Vestas Wind Systems A/S raised the price of its wind turbines further in the second quarter to guard against cost inflation pressures and attempt to return itself to profit.

The average selling price of the Danish manufacturer's onshore turbines rose to €960,000/MW during the period — up by more than 20% compared to a year ago — to reach Vestas' highest price in the last decade, CEO Henrik Andersen told analysts Aug. 10.

"Pricing continues to increase to mitigate cost inflation and secure future profitability," Andersen said, pointing to March and April as being "the most volatile period for both components and raw materials." The price of steel, in particular, "changed enormously" at the end of the first quarter, the CEO said.

"Let me just remind you: In Q2, the world almost came to a stop for several weeks," Andersen added, referring to Russia's invasion of Ukraine, which has made it "exceptionally difficult" for Vestas to get components to factories or equipment to project sites. The company recorded €401 million in write-downs, impairments and provisions in the first quarter after it decided to exit Russia and halt construction work in Ukraine.

The war exacerbated disruption that already existed in the supply chain for several months, with the challenging conditions for logistics expected to persist through the remainder of the year.

"We will see if there is an easing in [2023]. And if the easing comes, no one would welcome it more than us," Andersen said.

The macroeconomic challenges pushed Vestas to a €182 million operating loss before special items in the second quarter, with its EBIT margin before special items at negative 5.5%, down from positive 2.7% in the year-ago period.

Its customers are also grappling with inflation. The company secured 2,123 MW of new onshore wind turbine orders in the second quarter — a 53% year-over-year decrease — driven by declines in Europe and Asia, where customers are delaying orders due to uncertainties around costs and off-take.

"We would like to have taken more orders for sure, but we are happy with the orders we have taken," Andersen said. "Everyone will say we could have taken more if we had lower prices, but that one we won't do."

Vestas' order backlog reached €18.9 billion at the end of the second quarter, and the CEO referenced "positive policy development" in both Europe and the U.S. as being supportive of the company's longer-term fortunes.

In Europe, the EU's strategy to pivot away from Russian gas includes ramped-up capacity targets for wind. Meanwhile, the U.S. Inflation Reduction Act — described as the "single biggest climate investment in U.S. history," with nearly $370 billion in climate and energy spending promised — was passed by the Senate on Aug. 7.

"We feel U.S. is a home market for us, and we will keep investing in the U.S.," Andersen said, describing the nation as having been a "vacuum" of activity in recent times due to uncertainty over the extension of federal tax credits for wind projects.

"Seven days ago, we were sitting with something that looked like we didn't have a [production tax credit] route in the U.S.," the CEO said. "Now it seems like we have."

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