Narrowing of the annual outlook due to adjustments to planned costs in service
Company announcement:
Vestas Wind Systems A/S, Aarhus, August 12, 2024
Company Announcement No. 12/2024
Vestas reduces the financial outlook for 2024 to EUR 16.5-17.5 billion in sales (from EUR 16-18 billion) and the EBIT margin before special items to 4-5 percent (from 4-6 percent), based on adjustments to planned costs in the service segment.
Inflation indexation remains an important mechanism to protect profitability in the order book. However, adjustments to planned costs impact current profitability in Vestas’ service segment. As a result of this adjustment, the Group’s EBIT margin before exceptional items in the second quarter of 2024 will be (5.6) percent on revenue of EUR 3.3 billion, according to preliminary figures.
Due to percentage-of-completion accounting (POC), the adjustment of planned costs in service in the second quarter of 2024 will have a negative accounting effect of approximately EUR 300 million on EBIT. The preliminary service EBIT before special items for the quarter is minus EUR 107 million.
Our service business remains a highly profitable segment. Except for the negative adjustment in the second quarter of 2024, our profitability is at the level of recent quarters and we expect it to remain at this level and continue to increase in the future.
The adjustment has no significant impact on the value of the service order backlog (provisional value Q2 2024: EUR 34.9 billion) and the adjusted free cash flow (provisional value Q2 2024: EUR 0.5 billion).
The service adjustment is being made against a backdrop of a combination of ongoing inflation within specific inflation components, indirect impacts from increased repairs and upgrades, and operational inefficiencies, partially offset by expected future efficiency improvements and cost reduction initiatives.
In the Power Solutions segment, the turnaround is proceeding according to plan, with an improvement in the EBIT margin of almost 8 percentage points compared to the previous year and quarterly order intake of 3.6 GW.
Although the momentum and results in the Power Solutions division are above plan, the lower-than-expected profitability in the Services division is leading to a restriction of the full-year forecast for Group sales and EBIT margin. In addition, we now expect the Services segment to generate EBIT before special items of around EUR 500 million (previously EUR 800-880 million).
The outlook for total investments*) remains unchanged at around EUR 1.2 billion.
Outlook 2024
| New Instructions | First clues | |
| Sales (billion EUR) | 16.5-17.5 | 16-18 |
| EBIT margin (%) bsi | 4-5 | 4-6 |
| Total investments*) (billion EUR) | approx. 1.2 | approx. 1.2 |
*) Net investments in intangible assets and property, plant and equipment
A 30-minute conference call with our CEO and CFO on the financial updates described here will be held on Monday, August 12, 2024 at 15:30 CEST (14:30 BST). There will be a short presentation that will be audiocast (link). To register for the Q&A session of the call, please use the registration link below.
Vestas will publish its interim financial report for the second quarter of 2024 on August 14, 2024.
Contact details
Vestas Wind Systems A/S, Denmark
Investors/Analysts:
Daniel Patterson, Vice President
Investor information
Phone: +45 2669 2725
Media:
Anders Riis, Vice President
communication
Phone: +45 4181 3922
