Company Reg. No.: 10403782
Company announcement No. 10/2022
Interim financial report
First quarter 2022
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Page 2 of 32
Classification: Public
Contents
Summary ........................................................................................................................................ 3
Financial and operational key figures ......................................................................................... 4
Sustainability key figures ............................................................................................................. 5
Group financial performance ....................................................................................................... 6
Power Solutions ............................................................................................................................ 8
Service ......................................................................................................................................... 10
Sustainability ............................................................................................................................... 11
Strategy and financial and capital structure targets ................................................................ 12
Outlook 2022 ................................................................................................................................ 15
Consolidated financial statements 1 January - 31 March ........................................................ 16
Management’s statement ........................................................................................................... 30
Information meeting (audiocast)
On Monday 2 May 2022 at 11 a.m. CEST (10 a.m. BST),
Vestas will host an information meeting via an audiocast.
The audiocast will be accessible via vestas.com.
The meeting will be held in English and questions may
be asked through a conference call. The telephone
numbers for the conference call are:
Europe: +44 3333 000 804
USA: +1 6319 131 422
Denmark: +45 3544 5577
Conference PIN code: 36757623#
Contact details
Vestas Wind Systems A/S, Denmark
Investors/analysts:
Mathias Dalsten, Vice President
Investor Relations
Tel: +45 2829 5383
Media:
Anders Riis, Vice President
Communications
Tel: +45 4181 3922
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Page 3 of 32
Classification: Public
Summary
Summary: For the first quarter of 2022, Vestas’ revenue
amounted to EUR 2,485m with an EBIT margin before
special items of (13.2) percent. Record high combined
order backlog of EUR 48.9bn – an increase of 9.4
percent compared to same quarter last year. Full-year
guidance updated.
In the first quarter of 2022, Vestas generated revenue of
EUR 2,485m – a increase of 27 percent compared to the
year-earlier period. EBIT before special items decreased
by EUR 251m to EUR (329)m. This resulted in an EBIT
margin before special items of (13.2) percent, compared
to (3.9) percent in the first quarter of 2021. Adjusted for
impairments and warranty provisions related to a review
of the offshore activities, the EBIT margin before special
items was (6.2) percent.
Free cash flow* amounted to EUR (1,121)m compared
to EUR (898)m in the first quarter of 2021.
The quarterly intake of firm and unconditional wind
turbine orders amounted to 2,948 MW. The value of the
wind turbine order backlog was EUR 18.9bn as at 31
March 2022. In addition to the wind turbine order
backlog, at the end of March 2022, Vestas had service
agreements with expected contractual future revenue of
EUR 30.0bn. Thus, the value of the combined backlog of
wind turbine orders and service agreements stood at
EUR 48.9bn – an increase of EUR 4.2bn compared to
the year-earlier period.
As part of our decision to withdraw from Russia and to
address the current business environment, we have
made a strategic re-prioritisation of select markets while
also making one-time write-downs related to legacy
offshore activities.
Based on these circumstances and the revenue and
profits forfeited in Ukraine and Russia, Vestas is
updating its outlook for 2022.
Revenue for full year 2022 is now expected to range
between EUR 14.5bn and 16.0bn (previously EUR 15.0-
16.5bn) including Service revenue which is now
expected to grow min. 10 percent (previously approx. 5
percent). Vestas expects to achieve an EBIT margin
before special items of (5)-0 percent (previously 0-4
percent) with a Service EBIT margin before special items
of approx. 23 percent (previously approx. 25 percent).
Total investments
*)
are still expected to amount to
approx. EUR 1,000m in 2022.
Group President & CEO Henrik Andersen said: “In the
first quarter of 2022, Vestas achieved a strong order
intake and continued to increase prices in a very
challenging business environment and unfolding energy
crisis. Under these circumstances, our underlying
performance was solid with revenue of EUR 2.5bn, a 27
percent increase year-over-year, as well as an average
selling price of EUR 1.01m/MW and increased Service
revenue and EBIT, but profitability was heavily impacted
by highly disrupted supply chains and one-offs. In the
quarter, we made one-time write-downs related to the
Russian invasion of Ukraine and legacy offshore
activities. To address the current business environment,
we also made a strategic re-prioritisation of select
markets and plans to adjust our manufacturing footprint,
which together with the write-downs on Russia, Ukraine,
and Offshore impacted our results negatively. Based on
these decisions and the uncertain business environment,
we are adjusting our financial guidance for the full year.
The growing energy crisis, however, also led to stronger
political support for renewables to enhance energy
independence and keep energy prices low, and we are
strengthening our foundation to support governments
and customers achieve these goals. Everyone at Vestas
continues to do an outstanding job in executing on our
strategic priorities in unprecedented and very
unpredictable circumstances, and Executive
Management wants to thank our customers, colleagues,
and partners for their ongoing engagement and support.”
Key highlights
Order intake of 2.9 GW and continued increase in prices
Wind turbine order backlog remains strong at EUR 18.9bn.
Revenue of EUR 2.5bn
Year on year revenue growth of 27 percent despite supply chain disruptions.
Evaluation of business activities
Strategic review and geopolitical events led to manufacturing and technology re-prioritisation.
Profitability hampered by supply chain disruptions and one-offs
Underlying negative EBIT margin of 6.2 percent while reported margin was negative 13.2 percent.
Sustainability-linked bonds issued
Two EUR 500m sustainability-linked bonds with significant oversubscription in a challenging bond market.
*) Excl. acquisitions of subsidiaries, joint ventures, associates, and financial investments.
Page 4 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Financial and operational key figures
mEUR
Q1
2022
Q1
5)
2021
4)
FY
5)
2021
4)
FINANCIAL HIGHLIGHTS
Income statement
Revenue
2,485
1,962
15,587
Gross profit
22
189
1,556
Operating profit/(loss) before amortisation, depreciation and impairment (EBITDA)
before special items
(20)
128
1,341
Operating profit/(loss) (EBIT) before special items
(329)
(78)
429
Operating profit/(loss) before amortisation, depreciation and impairment (EBITDA)
(585)
128
1,250
Operating profit/(loss) (EBIT)
(894)
(78)
290
Net financial items
6
(18)
(101)
Profit/(loss) before tax
(889)
(84)
225
Profit/(loss) for the period
(765)
(64)
144
Balance sheet
Balance sheet total
20,078
19,060
19,648
Equity
3,899
4,658
4,697
Net working capital
(609)
(380)
(1,049)
Capital employed
5,856
6,106
6,133
Interest-bearing position (net), at the end of the period
58
445
1,200
Cash flow statement
Cash flow from operating activities
(928)
(754)
956
Cash flow from investing activities before acquisitions of subsidiaries, joint ventures,
associates and financial investments
(193)
(144)
(773)
Free cash flow before acquisitions of subsidiaries, joint ventures, associates and
financial investments
(1,121)
(898)
183
Free cash flow
(1,123)
(1,090)
57
FINANCIAL RATIOS
1)
Financial ratios
Gross margin (%)
0.9
9.7
10.0
EBITDA margin (%) before special items
(0.8)
6.5
8.6
EBIT margin (%) before special items
(13.2)
(3.9)
2.8
EBITDA margin (%)
(23.5)
6.5
8.0
EBIT margin (%)
(36.0)
(3.9)
1.9
Return on capital employed (ROCE)
2)
(%) before special items
0.7
12.1
4.5
Net interest-bearing debt / EBITDA before special items
2)
0.0
(0.3)
(0.9)
Solvency ratio (%)
19.4
24.4
23.9
Return on equity
2)
(%)
(12.5)
20.2
3.0
Share ratios
Earnings per share
3)
(EUR)
(0.6)
0.8
0.1
Dividend per share
(EUR)
-
-
0.05
Pay-out ratio (%)
-
-
36.0
Share price at the end of the period (EUR)
26.9
35.0
26.9
Number of shares at the end of the period (million)
1,010
1,010
1,010
OPERATIONAL KEY FIGURES
Order intake (bnEUR)
3.0
1.6
11.6
Order intake (MW)
2,948
2,016
13,896
Order backlog – wind turbines (bnEUR)
18.9
19.4
18.1
Order backlog – wind turbines (MW)
22,181
24,814
21,984
Order backlog – service (bnEUR)
30.0
25.3
29.2
Produced and shipped wind turbines (MW)
3,969
4,530
17,845
Produced and shipped wind turbines (number)
951
1,127
4,456
Deliveries (MW)
2,236
1,925
16,594
1) The ratios have been calculated in accordance with the guidelines from The Danish Finance Society (Recommendations & Financial ratios).
2) Calculated over a 12-month period.
3) Earnings per share has been calculated over a 12-month period and in accordance with IAS 33 on earnings per share.
4) Comparative figures for 2021 have been adjusted following the accounting policy change for configuration and customisation cost in cloud computing arrangements, refer to
note 5.3.
Page 5 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Sustainability key figures
1)
Q1
2022
Q1
2021
FY
2021
ENVIRONMENTAL
Utilisation of resources
Consumption of energy (GWh)
169
214
738
- of which renewable energy (GWh)
59
80
283
- of which renewable electricity (GWh)
49
62
233
Renewable energy (%)
35
37
38
Renewable electricity for own activities
(%)
100
100
100
Withdrawal of fresh water (1,000 m³)
81
100
378
Waste
Volume of waste from own operations (1,000 t)
14
19
70
- of which collected for recycling (1,000 t)
7
10
35
Recyclability rate of hub and blade
3)
(%)
//
//
42
Material efficiency (tonnes of waste excl. recycled per MW produced and shipped)
1.7
2.0
2.0
Carbon emissions adjusted for acquisitions and investments
Direct emissions of CO
2
e
(scope 1) (1,000 t)
24
25
2)
99
2)
Indirect emissions of CO
2
e
(scope 2) (1,000 t)
1
1
2)
3
2)
Indirect emissions of CO
2
e from the supply chain (scope 3)
3)
(million t)
//
//
10.56
Indirect emissions of CO
2
e from the supply chain (scope 3)
3)
(kg per MWh generated)
//
//
6.65
Products
Expected CO
2
e avoided over the lifetime of the MW produced and shipped during the
period (million t)
118
126
532
Annual CO
2
e
avoided by the total aggregated installed fleet (million t)
216
192
210
SOCIAL
Safety
Total Recordable Injuries (number)
47
49
201
- of which Lost Time Injuries (number)
20
16
67
- of which fatal injuries(number)
0
0
0
Total Recordable Injuries per million working hours (TRIR)
3.1
3.1
3.1
Lost Time Injuries per million working hours (LTIR)
1.3
1.0
1.0
Employees
Average number of employees (FTEs)
Employees at the end of the period (FTEs)
29,274
29,229
29,427
Diversity and inclusion
Women in the Board
and Executive Management at the end of the period (%)
27
27
27
Women in leadership positions at the end of the period (%)
22
20
21
Human rights
Community grievances
3)
(number)
//
//
17
Community beneficiaries
3)
(number)
//
//
8,236
Social Due Diligence on projects in scope
3)
(%)
//
//
0
GOVERNANCE
Whistle-blower system
EthicsLine compliance cases
3)
(number)
//
//
465
- of which substantiated
//
//
96
- of which unsubstantiated
//
//
292
1) For general definitions and specifications on these sustainability key figures, see the Notes to sustainability key figures in the Annual Report 2021, page 142-143.
2) In alignment with the GHG protocol standard, data for 2021 has retroactively been adjusted for acquisitions and divestments in 2020 and 2021 in accordance with Vestas’ policy
on baseline adjustments for CO
2
emissions and related indicators.
3) Only reported on an annual basis.
Page 6 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Group financial performance
Income statement
Revenue
Revenue in the first quarter of 2022 amounted to EUR
2,485m, an increase of 26.7 percent compared to EUR
1,962m in the first quarter of 2021. The increase was
particularly driven by higher wind turbine deliveries in the
USA and Northern Europe. Compared to the foreign
exchange rates in the first quarter of 2021, revenue for
the first quarter of 2022 reflects a positive impact of
approx. EUR 61m from foreign exchange rate translation.
Revenue and EBIT margin before special items
mEUR and percentage
Gross profit
Gross profit amounted to EUR 22m, corresponding to a
gross margin of 0.9 percent, which is an 8.8 percentage
point decrease compared to the first quarter of 2021. The
decrease in the gross margin was mainly attributable to
an adjustment related to offshore activities covering EUR
83m impairment losses related to the V164/V174 offshore
technology and related assets and as well increased
warranty provisions for offshore turbines already installed
of EUR 93m. Excluding these effects, the gross profit in
the quarter amounted to EUR 134m highlighting that the
quarter was also negatively impacted by the continued
external cost inflation and supply chain disruptions.
Warranty provisions
Costs for warranty provisions amounted to EUR 195m in
the first quarter of 2022, compared to EUR 63m in the first
quarter of 2021. This is equivalent to a warranty ratio of
7.8 percent of revenue in the first quarter of 2022. The
increase of 4.6 percentage points from 3.2 percent in the
first quarter of 2021 was a result of additional warranty
provisions totalling EUR 124m, caused by increasing
repair and upgrade costs due to external cost inflation and
EUR 93m to offshore wind turbines already installed.
Research and development costs, Distribution
costs and Administration costs
Research and development costs recognised in the
income statement amounted to EUR 149m, which is an
increase of EUR 56m compared to EUR 93m in the first
quarter of 2021. The increase was mainly related to the
impairment losses recognised on the V164/V174 offshore
technology.
Distribution costs amounted to EUR 115m in the first
quarter of 2022 compared to EUR 87m in the first quarter
of 2021. The increase was mainly due to higher sales
activity and increasing depreciation and impairment of
transportation equipment.
Administration costs amounted to EUR 87m which is on
par with the amount in the first quarter of 2021.
Depreciation, amortisation, and impairment
In the first quarter of 2022, overall depreciation,
amortisation, and impairment before special items
amounted to EUR 309m. This compares to EUR 206m in
the same quarter of 2021. The increases are primarily
attributable to higher depreciation of development
projects and transportation equipment as well as the
impairment of EUR 83m related to V164/V174 offshore
technology and related assets as part of the offshore
business acquired in 2020.
Operating profit (EBIT) before special items
EBIT before special items amounted to negative EUR
329m in the first quarter of 2022, compared to negative
EUR 78m in the first quarter of 2021, and equivalent to an
EBIT margin of negative 13.2 percent. The EBIT margin
before special items decreased by 9.3 percentage points
compared to the first quarter of 2021. The adjustments
related to offshore had an impact of EUR 176m, and
excluding this, the EBIT margin before special items in the
first quarter was negative 6.2 percent equal to a decline
of 2.3 percentage points compared to first quarter of 2021,
mainly driven by the lower gross profit.
Operating profit (EBIT) after special items
In the first quarter of 2022, EBIT after special items
amounted to negative EUR 894m (Q1 2021: negative
EUR 78m). The negative EBIT after special items reflects
special items costs of EUR 401m recognised in the first
quarter of 2022 following Russia’s invasion of Ukraine
and Vestas’ decision to withdraw from the Russian market
while stopping all service and construction activities in
Ukraine under the current circumstances. Furthermore,
special items costs of EUR 183m related to the
manufacturing footprint in China and India has been
recognised as well as an adjustment of positive EUR 19m
related to the footprint change announced in September
2021.
Income from investments in joint ventures and
associates
Income from investments in joint ventures and associates
amounted to net negative EUR 1m in the first quarter of
2022, compared to a profit of EUR 12m in the first quarter
of 2021. The negative net profit was comprised of a gain
from the investment in Copenhagen Infrastructure
Partners P/S, offset by a loss from the co-development
activities in the USA.
Page 7 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Net financial items
Financial items for the first quarter of 2022 amounted to
positive EUR 6m compared to negative EUR 18m in the
first quarter of 2021, primarily driven by foreign exchange
impacts.
Income tax
Income tax amounted to an income of EUR 124m,
equivalent to an effective tax rate of 14 percent, compared
to 24 percent in the first quarter of 2021.
Net result for the period
The net result amounted to a loss of EUR 765m in the first
quarter of 2022 compared to a loss of EUR 64m in the
first quarter of 2021. The decrease in net result was
mainly driven by the special items and offshore
adjustments recognised in the first quarter of 2022.
Financial ratios
Earnings per share calculated over a 12-month period
amounted to negative EUR 0.6 in the first quarter of 2022,
a decrease of EUR 1.4 compared to EUR 0.8 in the first
quarter of 2021, driven by the lower result in the period.
Return on capital employed (ROCE) before special items
was 0.7 percent in the first quarter of 2022, a decline
compared to 12.1 percent for the first quarter of 2021 due
to the lower EBIT.
Return on equity was negative 12.5 percent in the first
quarter of 2022 (Q1 2022: 20.2 percent), a decrease of
32.7 percentage points attributable to the lower net profit.
Working capital and free cash flow
Net working capital
Net working capital amounted to a net liability of EUR
609m as at 31 March 2022, compared to a net liability of
EUR 380m as at 31 March 2021. The development was
mainly driven by increasing payables offset by contracts
assets from the higher activity less down- and milestone
payments.
Cash flow from operating activities
Cash flow from operating activities was negative EUR
928m in the first quarter of 2022, down from negative
754m in the first quarter of 2021, primarily due to negative
cash flows from the profit in the period, partially offset by
a lower negative cash flow from net working capital
compared to the first quarter of 2021.
Cash flow from investing activities
Cash flow from investing activities before acquisition of
subsidiaries, joint ventures, associates, and financial
investments amounted to a net outflow of EUR 193m,
compared to EUR 144m in the first quarter of 2021. The
EUR 49m increase in the net investment level was driven
by investments in property, plant, and equipment (PPE)
relating to transport equipment and construction tools.
Free cash flow
Free cash flow before acquisition of subsidiaries, joint
ventures, associates, and financial investments
amounted to negative EUR 1,121m, compared to
negative EUR 898m in the first quarter of 2021. The
negative development was driven by a negative cash flow
from operating activities and purchase of property, plant
and equipment in the first quarter of the year.
Capital structure and financing items
Equity and solvency ratio
As at 31 March 2022, total equity amounted to EUR
3,899m, a decrease from the level at the end of March
2021 of EUR 4,658m and mainly attributable to the
negative net profit in the first quarter of 2022.
As at 31 March 2022, the solvency ratio was 19.4 percent,
which is a decrease of 5 percentage points from the first
quarter of 2021. The solvency ratio was negatively
impacted by a lower equity.
Net interest-bearing position and cash position
As at 31 March 2022, the net interest-bearing position
was positive EUR 58m, a decline of EUR 387m,
compared to a positive position of EUR 445m at the end
of the first quarter of 2021. This development was a result
of an increasing financial debt and a negative free cash
flow in the quarter.
Cash and cash equivalents amounted to EUR 1,801m as
at 31 March 2022, compared to EUR 1,677m at the end
of the first quarter of 2021.
On 15 March 2022, Vestas issued two EUR 500m
sustainability-linked bonds to refinance the EUR 500m
Green bond redeemed in December 2021 and secure
long-term funding. The two bonds will mature in 2029 and
2034, respectively.
The ratio net interest-bearing debt/EBITDA of 0.0 as at 31
March 2022 increased compared to negative 0.3 at the
end of the first quarter of 2021. The ratio was negatively
impacted by both a lower EBITDA and deteriorated net
interest-bearing position.
Page 8 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Power Solutions
Result for the period
In the first quarter of 2022, revenue from the Power
Solutions business amounted to EUR 1,862, above the
revenue in the first quarter of 2021 of EUR 1,438m. The
increase was mainly attributable to the markets in the
USA and Northern Europe. Offshore contributed with
revenue of EUR 157m.
EBIT before special items amounted to negative EUR
380m in the first quarter of 2022, equal to an EBIT margin
of negative 20.4 percent. Compared to the first quarter
of 2021, this is a deterioration of 12.8 percentage points.
The negative development in the EBIT margin was
attributable to the offshore adjustment covering
impairment losses related to the V164/V174 offshore
technology and additional warranty provisions.
Excluding this impact, the EBIT margin for the Power
Solutions business was negative 11.6 percent
highlighting an increased impact from external cost
inflation and supply chain disruptions.
Power Solutions revenue and EBIT margin before special
items
mEUR and percentage
Wind turbine order intake
In the first quarter of 2022, wind turbine order intake
amounted to 2,948 MW, corresponding to a value of
EUR 3.0bn. This represents an increase of 46 percent
compared to an order intake of 2,016 MW in the first
quarter of 2021. The increase was mainly related to two
offshore projects in Taiwan, and strong onshore order
intake in Latin America, particularly in Brazil and
Argentina.
The average price per MW was EUR 1.01m (EUR 0.89m
for onshore only) in the first quarter of 2022, compared
to EUR 0.80m in the first quarter of 2021 and EUR 0.83m
for full year 2021, highlighting continued price increases
towards customers to offset the external cost inflation, as
well as a relatively higher offshore order intake in the first
quarter of 2022 compared to the same quarter last year.
Wind turbine order intake, first quarter 2022
MW
EMEA
Ameri-
cas
Asia
Pacific
Total
Onshore order
intake
1,159
849
321
2,329
Offshore order
intake
30
-
589
619
Total order
intake
1,189
849
910
2,948
Wind turbine deliveries
Deliveries to customers amounted to 2,236 MW in the
first quarter of 2022, compared to 1,925 MW in the first
quarter of 2021. The increase was mainly driven by
deliveries in the USA and Northern Europe.
Deliveries
MW
By the end of March 2022, Vestas had installed a total
capacity of 154 GW in 87 countries.
Page 9 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Deliveries (onshore and offshore)
MW
Q1
2022
Q1
2021
FY
2021
Finland
233
20
838
Poland
165
50
739
France
128
129
668
United Kingdom
126
109
2,129
Germany
124
147
598
Netherlands
121
63
388
Sweden
70
49
679
Belgium
57
18
90
Spain
35
4
76
Austria
29
11
91
Ukraine
24
-
-
Greece
17
6
40
Faroe Islands
14
-
11
Russian Fed.
13
65
473
Italy
13
11
321
Ireland
11
-
-
Turkey
7
66
88
Egypt
6
4
24
Portugal
2
-
97
South Africa
-
49
330
Jordan
-
33
38
Denmark
-
31
235
Saudi Arabia
-
96
245
Norway
-
1
413
EMEA
1,195
962
8,611
Hereof Offshore
97
86
2,007
Brazil
368
398
1,892
USA
349
89
3,065
Colombia
37
-
41
Chile
33
70
314
Mexico
7
127
200
Bolivia
-
20
39
El Salvador
-
9
9
Panama
-
1
25
Canada
-
-
151
Puerto Rico
(2)
*)
-
11
Americas
792
714
5,747
Hereof Offshore
-
-
-
Japan
104
6
170
Australia
73
41
389
India
30
18
157
Vietnam
21
30
1,132
Taiwan
11
-
35
China
7
136
319
New Zealand
5
18
30
South Korea
1
-
1
Sri Lanka
(3)
*)
-
3
Asia Pacific
249
249
2,236
Hereof Offshore
16
-
-
Total
2,236
1,925
16,594
Hereof Offshore
113
86
2,007
*) Part of Vestas’ deliveries are based on a percentage-of-completion method
requiring estimates in relation to stage of completion.
Wind turbine order backlog
At the end of the first quarter of 2022, the wind turbine
order backlog amounted to 22,181 MW, which
corresponds to a value of EUR 18.9bn, of which EUR
3.5bn relates to offshore wind power projects. The
onshore order backlog was impacted by a 714 MW write-
down of order backlog in Russia and Ukraine
corresponding to EUR 0.5bn, due to the war in Ukraine.
Order backlog per region
MW
EMEA
Ameri-
cas
Asia
Pacific
Total
Onshore order
backlog
9,709
7,191
2,319
19,219
Offshore order
backlog
1,661
-
1,301
2,962
Total backlog as at
31 March 2022
11,370
7,191
3,620
22,181
Europe, Middle East, and Africa (EMEA)
The total order backlog for Europe, Middle East, and
Africa decreased 17 percent from end of first quarter of
2021 to 11,370 MW at the end of first quarter 2022. The
decrease was driven by the exclusion of Russia and
Ukraine and a decrease in the offshore backlog from
2,907 MW in first quarter 2021 to 1,661 MW in first
quarter 2022, following a high level of deliveries of
offshore wind turbines in 2021.
Americas
The total order backlog for Americas decreased 4
percent from the end of first quarter 2021 to 7,191 MW
at the end of first quarter 2022. The decrease was largely
driven by the onshore order backlog in the USA and
Brazil relating to high deliveries partially offset by
increases in Canada and Argentina.
Asia Pacific
The total order backlog for Asia Pacific at the end of the
first quarter 2022 of 3,620 MW was in line with the order
backlog end of first quarter 2021. The offshore backlog
contributed with an increase to 1,301 MW first quarter of
2022, mainly in Taiwan, offset by a decrease in onshore
backlog, mainly in Vietnam.
Page 10 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Service
Result for the period
The Service business generated revenue of EUR 623m
in the first quarter of 2022, which corresponds to a 19
percent increase compared to the first quarter of 2021.
The increase was mainly driven by higher activity levels
overall and within transactional sales as well as inflation
mechanisms in contracts.
Service revenue and EBIT margin before special items
mEUR and percentage
EBIT before special items amounted to EUR 127m in the
first quarter of 2022, corresponding to an EBIT margin of
20.4 percent, which is a 0.6 percentage point decrease
compared to the same period last year. Excluding the
impairment losses related to offshore technology, the
EBIT margin before special items was 22.3 percent. The
underlying improvement reflects a higher activity level.
Wind turbines under service
At the end of March 2022, Vestas had around 53,500
wind turbines under service, equivalent to 132 GW.
Lost Production Factor
*)
Percent
*) Data calculated across approx. 35,000 Vestas wind turbines under full-scope
service. The lost production factor includes both onshore and offshore turbines.
At the end of March 2022, the overall average Lost
Production Factor continued to be impacted by the level
of extraordinary repairs and upgrades.
Service order backlog
At the end of March 2022, Vestas had service contracts
in the order backlog with expected contractual future
revenue of EUR 30.0bn, an increase of EUR 4.7bn
compared to 31 March 2021 from all regions despite
negative impact from the write-down of order backlog in
Russia and Ukraine of EUR 0.6bn.
Service order backlog
bnEUR
At the end of the quarter, the average duration in the
service order backlog was approx. ten years,
unchanged from at the end of 2021.
Page 11 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Sustainability
The Vestas Sustainability Strategy
Vestas has been leading the transition to a world
powered by sustainable energy for over four decades.
But in 2020, we launched our sustainability strategy to
embed sustainability in everything we do with clear
ambitions: achieving carbon-neutrality of our own
operations by 2030, without using carbon offsets;
creating zero-waste wind turbines by 2040; becoming
the safest, most inclusive and socially responsible
workplace in the energy industry; and leading the
transition to a world powered by sustainable energy.
Carbon footprint
Wind turbines produced and shipped in the first quarter
of 2022 are expected to avoid 118 million tonnes of CO
2
e
over the course of their lifetime, while the aggregate
installed fleet (all turbines installed since 1981 minus the
turbines decommissioned) are estimated to have
avoided 216 million tonnes of CO
2
e to date.
In the first quarter of 2022, our total scope 1 and 2
emissions decreased by 4 percent compared to the first
quarter of 2021. This can be attributed to lower activity
levels overall and the installation of a new biomass boiler
in our factory in Daimiel, Spain. Scope 3 emissions are
reported annually in the Vestas Sustainability Report.
During the first quarter of 2022. we continued to
transition to e-mobility in our company car and service
vehicle fleet. For company cars, 64 percent of the fleet is
now plug-in hybrids or battery electric vehicles. For the
service fleet, 16 additional sustainably fueled vehicles
were introduced, bringing the total to 263.
Circularity
Following the launch of our Circularity Roadmap in the
third quarter of 2021, we now report the material
efficiency of our own operations on a quarterly basis. In
the first quarter of 2022, our material efficiency improved
15 percent compared to the first quarter of 2021 to 1.7
tonnes of waste per MW produced and shipped. This
improvement is primarily due to lower overall waste since
last year from factories sold or closed and lower
production levels.
Sustainability-linked Bonds
In March 2022, we became the first wind turbines
manufacturer and Danish company as such to issue
Sustainability-Linked Bonds (SLB’s). The two EUR 500m
bonds follow last year’s completion of a EUR 2bn
sustainability-linked revolving credit facility. The bond’s
fixed rate is directly linked to our sustainability
performance and will be adjusted based on yearly
defined sustainability targets in the following areas:
Reducing carbon emissions in our own
operations (scope 1 and 2)
Reducing carbon emissions in our supply chain
(scope 3)
Increasing material efficiency in our own
operations
The SLB’s are a significant step forward in leading the
transition towards a sustainable future by linking our
sustainability performance with interest rate margins,
and clearly reinforce our commitment to integrate
“Sustainability in everything we do.”
Safety
Working towards becoming the safest workplace in the
energy industry, we aim to reduce the Total Recordable
Injury Rate (TRIR) to 1.5 by 2025 and 0.6 by 2030,
equivalent to a 15 percent annual reduction from 2019.
In the first quarter of 2022, 47 recordable injuries were
registered, resulting in a TRIR of 3.1 which is unchanged
from the rate at the end of 2021.
Incidence of total recordable injuries*
Per million working hours
*) Up until 14 December 2020, when Vestas acquired MHI Vestas Offshore Wind A/S,
numbers reflect onshore only.
Page 12 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Strategy and financial and
capital structure targets
(For an extended introduction to the Vestas strategy,
please refer to the Annual Report 2021.)
Accelerating the journey to net zero
We are currently in a climate change crisis, which is the
greatest challenge humanity has ever faced. This can
only be changed through a new major industrial
revolution: the global energy transition and the need to
act has never been clearer. Global temperature levels
have already increased by 1.2°C and continue to rise,
highlighting the urgency with which we must act to stay
within the 1.5°C scenario.
An important step towards action was taken at COP26 in
Glasgow in November 2021, where climate targets were
increased, additional countries announced net zero
targets and the phase-out of coal was included for the
first time. However, these targets fall short of deploying
renewable energy fast enough, according to the
International Energy Agency (IEA). Further on the
COVID-19 pandemic led to a further deepening of the
world’s dependence on gas and coal and creating price
and supply volatility.
The value of wind turbines and other renewable
technologies is already well established. The energy
transition though is more than a technology revolution. It
also requires a fundamental shift in mindset – thinking
and acting across our entire value chain, employing
circularity and collaborating across the industry,
strengthening of supply chains to ensure flexibility and
alleviate challenges. Further on, the industry must
become more profitable, with appropriate return
measurements on equity and capital. As a leader in
sustainable energy solutions, Vestas is deeply
committed to ensuring the renewables industry achieves
full maturity.
Today, electricity constitutes just 20 percent of the global
energy system, and of this wind energy provides around
6 percent. With less than 2 percent of all energy coming
from wind turbines, it is clear the growth potential within
the electricity system alone is tremendous. For more
than 40 years, Vestas has driven the global energy
transition. This will remain our key focus. To create a
sustainable planet for future generations and continue to
provide an economic return to our shareholders, we
must, however, also look beyond wind energy. We will
continue to invest in solutions that enable both the
continued deployment of renewables and allow us to
integrate sustainability in everything we do.
Industry leadership and challenging new fields
For more than 40 years, Vestas has delivered solutions
to one of the world’s biggest challenges. This
commitment has taken us to global wind leadership with
a presence in more than 80 countries. During this period,
we have made wind energy the cheapest new sources of
electricity along solar PV. We have further paved the way
for a sustainable energy system but there is still a long
way to go.
Solving the climate crisis entails decarbonising the entire
energy system. Vestas has the scale, reach, track
record, and technological expertise to continue leading
the buildout of renewable energy and expand renewable
energy through the following core pillars:
· Increasing the renewable energy penetration of
electricity
· Driving direct electrification
· Developing and implementing solutions for
indirect electrification
As part of our strategy, and as part of our efforts to play
a leading role in the energy transition, in 2021 we made
significant strides towards achieving our vision of
becoming the global leader in sustainable energy
solutions. The main ones:
· Finalised the integration of Offshore, establishing
one globally aligned organisational footprint for
Vestas
· Introduced the offshore V236-15 MW™ offshore
turbine
· Launched roadmap to secure full circularity by
2040 and accelerated targets for full rotor
recyclability by 2030
· Matured our business across the value chain
· Increased our focus in project development,
Power-to-X, and Vestas Ventures
In the mid-term, our priorities remain to lead the market
in both wind power plant solutions and in service while
integrating sustainability in everything we do. We also
aim to ensure industry-leading profitability, sustaining
our preferred partner status with customers, and
attracting the best talent in the energy industry.
To achieve our goals and lead the energy transition, we
focus on three strategic business areas: onshore,
offshore, and service. For an elaborated version of
priorities and ambitions for those three business areas,
please refer to the Annual Report 2021.
Driving industry maturity
To drive our strategic priorities and ensure we focus on
the key challenges we face, Vestas runs a yearly
strategy cycle and review where we discuss, adjust and
optimise our strategy based on market changes and
future scenarios. The yearly cycle ensures close
alignment on strategic priorities between the Board of
Directors and the Executive Management team,
providing the organisation with a strong focus and
ensuring clear direction for all of our colleagues around
the world.
Page 13 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
In 2021, our key strategic priorities included among
others the following:
· Sustainability: To address the climate crisis while
meeting the growing expectations of our
stakeholders, we have mobilised internal functions to
accelerate our sustainability journey. Despite the
inclusion of offshore activities, we remain committed
to carbon neutrality in our own operations by 2030.
We have launched our Circularity Roadmap and
accelerated progress towards zero-waste turbines
and continue to invest in sustainable mobility.
· Quality: A key part of the continued evolution of our
industry is to provide quality to ensure resilient
energy systems. This includes dealing with issues in
an efficient and customer-focused manner.
Continued growth through new product introductions,
accelerated cost-out and high activity levels have put
pressure on the entire Vestas value chain, including
our quality. To address these challenges, we have
reinforced our quality culture and focus through
several initiatives and strengthened and simplified
our processes and governance and developed a
strong quality community across Vestas. Our aim is
to ensure issues are contained and solved close to
their origin, while providing best-in-class quality for
future customer solutions.
· Talent & Leadership: Vestas’ growth ambitions
require us to attract, recruit, develop, and retain
business-critical talents. In order to achieve these
talent objectives, we have launched several
initiatives to consolidate our position as an attractive
employer, improve succession planning and create a
more diverse talent pipeline.
Long-term financial ambitions
Wind power has outcompeted fossil fuel alternatives in
most parts of the world, volumes in the global wind
turbine market are good, and the prospects for the
coming years promising, with wind power’s expected
central role in the electrification of societies, industries
and mobility systems and forecasts of accelerated
annual growth of wind power capacity towards 2030
1
. At
the same time, the wind power industry has seen
consolidation, giving way for a more stable competitive
environment. The profitability, however, is still not at a
satisfactory level, and hence this needs to remain a focus
area for wind turbine manufacturers in the coming years.
Severe supply chain instability and cost inflation has only
made this more important.
1
Source: Wood Mackenzie: Market Outlook Update Q4 2021. November 2021.
Onshore
The demand for onshore wind power globally is expected
to remain relatively stable at the current high level the
next couple of years. After that, a new phase of growth
is expected, driven by new policies, increased
electrification, and corporate ambitions and activities.
Adding to that, Vestas expects to see increasing
contributions from its development activities, as well as
growing capabilities within the fast-developing market for
Power-to-X and hybrid solutions. On this background,
Vestas maintains its long-term ambition for the onshore
wind power segment to grow faster than the market and
be market leader in revenue.
Offshore
The projections for the offshore market suggest a
development in three phases for Vestas’ acquired
offshore business. Based on the order backlog, Vestas
will see a good activity level in the coming year.
Following that, the company expects to see a decline in
activity towards 2025, while necessitating to invest
heavily both in the organisation, supply chain, and
technology. By 2025, upon the steep increase in annual
offshore installations and Vestas' new platform gaining
traction in the market, Vestas aims to be a leading player
in offshore wind power.
Based on these assumptions, Vestas has an ambition to
achieve revenue in the offshore business area of EUR
+3bn by 2025, with an EBIT margin before special items
on par with the Group's overall margin.
Service
The wind power service market is expected to grow at
high single digit rate, and Vestas maintains its ambitions
for the long-term for the Service revenue to grow faster
than the market. The Service EBIT margin is expected at
a level of around 25 percent in the coming years, taking
into account the integration of the offshore business,
which currently generates lower margins than onshore.
General ambitions
Despite supply chain instability and a high degree of cost
inflation, causing volatility in the demand for wind power,
Vestas maintains its ambition on an overall level to grow
faster than the market and be market leader in revenue.
The company also remains optimistic about reaching a
10 percent EBIT margin before special items. Based on
the current market conditions and projections, we now
envision this to be achieved by 2025. The introduction of
our new offshore turbine platform will impact free cash
flow, but Vestas nevertheless expects to generate
positive cash flow and to achieve a long-term ROCE of
minimum 20 percent over the cycle.
Page 14 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Financial and capital structure targets and
priorities
The Board and Executive Management regularly assess
whether Vestas’ capital structure, i.e. how the company
funds its overall operations and growth, is in the
shareholders’ best interest. The ongoing assessments
also include the ways in which it supports our corporate
strategy.
Financial management
In relation to financial management, the objective is to
create the necessary flexibility and stability to implement
strategic development work, while in the long-term
achieving Vestas’ financial ambitions. At the same time,
we aim to reduce the cost of capital.
On the back of the strong investment grade credit rating
obtained in 2021 (Baa1 from Moody’s Investors Service),
in the first quarter of 2022 we issued two EUR 500m
sustainability-linked bonds. The proceeds will be used for
strengthening our liquidity and financial flexibility.
Capital structure targets
As a key player in a market where projects, customers,
and wind energy investors are increasing in size and
number, we aim to be a strong financial counterpart. We
will maintain capital resources to ensure compliance with
our capital structure target of net interest-bearing debt to
EBITDA below 1x at any time.
Capital allocation priorities
Vestas applies the following principles to capital
allocation:
Provide the investments and R&D required to
realise our corporate strategy and our long-term
vision of being the global leader in sustainable
energy solutions.
Make bolt-on acquisitions to accelerate or
increase profitable growth prospects. All
investments in organic growth and acquisitions
must support our long-term financial ambition of
achieving return on capital employed.
Pay shareholder dividends based on the Board’s
intention to recommend 25-30 percent of the
company’s annual net result after tax, which will be
paid out following shareholder approval at the
annual general meeting.
From time to time, initiate share buy-back
programmes to adjust the capital structure. Any
decision to distribute cash to shareholders will be
based on the capital structure target and
availability of excess cash. The level of excess
cash will be determined in line with our growth
plans and liquidity requirements. Share buy-back
programmes, if any, will likely be initiated in the
second half of the year based on performance. In
2021, we decided not to initiate a share buy-back
program, mainly because of the extraordinary
impact from cost inflation and general uncertainty
in the market.
The Board and Executive Management consider that
Vestas’ current capital and share structure serves the
interests of shareholders and the company well. It also
provides strategic flexibility to pursue our vision of
becoming the global leader in sustainable energy
solutions.
Page 15 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Outlook 2022
The business environment worsened significantly during
the first quarter of 2022 due to Russia’s invasion of
Ukraine, and the associated ripple effects on global trade
and cost inflation. At the same time, we have seen
lockdowns in China that will continue to impact the wind
power industry throughout 2022, together with increased
cost inflation for raw materials, wind turbine components
and energy prices.
As part of our decision to withdraw from Russia and to
address the current business environment, we have
made a strategic re-prioritisation of select markets, while
also making one-time write-downs related to legacy
offshore activities.
Based on these circumstances and the revenue and
profits forfeited in Ukraine and Russia, Vestas is
updating its outlook.
Revenue for full year 2022 is now expected to range
between EUR 14.5bn and 16.0bn (previously EUR 15.0-
16.5bn) including Service revenue which is now
expected to grow min. 10 percent (previously approx. 5
percent). Vestas expects to achieve an EBIT margin
before special items of (5)-0 percent (previously 0-4
percent) with a Service EBIT margin before special items
of approx. 23 percent (previously approx. 25 percent).
Total investments
*)
are still expected to amount to
approx. EUR 1,000m in 2022.
It should be emphasised that there is greater uncertainty
than usual around forecasts related to execution in 2022,
and the outlook seeks to take into account the current
situation and challenges.
In relation to forecasts on financials from Vestas in
general, it should be noted that Vestas’ accounting
policies only allow the recognition of revenue when the
control has passed to the customer, either at a point in
time or over time. Disruptions in production and
challenges in relation to shipment of wind turbines and
installation hereof, for example bad weather, lack of grid
connections, and similar matters, may thus cause delays
that could affect Vestas’ financial results for 2022.
Further, the full-year results may also be impacted by
movements in exchange rates from current levels.
Outlook 2022
Updated
outlook
Initial
outlook
Revenue (bnEUR)
14.5-16.0
15.0-16.5
EBIT margin (%) before
special items
(5)-0
0-4
Total investments
*)
(mEUR)
approx. 1,000
approx. 1,000
*)
Excl. acquisitions of subsidiaries, joint ventures, associates, and financial
investments.
Page 16 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Consolidated financial statements 1 January - 31 March
Condensed income statement 1 January - 31 March
mEUR
Note
Q1
2022
Q1
5)
2021
1)
Revenue
1.1, 1.2
Production costs
(2,463 )
(1,773 )
Gross profit
Research and development costs
(149 )
(93 )
Distribution costs
(115 )
(87 )
Administration costs
(87 )
(87 )
Operating profit/(loss) (EBIT) before special items 1.1 (329 ) (78 )
Special items
1.3
(565 )
Operating profit/(loss) (EBIT) (894 ) (78 )
Income from investments in joint ventures and associates
(1 )
Net financial items
(18 )
Profit before/(loss) tax
(889 )
(84 )
Income tax
Profit/(loss) for the period
(765 )
(64 )
Profit/(loss) is attributable to:
Owners of Vestas
(765 )
(68 )
Non-controlling interests
(0 )
Earnings per share (EPS)
Earnings per share for the period (EUR), basic
(0.76 )
(0.07 )
Earnings per share for the period (EUR), diluted
(0.76 )
(0.07 )
Condensed statement of comprehensive income 1 January - 31 March
mEUR
Q1
2022
Q1
1)
2021
1)
Profit/(loss) for the period
(765 )
(64 )
Items that may be reclassified to the income statement subsequently:
Exchange rate adjustments relating to foreign entities
Fair value adjustments of derivative financial instruments for the period
(69 )
(7 )
Gain/(loss) on derivative financial instruments transferred to the income statement
(2 )
(6 )
Share of fair value adjustments of derivatives financial instruments of joint ventures and associates
Tax on items that may be reclassified to the income statement subsequently
(2 )
Other comprehensive income after tax for the period
Total comprehensive income for the period
(757 )
(5 )
The above condensed statement of comprehensive income should be read in conjunction with the accompanying notes.
1)
Comparative figures for 2021 are adjusted in relation to accounting policy change for configuration and customisation cost in cloud computing arrangements, refer to note 5.3.
Page 17 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Condensed balance sheet – Assets
mEUR
Note
31 March
2022
31 March
1)
2021
1)
31 December
1)
2021
1)
Goodwill
Completed development projects
Software
Other intangible assets
Development projects in progress
Total intangible assets
Land and buildings
Plant and machinery
Other fixtures, fittings, tools and equipment
Right-of-use assets
Property, plant and equipment in progress
Total property, plant and equipment
2.1
Investments in joint ventures and associates
Other investments
Tax receivables
Deferred tax
Other receivables
3.4
Financial investments
3.4
Total other non-current assets
Total non-current assets
Inventories
Trade receivables
Contract assets
Contract costs
Tax receivables
Other receivables
3.4
Financial investments
3.4
Cash and cash equivalents
3.2
Total current assets
Total assets
The above condensed balance sheet should be read in conjunction with the accompanying notes.
1)
Comparative figures for 2021 are adjusted in relation to accounting policy change for configuration and customisation cost in cloud computing arrangements, refer to note 5.3.
Page 18 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Condensed balance sheet – Equity and liabilities
mEUR
Note
31 March
2022
31 March
1)
2021
1)
31 December
1)
2021
1)
Share capital
3.1
Other reserves
(100 )
Retained earnings
Attributable to owners of Vestas
Non-controlling interests
Total equity
Provisions
2.2
Deferred tax
Financial debts
3.4
Tax payables
Other liabilities
3.4
Total non-current liabilities
Financial debts
3.4
Contract liabilities
Trade payables
Provisions
2.2
Tax payables
Other liabilities
3.4
Total current liabilities
Total liabilities
Total equity and liabilities
The above condensed balance sheet should be read in conjunction with the accompanying notes.
1)
Comparative figures for 2021 are adjusted in relation to accounting policy change for configuration and customisation cost in cloud computing arrangements, refer to note 5.3.
Page 19 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Condensed statement of changes in equity – three months 2022
Reserves
mEUR
Share
capital
Transla-
tion
reserve
Cash flow
hedging
reserve
Other
reserves
Total
reserves
Retained
earnings
Non-
controlling
interests
Total
Equity as at 1 January 2022
(8 )
Impact from change in accounting
estimates (IAS 37 amendment)
(17 )
(17 )
Adjusted equity as at 1 January 2022
(8 )
Profit/(loss) for the period
(765 )
(0 )
(765 )
Other comprehensive income for the period
(51 )
Total comprehensive income for the period
(51 )
(765 )
(757 )
Transfer of cash flow hedge reserve to the
initial carrying amount of hedged items
(26 )
(26 )
(26 )
Transaction with owners:
Share-based payments
Tax on equity transactions
(0 )
(0 )
Total transactions with owners
Equity as at 31 March 2022
(61 )
(3 )
Condensed statement of changes in equity – three months 2021
Reserves
mEUR
Share
capital
Transla-
tion
reserve
Cash flow
hedging
reserve
Other
reserves
Total
reserves
Retained
earnings
1)
Non-
controlling
interests
Total
1)
Equity as at 1 January 2021
(114 )
(21 )
(11 )
(146 )
Profit/(loss) for the period
(68 )
(64 )
Other comprehensive income for the period
(15 )
Total comprehensive income for the period
(15 )
(68 )
(5 )
Transfer of cash flow hedge reserve to the
initial carrying amount of hedged items
(9 )
(9 )
(9 )
Transaction with owners:
Transactions with non-controlling interests
(6 )
Share-based payments
Tax on equity transactions
(4 )
(4 )
Total transactions with owners
Equity as at 31 March 2021
(47 )
(45 )
(8 )
(100 )
The above condensed statement of changes in equity should be read in conjunction with the accompanying notes.
1)
Comparative figures for 2021 are adjusted in relation to accounting policy change for configuration and customisation cost in cloud computing arrangements, refer to note 5.3.
Page 20 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Condensed cash flow statement 1 January - 31 March
mEUR
Note
Q1
2022
Q1
1)
2021
1)
Profit/(loss) for the period
(765 )
(64 )
Adjustment for non-cash transactions
Interest paid / received, net
(0 )
(17 )
Income tax paid
(68 )
(63 )
Cash flow from operating activities before change in net working capital
(319 )
(1 )
Change in net working capital
(609 )
(753 )
Cash flow from operating activities
(928 )
(754 )
Purchase of intangible assets
(88 )
(79 )
Purchase of property, plant and equipment
(107 )
(79 )
Disposal of property, plant and equipment
Dividends from investments in joint ventures and associates
Cash flow from investing activities before acquisitions of subsidiaries, joint ventures,
associates and financial investments
(193 )
(144 )
Free cash flow before acquisitions of subsidiaries, joint ventures, associates and
financial investments
(1,121 )
(898 )
Purchase of shares in joint ventures and associates
(2 )
(186 )
Purchase of other non-current financial assets
(1 )
Purchase of financial investments
(116 )
Disposal of financial investments
Cash flow from investing activities
(195 )
(336 )
Free cash flow
(1,123 )
(1,090 )
Payment of lease liabilities
(36 )
(34 )
Proceeds from borrowings
Payment of financial debt
(512 )
(291 )
Cash flow from financing activities
(309 )
Net change in cash and cash equivalents
(629 )
(1,399 )
Cash and cash equivalents at the beginning of period
Exchange rate adjustments of cash and cash equivalents
Cash and cash equivalents at the end of the period
The above condensed cash flow statement should be read in conjunction with the accompanying notes.
1) Comparative figures for 2021 are adjusted in relation to accounting policy change for configuration and customisation cost in cloud computing arrangements, refer to note 5.3.
Page 21 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Notes
1 Result for the period
1.1 Segment information
In the first quarter of 2022, Vestas recognised an impairment loss relating to the V164/V174 offshore activity, including
technology. Intangible assets of EUR 55m and tangible assets of EUR 28m have been impaired, impacting the Power
Solutions segment by EUR 71m and the Service segment by EUR 12m. Additional warranty provisions of EUR 93m was
recognised related to the offshore activity.
The change in accounting policy for configuration and customisation cost in cloud computing arrangements had an impact
of EUR 7m in the first quarter of 2022; EUR 3m in Power Solutions and EUR 4m in Service.
In the first quarter of 2022, impairment losses, write-downs and other costs of EUR 565m relating to the Russian invasion
of Ukraine as well as adjustments to the manufacturing footprint have been recognised in special items, impacting the
Power Solutions segment. For additional information, refer to note 1.3.
1) Comparative figures for 2021 are adjusted in relation to accounting policy change for configuration and customisation cost in cloud computing arrangements, refer to note 5.3.
mEUR
Power
Solutions
Service
Not allocated
Total
Group
Q1 2022
Total revenue
1,862
623
-
2,485
Total costs
(2,242)
(496)
(76)
(2,814)
Operating profit/(loss) (EBIT) before special items
(380)
127
(76)
(329)
Special items
(565)
(565)
Operating profit/(loss) (EBIT)
(945)
127
(76)
(894)
Income from investments in joint ventures and associates
(1)
Net financial items
6
Profit/(loss) before tax
(889)
Amortisation and depreciation included in total costs
(256)
(40)
(13)
(309)
mEUR
Power
Solutions
Service
Not allocated
Total
1)
Group
1)
Q1 2021
Total revenue
1,438
524
-
1,962
Total costs
(1,548)
(414)
(78)
(2,040)
Operating profit/(loss) (EBIT)
(110)
110
(78)
(78)
Income from investments in joint ventures and associates
12
Net financial items
(18)
Profit/(loss) before tax
(84)
Amortisation and depreciation included in total costs
(164)
(25)
(17)
(206)
Page 22 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
1.2 Revenue
The illustration below shows the process from order intake to revenue recognition in Vestas.
Disaggregation of revenue
In the following section, revenue is disaggregated for the two reportable segments, by primary geographical market, major
contract types, and timing of revenue recognition.
mEUR Power Solutions Service Total
Q1
2022
Q1
2021
Q1
2022
Q1
2021
Q1
2022
Q1
2021
Timing of revenue recognition
Products and services transferred at a point in time
1,082
699
80
72
1,162
771
Products and services transferred over time
780
739
543
452
1,323
1,191
1,862
1,438
623
524
2,485
1,962
Revenue from contract types
Supply-only
327
193
-
-
327
193
Supply-and-installation (at a point in time)
755
506
-
-
755
506
Supply-and-installation (over time)
559
538
-
-
559
538
Turnkey (EPC)
221
201
-
-
221
201
Service
-
-
623
524
623
524
1,862
1,438
623
524
2,485
1,962
Primary geographical markets
EMEA
1,030
768
313
301
1,343
1,069
Americas
603
459
247
174
850
633
Asia Pacific
229
211
63
49
292
260
1,862
1,438
623
524
2,485
1,962
Page 23 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
1.3 Special items
Group accounting policies
Special items comprise significant unusual and/or infrequently occurring items that are not attributable to Vestas’ normal
operations. Special items comprise income and costs related to significant organisational restructuring and significant
adjustments to production capacity and the product programme.
Russian invasion of Ukraine
Following Russia’s invasion of Ukraine in February 2022, Vestas announced on 5 April 2022 that Vestas would withdraw
from the Russian market. In order to facilitate the withdrawal from Russia, Vestas continues certain activities during a
limited transition period where Vestas will dispose of its Russian assets, wind down operations and end existing contractual
relationships. Furthermore, Vestas’ activities in Ukraine have been put on hold.
The costs related to the Russian invasion of Ukraine qualify as special items in accordance with Vestas’ accounting policy.
In the first quarter of 2022, special items of EUR 401m have been recognised including provisions of EUR 160m, write-
down of inventories located in Russia and Ukraine of EUR 227m, impairment of tangible assets of EUR 10m and a write-
down of VAT receivables of EUR 4m, as directly related to the Russian invasion of Ukraine.
Basis for recognition
The provisions primarily relate to potential risks related to the ceasing of activities in Russia and Ukraine existing at 31
March 2022. The write-down of inventory relates to inventory located in Russia and Ukraine that is not expected to be sold.
The impairment loss on tangible assets is primarily related to buildings and equipment located in Russia, which are written
down to zero as the assets are not expected to be utilised or sold. The write-down of VAT receivables is related to VAT
receivables that are deemed not recoverable.
Adjusting manufacturing footprint
Vestas continues to review the product portfolio and adapt the production capacity. As part of this development, Vestas
intends to adjust its manufacturing footprint by ceasing production at certain factories in China and India.
This adjustment of the manufacturing footprint qualifies as special items in accordance with Vestas’ accounting policy. In
the first quarter of 2022, special items of EUR 183m have been recognised including impairment of intangible assets of
EUR 27m, impairment of tangible assets of EUR 93m, write-down of inventory of EUR 44m and other costs of EUR 19m.
Furthermore, a reversal of previously recognised impairment losses on tangible assets of EUR 7m, staff costs of EUR 9m
and other costs of EUR 3m primarily relating to the factory in Lauchhammer, Germany, was recognised in special items.
Basis for recognition
The impairment loss is primarily related to intangible assets, buildings and production equipment which are written down
to fair value less expected cost to sell and inventory which is written down to net realisable value. The intangible assets,
buildings and production equipment at the factories have been written down from EUR 157m to EUR 37m reflecting the
value that is expected from the disposal of the assets considering costs to sell. Inventory has been written down from EUR
44m to zero as the inventory is expected to be scrapped. Other costs are primarily related to a write-down of VAT and tax
receivables that are deemed not recoverable.
mEUR
31 March
2022
31 March
2021
31 December
2021
Write-down of inventory
(271)
-
-
Provisions
(160)
-
-
Impairment loss on intangible and tangible assets
(123)
-
(68)
Other costs
(20)
-
(10)
Staff costs
9
-
(61)
Special items
(565)
-
(139)
Page 24 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
2 Other operating assets and liabilities
2.1 Property, plant and equipment
In the first quarter of 2022, Vestas acquired assets with a cost of EUR 107m mainly related to investments in transport
equipment and construction tools, compared to EUR 79m in the first quarter of 2021.
Lease contracts recognised as right-of-use assets during the first quarter amounted to EUR 28m, compared to EUR 85m
in the first quarter of 2021.
2.2 Warranty provisions (included in provisions)
mEUR
31 March
2022
31 March
2021
31 December
2021
Warranty provisions, 1 January
1,197
1,189
1,189
Provisions for the period
212
63
748
Warranty provisions consumed during the period
(154)
(117)
(852)
Additions from business combinations
-
-
55
Reclassification
-
57
57
Warranty provisions
1,255
1,192
1,197
The provisions are expected to be payable as follows:
< 1 year
675
596
655
> 1 year
580
596
542
1,255
1,192
1,197
During the first quarter of 2022, net warranty provisions charged to the income statement amounted to EUR 195m,
equivalent to 7.8 percent of revenue. The net amount consists of a gross warranty provision of EUR 212m less supplier
claims of EUR 17m. The warranty provisions in the first quarter of 2022 included additional warranty provisions of EUR
124m due to increased repair costs caused by external cost inflation, hereof EUR 93m related to offshore projects.
Warranty consumption amounted to EUR 154m compared to EUR 117m in the first quarter of 2021.
In general, provisions are made for all expected costs associated with wind turbine repairs or replacements, and any
reimbursement from other involved parties is not offset unless a written agreement has been made to that effect.
Provisions are made to cover possible costs of remedy and other costs in accordance with specific agreements. The
provisions are based on estimates, and actual costs may deviate substantially from such estimates.
Page 25 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
3 Capital structure and financing items
3.1 Share capital
Pursuant to authorisation granted to the Board of Directors at the Annual General Meeting 5 April 2022, the Board of
Directors was authorised to acquire treasury shares on behalf of Vestas at a nominal value not exceeding 10 percent of
the share capital at the time of authorisation.
Treasury shares
Nominal value (DKK)
31 March
2022
31 March
2021
31 December
2021
Treasury shares as at 1 January
944,632
1,098,495
1,098,495
Purchases for the period
-
-
78,225
Vested treasury shares for the period
-
(128,013)
(232,088)
Treasury shares
944,632
970,482
944,632
Each share has a nominal value of DKK 0.20.
3.2 Cash and cash equivalents
mEUR
31 March
2022
31 March
2021
31 December
2021
Cash and cash equivalents without disposal restrictions
1,775
1,653
2,394
Cash and cash equivalents with disposal restrictions
26
24
26
Cash and cash equivalents
1,801
1,677
2,420
3.3 Financial risks
Financial risks, and how Vestas manages its risks, including liquidity, credit and market risks, are addressed in the notes
to the consolidated financial statements in the Annual Report 2021, note 4.1 (Financial risk management), pages 99-102.
The risks in 2022 remain similar in nature.
On 15 March 2022, Vestas issued two EUR 500m sustainability-linked bonds to both refinance the EUR 500m Green bond
(early redeemed in December 2021) and secure long-term funding. The two bonds will mature in 2029 and 2034
respectively, and their interest rates are linked to Vestas’ sustainability KPIs. Vestas has also a revolving multi-currency
credit facility of EUR 2bn available for cash drawing and/or issuance of guarantees.
3.4 Financial instruments
Financial instruments measured at fair value have been categorised into level 1, 2, and 3 as addressed in the Annual
Report 2021, note 4.1, page 106. Other than the two EUR 500m sustainability-linked bonds described above, no significant
new financial instruments have been recognised compared to 2021 and there have been no transfers between fair value
levels.
Financial investments consist of interest-bearing investments which do not meet the definition for cash and cash
equivalents. As at 31 March 2022, the fair value of financial investments amounted to EUR 214m, equal to book value.
Marketable securities amounted to EUR 98m and deposits amounted to EUR 116m.
Derivative financial instruments were negative with a market value of net EUR 104m, equal to book value, and were
recognised in other receivables and other liabilities with EUR 470m and EUR 574m, respectively.
Financial instrument assets categorised within level 3 comprise other equity investments and renewable energy
certificates. Valuation methods remain unchanged from the description in the Annual Report 2021 and with no significant
changes in fair values.
As at 31 March 2021, the carrying amount of the sustainability-linked bonds issued by Vestas amounted to EUR 990m and
the fair value amounted to EUR 990m.
Page 26 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
4 Other disclosures
4.1 Related party transactions
Vestas has had the following material transactions with joint ventures and associates:
mEUR
Q1 2022
Q1 2021
Joint ventures
Revenue for the period
81
13
Proceeds from investments in joint ventures
-
10
Capital contribution
-
21
Receivable as at 31 March
91
34
Received prepayments balance as at 31 March
26
56
Associates
Revenue for the period
16
-
Proceeds from investments in associates
0
4
Capital contribution
3
-
Payable capital contribution as at 31 March
48
44
No other significant changes have occurred with related parties or types and scale of transactions with these parties other
than what is disclosed in the consolidated financial statements in the Annual Report 2021, note 6.3, page 113.
5 Basis for preparation
5.1 General accounting policies
The interim financial report of Vestas comprises a summary of the consolidated financial statements of Vestas Wind
Systems A/S and its subsidiaries.
The interim financial report has been prepared in accordance with IAS 34, Interim Financial Reporting as adopted by the
EU, accounting policies set out in the Annual Report 2021 of Vestas (except for the changes described below in note 5.3)
and additional Danish disclosure requirements for interim financial reporting of listed companies.
This interim financial report does not include all the notes included in an annual financial report. Accordingly, this report
should be read in conjunction with the Annual Report for the year ended 31 December 2021 and any public announcements
made during the interim reporting period.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to the expected annual
profit or loss.
5.2 Key accounting estimates and judgements
When preparing the interim financial reporting of Vestas, management makes a number of accounting estimates and
assumptions which form the basis of the recognition and measurement of Vestas’ assets and liabilities. The estimates and
assumptions made are based on experience and other factors that management considers reasonable in the
circumstances.
Reference is made to the consolidated financial statements in the Annual Report 2021, note 7.3, page 120 for further
description of Vestas’ key accounting estimates and judgements.
Estimate regarding recognition of contract elements
Management performs significant accounting estimates in connection with determining the appropriate income recognition
of contract elements. In certain situations, Supply-only projects contain elements that in nature are associated with a high
degree of estimations regarding allocation of consideration under a contract to elements already delivered and elements
to be delivered in the future. Management has assessed that the project-specific margin is a fair estimate of a reasonable
margin used to allocate consideration under a contract to the contract elements.
Page 27 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Estimate regarding measurement of warranty provisions
Measurement of warranty provisions is associated with significant estimation uncertainty and arises from component
defects and functional errors. Warranty provisions made also include wind turbines sold in prior years, but where serial
defects are identified later and comprise management’s best estimate of the costs required to settle the obligation from
such defects and functional errors.
Judgement regarding classification in the income statement
The use of special items entails management judgement in the separation from other items in the income statement. In
connection with the use of special items, it is crucial that these are of a significant unusual and/or infrequently occurring
nature that are not attributable to Vestas’ normal operations, as such classification highlights to users of financial
statements the items to which the least attention should be given when understanding current and future performance.
Estimate regarding the valuation of assets and liabilities in Russia and Ukraine
Measurement of the provision for the potential risks related to the ceasing of activities in Russia and Ukraine as well as
write-down of inventory located in Russia and Ukraine is associated with significant estimation uncertainty due to the
current situation in Russia and Ukraine. The recognised cost reflect management’s best estimate based on the current
expectations.
5.3 Changes in accounting policy and disclosures
Except for the changes below, the accounting policies remain unchanged compared to the annual report for the year ended
31 December 2021, to which reference is made.
IAS 38, Configuration or customisation costs in a cloud computing arrangement
As announced in Vestas’ Annual Report 2021, as of 1 January 2022, Vestas has changed its accounting policy on
configuration and customisation costs related to cloud computing arrangements, also referred to as Software as a Service
(SaaS).
Previously, Vestas had capitalised costs related to the implementation of cloud computing arrangements as intangible
assets. Under the new policy, implementation costs including costs to configure and customise the cloud provider’s
application software are recognised as operating expenses when the services are received.
Historical financial information has been restated to account for the impact of the change in accounting policy in relation to
SaaS arrangements as follows:
Condensed income statement extract 1 January - 31 March
mEUR
Q1 2021
Reported
Effect of new
policy
Q1 2021
Restated
Research and development costs
(87)
(6)
(93)
Distribution costs
(86)
(1)
(87)
Operating profit (EBIT) before special items
(71)
(7)
(78)
Operating profit (EBIT)
(71)
(7)
(78)
Profit before tax
(77) (7) (84)
Profit for the period
(57)
(7)
(64)
Profit is attributable to:
Owners of Vestas
(61)
(7)
(68)
Non-controlling interests
4
-
4
Earnings per share (EPS)
Earnings per share for the period (EUR), basic
(0.06)
(0.07)
Earnings per share for the period (EUR), diluted
(0.06)
(0.07)
Page 28 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Condensed statement of comprehensive income extract 1 January - 31 March
mEUR
Q1 2021
Reported
Effect of new
policy
Q1 2021
Restated
Profit for the period
(57)
(7)
(64)
Other comprehensive income after tax for the period
59
-
59
Total comprehensive income for the period
2
(7)
(5)
Condensed balance sheet extract – Assets, 31 March
mEUR
31 March
2021
Reported
Effect of new
policy
31 March
2021
Restated
Completed development projects
595
(1)
594
Software
149
(17)
132
Development projects in progress
369
(24)
345
Total intangible assets
2,896
(42)
2,854
Deferred tax
337
4
341
Total other non-current assets
1,720
4
1,724
Total non-current assets
6,714
(38)
6,676
Total assets
19,098
(38)
19,060
Condensed balance sheet extract – Equity and liabilities, 31 March
mEUR
31 March
2021
Reported
Effect of new
policy
31 March
2021
Restated
Retained earnings
4,706
(38)
4,668
Attributable to owners of Vestas
4,633
(38)
4,595
Total equity
4,696
(38)
4,658
Total equity and liabilities
19,098
(38)
19,060
Condensed cash flow statement extract 1 January - 31 March
mEUR
Q1 2021
Reported
Effect of new
policy
Q1 2021
Restated
Profit for the period
(57)
(7)
(64)
Adjustment for non-cash transactions
144
(1)
143
Cash flow from operating activities
(746)
(8)
(754)
Purchase of intangible assets
(87)
8
(79)
Cash flow from investing activities before acquisition of subsidiaries, joint ventures,
associates and financial investments
(152)
8
(144)
Cash flow from investing activities
(344)
8
(336)
Page 29 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Condensed balance sheet extract – Assets, 31 December
mEUR
31 December
2020
Reported
Effect of new
policy
31 December
2020
Restated
Completed development projects
621
(1)
620
Software
164
(17)
147
Development projects in progress
317
(17)
300
Total intangible assets
2,888
(35)
2,853
Deferred tax
335
4
339
Total other non-current assets
1,003
4
1,007
Total non-current assets
5,913
(31)
5,882
Total assets
18,160
(31)
18,129
C
ondensed balance sheet extract – Equity and liabilities, 31 December
mEUR
31 December
2020
Reported
Effect of new
policy
31 December
2020
Restated
Retained earnings
4,773
(31)
4,742
Attributable to owners of Vestas
4,654
(31)
4,623
Total equity
4,703
(31)
4,672
Total equity and liabilities
18,160
(31)
18,129
IAS 37, Cost of fulfilling a contract
As of 1 January 2022, Vestas adopted the amendment to IAS 37 relating to onerous contracts. The amendment specifies
that an allocation of directly related production costs, such as depreciations of production plants, machinery and equipment,
should be included in the cost of fulfilling a contract when applying IAS 37. Historically, Vestas’ accounting policy has not
included an allocation of such costs in the cost of fulfilling a contract.
The application of the amendment resulted in the recognition of an increased provision for onerous contracts related to
prior years of EUR 22m with a net impact of EUR 17m on retained earnings as at 1 January 2022. Vestas has applied the
amendment using the cumulative effect method. Under this method, the comparative information is not restated.
Page 30 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Management’s statement
The Executive Management and the Board of Directors
have today discussed and approved the interim financial
report of Vestas Wind Systems A/S for the period 1
January to 31 March
2022.
The interim financial report has been prepared in
accordance with IAS 34 on interim financial reporting as
adopted by the EU, accounting policies set out in the
Vestas’ Annual Report 2021 (except for the changes
described in note 5.3) and additional Danish disclosure
requirements for interim financial reports of listed
companies. The interim financial report has neither been
audited nor reviewed.
In our opinion the accounting policies used are
appropriate and the interim financial report gives a true
and fair view of Vestas' assets, liabilities, and financial
position as at 31 March
2022 and of the results of Vestas'
operations and cash flows for the period 1 January to 31
March
2022.
Further, in our opinion the management report gives a
true and fair review of the development in Vestas'
operations and financial matters, the results of Vestas'
operations for the period and Vestas' financial position
as a whole and describes the significant risks and
uncertainties pertaining to Vestas.
Besides what has been disclosed in the interim financial
report, no changes in Vestas’ most significant risks and
uncertainties have occurred relative to what was
disclosed in the Annual Report 2021.
Aarhus, Denmark, 1 May 2022
Executive Management
Henrik Andersen
Group President & CEO
Hans Martin Smith
Executive Vice President & CFO
Board of Directors
Bert Nordberg
Chairman
Anders Runevad
Deputy Chairman
Lena Olving
Eva Merete Søfelde Berneke
Bruce Grant
Helle Thorning-Schmidt
Kentaro Hosomi
Karl-Henrik Sundström
Michael Abildgaard Lisbjerg*
)
Sussie Dvinge*
)
Pia Kirk Jensen*
)
Claus Skov Christensen*
)
*) Employee representative
Page 31 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Page 32 of 32
Vestas Wind Systems A/S
Interim Financial Report – First Quarter 2022
Classification: Public
Vestas Wind Systems A /S
Hedeager 42, 8200 Aarhus N, Denmar k
Tel: +45 9730 0000
vestas@vestas.com, vestas.com
Disclaimer and cautionary statement
This document contains forward-looking statements
concerning Vestas’ financial condition, results of
operations and business. All statements other than
statements of historical fact are, or may be deemed to
be, forward-looking statements. Forward-looking
statements are statements of future expectations that are
based on management’s current expectations and
assumptions and involve known and unknown risks and
uncertainties that could cause actual results,
performance or events to differ materially from those
expressed or implied in these statements.
Forward-looking statements include, among other
things, statements concerning Vestas’ potential
exposure to market risks and statements expressing
management’s expectations, beliefs, estimates,
forecasts, projections, and assumptions. A number of
factors that affect Vestas’ future operations and could
cause Vestas’ results to differ materially from those
expressed in the forward-looking statements included in
this document, include (without limitation): (a) changes in
demand for Vestas' products; (b) currency and interest
rate fluctuations; (c) loss of market share and industry
competition; (d) environmental and physical risks,
including adverse weather conditions; (e) legislative,
fiscal, and regulatory developments, including changes
in tax or accounting policies; (f) economic and financial
market conditions in various countries and regions; (g)
political risks, including the risks of expropriation and
renegotiation of the terms of contracts with governmental
entities, and delays or advancements in the approval of
projects; (h) ability to enforce patents; (i) product
development risks; (j) cost of commodities; (k) customer
credit risks; (l) supply of components; and (m) customer
created delays affecting product installation, grid
connections and other revenue-recognition factors.
All forward-looking statements contained in this
document are expressly qualified by the cautionary
statements contained or referenced to in this statement.
Undue reliance should not be placed on forward-looking
statements. Additional factors that may affect future
results are contained in Vestas’ Annual Report for the
year ended 31 December 2021 (available at
vestas.com/en/investor) and these factors also should
be considered. Each forward-looking statement speaks
only as of the date of this document. Vestas does not
undertake any obligation to publicly update or revise any
forward-looking statement as a result of new information
or future events other than as required by Danish law. In
light of these risks, results could differ materially from
those stated, implied or inferred from the forward-looking
statements contained in this document.