First quarter 2012
Aarhus, 2 May 2012 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 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 2011 (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.
2 Q1 2012 Agenda
1. Introduction 2. Update on organisational changes 3. Financials 4. Order intake Q1 2012 5. Market shares 2011 6. Questions & answers
3 Q1 2012 Introduction Main events
• Outlook for EBIT, cash flow and revenue retained.
• Disappointing Q1 revenue and earnings.
• Aligning the organisation to 2012 and 2013 challenges.
• Very high activity level for the rest of the year.
• Additional provisions of EUR 40m for V90-3.0 MW gearboxes.
• Order intake realised in tough markets.
• V164-7.0 MW update.
• Market shares: Increasing the gap.
5 Q1 2012 Outlook for EBIT, cash flow and revenue retained
2012 EBIT margin low due to: Revenue (mEUR) 6,500-8,000 • Too high production costs - of which service revenue (mEUR) 850 primarily on the V112 turbine and the GridStreamer™ EBIT margin (%) 0-4 technology, which will be reduced over the year. EBIT margin, service (%) ~ 14 • Depreciation and amortisation Investments (mEUR) 550 increase by EUR 100m. - Intangible (mEUR) 350 - Tangible (mEUR) 200
Free cash flow (mEUR) > 0 Special items related to the lay-off of 2,335 employees expected to Warranty provisions (%) ~ 3 amount to EUR 50-100m.
6 Q1 2012 Update on organisational changes New Chief Financial Officer appointed
“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 CEO Ditlev Engel
CEO Staff functions
Global Solutions & Finance Manufacturing Turbines R&D Sales Services Dag Gunnar (Vacant) Anders Vedel Juan Araluce (Vacant) Andresen
8 Q1 2012 Changing the Vestas organisation In a busy 2012
Shipment and delivery activities in 2012 Expected distribution over the year; illustrative example • Employee reductions to take place during Deliveries busy 2012 execution.
• 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.
Shipments
9 Q1 2012 Employee overview
Headcount to be further reduced
Employees Number of employees, end of period
23,252 22,721 22,576 • Employee base did not decrease significantly in Q1 due to ramp-up in manufacturing and 20,829 20,730 ~20,400 service.
15,305 • Some employees laid off in Q1 2012 are still working during lay-off period.
• End 2012 target of approx 20,400 employees maintained. Full-year reduction target of 2,335 employees will contribute to reduce costs by more than EUR 150m, with full effect as from the end of 2012.
• US decision during Q3. FY FY FY FY FY Q1 FY 2007 2008 2009 2010 2011 2012 2012 Expected
10 Q1 2012 Financials Activity level at factories
Shipments are the primary cash generator
Shipments by region MW
+47% 1,626 • Q1 2012 shipments up by 47 per cent 1,525 compared to Q1 2011. 1,456 1,478 1,417 488 • Higher activity level in Americas due to 481 675 potential PTC expiration in the USA. 595 707
931 • 2012 shipments expected to increase by 619 354 almost 40 per cent compared to 2011. 571 634 588 604 427 260 712 387 277 286
228 519 173 208 404 344 291 60 201 246 99 103 110
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2010 2011 2011 2011 2011 2012
Europe and Africa Americas Asia Pacific
12 Q1 2012 Deliveries
Deliveries are the primary revenue driver
Deliveries by region MW
2,557 • Lower Q1 deliveries than expected.
+28% • Q1 2012 deliveries up by 28 per cent 1,956 compared to Q1 2011 – but the proportion of 1,449 turnkey deliveries was higher. 1,688
458 1,270 1,124 • Q1 deliveries in Americas more than doubled. 1,127 1,108 327
839 675 864 384 758 613 587 542 516 495 562 642 647 375 555 163 495 401 131 63 337 65 134 185 96 146
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2010 2011 2011 2011 2011 2012
Europe and Africa Americas Asia Pacific
13 Q1 2012 Quarterly P&L fluctuations driven by contract mix
Distribution of margins Pricing and risk variables +200 projects a year Not exhaustive
1. Scope – type of contract. 2. Uniqueness of offering. 3. Value of revenue. 4. Scale. 5. OPEX/CAPEX allocation. 6. Design lifetime. 7. Cost differentiation. 8. Risk allocation. 9. Early generation sharing. 10. Relationship efficiency.
14 Q1 2012 MW under completion - one of the revenue drivers
MW under completion end of period
3,398 3,147 • “MW under completion”, shipments and 2,915 service are revenue drivers for the coming quarters. -8% 2,299 • Vestas entered Q1 2012 with 8 per cent lower 2,044 2,549 2,184 1,984 “MW under completion” compared to the 1,754 1,821 2,207 1,644 beginning of 2011. 1,549 1,201 1,246 990 1,132 899
244 389 366 291 301 271 285 428 360 605 574 447 463 477 474 423 322 329
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2010 2011 2011 2011 2011 2012
Europe and Africa Americas Asia Pacific
15 Q1 2012 Income statement
mEUR Q1 2012 Q1 2011 Change FY 2011 Revenue 1,105 1,060 4% 5,836 Revenue low due to deferred projects. Cost of sales (1,093) (960) 14% (5,111) Additional warranty Gross profit 12 100 (88)% 725 provisions of EUR 40m related to V90- Fixed costs* (216) (169) 28% (763) 3.0 MW gearbox.
Operating profit before special items (204) (69) - (38) Too high production costs primarily on the Special items (41) 0 - (22) V112 turbine and the Operating profit after special items (245) (69) - (60) GridStreamer™ technology. Profit for the period (162) (85) - (166) Special items with full cash effect. *R&D, administration and distribution
Gross margin 1.1% 9.4% (8.3)%-pts. 12.4%
EBITDA margin before special items (8.1)% 0.0% (8.1)%-pts. 5.2%
EBIT margin before special items (18.5)% (6.5)% (12.0)%-pts. (0.7)%
EBIT margin after special items (22.2)% (6.5)% (15.7)%-pts. (1.0)%
16 Q1 2012 Gross margin and fixed costs Margins hurt by lower margins on delivered projects
Gross margin to improve by higher utilisation Fixed costs* to be reduced
• Too high turbine cost on projects recognised in Q1, • Q1 2012 fixed costs are 26 per cent higher than Q1 2011 primarily on V112 turbines and the GridStreamer™ due to higher R&D amortisation and administration costs. technology. • Fixed costs* including fixed capacity costs to be reduced by • Higher depreciation. more than EUR 150m with full effect as from the end of 2012.
Gross profit and margin Fixed costs* mEUR and percentage mEUR
700 25% 250 25% 23% 613 221 216 600 20% 197 202 20% 200 192 20% 18% 178 500 169 171 449 108 77 114 150 140 78 92 400 13% 15% 71 15% 12% 70 73 53 300 9% 267 248 8% 10% 100 10% 200 120 110 114 107 110 113 101 12 100 12 5% 50 87 99 98 102 5% 100 1% 1% 0 0% 0 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2010 2011 2011 2011 2011 2012 2010 2010 2010 2010 2011 2011 2011 2011 2012 Gross margin Gross profit Depreciation and amortisation Other fixed costs
*R&D, administration and distribution 17 Q1 2012 Direct cost reductions Examples of direct cost reduction initiatives
Removal of grounding V112 crane gallery simplification Lifting hook redesign cable from towers
Cost reduction on lift Standardisation of rear frame cross assembly Lighter version of transformer bracket galleries in towers
18 Q1 2012 Service revenue
Firm Service agreements with contractual future revenue of +17% EUR 4.2bn by the end of Q1 203 203 2012. • Service revenue expected to further increase during 169 173 169 159 160 2012. 146 149 140 130 • Ramp-up of employees in 122 service area in order to 112 prepare for higher activity.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012
19 Q1 2012 Balance sheet
Assets (mEUR) Q1 2012 Q1 2011 Change FY 2011 Change
Development projects in progress 264 517 (49)% 256 3%
Completed development projects 572 170 236% 577 (1)% • V112 turbine and the GridStreamer™ Goodwill and software 407 408 0% 410 (1)% technology brought into serial production. Property, plant and equipment 1,851 1,701 9% 1,898 (2)%
Other non-current assets 433 289 50% 381 14%
Current assets 4,442 3,924 13% 4,167 7%
Total assets 7,969 7,009 14% 7,689 4%
Liabilities (mEUR)
Equity 2,378 2,677 (11)% 2,576 (8)%
Non-current liabilities 1,320 1,332 (1)% 1,073 23%
Current liabilities 4,271 3,000 42% 4,040 6%
Total equity and liabilities 7,969 7,009 14% 7,689 4%
Net debt 850 1,000 (15)% 545 56% • Net debt and net working capital reduced. Net working capital 20 910 (98)% (71) -
20 Q1 2012 Change in net working capital
NWC decreased over the last 12 months NWC increased slightly over Q1
• Make-to-order/just-in-time implementation has paid off. • Preparing for busy quarters.
• Prepayments increased more than inventories. • Building up inventories to execute a record-high shipment year.
Net working capital change over the last 12 months Net working capital change over the last three months mEUR mEUR
399
910 88 15 813 367 20 472 13
135 -71 49 492
113 57 20
NWC end Receiv- CCP* Inven- Pre- Payables Other NWC end NWC end Receiv- CCP* Inven- Pre- Payables Other NWC end Q1 2011 ables tories payments liabilities Q1 2012 2011 ables tories payments liabilities Q1 2012
*Construction contracts in progress. 21 Q1 2012 Warranty provisions
Warranty provisions Lost production factor
• Warranty provisions increased in Q1 2012 due to • End Q1 LPF around 2. additional provisions of EUR 40m for V90-3.0 MW • Target 2012: LPF < 2. gearboxes. • LPF measures potential energy production not captured by the wind turbines.
Warranty provisions made and consumed Lost production factor mEUR Percentage 87 5.0 4.5 69 65 63 62 4.0 60 58 56 3.5 51 45 43 3.0 38 40 40 34 2.5 29 30 27 2.0 1.5 9 22 1.0 0.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 0.0 2010 2010 2010 2010 2011 2011 2011 2011 2012 Jan Jan Jan Jan Provisions made Provisions consumed 2009 2010 2011 2012
22 Q1 2012 V90-3.0 MW gearbox provisions In details
. EUR 40m of additional provisions made for V90-3.0 MW gearboxes. . 376 gearboxes – 36 offshore – delivered between June 2009 and September 2011 potentially impacted. . Impacted gearboxes corresponding to around 1/3 of V90-3.0 MW deliveries in the period in question. . Vestas will pursue all relevant actions with regards to potential compensation from ZF and the bearing supplier in question. . Current LPF of impacted turbines is ~3.6.
23 Q1 2012 Cash flow statement
mEUR Q1 2012 Q1 2011 FY 2011 Cash flow from operating activities before (113) (29) 93 change in working capital
Change in working capital (91) (238) 747 • Free cash flow improved by EUR 136m Cash flow from operating activities (204) (267) 840 due to reduced net working capital and lower investments. Cash flow from investing activities (91) (164) (761)
Free cash flow (295) (431) 79
Cash flow from financing activities 242 283 (13)
Change in cash at bank and in hand less (53) (148) 66 current portion of bank debt
24 Q1 2012 Cash flow
Positive trend since mid-2009 Net debt to be reduced by year-end
Cash flow from operations and investments Net debt and debt coverage mEUR mEUR and ×EBITDA 3.95x 1,000 1,000 4.0x 800 3.0x 500 600 400 1.79x 2.0x 0 200 0.78x 1.0x 0 -500 -0.05x -200 -0.29x 0.0x -400 -1,000 -1.0x -600 -1.82x -1,500 -800 -2.0x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY FY FY FY FY Q1 FY ’08 ’08 ’08 ’08 ’09 ’09 ’09 ’09 ’10 ’10 ’10 ’10 ’11 ’11 ’11 ’11 ’12 2007 2008 2009 2010 2011 2012 2012 Exp. Free cash flow, last 12 months Cash flow from operations, last 12 months Net debt to EBITDA before special items, last 12 months Investments, last 12 months Net debt
25 Q1 2012 Return on invested capital
Focus on improving ROIC Lower Q1 2012 investments
• ROIC hurt by poor results and by investments made to • Q1 investments lower than D&A level. develop and convert platforms to improve competitiveness. • Investments in intangibles to increase relatively to • ROIC to be improved by growth in higher margin service investments in property, plant and equipment. business.
Return on Invested Capital* (ROIC) PPE and intangible assets Percentage mEUR and percentage
54% 54% 12% 4,500 53% 49% 50% 10% 4,000 43% 8% 3,500 40% 39% 39% 6% 3,000 2,500 4% 2,000 2% 1,500 0% 1,000 -2% 500 -4% 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2010 2010 2010 2010 2011 2011 2011 2011 2012 PPE & intangibles to revenue, last 12 months ROIC, last 12 months Total PPE EBIT margin before special items, last 12 months Total intangible assets * Invested capital includes net working capital, PPE and intangibles.
26 Q1 2012 Order intake Q1 2012 Order intake
Significant improvement in order intake Price per MW
• Q1 order intake increased by 101 per cent compared to • Price per MW depends on a variety of factors i.e. turbine Q1 2011. type, geography, scope, uniqueness of offering, etc. • Order intake achieved in challenging markets. • New products protect price per MW, but carry higher costs than more mature products. • Three big orders in the USA and Mexico constituted more than half of Q1 order intake.
Order intake Average selling price of order intake MW mEUR per MW +101% 1.23 3,186 3,031 1.11 1.03 1.04 1.02 0.92 0.93 0.91 2,278 2,265 0.86 2,106
1,258 1,316 1,269 1,050 1,022
542 630 458
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2010 2010 2010 2010 2011 2011 2011 2011 2012
28 Q1 2012 WTG order backlog
Order backlog at the highest level ever
Order backlog by region MW (excl. of service contracts) 9,893 9,552 • Order backlog at the highest level ever.
• Value of WTG order backlog equals EUR 7,622 10.0bn. 57% 60% Europe and Africa Americas 65% Asia Pacific
28% 25%
22%
15% 15% 13%
FY 2010 FY 2011 Q1 2012
29 Q1 2012 Product platform V164-7.0 MW prototype installation deferred
High, medium and low wind, on- and offshore
• Prototype installation expected in 2014.
• Inquiries received from potential partners.
30 Q1 2012 Market shares 2011 Global market shares 2011 Vestas No. 1 according to three of the leading wind industry consultancies
41.1 GW 40.4 GW 40.8 GW
Vestas 12.7% Vestas 12.9% Vestas 12.9%
Sinovel 9.0% Goldwind 9.4% Goldwind 8.8%
Goldwind 8.7% GE Energy 8.8% Enercon 7.6%
Suzlon Group 7.6% Gamesa 8.0% Gamesa 8.2% Siemens 7.6% Enercon 7.8% Enercon 7.9% GE Energy 7.4% GE Energy 7.7% Suzlon Group 7.7% Sinovel 7.2% Suzlon Group 7.6% Sinovel 7.3% Guodian United Power 7.0% Guodian United Power 7.4% Guodian United Power 7.1% Gamesa 6.4% Siemens 6.3% Siemens 6.3% Mingyang 2.9% Mingyang 3.6% Mingyang 2.9%
Other 24.6% Other 21.2% Other 21.5%
EER BTM-Navigant MAKE "Installed MW" "Installations" "Grid-connected"
Sources: IHS EER, BTM-Navigant, MAKE
32 Q1 2012 EER: Top 10 largest markets in 2011
Market size Market Rank 1 Rank 2 Rank 3 No.
1 China Sinovel Goldwind Guodian • Vestas largest foreign player in 2USAGE Vestas Siemens China – ranked 8th.
3 India Suzlon Group* Gamesa Vestas • Vestas in top-three 4GermanyEnercon Vestas Suzlon Group* in nine out of ten largest markets. 5UKSiemens Suzlon Group* Vestas
6 Canada GE Siemens Vestas
7FranceEnercon Vestas Suzlon Group*
8RomaniaGE Vestas Gamesa
9ItalyGamesa Vestas Enercon
10 Spain Gamesa Vestas GE
* Including REpower
33 Q1 2012 Today’s key points
. Outlook for EBIT, cash flow and revenue retained.
. Disappointing Q1 revenue and earnings.
. Aligning the organisation to 2012 and 2013 challenges.
. Very high activity level for the rest of the year.
. Additional provisions of EUR 40m for V90-3.0 MW gearboxes.
. V164-7.0 MW offshore: Deferral of prototype installation to 2014 - inquiries received from potential partners.
34 Q1 2012 Financial calendar 2012
22 August 2012 Disclosure of H1/Q2 2012 results
7 November 2012 Disclosure of Q3 2012 results
35 Q1 2012 Questions & answers 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, 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, or anyone 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” and Vestas Wind Systems A/S shall not have any responsibility or liability whatsoever for the results of use of the documents by you.
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