Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Order intake increased by 27% to 3.4 gigawatts in the first half of 2024, driven by strong performance in Q1.
- Gross margin improved to 19.5% in H1 2024, compared to 10.7% in H1 2023.
- EBITDA margin improved to 3.4% in H1 2024, up from a negative margin in the previous year.
- Liquidity improved, closing the quarter with EUR827 million.
- Service revenues grew by 12%, with service EBIT margin increasing from 13.2% to 15.3% year-on-year.
Negative Points
- Working capital ratio stood at minus 7.4%, indicating ongoing challenges in managing working capital.
- Despite improvements, the EBITDA margin remains relatively low at 3.4%, indicating room for further profitability enhancement.
- The US market reentry plan is still in its early stages, with significant investments required to reactivate production facilities.
- Latin American markets, particularly Brazil, remain weak, impacting overall regional performance.
- Warranty provisions increased, reflecting ongoing quality and reliability challenges in some product lines.
Q & A Highlights
Q: Can you talk to us about how the legacy backlog is progressing? Does your 3% to 4% guide for the year have a different view on how the backlog goes through this year versus the start of the year?
A: Yes, the execution of the backlog is slightly more back-ended but stable throughout the year. We expect the majority of those legacy orders to be completed within this calendar year.
Q: Percentage of completion (PoC) revenues were about 80% in your H1 numbers. Is it fair to say that PoC will be smaller in your H2 numbers on a percentage basis?
A: We expect more activity in the second half in all areas of the company. The industrial activity and manufacturing will not be as back-loaded as last year, so the activity in H2 will not see as steep a step-up as in the previous year.
Q: How comfortable are you with your ability to execute well on the high level of activity in the second half, given last year's busy second half?
A: The operations side of the company has improved significantly, and the major roadblocks from previous years are easing. We are better equipped to handle the activity level of the second half.
Q: What is your view on the regulatory environment in the US and Europe, especially with potential changes in the US administration?
A: We are reasonably confident that regardless of the US presidential election results, wind onshore will not see dramatic changes. The economics of wind onshore are robust, and demand growth is strong. In Europe, we expect stability in wind targets and policies, with positive developments in Germany and potential support in the UK and France.
Q: What kind of margin trajectory can we expect for the service business into next year?
A: Over the next two to two and a half years, we expect to return to previous margins in the service business, driven by increased volume, especially with Delta products, and synergies from a larger service network.
Q: Are there any potential risks in terms of components for the Delta4000 range or any previous models?
A: We have passed the infancy mistakes of our new platform, and the non-quality costs for the Delta4000 platform are lower than for legacy platforms. We do not see any major issues currently.
Q: How are you seeing current conditions for pipeline pricing, especially in developed versus developing markets?
A: We are pleased with the pricing situation, with stable and rational behavior from competitors in most markets. We are satisfied with the competitive landscape and the price levels that support our midterm profitability targets.
Q: How quickly are you looking at order growth in the US market, and when might we see you back at full capacity?
A: We are currently in commercial discussions and expect deal flow to start in 2025, with potential deals in 2024. Depending on the product line, we may see projects in the P&L by 2026.
Q: How should we think about the timeline to achieving the 8% EBITDA margin?
A: The prerequisites remain market growth, cost stability, and margin stability. We expect to grow with the market, especially in Europe and North America, and improve profitability in the service business over time.
Q: Can you give us more granularity on your expectations for installation volumes for Q3 and Q4?
A: We expect Q3 to be the record quarter of the year, with Q4 slightly lower. We are reasonably happy with the installation profile and do not foresee delays of the magnitude experienced last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
