Investor and Analyst presentation Senvion S.A. Nine month results for the period ended on 30 September 2018 14 November 2018
Disclaimer This presentation (the Presentation ) has been prepared by Senvion S.A. ( Senvion and together with its subsidiaries, we, us or the Group ) solely for informational purposes and has not been independently verified, and no representation or warranty, express or implied, is made or given by or on behalf of the Group. Senvion reserves the right to amend or replace this Presentation at any time. This Presentation is valid only as of its date, and Senvion undertakes no obligation to update the information in this Presentation to reflect subsequent events or conditions. This Presentation may not be redistributed or reproduced in whole or in part without the consent of Senvion. Any copyrights that may derive from this Presentation shall remain the sole property of Senvion. This Presentation does not constitute or form part of, and should not be construed as, an offer or invitation or inducement to subscribe for, underwrite or otherwise acquire, any securities of Senvion, nor should it or any part of it form the basis of, or be relied on in connection with, any investment decision with respect to securities of Senvion or any other company. Certain statements in this Presentation are forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial consequences of the plans and events described herein. Actual results may differ from those set forth in the forward-looking statements as a result of various factors (including, but not limited to, future global economic conditions, changed market conditions affecting the wind industry, intense competition in the markets in which the Group operates, costs of compliance with applicable laws, regulations and standards, diverse political, legal, economic and other conditions affecting the Group s markets, and other factors beyond the control of the Group). Neither Senvion nor any of its respective directors, officers, employees, advisors, or any other person is under any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak of the date of this Presentation. Statements contained in this Presentation regarding past trends or events should not be taken as a representation that such trends or events will continue in the future. In particular, no statements in this Presentation should be construed as concrete guidance as to the results of operations, cash-flows, balance sheet data or any non-financial metrics as of or for the financial year ending December 31, 2018 or any subsequent financial period. Certain financial data included in the presentation consists of non-ifrs financial measures. These non-ifrs financial measures may not be comparable to similarly titled measures presented by other companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. You are cautioned not to place undue reliance on any non-ifrs financial measures and ratios included herein. This Presentation does not constitute or contain any investment, legal, accounting, regulatory, taxation or other advice. Due to rounding, numbers presented through out this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures. 2
Agenda 1 2 3 4 5 6 Key highlights Q3 2018 Markets and orders Financials Future outlook Key takeaways Appendix 3
1. Key highlights
Q3 2018 key highlights at a glance Financials Revenue guidance adjusted to ~ 1.6bn with adj. EBITDA of ~5%; 200m revenues shift to early 2019 1.7bn revenue coverage for 2019 Quarter-on-quarter step up in revenues and EBITDA Q3 revenues at 343m with EBITDA of 8.6%, 9M 18 revenues at 809m with EBITDA of 5.3% Working capital at 2.8% with cash balance of 146m Operational developments Corporate Equity raise of 62.5m to support growth in 2019; shows support of key shareholders including Centerbridge Strengthened management board with appointment of Yves Rannou as CEO Orders More than 1 GW of conditional orders announced; new market re-entries US and Spain Alliance with Toshiba in Japan for onshore and offshore segment Efficiency Further 26m cost saving in fixed cost and interest cost achieved in 9M CY18 India supply chain expansion in progress Service Continuous growth in order book now stands at 2.8bn, up c.11% yoy Robust cash flow + double digit growth + predictable revenues - CY18e revenues of ~ 350m with ~42% contribution margin YTD Notes: Financials with IFRS 15 changes adopted; Contribution margin = Revenues minus the cost of goods sold, including production, material, logistics, construction site costs, commissioning costs, general warranty provisions and the cost of managing these direct cost centres. 5
Successful placement of new shares Proceeds to support higher growth Transaction summary and rationale Raised 62.5m via Accelerated Book at 7.7/share Increasing financial flexibility Timing driven by certainty of the deal (underwriting availability) Upfront investments to support growth in markets such as Chile and India 100% underwritten transaction 60% underwritten by Centerbridge with remaining 40% backstop provided by Berenberg Participation driven by existing investors Capital to support growth capex: India Expansion of nacelles production facility to support growth China Mobile factory being planned Strong commitment from existing and new investors to grow the business 6
Good order momentum in Q3 More than 1 GW of orders* announced 355 MW 20 MW firm orders 335 MW conditional orders Installation in 2019/2020 First US order and confirmation of product fit 130 MW Firm order 4 MW Conditional order of 14 MW Installation in 2018-2020 Prototype in installation Entry into two new markets: Spain and US 205 MW Converted to firm already 205 MW conditional order Installation in 2020 Showcasing the global potential of the new 2MW turbine Firm 300 MW 245 MW conditional orders Installation in 2019 Confirmation for product competitiveness Order breakup Conditional 250 MW 250 MW conditional orders Installation in 2019/2020 Total 720 MW orders won in India in 2018 Framework Supported by new products: Testament of product competitiveness Partnership agreement with Toshiba to seize market opportunities in Japan Increasing revenue visibility until 2020 ~230 MW ~845 MW ~165 MW Strong order pipeline to secure revenues also beyond 2019 Re-entry into market *-Order status as of Sept end 7
Progress on cost out initiatives 26m fixed cost and interest cost reduction YTD 2017 9M 2018 Fixed cost evolution ( m) Consolidation of production footprint Three factories closed in Germany Capacity reduced to 2.7 GW New suppliers added from Asia; ramp-up under way Reduction of employees Net reduction in employees - ~600 Fixed costs reduction 2017 Opex costs cut by 19% 2017 interest costs cut by 28% Interest cost OPEX Personnel 122-7% 12 111 110 119 106 108 9 9 103 10 8 9 11 39 35 36 42 36 35 30 71 66 65 57 63 64 62 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Total savings in 2017 52m Total savings in 9M 2018 26m 8
Growing service business Efficient set-up to drive resilient and profitable growth Key results Key attributes Service revenue ( m) 220m 244m Significant growth YTD growth at 11.4% Working towards digitisation Predictable annuity like revenues 72.6 78.8 68.2 +18.0% 85.2 78.0 80.5 Q1 17 Q2 17 Q3 17 Q1 18 Q2 18 Q3 18 GW under service High visibility High visibility from 2.8bn service order book 10+ years 1 average duration providing annuity-like revenue 11.9 +7.2% 12.8 +9.4% 14.0 High renewal rate 2 (~75% last 3 years) Q3 16 Q3 17 Q3 18 High margins and cash flow contribution Stronger contribution margin v/s turbine business Higher FCF contribution Service margins (Contribution margins 3 ) 34.6% 42.3% 33.9% 9M 16 9M 17 9M 18 Service provides a growing, predictable, annuity-like cash flow stream to the business Notes. 1. Only includes active contracts and tenors weighted by no. of WTGs, 2. Turbine renewal rate of service contracts since 2016 based on quarterly data, 3. Contribution margin = Revenues minus the cost of goods sold, including production, material, logistics, construction site costs, commissioning costs, general warranty provisions and the cost of managing these direct cost centres 9
2. Markets and Orders
Stabilising prices Senvion progress Strong market Market developments Senvion growing rapidly in India Indian Auctions India Market development 1.1 3.46 Size of the key auctions completed (GW) 1.1 2.0 2.0 1.2 Auctions Min tariff achieved /kwh +10% 2.64 2.44 2.51 2.76 Market outlook Strong growth expected in 2019 based on auctions already completed Prices Auction prices improving with price for right turbines improving SECI I SECI II SECI III Firm orders Senvion orders (MW) Conditional orders 300 101 30 SECI II Guj Auction SECI III SECI IV 250 SECI IV SECI V 681 Total Senvion Building market share Order book build up from Zero beginning of 2018 to 680 MW by end of 2018 Local facilities being expanded Nacelle facility expanded to 1 GW Local partnership for blade manufacturing German Auctions German market developments 70 57 Auction prices 43 38 46 /MWh 14% 57 62 63 FIT May 17 Aug 17 Nov 17 Feb 18 May-18 Aug 18 Oct 18 Undersubscribed last auction (363 MW out of 670 MW) due to lower availability of permitted projects Government announced 4 GW extra auctions between 2019-2021 Senvion well positioned with new turbines in 2019 11 Notes: NTPC = National Thermal Power Corporation
Order book of 5.8bn Firm order book improving by 37% yoy Order book ( bn) Net Firm Orders Conditional Service Total Q3 2018 split by geography Net firm orders at 2.0bn Figures in m Q3 18 1.7 0.3 2.0 1.1 2.8 5.8 2,002 Offshore 295 Q2 18 1.7 0.3 2.1 0.6 2.7 5.4 Q1 18 1.6 0.3 1.9 +37% 0.6 2.7 5.2 Q4 17 1.2 0.3 1.5 1.0 2.5 5.0 New markets 1,215 Onshore 1.7bn Q3 17 Q2 17 1.0 1.1 0.5 1.5 0.5 1.6 1.3 1.4 2.5 2.3 5.3 5.3 Germany UK France Others 119 155 117 101 Q1 17 1.0 0.3 1.3 1.3 0.3 1.6 2.3 5.2 Q3 18 Offshore Onshore Service orders Note: Net Firm orders are confirmed orders minus PoC revenues already booked. Conditional orders are signed contracts where either building permit and/or grid connection and/or financing is missing. 12
YTD firm onshore order intake marginally higher Firm WTG order intake ( m) 9M CY16 ON - 825m 9M CY17 ON - 970m 9M CY18 ON - 1,006m OFF - NIL OFF - 306m 587 484 306 353 337 284 31 267 269 272 5 53 265 279 322 227 217 72 Q1 16 Q2 16 Q3 16 Q1 17 Q2 17 Q3 17 Q1 18 OFF - NIL 313 209 268 140 45 69 Q2 18 Q3 18 Order intake profile changing due to our conscious efforts to expand into new markets Conversion of large conditional orders expected in next few quarters driven by India, Australia and Argentina Offshore New markets Current Markets High conditional order intake to support uptick in firm orders in upcoming quarters 13
17% higher installations in Q3 v/s H1 2018 Still recovering from delays experienced earlier 1,762 687 498 336 376 121 241 243 167 2016 Installations Back-end loaded 2018 In MW Step up in installations in Q3 In MW Similar installations achieved in Q416 1,478 288 571 2017 ~1,300 c.700 336 2018e 18 167 30 41 60 18 121 45 41 Q1 18 Q2 18 +179% 336 125 98 51 22 8 26 40 Q3 18 Changing nature of geographical profile adding to the seasonality Some delays in new markets due to initial learning curve and country specific issues Step up in Q3 installations mainly driven by UK and Chile Heavy pace of installations continue in Q4 mainly driven by LatAM, UK and Australia Q4 installations Q2 installations New markets France Q3 installations Q1 installations Other current markets Germany UK Some installations shift to early 2019 due to bad weather conditions and other unusual external factors 14
3. Financials
Key highlights Step up in financials, ahead of heavy Q4 ( m) Adj. Q3 17 Adj. Q3 18 Adj. 9M 17 Adj. 9M 18 Revenue 480 343 1,309 809 Gross profits 137 119 398 329 Gross margin % 28.5% 34.7% 30.4% 40.7% Adj. EBITDA 41 30 103 43 Adj. EBITDA % 8.6% 8.6% 7.9% 5.3% Adj. EBIT 27 13 57 (11) Adj. EBIT % 5.6% 3.7% 4.3% (1.4%) Adj. PAT 18 (3) 34 (32) Working Capital % 0.4% 2.8% 0.4% 2.8% Lower revenues driven by delays in installations and effects of IFRS 15 compared to last year Higher share of service revenues drive gross margins Working capital remained flat due to some delays in order intake and installations Higher cash position of 146m driven by capital raise completed in the quarter Working Capital 8 39 8 39 Net Debt / (Cash) 211 250 211 250 Note: Q3/9M 2018 financials are adjusted for PPA and extraordinary expenses related to restructuring, Q3/9M 2017 financials are adjusted for PPA effects, extraordinary expenses and one off expenses in relation to high yield bond refinancing Q3/9M 2017 financials are not restated to reflect change in IFRS 15, hence only a limited comparison can be made between the financial figures of Q3/9M 2017 with Q3/ 9M 2018. 16
Additional key performance metrics Continued improvement Material cost development ( m) 28.0% 28.5% 30.4% Adj. COGS Gross margin 40.7% 9M 18 margins driven by higher service revenue component and offshore income 1,618 1,355 1,038 805 2016 2017 9M 17 9M 18 Cost breakdown ( m) D&A OPEX -6% 127 117 116 119 116 120 17 109 15 15 19 17 20 17 39 35 36 42 36 35 30 71 66 65 57 63 64 62 Personnel Continued OPEX reduction Net employee costs reduced despite expected growth in 2019 Working on further cost reduction in 2019 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Note: Financials adjusted for PPA in D&A 17
Breakup of total Capex and R&D Spending in line with last year Total intangible and tangible capex 1 ( m) 2.7% 60 2.7% 3.8% 5.8% 51 43 39 Investments according to plan Expansion of Indian blade and nacelle factory has started 2016 2017 9M 17 9M 18 [%] Capex over sales R&D expenditure ( m) 3.1% 68 23 26 45 42 2.9% 4.3% 8.7% 68 51 19 56 21 32 36 Key R&D spending focused on acceleration of 4.XM and 2.XM platforms Slightly higher R&D costs expected yoy due to accelerated focus on ensuring the realisation of LCoE reduction 2016 2017 9M 17 9M 18 [%] R&D over sales Expensed Capitalised 1. Excluding capitalised R&D. 18
Net working capital Meaningful WC improvement expected in next few quarters Net working capital 1 evolution ( m) Net working capital NWC 1 % of trailing 12 months revenue 4.6% 2.5% 3.1% (0.2)% 0.4% 99 (3.7)% 47 54 8 12.1% (5) 8.3% (83) Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 2.6% 2.8% 40 39 Q2 18 Q3 18 Working Capital remained stable due to installation profile Further inventory build up of 79m in Q3 18 due to build up of Q4 projects WC expected to normalise in next two quarters Quarterly free cash flow evolution ( m) 14 (109) (173) 44 48 (60) (40) (43) Seasonal effects of inventory build up generated negative cash flow in first half Improved FCF generation expected in next two quarters Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Free cash flow Operating cash flow Investing cash flow 1. Net working capital defined as current assets (adjusted for liquid funds and assets of disposal Group classified as held for sale) minus total current liabilities (adjusted for provisions, liabilities of disposal Group classified as held for sale and short-term loans and current portion of long-term loans). 19
4. Future outlook
Guidance 2018 Revenue guidance adjusted Former Guidance 2018 Revised Guidance 2018 9M 18 Revenues 1.8-1.9bn ~ 1.6bn 806m Adj. EBITDA margin 5.0-6.5% ~ 5.0% 5.3% 21
1.7bn revenue coverage for 2019 Further commentary on 2019 with Q4 results and new CEO on board 2018 Revenue drivers Business Split 20% to 40% growth Targets 2019 Revenues Onshore ~70-75% 1.1bn+ of firm orders already covered Order conversions expected in six to nine months Significant revenue growth potential ~ 1.6bn Offshore and service 25-30% c. 600m covered for 2019 Underpinned by 1.7bn firm order coverage 2018 EBITDA drivers Healthy EBITDA growth Targets 2019 Adj. EBITDA margin ~5% Material cost out Fixed cost reduction Higher volumes to drive EBITDA recovery Cost out from scale driven component pricing possible as component demand doubles due to higher installations Increase in EBITDA 22
5. Key takeaways
Key takeaways 1 Sequential step up in revenues and EBITDA 2 Growth in conditional orders, with expected conversions over upcoming quarters 3 MOVE FORWARD Intensive cost outs to deliver margins 4 Service business continues to grow with healthy margins & cash flows 5 High revenue visibility for 2019 with 1.7bn firm orders secured and a healthy pipeline in place 24
6. Appendix
Financial calendar Financial Calendar 2018 Event Date Q3 2018 Results November 14, 2018 Your Investor Relations Team: Dhaval Vakil VP Capital Markets & Public Relations Phone UK: +44 20 3859 3664 Mobile: +44 7788390185 Email: dhaval.vakil@senvion.com Anja Siehler Sr. Manager Capital Markets Phone Lux: +352 26 00 5285 Mobile: +49 152 21817093 Email: anja.siehler@senvion.com For general queries: IR@senvion.com 26
Income Statement Q3 18 Bridge between reported and adjusted earnings m Adj. 2017 Q3 18 Adj. Adj Q3 18 Revenue 1,890 343 343 Total performance 1,893 414 414 Material expenses (1,355) (295) (295) Gross profit 538 119 119 Gross margin % 28.5% 34.7% 34.7% Other operating income 30 2 2 Personnel expenses (260) (62) (62) Other operating expenses (153) (30) (30) FX gain/loss (4) 0 0 EBITDA 152 30 30 EBITDA % 8.0% 8.6% 8.6% Depreciation & Amortization (66) (27) 1 10 (17) EBIT 86 3 13 EBIT% 4.5% 0.8% 3.7% Extraordinary Expenses 0 (4) 2 4 0 Net interest (41) (11) (11) Taxes (0) (2) 3 (3) (5) Net Profit from continued ops 45 (14) (3) PAT % 2.4% (4.1%) (0.9%) 1 2 3 Key adjustments PPA adjustment (non cash) Extraordinary expenses of 3.8m relate to second phase of initiatives to cut further costs and include legal and consulting costs and employee termination benefits PPA adjustment (non cash) 27
Quarterly Income Statements Income Statement Adj. Adj. Adj. Adj. Adj. Adj. m Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Revenue 437 480 580 256 210 343 Total performance 446 475 458 355 364 414 Material expenses (308) (338) (317) (255) (255) (295) Gross profit 138 137 141 100 110 119 Gross margin % 31.5% 28.5% 24.2% 39.3% 52.2% 34.7% Other operating income 6 5 10 1 3 2 Personnel expenses (66) (65) (57) (63) (64) (62) Other operating expenses (35) (36) (42) (36) (35) (30) FX gain/loss (2) 0 (3) (2) (1) 0 EBITDA 40 41 48 1 13 30 EBITDA % 9.2% 8.6% 8.4% 0.3% 6.0% 8.6% D&A (15) (14) (19) (17) (20) (17) EBIT 25 27 29 (16) (7) 13 EBIT% 5.7% 5.6% 5.0% (6.4%) (3.5%) 3.7% Extraordinary exp. (19) (3) 1 (1) (6) (4) Net interest (9) (9) (10) (8) (9) (11) Taxes (1) 0 (8) 3 8 (5) Net Profit from continued ops 15 18 11 (21) (8) (3) Financials adjusted for PPA, restructuring expenses in CY18 PPA, restructuring expenses and HYB refi expenses in CY17 28
9M Income Statements Income Statement Adj. Adj. m 9M 17 9M 18 Revenue 1,309 809 Total performance 1,436 1,134 Material expenses (1,038) (805) Gross profit 398 329 Gross margin % 30.4% 40.7% Other operating income 20 6 Personnel expenses (203) (189) Other operating expenses (111) (102) FX gain/loss (2) (2) EBITDA 103 43 EBITDA % 7.9% 5.3% D&A (46) (54) EBIT 57 (11) EBIT% 4.3% (1.4%) Extraordinary exp. (55) (11) Net interest (31) (27) Taxes 8 6 Net Profit from continued ops 34 (32) Financials adjusted for PPA, restructuring expenses in CY18 PPA, restructuring expenses and HYB refi expenses in CY17 29
Balance Sheet Assets ( m) Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Liquid Funds 190 235 175 133 146 Current Assets (excluding liquid funds) 804 774 850 1,058 1,103 Receivables 153 206 156 187 155 Inventories 560 490 601 771 850 Others 91 78 93 101 98 Property, plant & equipment 234 224 231 230 235 Intangible assets 541 527 521 514 507 Other Non current assets 1 40 35 32 31 30 Deferred tax assets 0 13 11 11 13 Total 1,808 1,808 1,820 1,977 2,033 Liabilities ( m) Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Loans (short term, long term and High Yield Bond) 401 400 399 398 396 Current liabilities (excl. provisions and short term loans) 797 728 797 1,018 1,064 Advance payments received 159 119 402 517 486 Trade payables 381 340 279 393 440 Gross amount due to customers for contract work as a liability 119 139 6 12 28 Others 138 131 110 96 110 Provisions 247 300 284 257 218 Deferred tax liability 140 150 141 129 133 Total equity capital 225 230 200 175 222 Total 1,808 1,808 1,820 1,977 2,033 Notes: 1. includes assets held for sale 30
Cash flow summary ( m) Q3 17 Q3 18 9M 17 9M 18 Result before income taxes (11) (11) (126) (79) Adjustments for Depreciation on property, plant and equipment, amortization of intangible assets and write-offs on financial assets 40 27 123 84 Interest income (0) (4) (1) (4) Interest expenses 10 13 52 31 Increase/decrease in provisions (50) (38) (42) (82) Profit or loss from sales of property 0 0 0 1 Change in working capital 115 (1) (73) 8 Interest received (0) 2 1 4 Interest paid (5) (8) (50) (23) Income tax paid/received (27) 2 (33) (8) Cash flow from operating activities 71 (18) (149) (68) Cash receipts from the sale of property, plant and equipment, intangible and other long-term assets 0 (3) 3 2 Cash payments for the purchase of intangible assets (11) (12) (34) (40) Cash payments from purchase of property, plant and equipment and other longterm assets (16) (10) (57) (38) Cash flow from investing activities (27) (25) (89) (76) Cash proceeds from Capital Increase 0 59 0 59 Acquisition of treasury shares (2) 0 (8) 0 Net Cash repayments of amounts borrowed / repayments (1) (0) (4) (2) Cash flow from financing activities (4) 59 (12) 57 Increase/decrease in cash and cash equivalents 40 16 (249) (87) Cash and cash equivalents at the beginning of the period 145 128 434 231 Cash and cash equivalents at the end of the period 184 144 184 144 Liquid funds 190 146 190 146 Short-term bank liabilities (6) (2) (6) (2) 31
Revenue development Growth in service and offshore revenues Onshore revenues ( m) Service revenues ( m) Offshore revenues ( m) 867-38% 377 535 263 249 227 161 125 9M 17 9M 18 Q3 Q2 Q1 +11% 220 244 68 81 79 78 73 85 9M 17 9M 18 218 33 94 91 9M 17 13 1 12 9M 18 Other revenues at 1.3m in Q3 2018 ( 1.3m in Q3 2017) and 16.7m in H1 2018 ( 4.4m in 9M 2017) Onshore revenues breakdown ( m) Euope ( m) Americas ( m) Asia-Pacific ( m) 820 462 358 9M 17 421 251 170 9M 18 Lower revenues mainly due to low installation in Germany and UK 59 55 4 33 31 17 55 16 16 14 24 2 9M 17 9M 18 9M 17 9M 18 Increase in revenues due to pick up in Chile Includes revenues from Japan and Australia H1 Q3 32
Overview of PPA Adjustments Net PPA booked in CY18 ( m) Expected yearly P&L effects 1 ( m) 21 2017 64 Q3 18 7 2018e 28 Q2 18 7 2019e 28 Q1 18 7 2020e 27 9M CY18 Notes: 1. Including deferred tax impacts and is not the complete schedule; assumed group tax rate of 29.765% for calculations. Source: Company information; Deloitte analysis. 33