Description
Abstract explain full year 2013, outlook for 2014 and strategic update.
Full year 2013, outlook for 2014 and strategic update
Copenhagen, 4 February 2014
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 2013 (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 Full year 2013, outlook for 2014 and strategic update
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
3
New
organisation
and operating
business
model
Advanced
wind
turbine
technology
Efficient
manufac-
turing of
wind
turbines
Sale and service of wind
power plants
Improve capacity
utilisation
Reduce
costs
I
III
Full year 2013, outlook for 2014 and strategic update
Turnaround plan
Build new organisation and operating business model
4
Reduce
investments
II
Three core focus areas
Improve capacity utilisation and
capital efficiency through
divestments, supply to third parties
and NWC management.
III
Reduce investments through asset-
light solutions and simplified product
roadmap.
II
Reduce costs through operational
excellence.
I
I
(58)
(9)
(52)
152
273
Sale Production R&D Fixed
capacity
costs Q4
2013
Administrative Fixed
capacity
costs Q4
2011
(2)
-121
Full year 2013, outlook for 2014 and strategic update
Fixed cost savings of EUR 484m* achieved
Quarterly fixed costs reductions of EUR 121m comparing Q4’11 to Q4‘13
5
Fixed capacity cost savings
mEUR
*With full effect as from the end of 2011 to the end of 2013. Excluding bonus provisions.
Cost levers
Contribution from reduction in number of
salaried employees
9,875
Q4 2011 Q4 2013
-4,287
5,588
>70%
Contribution from site simplification, closure
of factories and other cost measures
<30%
Proportion of the EUR 484m fixed cost savings:
15,497
2013 FY 2012 FY
17,778
22,721
-7,224
2011 FY Hourly paid
employees
Salaried
employees
Total reduction
of employees
2,937
4,287
7,224
Full year 2013, outlook for 2014 and strategic update
Employee reductions of 32 per cent
-of which 59 per cent were salaried
I
6
Employees, end of period
Number of employees
Employee reductions
Number of employees
Net investments, last five years
mEUR
286
761
789
808
239
~250
-522
FY
2013
FY
2014E
FY
2012
FY
2011
FY
2010
FY
2009
• Capex requirement reduced
significantly while launching of
new product variants and
developing the V164-8.0 MW.
• Launch of:
V105-3.3 MW
V112-3.3 MW
V117-3.3 MW
V126-3.3 MW
V110-2.0 MW
II
Full year 2013, outlook for 2014 and strategic update
Reduced capex requirement
Capex requirement reduced by more than EUR 500m
7
Joint
Venture*
J oint venture between Vestas and MHI
A strong joint venture to address the expected growth in the offshore
segment
II
• Lower and more flexible capex set-up at Vestas.
• Strong parent positions combined in one offering.
• A strong company for the future offshore market.
Full year 2013, outlook for 2014 and strategic update 8
*The transaction is subject to customary closing conditions.
Operational drivers Strategic levers
mEUR
III
• Improved cash conversion driven by improved installation time,
better planning and control of inventory and alignment of payment
terms and payment milestones according to industry best
practice.
• Still room for improvement in MW under completion even though
it was markedly improved during Q4.
• From 31 to 19 factories in two years to optimise capacity
utilisation while maintaining a global manufacturing footprint.
• Continued improvement of balance sheet.
• Optimised invested capital through better net working capital
and a more asset-light and scalable manufacturing footprint.
(596)
(117)
(56)
197
233
481
330
20
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
Q1
2012
Q3
2012
Q2
2012
Full year 2013, outlook for 2014 and strategic update
Production sites divested or closed since end of 2011.
Current production sites.
Capital efficiency and capacity utilisation
Net working capital at record low level end 2013
9
Net working capital
From 31 to 19 factories
6
2
0
(2)
8
4
Q3
2013
Q3
2012
Q4
2013
(4)
Q1
2012
Q4
2011
Q2
2013
Q1
2013
Q4
2012
Q2
2012
(6)
EBIT margin before special items, last 12 months ROIC, last 12 months
Full year 2013, outlook for 2014 and strategic update
Return on invested capital
Turnaround plan has improved ROIC substantially
10
ROIC has increased due to:
• Improved earnings through
cost reduction and growth in
the service business.
• Better capital efficiency
through capex-light solutions
and improved net working
capital.
Return on invested capital (ROIC)
Percentage
A more scalable, flexible, agile and lean Vestas
Foundation for the future strengthened via the capital increase
Full year 2013, outlook for 2014 and strategic update 11
Foundation Results Strategy
Two-year turnaround Profitable growth for Vestas
Two-year turnaround plan
completed:
Turnaround resulting in a
Vestas today:
Strengthening Vestas’ global
leadership:
• Fixed cost savings of almost
EUR 500m*.
• Capex requirements lowered
by more than EUR 500m.
• NWC lowered to approx
EUR (600)m.
• Improved operations during
2013.
• Double-digit EBIT margin in
Q4.
• Free cash flow EUR ~1bn in
2013.
• Strengthening the balance
sheet via announced capital
increase to generate more
and better business for
Vestas.
*With full effect as from the end of 2011 to the end of 2013.
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
12
*R&D, administration and distribution
mEUR
Q4 2013 Q4 2012
%
change
Revenue 2,361 2,512 (6)%
Cost of sales (1,905) (2,179) (13)%
Gross profit 456 333 37%
Fixed costs* (216) (178) 21%
EBIT before special items 240 155 55%
Special items (10) (485) (98)%
EBIT after special items 230 (330) -
Net profit/(loss) 218 (618) -
Gross margin 19.3% 13.3% 6.0%-pts
EBITDA margin before special items 14.3% 10.6% 3.7%-pts
EBIT margin before special items
10.2% 6.2%
4.0%-pts
• Gross profit increased by 37
per cent despite lower revenue
due to improved project
margins, lower fixed capacity
costs and lower depreciation.
• EBIT before special items
increased by 55 per cent.
• EBIT margin before special
items increased by 4.0
percentage points to 10.2 per
cent.
Full year 2013, outlook for 2014 and strategic update
Income statement
Q4
13
*R&D, administration and distribution
mEUR
FY 2013 FY 2012
%
change
Revenue 6,084 7,216 (16)%
Cost of sales (5,188) (6,420) (19)%
Gross profit 896 796 13%
Fixed costs* (685) (792) (14)%
EBIT before special items 211 4 -
Special items (109) (701) (84)%
EBIT after special items 102 (697) -
Net profit/(loss) (82) (963) -
• Decrease in revenue more than
offset by lower fixed capacity
costs, depreciation and better
project margins.
• EBIT before special items
increased by EUR 207m.
• EBIT margin before special
items increased by 3.4
percentage points to 3.5 per
cent.
Full year 2013, outlook for 2014 and strategic update
Income statement
Full year
Gross margin 14.7% 11.0% 3.7%-pts
EBITDA margin before special items 10.0% 6.6% 3.4%-pts
EBIT margin before special items
3.5 % 0.1%
3.4%-pts
14
EBIT Q4 2013 vs. Q4 2012
mEUR
(29)
133
(32)
42
44
12
(94)
240
155
Bonus
provisions
D&A Q4 2013
EBIT
Project
margin
Q4 2012
EBIT
Project
volume
9
Fixed
capacity
costs
Service
volume
Service
margin
Warranty
provisions
EBIT increased by EUR 85m in Q4
2013 compared to Q4 2012 driven
by:
• Margin improvements in both
wind turbines and service,
lower D&A and fixed costs
more than offset lower volume
and bonus provisions.
Full year 2013, outlook for 2014 and strategic update
EBIT development Q4 2013 vs. Q4 2012
EBIT improved despite 6 per cent revenue drop
15
EBIT FY 2013 vs. FY 2012
mEUR
211
(94)
68
4
Service
margin
Bonus
provisions
FY 2013
EBIT
43
D&A Fixed
capacity
costs
266
Warranty
provisions
19
Project
margin
(256)
FY 2012
EBIT
133
Service
volume
28
Project
volume
EBIT increased by EUR 207m in
2013 compared to 2012 driven by:
• Margin improvements in both
wind turbines and service,
lower D&A and fixed costs
more than offset lower volume
and bonus provisions.
Full year 2013, outlook for 2014 and strategic update
EBIT development FY 2013 vs. FY 2012
EBIT improved despite 16 per cent revenue drop
16
Service revenue
mEUR
886
705
623
504
954
+17%
FY
2013
FY
2012
FY
2011
FY
2009
FY
2010
• Full-year service growth of 8 per
cent.
• CAGR* from 2009-2013 of 17
per cent.
• 2013 EBIT before allocation of
Group costs: EUR 213m.
Margin: 22 per cent.
• 2013 EBIT after allocation of
Group costs: EUR 147m.
Margin: 15 per cent.
• Around 5,000 employees in the
service business.
*Compound annual growth rate.
Full year 2013, outlook for 2014 and strategic update
Service
Full year
17
Assets (mEUR) FY 2013 FY 2012
Abs.
Change
%
Change
Intangible assets 741 1,016 (275) (27)%
Property, plant and equipment 1,221 1,286 (65) (5)%
Other non-current assets 190 179 11 6%
Non-current assets 2,152 2,481 (329) (13)%
Current assets 3,156 4,360 (1,204) (28)%
Current and non-current assets held for sale 332 131 201 153%
Total assets 5,640 6,972 (1,332) (19)%
Liabilities (mEUR) FY 2013 FY 2012
Abs.
change
%
change
Equity 1,524 1,622 (98) (6)%
Non-current liabilities 827 1,652 (825) (50)%
Current liabilities 3,046 3,698 (652) (18)%
Liabilities held for sale 243 0 243 -
Total equity and liabilities 5,640 6,972 (1,332) (19)%
Net debt (86) 900 (986) -
Net working capital (596) 233 (829) -
Solvency ratio (%) 27.0 23.3 - 3.7%-pts
• Current assets lowered due to
lower inventories and
receivables.
• NWC improvement was the
main driver of the net debt
reduction of more than EUR
800m, resulting in a net cash
position of EUR 86m.
• Solvency ratio to improve via
capital increase.
Full year 2013, outlook for 2014 and strategic update
Balance sheet
Full year
18
• Inventories reduced due to lower MW under
completion and good cash conversion.
• Prepayments stable despite the lower MW under
completion.
• Receivables reduced due to improved cash
collection.
*Construction contracts in progress.
NWC improvement over the last year NWC improvement during Q4
• Inventories reduced due to lower MW under completion
and good cash conversion.
• Smooth execution on installations and transfer of risk in
December allowing for payment collections.
• Prepayments stable despite the lower MW under
completion.
NWC change over the last 12 months
mEUR
NWC change over the last three months
mEUR
233
Other
liabilities
159
Pre-
payments
(32)
NWC end
2013
(596)
Payables NWC end
2012
(749)
(238)
Inventories
5
26
Receiv-
ables
CCP*
(694)
CCP* NWC end
Q3 2013
7
(117)
263
(73)
(596)
Receiv-
ables
Other
liabilities
Payables Pre-
payments
(29)
47
NWC end
Q4 2013
Inventories
Full year 2013, outlook for 2014 and strategic update
Change in net working capital
Strong progress on implemented initiatives during 2013
19
148 148
194
292
117 119
179
253
257
84
FY
2011
FY
2012
FY
2010
FY
2009
-24%
FY
2013
Provisions made Provisions consumed
0
1
2
3
4
5
Dec
2013
Dec
2012
Dec
2011
Dec
2009
Dec
2010
Warranty provisions and consumption Lost Production Factor (LPF)
• Warranty consumption steadily declining due do
improved quality.
• Provisions made were higher than provisions
consumed for the second year in a row.
• End 2013: LPF at 1.7 per cent.
• LPF measures potential energy production not
captured by the wind turbines.
Warranty provisions made and consumed
mEUR
Lost production factor
Percentage
Full year 2013, outlook for 2014 and strategic update
Warranty provisions and Lost Production Factor
Warranty consumption and LPF continue at a low level
20
mEUR
Q4 2013 Q4 2012
Abs.
change
%
change
Cash flow from operating activities before
change in working capital
428 247 181 73%
Change in working capital 478 248 230 93%
Cash flow from operating activities 906 495 411 83%
Cash flow from investing activities (90) (79) (11) 14%
Free cash flow 816 416 400 96%
Cash flow from financing activities (493) (11) (482) -
Change in cash at bank and in hand less
current portion of bank debt
323 405 (82) (20)%
• Increased cash flow from
operations, mainly driven
by NWC improvements.
• Q4 FCF of EUR 816m.
Full year 2013, outlook for 2014 and strategic update
Cash flow statement
Q4 FCF of EUR 816m
21
• Increased cash flow from
operations, mainly driven by
NWC improvements.
• Free cash flow improved by
EUR 1,368m to EUR 1,009m.
mEUR
FY 2013 FY 2012
Abs.
change
%
change
Cash flow from operating activities before
change in working capital
419 231 81%
Change in working capital 829 (304) 1,133
Cash flow from operating activities 1,248 (73) 1,321
Cash flow from investing activities (239) (286) (16)%
Free cash flow 1,009 (359) 1,368
Cash flow from financing activities (1,150) 832 (1,982)
Change in cash at bank and in hand less
current portion of bank debt
(141) 473 (614)
Full year 2013, outlook for 2014 and strategic update
Cash flow statement
Full year FCF of EUR 1,009m
22
Net debt
mEUR
728
779
972
900
(86)
-986
Q4
2013
Q3
2013
Q2
2013
Q4
2012
Q1
2013
• Net debt reduction of approx
EUR 1bn over the last 12
months resulting in a net cash
position of EUR 86m.
• Reduction primarily driven by
NWC improvements.
Full year 2013, outlook for 2014 and strategic update
Net debt
Net debt converted to net cash position of EUR 86m
23
Net debt to EBITDA
×EBITDA
• Net debt to EBITDA fell to
(0.1) in 2013 down from 1.9 in
2012.
• Development driven by both
net debt reduction and
improved EBITDA.
Q3
2013
-0.1
1.6
1.4
-0.3
FY
2009
1.9
FY
2012
Q2
2013
FY
2011
Q4
2013
1.8
0.8
Q1
2013
1.8
FY
2010
FY
2008
-0.1
Net debt to EBITDA before special items, last 12 months
Full year 2013, outlook for 2014 and strategic update
Net debt to EBITDA
Negative net debt to EBITDA
24
Improved wind turbine order intake
• 2013 order intake was 60 per cent higher than in
2012 – primarily driven by pick-up in the USA and
new wind markets.
• Global footprint and competitive turbine offerings
secured orders in different markets.
Price per MW
• Price per MW decreased by 4 per cent compared to
2012.
• Price per MW depends on a variety of factors i.e. wind
turbine type, geography, scope and uniqueness of
offering.
• Relatively more supply-only orders received in 2013.
3,072
8,673
+2,226
FY
2013
5,964
FY
2012
3,738
FY
2011
7,397
FY
2009
FY
2010
1.04
FY
2010
FY
2009
0.99
-4%
FY
2013
0.97
FY
2012
1.02
FY
2011
0.99
Order intake
MW
Average selling price of order intake
mEUR per MW
Full year 2013, outlook for 2014 and strategic update
Wind turbine order intake
Full year 2013
25
Wind turbines:
EUR
6.8bn
Service:
EUR
6.7bn
Full year 2013, outlook for 2014 and strategic update
Backlog: Wind turbines and service
Combined backlog increased by EUR 1.1bn to EUR 13.5bn
26
EUR -0.3bn EUR +1.4bn
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
27
• Market environment
• Vestas’ key differentiators
• Vestas’ strategy
Continued growth in the electricity market
Electricity generation to increase by 20 per cent until 2020
ENERGY GENERATION
• Forecasted growth in global electricity generation above 3 per cent per year increasing
total generation by over 20 per cent during the period 2014-2020.
• Higher growth in non-OECD countries (4 per cent per year, 25 per cent for the period)
compared to OECD countries (1 per cent per year, 7 per cent for the period).
Electricity Generation OECD and Non-OECD
Full year 2013, outlook for 2014 and strategic update
Source: Worldbank.
28
T
W
h
Power plants are being retired in the USA and Europe
195 GW of capacity to be shut down in the next 10 years due to economical
and environmental reasons
POWER PLANT RETIREMENT
US Energy Supply Forecasts: new capacity additions / removals (MW)¹
Source: DB Climate Change Advisors
Gas
Wind
Solar CSP
Solar PV
Geothermal
Nuclear
Coal
20.000
15.000
10.000
5.000
0
-5.000
-10.000
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
Full year 2013, outlook for 2014 and strategic update
Source:
1
Citi Global Perspectives & Solutions (Citi GPS) “Energy Darwism”, 2013.
2
DB Climate Change Advisors “Repowering America: Creating J obs”, 2011.
29
• An estimated 95 GW of capacity to shut down in Europe in the next 10 years
1
.
• Expected 100 GW of coal-fired plants to be retired in the USA in the next 10 years
2
.
Wind is competitive against other energy sources
While levelised cost of energy increases for many energy sources, cost of
energy for wind has decreased by 15 per cent over the last five years
LEVELISED COST OF ENERGY
70
82 82
91
140
149
313
134
187
140
166
329
0
50
100
150
200
250
300
350
Hydro Gas Wind Coal Nuclear Solar PV
LCOE evolution
mid 2009 – H1 2014
5% 68% -15% 65% 51% -52%
LCOE
USD/MWh
(J an 2014)
Current LCOE per energy source (Jan 2014)
Full year 2013, outlook for 2014 and strategic update
Source: BNEF, J anuary 2014. (Note: wind only covers onshore. Hydro and nuclear have only been covered since Q2 2012)
30
• Renewable energy such as wind and solar are key to meet increasing electricity demand
as their levelised costs keep decreasing.
• Today wind is already on a par with new-build gas and has lower costs than new coal in
more than 30 listed countries.
26
64
37
60
32
82
Wind market forecast 2013-2020
Growth rates of 4-10 per cent expected
WIND MARKET FORECAST (GW)
Full year 2013, outlook for 2014 and strategic update
Source: IHS Emerging Energy Research December 2013. MAKE Consulting November 2013.
31
2019e
65
40
35
50
2016e 2015e
55
2020e 2018e
60
2014e 2013e
45
0
2017e
IHS MAKE
CAGR: +10 per cent
CAGR: +4 per cent
• Different views but growth is expected.
Vestas major key differentiators
Largest installed base, world-class products, global reach and a strong brand
Full year 2013, outlook for 2014 and strategic update
• World-class product portfolio: geographical fit and
reach, siting flexibility, best-in-class quality.
• Largest global installed base, providing significant
service business potential.
• Very strong and competitive product offering. • 2013 order intake of 6 GW from 37 countries.
Vestas
~60
2nd largest
WTG supplier
~40
+50%
0
1
2
3
4
5
Dec
2009
Dec
2010
Dec
2013
Dec
2012
Dec
2011
Total installed base (GW) Lost production factor
Latest product launches Global reach in sales, installation and manufacturing
32
Low
wind
Medium
wind
High
wind
2 MW
platform
3 MW
platform
V110-2.0 MW V100-2.0 MW
V112-3.3 MW
V117-3.3 MW
V105-3.3 MW
V112-3.3 MW
V117-3.3 MW
V126-3.3 MW
The building blocks of the Vestas strategy
A strengthened global leadership position for the long term
Global wind leader
Vision: Bringing wind on par with oil and gas
Full year 2013, outlook for 2014 and strategic update 33
Grow profitably in mature &
emerging markets
Capture full potential of the
service business
Reduce levelised cost of energy
Improve operational excellence
Governance, leadership & culture
Mid-term
(3-5 years)
Market leader in volume | Best-in-class margins | Strongest brand in industry
Grow faster than the market
Build partnerships and generate new opportunities to enable growth
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Strengthen position in mature markets.
• Grow market share in emerging markets.
• Build partnership with our strategic accounts.
• Pursue opportunities with new market segments.
• Build partnership based on value, business case
certainty and stability.
Grow faster than the market
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Global reach, trusted partner & strong brand.
Full year 2013, outlook for 2014 and strategic update 34
Grow the service business by more than 30 per cent
Leverage on the installed base and establish a new service organisation
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Capture service business on all new orders.
• Establish a new service organisation, which will
report directly to CEO.
• Segmented service portfolio.
• Improve renewal rate via increased service business
innovation.
• Efficiency from knowledge and scale.
Grow the service business by more than
30 per cent
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Leverage on the biggest installed base in the world.
Full year 2013, outlook for 2014 and strategic update 35
Capture full
potential of the
service business
2
Reduce cost of energy faster than market average
Increase competitiveness and reduce dependency on support schemes
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Industrialisation to ensure a flexible, scalable,
generic and modular product architecture.
• Effectiveness, efficiency and pace of the product
development process.
• Increase product functionality and competitiveness
via larger rotors and generators.
• Cost out on 2 MW and 3 MW turbine platforms to
increase competitiveness.
Reduce levelised cost of energy faster than
market average
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Largest wind R&D to focus on industrialisation and cost out.
Full year 2013, outlook for 2014 and strategic update 36
Reduce the
levelised
cost of energy
3
Capture full
potential of the
service business
2
Improve earnings capability
Reducing time and costs to achieve operational excellence
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Reduce external spend with suppliers to lower
variable costs.
• Continued focus on fixed costs, e.g. shared service
centres, increased outsourcing and site
consolidation.
• Working capital management to reduce cash
conversion cycle days and leadtimes.
• Modular product development to reduce time and
cost.
• Cross-functional processes.
Improve earnings capability
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Economies of scale and full focus on wind.
Full year 2013, outlook for 2014 and strategic update 37
Capture full
potential of the
service business
2
Reduce the
levelised
cost of energy
3
Improve
operational
excellence
4
Governance to execute the strategy
Changes to the organisation and new principles to ensure implementation of
the strategy across Vestas
STRATEGY GOVERNANCE & LEADERSHIP PRINCIPLES
Full year 2013, outlook for 2014 and strategic update 38
Governance, leadership & culture
Speed. Simplicity. Accountability.
Changes to organisational structure:
• Creation of a new unit for the service business reporting to
the CEO.
• Extend Group Management from five to eight seats with
GSVP Service, GSVP Marketing & Communications and
GSVP HR.
Governance principles:
• Increase transparency.
• Improve performance management.
• Delegation to measurable (P&L) units.
• Cross-functional EVP Governance.
• Yearly strategy cycle.
Vestas’ profitable growth strategy to strengthen global leadership
Each of the four objectives will allow Vestas to reach its vision and long-term
ambitions
OBJECTIVES STRATEGY AMBITIONS VISION
39
Profitable Growth
for Vestas
Grow profitably in
mature &
emerging markets
1
Capture full
potential of the
service business
2
Reduce the
levelised
cost of energy
3
Improve
operational
excellence
4
Grow faster than the market
Grow the service business
by more than 30 per cent
Reduce levelised cost of
energy faster than market
average
Improve earnings capability
Global wind leader
• Wind on a par with oil & gas.
• Market leader in volume.
• Best-in-class margins.
• Strongest brand in industry.
Efficiency
Products
Service
Markets & Customers
Governance, leadership & culture
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
40
Outlook and financial targets
2014 and beyond
Full year 2013, outlook for 2014 and strategic update
Outlook
2014
41
Mid-term
financial targets
• Service business is expected to
continue to grow with stable margins in
2014.
Revenue (bnEUR) min. 6
EBIT margin before special items (%) min. 5
Total investments (mEUR) approx 250
Free cash flow (mEUR) min. 300
ROIC: • Double-digit each year over the cycle.
FCF: • Positive FCF each year.
Capital
structure:
• Net debt/EBITDA ratio must be lower
than 1 at the end of each financial year.
• Solvency ratio must be above 30 per
cent at the of end financial year.
Priorities for
excess cash:
1. Repayment of debt if net debt/EBITDA
ratio is above target.
2. Allocation to shareholders if solvency
ratio is above target.
Capital increase of up to 9.99 per cent
Strengthen balance sheet to enable more and better business
Full year 2013, outlook for 2014 and strategic update 42
Customers Suppliers Banks
• Availability of improved guarantee
facilities.
• Strong enabler for improved
business.
• Increased number of projects
from risk-averse customers.
• Potential to receive better terms. • Bank facilities with longer maturity,
lower costs and more flexibility.
Solvency ratio increase to a target level of above 30 per cent.
Full year 2013, outlook for 2014 and strategic update
Revised bank agreement
Longer maturity and more bonding lines
43
Syndicated credit facility
• Revolving credit facility – EUR 850m.
• Expiration 2019.
• Full facility available for project guarantees.
Corporate bond
• Corporate bond listed at Bourse de
Luxembourg – EUR 600m.
• Expiration March 2015.
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
44
Summary
Successful turnaround as foundation for a strengthened global leadership
position for Vestas
Full year 2013, outlook for 2014 and strategic update
Turnaround
achievements
45
2014
and beyond
• Fixed cost savings of almost
EUR 500m*.
• Capex requirements lowered
by more than EUR 500m.
• NWC lowered to EUR (596)m.
• Free cash flow of more than
EUR 1bn (FY 2013).
• Improved operations.
• Profitable growth.
• Capture more service
business.
• Reduce levelised cost
of energy.
• Improve operational
excellence.
Capital increase to strengthen Vestas.
*With full effect as from the end of 2011 to the end of 2013.
Questions & answers 5
Financial calendar 2014:
• Annual general meeting in Aarhus, Denmark
(24 March, 2014).
• Disclosure of Q1 2014 (9 May 2014).
• Disclosure of Q2 2014 (20 August 2014).
• Disclosure of Q3 2014 (7 November 2014).
• Vestas is hosting a Capital
Markets Day on 12 June
2014.
Q&A
46 Full year 2013, outlook for 2014 and strategic update
doc_103467983.pdf
Abstract explain full year 2013, outlook for 2014 and strategic update.
Full year 2013, outlook for 2014 and strategic update
Copenhagen, 4 February 2014
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 2013 (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 Full year 2013, outlook for 2014 and strategic update
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
3
New
organisation
and operating
business
model
Advanced
wind
turbine
technology
Efficient
manufac-
turing of
wind
turbines
Sale and service of wind
power plants
Improve capacity
utilisation
Reduce
costs
I
III
Full year 2013, outlook for 2014 and strategic update
Turnaround plan
Build new organisation and operating business model
4
Reduce
investments
II
Three core focus areas
Improve capacity utilisation and
capital efficiency through
divestments, supply to third parties
and NWC management.
III
Reduce investments through asset-
light solutions and simplified product
roadmap.
II
Reduce costs through operational
excellence.
I
I
(58)
(9)
(52)
152
273
Sale Production R&D Fixed
capacity
costs Q4
2013
Administrative Fixed
capacity
costs Q4
2011
(2)
-121
Full year 2013, outlook for 2014 and strategic update
Fixed cost savings of EUR 484m* achieved
Quarterly fixed costs reductions of EUR 121m comparing Q4’11 to Q4‘13
5
Fixed capacity cost savings
mEUR
*With full effect as from the end of 2011 to the end of 2013. Excluding bonus provisions.
Cost levers
Contribution from reduction in number of
salaried employees
9,875
Q4 2011 Q4 2013
-4,287
5,588
>70%
Contribution from site simplification, closure
of factories and other cost measures
<30%
Proportion of the EUR 484m fixed cost savings:
15,497
2013 FY 2012 FY
17,778
22,721
-7,224
2011 FY Hourly paid
employees
Salaried
employees
Total reduction
of employees
2,937
4,287
7,224
Full year 2013, outlook for 2014 and strategic update
Employee reductions of 32 per cent
-of which 59 per cent were salaried
I
6
Employees, end of period
Number of employees
Employee reductions
Number of employees
Net investments, last five years
mEUR
286
761
789
808
239
~250
-522
FY
2013
FY
2014E
FY
2012
FY
2011
FY
2010
FY
2009
• Capex requirement reduced
significantly while launching of
new product variants and
developing the V164-8.0 MW.
• Launch of:
V105-3.3 MW
V112-3.3 MW
V117-3.3 MW
V126-3.3 MW
V110-2.0 MW
II
Full year 2013, outlook for 2014 and strategic update
Reduced capex requirement
Capex requirement reduced by more than EUR 500m
7
Joint
Venture*
J oint venture between Vestas and MHI
A strong joint venture to address the expected growth in the offshore
segment
II
• Lower and more flexible capex set-up at Vestas.
• Strong parent positions combined in one offering.
• A strong company for the future offshore market.
Full year 2013, outlook for 2014 and strategic update 8
*The transaction is subject to customary closing conditions.
Operational drivers Strategic levers
mEUR
III
• Improved cash conversion driven by improved installation time,
better planning and control of inventory and alignment of payment
terms and payment milestones according to industry best
practice.
• Still room for improvement in MW under completion even though
it was markedly improved during Q4.
• From 31 to 19 factories in two years to optimise capacity
utilisation while maintaining a global manufacturing footprint.
• Continued improvement of balance sheet.
• Optimised invested capital through better net working capital
and a more asset-light and scalable manufacturing footprint.
(596)
(117)
(56)
197
233
481
330
20
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
Q1
2012
Q3
2012
Q2
2012
Full year 2013, outlook for 2014 and strategic update
Production sites divested or closed since end of 2011.
Current production sites.
Capital efficiency and capacity utilisation
Net working capital at record low level end 2013
9
Net working capital
From 31 to 19 factories
6
2
0
(2)
8
4
Q3
2013
Q3
2012
Q4
2013
(4)
Q1
2012
Q4
2011
Q2
2013
Q1
2013
Q4
2012
Q2
2012
(6)
EBIT margin before special items, last 12 months ROIC, last 12 months
Full year 2013, outlook for 2014 and strategic update
Return on invested capital
Turnaround plan has improved ROIC substantially
10
ROIC has increased due to:
• Improved earnings through
cost reduction and growth in
the service business.
• Better capital efficiency
through capex-light solutions
and improved net working
capital.
Return on invested capital (ROIC)
Percentage
A more scalable, flexible, agile and lean Vestas
Foundation for the future strengthened via the capital increase
Full year 2013, outlook for 2014 and strategic update 11
Foundation Results Strategy
Two-year turnaround Profitable growth for Vestas
Two-year turnaround plan
completed:
Turnaround resulting in a
Vestas today:
Strengthening Vestas’ global
leadership:
• Fixed cost savings of almost
EUR 500m*.
• Capex requirements lowered
by more than EUR 500m.
• NWC lowered to approx
EUR (600)m.
• Improved operations during
2013.
• Double-digit EBIT margin in
Q4.
• Free cash flow EUR ~1bn in
2013.
• Strengthening the balance
sheet via announced capital
increase to generate more
and better business for
Vestas.
*With full effect as from the end of 2011 to the end of 2013.
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
12
*R&D, administration and distribution
mEUR
Q4 2013 Q4 2012
%
change
Revenue 2,361 2,512 (6)%
Cost of sales (1,905) (2,179) (13)%
Gross profit 456 333 37%
Fixed costs* (216) (178) 21%
EBIT before special items 240 155 55%
Special items (10) (485) (98)%
EBIT after special items 230 (330) -
Net profit/(loss) 218 (618) -
Gross margin 19.3% 13.3% 6.0%-pts
EBITDA margin before special items 14.3% 10.6% 3.7%-pts
EBIT margin before special items
10.2% 6.2%
4.0%-pts
• Gross profit increased by 37
per cent despite lower revenue
due to improved project
margins, lower fixed capacity
costs and lower depreciation.
• EBIT before special items
increased by 55 per cent.
• EBIT margin before special
items increased by 4.0
percentage points to 10.2 per
cent.
Full year 2013, outlook for 2014 and strategic update
Income statement
Q4
13
*R&D, administration and distribution
mEUR
FY 2013 FY 2012
%
change
Revenue 6,084 7,216 (16)%
Cost of sales (5,188) (6,420) (19)%
Gross profit 896 796 13%
Fixed costs* (685) (792) (14)%
EBIT before special items 211 4 -
Special items (109) (701) (84)%
EBIT after special items 102 (697) -
Net profit/(loss) (82) (963) -
• Decrease in revenue more than
offset by lower fixed capacity
costs, depreciation and better
project margins.
• EBIT before special items
increased by EUR 207m.
• EBIT margin before special
items increased by 3.4
percentage points to 3.5 per
cent.
Full year 2013, outlook for 2014 and strategic update
Income statement
Full year
Gross margin 14.7% 11.0% 3.7%-pts
EBITDA margin before special items 10.0% 6.6% 3.4%-pts
EBIT margin before special items
3.5 % 0.1%
3.4%-pts
14
EBIT Q4 2013 vs. Q4 2012
mEUR
(29)
133
(32)
42
44
12
(94)
240
155
Bonus
provisions
D&A Q4 2013
EBIT
Project
margin
Q4 2012
EBIT
Project
volume
9
Fixed
capacity
costs
Service
volume
Service
margin
Warranty
provisions
EBIT increased by EUR 85m in Q4
2013 compared to Q4 2012 driven
by:
• Margin improvements in both
wind turbines and service,
lower D&A and fixed costs
more than offset lower volume
and bonus provisions.
Full year 2013, outlook for 2014 and strategic update
EBIT development Q4 2013 vs. Q4 2012
EBIT improved despite 6 per cent revenue drop
15
EBIT FY 2013 vs. FY 2012
mEUR
211
(94)
68
4
Service
margin
Bonus
provisions
FY 2013
EBIT
43
D&A Fixed
capacity
costs
266
Warranty
provisions
19
Project
margin
(256)
FY 2012
EBIT
133
Service
volume
28
Project
volume
EBIT increased by EUR 207m in
2013 compared to 2012 driven by:
• Margin improvements in both
wind turbines and service,
lower D&A and fixed costs
more than offset lower volume
and bonus provisions.
Full year 2013, outlook for 2014 and strategic update
EBIT development FY 2013 vs. FY 2012
EBIT improved despite 16 per cent revenue drop
16
Service revenue
mEUR
886
705
623
504
954
+17%
FY
2013
FY
2012
FY
2011
FY
2009
FY
2010
• Full-year service growth of 8 per
cent.
• CAGR* from 2009-2013 of 17
per cent.
• 2013 EBIT before allocation of
Group costs: EUR 213m.
Margin: 22 per cent.
• 2013 EBIT after allocation of
Group costs: EUR 147m.
Margin: 15 per cent.
• Around 5,000 employees in the
service business.
*Compound annual growth rate.
Full year 2013, outlook for 2014 and strategic update
Service
Full year
17
Assets (mEUR) FY 2013 FY 2012
Abs.
Change
%
Change
Intangible assets 741 1,016 (275) (27)%
Property, plant and equipment 1,221 1,286 (65) (5)%
Other non-current assets 190 179 11 6%
Non-current assets 2,152 2,481 (329) (13)%
Current assets 3,156 4,360 (1,204) (28)%
Current and non-current assets held for sale 332 131 201 153%
Total assets 5,640 6,972 (1,332) (19)%
Liabilities (mEUR) FY 2013 FY 2012
Abs.
change
%
change
Equity 1,524 1,622 (98) (6)%
Non-current liabilities 827 1,652 (825) (50)%
Current liabilities 3,046 3,698 (652) (18)%
Liabilities held for sale 243 0 243 -
Total equity and liabilities 5,640 6,972 (1,332) (19)%
Net debt (86) 900 (986) -
Net working capital (596) 233 (829) -
Solvency ratio (%) 27.0 23.3 - 3.7%-pts
• Current assets lowered due to
lower inventories and
receivables.
• NWC improvement was the
main driver of the net debt
reduction of more than EUR
800m, resulting in a net cash
position of EUR 86m.
• Solvency ratio to improve via
capital increase.
Full year 2013, outlook for 2014 and strategic update
Balance sheet
Full year
18
• Inventories reduced due to lower MW under
completion and good cash conversion.
• Prepayments stable despite the lower MW under
completion.
• Receivables reduced due to improved cash
collection.
*Construction contracts in progress.
NWC improvement over the last year NWC improvement during Q4
• Inventories reduced due to lower MW under completion
and good cash conversion.
• Smooth execution on installations and transfer of risk in
December allowing for payment collections.
• Prepayments stable despite the lower MW under
completion.
NWC change over the last 12 months
mEUR
NWC change over the last three months
mEUR
233
Other
liabilities
159
Pre-
payments
(32)
NWC end
2013
(596)
Payables NWC end
2012
(749)
(238)
Inventories
5
26
Receiv-
ables
CCP*
(694)
CCP* NWC end
Q3 2013
7
(117)
263
(73)
(596)
Receiv-
ables
Other
liabilities
Payables Pre-
payments
(29)
47
NWC end
Q4 2013
Inventories
Full year 2013, outlook for 2014 and strategic update
Change in net working capital
Strong progress on implemented initiatives during 2013
19
148 148
194
292
117 119
179
253
257
84
FY
2011
FY
2012
FY
2010
FY
2009
-24%
FY
2013
Provisions made Provisions consumed
0
1
2
3
4
5
Dec
2013
Dec
2012
Dec
2011
Dec
2009
Dec
2010
Warranty provisions and consumption Lost Production Factor (LPF)
• Warranty consumption steadily declining due do
improved quality.
• Provisions made were higher than provisions
consumed for the second year in a row.
• End 2013: LPF at 1.7 per cent.
• LPF measures potential energy production not
captured by the wind turbines.
Warranty provisions made and consumed
mEUR
Lost production factor
Percentage
Full year 2013, outlook for 2014 and strategic update
Warranty provisions and Lost Production Factor
Warranty consumption and LPF continue at a low level
20
mEUR
Q4 2013 Q4 2012
Abs.
change
%
change
Cash flow from operating activities before
change in working capital
428 247 181 73%
Change in working capital 478 248 230 93%
Cash flow from operating activities 906 495 411 83%
Cash flow from investing activities (90) (79) (11) 14%
Free cash flow 816 416 400 96%
Cash flow from financing activities (493) (11) (482) -
Change in cash at bank and in hand less
current portion of bank debt
323 405 (82) (20)%
• Increased cash flow from
operations, mainly driven
by NWC improvements.
• Q4 FCF of EUR 816m.
Full year 2013, outlook for 2014 and strategic update
Cash flow statement
Q4 FCF of EUR 816m
21
• Increased cash flow from
operations, mainly driven by
NWC improvements.
• Free cash flow improved by
EUR 1,368m to EUR 1,009m.
mEUR
FY 2013 FY 2012
Abs.
change
%
change
Cash flow from operating activities before
change in working capital
419 231 81%
Change in working capital 829 (304) 1,133
Cash flow from operating activities 1,248 (73) 1,321
Cash flow from investing activities (239) (286) (16)%
Free cash flow 1,009 (359) 1,368
Cash flow from financing activities (1,150) 832 (1,982)
Change in cash at bank and in hand less
current portion of bank debt
(141) 473 (614)
Full year 2013, outlook for 2014 and strategic update
Cash flow statement
Full year FCF of EUR 1,009m
22
Net debt
mEUR
728
779
972
900
(86)
-986
Q4
2013
Q3
2013
Q2
2013
Q4
2012
Q1
2013
• Net debt reduction of approx
EUR 1bn over the last 12
months resulting in a net cash
position of EUR 86m.
• Reduction primarily driven by
NWC improvements.
Full year 2013, outlook for 2014 and strategic update
Net debt
Net debt converted to net cash position of EUR 86m
23
Net debt to EBITDA
×EBITDA
• Net debt to EBITDA fell to
(0.1) in 2013 down from 1.9 in
2012.
• Development driven by both
net debt reduction and
improved EBITDA.
Q3
2013
-0.1
1.6
1.4
-0.3
FY
2009
1.9
FY
2012
Q2
2013
FY
2011
Q4
2013
1.8
0.8
Q1
2013
1.8
FY
2010
FY
2008
-0.1
Net debt to EBITDA before special items, last 12 months
Full year 2013, outlook for 2014 and strategic update
Net debt to EBITDA
Negative net debt to EBITDA
24
Improved wind turbine order intake
• 2013 order intake was 60 per cent higher than in
2012 – primarily driven by pick-up in the USA and
new wind markets.
• Global footprint and competitive turbine offerings
secured orders in different markets.
Price per MW
• Price per MW decreased by 4 per cent compared to
2012.
• Price per MW depends on a variety of factors i.e. wind
turbine type, geography, scope and uniqueness of
offering.
• Relatively more supply-only orders received in 2013.
3,072
8,673
+2,226
FY
2013
5,964
FY
2012
3,738
FY
2011
7,397
FY
2009
FY
2010
1.04
FY
2010
FY
2009
0.99
-4%
FY
2013
0.97
FY
2012
1.02
FY
2011
0.99
Order intake
MW
Average selling price of order intake
mEUR per MW
Full year 2013, outlook for 2014 and strategic update
Wind turbine order intake
Full year 2013
25
Wind turbines:
EUR
6.8bn
Service:
EUR
6.7bn
Full year 2013, outlook for 2014 and strategic update
Backlog: Wind turbines and service
Combined backlog increased by EUR 1.1bn to EUR 13.5bn
26
EUR -0.3bn EUR +1.4bn
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
27
• Market environment
• Vestas’ key differentiators
• Vestas’ strategy
Continued growth in the electricity market
Electricity generation to increase by 20 per cent until 2020
ENERGY GENERATION
• Forecasted growth in global electricity generation above 3 per cent per year increasing
total generation by over 20 per cent during the period 2014-2020.
• Higher growth in non-OECD countries (4 per cent per year, 25 per cent for the period)
compared to OECD countries (1 per cent per year, 7 per cent for the period).
Electricity Generation OECD and Non-OECD
Full year 2013, outlook for 2014 and strategic update
Source: Worldbank.
28
T
W
h
Power plants are being retired in the USA and Europe
195 GW of capacity to be shut down in the next 10 years due to economical
and environmental reasons
POWER PLANT RETIREMENT
US Energy Supply Forecasts: new capacity additions / removals (MW)¹
Source: DB Climate Change Advisors
Gas
Wind
Solar CSP
Solar PV
Geothermal
Nuclear
Coal
20.000
15.000
10.000
5.000
0
-5.000
-10.000
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
Full year 2013, outlook for 2014 and strategic update
Source:
1
Citi Global Perspectives & Solutions (Citi GPS) “Energy Darwism”, 2013.
2
DB Climate Change Advisors “Repowering America: Creating J obs”, 2011.
29
• An estimated 95 GW of capacity to shut down in Europe in the next 10 years
1
.
• Expected 100 GW of coal-fired plants to be retired in the USA in the next 10 years
2
.
Wind is competitive against other energy sources
While levelised cost of energy increases for many energy sources, cost of
energy for wind has decreased by 15 per cent over the last five years
LEVELISED COST OF ENERGY
70
82 82
91
140
149
313
134
187
140
166
329
0
50
100
150
200
250
300
350
Hydro Gas Wind Coal Nuclear Solar PV
LCOE evolution
mid 2009 – H1 2014
5% 68% -15% 65% 51% -52%
LCOE
USD/MWh
(J an 2014)
Current LCOE per energy source (Jan 2014)
Full year 2013, outlook for 2014 and strategic update
Source: BNEF, J anuary 2014. (Note: wind only covers onshore. Hydro and nuclear have only been covered since Q2 2012)
30
• Renewable energy such as wind and solar are key to meet increasing electricity demand
as their levelised costs keep decreasing.
• Today wind is already on a par with new-build gas and has lower costs than new coal in
more than 30 listed countries.
26
64
37
60
32
82
Wind market forecast 2013-2020
Growth rates of 4-10 per cent expected
WIND MARKET FORECAST (GW)
Full year 2013, outlook for 2014 and strategic update
Source: IHS Emerging Energy Research December 2013. MAKE Consulting November 2013.
31
2019e
65
40
35
50
2016e 2015e
55
2020e 2018e
60
2014e 2013e
45
0
2017e
IHS MAKE
CAGR: +10 per cent
CAGR: +4 per cent
• Different views but growth is expected.
Vestas major key differentiators
Largest installed base, world-class products, global reach and a strong brand
Full year 2013, outlook for 2014 and strategic update
• World-class product portfolio: geographical fit and
reach, siting flexibility, best-in-class quality.
• Largest global installed base, providing significant
service business potential.
• Very strong and competitive product offering. • 2013 order intake of 6 GW from 37 countries.
Vestas
~60
2nd largest
WTG supplier
~40
+50%
0
1
2
3
4
5
Dec
2009
Dec
2010
Dec
2013
Dec
2012
Dec
2011
Total installed base (GW) Lost production factor
Latest product launches Global reach in sales, installation and manufacturing
32
Low
wind
Medium
wind
High
wind
2 MW
platform
3 MW
platform
V110-2.0 MW V100-2.0 MW
V112-3.3 MW
V117-3.3 MW
V105-3.3 MW
V112-3.3 MW
V117-3.3 MW
V126-3.3 MW
The building blocks of the Vestas strategy
A strengthened global leadership position for the long term
Global wind leader
Vision: Bringing wind on par with oil and gas
Full year 2013, outlook for 2014 and strategic update 33
Grow profitably in mature &
emerging markets
Capture full potential of the
service business
Reduce levelised cost of energy
Improve operational excellence
Governance, leadership & culture
Mid-term
(3-5 years)
Market leader in volume | Best-in-class margins | Strongest brand in industry
Grow faster than the market
Build partnerships and generate new opportunities to enable growth
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Strengthen position in mature markets.
• Grow market share in emerging markets.
• Build partnership with our strategic accounts.
• Pursue opportunities with new market segments.
• Build partnership based on value, business case
certainty and stability.
Grow faster than the market
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Global reach, trusted partner & strong brand.
Full year 2013, outlook for 2014 and strategic update 34
Grow the service business by more than 30 per cent
Leverage on the installed base and establish a new service organisation
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Capture service business on all new orders.
• Establish a new service organisation, which will
report directly to CEO.
• Segmented service portfolio.
• Improve renewal rate via increased service business
innovation.
• Efficiency from knowledge and scale.
Grow the service business by more than
30 per cent
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Leverage on the biggest installed base in the world.
Full year 2013, outlook for 2014 and strategic update 35
Capture full
potential of the
service business
2
Reduce cost of energy faster than market average
Increase competitiveness and reduce dependency on support schemes
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Industrialisation to ensure a flexible, scalable,
generic and modular product architecture.
• Effectiveness, efficiency and pace of the product
development process.
• Increase product functionality and competitiveness
via larger rotors and generators.
• Cost out on 2 MW and 3 MW turbine platforms to
increase competitiveness.
Reduce levelised cost of energy faster than
market average
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Largest wind R&D to focus on industrialisation and cost out.
Full year 2013, outlook for 2014 and strategic update 36
Reduce the
levelised
cost of energy
3
Capture full
potential of the
service business
2
Improve earnings capability
Reducing time and costs to achieve operational excellence
OBJECTIVE MID-TERM AMBITIONS & INITIATIVES
• Reduce external spend with suppliers to lower
variable costs.
• Continued focus on fixed costs, e.g. shared service
centres, increased outsourcing and site
consolidation.
• Working capital management to reduce cash
conversion cycle days and leadtimes.
• Modular product development to reduce time and
cost.
• Cross-functional processes.
Improve earnings capability
Grow profitably in
mature &
emerging markets
1
Profitable Growth
for Vestas
STRATEGY
Economies of scale and full focus on wind.
Full year 2013, outlook for 2014 and strategic update 37
Capture full
potential of the
service business
2
Reduce the
levelised
cost of energy
3
Improve
operational
excellence
4
Governance to execute the strategy
Changes to the organisation and new principles to ensure implementation of
the strategy across Vestas
STRATEGY GOVERNANCE & LEADERSHIP PRINCIPLES
Full year 2013, outlook for 2014 and strategic update 38
Governance, leadership & culture
Speed. Simplicity. Accountability.
Changes to organisational structure:
• Creation of a new unit for the service business reporting to
the CEO.
• Extend Group Management from five to eight seats with
GSVP Service, GSVP Marketing & Communications and
GSVP HR.
Governance principles:
• Increase transparency.
• Improve performance management.
• Delegation to measurable (P&L) units.
• Cross-functional EVP Governance.
• Yearly strategy cycle.
Vestas’ profitable growth strategy to strengthen global leadership
Each of the four objectives will allow Vestas to reach its vision and long-term
ambitions
OBJECTIVES STRATEGY AMBITIONS VISION
39
Profitable Growth
for Vestas
Grow profitably in
mature &
emerging markets
1
Capture full
potential of the
service business
2
Reduce the
levelised
cost of energy
3
Improve
operational
excellence
4
Grow faster than the market
Grow the service business
by more than 30 per cent
Reduce levelised cost of
energy faster than market
average
Improve earnings capability
Global wind leader
• Wind on a par with oil & gas.
• Market leader in volume.
• Best-in-class margins.
• Strongest brand in industry.
Efficiency
Products
Service
Markets & Customers
Governance, leadership & culture
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
40
Outlook and financial targets
2014 and beyond
Full year 2013, outlook for 2014 and strategic update
Outlook
2014
41
Mid-term
financial targets
• Service business is expected to
continue to grow with stable margins in
2014.
Revenue (bnEUR) min. 6
EBIT margin before special items (%) min. 5
Total investments (mEUR) approx 250
Free cash flow (mEUR) min. 300
ROIC: • Double-digit each year over the cycle.
FCF: • Positive FCF each year.
Capital
structure:
• Net debt/EBITDA ratio must be lower
than 1 at the end of each financial year.
• Solvency ratio must be above 30 per
cent at the of end financial year.
Priorities for
excess cash:
1. Repayment of debt if net debt/EBITDA
ratio is above target.
2. Allocation to shareholders if solvency
ratio is above target.
Capital increase of up to 9.99 per cent
Strengthen balance sheet to enable more and better business
Full year 2013, outlook for 2014 and strategic update 42
Customers Suppliers Banks
• Availability of improved guarantee
facilities.
• Strong enabler for improved
business.
• Increased number of projects
from risk-averse customers.
• Potential to receive better terms. • Bank facilities with longer maturity,
lower costs and more flexibility.
Solvency ratio increase to a target level of above 30 per cent.
Full year 2013, outlook for 2014 and strategic update
Revised bank agreement
Longer maturity and more bonding lines
43
Syndicated credit facility
• Revolving credit facility – EUR 850m.
• Expiration 2019.
• Full facility available for project guarantees.
Corporate bond
• Corporate bond listed at Bourse de
Luxembourg – EUR 600m.
• Expiration March 2015.
Agenda
Full year 2013, outlook for 2014 and strategic update
Completion of the turnaround
Outlook and financial targets
Summary, questions and answers
Profitable growth for Vestas
2013 financials and order intake
44
Summary
Successful turnaround as foundation for a strengthened global leadership
position for Vestas
Full year 2013, outlook for 2014 and strategic update
Turnaround
achievements
45
2014
and beyond
• Fixed cost savings of almost
EUR 500m*.
• Capex requirements lowered
by more than EUR 500m.
• NWC lowered to EUR (596)m.
• Free cash flow of more than
EUR 1bn (FY 2013).
• Improved operations.
• Profitable growth.
• Capture more service
business.
• Reduce levelised cost
of energy.
• Improve operational
excellence.
Capital increase to strengthen Vestas.
*With full effect as from the end of 2011 to the end of 2013.
Questions & answers 5
Financial calendar 2014:
• Annual general meeting in Aarhus, Denmark
(24 March, 2014).
• Disclosure of Q1 2014 (9 May 2014).
• Disclosure of Q2 2014 (20 August 2014).
• Disclosure of Q3 2014 (7 November 2014).
• Vestas is hosting a Capital
Markets Day on 12 June
2014.
Q&A
46 Full year 2013, outlook for 2014 and strategic update
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