Chair of the Board of Directors, Vestas
Vestas CEO on Earnings, Competition, Tariffs
Aug.15 -- Anders Runevad, chief executive officer at Vestas, discusses earnings, competition, how the tariff story will impact his ...
Transcript (12 segments)
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Interviewer0:00
And as the stock is trading really strongly this morning, you're up really nicely, you're one of the best performing stocks in Europe today. A lot of what you said this morning kind of sounds cautious. What is it you think people are seeing in the numbers you posted today, and the outlook you posted today, and the buyback you posted today, that you think is encouraging people to buy the stock?
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Anders Runevad0:22
Oh, good morning. Yeah, I mean, overall I would say that we delivered a solid quarter in a high activity and competitive market. And of course, starting from the total order intake of 43% year-over-year, leading to a record high order backlog. And I think that's of course a strong message.
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Interviewer0:51
Are you concerned about increased competition? When I read about, for example, Nordex, it seems like there's going to be a lot more gas coming onshore in Europe. Does that cloud your outlook at all?
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Anders Runevad1:05
I think that we see a very strong commitment to renewable energy targets globally. And I mean, one such example is of course in Europe, where the EU's renewable energy target was raised from 27% to 32%. So I mean, with the increased cost competitiveness of wind, and of course the concern on climate change, I must say that overall, governments are setting out targets for renewable auctions that remain solid and lead to a high activity level in the market.
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Interviewer1:48
One of the things that we've been looking at this morning is trying to get an understanding of how specifically and in kind of detail how the tariff story is going to affect your business. What is your view of the situation at the moment? How specific can you get in terms of an understanding of what it's going to mean?
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Anders Runevad2:09
No, but I mean, as you say, of course it's really difficult to be specific in such a fluid and changing environment when it comes to tariffs. So I mean, we are a global company, we are present in 80 countries, we have a global supply chain and a global manufacturing chain. So we try to mitigate the existing and potential tariffs on different components. But as you say, to have a clear view of all of that is almost impossible, especially since it is changing fairly frequently.
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Interviewer2:54
But if you look at the supply chain, if you look at how, for instance, your sourcing materials are, are you already seeing an effect coming through into some of your manufacturing plants?
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Anders Runevad3:05
No, I mean, the biggest impact is here so to speak in the short term, but for us, as we say, it's of course the steel tariffs, and of course the increased steel prices in the US. And as we said before, that has a very limited impact on us during this year because we work with different mechanisms to hedge the sale here for our margins. But of course, looking forward, that potentially can have an impact on the cost for wind energy overall in markets with high steel prices and other tariffs. As I said, we see wave 1 and wave 2 being implemented, and of course components that we use get more expensive, which has a cost impact on the supply chain that we will have to try to mitigate. But to exactly pinpoint that in such a fluid environment is of course extremely cumbersome.
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Interviewer4:16
I remember a few months ago you got a big order, like a quarter of a billion dollars, from a Turkish wind plant. How are you viewing your business? What kind of business do you have in Turkey right now, Anders? And how are you viewing the future of that?
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Anders Runevad4:35
I don't really recognize the order you talk about. But I mean, Turkey is one of the markets we have in Europe, and we've seen fairly stable development there, even if it's been down a bit recently. So I don't really recognize that order you talk about. So I think it's more that it came up and has come down a bit.
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Interviewer5:07
All right. I see a Bruce on ENBW joint venture getting wind turbines, 138 megawatts, Can Akali, 72 megawatts, Kier clearly wind plants. Those are Turkish wind plants from Vestas for $240 million. If you don't see that, maybe the report was mistaken. But do you see the same kind of demand continuing in Turkey for wind energy that we have seen before this crisis?
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Anders Runevad5:38
I think those are not firm or unconditional orders from a contractual point of view, and therefore they are not counted in our backlog. So that's probably why we saw very high activity levels in Turkey also on the delivery side, probably most about a year ago, a year and a half ago. I think with the introduction of auctions in Turkey, we've seen from a delivery point of view, Turkey has been down somewhat in the last year and a half. That was compensated by our diversity in Europe. So I wouldn't say that we have any sort of big reliance on the Turkish market overall at all.