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
3 │ CMD 2016 - Finance Classification: Public
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
5 │ CMD 2016 - Finance Classification: Public
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
6 │ CMD 2016 - Finance Classification: Public
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
7 │ CMD 2016 - Finance Classification: Public
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.
8 │ CMD 2016 - Finance Classification: Public
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.
9 │ CMD 2016 - Finance Classification: Public
Agenda
10
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
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.
11 │ CMD 2016 - Finance Classification: Public
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
12 │ CMD 2016 - Finance Classification: Public
• 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:
13 │ CMD 2016 - Finance Classification: Public
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
14 │ CMD 2016 - Finance Classification: Public
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:
15 │ CMD 2016 - Finance Classification: Public
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%
16 │ CMD 2016 - Finance Classification: Public
Mid-term ambitions: Capital structure targets:
Agenda
17
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
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.
18 │ CMD 2016 - Finance Classification: Public
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
Top Related