first quarter 2011 - vestas/media/vestas/investor... · first quarter 2011 │ new york city │ 4...

First quarter 2011 Markets in recovery, but it’s rough and tough 4 May 2011 │ Four Seasons Hotel, New York City

Disclaimer and cautionary statement

First quarter 2011 │ New York City │ 4 May 2011 2

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; and (l) supply of components.

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 2010 (available at www.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.

Company announcement, 4 May 2011, page 18

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; and (l) supply of components.

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 2010 (available at www.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.

Disclaimer and cautionary statement


Company announcement, 4 May 2011, page 18


Today’s key points

Q1 order intake slower than expected.

Markets rough and tough.

Q1: A loss as guided.

H1 EBIT breaks even.

Guidance maintained.

Agenda


1. First quarter 2011 accounts.

2. Industry trends.

3. Guidance 2011.

4. Questions & Answers.

First quarter 2011 accounts.

1

Activity at Vestas


Deliveries to customers


Income statement


Main lines

EURm Q1 2011

Q1 2010

Change

Revenue 1,060 849 25%

Cost of sales (960) (748) 28%

Gross profit 100 101 (1%)

Fixed costs (169) (140) 21%

Operating profit/(loss) (69) (39) (77%)

Profit/(loss) for the period (85) (39) (118%)

Gross margin 9.4% 11.9%

EBITDA margin 0.0% 1.5%

EBIT margin (6.5%) (4.6%)

EBIT lower than Q1 2010 due to change in geographical mix, depreciation and amortisation of EUR 17m and phase out of the V82. Quarterly revenue and earnings fluctuate depending on mix of products, capacity utilisation, contract types and geography.

Income statement


Fixed cost

EURm Q1 2011

Q1 2010

Change

Research and Development costs 33 18 83%

Selling and distribution expenses 51 44 16%

Administrative expenses 85 78 9%

Total fixed cost 169 140 21%

R&D: Ramp-up in 2010 affecting 2011 cost.

Q1 2010/Q1 2011 decline, however, not yet showing full effect of shared service centres, etc.

Still more efficient


Reduction of work force in late 2010 to mirror expected 2011 activity level. Current number of employees to ship approx 50 per cent more than Vestas shipped in 2010.

More MW per employee

mEUR Q1 2011

Q1 2010

Inventories 2,619 3,935

Trade receivables 568 575

Construction contracts in progress 49 97

Other receivables 353 262

Prepayment from customers (1,457) (3,185)

Trade payables (936) (700)

Other current liabilities (286) (391)

Net working capital 910 593

As per cent of revenue 13% 9%


Net working capital

Reduced ‘Inventories’ reflecting deliveries over the period. Inventories still too large. Further reduction of inventories to take place this year. ‘Prepayments’ reflect timing of order intake and limited shipments. Note: Cost of ‘supply-only’ and ‘supply-and-installation’ constitutes part of inventories and prepayments.

Inventories to be reduced


Assets (mEUR) Q1 2011

Q1 2010

Change

Intangible assets 1,095 864 27%

Property, plant and equipment 1,701 1,550 10%

Other non-current assets 289 382 (24%)

Current assets 3,924 5,438 (28%)

Total assets 7,009 8,234 (15%)

Equity and liabilities (mEUR) Q1 2011

Q1 2010

Change

Equity 2,677 2,517 6%

Non-current liabilities 1,332 1,037 28%

Current liabilities 3,000 4,680 (36%)

Total equity and liabilities 7,009 8,234 (15%)

Balance sheet Assets and liabilities

Net debt of EUR 1,000m (including Eurobond) reflecting increase of EUR 596m. Increase in net debt of EUR 421m since end of 2010.

Despite higher activity for 2011, total assets have been reduced by EUR 1.2bn – i.e. better utilisation of the capital.

mEUR Q1

2011 Q1

2010

Profit for the period (85) (39)

Adjustment for non-cash transactions 77 6

Corporation tax paid (7) (89)

Interest received and paid (net) (14) 0

Cash flow from operating activities before change in working capital

(29) (122)

Change in working capital (238) (276)

Cash flow from operating activities (267) (398)

Cash flow from investing activities (164) (149)

Free cash flow (431) (547)

Cash flow from financing activities 283 520

Change in cash at bank and in hand less current position of bank debt

(148) (27)


Cash flow statement Main lines

Change in ‘Adjustments for non-cash transactions’ constituted by depreciation, amortisation, provisions, tax, hedging, exchange rate, etc.


Expected strong cash flow generation rest of 2011

Cash flow from operations EURm

Investments EURm

Free cash flow (1,000)

(800)

(600)

(400)

(200)

0

200

400

600

800

1,000

2007 2008 2009 2010 2011


Sustainability

As green as it gets

2

Industry trends.

World’s largest tower factory: Vestas Towers, Pueblo, Colorado, USA

Competition remains fierce


Source: BTM Consult – part of Navigant Consulting – March 2011

Still more markets take advantage of wind power


Number of countries installing wind power - in that particular year

20

39

53

2000 2005 2010Source: Emerging Energy Research

Presence is of essence


Vestas in Top 10 Markets Ranking

Source: BTM Consult – part of Navigant Consulting – March 2011

China on its own growth path: Larger than the rest of the list combined. With 5 per cent of the market, Vestas is the largest foreign manufacturer in China. No Chinese manufacturers outside China. Vestas has installed more capacity in China than all Chinese manufactures combined have installed outside of China.

Chinese players have taken the lead in solar PV…


…whereas European and US players dominate the wind power sector



Harry Reid, Senator, Nevada (D):

“China isn't investing so heavily in clean energy just because it's good for the environment — it’s doing so because it's good for the economy. China knows clean energy creates jobs and, in reducing its reliance on oil, makes it more secure.”

Politico, 28 April 2011


It takes a variety of turbines to serve the world

Recent product launches

Mainly for sale in Europe and Asia Pacific. Based on the well proven V90-3.0 MW. Latest addition to low/medium wind speed sites. Production start: Summer 2011.

For global sale. Based on the mature and reliable 2 MW platform. Designed for low wind speed.

V100-1.8 MW

V100-2.6 MW

V164-7.0 MW Designed for North Sea conditions. First turbine exclusively designed for offshore. For medium-to-high wind speed.

Most versatile turbine ever. Onshore (low/medium speed) and offshore (high speed). Production start: Summer 2011.

V112-3.0 MW



When offshore powers the World, size does matter!

The rotor is the motor

27

164 metres

21,124 sq metres = 25,263 sq yards

Compared to four Airbus A380

– the world’s largest passenger airplane.

First quarter 2011 │ New York City │ 4 May 2011


Wind powering Europe It only takes 27,500 V164-7.0 MW to fuel all European households

141 x 141 kilometres or 88 x 88 miles is all it takes.

Google Maps


Can the US do the same? YES, you can – onshore & offshore! It only takes 44,506 V164-7.0 MW to fuel all US households

Anywhere along the US coast line: 171 x 171 kilometres or 106 x 106 miles is all it takes.

Google Maps


It’s a matter of Wind, Oil and Gas.

It’s not a matter of either/or.

Enough firm orders will secure serial production of the V164-7.0 MW



But, reliability is king.

When offshore powers the world, size does matter!

Failure is not an option Quality / Lost Production

Factor


Reliability makes it possible

0

1

2

3

4

5

JAN APR JUL OCT JAN APR JUL OCT DEC

The trend continues


Lost Production Factor Per cent

Still more reliable

2009 2010

Not

e: F

rom

turb

ines

with

yie

ld g

uara

ntee

More than 33,000 MW under daily surveillance and service.


AOM 1000

► Pay as you go

AOM 2000

► Regular maintenance

AOM 3000


► Spare parts (excl. of main components)

AOM 4000


► Spare parts

► Availability guarantee

AOM 5000


► Spare parts

► Yield

AOM: Active Output Management

Generating power and profits

New service concept: AOM 5000 launched in March.

3

Guidance 2011.


Long term fundamentals for wind power keep improving.

Short term still rough and tough.


Uncertainty for 2011 still prevails.

Full year 2010 presentation, 9 February 2011

Expected order intake intact despite slow Q1


Slow order intake in Q1 mainly due to extended public hearings, waiting time for financing, and postponement of final approvals of projects under negotiation.

Geographical mix


Vestas Treasury to relocate to Zurich:

Stronger support to customers’ project financing.

Order intake by region Share of total order intake (MW)

49%

29%

22%

50%

25% 25%

Europe Americas Asia PacificActual 2010 Expected 2011


Our strong American presence is very important in getting the orders – in a highly competitive market.

Vestas employs people in 28 US states and all 10 Canadian provinces,

in total more than 3,100.


Guidance 2011: Maintained despite slow Q1 order intake

Order backlog of 7,352 MW.

The value of the order backlog stated in Euro is reduced by EUR ~200m due to adverse exchange rate effect.

Present value of order backlog: EUR 7.2bn.

Value of Q1 2011 order intake : EUR 0.7bn (~630 MW).

We expect H1 2011 EBIT to break even against a loss of EUR 219m in H1 2010 .

Order intake, firm and unconditional (MW) 7,000-8,000

Production and shipments (MW) 6,000

Revenue (mEUR) 7,000

- of which service revenue (mEUR) 700

EBIT margin (per cent) 7

EBIT margin service (per cent) 15

Financials, net (mEUR) (60)

Tax rate (per cent) 28

Investments (mEUR) 850

Free cash flow (mEUR) > 0

Warranty provisions (per cent) < 3

Industrial injuries (per one million working hours) ≤ 5

Customer loyalty (index) 72

Share of renewable energy (per cent) 40

Share of renewable electricity (per cent) 95

Quality level (Sigma) ≥ 5

Strategic update on

at Q3 2011 reporting


2nd Quarter 2011

17 August 2011

London

United Kingdom

3rd Quarter 2011

9 November 2011

New York City

USA

4th Quarter 2011

8 February 2012

London

United Kingdom

Financial Calendar


Today’s key points

Q1 order intake slower than expected.

Markets rough and tough.

Q1: A loss as guided.

H1 EBIT breaks even.

Guidance maintained.

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