Vestas Wind Systems A/S (CPH:VWS) sought to reassure investors as it reported a surge in wind turbine orders, two days after issuing a profit warning related to a different part of its business.
The company sold turbines equivalent to 3.6 gigawatts of capacity in the second quarter, a 54% increase compared to a year earlier, according to a statement released Tuesday. It follows a warning issued on August 12 that tightened the company’s guidance on its full-year revenue.
Vestas rose 0.5% in Copenhagen, paring this week’s drop to about 4%.
The firm’s second-quarter challenges came from a surprise loss at its business providing after-sales services for turbines. The unit has been a pillar of strength for the company during a difficult past few years when soaring costs and supply chain issues led to steep losses in its core turbine business.
Chief Financial Officer Hans Martin Smith said the issue was “hugely complicated,” but that profits at the services unit would return to previous levels going forward. The business took a disproportionate hit in the second quarter for accounting reasons, as higher costs weighed on the company’s long-term service contracts, he said.
That’s partly because demands for higher salaries exceeded Vestas’s expectations, while costs from sending workers to repair turbines also increased.
“Salary inflation is more sticky than we thought,” Smith said.
The unit’s quarterly loss forced Vestas to trim its full-year guidance earlier this week. The 2024 earnings margin is now expected at 4% to 5%, down from a range of 4% to 6%.
Now that weakness is being countered by the turbine business, with sales rising even as the company raises prices.
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