Vestas: Riding the Storm

Abstract

This report looks deeper into how the last five years have had external factors that dramatically changed the world, along with the wind turbine industry, with a focus on the Danish company Vestas, as well as how it should react to these factors. These recent seems to have been more unstable than the period before it, namely the calmer period between the financial crisis and 2019, and recent times are therefore the base of interest of this report. This started with issues around creating enough supply of different materials and chips, which started to create supply chain issues for many companies, which also impacted Vestas. Afterwards the Corona virus meant shutdowns almost everywhere, forcing Vestas to seize production in plants temporarily, and required layoffs as well. Raw material, distribution and energy costs also sore upwards. However, governments were quick to react with stimulus and new incentives to help throughout society, but especially also in renewable energies. The political help only grew after Ukraine was invaded by Russia, incentivizing especially European countries to accelerate the path of independence of Russian energy. Both supply chain issues and rising demand have already started showing in Vestas’ financials, where backlog is now bigger than ever, while margins are negative for the first time in a long while. Looking forward Vestas can expect to be impacted even more by the competitiveness in the market, as big competitors will be even more eager than ever to get a bigger slice of the growing industry, also shifting the bargaining power to customers, while some suppliers are also currently on top due to scarcity. Even with this, expectations are that wind industry will grow to be the biggest source of renewable energy in the future, and with Vestas currently being the biggest in this segment, expectations have only grown exponentially in the last 5 years, as their stock price has also soared upwards compared to both the international and national market, as well as the industry. This reflects Vestas current market position as market leaders, and with several strong sides and opportunities. Despite huge expectations, Vestas suffer different weaknesses and external threats, which must be mitigated in order to maximize growth. This can both include diversification, in terms of both revenue streams, geographics and suppliers, as well as preparing for different future scenarios, as the last five years have clearly shown that the future can be very difficult to foresee. Doing so will require the company to remain agile, a difficult task for a company of Vestas size, but inevitably a task that can help them better react to potential changes in demand and material supply, as well as changes in regulations and policies worldwide.