120607 virksomhedsdag ddf vestas - finansanalytiker.dk · swot 3. vestas today 4. summing up 5....

Virksomhedsdagen 2012

København, 7. juni 2012

This presentation contains forward-looking statements concerning Vestas' financial condition, results ofoperations 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 onmanagement’s current expectations and assumptions and involve known and unknown risks and uncertaintiesthat could cause actual results, performance or events to differ materially from those expressed or implied inthese statements.

Forward-looking statements include, among other things, statements concerning Vestas' potential exposure tomarket risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projectionsand assumptions. There are a number of factors that could affect Vestas' future operations and could causeVestas' results to differ materially from those expressed in the forward-looking statements included in thispresentation, including (without limitation): (a) changes in demand for Vestas' products; (b) currency and interestrate 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 andfinancial market conditions in various countries and regions; (g) political risks, including the risks of expropriationand renegotiation of the terms of contracts with governmental entities, and delays or advancements in theapproval 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 andability to accept delivery and installation of products and transfer of risk.

All forward-looking statements contained in this presentation are expressly qualified by the cautionarystatements contained or referenced to in this statement. Undue reliance should not be placed on forward-lookingstatements. Additional factors that may affect future results are contained in Vestas' annual report for the yearended 31 December 2011 (available at vestas.com/investor) and these factors also should be considered. Eachforward-looking statement speaks only as of the date of this presentation. Vestas does not undertake anyobligation to publicly update or revise any forward-looking statement as a result of new information or futureevents 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


Agenda

1. Introduction

2. SWOT

3. Vestas today

4. Summing up

5. Questions & answers


Introduction

Vestas installed capacityVestas has reached an installed global capacity of 50 GW of wind energy

• Vestas has installed more than 46,000 turbines in 69 countries, which generate electricity equivalent to the consumption of all households in Spain and Sweden.

• These turbines save the world from 55 million tons of CO2 emissions every year.

Together with our customers, we have reached an installed global capacity of 50 GW of wind energy. This is a significant milestone for maturing the wind industry and getting wind on a par with oil and gas.


Global market shares 2011Vestas No. 1 according to three of the leading wind industry consultancies

Sources: IHS EER, BTM-Navigant, MAKE

Other

Mingyang

Siemens

Guodian United Power

Suzlon Group

GE Energy

Enercon

Gamesa

Goldwind

Sinovel

Vestas

EER"Installed MW"

41.1 GW

21.2%

3.6%

6.3%

7.4%

7.6%

7.7%

7.8%

8.0%

8.7%

9.0%

12.7%

Other

MingyangSiemens


Sinovel

Suzlon Group

Enercon

Gamesa

GE Energy

Goldwind

Vestas

BTM-Navigant"Installations"

40.4 GW

21.5%

2.9%6.3%

7.1%

7.3%

7.7%

7.9%

8.2%

8.8%

9.4%

12.9%

Other

MingyangGamesa


Sinovel

GE Energy

Siemens

Suzlon Group

Enercon

Goldwind

Vestas

MAKE"Grid-connected"

40.8 GW

24.6%

2.9%6.4%

7.0%

7.2%

7.4%

7.6%

7.6%

7.6%

8.8%

12.9%


EER: Top 10 largest markets in 2011

Market size No. Market Rank 1 Rank 2 Rank 3

1 China Sinovel Goldwind Guodian

2 USA GE Vestas Siemens

3 India Suzlon Group* Gamesa Vestas

4 Germany Enercon Vestas Suzlon Group*

5 UK Siemens Suzlon Group* Vestas

6 Canada GE Siemens Vestas

7 France Enercon Vestas Suzlon Group*

8 Romania GE Vestas Gamesa

9 Italy Gamesa Vestas Enercon

10 Spain Gamesa Vestas GE

* Including REpower

• Vestas largest foreign player in China – ranked 8th.

• Vestas in top-three in nine out of ten largest markets.


Overview of Vestas’ Global Presence


Product platform

High, medium and low wind, on- and offshore

It takes a variety of turbines and services to meet customers needs

AOM1000 Service on demand.

AOM2000

AOM3000

AOM4000

AOM5000

Basic service.

Full service.

Guaranteed availability.

Energy based guaranteed availability.

Service solutionsTurbines

Different service levels for different needs


New Vestas organisation being implemented

“Vestas Wind Systems A/S has appointed Dag Gunnar Andresen, 48, as new Chief Financial Officer. […] He is expected to take up office around 1 August this year.”

President and CEODitlev Engel

Global Solutions & Services(Vacant)

Manufacturing

(Vacant)

Turbines R&D

Anders Vedel

FinanceDag Gunnar

Andresen

SalesJuan Araluce

CEO Staff functions


Strengths

• Knowledge of wind.• Technology leadership. • Global footprint.• Strong customer relations.

SiteHunt®

46,000 wind turbines installed in 69 countries


Strengths


High, medium and low wind, on- and offshore

Lost production factorPercentage

0.00.51.01.52.02.53.03.54.04.55.0

Jan 2012

Jan 2011

Jan 2010

Jan 2009


Strengths

• Knowledge of wind.• Technology leadership.• Global footprint.• Strong customer relations.


Strengths


696464

52

46

2010 2011

+5

200920082007

Customer LoyaltyIndex


Weaknesses• Too high product and production

costs on new platforms.• Too high fixed costs compared to

current market environment.

A few examples of recent cost-out initiatives

Cost reduction on lift galleries in towers

V112 crane gallery simplification

Standardisation of rear frame cross assembly


20,400

22,57622,721

23,525

20,73020,829

FY 2012 Expected

Q1 2012FY 2011FY 2010FY 2009FY 2008

Weaknesses• Too high product and production costs

on new platforms.• Too high fixed costs compared to

current market environment.

Contributes to cost reduction of more than EUR 150m

EmployeesNumber of employees, end of period


Opportunities• Wind is getting increasingly

competitive. • Market expansion opportunities.

• Demand for electricity will rise.• Renewed focus on climate agenda.• Coal and nuclear retirements.• Natural resources are getting more

expensive.

• Large installed base creates opportunities for service business.

• Offshore development could accelerate.

Levelised cost of energy (LCOE)USD/MWh

Source: Bloomberg New Energy Finance


Opportunities

”Delaying action is a false economy: For every $1 of investment avoided in the power sector before 2020 an additional $4.3 would need to be spent after 2020 to compensate for the increased emissions.”

IEA, World Energy Outlook 20119 November 2011

• Wind is getting increasingly competitive.

• Market expansion opportunities• Demand for electricity will rise.• Renewed focus on climate agenda.• Coal and Nuclear retirements.• Natural resources are getting more

expensive. • Large installed base creates

opportunities for service business.• Offshore development could

accelerate.


2033 35 37 41 42

5212

13 1418

1924

24

17

410

12

1110

49

32

2017

E

2018

E

2020

E

21

2019

E

2016

E

2015

E

2014

E

2013

E

2012

E

14

2011

Coal

2010

14

2

Nuclear

46

60

67

76

28

55

Source: IHS EER Europe Renewable Power Market Forecasts 2012-2025

Power generation capacity expected to be decommissionedGW, accumulated 2010-2020

Opportunities

Service revenuemEUR 850

705

623

504

396

298

214

20072006 2012E2011

+26%

201020092008


• Market expansion opportunities.• Demand for electricity will rise.• Renewed focus on climate agenda.• Coal and Nuclear retirements.• Natural resources are getting more

expensive.




OpportunitiesOffshore market sizeYearly wind power capacity added (GW)

2012E

2.2

2011E

1.0

+35%

2016E

4.6

2015E

3.9

2014E

3.6

2013E

2.9

Source: IHS EER Global Wind Energy Market Forecast 2011-2025, 30 November 2011.


• Market expansion opportunities• Demand for electricity will rise.• Renewed focus on climate agenda.• Coal and Nuclear retirements.• Natural resources are getting more

expensive.




Threats• Weak economic outlook in OECD-

countries.• Shale gas exploration drives down

electricity prices in North America.• Increased NIMBYism.• Grid constraints.• Fierce competition.





Henry Hub Natural Gas Spot PriceUSD/MMBtu

Source: Bloomberg




electricity prices in North America. • Increased NIMBYism.• Grid constraints.• Fierce competition.

Picture copyright: Phil Hands, Wisconsin Journal, 20 March 2009





Source: Politiken.dk, 6 June 2012




electricity prices in some regions.• Increased NIMBYism.• Grid constraints.• Fierce competition.

”Wind is a wildcard, especially due to all the things that can happen in the strong market in 2012. Energy may vary from a slightly good margin to a slightly worse margin.”

GE Q1 ‘12, CEO Jeff Immelt20 April 2012

”As expected, the second quarter was not easy.”

Siemens Q2 ‘12, CEO Peter Löscher25 April 2012

”Challenging market conditions in renewable energy, including pricing pressure, are expected to continue in coming quarters.”

Siemens Q2 ‘12, Company announcement25 April 2012


Vestas today

EER: Wind sector outlook

The wind sector is entering a lower growth phase

Global total wind power capacity addedGW

-13%

+1%

+26%

17E

47.8

16E

46.9

15E

45.3

14E

44.0

13E

18.9

06

15.1

05

11.1

2004

7.3

39.9

12E

46.1

11

41.1

10

39.9

09

36.7

08

30.5

07

• 1% average global growth is expected in the coming years –according to EER.

• Focus shift from growth to profitability.


Source: IHS EER

Turbine and service order backlog

Turbines

End Q1 2012 backlog was the largest in Vestas’ history

Services

EUR 10.0bn EUR 4.2bn


Shipments and deliveries 2012

• Shipments expected to increase by almost 40 per cent in 2012 to around 7 GW.

• Deliveries will fluctuate and are expected to increase over the year.

• Cash inflows are correlated to shipments.

• Deliveries are the primary revenue driver.

Deliveries

Shipments

Shipment and delivery activities in 2012Expected distribution over the year; illustrative example


Outlook for 2012

Revenue (mEUR) 6,500-8,000

- of which service revenue (mEUR) 850

EBIT margin (%) 0-4

EBIT margin, service* (%) ~ 14

Investments (mEUR) 550

- Intangible (mEUR) 350

- Tangible (mEUR) 200

Free cash flow (mEUR) > 0

Warranty provisions (%) ~ 3

2012 EBIT margin low due to:• Too high product and production

costs primarily on the V112 turbine and the GridStreamer™ technology, which will be reduced over the year.

• Depreciation and amortisation increase by EUR 100m.

Special items related to the lay-off of 2,335 employees expected to amount to EUR 50-100m.


*before allocation of Group costs.

Cash flow

-1,000

-500

0

500

1,000

2007 2008 2009 2010 2011

Free cash flowInvestmentsCash flow from operations

Cash flow from operations and investmentsmEUR

Focus on improving cash flow

• Free cash flow has been improving after years with high investments.

• Focus is to secure free cash flow while still maintaining a reasonable level of investments.


Return on invested capital

Focus on improving ROIC

Return on Invested Capital* (ROIC)Percentage

• ROIC is hurt by poor results, by investments made to increase regional manufacturing capacity, and by development and conversion of platforms to improve competitiveness.

• ROIC to be improved by growth in higher margin service business.

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2007 2008 2009 2010 2011


*Invested capital includes net working capital, PPE and intangibles.

Two revenue streams

AOM1000 Service on demand

AOM2000

AOM3000

AOM4000

AOM5000

Basic service

Full service

Guaranteed availability

Energy based guaranteed availability

SiteHunt®


Service revenue

Service revenue is expected to continue the positive trend

Service revenuemEUR

• 96% of all announced MW in 2011 came with a service contract.

• Service business driven by increasingly large installed base and still more sophisticated offerings.

850

705

623

504

396

298

214

2006 2007 201020092008

+26%

2012E2011


Net working capital

-71

672

317

-73

-411

11

200820072006 201120102009

Net Working Capital, end of periodmEUR

Focus on keeping NWC down

• 2009 and 2010 NWC impacted by too large inventories.

• Make-to-order/Just-in-time implementation has paid off in 2011.

• Improved quality and regional suppliers have reduced lead-time.


CapexCapex declining after years of heavy investments

200

350

789808

050

100150200250300350400450500550600650700750800850

2007

550

761

680

317

2012 Expected

2011201020092008

InvestmentsmEUR

Intangible.

Tangible.


Net Debt/EBITDA

Net debt and debt coveragemEUR and ×EBITDA

3.95x

-0.05x

-800

-600

-400

-200

0

200

400

600

800

1,000

-2.0x

-1.0x

0.0x

1.0x

2.0x

3.0x

4.0x

FY 2012 Exp.

Q12012

FY2011

1.79x

FY2010

0.78x

FY2009

-0.29x

FY2008

FY2007

-1.82x

Net debt to EBITDA before special items, last 12 monthsNet debt

Nine participating banks in the 5 (+1 +1) year facility:Commerzbank AG, DnB NOR Bank ASA, Nordea, HSBC, Rabobank, Royal Bank of Scotland, SEB, Unicredit and Société Générale.

Nine participating banks in the 5 (+1 +1) year facility:Commerzbank AG, DnB NOR Bank ASA, Nordea, HSBC, Rabobank, Royal Bank of Scotland, SEB, Unicredit and Société Générale.

Expected positive free cash flow of EUR >295m in the rest of 2012 gives comfortable headroom entering 2013.

Expected positive free cash flow of EUR >295m in the rest of 2012 gives comfortable headroom entering 2013.

Revolving credit facility of EUR 1.3bn announced in June 2011


Summing up

Today’s key points

Cost competiveness of wind creates a lot of opportunities in the energy space.

The wind industry has entered a lower growth phase; Focus shift from growth to profitability and cash flow.

Vestas focuses on lowering fixed costs and direct costs to align with the current market environment.

ROIC improvement will be obtained by better utilisation of the invested capital, increasing profitability and further emphasis on the service business.


Financial calendar 2012

22 August 2012Disclosure of H1/Q2 2012 results

7 November 2012Disclosure of Q3 2012 results


Questions & answers

Copyright NoticeThe 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 anymeans - 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, oranyone 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” andVestas Wind Systems A/S shall not have any responsibility or liability whatsoever for the results of use of the documents by you.

In case we have unintentionally violated copyrighted material, we want to be informed immediately in order to straighten things out and thus to honour any obligatory fees.

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