Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vestas Wind Systems AS (VWDRY, Financial) reported a 19% year-on-year increase in revenue for Q3 2024, reaching EUR 5.2 billion, driven by higher prices and volumes.
- The company's EBIT margin improved to 4.5%, marking an increase of almost 3 percentage points year-on-year.
- The Service EBIT margin ended at 16%, reflecting ongoing efforts to improve operational efficiency.
- Vestas achieved an all-time high turbine backlog of more than EUR 28 billion, indicating strong demand and future revenue potential.
- The order backlog in Power Solutions increased to EUR 28.3 billion, showing good traction with customers across core markets.
Negative Points
- The Service business faced challenges with a lower-than-expected EBIT margin of 16%, attributed to ongoing cost scrutiny and inflationary pressures.
- Vestas experienced regional disruptions in the supply chain, including a threat of a strike in US harbors, affecting project execution.
- The company is still completing low-margin projects from mid-2022, which continue to impact profitability.
- Warranty costs remained high, with a specific provision for an offshore-related component issue, leading to elevated warranty expenses.
- The ramp-up in manufacturing, particularly in the US and Europe, presents challenges and additional costs, impacting operational efficiency.
Q & A Highlights
Q: Can you explain the factors behind the weaker Service margin in Q3 and the expected rebound in Q4?
A: Hans Smith, CFO, explained that the 16% margin in Q3 was due to ongoing scrutiny and cost pressures similar to Q2. The Q4 margin is expected to improve as these issues are addressed, although it will take time to fully resolve them.
Q: Regarding Power Solutions, is the warranty provision in Q3 a one-off, and what are the expectations for Q4?
A: Henrik Andersen, CEO, confirmed that the warranty provision was specific to a case and should not recur. The Q4 outlook is positive, with improved execution and visibility in Power Solutions.
Q: Are there any restructuring costs in the Service business that affected Q3 margins?
A: Henrik Andersen clarified that there were no restructuring costs. The organizational changes were about reallocating responsibilities across regions and the Service business.
Q: How does the US election impact your order intake expectations for the end of the year?
A: Henrik Andersen stated that the order intake is not dependent on the election outcome. The demand for green energy is strong, and they expect a steady flow of orders in Q4.
Q: What are the implications of potential US tariffs on your cost structure, and can these be passed on to customers?
A: Henrik Andersen noted that while tariffs are a concern, Vestas has been working to exclude components from China to mitigate impacts. Passing costs to customers depends on specific contract terms and legislative changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
