Wednesday, 10 February 2021

Vestas Wind - 2020 Full Year Results


Vestas is one of the world's leading players in wind turbines - it designs, makes, installs and services both onshore and offshore turbines and holds the record of providing more turbines throughout 80 countries than any other company. The core of the business is providing sustainable, clean and affordable energy to people all around the world.

The company's aim is to become carbon neutral by 2030 and to produce zero-waste wind turbines by 2040.

Clean energy has been the fastest growing sector of the energy market in 2020 with a record 200GW of renewables coming onstream according to the IEA.

Vestas are the global leader in onshore wind - over 120 GW installed and also onshore servicing. They are #2 in offshore wind (behind Orsted) with 5 GW installed and plans to double this by 2022. It's market cap. is currently 250bn DKK (approx £30bn).

The shares were added to my ISA portfolio in October 2019 at the price of 535 DKK.

Results

The company have this week released results for the full year to end December 2020 (link via company website pdf).

It's been a tough year due to Covid so it's an achievement to have increased annual revenues by 22% to €14.8bn. However profits were down 25% to €750m due to supply chain challenges resulting from the global pandemic.

The combined order backlog increased from €34bn to €43bn which includes €4bn of offshore turbines and €24bn of servicing contracts. The company anticipates revenues of €16 to 17bn for the coming year with increased profit margin of 6 - 8%.

The company are moving into project development and in December they agreed a deal with Copenhagen Infrastructure and will invest €500m with a view to developing new projects and new markets across the world over the coming decade. As the wind sector becomes more competitive and margins fall, they see this as a way of capturing more value from future projects. CIP has over €14bn of assets under management and is a leading investor in clean energy.


Vestas is also moving to scale up its offshore operations and agreed to acquire the share of its joint venture with Mitsubishi Heavy Industries in the belief that offshore is likely to quadruple over the coming decade.

They propose a 6.6% hike in the dividend to 8.45 DKK which equates to just over 0.7% at current share price.

Group CEO, Henrik Andersen said : “Renewable energy took another large step forward in 2020 by improving its competitiveness, showing great resilience during a global pandemic, and proving renewables can serve as the backbone of our societies in the future. In 2020, Vestas continued to play a key role in the fight against climate crisis, and we met our revised guidance on all parameters, leading the industry on revenue, order intake, and profitability despite COVID-19 affecting all parts of our value chain.

In this environment, we achieved more than 17 GW of deliveries and bolstered our total order backlog to an all-time high of EUR 43bn through strong order intake, service growth, and the re-integration of offshore wind. Service performance was once again very strong with a 10 percent increase in revenue year-over-year and record EBIT margin of 28 percent. Group profitability was negatively impacted by warranty provisions and increased execution costs. In addition to acquiring MHI Vestas Offshore Wind, Vestas also made strategic strides to increase our presence across the value chain, including establishing a dedicated development business unit, launching the largest turbine in offshore wind and underlining our leading position within sustainability by reducing our own carbon emissions by 33 percent and reaching 186m tonnes of CO2 avoided on a yearly basis through our installed base. To position Vestas strongly for future growth and profitability, our focus in 2021 will be to fully integrate offshore and address executional challenges.”

One Year Share Price

The results have received a mixed response with the share price falling 3% to 1228 DKK on Wednesday.

In the US, the new Biden administration has pledged a $2 trillion clean energy transition with the promise of "tens of thousands of wind turbines". In Europe there's the €1 trillion Green Deal and the ambition of a 55% reduction of carbon emissions by 2030.  It is my opinion that we are at the beginning of a renewable energy megatrend which will build over the coming 20 to 30 years as we transition from fossil fuels to renewable energy. I fully expect Vestas to continue to benefit over the long term

As with Orsted, I am more than happy with my acquisition. In August last year I needed to sell some of my shares to fund my house purchase which completed later in the year but have recently repurchased to top up my holding which currently stands at 7% of my green portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in individual companies can be rewarding but is higher risk compared to collective investments - always DYOR!

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