third quarter 2016 - vestas/media/vestas/investor... · 2015. overall regulatory environment...

Third quarter 2016

Vestas Wind Systems A/S

Copenhagen, 8 November 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

│ Third quarter 2016 2 Classification: Public

Key highlights Solid quarterly performance

High activity levels Deliveries up by 44 percent in third quarter of 2016 – driven by all regions.

Strong earnings EBIT margin before special items of 14.9 percent – up by 4.0 percentage points

compared to third quarter of 2015.

Solid free cash flow Free cash flow amounted to EUR 155m in third quarter of 2016 – on a par with third

quarter of 2015.

Combined order backlog remains high Combined order backlog at EUR 17.1bn. Wind turbine order backlog impacted by

high activity levels in third quarter of 2016.

Outlook 2016 2016 has proven to be an extraordinary year and based mainly on better visibility for

the remainder of the year, guidance for 2016 is increased on all parameters.

3 │ Third quarter 2016 Classification: Public

Agenda

4

1. Orders and markets

2. Financials

3. Outlook, and questions & answers

Q3 Interim financial report,

third quarter 2016.

│ Third quarter 2016 Classification: Public

Quarterly order intake increased by 17 percent Order intake of 1.8 GW – an increase of 17 percent compared to Q3 2015. Average selling price

fairly stable.

Order intake

MW

Average selling price of order intake

mEUR per MW

• Q3 2016 order intake was 261 MW higher than in

Q3 2015, corresponding to an increase of 17

percent.

• USA, China, Germany, and Morocco were the

main contributors to order intake in Q3 2016,

accounting for approx 75 percent.

Key takes:

• Price per MW in Q3 2016 fairly stable.

• Price per MW depends on a variety of factors,

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

uniqueness of offering.

Key takes:

1,769

Q3

2016

Q2

2016

1,790

Q1

2016

Q4

2015

Q3

2015

2,667

2,403

1,508

+261

Q3

2015

0.96

Q3

2016

0.88 0.89

Q4

2015

0.82

Q2

2016

Q1

2016

0.90


Order intake: 9M 2016 keeping up the pace from last year

Americas

MW

EMEA

MW

Asia Pacific

MW

• 9M 2016 primarily driven by

lower realised FOI activity in

the US due to the PTC

situation, while Canada and

Argentina were the biggest

positive contributors.

• 9M 2016 driven by a range of

countries with especially

Germany, Norway*, and

Morocco contributing positively.

Offshore* having a negative

impact.

• 9M 2016 mainly impacted by

126 MW order in Thailand in

2015. First ever order

secured in Mongolia in Q3

2016.

538 340

2,711

-23%

-37%

9M 9M

+22%

9M

2,320

3,302 3,026

2016 2015

Global reach from 29 countries across five continents secures order intake level on a par with 9M

2015. Overall regulatory environment remains favourable with no significant Q3 2016 events.


* Vestas received a 1 GW order in Norway 23.02.2016. Vestas received, via MHI Vestas Offshore Wind, a 400 MW offshore order in the UK 18.05.2015.

Deliveries: Continued strong growth across all regions

Americas

MW

EMEA

MW

Asia Pacific

MW

• 9M and Q3 2016 primarily

driven by USA and a general

improvement across Latin

America, especially in Chile

and Brazil.

• 9M and Q3 2016 with higher

activity levels mainly in

Germany, Sweden, and

Belgium (mainly due to

offshore).

• 9M and Q3 2016 mainly

driven by higher activity

levels in China, Thailand, and

India.

293838

504909

Q3

+29%

Q3

140

1,733

9M

1,044

+8%

+66%

3,307

2,432 +72%

9M

+36%

+169%

Q3

52

9M

2,676 2,081

2016 2015


9M 2016 total MW deliveries up by 35 percent – totalling 6,487 MW – driven by stronger perfor-

mance in all regions. US market expected to build up towards 2020 from lower level in 2017.

Combined order backlog remains strong at EUR 17.1bn Combined backlog decreased by EUR 1.0bn in the quarter. Backlog of wind turbines decreased

by EUR 1.0bn due to higher MW deliveries in Q3, while the service backlog increased slightly.

Wind turbines:

EUR

7.2bn

Service:

EUR

9.9bn

EUR -1.0bn* EUR +0.0bn*

* Compared to Q2 2016.


High installation activity

• Burbo Bank Extension: Under installation, progressing

as planned. More than half of the turbines installed.

• Nobelwind: Under installation, progressing well. The 1st

turbine was installed 28 October.

• Rampion: Vestas has started delivery of the V112-3.45

MW turbines to the JV.

JV in installation mode Delivery of projects progresses according to plan, while sales activity remains high

Sales strength continues

• Order backlog grows to…

… with the signing of the Aberdeen Bay project in the

UK for a total capacity of 92 MW consisting of 11 V164-

8.0 MW turbines.

• Conditional orders of 450 MW.

• Announced preferred supplier agreements increased to

622 MW with the 252 MW Deutsche Bucht project in

Germany.


~1.7

GW

Burbo Bank

Extension (UK)

258 MW, 2017*

Nobelwind (BE)

165 MW, 2017*

Rampion (UK)

400 MW, 2018*

* Expected full-project installation year by MHI Vestas Offshore Wind.

Agenda

10


2. Financials



third quarter 2016.


Income statement Strong quarterly revenue and earnings primarily driven by higher activity levels

– EBIT margin before special items increased by four percentage points to 14.9 percent

11

• Revenue increased by 37 percent

primarily due to higher MW deliveries.

• Gross profit up by 52 percent mainly

driven by the higher revenue and to a

lesser extent better average margins.

Note: Write-down of EUR 54m in Q3

2016 related to development and

construction activities in prior years.

• Income from JV decreased by EUR

33m due to increased ToR from Vestas

to the JV and V164 D&A.

• EBIT before special items up by 87

percent mainly driven by higher gross

profit.

• Net profit up by 50 percent - EUR

103m compared to Q3 2015.

Key takes:

*R&D, administration and distribution

mEUR Q3 2016 Q3 2015 %

change

Revenue 2,903 2,120 37%

Cost of sales (2,312) (1,731) 34%

Gross profit 591 389 52%

SG&A* (158) (157) 1%

EBIT before special items 433 232 87%

Special items - - -

EBIT after special items 433 232 87%

Income from investments account for

using the equity method (20) 13 -

Net profit/(loss) 309 206 50%

Gross margin 20.4% 18.3% 2.1%-pts

EBITDA margin before special items 18.2% 15.1% 3.1%-pts

EBIT margin before special items 14.9% 10.9% 4.0%-pts


Leveraging on SG&A SG&A costs continue to be under control

SG&A costs (TTM)*

mEUR and percent of revenue Key takes:

• SG&A costs* relative to activity levels

continue downward in stable trend.

• Relative to activity levels, SG&A

costs* amounted to 7.2 percent in Q3

2016 – a decrease of 0.9 percentage

points compared to Q3 2015.

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

712

660645638636622619

713

8.4%

Q2

2015

8.7%

Q4

2014

Q3

2016

7.2%

Q2

2016

7.8% 7.9%

Q4

2015

Q1

2015

Q1

2016

Q3

2015

7.7%

(0.9)%-pts

8.1% 9.0%


Service Continued progress in the underlying service business and the integration of Availon and UpWind

proceeds as planned

Service revenue

mEUR

326

299311

280

312

Q4

2015

Q2

2016

Q3

2015

Q1

2016

Q3

2016

+11%

Key takes:

• Service revenue increased by 11

percent compared to Q3 2015 driven

by both organic as well as growth

from service acquisitions.

• EBIT before special items: EUR 44m.

Margin: 14.1 percent.

• Service order backlog grew slightly

compared to Q2 2016 and 21 percent

compared to Q3 2015.


Balance sheet Continued strong balance sheet supporting the business model

14

• Improvement in net debt due to

improved earnings.

• Stable net working capital

development of EUR 4m.

• Solvency ratio at 32.9 percent.

Key takes: Assets (mEUR) Q3 2016 Q3 2015 Abs.

change

%

change

Non-current assets 2,557 2,158 399 18%

Current assets 6,780 6,061 719 12%

Total assets 9,337 8,322 1,015 12%

Key figures (mEUR) Q3 2016 Q3 2015 Abs.

change

%

change

Net debt (2,116) (1,809) 307 17%

Net working capital (787) (783) 4 1%

Solvency ratio (%) 32.9% 33.8% - (0.9)%-pts

Liabilities (mEUR) Q3 2016 Q3 2015 Abs.

change

%

change

Equity 3,073 2,813 260 9%

Non-current liabilities 986 802 184 23%

Current liabilities 5,278 4,707 571 12%

Total equity and liabilities 9,337 8,322 1,015 12%


Change in net working capital Satisfactory and controlled development in net working capital despite negative impact caused by

higher activity levels

NWC change over the last 12 months

mEUR

NWC change over the last 3 months

mEUR

(47)

(783)

NWC

end

Q3 2015

CCP* Trade

receiv-

ables

34

573

Payables

(337)

55

(787)

(282)

Inventories NWC

end

Q3 2016

Pre-

payments

Net

Other

liabilities

and

receivables

(787)

(71)

Payables

199

Inventories Net

Other

liabilities

and

receivables

65

Pre-

payments

NWC

end

Q3 2016

CCP*

(1,016)

299

11

Trade

receiv-

ables

(274)

NWC

end

Q2 2016

15

• Stable development primarily driven by higher

payables and net other liabilities and

receivables more than offsetting primarily

higher trade receivables due to increased

activity levels.

Key takes:

• Net working capital increased by EUR 229m in

Q3 2016 due to higher activity levels.

• The negative Q3 2016 development was mainly

driven by higher trade receivables and lower

prepayments more than offsetting lower

inventories.

Key takes:

* Construction contracts in progress.


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

48

28

56

44

52

1819

2826 27

Q4

2015

Q2

2016

Q3

2016

Q1

2016

Q3

2015

Provisions consumed Provisions made

• Warranty consumption constitutes approx 0.9

percent of revenue over the last 12 months.

• Warranty provisions made correlates with

revenue in the quarter, corresponding to approx

1.8 percent in Q3 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

Sep

2016

Dec

2015

Dec

2009

Dec

2014

Dec

2013

Dec

2012

Dec

2011

Dec

2010


Cash flow statement Free cash flow of EUR 155m driven by strong underlying earnings capabilities

17

Key takes: mEUR Q3 2016 Q3 2015 Abs.

change

Cash flow from operating activities before

change in net working capital 563 398 165

Change in net working capital (295) (161) 134

Cash flow from operating activities 268 237 31

Cash flow from investing activities (113) (79) 34

Free cash flow 155 158 3

Cash flow from financing activities (122) (19) 103

Change in cash at bank and in hand less

current portion of bank debt 2,612 2,304 308

• Free cash flow in line with Q3 2015

driven primarily by higher earnings

offset by change in net working

capital and cash flow from investing

activities.

• Higher cash outflow from financing

activities due to acquisition of

treasury shares as per the

announced 2016 share buy-back

programme.

Note: Change in net working capital in Q3 2016 impacted by non-cash adjustments and exchange rate adjustments with a total amount of EUR 66m.


Total investments Investments driven by capitalised R&D, blade moulds, and IT. Q3 2016 investments also

impacted by acquisition of Vestas leased blades facility in Lauchhammer, Germany.

Net investments

mEUR

149

95 91

96

79

83

55

22

Q4

2015

204

Q3

2015

Q2

2016

Q1

2016

113

+12

Q3

2016

178

Key takes:

• Investments excluding other acquisitions

increased by EUR 12m compared to Q3

2015 primarily driven by higher R&D

activity.

• In the quarter, EUR 22m was spent on

the transfer of the blades facility in

Lauchhammer, Germany from leased to

owned.

• Trailing 12 months net investments of

EUR 591m – adjusting for the

acquisitions underlying net investments

amount to EUR 431m.

Service acquisitions Other acquisitions


Transfer of blades

facility in Lauch-

hammer, Germany

from leased to

owned, EUR 22m.

Capital structure Capital structure targets within set boundaries

Net debt to EBITDA

×EBITDA

Solvency ratio

Percent

Q1

2016

(1.4)

Q2

2016

Q4

2015

Q3

2015

(1.7) (1.9)

<1.0

Q3

2016

(1.8)

(1.6)

Net debt to EBITDA before special items, last 12 months

Net debt to EBITDA, financial target

28

30

32

34

36

33.8

Q3

2015

30.7

Q3

2016

Q2

2016

Q4

2015

32.9

Q1

2016

30.0

30.5

33.8 35.0

Solvency ratio, financial target range

Solvency ratio

• Net debt to EBITDA decreased to (1.8) in Q3

2016.

• Development driven primarily by improved

EBITDA more than offsetting the improved net

cash position.

Key takes:

• Solvency ratio of 32.9 percent in Q3 2016.

• Q3 2016 development mainly driven by lower

inventories and improved earnings.

Key takes:


Return on invested capital Strong ROIC of 163 percent

Return on invested capital (ROIC)

Percent

-20

0

20

40

60

80

100

120

140

160

180

Q3

2016

119.1

Q2

2016

117.2

Q3

2015

Q4

2015

162.5

148.2

71.3

Q1

2016

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

Key takes:

• ROIC increased to 162.5

percent in Q3 2016 – an

improvement of 91.2

percentage points compared

to Q3 2015.

• Development primarily driven

by higher earnings and

improved net cash position.


Agenda

21


2. Financials



third quarter 2016.


Outlook 2016 2016 outlook raised on all parameters based mainly on better visibility for the remainder of the

year

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


New outlook Previous outlook

Revenue (bnEUR)

- service business is expected to continue to grow 10 – 10.5 min. 9.5

EBIT margin before special items (%)

- service business is expected to have stable margins 13 – 14 min. 12.5

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

investments in marketable securities)

approx 600 approx 500

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

investments in marketable securities)

min. 1,000 min. 800

• Dividend policy: The Board’s general intention is to recommend a dividend of 25-30 percent of

the net result of the year.

Financial calendar 2017:

• Disclosure of FY 2016 (8 February 2017).

• Annual General Meeting (6 April 2017).

• Disclosure of Q1 2017 (5 May 2017).

• Disclosure of Q2 2017 (17 August 2017).

• Disclosure of Q3 2017 (9 November 2017).

Q&A

23 │ Third quarter 2016 Classification: Public

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Thank you for your attention

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