(Bloomberg) — Vestas Wind System A/S cut its full-year guidance as supply chain disruptions and rising costs are set to persist, dragging on the steel-intensive wind-turbine business throughout the year.
The guidance revision is a sign that the industry that continued to have strong sales throughout the pandemic will have a more difficult time weathering this year’s boom in the prices of metals essential for the wind industry. Vestas posted revenue and earnings for the second quarter that were below analsyts’ estimates.
Vestas expects full year revenue of 15.5 billion euros ($18.2 billion) to 16.5 billion euros ($19.3 billion), down from previous forecast of 16 billion euros to 17 billion euros. They also cut their expected margin on earnings before interest and taxes to between 5% and 7%, down from a 6% to 8% range.
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The trouble for turbine makers comes at a critical time for a world that will need drastically more renewable energy in order to limit the most dangerous affects of rising temperatures.
The surging prices for key metals and shipping already helped cause Vestas to post a loss in the first quarter of the year. The price of steel in the U.S. has increased 87% this year amid rising demand as the global economy recovers from the onset of the coronavirus last year. Steel is the single biggest input for manufacturers like Vestas, making up about 84% of a turbine’s weight.
The revised guidance shows that the situation is more challenging than executives first thought. Vestas said earlier this year that despite a slow start, it would be able to recover for the full year and maintained its guidance after the first quarter.
The commodities boom also forced Vestas and its competitors to raise prices this year. Earlier this year, Spanish turbine maker Siemens Gamesa Renewable Energy SA reported a loss of more than 300 million euros, due in part to steel prices. The company had to change the way it contracts on projects to be better able to pass on price volatility to its customers.
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