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 average annual growth of wind power capacity of 8 percent towards 2030.*)
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 be a focus area for wind turbine manufacturers in the coming years.
Ambitions for the three business areas
Onshore
The demand for onshore wind power globally is expected to remain stable or grow slightly from the current high level the next two-to-three-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.
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’ newly acquired offshore segment. Based on the order backlog Vestas will see a couple of years with high activity levels and solid financial performance. Then, from 2023, the company expects to see a decline in activity towards 2025. These first two phases will be under the influence of heavy investments both in the organisation, supply chain, and technology. By 2025, when a steep increase in annual offshore installations is expected, and Vestas’ new platform will be 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 segment of EUR +3bn by 2025, with an EBIT margin on par with the Group’s overall margin.
Service
The wind power service market is expected to continue growth at the current 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, accounting for the integration of the offshore business, which currently generates lower margins than onshore.
Ambitions on Group level
Vestas maintains its ambition on an overall level to grow faster than the market and be market leader in revenue. Even with the integration of the offshore business, the company remains optimistic about reaching a 10 percent EBIT margin based on the current market conditions and projections. The introduction of a new offshore wind power platform will impact free cash flow, but Vestas nevertheless expects to generate a positive cash flow each year. The ambition is still to achieve a long-term ROCE of minimum 20 percent over the cycle.
Long-term financial ambitions
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Revenue
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Grow faster than the market and be market leader in revenue
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EBIT margin
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At least 10 percent
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Free cash flow
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Positive each year
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ROCE
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Minimum 20 percent over the cycle
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*) Source: Wood Mackenzie: Market Outlook Update Q4/2020. December 2020.