Nordex SE — Call Transcript 2017

Nov 14, 2017

Nordex SE Conference Call 9M 2017

Hamburg, 14 November 2017

• All financial figures within this presentation are unaudited.
• This presentation was produced in November 2017 by Nordex SE solely for use as a source of general information regarding the economic circumstances and status of Nordex SE. It does not constitute an offer for the sale of securities or an invitation to buy or otherwise acquire securities in the Federal Republic of Germany or any other jurisdiction. In particular it is not intended to be an offer, an investment recommendation or a solicitation of an offer to anyone in the U.S., Canada, Japan and Australia or any other jurisdiction. This presentation is confidential. Any reproduction or distribution of this presentation, in whole or in part, without Nordex SE's prior written consent is expressly prohibited.
• This presentation contains certain forward-looking statements relating to the business, financial performance and results of Nordex SE and/or the industry in which Nordex SE operates, these statements are generally identified by using phrases such "aim", "anticipate", "believe", "estimate", "expect", "forecast", "guidance", "intend", "objective", "plan", "predict", "project", and "will be" and similar expressions. Although we believe the expectations reflected in such forward-looking statements are based upon reliable assumptions, they are prepared as up-to-date and are subject to revision in the future. We undertake no responsibility to update any forward-looking statement. There is no assurance that our expectations will be attained or that any deviations may not be material. No representation or warranty can be given that the estimates, opinions or assumptions made in, or referenced by, this presentation will prove to be accurate.

1	Introduction	José Luis Blanco
2	Markets, orders & installations	Patxi Landa
3	Financials	Christoph Burkhard
4	"45-by-18"	Christoph Burkhard
5	Product development	José Luis Blanco
6	Guidance 2017	José Luis Blanco
7	Strategic outlook	José Luis Blanco
8	Q&A	All

Conference Call 9M 2017 14 Nov 2017 3

Introduction

9M 2017 results

• Sales EUR 2,319m (-1% y-o-y)
• EBITDA EUR 182m (-11% y-o-y)
• Order intake turbines EUR 1,108m (-49% y-o-y)
• Strong order intake in Q4 expected
• Cost reduction target increased from "30-by-18" to "45-by-18"
• New products announced: Delta4000, AW140/3000

Guidance 2017

• EBITDA margin, working capital and CAPEX confirmed
• Sales slightly below EUR 3.1bn expected

Nordex transformation in execution as planned

Volatility in markets due to US, India, Germany

• General trend in European markets transitioning towards auction based systems
• Spain with over 4 GW of wind awarded in 2017 auctions
• Turkey: upcoming auction offers chances beyond YEKA tender

• Germany to recover as big volume market from 2020 onwards

• PTC cycle in full swing in the US. Proposed tax bill reform may create market uncertainty

• Recent onshore wind auction results fuel market expansion with auctions taking place in Mexico, Brazil, Argentina and Chile

Europe America Rest of World

• Transition to auction based systems creates uncertainty in India – PPAs have not been ratified yet
• RSA: Expectation for the first projects awarded in round 4 to reach financial close before year end

Markets, orders & installations

9M order intake of EUR 1.1bn

• Decrease mainly driven by German market and back-end profile of large scale orders
• Strong order intake expected for Q4

Distribution shows increased global footprint with significant shift to oversea markets

*Project segment, excl. service

Service segment with promising development

Service sales (in EUR m) Comments

*Adjusted after change in segment reporting

• Service share of around 10% of total sales in 9M 2017
• Service sales supported by inorganic growth (AWP included from Q2 2016 on)

Markets, orders & installations

Turbine and service order backlog stands at EUR 3.0bn

• Turbine order backlog impacted by low order intake in Q3
• Distributed on Nordex' focus markets: Europe (46%), North America (4%), Latin America (41%), RoW (9%)
• ~6.500 WTG under service, corresponding to 15.2 GW (Q3 2016: 12.0 GW)

Markets, orders & installations

Income statement 9M 2017

in EUR m	9M 2017	9M 2016	Δ in %
Sales	2,319.5	2,339.5	-0.9
Total revenues	2,364.9	2,360.7	0.2
Cost of materials	-1,741.9	-1,789.0	-2.6
Gross profit	622.9	571.7	9.0
Personnel costs	-247.6	-205.2	20.7
Other operating (expenses)/income	-193.4	-162.7	18.9
EBITDA	181.9	203.9	-10.8
Depreciation/amortization	-118.6	-78.1	51.9
EBIT	63.3	125.8	-49.7
Net profit	27.9	64.4	-56.7
Gross margin	26.3%	24.2%
EBITDA margin	7.8%	8.7%
EBIT margin w/o PPA	4.8%	6.4%

Comments

• Increased gross profit margin also supported by service margin
• Depreciation includes EUR 47.5m from PPA
• Tax rate stands at 35%

Financials

Balance sheet 9M 2017

in EUR m	30.09.17	31.12.16	abs. change	Δ in %
Non-current assets	1,245.8	1,275.1	-29.3	-2.3
Current assets	1,586.2	1,719.1	-132.9	-7.7
Total assets	2,832.0	2,994.2	-162.2	-5.4
Equity	954.3	940.0	14.3	1.5
Non-current liabilities	789.1	812.0	-22.9	-2.8
Current liabilities	1,088.6	1,242.2	-153.6	-12.4
Equity and total liabilities	2,832.0	2,994.2	-162.2	-5.4
Net debt*	214.7	-6.1
Working capital ratio**	8.6%	4.1%
Equity ratio	33.7%	31.4%

Comments

• High installation activity drives inventories level
• Decrease in current liabilities reflects lower customer prepayments

*Cash and cash equivalents less bank borrowings **Based on last twelve months

Financials

Working capital 9M 2017

Working capital development (in EUR m) Working capital ratio (in % of sales*)

283 201 147 80 290 Q3 2017 Payables Prepayments Inventories Receivables 18 YE 2016

• Increased working capital compared to YE 2016 due to reduced prepayments and higher inventories
• Working capital programme starts to contribute

Working capital ratio decreased after peak in Q2 as expected

Cash flow statement 9M 2017

in EUR m	9M 2017	9M 2016
Cash flow from operating activities before net working capital	+47.9	108,5
Cash flow from changes in WC	-143.4	-223.6
Cash flow from operating activities	-95.5	-115.1
Cash flow from investing activities	-110.1	-357.0
Free cash flow	-205.6	-472.1
Cash flow from financing activities	+21.1	+372.8
Change in cash and cash equivalents*	-184.5	-99.4

Comments

• Free cash flow impacted by high working capital
• Working capital programme with increasing impact

*Including FX effects

Total investments 9M 2017 developed as planned

CAPEX (in EUR m) Comments

Intangible assets Property, plant, equipment

• Investments in property, plant, equipment mainly driven by:
• Investments in new products (e.g. Delta4000) and supply chain for new product generation with substantial COE reduction
• Activity increase on AW platform
• Indian blade production to support global volume
• Increased intangible assets related to development of new product generation for land and grid constrained markets

*Excluding first time consolidation of acquisition of Nordex Blade Technology Centre 2017 respectively of AWP 2016

Financials

Capital structure Q3 2017

Fairly stable leverage ratio over the past 12 months

Solid equity ratio of ~34 % at the end of Q3 2017

*Cash and cash equivalents less bank borrowings ** Last twelve months

"45-by-18"

Cost reduction programme increased from "30-by-18" to "45-by-18" to support long-term profitability

Programme is progressing well

No overlap or double-counting with ongoing COE activities and factory utilization adjustments

Product development in land-constrained markets (Delta platform)

Product development in grid-constrained markets (AW platform)

Start of Serial Production

Launched to market in September

Next Product Move

AW140/3000

Segment-leading capacity factor

Evolution of the successful

Quick time to market with production capabilities in 2018

AW3000 platform

Guidance 2017

		Update guidance Q3
Sales Sales	EUR 3.1-3.3bn 3.1 - 3.3 bn	slightly below EUR 3.1bn
EBITDA margin	7.8–8.2%*	
W/C ratio	5.0–7.0%	
CAPEX	approx. EUR 150m	
*Excluding restructuring costs
Guidance 2018	published in Q1 2018

Global demand for electricity will grow by almost 60% until 2040:

In non-OECD countries growing demand will be driven mainly by intensive industrialization and electrification

In OECD countries demand will remain flat but there will be a growing need for replacement of retiring fossil fuel and nuclear plants

Drivers for wind energy

Source: Bloomberg NEF, MAKE, IRENA, Thinkstockphotos, others

14 Nov 2017

Strategic outlook

Global onshore market (ex. China) is expected to grow at 7.9% CAGR between 2017 and 2020

Global (ex. China) onshore wind capacity addition (GW)

Source: MAKE Wind Market Outlook Q3 2017

2018E will be impacted by German market contraction

• Unfavorable market development in Europe
• Main cause of impact is the German auction system
• Market impact from contraction in Germany compensated by growth in North America and International

Source: MAKE Wind Market Outlook Q3 2017; ¹ Pro forma as of December 31, 2016

Nordex expects positive development from 2019 onwards; despite decline in sales and profitability in 2018; all measures are set

Nordex Group strategic business outlook - trend compared to previous year

	2018e	2019e	2020e
Volume effect	Sales in Germany expected to drop by around EUR 600m due to auction delayed projects	German market volume stays low due to delayed auction projects; growth in other markets leads to revenue recovery; introduction of Delta4000 supports positive development	German market recovers; Delta4000 and new AWP in serial delivery
Price effect	COE programme improvements cannot fully mitigate price pressure leading to a negative 3-5% net effect on GP margin	Continuing price pressure will be reduced by COE programme to 1-3% net effect on GP margin	Substantial COE improvement from new products compensate margin pressure
Structural costs	Structural cost reduction of EUR 45m as planned, not compensating volume effect	Organizational efficiencies allow additional volume vs 2018 at similar structural costs	Continue efforts for organizational efficiencies and keep structural cost flat despite volume growth

• Service business expected to profitably grow at around 10% p.a.
• Solid pipeline for project development business expected to positively contribute to overall group results
• Continuous proactive working capital management targeting WC ratio sustainably below 5%

Q&A

Questions Answers

José Luis Blanco CEO

• CEO Acciona Windpower
• Various senior management & Chief Officer positions at Gamesa

Christoph Burkhard CFO

• CFO Siemens Wind Power Offshore
• Various other positions at Siemens
• BHF Bank, EBRD

Patxi Landa CSO

• Business development director and Executive Committee member at Acciona Windpower
• Various Chief Officer Positions at Acciona

2017	Event
1 March	Publication of Preliminary Results 2016 and Outlook 2017 (Frankfurt)
30 March	Publication of Annual Report 2016
11 May	Interim statement Q1 2017
30 May	Annual General Meeting (Rostock)
3 August	Interim report H1 2017
14 November	Interim statement Q3 2017

2018	Event
27 March	Publication of Annual Report 2017
15 May	Interim statement Q1 2018
5 June	Annual General Meeting (Rostock)
14 August	Interim report H1 2018
6 November	Interim statement Q3 2018

Together on the same course

Contact Investor Relations:

Felix Zander Tobias Vossberg Rolf Becker

Nordex SE Langenhorner Chaussee 600 22419 Hamburg Germany

Tel:	+49-40-30030-1000
Fax:	+49-40-30030-1333
Email:	info@nordex-online.com
Web:	www.nordex-online.com