first quarter 2016 - vestas/media/vestas/investor...first quarter 2016 vestas wind systems a/s ......

First quarter 2016

Vestas Wind Systems A/S

Copenhagen, 29 April 2016

Classification: Public

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 2015 (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.

Disclaimer and cautionary statement

│ First quarter 2016 2 Classification: Public

Key highlights Solid first quarter performance and inventory build-up for expected busy 2016

Record-high Q1 order intake Order intake in the quarter reached 2,403 MW.

Highest combined order backlog ever Wind turbine and service order backlog of EUR 18bn.

Improved earnings EBIT margin before special items at 5.8 percent – an improvement of 0.6

percentage points.

Negative cash flow Cash flow impacted by net working capital and service acquisition.

3 │ First quarter 2016 Classification: Public

Agenda

4

1. Orders and markets

2. Financials

3. Outlook and questions & answers

Q1 Interim financial report,

first quarter 2016

│ First quarter 2016 Classification: Public

Vestas gained market share in 2015 Vestas retains strong position in fragmented market

Market shares development

Percent

5

MAKE Consulting “Onshore grid-connected”

Source: MAKE Consulting, Bloomberg New Energy Finance.

│ First quarter 2016

Senvion

Mingyang

Others

Envision

30.1%

3.3%

4.3%

2015

Guodian

100% = 58 GW

GE

Gamesa

Goldwind

Enercon

Vestas

Siemens

4.5%

6.2%

4.9%

5.1%

11.0%

5.3%

12.0%

13.3%

Others

Gamesa

Enercon

Siemens

Mingyang

GE

Vestas

Goldwind

2015

100% = 57 GW

30.3%

Guodian

Envision

CSIC

5.3%

4.7%

13.5%

5.3%

10.2%

12.6%

3.4%

4.8%

4.7%

5.2%

Enercon

Goldwind

Vestas

Gamesa

Siemens

2014

XEMC

GE

Others

Mingyang

Envision

Guodian

3.5%

4.1%

10.2%

4.3%

5.2%

8.5%

8.1%

100% = 50 GW

32.4%

3.7%

9.5%

10.5%

Mingyang

Guodian

Envision

Vestas

Suzlon

Goldwind

Gamesa

Enercon

Siemens

Others

5.3%

9.2%

9.9%

3.9%

100% = 49 GW

9.9%

GE

29.6%

4.7%

5.1%

7.8%

2014

3.9%

10.7%

Bloomberg New Energy Finance “Onshore installations”


Overall supportive environment for renewable energy remains

Note: PTC= Production Tax Credit. IRS = Internal Revenue Service. RE = Renewable Energy.

EU moving towards 2020 and

2030 targets…

• Trend to move from Feed-in-

Tariffs to tenders/auctions.

Positive signals in MEA…

• Renewable targets developed

in several countries in Middle

East / Africa.

EMEA

Various regulatory developments in all regions; PTC IRS timing a key event.

Asia Pacific

China’s 13th five-year plan…

• 13th 5-year plan wind target is

250 GW cumulative installation

by 2020.

India remains interesting…

• Target of 60 GW by 2022

remains in place.

Americas

PTC timing in USA…

• IRS developing new guidance

on PTC extension - timing

uncertain, but likely Q2 2016.

Latin America tenders……

• General movement towards

tender/auction systems.

6 │ First quarter 2016

Broader Asia Pacific region on

the move…

• Renewable targets in most

markets.


Record-high Q1 order intake Order intake at 2.4 GW – an increase of 37 percent compared to Q1 2015. Average selling price

impacted by 1 GW order in the quarter.

Order intake

MW

Average selling price of order intake

mEUR per MW

• Q1 2016 order intake was 653 MW higher than in

Q1 2015, corresponding to an increase of 37

percent.

• Norway, USA, and Germany were the main

contributors to order intake in Q1 2016,

accounting for more than 70 percent.

Key takes:

• Price per MW in Q1 2016 is impacted by 1 GW

order.

• Price per MW depends on a variety of factors,

i.e. wind turbine type, geography, scope and

uniqueness of offering.

Key takes:

2,403

1,508

Q2

2015

3,018

Q4

2015

Q3

2015

Q1

2016

+653

2,668

Q1

2015

1,750

0.82

Q1

2016

Q2

2015

0.92 0.90

Q1

2015

Q3

2015

Q4

2015

0.96

0.90


Overall improvement in order intake driven by EMEA-region

Americas

MW

EMEA

MW

Asia Pacific

MW

• Solid development in the US

and Uruguay more than offset

by a general lower activity

level in the region, mainly in

Brazil.

• Strong performance primarily

driven by Norway, France, and

Germany.

• Good activity levels observed

across the region.

• Development driven by lower

Q1 activity in China, slightly

offset by a smaller order in

India.

710 820

220460

1,885

+130%

Q1 Q1

-74%

Q1

-35%

58

2015 2016


Q1 2016 order intake improvements mainly seen in Norway, France, and Germany, whereas the

Americas and Asia Pacific regions had relatively lower activity levels


Stable deliveries highlight benefits from unique global reach

Americas

MW

EMEA

MW

Asia Pacific

MW

• Overall decline mainly driven

by lower activity in the US

and Chile.

• Strong development driven by

a broad-based mix of

countries.

• Stable development although

at limited levels.

• Good activity levels in

Thailand and Vietnam.

718

457

96

641

89

484

-33% +40%

Q1 Q1 Q1

-7%

2015 2016

9

Main improvements seen in Germany, Thailand, Sweden, and the UK


Record-high combined order backlog at EUR 18bn Combined backlog increased by EUR 1.2bn in the quarter. Backlog of wind turbines

increased by EUR 0.7bn, while the service backlog increased by EUR 0.5bn.

Wind turbines:

EUR

8.6bn

Service:

EUR

9.4bn

EUR +0.7bn* EUR +0.5bn*

* Compared to Q4 2015.


JV on track Ownership ratio remains 50/50. 8 MW platform gradually commencing project execution.


Ownership ratio remains 50/50

• MHI has chosen not to exercise the option to

change the ownership ratio to 51 percent of the JV.

“We believe that unchanged ownership share is the best

way to support the further development of the joint venture

while showing the strong partnership and equal contribution

from the two parent companies to the market.”

Manufacturing ramp-up and project execution Preparing for near-term project execution

Nacelle production

Lindoe, DK

Blades production

Isle of Wight, UK

Burbo Bank

Extension

• Order backlog of ~1.2 GW firm orders showing

stable ramp-up of manufacturing until 2019.

• Activities started for pre-assembly of the V164

for the Burbo Bank Extension (installation

expected to begin in Autumn 2016).

• Preparations started for Nobelwind and

Rampion (3 MW turbine projects).

Michisuke Nayama, President and CEO, Energy

& Environment, Mitsubishi Heavy Industries Ltd.

50% 50%

Nobelwind (BE)

Rampion (UK)


Agenda

12


2. Financials



first quarter 2016


Income statement EBIT margin before special items increased by 0.6 percentage points despite lower revenue and

higher quarterly fixed costs

13

• Revenue decreased by 4 percent

mainly due to lower deliveries partly

offset by growth in service business.

• Gross profit up by 9 percent mainly

driven by improved average project

margins and service growth, partially

offset mainly by lower project volume,

service mix, and service acquisitions.

• EBIT before special items increased

by 8 percent mainly driven by higher

gross profit slightly offset by higher

fixed costs.

Margin: 5.8 percent.

• Income from investments accounted

for using the equity method (Offshore

JV) negatively impacted by initiation

of amortisation of the V164 platform.

Key takes:

*R&D, administration and distribution

mEUR Q1 2016 Q1 2015 %

change

Revenue 1,464 1,519 (4)%

Cost of sales (1,217) (1,293) (6)%

Gross profit 247 226 9%

Fixed costs* (162) (147) 10%

EBIT before special items 85 79 8%

Special items - - -

EBIT after special items 85 79 8%

Income from investments accounted for

using the equity method (19) 4 -

Net profit/(loss) 35 56 (38)%

Gross margin 16.9% 14.9% 2.0%-pts

EBITDA margin before special items 12.0 10.6% 1.4%-pts

EBIT margin before special items 5.8% 5.2% 0.6%-pts


Leveraging on fixed costs Fixed costs continue to be under control

Fixed costs (TTM)*

mEUR and percent of revenue Key takes:

• Fixed costs* relative to a activity

levels continue downward to stable

trend.

• Relative to activity levels, fixed costs*

amounted to 7.9 percent in Q1 2016

– an increase of 0.2 percentage

points compared to Q4 2015 primarily

due to R&D and distribution.

14

* R&D, administration and distribution on trailing 12 months basis.

645638636622619

671 660

8.1% 8.4%

Q2

2015

Q3

2015

9.0%

Q1

2015

8.7%

Q4

2014

9.9%

Q3

2014

(0.8) %-pts

7.9% 7.7%

Q1

2016

Q4

2015


Service Strong service performance driven by organic growth and impact from service acquisitions

Service revenue

mEUR

311

280292

255

299

Q3

2015

Q2

2015

Q1

2016

Q1

2015

+17%

Q4

2015

Key takes:

• Service revenue increased by 17

percent compared to Q1 2015 mainly

due to organic growth and impact

from service acquisitions.

• EBIT before special items: EUR 52m.

Margin: 17.4 percent.

• Service order backlog growth of EUR

0.5bn compared to Q4 2015.


Balance sheet Balance sheet remains strong

16

• Stronger net cash position.

• Slightly higher net working capital

due to higher activity levels.

• Solvency ratio at 30.7 percent.

Key takes: Assets (mEUR) Q1 2016 Q1 2015 Abs.

change

%

change

Non-current assets 2,568 2,278 290 13%

Current assets 6,223 5,216 1,007 19%

Assets held for sale 103 103 - -

Total assets 8,894 7,597 1,297 17%

Key figures (mEUR) Q1 2016 Q1 2015 Abs.

change

%

change

Net debt (1,957) (1,686) 271 16%

Net working capital (1,068) (1,148) 80 (7)%

Solvency ratio (%) 30.7% 31.4% - (0.7)%-pts

Liabilities (mEUR) Q1 2016 Q1 2015 Abs.

change

%

change

Equity 2,728 2,388 340 14%

Non-current liabilities 909 762 147 19%

Current liabilities 5,257 4,447 810 18%

Total equity and liabilities 8,894 7,597 1,297 17%


Change in net working capital Satisfactory net working capital management despite negative impact from higher activity levels

NWC change over the last 12 months

mEUR

NWC change over the last 3 months

mEUR

(74)

(572)

(140)

NWC

end

Q1 2016

(1,068)

Payables

593

CCP* Other

liabilities

Pre-

payments

Inventories

71 202

Receiv-

ables

(1,148)

NWC

end

Q1 2015

Other

liabilities

Pre-

payments

Inventories

(1,068)

9

158

(284)

CCP* Receiv-

ables

(24)

NWC

end

Q4 2015

Payables

(107) 563

NWC

end

Q1 2016

(1,383)

17

• Development primarily driven by higher

inventories and receivables almost offset by

higher payables and prepayments due to

increased activity levels.

Key takes:

• Quarterly development of EUR 315m primarily

driven by inventory build-up partly offset by

higher prepayments and payables – both driven

by higher activity levels.

Key takes:

* Construction contracts in progress.

Note: Other liabilities excluding EUR 201m due to the dividend for FY 2015 approved at the annual general meeting 30 March 2016.


Warranty provisions and Lost Production Factor Warranty consumption and LPF continue at a low level

Warranty provisions made and consumed

mEUR

Lost Production Factor (LPF)

Percent

18

56

44

33

27 282826

1922

19

Q1

2015

Q2

2015

Q1

2016

Q4

2015

Q3

2015

Provisions consumed Provisions made

• Warranty consumption constitutes approx 1.1

percent of revenue over the last 12 months.

• Warranty provisions made correlates with

revenue in the quarter, corresponding to approx

1.9 percent in Q1 2016.

Key takes:

• LPF continues at a low level below 2.0.

• LPF measures potential energy production not

captured by the wind turbines.

Key takes:


0

1

2

3

4

5

6

Dec

2015

Dec

2012

Dec

2010

Dec

2011

Dec

2009

Dec

2013

Dec

2014


Cash flow statement Free cash flow impacted by inventory build-up and acquisition of Availon

19

Key takes: mEUR Q1 2016 Q1 2015 Abs.

change

Cash flow from operating activities before

change in net working capital 164 160 4

Change in net working capital (278) 49 327

Cash flow from operating activities (114) 209 323

Cash flow from investing activities (182) (63) 119

Free cash flow (296) 146 442

Cash flow from financing activities 5 (97) 102

Change in cash at bank and in hand less

current portion of bank debt (291) 49 340

• Free cash flow of EUR (296)m

driven primarily by change in net

working capital and higher

investment activity.

• Cash flow from investing activities

impacted by EUR (83)m due to the

acquisition of German independent

service provider Availon in Q1

2016.

• Cash flow from financing activities

impacted by refinancing of

Eurobond in Q1 2015.

Note: Change in net working capital in Q1 2016 impacted by non-cash adjustments and exchange rate adjustments with a total amount of EUR 37m.


Total investments Quarterly investments heavily impacted by EUR 83m Availon acquisition. Moulds and capitalised

R&D main drivers of normalised investments.

Net investments

mEUR

7979

63

95

149

83

55

Q3

2015

Q2

2015

Q1

2015

+32

178

Q4

2015

Q1

2016

204

20

Key takes:

• Investments excluding service

acquisitions increased by EUR 32m

compared to Q1 2015 primarily driven

by blade moulds and capitalised R&D.

• In the quarter, EUR 83m was spent on

the acquisition of the German

independent service provider Availon.

• Trailing twelve months net investments

of EUR 540m – adjusting for the

acquisitions underlying net investments

amount to EUR 402m.


Service acquisitions


Capital structure Capital structure targets within set boundaries. Quarterly developments primarily impacted by

working capital elements due to higher activity levels and approved dividend.

Net debt to EBITDA

×EBITDA

Solvency ratio

Percent

21

Q3

2015

(1.7)

Q2

2015

(1.7) (1.6)

Q1

2015

Q1

2016

Q4

2015

< 1.0

(1.9) (1.8)

Net debt to EBITDA before special items, last 12 months

Net debt to EBITDA, financial target

28

30

32

34

36

33.8

Q2

2015

32.2

Q4

2015

33.8

Q1

2016

Q3

2015

31.4

35.0

Q1

2015

30.0

30.7

Solvency ratio, financial target range

Solvency ratio

• Net debt to EBITDA increased to (1.6) in Q1

2016.

• Development driven primarily by lower net cash

position and to a lesser extent improved EBITDA.

Key takes:

• Solvency ratio of 30.7 percent in Q1 2016.

• Q1 development mainly driven by working

capital elements and approved dividend.

Key takes:


Return on invested capital ROIC at very high level of 119 percent

22

Return on invested capital (ROIC)

Percent

-10

0

10

20

30

40

50

60

70

80

90

100

110

120

Q1

2015

43.8

Q4

2015

54.6

119.1

Q1

2016

117.2

Q3

2015

71.3

Q2

2015

EBIT margin before special items, last 12 months ROIC, last 12 months

Key takes:

• ROIC increased to 119.1

percent in Q1 2016 – an

improvement of 75.3

percentage points compared

to Q1 2015.

• Development primarily driven

by higher earnings and

improved net cash position.


Agenda

23


2. Financials



first quarter 2016


Outlook 2016 2016 outlook unchanged

• Service business is expected to continue to grow with stable margins.

Outlook

Revenue (bnEUR) min. 9

EBIT margin before special items (%) min. 11

Total investments (mEUR) (incl. the acquisition of Availon GmbH)

approx 500

Free cash flow (mEUR) (incl. the acquisition of Availon GmbH)

min. 600


Note: Outlook for 2016 is subject to exchange rate movements.


Financial calendar 2016:

• Capital Markets Day 2016

(21 June 2016).

• Disclosure of Q2 2016 (18 August 2016).

• Disclosure of Q3 2016 (8 November 2016). Q&A


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