Marika Fredriksson, Executive Vice President & CFO/media/vestas/investor... · 12 │ CMD 2016 -...

Strong financial performance delivered

Marika Fredriksson, Executive Vice President & CFO

London, 21 June 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

2 │ CMD 2016 - Finance Classification: Public

Profitable Growth for Vestas Vestas has delivered strong financial results since the launch of the strategy 2½ years ago


To be the undisputed global wind leader

• Market leader in revenue

• Best-in-class margins

• Strongest brand in industry

• Bringing wind on a par with coal and gas

Deliver best-in-class wind energy solutions and set the pace in the

industry to the benefit of Vestas’ customers and the planet

Grow profitably in mature

and emerging markets

Capture the full potential of

the service business

Reduce levelised cost of energy (LCOE)

Improve operational excellence

Accountability, Collaboration, and Simplicity

Revenue, 2015

bnEUR

Peer 2 Vestas Peer 3

5.7 4.2 4.5

8.4

Peer 1

EBIT margin, 2015

percent

Peer 2 Vestas Peer 3

10.1

5.2

8.4 10.2

Peer 1

Market leader in revenue…

… and best-in-class margins

Note: Peer data subject to public availability .

Agenda

4

1. Is stability the new normal for Vestas?

2. Balance Sheet and Capital Structure reflections

3. Summary and questions & answers

CMD Capital Markets Day,

21 June 2016

│ CMD 2016 - Finance Classification: Public

Vestas’ business model has diversified over the last 5 years With strong positions in each of the three main business areas, Vestas is well positioned to reap

the benefits of a more stable market situation


Wind turbines Services MHI Vestas Offshore Wind

• Long-term PTC visibility.

• German energy law approved.

• RE targets in place or

increasingly coming so.

• EMs establishing framework

policies around REs.

• Order backlog: EUR 8.6bn*.

• Stable business with high

profitability.

• Market for services expected to

continue to grow.

• Installed base is only getting

bigger.

• Order backlog: EUR 9.4bn*.

• JV on track and according to

plan.

• Controlled ramp-up.

• Impeccable cooperation.

• Satisfactory exposure to

promising offshore market.

• Announced firm orders ~1.2GW

* As of Q1 2016.

Turbine business supported by broad-based demand


Although fluctuating somewhat, turbine revenues have been increasing over time, supported by a

diversified market footprint, second to none in the industry

Project revenue

mEUR

5,946

2013 2015 2014

7,285

2012

5,130 5,115

6,330

2011

Order intake

2015:

8,943 MW • 34 countries

• 5 continents

Service business continues to contribute with stability


Strong growth in service revenue, supported by sale of new turbines and the largest installed

base in the industry

Onshore service revenue

mEUR

949889

825

659

2013 2015 2014

1,138

2012 2011

Installed

base:

> 75 GW • 75 countries

• 6 continents

MHI Vestas Offshore Wind: performance according to plan Solid order intake and continued strong performance of the existing fleet provide a firm base for

the years ahead. Extensive V164 start-up costs expected to offset increased revenue in 2016.

Key messages 2015/16

• Solid order intake.

• Maturing V164-8.0 MW technology.

• Preparing extensive ramp-up of manufacturing.

• Ensuring strong performance of existing installed

base.

• First year with extensive D&A on V164-8.0 MW.

Outlook

• Activity level will continue to increase with

factories ramping up for first offshore V164

project.

• Execution of existing V112 3 MW turbine and

service order backlog.

• Increased activity level expected to result in

higher revenue – earnings to decline due to

extensive start-up costs for V164 introduction.


JV net income not expected short term to absorb 8 MW ramp-up Quarterly fluctuations will remain. V164 start-up costs expected to negatively impact the JV in

2016.

20

12

-19

-10

3

-6-11

-17

4

6

Q1

2016

0

Q3

2015

Q4

2014

2

Q4

2015

-8

Q2

2015

-5

Q3

2014

-19

-10

13

2

1

26

Q1

2015

0

5

-19

-2

Q2

2014

Effect of ToR difference in sale of 3 MW turbines to JV

Vestas’ share of JV profit

Income from investments accounted for using equity method

mEUR Key takes:

• Vestas’ share of JV profit:

Extensive start-up costs related to

V164 will have a negative impact

on the overall profit in the JV more

than offsetting the expected higher

revenue in 2016.

• Effect of ToR difference in sale of 3

MW turbines to JV:

Dependent on ToR timing

differences of

− Nobelwind, 165 MW (3 MW,

expected Vestas ToR in

2016/17); and

− Rampion, 400 MW (3 MW,

expected Vestas ToR in

2017); and

− … potential new 3 MW

offshore orders.


Agenda

10





21 June 2016


Net Working Capital a key enabler in balance sheet journey Impressive NWC development which has been stabilising in current high-activity environment

Net working capital

mEUR

(957)

233

(71)

672

317

(1,383)

FY

2015

Q1

2016

FY

2014

FY

2013

(596)

(1,068)

FY

2012

FY

2009

FY

2010

FY

2011

Key takes:

• Main cash conversion cycle

opportunities:

− Lower MW under

completion.

− Better payment terms.

− Lower inventory.

− Reduce lead times.


Cash increasingly generated by earnings Cash generation increasingly driven by operations in recent years, signalling longer term ability

to sustainably generate cash

Net debt to EBITDA

×EBITDA

2013 2014

(1.5)

2015

1.9

2011

(1.9)

(0.1)

< 1.0

2012

1.8

Net debt to EBITDA before special items, last 12 months

Net debt to EBITDA, financial target

Change in net cash

mEUR

260

86

Net

cash

YE15

Net

cash

YE12

Invest-

ments

Oth

ers

Investm

ents

484

(188)

CF

FO

be

fore

NW

C

NW

C

1,411

397

1,075

(425)

866

239

NW

C

(23)

CF

FO

be

fore

NW

C

900

829

Net

cash

YE13

Investm

ents

419

Oth

ers

Net

cash

YE14

Oth

ers

NW

C

2,270

(285)

CF

FO

be

fore

NW

C


• Leverage ratio far below the limit of 1 times EBITDA at any point in the cycle due to the strong net cash position.

• Strong cash generation from operations in 2015, payment of dividends for the first time in 12 years and the first ever

share buy-back programme conducted in November-December 2015.

Key takes:

Solvency ratio a key metric in conservative capital structure

Solvency ratio currently the more limiting factor in the re-distribution of cash

23.3

YE14

Net p

rofit

4.2

YE12

(0.9)

WC

Lia

b

0.4

Div

idend

34.0

Share

buy-b

ack

Oth

er

Oth

er

YE15

27.0

Net p

rofit

Net p

rofit

YE13

(2.2)

WC

Lia

b

5.7

Oth

er

(1.1)

WC

Lia

b

(1.1) 0.3

4.6

4.5

33.8

(4.0)

35.0

30.0

Solvency ratio

Percent

22

24

26

28

30

32

34

36

2011 2012 2013 2014 2015

34.0

27.0

33.8

23.3

33.5 35.0

30.0

Solvency ratio Solvency ratio, financial target range

• Solvency ratio is seen as a strong business enabler, as it is an easy to understand metric in customer discussions.

• A strong solvency ratio and credibility as it relates to maintaining a trustworthy capital structure policy is what enables

improved flexibility, terms and conditions and gives better access to favourable credit and bonding facilities.

Key takes:


Solvency ratio

Percent/Percentage points

Risk-averse customers are still requiring certainty …and hence, contingent obligations such as e.g. guarantees continue to play a role

Signing of contract First shipment / delivery on site Taking over Quotation/offer 1 2 3 4

Types of guarantees

Advance payment bond Performance bond Warranty bond Bid bond

Before shipment of wind turbines to the site After delivery of the first wind turbine to the site

1 2 3 4


The need for credit facilities has not vanished Vestas’ credit and bonding facilities are being utilised to support ongoing business operations

Amount Drawn Available Expiry

Main credit facilities* 1,050 92 958 2021

Other credit facilities* 397 251 146 2017

Corporate bonds 500 500 0 2022

Total credit facilities 1,947 843 1,104

Credit and bonding facilities, year end 2015

mEUR

* The drawn amount is not cash but related to issuance of bonds.

First of two options to extend

the final maturity by 1 year was

exercised in May 2016. Final

maturity now 3 June 2021.

Main credit facility consists of a EUR

1,050m revolving credit and bonding

facility with a strong banking group:


Priorities for capital allocation In years without major extraordinary investments the total return to shareholders through

dividends and share buy-backs may constitute the majority of the FCF

Organic growth

• Investments.

• R&D.

• Strong balance

sheet to enable

growth.

Acquisitions

• Bolt-on

acquisitions (not

building war

chest for major

acquisitions).

Dividend

• 25-30% of the

net result of the

year after tax.

• Pay-out during

H1 given AGM

approval.

time

H2

Share buy-back

• From time to

time to adjust

capital structure.

• IF relevant

launch during H2

based on

realised FCF

performance.

H1

Share buy-backs Dividends

• Double-digit ROIC • FCF ≥ 0 • Net debt to EBITDA < 1.0x • Solvency ratio = 30-35%


Mid-term ambitions: Capital structure targets:

Agenda

17





21 June 2016


Summary

1

2

3

With strong positions in each of the three main business areas, wind

turbines, service and offshore, Vestas is well positioned to reap the

benefits of a more stable market situation.

A strong balance sheet and credibility as it relates to maintaining

a trustworthy capital structure policy is a strong business

enabler.

In years without major extraordinary investments the total return

to shareholders through dividends and share buy-backs may

constitute the majority of the FCF.


Copyright Notice

The documents are created by Vestas Wind Systems A/S and contain copyrighted material, trademarks, and other proprietary information. All rights reserved. No part of the documents may be reproduced or copied in any form or by any

means - such as graphic, electronic, or mechanical, including photocopying, taping, or information storage and retrieval systems without the prior written permission of Vestas Wind Systems A/S. The use of these documents by you, or

anyone else authorized by you, is prohibited unless specifically permitted by Vestas Wind Systems A/S. You may not alter or remove any trademark, copyright or other notice from the documents. The documents are provided “as is” and

Vestas Wind Systems A/S shall not have any responsibility or liability whatsoever for the results of use of the documents by you.

Thank you for your attention

Marika Fredriksson, Executive Vice President & CFO/media/vestas/investor... · 12 │ CMD 2016 -...

Documents

Transcript of Marika Fredriksson, Executive Vice President & CFO/media/vestas/investor... · 12 │ CMD 2016 -...