The wind power industry’s challenging period continued in 2022 due to unexpected geo-political uncertainty, an accelerating energy crisis, and high inflation. In this environment, Vestas’ fourth quarter results were negatively impacted by additional challenges. The negative impact in the fourth quarter causes the full-year results to be lower than the outlook, primarily driven by a confined number of project delays, an impairment on the V174-9.5 MW turbine and increased warranty provisions.
In 2022, Vestas made strategic and commercial progress in terms of strengthening operations and substantially raising prices that indicates Vestas will deliver improved financial results in 2023. Activity levels in 2023 are expected to be lower than in 2022 followed by a step up in 2024 where installations in key markets are projected to increase.
Vestas’ preliminary and unaudited 2022 results show a total revenue of EUR 14,486m, (outlook: EUR 14.5-15.5bn). The Service business accounted for EUR 3,155m of the total revenue, corresponding to a year-on-year growth of 27 percent (outlook: min. 20 percent). The higher-than-expected revenue growth in Service thereby partially offsets the lower-than-expected Power Solutions revenue, which has been impacted by delays in execution.
Based on preliminary numbers, the EBIT margin before special items was 8.0, primarily driven by isolated events in the fourth quarter of 2022 as well as delays in a confined number of projects by the end of the fourth quarter. In the fourth quarter, additional warranty provisions of EUR 210m were made. The higher warranties primarily relate to increased repair and upgrade costs and a few select cases. As a result of an expected challenged profitability and lower order intake for offshore projects using the V174 turbine, an impairment of EUR 95m has been made on that platform in the quarter.
Increasing the price on wind turbines is and has been a necessity to address the external cost inflation and ensure the industry’s long-term value creation. Order intake in the fourth quarter was 4.2 GW with an average selling price of EUR 1.15m per MW, a sequential increase of 8 percent.
For the full year 2022 this resulted in an average selling price of EUR 1.07m per MW (onshore only: EUR 1.04m per MW).
Free cash flow amounted to EUR 1,283m in the fourth quarter but was negative EUR 953m for the full year compared to EUR 183m in 2021. This development was primarily a reflection of the lower profitability and resulted in a net debt position of EUR (46)m.
In 2023, high inflation levels are expected throughout the supply chain and reduced wind power installations to impact revenue and profitability negatively. The lower level of installations is caused by slow permitting processes in Europe as well as dampened activity levels in the U.S. due to a steep ramp-up ahead of a busy 2024 driven by the Inflation Reduction Act. Increasing prices on our order intake is an offsetting factor, but still leaves Vestas challenged on profitability in 2023.
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