Vestas warns war in Ukraine will worsen wind industry downturn

Vestas Wind Systems has confirmed the wind industry’s woes as the world’s largest wind turbine maker posted a bigger-than-expected loss and cut its profit forecast due to fallout from the Russian war in Ukraine.

The Danish turbine manufacturer mentioned On Monday, first-quarter revenue rose 27% to 2.5 billion euros, but fell to an operating loss before special items of 329 million euros from a profit of 251 million. euros a year ago.

Wind turbine makers are struggling to make money even as demand rises as Western countries try to turn away from Russian oil and gas.

The wind industry has suffered from soaring cost inflation and disrupted supply chains just after managing to become price competitive with fossil fuel sources.

Henrik Andersen, chief executive of Vestas, called it a “very difficult business environment and an ongoing energy crisis” as Western countries grapple with how to end their dependence on Russian oil and gas while maintaining prices. relatively low electricity.

“The growing energy crisis, however, has also led to stronger political support for renewable energy to improve energy independence and keep energy prices low, and we are strengthening our foundations to help governments and customers to achieve these goals,” he added.

Vestas has warned that its operating profit margin before special items for this year is now expected to be zero to minus 5%, down from a previous range of zero to 4%. Revenue is now expected to be €14.5bn to €16bn, down from €15bn to €16.5bn.

Shares of Vestas fell 8% to DKr 168.82 on Monday, their lowest level since the day before Russia invaded Ukraine in February.

The warning from the Danish group follows problems encountered in recent weeks by Siemens Gamesa and General Electric in renewable energies.

Siemens Gamesa replaced its chief executive in February for the second time in less than two years after a series of profit warnings at the world’s largest offshore turbine maker. Its shares have more than halved over the past year as some warned it was close to “uninvestable”.

Some investors are now wondering if European and American wind companies will follow in the footsteps of their solar counterparts and completely lose out to their Asian rivals in terms of profitable business.

Vestas pulled out of Russia and suspended its Ukrainian operations, leading to writedowns in those areas in the first quarter as well as its legacy offshore business. Its losses were also exacerbated by “strategic re-prioritization of certain markets” and changes to its “manufacturing footprint” in India and China.

Citi analysts said a bright spot was that Vestas was able to raise prices, which they described as “encouraging” as it reported better gross margins in its order book.

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