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With another solid quarter showing improvements in most areas, we remain focused on executing on our strategy, Profitable Growth for Vestas. Based on the improved cost base and the expected delivery plan for the second half of the year, we raise our 2014 EBIT margin target to minimum 6 per cent.

Anders Runevad, Group President and CEO

Webcast

The Group President & CEO's and Executive Vice President & CFO's presentation of the interim financial report - second quarter 2014 - webcast.

Summary

In the second quarter of 2014, Vestas generated revenue of EUR 1,341m – an increase of 13 per cent compared to the second quarter of 2013. EBIT before special items increased by EUR 92m to EUR 104m primarily due to improved average project margins and higher volume. The EBIT margin before special items was 7.8 per cent. Net result increased by EUR 156m to EUR 94m and the free cash flow decreased by EUR 218m to EUR (21)m compared to the second quarter of 2013.

The intake of firm and unconditional wind turbine orders amounted to 1,932 MW in the second quarter of 2014 – an increase of 18 per cent compared to the second quarter of 2013. The value of the wind turbine backlog amounted to EUR 7.4bn at 30 June 2014. In addition to the wind turbine order backlog, Vestas had service agreements with contractual future revenue of EUR 6.5bn at the end of June 2014. Thus, the value of the combined backlog of wind turbine orders and service agreements stood at EUR 13.9bn.

Vestas upgrades the 2014 guidance on EBIT margin before special items from minimum 5 per cent to minimum 6 per cent based on the improving cost base and the expected delivery plan for the second half of 2014.  

H1 at a glance 

- compared to H1 2013

+ 37%

 Vestas had an order intake of 3,120 MW  
 - an increase of 37 per cent 

+ 47%

 Vestas produced and shipped 2,581 MW  
 - an increase of 47 per cent

+ 26%

 Vestas delivered wind power systems with an aggregate capacity of 2,133 MW
 - an increase of 26 per cent

+ 15%

 Vestas generated revenue of EUR 2,624m
 - an increase of 15 per cent

+ 4%

 Onshore service revenue amounted to EUR 454m
 - an increase of 4 per cent 

+ EUR 240m

 EBIT before special items amounted to EUR 144m 
 - an increase of EUR 240m

+ EUR 309m

 Net profit amounted to EUR 96m
 - an increase of EUR 309m

- EUR 182m

 Vestas realised a free cash flow of EUR (45)m
 - a decrease of EUR 182m

+ 2%

 The number of employees at the end of the first half-year was 17,586
 - an increase of 2 per cent 

- 1% point

Renewable energy amounted to 52 per cent of total energy consumption
- a decrease of 1 percentage points 

- 20%

Industrial injuries per one million working hours was 2.0
- a decrease of 20 per cent 


 “Profitable Growth for Vestas is on track with another solid quarter showing improvements in most areas. Guidance on EBIT margin increased to minimum 6 per cent.”

Anders Runevad
Group President & CEO

Anders Runevad

Profitable Growth for Vestas on track

There are many words in our new corporate strategy, but the two most important ones continue to be “Profitability” and “Growth”. Those two words represent the very essence of what we are aiming to achieve.

Profitability is of great importance because we want to make a satisfactory return to our owners and Growth is important because we want to continue to build on the solid foundation we have developed over the past year and work consistently towards the realisation of our vision of being the undisputed global wind energy leader.

By building on our leadership in the industry, we also continue to add to our scale advantages in sourcing, manufacturing and technology development.

The financial results for the first half of 2014 and the decision to upgrade our full-year expectations for the EBIT margin before special items show that we are well on track on both growth and profitability. Revenue grew by 15 per cent in the first half of 2014 and the EBIT margin before special items was 5.5 per cent – almost 10 percentage points higher than the first half of 2013. If you look at the second quarter of 2014 alone, we actually achieved a 7.8 per cent EBIT margin before special items and a net result of close to EUR 100m.

The situation in many of our key markets – whether being mature or emerging – is challenging both when it comes to regulatory systems, competitive landscapes and economic growth. In the first half of 2014, we have, however, seen a good progress on order intake especially driven by the US market. Order intake in service was also satisfactory, and I am confident that with our new leadership in the service organisation, we will be able to capture the full potential of that business as well.

On 1 April 2014, the MHI Vestas Offshore Wind joint venture became operational, and we look forward to seeing the joint venture’s further development towards leading the growth in the offshore wind turbine market.


“With fixed costs stabilising at a lower level, continued cost-out on products, working capital control and a new bank agreement, we feel comfortable that our customers and suppliers acknowledge our strengthened financial position.”

Marika Fredriksson
Executive Vice President & CFO

Marika Fredriksson

Solid progress on most financial metrics

We continued to see solid progress on most financial metrics in the first half of 2014. Revenue amounted to EUR 2,624m – an increase of 15 per cent compared to the first half of 2013. EBIT margin before special items increased by 9.7 percentage points to 5.5 per cent driven by a continued improved cost base – both on fixed and variable costs.

The free cash flow was EUR 182m lower than in the first half of 2013, primarily due to ramping up for a busy second half-year as well as one-off effects from the sale of two wind power plants in Chile and Romania in 2013. We continue to focus on optimising our working capital by implementing improvements in the entire supply chain from sourcing to installation.

The net result amounted to EUR 96m in the first half of 2014. This is the first time in more than five years that we have seen a positive net result in the first half, and combined with the capital increase and the new banking agreement conducted earlier in the year this is a significant strengthening of our balance sheet.

Over the last 12 months, we have generated a return on invested capital of 19 per cent – comfortably above our target of minimum 10 per cent each financial year, but obviously we strive to continue to improve.

With fixed costs stabilising at a lower level, continued cost-out on products, good working capital control and a new flexible and long-term bank agreement, we feel comfortable that our customers and suppliers acknowledge our strengthened financial position.

Read more in the article "Financial performance" in the interim financial - second quarter 2014.


“The significant intake of orders shows that our customers welcome our new turbine variants and service offerings, focusing on lowering cost of energy and increasing the energy output – directly benefitting our customers’ bottom line.”

Anders Vedel
Executive Vice President & CTO

Anders Vedel

Continued focus on doing more with less

In 2013, Vestas announced five new product variants based on existing product platforms, all of which have been well received by our customers. Having introduced several rotor sizes that can be used on the same nacelle, Vestas offers a wide array of turbines of varying rotor sizes and power output that can be targeted specific site, wind and grid conditions.

In February 2014, the first V110-2.0 MW was installed, and later in the year, the first V117-3.3 MW and V126-3.3 MW turbines were installed. Together with our customers, we have been successful in improving time-to-market allowing for early selling of the new and more competitive products.

Vestas continues to optimise the existing 2 and 3 MW turbine technologies as well as to develop service offerings that improve the energy output in order to lower the cost of energy for its customers. In March 2014, Vestas presented a new tower concept, the large diameter steel tower, for the 3 MW platform, enabling a more competitive technology for tower heights of 140 metres and above which can boost annual energy production on low wind sites by up to 8 per cent. In May, Vestas launched PowerPlusTM, a series of upgrades designed to increase the power output of existing wind power plants by up to 5 per cent without compromising the lifetime of the wind turbines. Vestas has already received several orders for these solutions.

All in all, Vestas has developed new competitive products and improved quality while reducing R&D cash spend by more than 40 per cent. We remain committed to lower the cost of energy faster than the market.


“Lowering costs while ramping up to meet customer demand has been an important task during the first half year of 2014 – and we accomplished it without compromising safety and quality.”

Jean-Marc Lechêne
Executive Vice President & COO

Jean March

Ramping up while lowering costs

The first half year of 2014 has been busy in the Vestas factories. Due to the large order intake, especially in the USA, our factories have been ramping up substantially to meet customer demand. Our new employees in the factories are going through an intensive training programme and are supported by their more experienced colleagues when starting out. The main focus in Manufacturing lies upon the serial production of the V110 and the V126 turbines and to meet our delivery deadlines.

Our factories are managing the ramp-up without compromising safety and quality. On safety, Vestas is intensifying the work with safe behaviour and component handling to maintain and improve its world-class position in this area within the industry.

To accommodate our strengthened focus in emerging markets, Vestas is establishing a strong supply chain to live up to local content requirements. At the same time, Global Sourcing is working closely with our suppliers to lower the costs throughout the entire value chain, and the cost-out project we started out last year called “Accelerated Earnings” has proven its value and is continued and embedded in the organisation.


“Order intake continued to grow in the first half of 2014 mainly driven by the USA. An important growth driver is Vestas’ ability to leverage on its strong position in mature and new markets.”

Juan Araluce,
 Executive Vice President & CSO

Juan Araluce

Leveraging on strong market position

Activity continued to increase in the first half of 2014 mainly driven by the USA, which accounted for nearly 1,100 MW in announced order intake and deliveries of 490 MW – almost 500 MW more than in the first half of 2013. An important growth driver is Vestas’ ability to leverage on its strong position in mature and new markets. Having pioneered 35 out of 73 markets – more than any other manufacturer – provides Vestas with a unique competitive advantage.

Vestas expects to improve its regional competitiveness and presence in markets like China, India and Brazil. Continuous cost and performance improvements have been initiated in these markets, which combined with a higher degree of local sourcing, are key levers going forward.

In order to win more and larger orders, Vestas seeks to partner with potential customers early in the project development phase. Thus, Vestas has increasingly become an opportunity originator by helping both established and new customers and investors to step up their commercial focus on wind power as well as enter new and promising wind power markets with a high return on their investments.

Through its unrivalled track record and close customer relationships, Vestas has developed a clear understanding of the customers’ requirements and how to optimise projects in order to maximise value. This was confirmed by customers, who participated in the latest annual Customer Loyalty Survey, which results clearly stated that customers have renewed trust in Vestas’ future and offerings.

Read more in the article "Market development" in the interim financial report - second quarter 2014.