(Reuters) – Wind turbine maker Vestas (VWS.CO) posted a deep first-quarter loss and slashed its 2022 margin forecast due to the war in Ukraine and writedowns in its offshore business, reflecting an industry wide struggle to turn a profit despite record demand.
Focus on renewables has intensified as the West steps up efforts to wean itself off Russian fossil fuels, but what Moscow refers to as its “special operation” in Ukraine has also boosted already soaring raw material and freight costs.
“The business environment worsened significantly during the first quarter of 2022 due to Russia’s invasion of Ukraine, and the associated ripple effects on global trade and cost inflation,” Vestas said in its earnings report late Sunday.
Its shares, which had spiked following Russia’s invasion of its neighbour, were trading 6.8% lower at 0847 GMT on Monday, wiping out all of those gains.
The world’s largest maker of wind turbines now expects a margin on earnings before interest and tax (EBIT) before special items of between minus 5% and 0%, down from a previously guided range of 0-4%.
Sales are seen at 14.5-16 billion euros, compared to 15-16.5 billion euros previously.
The former CEO of Vestas’ main rival Siemens Gamesa (SGREN.MC) last year warned that a decade-long race to lower the cost of generating wind power could not continue as it would reduce turbine producers’ ability to invest in new technologies.
Siemens Gamesa last month pointed to deeper-than-expected operating problems and rising costs as it also posted a substantial quarterly loss. read more
Vestas said costs related to the disposal of its Russian assets amounted to 401 million euros in the first quarter.
It also took writedowns and warranty provisions related to older offshore wind platforms, among other things, worth 176 million euros.
“We’ve seen similar things at its competitors and it shows an unhealthy race which means the turbine makers don’t make enough money on their products and can’t sell them for long enough,” Sydbank analyst Jacob Pedersen told Reuters, calling the move “very concerning”.
While first-quarter sales were slightly higher than expected, the company made a loss before interest, tax and special items of 329 million euros, far exceeding the 91 million euro loss expected by analysts in a poll compiled by the company.
Vestas’ EBIT margin before special items decreased by 9.3 percentage points compared to the same period last year to a negative 13.2%.