Vestas Narrows Guidance as 2Q Revenue Misses Expectations — Update

By Dominic Chopping

Vestas Wind Systems narrowed its full-year guidance and reported preliminary second-quarter revenue that missed expectations after it made an adjustment to cost expectations in its service business.

The Danish wind turbine maker said it has had to adjust the planned costs in its service business, resulting in a 300-million-euro ($327.5 million) hit for its service business earnings. Vestas said the adjustment was based on an accounting method that recognizes revenue and costs of a project on the basis of the percentage of work currently completed.

Shares were down 3.8% in afternoon trade.

"The adjustment in service is made on the background of a combination of sustained inflation within specific inflation components, indirect effects of increased repairs and upgrades, as well as operational inefficiencies, partly offset by expected future efficiency achievements and cost-out initiatives," the company said.

As a result, the company now expects full-year revenue of between 16.5 billion and 17.5 billion euros, from 16 billion euros to 18 billion euros previously. The earnings before interest and tax margin before special items is now seen at between 4% and 5% from previous guidance of 4%-6%.

The company said preliminary second-quarter revenue is seen at 3.3 billion euros with an EBIT margin before special items of minus 5.6%. A company-compiled consensus had expected revenue of 3.8 billion euros.

Vestas maintained that the service business remains highly profitable and is expected to remain so in the future, with second-quarter profitability on par with recent quarters when excluding the negative adjustment.

Preliminary second-quarter service EBIT before special items is expected to be a loss of 107 million euros and it now expects the unit to generate EBIT before special items of around 500 million euros this year, from 800 million euros to 880 million euros previously.

In the power solutions unit, Vestas said the turnaround is on track with an EBIT margin improvement of almost 8 percentage points year-on-year, and a quarterly order intake of 3.6 gigawatts.

The company is due to report second quarter earnings on Wednesday.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

August 12, 2024 09:20 ET (13:20 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.