Vestas Wind Systems A/s · OMXCOP:VWS
Vestas Wind Systems A/s — H1 2005 Earnings Presentation
41 slides from Vestas Wind Systems A/s's earnings presentation, Aug 25, 2005
Slide 1: Half-year report 2005
Half-year report 2005 Vestas Wind Systems A/S ‘Danish Design Center’, Copenhagen 25 August, 2005
Slide 2: 2005: Tough and challenging
2005: Tough and challenging
Slide 3: Our fundamental challenge: Handling extreme topline growth
Our fundamental challenge: Handling extreme topline growth Group turnover (bnEUR) 4,0 3,5 Turnover more 3,0 than doubled in 2,5 two years! 2,0 1,5 1,0 0,5 0,0 2003 2004 2005 3
Slide 4: Fantastic opportunities - but tremendous challenges
Fantastic opportunities - but at the same time Tremendous challenges
Slide 5: Opportunities abound: Wind vs. oil
Opportunities abound: Wind vs. oil Oil price (USD/Barrel) Cost of wind power (USD/kWh) 70 0,70 60 0,60 Oil (left hand scale) 50 0,50 40 0,40 30 0,30 20 0,20 10 0,10 Wind (right hand scale) 0 0,00 1980 1985 1990 1995 2000 2005 5
Slide 6: Facing up to the challenge: Evening out deliveries and cash flow
Facing up to the challenge: Evening out deliveries and cash flow By moving into wind power systems and expanding the cooperation with major utilities, Vestas expects and will seek to insure a more even distribution of deliveries and cash flow over the year 100% Accumulated deliveries 50% 30% 1H 2H 6
Slide 7: 3rd party suppliers and Vestas value chain
3rd party Vestas suppliers • Gearboxes Technology • Generators • Transformers • Bearings • Carbon fibre Manufacturing • Fibre glass • Steel • Trucks • Vessels Transportation • Cranes Installation
Slide 8: Congestion in the supply chain and component failures are very costly
Congestion in the supply chain and component failures are very costly
Slide 9: Slide 9
Slide 10: In other words… Implementing 'The Will to Win' is crucial
In other words… • Vestas is growing at a staggering pace • So is the entire industry • Immense pressure on the supply chain translates into significant cost pressure in Vestas • Unprecedented logistic challenges Implementing 'The Will to Win' is crucial to our continued success 10
Slide 11: 'The Will to Win': Objectives for 2008
'The Will to Win' Objectives for 2008 Financial results have priority to market share 1. EBIT-margin is first priority • EBIT-margin of at least 10% 2. Net Working Capital is second priority • Net Working Capital at year end 20-25% of turnover 3. Market share is third priority • A global market shar
Slide 12: 'The Will to Win': Status on implementation [1]
‘The Will to Win’ Status on implementation [1] ‘The Will to Win’ presented to nearly all 10.500 employees face-to-face 12
Slide 13: 'The Will to Win': Status on implementation [2]
'The Will to Win' Status on implementation [2] Contract Review Board • Review of all large contracts • Part of Vestas’ risk management structure • Reports to Executive Management • Has already lead to rejection of potential orders 13
Slide 14: 'The Will to Win': Status on implementation [3]
'The Will to Win' Status on implementation [3] Review of business processes • Comprehensive analysis and documentation of business processes initiated • 'Vestas Constitution' anchored to the Vestas Government 14
Slide 15: 'The Will to Win': Status on implementation [4]
'The Will to Win' Status on implementation [4] Objectives of the efficiency program • Create a much more coherent organisation • Clarification of business responsibilities • Improved co-ordination and flow in production • Analysis and minimization of operational risk • Basis for implementation of gl
Slide 16: 'The Will to Win': Status on implementation [5]
'The Will to Win' Status on implementation [5] Plans for organisational changes: • Discontinuation of duplicate administrative functions • Implementation of lean manufacturing in ‘Vestas Towers’ • Expected to involve some 625 staff, subject to negotiations with employee representatives • Additional
Slide 17: Plan for new setup in Towers
Plan for new setup in Towers Today (A little bit of every thing): Proces 2 Proces 5 Proces 3 Proces 1 Proces 4 Proces 1 Proces 4 Proces 3 Proces 5 Proces 8 Proces 1 Proces 1 Proces 3 Proces 4 Proces 1 Proces 2 Proces 4 Proces 5 Proces 2 Proces 3 Proces 5 Proces 6 Proces 2 Proces 3 Proces 1 Proces 2
Slide 18: 'The Will to Win': Status on implementation [6]
'The Will to Win' Status on implementation [6] Staffing • Vestas’ growth has created almost 1,000 new jobs during 1H 2005, primarily in production • Vestas has no plans for further staff reductions Blade factory, Nakskov, Denmark 18
Slide 19: Market and financial review
eee V25/25o Market and financial review
Slide 20: Deliveries 1H 2005 (1H 2004)
Deliveries 1H 2005 (1H 2004) Greece Germany/Austria 5% (0%) 13% (26% ) Scandinavia India 3% (2%) 21% (11%) Other 3% (15%) Italy Rest of Asia 16% (7%) 5% (10%) USA/Canada Benelux 8% (5%) 4% (9%) Spain/Portugal 1% (4%) Australia/N.Z 21% (12%) Geographical overview of deliveries. 964 MW delivered in 1H
Slide 21: Income statement
Income statement Pro forma (EUR million) 1H 2005 1H 2004* 2005E 2004R Invoiced Turnover 839 1,062 - 2,598 Change in sales orders in progress 548 (116) - (37) Net turnover 1,387 946 3,200-3,400 2,561 Growth in turnover 46.6% 25.0%-32.8% Gross profit 21 19 121 Gross margin 1.5% 2.0% 4.7% Operating Pro
Slide 22: Income statement: Key points
Income statement Key points • Reduction in invoiced turnover (-21%) reflects the asymmetry between 1H and 2H also in 2005: • Production of US orders has pushed delivery of other orders into 2H, leading to further reduction in invoiced turnover in 1H • Growth in net turnover (+47%) driven by increase
Slide 23: Balance sheets
Balance sheets Pro forma (EUR million) 1H 2005R 1H 2004R* 2004R Intangible fixed assets 442 456 449 Tangible fixed assets 465 480 469 Current assets 2,271 1,912 1,993 Total assets 3,191 2,861 2,924 Equity 1,137 1,249 1,251 Provisions 190 248 214 Total liabilities 3,191 2,861 2,924 interest bearing n
Slide 24: Balance sheets: Key points
Balance sheets Key points • Current Assets mEUR 278 higher than end of 2004 • mEUR 250 pertains to increase in work in progress • mEUR 76 pertains to increase in inventories • Provisions mEUR 24 less than end of 2004 • mEUR 14 reduction in deferred taxes • mEUR 10 reduction in warranty provisions du
Slide 25: Cash flow statement
Cash flow statement Pro forma (EUR million) 1H 2005R 1H 2004R* 2004R Net profit (80) (54) (39) Non cash items 10 66 150 Change in working capital (14) (293) (90) Net financial items (26) (19) (41) Corporation tax paid (10) (7) (10) Cash flows from operating activities (120) (307) (30) Capital expend
Slide 26: Cash flow statement: Key points
Cash flow statement Key points • Improved cash flow from operations despite build up of inventory and receivables, due to - Higher prepayments from customers and increased trade payables, implying… • Only a minor increase in net working capital 26
Slide 27: Order backlog June 2005
Order backlog 30 June 2005 Firm and unconditional orders for delivery in 2005-2006 f o r d e e li livveerryy TTuurrbbiinneess for d sicallyy 0 0 5 a r e r e bbaasicall iinn 22005 a ssoolldd oouutt France India Rest of Asia Germany/Austria 4% 3% Pacific 9% 4% Spain/Portugal • Order backlog 14% corres
Slide 28: Market development: Europe
Market development Europe • Germany/Spain • Continued large and stable markets • Order intake as expected • Other European markets • Positive development in Italy and Portugal • Large UK offshore projects under construction V90-3.0 MW, Kentish Flats, UK, 2005 28
Slide 29: Market development: Rest of the world
Market development Rest of the world • USA • High level of activity in 2H 2005 • PTC scheme extended for two years, but no federal RPS (Renewable Portfolio Standard) • Asia/Pacific • Strong development in India • Increased activity in China • Market potential in Australia very uncertain – no extensi
Slide 30: Expectations for FY 2005
Expectations for FY 2005 • Turnover of bnEUR 3.2 - 3.4 (previously bnEUR 3.0 - 3.2) • EBIT-margin of approx. 4% (i.e. unchanged) • Investments in tangible fixed assets mEUR 140-160 (previously bnEUR 160 - 170) • Net Working Capital 30 - 35% of turnover at year end (i.e. unchanged) V90-3.0 MW, Greece
Slide 31: IFRS effects
IFRS effects • Two main effects from IFRS • Sales value of orders in progress (only in production units) • Goodwill 31
Slide 32: IFRS effects: Sales value of orders in progress
IFRS effects Sales value of orders in progress in production units From: Percentage of completion method (production principle) To: Completed contract method (delivery principle) Net effect, FY 2005 *) mEUR P/L No change Balance sheet, beginning of 2005 Inventories/Sales value of orders in progress
Slide 33: IFRS effects: Goodwill
IFRS effects Goodwill From: Systematic amortisation To: No systematic amortisation, impairment test for balance sheet value Net effect, FY 2005 (2004) mEUR P/L +17(+15) Balance sheet, end of 2005 Goodwill (accumulated) +32 Equity (accumulated) +32 33
Slide 34: The PTC extension has reduced contract risks on low-margin US projects
The PTC extension has reduced contract risks on the low-margin US projects considerably, however…
Slide 35: Uncertainties 2005
Uncertainties 2005 High uncertainty on estimates due to • Back-end loaded deliveries • Large projects • Component failures and delays • Pressure on transportation and installation capacity 35
Slide 36: First indication 2006
First indication 2006 • Structured effort to even out production and deliveries over the year • Including long-term delivery contracts with large customers • Significant order backlog for 2005-2006 • No plans for additions to overall production capacity in 2006 Expectations for 2006 to be announced
Slide 37: Tough and challenging
Tough and challenging
Slide 38: We have asked the impossible of our employees
We have asked the impossible of our employees: Working overtime Working extra time Working day and night - knowing that a staff reduction was on the cards
Slide 39: We in the Vestas Government can't and won't keep up that pressure
We in the Vestas Government can’t and won’t keep up that kind of pressure on our colleagues
Slide 40: Towards our long-term objectives
Towards our long-term objectives Towards our long-term objectives: • No single suppliers • Review of business processes • Contract Review Board • Organisational changes From From project project driven driven customer customer relations relations to to long-term long-term customer customer relations
Slide 41: Q & A
Q&A Wind, Oil & Gas 41