUR 16.5 billion and EUR 17.5 billion, down from an earlier estimate of EUR 16 billion to EUR 18 billion. The expected EBIT margin before special items has also been adjusted to a range of 4% to 5%, compared to the previous guidance of 4% to 6%. These changes stem from updated cost projections within the Service segment.

The company indicated that while inflation indexation is a crucial factor in safeguarding profitability across its order backlog, recent adjustments to planned costs are impacting the current profitability of its Service segment. Preliminary figures show that Vestas expects a second-quarter EBIT margin before special items of (5.6) percent on revenue of EUR 3.3 billion.

Due to percentage-of-completion (POC) accounting, the adjustments to Service costs are anticipated to negatively affect EBIT in the second quarter by approximately EUR 300 million. Preliminary data reveals that the Service EBIT before special items for this quarter is expected to be a negative EUR 107 million. Despite this, Vestas maintains that the Service business remains a highly profitable segment, with ongoing profitability levels expected to stabilize and improve in the future.

The company emphasized that this cost adjustment does not significantly impact the value of its Service order backlog, which is preliminarily estimated at EUR 34.9 billion for Q2 2024, nor does it affect adjusted free cash flow, projected at EUR 0.5 billion for the same period.

The revisions to the Service segment outlook are attributed to persistent inflation in specific components, increased costs related to repairs and upgrades, and some operational inefficiencies. These factors, however, are expected to be counterbalanced by anticipated efficiency gains and cost-cutting initiatives moving forward.

In the Power Solutions segment, Vestas reported promising progress, with an EBIT margin improvement of nearly 8 percentage points year-on-year and a robust quarterly order intake of 3.6 GW. Although the results in Power Solutions are exceeding expectations, the underperformance in the Service segment has led to the adjustment of the Group’s overall revenue and EBIT margin outlook. The company now anticipates the Service segment will generate EBIT before special items of approximately EUR 500 million, down from a previous estimate of EUR 800 million to EUR 880 million.

The total investment outlook remains unchanged at approximately EUR 1.2 billion.

Updated Outlook for 2024

• Revenue: EUR 16.5–17.5 billion (previously EUR 16–18 billion)
• EBIT Margin: 4–5% (previously 4–6%)
• Total Investments: Approximately EUR 1.2 billion (unchanged)

A conference call with Vestas’ CEO and CFO is scheduled for August 12, 2024, at 3:30 PM CEST (2:30 PM BST) to discuss these financial updates. Interested parties can register for the call and view a short presentation via the provided link. Additionally, Vestas will release its Interim Financial Report for the Second Quarter of 2024 on August 14, 2024.

Media Contact:

Investors/analysts:
Daniel Patterson
Vice President
Investor Relations
Tel: +45 2669 2725

Media analysts:
Anders Riis
Vice President
Communications
Tel: +45 4181 3922

SOURCE: Vestas