Vestas Wind Systems A/s · OMXCOP:VWS
Vestas Wind Systems A/s — FY2011 Earnings Presentation
44 slides from Vestas Wind Systems A/s's earnings presentation, Feb 8, 2012
Slide 1: Full-year 2011 and guidance for 2012
Full-year 2011 and guidance for 2012 Aarhus, 8 February 2012
Slide 2: Disclaimer and cautionary statement
Disclaimer and cautionary statement 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 state
Slide 3: Agenda
Agenda 1. Introduction 2. Update on organisational changes 3. Financials 4. Order intake 2011 5. Outlook 6. Questions & answers 3 Full year 2011 and guidance 2012
Slide 4: Introduction
4 Introduction Full year 2011 and guidance 2012
Slide 5: Main events
Main events • Aligning organisational design to market dynamics. • Order intake realised in tough markets. • Launch of V112 and GridStreamer™. • Regrettable Q4 difficulties. • Gaining market share. • Higher activity level in 2012. 5 Full year 2011 and guidance 2012
Slide 6: Changing the Vestas organisation
Changing the Vestas organisation In a busy 2012 Production and shipment activity in 2012 Expected distribution over the year; illustrative example Employee reductions to take place during busy 2012 execution. Expected 2012 shipments of around 7 GW. Approx 1,000 employees made redundant. Shipments Fu
Slide 7: Update on organisational changes
Update on 7 organisational changes Full year 2011 and guidance 2012
Slide 8: Recent developments in the organisation
Recent developments in the organisation ” “The Board of Directors of Vestas Wind Systems A/S has today received a thorough briefing on the conditions which during the last months have led to profit warnings. As a consequence of this, CFO and Deputy CEO, Henrik Nørremark resigns.” Vestas company anno
Slide 9: Employee overview
Employee overview Headcount reduced since FY 2010 Reductions mainly in Europe • End 2011, 531 lower than end 2010. • Potential lay-off of 1,600 employees at the factories in the USA if the PTC is not extended. • Target of approx 20,400 after lay-off of 2,335 employees. (Not included in the charts be
Slide 10: Financials
10 Financials Full year 2011 and guidance 2012
Slide 11: Activity level at factories
Activity level at factories Shipments are primary cash generator Shipments by region MW • 2011 activity level increased by 25%, but this is compared to a relatively low 2010 activity level. • Higher activity level in Europe and Americas. • Q4 shipments lower than expected. 11 Full year 2011 and guid
Slide 12: Deliveries
Deliveries Primary revenue driver Lower deliveries due to generator factory and weather High margin markets reduced • 2011 deliveries down by 11% compared to 2010. • New all-time-high in Americas – deliveries increased by 25% compared to 2010. • Slow ramp-up of generator factory in Travemünde, Germa
Slide 13: Income statement
Income statement Disappointing results mEUR FY 2011 FY 2010 Change Q4 2011 Q4 2010 Change Revenue 5,836 6,920 -16% 2,038 3,123 -35% Cost of sales -5,111 -5,745 -11% -1,771 -2,510 -29% Gross profit 725 1,175 -38% 267 613 -56% Fixed costs -763 -707 8% -221 -197 12% Operating profit before special item
Slide 14: From expected to realised revenue
From expected to realised revenue Full-year revenue EUR ~1.2bn lower than original guidance 7,000 600 210 140 50 164 5,836 Expected Delayed ramp-up Weather delays Customer- Production delays Customer- Realised revenue in 2011 of generator facility related delays related delays revenue in 2011 Ref. a
Slide 15: From expected to realised EBIT
From expected to realised EBIT 490 199 35 145 149 22 -60 Expected Volume effect from Costs from Volume effect from Cost overruns, cost- Special items Realised EBIT in 2011 revenue change delayed ramp-up revenue change out not achieved EBIT in 2011 of generator facility and write-downs Ref. annual re
Slide 16: Estimated versus actual cost overruns
Estimated versus actual cost overruns Estimated and actual costs mEUR EUR 70 EUR 86 Increased indirect production cost, construction 149 changes and scrap. 125 EUR 30 EUR 41 Cost-out initiatives not achieved according to schedule. 86 EUR 25 EUR 22 70 +86 Write-downs of individual projects. +70
Slide 17: Status
Status • Too high platform costs, primarily for the V112 and GridStreamer™ technology. • On-going cost-out initiatives on all platforms. • Generator factory in Travemünde, Germany, is not expected to adversely impact 2012 shipments. • Product quality not compromised by issues in connection with manu
Slide 18: Gross margin and fixed costs
Gross margin and fixed costs Margins hurt by lower deliveries and higher than expected costs Gross margin to improve by higher utilisation Fixed costs to be reduced • Lower revenue than expected hurts the gross • Full-year fixed costs increased by 8% due to increased margin. R&D. • Production cost f
Slide 19: Balance sheet
Balance sheet Assets (mEUR) FY 2011 FY 2010 Change Q4 2011 Q3 2011 Change Development projects in progress 256 457 -44% 256 257 0% • V112 and GridStreamer™ Completed development projects 577 169 241% 577 512 13% brought into serial production Goodwill and software 410 408 0% 410 408 0% Property, pla
Slide 20: Warranty provisions
Warranty provisions Warranty provisions have been decreasing Lost production factor • Full-year provision of 2.5%. • Target 2012: LPF < 2 • LPF measures potential energy production not captured by the wind turbines Warranty provisions consumed and made the year before Lost production factor mEUR Per
Slide 21: Balance sheet: Working capital
Balance sheet Working capital Significant NWC reduction Improvement in NWC mainly caused by payables • Significant improvement of net working capital. • Make-to-order/just-in-time pays off, and made possible by professionalised supply chain. • NWC will fluctuate over the year. • Trade payables incre
Slide 22: Cash flow statement
Cash flow statement FY 2011 FY 2010 Change Q4 2011 Q4 2010 Change mEUR Cash flow from operating activities 93 409 -77% 99 375 -74% before change in working capital Change in working capital 747 -353 - 475 26 1,727% Cash flow from operating activities 840 56 1,400% 574 401 43% Cash flow from investin
Slide 23: Cash flow
Cash flow Since 2009, there has been a positive trend in free cash flow Cash flow from operations and investments, quarterly Cash flow from operations and investments, TTM mEUR mEUR 23 Full year 2011 and guidance 2012
Slide 24: Return on invested capital
Return on invested capital Focus on improving ROIC 2011 investments lower than expected • ROIC hurt by lower activity than expected and by • Lower tangible investments than expected due to lower investments made to develop and convert platforms, to than expected investments in China and at different
Slide 25: Net debt and facilities
Net debt and facilities Net debt and debt coverage No drawing on revolving credit facility of EUR 1.3bn as of 31 mEUR and ×EBITDA December 2011 mEUR Maturity Revolving credit facility 1,300 2016 EUR-denominated bond 600 2015 European Investment Bank 250 2016 Nordic Investment Bank 55 2015 25 Full ye
Slide 26: Order intake 2011
26 Order intake 2011 Full year 2011 and guidance 2012
Slide 27: Order intake
Order intake Order intake in line with expectations Order intake by geography • Order intake achieved in challenging markets. • Reinforced market positions in Europe and Americas. • Strong December order intake. • In USA, customers pull projects from 2013 to qualify for the PTC. • More than 600 MW i
Slide 28: Details on order intake
Details on order intake Order intake by turbine Price per MW • V100 and V112 constituted 45% of order intake. • P/MW depends on a variety of factors i.e. turbine type, geography, scope, uniqueness of offering, etc. • V112-3.0 MW accumulated order intake of 2 GW. • New products protect P/MW, but carr
Slide 29: Order backlog
Order backlog Order backlog at highest level ever Order backlog by region MW • Order backlog increased by 25%. • Value of order backlog equals EUR 9.6bn. 29 Full year 2011 and guidance 2012
Slide 30: Customer Loyalty
Customer Loyalty Continuing the positive progress in Customer Loyalty Customer Loyalty Index +5 • Published since 2007. 69 64 64 • Though not meeting the 2011 target, the score improved by 5. 52 46 • The increase is significant and spread across all SBUs, indicating an increasingly more customer-foc
Slide 31: Customer relations
Customer relations Customer relations continue to improve Net promoter score Vestas measures its customer relations on the Customer • The Net promoter score measures the customers’ tendency Relationship Strength Indicator, which is a composite index to recommend Vestas. of four measures: • Reputatio
Slide 32: Outlook
32 Outlook Full year 2011 and guidance 2012
Slide 33: Levelised Cost of Energy
Levelised Cost of Energy Onshore wind is quite competitive Levelised cost of energy (LCOE) USD/MWh • Offshore cost of energy will improve with development of new turbines like the V164-7.0 MW. Source: Bloomberg New Energy Finance (BNEF) LCOE model as of Q4 2011 33 Full year 2011 and guidance 2012
Slide 34: Price developments
Price developments Competitive drivers Bloomberg European Brent Blend Crude Oil Spot Price US Steel Plate Price, The Steel Index USD/Barrel USD/Metric Ton Henry Hub Natural Gas Spot Price London Metal Exchange Copper Spot Price USD/MMBtu USD/Metric Ton Source: Bloomberg and The Steel Index 34 Full y
Slide 35: Wind industry outlook
Wind industry outlook Growth pace slows in the coming years Global market size (incl. offshore) Yearly wind power capacity added (GW) +4% 46.1 46.9 45.3 44.0 Accelerators 39.9 +18% 37.7 • Demand for electricity will rise. 34.3 32.6 • Natural resources are getting more expensive. 27.7 • Wind is getti
Slide 36: Americas market outlook
Americas market outlook Significant drop in the US market in 2013 if no PTC extension Americas onshore market size Yearly wind power capacity added (GW) +1% 14.0 3.3 Accelerators • Latin America offers great opportunities for wind. 9.5 9.3 9.0 9.1 • State RPS targets in the USA and Canadian province
Slide 37: Europe, Middle East and Africa market outlook
Europe, Middle East and Africa market outlook Wind energy is quite competitive in Europe EMEA onshore market size Yearly wind power capacity added (GW) +3% 11.0 10.3 10.1 10.3 9.7 Accelerators 9.3 • EU 2020 targets are driving demand in EU. • Eastern European markets on the rise. • South African mar
Slide 38: Asia Pacific market outlook
Asia Pacific market outlook Chinese market remains the largest in the world Asia Pacific onshore market size Yearly wind power capacity added (GW) +4% 22.0 21.6 20.7 21.1 20.1 Accelerators 4.2 4.3 18.3 3.9 4.0 3.6 • New markets are emerging. 3.7 • China still ambitious. • Australia introducing fixed
Slide 39: Offshore market outlook
Offshore market outlook High growth projected Offshore market size Yearly wind power capacity added (GW) 4.6 Accelerators 3.9 • Traditional markets are keeping +35% momentum. 3.6 • France is getting into the offshore 2.9 market. • NIMBYism. 2.2 Inhibitors • Chinese offshore contracts fail to 1.0 gua
Slide 40: Service revenue
Service revenue Service revenue expected to continue the positive trend Service revenue mEUR 850 • 96% of all announced MW in 2011 came with a service contract. 705 +26% 623 • Service business driven by increasingly large installed base and still more 504 sophisticated offerings. 396 • Already signe
Slide 41: Financial guidance 2012
Financial guidance 2012 2012 EBIT margin low due to: Revenue (mEUR) 6,500 - 8,000 • Too high production costs - of which service revenue (mEUR) 850 primarily on the V112 and GridStreamer™, which will be EBIT margin (%) 0-4 reduced over the year. • Depreciations and amortisations EBIT margin, service
Slide 42: Financial Calendar 2012
Financial Calendar 2012 2 May 2012 Publication of Q1 2012 results 22 August 2012 Publication of H2/Q2 2012 results 7 November 2012 Publication of Q3 2012 results 42 Full year 2011 and guidance 2012
Slide 43: Questions & Answers
43 Questions & Answers Full year 2011 and guidance 2012
Slide 44: Copyright Notice
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, i