Vestas has revised its financial outlook for 2024, narrowing its expected EBIT margin before special items to 4-5%, down from the previously forecasted 4-6%. The turbine manufacturer also adjusted its projected revenue for the year to a range of €16.5 billion to €17.5 billion, slightly lower than the earlier estimate of €16 billion to €18 billion.
The company attributed these adjustments to planned cost changes within its Service segment, which have impacted current profitability. While inflation indexation continues to be a key mechanism to protect profitability within the order backlog, the adjustments have led to a negative accounting effect of approximately €300 million on EBIT for the second quarter of 2024, due to percentage-of-completion (POC) accounting.
Preliminary figures for the second quarter of 2024 show that the Group's EBIT margin before special items stands at 5.6% with revenue at €3.3 billion. However, the Service segment reported a preliminary EBIT loss before special items of €107 million for the quarter.
Despite these challenges, Vestas emphasized the overall strength of its Service business. “Disregarding the negative adjustment in second quarter 2024, our profitability is on par with recent quarters, and we expect it to continue to stay on that level in the future with an upward trajectory,” the company stated. Vestas also noted that the adjustment has no significant impact on the value of the Service order backlog, which is preliminarily estimated at €34.9 billion for Q2 2024, or on adjusted free cash flow, preliminarily estimated at €0.5 billion.
The adjustments in the Service segment were attributed to a combination of sustained inflation in specific components, increased repairs and upgrades, and operational inefficiencies, partially offset by anticipated future efficiency gains and cost-out initiatives.
In contrast, the Power Solutions segment showed positive momentum, with an EBIT margin improvement of nearly 8% year-on-year and a quarterly order intake of 3.6 GW. However, the board noted that the lower-than-expected profitability in the Service segment led to the narrowing of the full-year outlook on Group revenue and EBIT margin.
Vestas now expects the Service segment to generate an EBIT before special items of around €500 million, down from the previously estimated range of €800 million to €880 million.
