Vestas Wind Systems A/S · OMXCOP:VWS
Vestas Wind Systems A/S — FY2012 Earnings Presentation
48 slides from Vestas Wind Systems A/S's earnings presentation, Feb 6, 2013
Slide 1: Full year 2012 and outlook for 2013
Full year 2012 and outlook for 2013 Aarhus, 6 February 2013
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 Ditlev Engel CEO 2. Financials Dag Andresen CFO 3. Order intake Ditlev Engel CEO 4. Outlook Ditlev Engel CEO 5. Questions & answers Ditlev Engel and Dag Andresen 3 Full year 2012 and outlook 2013
Slide 4: Introduction
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Slide 5: Closing a challenging 2012
Closing a challenging 2012 Transition to a more scalable, lean and agile Vestas 2005-2011 Nov 2011 2012 2013 Beyond 2013 Investing in Organisational Implementation and Additional reductions to no A more profitable regionalisation change process intensification of cost more than 16,000 employees, Ves
Slide 6: New organisation and operating business model
New organisation and operating business model Scalable, flexible, agile and lean Vestas’ operating business model Three core focus areas I Reduce costs through operational Reduce Reduce I II excellence. costs investments Efficient Advanced manufac- wind turing of turbine New wind technology organisa
Slide 7: Fixed cost savings of more than EUR 250m
Fixed cost savings of more than EUR 250m* Employee reductions of 22 per cent Employees, end of period Number of employees -4,943 22,721 22,576 Employee reductions of 4,943 during 2012. 21,767 Back-end loaded reduction: 3,989 employees have left 20,090 Vestas in H2. 17,778 2011 FY 2012 Q1 2012 Q2 201
Slide 8: Fixed cost savings of more than EUR 250m
Fixed cost savings of more than EUR 250m* Reduction of 4,943 employees - Salaried employees constituted 63 per cent Employees reductions Employee reductions Number of employees Number of employees 2,312 4,943 4,943 3,122 1,677 1,821 809 145 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Total Total reduction Salar
Slide 9: Lower capex
Lower capex Net investments were lowered by 62 per cent in 2012 • Investments are declining Net investments after years of high mEUR investments in 808 -62% regionalisation and 789 761 technology. 680 • Net investments are lowered to EUR 286m due to the lower activity level in 2013 and a more focuse
Slide 10: Leveraging on our investments in existing platforms
Lower capex Leveraging on our investments in existing platforms New 2 MW platform 3 MW platform 3 MW platform >10,000 >1,000 >2,500 turbines turbines turbines V80 – V90 – V100 V112 – V126 V90 – V100 10 Full year 2012 and outlook 2013
Slide 11: More efficient manufacturing
More efficient manufacturing Examples of implemented initiatives during 2012 Sold tower factory in Varde (DK). Closed factory in Hohhot (CH). Consolidated the manufacturing organisation. Reduced manufacturing workforce at nacelle assembly in Brighton, Colorado (US), tower factory in Pueblo,
Slide 12: More efficient manufacturing
More efficient manufacturing More to come in 2013 Decision on manufacturing footprint Supply to third parties to The long-term vision remains: increase capacity utilisation • Asset-light operating business model Short-term, Vestas will supply to • More outsourcing third parties to increase capacity
Slide 13: First results
First results Efficiency improvements Shipments Total employees end of period GW Number of employees -22% 6.2 22,721 +22% 5.1 17,778 2011 2012 2011 2012 13 Full year 2012 and outlook 2013
Slide 14: First results
First results After a weak Q1, cost savings and a positive FCF began to materialise in Q4 EBIT (before special items) Free cash flow mEUR mEUR 200 500 155 416 150 400 100 300 50 40 200 13 0 100 -50 0 -100 -100 (142) -150 -200 -200 -300 (295) (204) (338) -250 -400 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2012 20
Slide 15: Free cash flow development
Free cash flow development Weaker order intake and reduction of payables Free cash flow 2011 vs. 2012 mEUR Inventories Prepayments Payables Still at a too high level due to 1,953 Decreased due to lower order Decreased significantly due to MW under completion. intake than expected. lower activity lev
Slide 16: Financials
2 Financials
Slide 17: Activity level at factories
Activity level at factories Shipments increased by 22 per cent Shipments by region MW +22% 6,160 6,132 6,171 • Shipments amounted to 6.2 GW. 931 1,141 1,059 5,054 • The growth is primarily driven by higher 901 1,358 4,057 shipments in the EU. 1,718 2,327 1,125 1,916 1,458 3,715 3,301 2,913 2,237 1,4
Slide 18: Deliveries
Deliveries Deliveries are the primary revenue driver and increased by 16 per cent Deliveries (TOR) by region MW +16% 6,039 5,842 5,580 • Record-high deliveries in 2012. 971 5,217 1,249 1,154 4,764 1,019 683 • The biggest contributor was the USA 1,482 1,978 with deliveries of 1,313 MW in 2012. 1,719
Slide 19: Income statement Q4
Income statement Q4 Absolute mEUR Q4 2012 Q4 2011 %-change change Revenue 2,512 2,038 474 23% • Q4 2012 EBIT before special items was more Cost of sales (2,179) (1,771) (408) 23% than three times higher than Q4 2011 driven by Gross profit 333 267 66 25% higher volume and lower fixed costs. Fixed cos
Slide 20: Income statement full year
Income statement Full year Absolute mEUR FY 2012 FY 2011 %-change change Revenue 7,216 5,836 1.380 24% • Higher revenue, but lower gross profit due to higher Cost of sales (6,420) (5,111) (1,309) 26% depreciation and too high product and production Gross profit 796 725 71 10% costs, primarily on the
Slide 21: Special items
Special items A total review of all non-current assets has been performed Full year special items mEUR 701 182 • Write-down of non-current assets of 177 EUR 527m was recognised as special items in 2012. 104 • Write-downs will lower depreciation and amortisation by approx EUR 50m 64 in 2013. 119 • EU
Slide 22: Gross margin
Gross margin After a weak Q1, product cost out began to materialise in Q4 Gross profit and margin mEUR and percentage 20% Q4 gross margin at 13.3 per cent 18% 613 • Quarter-on-quarter developments in 15% project margins may result in substantial 13% 13% fluctuations in earnings. • 2012 gross margin
Slide 23: Reduction of employee costs
Reduction of employee costs Employee reductions in 2012 and 2013 of approx 7,000 Employees, end of period Number of employees -4,943 22,721 22,576 Employee reductions in 2012 21,767 and 2013 of approx 7,000 will contribute to reducing costs by 20,090 more than EUR 400m with full effect as from the e
Slide 24: Fixed costs
Fixed costs* Fixed costs excluding depreciation and amortisation continue to trend down Fixed costs* excl. of D&A Fixed costs excl. of depreciation and amortisation mEUR -42 160 156 Headcount reductions during 2012 is 155 154 the major contributor to fixed costs 150 savings. 145 145 140 141 Part of
Slide 25: EBIT development
EBIT development 2012 EBIT margin impacted by higher depreciation and amortisation and product costs EBIT 2011 vs. 2012 EBIT Q4 ‘11 vs. Q4 ‘12 • Higher volume and improved service earnings, but • Higher volume and lower fixed capacity costs partly offset lower wind turbine margins on projects delive
Slide 26: Service
Service Service is the fastest growing and most profitable part of Vestas Service revenue • Service revenue increased by mEUR 10 per cent compared to Q4 +10% 233 2011. 227 223 203 203 • Full-year service growth of 26 per cent. 173 169 169 159 160 146 149 • 2012 EBIT before allocation of 140 Group co
Slide 27: Balance sheet
Balance sheet Full year Absolute Assets (mEUR) FY 2012 FY 2011 %-change Change Intangible assets 1,016 1,243 (227) (18)% • EUR 527m write-downs of goodwill, development Property, plant and equipment 1,286 1,898 (612) (32)% projects and property, plant and equipment. Other non-current assets 179 381
Slide 28: Change in net working capital
Change in net working capital Net working capital increased by EUR 304m in 2012 NWC increase over the last 12 months NWC increase during Q4 • Decrease in payables not fully balanced by • Decrease in inventories and prepayments decrease in inventories. driven by completion of projects. • Prepayments
Slide 29: MW under completion
MW under completion A significant reduction in Q4 - Further improvement potential Under completion by region MW -26% 2,649 2,497 2,299 510 506 2,044 322 • MW under completion decreased by 26 1,984 1,953 1,821 438 per cent over the quarter. 1,754 477 289 447 428 1,644 329 728 463 291 366 474 • MW und
Slide 30: Warranty provisions and Lost Production Factor
Warranty provisions and Lost Production Factor Warranty consumption trends down as LPF improves Warranty provisions and consumption Lost production factor (LPF) • Warranty provisions made in 2012 amounted to EUR • End 2012: LPF below 2 per cent. 148m equivalent to 2011 provisions. • LPF measures pot
Slide 31: Improved performance of wind turbine fleet
Improved performance of wind turbine fleet Warranty consumption as percentage of revenue has decreased Warranty consumption Percentage of revenue -64% 5.1 • Warranty consumption as percentage of 4.4 revenue has decreased by 64 per cent from 4.4 per cent in 2008 to 1.6 per cent in 2012. 3.7 3.1 • Thi
Slide 32: Cash flow statement Q4
Cash flow statement Q4 Absolute mEUR Q4 2012 Q4 2011 %-change change • Increased cash flow Cash flow from operating activities before from operations and 247 99 148 149% change in working capital lower investments were key contributors Change in working capital 248 475 (227) (48)% to a strong Q4 201
Slide 33: Cash flow statement full year
Cash flow statement Full year Absolute mEUR FY 2012 FY 2011 %-change change Cash flow from operating activities before • The difference of 231 93 138 148% approx EUR 1bn in change in working capital change in NWC was Change in working capital (304) 747 (1,051) (141)% not fully offset by better cash
Slide 34: Revised bank agreement
Revised bank agreement Vestas has secured sufficient funding Vestas’ lenders Syndicated credit facility, term loans and corporate bond 1 The revolving credit facility will expire in January 2015 with an option to extend it for another two years. 2 The terms loans will be amortised by January 2015. 3
Slide 35: Net debt to EBITDA
Net debt to EBITDA Net debt to EBITDA is below two Net debt and debt coverage mEUR and ×EBITDA 1.9 1.8 • Net debt to EBITDA rose to 1.9 in 2012 from 1.8 in 2011. 0.8 • Net debt to EBITDA is expected to decrease by end 2013. -0.1 -0.3 FY FY FY FY FY 2008 2009 2010 2011 2012 Net debt to EBITDA before
Slide 36: Return on invested capital
Return on invested capital Improved ROIC, but still at an unacceptable level Return on invested capital* (ROIC) Percentage 2% • ROIC will improve by cost reductions, potential 0% divestments and outsourcing opportunities, lower capex, improved net working capital and growth in service business. -2%
Slide 37: Order intake
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Slide 38: Wind turbine order intake
Wind turbine order intake Slow order intake driven by weaker market development Lower wind turbine order intake Price per MW • Global wind turbine market slowdown. • Price per MW depends on a variety of factors i.e. wind turbine type, geography, scope, uniqueness of offering. • 2012 order intake was
Slide 39: Order backlog
Order backlog Wind turbine backlog down, but service backlog continues to increase Wind turbine backlog Service backlog • Value of wind turbine order backlog equals • The service order backlog increased by 8 per cent EUR 7.1bn. during Q4. • Price per MW in order backlog is EUR • Total service backlo
Slide 40: Backlog: Wind turbines and service
Backlog: Wind turbines and service 2012: Combined backlog of EUR 12.4bn Wind turbines: Service: EUR EUR 7.1bn 5.3bn 40 Full year 2012 and outlook 2013
Slide 41: Outlook
4 Outlook
Slide 42: Key enablers for 2013
Key enablers for 2013 Solid order backlog, good customer relationships, world-class safety and low warranty consumption Good customer relationship Warranty consumption Customer Satisfaction Score Percentage of revenue 5.1 71 70 4.4 69 3.7 68 3.1 1.6 2009 2010 2011 2012 2008 2009 2010 2011 2012 World
Slide 43: Wind energy competitiveness
Wind energy competitiveness Short-term barriers, but long-term drivers remain intact The market conditions are tough… … but wind is getting more competitive Natural gas prices Henry Hub Spot Price, $/MMBTU 15 Source: www.eia.gov 1 Feb 2013 10 5 0 Jan Jan Jan Jan Jan Jan 2008 2009 2010 2011 2012 2013
Slide 44: Outlook 2013
Outlook 2013 Positive free cash flow and EBIT margin before special items: minimum 1 per cent • The development of the V164-8.0 MW Outlook turbine continues according to Vestas’ plans with installation of the first prototype still expected to take place in the second Shipments (GW) 4-5 quarter of 20
Slide 45: Bonus targets for Vestas employees
Bonus targets for Vestas employees Global bonus targets: Free cash flow and EBIT Low bonus High bonus Weight targets targets EBIT before special • No global bonus will be paid out for 3.7 5.0 45% 2013 if the low targets are not met. items (%)* Free cash flow (mEUR) 220 500 55% • No global bonus pay-
Slide 46: Prepared for a tough 2013
Prepared for a tough 2013 Unfolding the new operating business model’s potential Three core focus areas Achievements in 2012 Objectives for 2013 I Reduce costs through • Employee reductions of almost • Maximum 16,000 employees. operational excellence. 5,000. • Significantly increasing cost out • Red
Slide 47: Questions & answers
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Slide 48: 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