MOBILITY

In the fourth quarter of 2021, Vestas’ operational profit drops by 70%

The supply chain instability and the cost of raw materials are to blame, according to the Danish company.

Vestas’ operational profit in the fourth quarter of 2021 was €106 million, down 70% from €358 million in the same quarter of 2020.

According to the company’s preliminary figures for last year, operating profit for the entire year of 2021 was €461 million, down from €750 million in 2020.

According to the Danish manufacturer, the wind sector is facing supply chain instability, which is driving considerable cost inflation and project delays.

Vestas is providing preliminary data for 2021 and a financial prognosis for 2022, citing the current business environment as having “severely impacted both visibility and profitability.”

The market “remains volatile in the short term,” but “prosperous in the long term,” according to Vestas.

According to the corporation, cost inflation will be “heavily impacted” in the near future and until at least 2022, “while the advent of an energy crisis fueled by geopolitics and fossil fuel instability has also resulted in substantial rises in energy costs.”

According to Vestas, supply chain instability induced by the pandemic will persist this year, resulting in higher transportation and logistical expenses.

In 2022, the business anticipates a greater effect from cost inflation in raw materials, wind turbine components, and energy costs.

Increases in wind turbine pricing are a “necessity to handle external cost inflation and ensure the industry’s long-term value development,” according to the report.

Vestas expects revenue to be in the €15.0 billion to €16.5 billion range this year, but added there is “more uncertainty than normal around predictions relating to execution in 2022, and the outlook strives to take account of the present circumstances and challenges.”

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Revenue in the fourth quarter of 2021 was about €4.6 billion, up from just under €4.3 billion in the fourth quarter of 2020.

The total revenue for 2021 was slightly shy of €15.59 billion, compared to €14.82 billion the previous year.

Order intake in Q4 2021 was €2.5 billion, down from €4 billion in Q4 2020, and declined to 2863 megawatts from 5558 megawatts during the same time.

The total order intake for 2021 was €11.6 billion (13,896 megawatts), up from €12.7 billion in the previous year (17,249MW).

In 2021, the turbine order backlog was €18.1 billion (21,984MW), down from €19.0 billion (24,630MW) in 2020.

“Everyone at Vestas performed a fantastic job in 2021 to assure record-high revenue despite a worldwide business climate that got more tough as the year proceeded,” stated Henrik Andersen, president and chief executive of Vestas.

“However, supply chain instability and rising energy prices, as well as increased cost inflation from raw materials, transportation, and turbine components, continued to magnify expenses throughout the year, causing visibility and profitability to suffer.”

“While we remain committed to executing our plan and advancing the energy transition with our clients, we expect the present adverse business climate to persist until 2022, lowering our projection.”

“To address these short-term issues, the industry must demonstrate the discipline required to safeguard profitability and promote long-term value generation, and Vestas will continue to lead the way.”

“For Vestas, partnerships remain critical, and I want to express my gratitude to our employees, customers, and other partners across the whole value chain.”

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The firm also provided an update on the hack that occurred on November 19, 2021.

“While this had no direct impact on Vestas’ operations or added significant additional costs because wind turbines were unaffected, it did keep certain internal IT systems down for some time and required significant internal resources to be re-allocated to handle the attack and mitigate the impact,” the company said.

“As a result of the attack, our efficiency and the organization’s capacity to completely focus on end-of-year execution was briefly harmed.”

“Although the immediate problem is passed, and the company’s cyber security setup assisted in containing the situation, Vestas’ effort to further reinforce both our own and the energy system’s cyber security and resilience continues.”