Shareholder information 2/2009

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Leslie Thornton
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1 Shareholder information 2/ vestas.com

2 The Vestas Willpower once again put to the test: In spite of the many challenges in the first six months of the year, we retain our targets It would almost be an irresponsible act towards our shareholders if we opted for the easy solution by downgrading our forecast. Based on the principle What WE see is what YOU get, we consistently endeavour to convey this exact picture. Based on the data currently available to us at the management level, we see no reason to downgrade our forecast. The second quarter, and thus the first half of the year, has come and gone. Overall, there weren t many bright spots, but nonetheless Vestas achieved revenue growth of as much as 29 per cent relative to the first half of last year. The improvement should be seen against the background of our full-year guidance of revenue growth of 20 per cent. However, the positive trends in this area should not be used to conceal the many challenges we indeed did encounter also at Vestas especially during the second quarter. Therefore, I m especially pleased that we have managed to retain half-year earnings at more or less the same level as the first half of, and in this context I would like to refer to the highlights and other tables set out later in this issue of the Shareholder information. Orders for 4.4 billion euros currently under approval But, more specifically, what is it that makes us retain our forecast in spite of the challenges we faced in the second quarter with a modest order backlog of only 4.0 billion euros at June as compared with 7.2 billion euros at the same time last year? The reason is that we on the Contract Review Board, the company s overall endorsement body for large contracts, are currently processing and evaluating several contracts with a total value of more than 4.4 billion euros. The Group s senior management is heavily represented on the Contract Review Board. My Executive Management colleague Henrik Nørremark and myself thus take part in this important task in order to ensure profitability in the projects that we opt to accept. In this way, we ensure not only that we meet our earnings requirements, but (based on experience) also that all terms and conditions are consistent with the guidelines issued by the Board of Directors and the Executive Management. All orders worth more than 15 million euros are discussed here. But unlike our peers, at Vestas we have decided only to announce firm and unconditional orders and only when such orders represent a value of more than 250 million Danish kroner (34 million euros). The reason why, in connection with this interim report, we report on orders which, in a manner of speaking, are not part of the tip of the iceberg, is that we would like to illustrate at an overall level the scope of the many orders we are currently processing in-house. Also against this background, we still believe that it is important to distinguish between a demand crisis and a funding crisis. The Vestas Willpower: More than just a sculpture The rest of the year will certainly not be easy. It will bring hard work for us all. We know, because we have been down that road before, and once again what we refer to as the Vestas Willpower will be put to the test. Our undaunted willpower and belief that Vestas can achieve its targets almost no matter what is quite simply the secret behind the fact that a small Danish business has grown into a global market leader. It was this willpower that left an indelible mark when, as recently as in 2004 and 2005, we managed to turn around an unfortunate situation and once again started to make money. The Vestas Willpower is truly more than just a shining sculpture on display outside our headquarters! Frustrations and local opposition to wind power In April, we reported that the markets in Northern Europe had more or less come to a complete standstill. As is well-known, the very unfortunate consequence of this trend was that we were compelled as a very last resort to lay off staff in order to be able to meet our overall profitability target. Neither we nor other manufacturers can justifiably continue to operate with severe excess capacity. In the case of Vestas as many as 49 per cent of our employees work in the markets in Northern Europe, whilst in the same markets we can only expect demand representing 12 per cent of total global sales. In connection to this, I would like to draw attention to the fact that both in the USA and in China we have continued to recruit many new employees, so at 30 June of this year there were in fact more Vestas employees globally than at the same time last year. When we announced lay-offs in Denmark in April, we were also compelled not only to lay off staff but close down our blade factory on the Isle of Wight, UK, altogether. Here, the announcement was of course met with some concern, and the situation heated up in late summer when some of the employees occupied the factory. The frustrations are understandable, but as the Isle of Wight and the rest of the UK fail to install a sufficient number of wind turbines, we cannot justify, being a responsible company, letting operations continue. The fact is that even though the British government and this is greatly appreciated is ready to propose new legislation that will set the stage for more renewable energy, we are only dealing with government intentions. All the good visions in central government are thus not in any way anchored among the local politicians. On the contrary, many of these politicians are evidently helping to build local opposition to wind power. Also on the Isle of Wight. Creative Scots showing the way forward Many people would benefit from seeking inspiration from the inhabitants of the Scottish village of Fintry, who took matters into their own hands when a wind farm was to be constructed in their area. Instead of protesting, they borrowed 2.5 million British pounds, asking the people behind the wind farm to build an extra wind turbine for them. After just over 12 months, the village had earned 140,000 British pounds selling power to the electricity grid. But what is equally important: The people of Fintry have spent the money they earned on 02 Vestas shareholder information 2/

3 achieving energy savings enabling even more people to save hundreds of British pounds a year on their heating bills. If only there were more people who showed the same type of creativity as the thrifty Scots! Just think how far we could go. At any rate, this example clearly illustrates that attitudes need to be changed at the locations where the wind turbines are to be installed. The locals may even benefit financially. No bailouts for the climate Earlier this year, U.N. Secretary-General Ban Ki-moon visited Copenhagen in connection with the World Business Summit on Climate Change, and on that occasion I had the chance to speak with him. Mobilise employees, partners, clients and customers to take a stand and demand climate action from governments, now was his message to business leaders around the world. I would like to pass on this message to the more than 115,000 recipients of this issue of Shareholder information: Talk to your politicians. Ask your colleagues, business partners and others to do the same. We MUST reach an agreement on the Copenhagen Climate Summit in December, or to put it in the words of former US Vice President Al Gore, when he was in Copenhagen: We MUST do it this year. Not next year. No, this year. The clock is ticking, because Mother Nature does not do bailouts. This September, the U.N., headed by Ban Ki-moon, will host a Global Climate Week, which coincides with the Secretary General s Summit on Climate Change on 22 September, which I have been given the honour of attending. We MUST end up by signing a comprehensive climate agreement. There are plenty of sceptics around, but given the many political statements of intent and, especially, the many concrete decisions made by the EU, the USA and China, I choose to be optimistic. Nothing is more important and in any circumstance the climate crisis has reached such proportions that the financial crisis dwindles in comparison. Vestas therefore makes the following three pleas: Listen to science Scientists from around the globe under the auspices of the U.N. have concluded that we are facing huge challenges due to the very serious threats posed by climate change. The rest of us cannot make believe that we know better. Take action Mere words won t help and that applies at all steps of the political hierarchy, all the way to the wind turbine site. Do whatever it takes from the bottom up Start by looking at target bottom line results once we are finished. Once we have agreed to the targets and fortunately many politicians around the world have agreed on them we specifically need to launch the activities required to actually accomplish the bottom line figure. Even if it hurts a little along the way. It is my impression that politicians sometimes underestimate the desire among the general population for change towards a greener world. That should stop now: Seal the Deal is the U.N.'s appeal when politicians from around the globe gather in Copenhagen. I wonder if the summit will be successful? I hope so. The future ahead of us I hope that this interim report will contribute to stabilising expectations for the wind power industry but also to restoring faith that our industry, more than any other, and with Vestas as the market leader, has the future ahead of it even though just like any other industry of course we are also feeling the impact of the financial crisis. Thank you for the support we have received from our shareholders and employees alike. This support is crucial for us to continue to live the Vestas Willpower and once again prove that it pays to fight for your goals instead of just giving up. We value your support. Ditlev Engel President and CEO Vestas shareholder information 2/ 03

4 Financial highlights for the Group meur Highlights Income statement 1) 1) 1) 1) Full-year Revenue 1,211 1,094 2,316 1,795 6,035 Gross profit ,179 Profit before financial income and expenses, depreciation and amortisation (EBITDA) Operating profit (EBIT) Financial items, net (19) (2) (17) Profit before tax Profit for the period Balance sheet Balance sheet total 6,050 4,875 6,050 4,875 5,308 Equity 2,876 1,606 2,876 1,606 1,955 Provisions Average interest-bearing position (net) (133) 434 (74) Net working capital (NWC) 804 (53) 804 (53) 299 Investments in property, plant and equipment Cash flow statement Cash flow from operating activities (180) 222 (375) Cash flow from investing activities (260) (136) (445) (216) (680) Cash flow from financing activities 540 (16) 848 (64) (91) Change in cash at bank and in hand less current portion of bank debt (182) (494) Employees Average number of employees 21,230 17,067 21,140 16,476 17,924 Number of employees at the end of the period 21,153 17,370 21,153 17,370 20,829 Ratios Financial ratios Gross margin (%) EBITDA margin (%) EBIT margin (%) Return on invested capital (ROIC) (%) 2) Solvency ratio (%) 3) Return on equity (%) 2) Gearing (%) Share ratios Earnings per share (EUR) 2) Book value per share Price / book value Cash flow from operating activities per share (0.9) 1.2 (2.0) Dividend per share Payout ratio (%) Share price at the end of the period (EUR) Average number of shares 198,011, ,204, ,886, ,204, ,204,103 Number of shares at the end of the period 203,704, ,204, ,704, ,204, ,204,103 1) Neither audited nor reviewed. 2) Calculated over a 12-month period. 3) The increase in the solvency ratio is mainly due to the capital increase at the end of April. 04 Vestas shareholder information 2/

5 Non-financial highlights for the Group key figures Occupational health & safety 1) 1) 1) 1) Full-year Industrial injuries (number) of which fatal industrial injuries (number) Products MW delivered 1,060 1,154 1,850 1,934 5,580 Utilisation of resources 2) Consumption of metals (tonnes) 49,337 N/C 107,574 N/C 187,478 Consumption of other raw materials, etc. (tonnes) 33,884 N/C 71,790 N/C 129,207 Consumption of energy (MWh) 119,444 N/C 278,044 N/C 458,296 of which renewable energy (MWh) 46,464 N/C 109,642 N/C 172,800 of which renewable electricity (MWh) 43,231 N/C 95,346 N/C 167,311 Consumption of water (m 3 ) 102,125 N/C 206,040 N/C 474,958 of which water of non-drinking water quality (m 3 ) 27,008 N/C 47,336 N/C 103,066 Waste disposal Volume of waste (tonnes) 24,244 N/C 51,023 N/C 96,632 of which collected for recycling (tonnes) 7,460 N/C 15,728 N/C 30,254 Emissions Emission of CO 2 (tonnes) 11,149 N/C 26,238 N/C 41,832 Local community Environmental accidents (number) Breaches of internal inspection conditions (number) 1 N/C 2 N/C 5 indicators Occupational health and safety Incidence of industrial injuries per one million working hours 3) incidence of industrial injuries in the sales business units incidence of industrial injuries in the production business units Absence due to illness among hourly-paid employees (%) Absence due to illness among salaried employees (%) Products CO 2 savings on the delivered MW (million tonnes of CO 2 ) Annual CO 2 savings on delivered MW (million tonnes of CO 2 ) Utilisation of resources Renewable energy (%) 39 N/C 39 N/C 38 Renewable electricity (%) 64 N/C 67 N/C 68 Management system ISO (%) 100 N/C 100 N/C 100 OHSAS (%) 100 N/C 100 N/C 98 1) Neither audited nor reviewed. 2) Not calculated (N/C) for the period. 3) Please note that accounting policies has been changed as from ; reference is made to the annual report page 101. Vestas shareholder information 2/ 05

6 Overview Vestas generated revenue of EUR 2,316m in the first half of, against EUR 1,795m in the first half of, an increase of 29 per cent. Europe accounted for 61 per cent of revenue, while the Americas and Asia/Pacific accounted for 30 per cent and 9 per cent of revenue, respectively. Operating profit (EBIT) rose from EUR 126m to EUR 154m, which corresponds to an EBIT margin of 6.6 per cent, against 7.0 per cent in the first half of. The declining EBIT, among other things, is due to severance payments in Northern Europe and the intensified increases in production staff at the new facilities in China and the USA. At the end of June, the Group s net working capital amounted to EUR 804m, or 11 per cent of expected annual revenue. Net working capital, which is expected to fluctuate in the course of the year, was adversely affected by an increase in inventories of EUR 547m since 30 June. Furthermore, prepayments from customers declined by EUR 473m in line with the lower order intake for the period. Order backlog Since the autumn of, the credit crisis has impacted the wind power industry, causing limited order intake during the past nine months and keeping it well short of the level of the same period in 2007/. At 30 June, the order backlog amounted to EUR 4.0bn, a decrease of 44 per cent relative to June. Measured in megawatt, the order backlog amounted to 3,596 MW. Europe accounted for 72 per cent and the Americas and Asia/Pacific accounted for 17 and 11 per cent, respectively. Longer term, Vestas expects a more even distribution between the three regions. Outlook In spite of the weak order intake since the onset of the credit crises, Vestas retains its forecast for. Since the end of the reporting period, Vestas has recorded an order intake of EUR 0.7bn. Additionally, Vestas corporate Contract Review Board will be evaluating several contracts with a total value of more than EUR 4.4bn in the upcoming period. Employees On 28 April, Vestas announced the necessity of lay-offs in Northern Europe due to lack of demand. Unfortunately, this meant that 1,142 Danish employees were made redundant. In the UK, 425 employees were made redundant as per 12 August, when unfortunately, it proved necessary to close the blade production on the Isle of Wight. However, the planned expansion of the research and development centre will continue. Since the end of 2005, Vestas has taken on approximately 10,000 new employees, net, while at the same time noticeably increasing investments in training. Investing in growth In, Vestas investments in organic growth are expected to amount to EUR 1.0bn. The bulk of these investments will be made in capacity expansions in China and the USA. For the period 2005-, Vestas will make growth investments totalling EUR 2.3bn. The large expansions in China and the USA will increase the share of costs outside the euro zone and reduce sensitivity to fluctuations in USD relative to EUR. At the same time, the geographical location of Vestas production facilities will henceforth better match the market demand. Non-financial highlights As from the second quarter of, Vestas will be reporting on quarterly developments on its non-financial highlights in order to give prominence to the performance in achieving its environmental and safety targets. EBIT (meur) 350 Net working capital (meur) (90) (53) Vestas shareholder information 2/

7 The share of renewable energy was 39 per cent and the share of renewable electricity was 67 per cent in the first half of. The share of renewable energy was 38 per cent, full year, and the share of renewable electricity was 68 per cent. The declining share of renewable electricity is due to the rising electricity consumption at Vestas newly opened factories in China, where it is currently not possible to purchase renewable electricity. The target is for 50 per cent of Vestas energy consumption to come from renewable sources by Another goal is to increase the proportion of renewable electricity to more than 90 per cent. Contracts that come into force at the beginning of 2010 will help ensure a substantial increase in the proportion of renewable electricity. The incidence of industrial injuries per one million working hours was 10.1 in the first half of, a drop of 42 per cent relative to the first half of. The target for 2012 is to achieve an incidence of three industrial injuries or less per one million working hours. Changes in equity In connection with the publication of the report for the first quarter of, Vestas increased its share capital by 10 per cent, receiving proceeds of EUR 792m. The funds will be used to strengthen Vestas technology platform. Ownership At the end of the second quarter of, Danish shareholders owned about 30 per cent of Vestas, which has a free float of 100 per cent. Vestas had 115,187 registered shareholders at the end of June. Second quarter Revenue was EUR 1,211m, an increase of 11 per cent relative to the second quarter of. The EBIT margin declined to 6.4 per cent, among other things, due to severance payments in Northern Europe and the intensified increases in production staff at the new facilities in China and the USA. Cash flows from operations were EUR (180)m against EUR 222m in the second quarter of. The development is primarily due to large inventories and a lower level of prepayments from customers following the fall in order intake. Revenue (meur) 3,500 3,000 Group financial performance (meur) Revenue 1,211 1,094 2,316 1,795 1) 1) 1) 1) EBIT EBIT margin (%) Profit Net working capital (53) Net working capital (%) 11 (1) 11 (1) 1) Neither audited nor reviewed. 2,500 2,000 1,500 1, ,138 1,615 1,827 1,795 2,316 Forecast for (meur) Revenue 7,200 of which service revenue 550 EBIT margin (%) EBIT margin (%), service 15 Net financial items (20) Tax rate (%) 28 Net working capital (%) max. 10 Investments property, plant and equipment 800 intangible assets Vestas shareholder information 2/ 07

8 No. 1 in Modern Energy Vestas Wind Systems A/S Alsvej Randers SV Denmark Tel.: Fax: vestas@vestas.com vestas.com

Company announcement from Vestas Wind Systems A/S

Company announcement from Vestas Wind Systems A/S Company announcement from Randers, 10 February 2010 Page 1 of 7 Annual report 2009: Strong foundation for Triple15 EBIT rose by 28 per cent to EUR 856m in 2009, consistent with the mid-point guidance.