First quarter 2012 Aarhus, 2 May 2012
Disclaimer and cautionary statement This presentation contains forward-looking statements concerning Vestas' financial condition, results of operations and business. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning Vestas' potential exposure to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. There are a number of factors that could affect Vestas' future operations and could cause Vestas' results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) changes in demand for Vestas' products; (b) currency and interest rate fluctuations; (c) loss of market share and industry competition; (d) environmental and physical risks; (e) legislative, fiscal and regulatory developments, including changes in tax or accounting policies; (f) economic and financial market conditions in various countries and regions; (g) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, and delays or advancements in the approval of projects; (h) ability to enforce patents; (i) product development risks; (j) cost of commodities; (k) customer credit risks; (l) supply of components from suppliers and vendors; and (m) customer readiness and ability to accept delivery and installation of products and transfer of risk. All forward-looking statements contained in this presentation are expressly qualified by the cautionary statements contained or referenced to in this statement. Undue reliance should not be placed on forward-looking statements. Additional factors that may affect future results are contained in Vestas' annual report for the year ended 31 December (available at vestas.com/investor) and these factors also should be considered. Each forward-looking statement speaks only as of the date of this presentation. Vestas does not undertake any obligation to publicly update or revise any forward-looking statement as a result of new information or future events others than required by Danish law. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation. 2 2012
Agenda 1. Introduction 2. Update on organisational changes 3. Financials 4. Order intake 2012 5. Market shares 6. Questions & answers 3 2012
Introduction
Main events Outlook for EBIT, cash flow and revenue retained. Disappointing revenue and earnings. Aligning the organisation to 2012 and 2013 challenges. Very high activity level for the rest of the year. Additional provisions of EUR 40m for V90-3.0 MW gearboxes. Order intake realised in tough markets. V164-7.0 MW update. Market shares: Increasing the gap. 5 2012
Outlook for EBIT, cash flow and revenue retained Revenue (meur) 6,500-8,000 - of which service revenue (meur) 850 EBIT margin (%) 0-4 EBIT margin, service (%) ~ 14 Investments (meur) 550 - Intangible (meur) 350 - Tangible (meur) 200 Free cash flow (meur) > 0 Warranty provisions (%) ~ 3 2012 EBIT margin low due to: Too high production costs primarily on the V112 turbine and the GridStreamer technology, which will be reduced over the year. Depreciation and amortisation increase by EUR 100m. Special items related to the lay-off of 2,335 employees expected to amount to EUR 50-100m. 6 2012
Update on organisational changes
New Chief Financial Officer appointed Vestas Wind Systems A/S has appointed Dag Gunnar Andresen, 48, as new Chief Financial Officer. [ ] He is expected to take up office around 1 August this year. President and CEO Ditlev Engel CEO Staff functions Manufacturing (Vacant) Turbines R&D Anders Vedel Global Solutions & Services (Vacant) Finance Dag Gunnar Andresen Sales Juan Araluce 8 2012
Changing the Vestas organisation In a busy 2012 Shipment and delivery activities in 2012 Expected distribution over the year; illustrative example Deliveries Employee reductions to take place during busy 2012 execution. Shipments expected to increase by almost 40 per cent in 2012 to around 7 GW. Deliveries will fluctuate and are expected to increase over the year. Shipments 9 2012
Employee overview Headcount to be further reduced Employees Number of employees, end of period 20,829 20,730 23,252 22,721 22,576 ~20,400 Employee base did not decrease significantly in due to ramp-up in manufacturing and service. 15,305 Some employees laid off in 2012 are still working during lay-off period. End 2012 target of approx 20,400 employees maintained. Full-year reduction target of 2,335 employees will contribute to reduce costs by more than EUR 150m, with full effect as from the end of 2012. FY 2007 FY 2008 FY 2009 FY FY 2012 FY 2012 Expected US decision during. 10 2012
Financials
Activity level at factories Shipments are the primary cash generator Shipments by region MW 1,456 481 1,626 488 1,417 595 +47% 1,525 675 1,478 707 2012 shipments up by 47 per cent compared to. Higher activity level in Americas due to potential PTC expiration in the USA. 387 588 277 571 619 634 260 712 604 427 931 354 286 2012 shipments expected to increase by almost 40 per cent compared to. 228 60 99 208 103 404 519 173 201 110 246 344 291 2012 Europe and Africa Americas Asia Pacific 12 2012
Deliveries Deliveries are the primary revenue driver Deliveries by region MW 2,557 Lower deliveries than expected. 1,688 1,449 +28% 1,956 2012 deliveries up by 28 per cent compared to but the proportion of turnkey deliveries was higher. 458 1,127 1,270 327 1,124 1,108 deliveries in Americas more than doubled. 758 562 131 65 839 642 134 63 675 613 555 495 864 516 163 185 384 647 96 542 495 401 337 587 375 146 2012 Europe and Africa Americas Asia Pacific 13 2012
Quarterly P&L fluctuations driven by contract mix Distribution of margins +200 projects a year Pricing and risk variables Not exhaustive 1. Scope type of contract. 2. Uniqueness of offering. 3. Value of revenue. 4. Scale. 5. OPEX/CAPEX allocation. 6. Design lifetime. 7. Cost differentiation. 8. Risk allocation. 9. Early generation sharing. 10. Relationship efficiency. 14 2012
MW under completion - one of the revenue drivers MW under completion end of period 3,398 3,147 2,915 MW under completion, shipments and service are revenue drivers for the coming quarters. 2,549 2,184 2,207 1,984 1,754-8% 2,044 2,299 1,821 1,644 Vestas entered 2012 with 8 per cent lower MW under completion compared to the beginning of. 1,246 990 1,201 1,549 1,132 899 244 389 285 291 301 366 428 360 271 605 574 423 447 463 477 322 329 474 2012 Europe and Africa Americas Asia Pacific 15 2012
Income statement meur 2012 Change FY Revenue 1,105 1,060 4% 5,836 Cost of sales (1,093) (960) 14% (5,111) Gross profit 12 100 (88)% 725 Fixed costs* (216) (169) 28% (763) Operating profit before special items (204) (69) - (38) Special items (41) 0 - (22) Operating profit after special items (245) (69) - (60) Profit for the period (162) (85) - (166) *R&D, administration and distribution Revenue low due to deferred projects. Additional warranty provisions of EUR 40m related to V90-3.0 MW gearbox. Too high production costs primarily on the V112 turbine and the GridStreamer technology. Special items with full cash effect. Gross margin 1.1% 9.4% (8.3)%-pts. 12.4% EBITDA margin before special items (8.1)% 0.0% (8.1)%-pts. 5.2% EBIT margin before special items (18.5)% (6.5)% (12.0)%-pts. (0.7)% EBIT margin after special items (22.2)% (6.5)% (15.7)%-pts. (1.0)% 16 2012
Gross margin and fixed costs Margins hurt by lower margins on delivered projects Gross margin to improve by higher utilisation Too high turbine cost on projects recognised in, primarily on V112 turbines and the GridStreamer technology. Higher depreciation. Fixed costs* to be reduced 2012 fixed costs are 26 per cent higher than due to higher R&D amortisation and administration costs. Fixed costs* including fixed capacity costs to be reduced by more than EUR 150m with full effect as from the end of 2012. Gross profit and margin meur and percentage Fixed costs* meur 700 600 500 400 300 12% 23% 449 613 20% 9% 18% 248 8% 13% 267 25% 20% 15% 10% 250 25% 221 216 202 200 192 197 20% 178 169 171 108 78 77 92 114 150 140 71 15% 70 73 53 100 10% 200 100 101 12 1% 100 110 12 1% 5% 50 87 114 107 120 99 98 110 113 102 5% 0 2012 0% 0 2012 0% Gross margin Gross profit Depreciation and amortisation Other fixed costs 17 2012 *R&D, administration and distribution
Direct cost reductions Examples of direct cost reduction initiatives Removal of grounding cable from towers V112 crane gallery simplification Lifting hook redesign Cost reduction on lift galleries in towers Standardisation of rear frame cross assembly Lighter version of transformer bracket 18 2012
Service revenue Firm Service agreements with contractual future revenue of EUR 4.2bn by the end of 2012. 112 130 122 140 146 159 149 169 173 169 +17% 160 203 203 Service revenue expected to further increase during 2012. Ramp-up of employees in service area in order to prepare for higher activity. 2009 2009 2009 2009 2012 19 2012
Balance sheet Assets (meur) 2012 Change FY Change Development projects in progress 264 517 (49)% 256 3% Completed development projects 572 170 236% 577 (1)% Goodwill and software 407 408 0% 410 (1)% Property, plant and equipment 1,851 1,701 9% 1,898 (2)% V112 turbine and the GridStreamer technology brought into serial production. Other non-current assets 433 289 50% 381 14% Current assets 4,442 3,924 13% 4,167 7% Total assets 7,969 7,009 14% 7,689 4% Liabilities (meur) Equity 2,378 2,677 (11)% 2,576 (8)% Non-current liabilities 1,320 1,332 (1)% 1,073 23% Current liabilities 4,271 3,000 42% 4,040 6% Total equity and liabilities 7,969 7,009 14% 7,689 4% Net debt 850 1,000 (15)% 545 56% Net working capital 20 910 (98)% (71) - Net debt and net working capital reduced. 20 2012
Change in net working capital NWC decreased over the last 12 months Make-to-order/just-in-time implementation has paid off. NWC increased slightly over Preparing for busy quarters. Prepayments increased more than inventories. Building up inventories to execute a record-high shipment year. Net working capital change over the last 12 months meur Net working capital change over the last three months meur 399 910 88 15 813 472 367 13 20 492-71 49 135 57 20 113 NWC end Inventories Receivables CCP* Prepayments Prepayments Payables Other liabilities NWC end 2012 NWC end CCP* Inventories Receivables Payables Other liabilities NWC end 2012 *Construction contracts in progress. 21 2012
Warranty provisions Warranty provisions Warranty provisions increased in 2012 due to additional provisions of EUR 40m for V90-3.0 MW gearboxes. Lost production factor End LPF around 2. Target 2012: LPF < 2. LPF measures potential energy production not captured by the wind turbines. Warranty provisions made and consumed meur Lost production factor Percentage 87 5.0 63 69 38 65 60 56 27 45 29 40 34 51 58 43 62 40 30 4.5 4.0 3.5 3.0 2.5 2.0 9 22 1.5 1.0 0.5 Provisions made Provisions consumed 2012 0.0 Jan 2009 Jan Jan Jan 2012 22 2012
V90-3.0 MW gearbox provisions In details EUR 40m of additional provisions made for V90-3.0 MW gearboxes. 376 gearboxes 36 offshore delivered between June 2009 and September potentially impacted. Impacted gearboxes corresponding to around 1/3 of V90-3.0 MW deliveries in the period in question. Vestas will pursue all relevant actions with regards to potential compensation from ZF and the bearing supplier in question. Current LPF of impacted turbines is ~3.6. 23 2012
Cash flow statement meur 2012 FY Cash flow from operating activities before change in working capital (113) (29) 93 Change in working capital (91) (238) 747 Cash flow from operating activities (204) (267) 840 Cash flow from investing activities (91) (164) (761) Free cash flow improved by EUR 136m due to reduced net working capital and lower investments. Free cash flow (295) (431) 79 Cash flow from financing activities 242 283 (13) Change in cash at bank and in hand less current portion of bank debt (53) (148) 66 24 2012
Cash flow Positive trend since mid-2009 Net debt to be reduced by year-end Cash flow from operations and investments meur 1,000 500 0-500 -1,000-1,500 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 Free cash flow, last 12 months Cash flow from operations, last 12 months Investments, last 12 months Net debt and debt coverage meur and EBITDA 1,000 800 600 400 200 0-200 -400-600 -800-1.82x FY 2007-0.05x -0.29x FY 2008 FY 2009 0.78x FY 1.79x FY 3.95x 2012 FY 2012 Exp. 4.0x 3.0x 2.0x 1.0x 0.0x -1.0x -2.0x Net debt to EBITDA before special items, last 12 months Net debt 25 2012
Return on invested capital Focus on improving ROIC ROIC hurt by poor results and by investments made to develop and convert platforms to improve competitiveness. ROIC to be improved by growth in higher margin service business. Lower 2012 investments investments lower than D&A level. Investments in intangibles to increase relatively to investments in property, plant and equipment. Return on Invested Capital* (ROIC) Percentage PPE and intangible assets meur and percentage 12% 10% 8% 6% 4% 2% 0% -2% -4% 2009 2012 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 49% 54% 50% 40% 39% 39% 43% 54% 53% 2012 ROIC, last 12 months EBIT margin before special items, last 12 months * Invested capital includes net working capital, PPE and intangibles. PPE & intangibles to revenue, last 12 months Total PPE Total intangible assets 26 2012
Order intake 2012
Order intake Significant improvement in order intake order intake increased by 101 per cent compared to. Order intake achieved in challenging markets. Three big orders in the USA and Mexico constituted more than half of order intake. Price per MW Price per MW depends on a variety of factors i.e. turbine type, geography, scope, uniqueness of offering, etc. New products protect price per MW, but carry higher costs than more mature products. Order intake MW 3,031 2,278 2,106 2,265 +101% 3,186 Average selling price of order intake meur per MW 1.03 0.86 0.92 1.23 1.11 0.93 0.91 1.04 1.02 1,258 1,050 1,022 1,316 1,269 458 542 630 2009 2009 2009 2009 2012 2012 28 2012
WTG order backlog Order backlog at the highest level ever Order backlog by region MW (excl. of service contracts) 9,552 9,893 Order backlog at the highest level ever. 7,622 Value of WTG order backlog equals EUR 10.0bn. 65% 60% 57% Europe and Africa Americas Asia Pacific 22% 25% 28% 13% 15% 15% FY FY 2012 29 2012
Product platform V164-7.0 MW prototype installation deferred High, medium and low wind, on- and offshore Prototype installation expected in 2014. Inquiries received from potential partners. 30 2012
Market shares
Global market shares Vestas No. 1 according to three of the leading wind industry consultancies 41.1 GW 40.4 GW 40.8 GW Vestas 12.7% Vestas 12.9% Vestas 12.9% Sinovel 9.0% Goldwind 9.4% Goldwind 8.8% Goldwind 8.7% GE Energy 8.8% Enercon 7.6% Gamesa 8.0% Gamesa 8.2% Suzlon Group 7.6% Enercon 7.8% Enercon 7.9% Siemens 7.6% GE Energy Suzlon Group Guodian United Power Siemens Mingyang 7.7% 7.6% 7.4% 6.3% 3.6% Suzlon Group Sinovel Guodian United Power Siemens Mingyang 7.7% 7.3% 7.1% 6.3% 2.9% GE Energy Sinovel Guodian United Power Gamesa Mingyang 7.4% 7.2% 7.0% 6.4% 2.9% Other 21.2% Other 21.5% Other 24.6% EER "Installed MW" BTM-Navigant "Installations" MAKE "Grid-connected" Sources: IHS EER, BTM-Navigant, MAKE 32 2012
EER: Top 10 largest markets in Market size No. Market Rank 1 Rank 2 Rank 3 1 China Sinovel Goldwind Guodian 2 USA GE Vestas Siemens 3 India Suzlon Group* Gamesa Vestas 4 Germany Enercon Vestas Suzlon Group* 5 UK Siemens Suzlon Group* Vestas Vestas largest foreign player in China ranked 8 th. Vestas in top-three in nine out of ten largest markets. 6 Canada GE Siemens Vestas 7 France Enercon Vestas Suzlon Group* 8 Romania GE Vestas Gamesa 9 Italy Gamesa Vestas Enercon 10 Spain Gamesa Vestas GE * Including REpower 33 2012
Today s key points Outlook for EBIT, cash flow and revenue retained. Disappointing revenue and earnings. Aligning the organisation to 2012 and 2013 challenges. Very high activity level for the rest of the year. Additional provisions of EUR 40m for V90-3.0 MW gearboxes. V164-7.0 MW offshore: Deferral of prototype installation to 2014 - inquiries received from potential partners. 34 2012
Financial calendar 2012 22 August 2012 Disclosure of H1/ 2012 results 7 November 2012 Disclosure of 2012 results 35 2012
Questions & answers
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