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Vestas Wind Systems — Interim / Quarterly Report 2011
Aug 17, 2011
3390_ir_2011-08-17_31af1600-0e69-40a8-be81-59fe1179002b.pdf
Interim / Quarterly Report
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Company announcement from Vestas Wind Systems A/S
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 1 of 33
Interim financial report, first half year 2011 Outlook maintained - profit in line with expectations - safety improved once again.
Summary: Vestas generated first half-year revenue of EUR 2,461m; an increase of 31 per cent on the first half of 2010. EBIT amounted to EUR 8m, against a loss of EUR 219m in the first half of 2010. The EBIT margin thus rose to 0.3 per cent from (11.6) per cent. The free cash flow improved significantly to EUR (494)m from EUR (1,058)m in the first half of 2010. The half-year intake of firm and unconditional orders was 2,895 MW, and the backlog of firm and unconditional orders amounted to EUR 8.0bn at 30 June 2011. Safety at Vestas' workplaces was higher than ever before with an incidence of industrial injuries of 3.2. Renewable energy accounted for 32 per cent of Vestas' total energy consumption in the half-year. Firm and unconditional orders covering almost all the expected revenue of EUR 7bn for 2011 have already been secured, which is why the outlook for revenue. EBIT margin and the free cash flow is maintained at EUR 7bn, 7 per cent and a minimum of EUR 0, respectively. In spite of the macro-economic and financial uncertainty, Vestas still expects an intake of firm and unconditional orders of 7,000-8,000 MW in a market that remains fiercely competitive.
H1 2011 at a glance (against H1 2010)
- a decrease of 3 per cent
| + 38% | Vestas delivered a total of 1,062 wind turbines to its customers - an increase of 38 per cent |
|---|---|
| + 25% | Vestas delivered wind power systems with an aggregate capacity of 1,991 MW - an increase of 25 per cent |
| $+31%$ | Vestas generated revenue of EUR 2,461m - an increase of 31 per cent |
| + EUR 227m | EBIT amounted to EUR 8m - an increase of EUR 227m |
| + EUR 152m | Profit after tax amounted to EUR (30)m - an increase of EUR 152m |
| - 3% | The number of employees at the end of the quarter was 21,700 |
Vestas Wind Systems A/S Alsvej 21, 8940 Randers SV, Denmark Tel: +45 9730 0000, Fax: +45 9730 0001, [email protected], www.vestas.com
Bank: Nordea Bank Danmark A/S, Reg. No.: 2100, Account No.: DKK 0651 117097 - EUR 5005 677997 Company Reg. No.: 10 40 37 82 Company Reg. Name: Vestas Wind Systems A/S
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 2 of 33
| - 29% | Industrial injuries per one million working hours was 3.2 - a reduction of 29 per cent |
|---|---|
| $-14\%$ nointe | The share of renewable energy amounted to 32 per cent |
The share of renewable energy amounted to 32 per cent 14% points - a decrease of 14 percentage points
The Group's financial performance in the first half year 2011
| Q 2 $2011^{1}$ |
Q 2 $2010^{1}$ |
H1 $2011^{1}$ |
H 1 $2010^{1}$ |
Full year 2010 |
|
|---|---|---|---|---|---|
| Revenue (mEUR) | 1,401 | 1.032 | 2,461 | 1.881 | 6,920 |
| EBIT before one-off costs (mEUR) | 77 | (180) | 8 | (219) | 468 |
| EBIT margin before one-off costs (%) | 5.5 | (17.4) | 0.3 | (11.6) | 6.8 |
| Profit after tax (mEUR) | 55 | (143) | (30) | (182) | 156 |
| Cash flow from operating activities (mEUR) | 126 | (309) | (141) | (707) | 56 |
| Free cash flow (mEUR) | (63) | (511) | (494) | (1,058) | (733) |
1) Neither audited nor reviewed.
Revenue for the first half year amounted to EUR 2,461m, resulting in an EBIT margin of 0.3 per cent, which is in line with expectations. Cash flow from operating activities amounted to EUR (141)m, and the free cash flow amounted to EUR (494)m in the first half of 2011.
Second-quarter revenue amounted to EUR 1,401m, and EBIT stood at EUR 77m, which translates into an EBIT margin of 5.5 per cent. The development confirms that revenue and especially earnings may show major quarter-on-quarter fluctuations depending on capacity utilisation and the type of projects handed over. Cash flow from operating activities amounted to EUR 126m, and the free cash flow amounted to EUR (63)m in the second quarter of 2011. Capacity utilisation and cash generation are expected to increase during the remainder of 2011.
Outlook for 2011
In spite of the macro-economic uncertainty and the turmoil in the financial markets Vestas still expects an intake of firm and unconditional orders of 7,000-8,000 MW. Europe and Africa are still expected to contribute about 50 per cent, the Americas about 25 per cent and Asia Pacific about 25 per cent. As expected, competition remains fierce, but a strong product platform, advanced service solutions and regional production capacity allow Vestas to offer its customers the most competitive solutions. The majority of the orders are expected to include short-term or longer-term service contracts with varying scope. Shipments are expected to rise from 4,057 MW in 2010 to 6,000 MW in 2011.
In 2011, Vestas still expects to achieve an EBIT margin of 7 per cent and revenue of EUR 7bn. Revenue in the service business is expected to amount to EUR 700m with an EBIT margin of 15 per cent. Vestas expects a positive free cash flow, equivalent to an improvement of more than EUR 700m compared to 2010. Inventory reductions will help to achieve this improvement. The expected revenue of EUR 7bn for 2011 has almost been secured by signed firm and unconditional orders. The risk thus primarily lies in the practical challenges and risks of disruptions in production and in relation to installations of new turbine types in a year, in which a large proportion of revenue, earnings, and cash flow will be generated in the latter part of the year. Revenue for the fourth quarter of 2011 is thus expected to be on a level with that achieved in the fourth quarter of 2010.
Investments in property, plant and equipment and intangible assets are expected to amount to EUR 550m and EUR 300m, respectively. Investments will, however, materialise later in the year than earlier
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 3 of 33
announced, which means that the expected increase in depreciations and amortisations compared to 2010 will be around EUR 70m against the earlier announced increase of about EUR 100m.
Financial expenses and the corporate tax rate are expected to be EUR (60)m and 28 per cent, respectively. Total warranty and product provisions are expected to account for less than 3 per cent of the expected revenue for the year, as the performance of the wind power plants is constantly improved to the benefit of customer earnings and Vestas' costs.
The aim is to keep the incidence of industrial injuries at no more than 5.0 industrial injuries per one million working hours. The green proportion of Vestas' energy consumption is expected to be 40 per cent. The decline relative to 2010 is due to the increase in production outside Europe, where access to green electricity is often limited. The target for the customer loyalty index is 72, and the Sigma level must be at least 5.
Assumptions and risks
As the banks have become much more critical than previously, processing times and documentation requirements have gone up. This is clearly to the benefit of the financially strong blue-chip providers. A setback in the credit market would adversely affect the wind turbine market. Similarly, low prices of fossil fuels could postpone demand, and lower energy consumption caused by economic cycles could also affect demand for wind power plants.
Prices of a number of components are rising. As a general rule, Vestas' contracts take such price increases into account so that the final price of the projects will reflect developments in input prices. This means that Vestas' margin is relatively robust towards fluctuating input prices of contracts signed. Consequently, rising raw materials prices would seem to represent a larger challenge when signing new contracts. Large-scale investments throughout the supply chain have eliminated most of the immediate risk of bottlenecks and, by extension, Vestas' need for buffer stocks, which will be reduced in the course of 2011.
Other than the aforementioned, the most important risk factors include additional warranty provisions due to potential quality issues, transport costs, disruptions in production and wind turbine installations as well as potential patent disputes. The regionalisation of Vestas' production and procurement has reduced its exchange rate risk, but the risk has not been eliminated.
Vestas operates with three types of contracts: supply-only, supply-and-installation and turnkey. Revenue from supply-only and supply-and-installation orders is not recognised until the projects have been finally handed over to the customer. This may cause a time lag concerning the final income recognition. Revenue from turnkey orders is recognised after the percentage of completion method. There are no differences between the contract types in terms of the payment profile. Payments are typically received when orders are received and as physical shipments are effected.
Along with certain of its directors and officers, Vestas has been named as a defendant in a class action lawsuit filed in the United States District Court. District of Oregon, USA, see also company announcement No. 8/2011 of 21 March 2011.
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 4 of 33
Vestas since 2006:
Improved quality, strengthened R&D efforts and increased regionalisation
| H 1 $2011^{1}$ |
Full year 2010 |
Full year 2009 |
Full year 2008 |
Full year 2007 |
Full year 2006 |
|
|---|---|---|---|---|---|---|
| Order intake (bnEUR) | 2.8 | 8.6 | 3.2 | 6.4 | 5.5 | 4.9 |
| Order intake (MW) | 2,895 | 8,673 | 3,072 | 6,019 | 5,613 | 5,559 |
| Revenue (mEUR) | 2,461 | 6,920 | 5,079 | 5,904 | 3,828 | 4,179 |
| Gross margin (%) | 14.1 | 17.0 | 16.5 | 19.1 | 15.3 | 11.1 |
| Warranty provisions (%) | 2.3 | 2.8 | 5.8 | 4.5 | 6.6 | 3.6 |
| EBIT margin before one-off costs(%) |
0.3 | 6.8 | 4.9 | 10.4 | 5.3 | 4.9 |
| Free cash flow | (494) | (733) | (842) | (403) | 384 | 454 |
| Return on invested capital before one-off costs $(\%)^2$ |
2.7 | 10.8 | 9.5 | 43.4 | 21.3 | 14.4 |
| Investments in property, plant and equipment (mEUR) |
201 | 458 | 606 | 509 | 265 | 153 |
| Number of employees, | ||||||
| end of period | 21,700 | 23,252 | 20,730 | 20,829 | 15,305 | 12,309 |
| - of which outside Europe | 8,054 | 8,127 | 6,569 | 5,320 | 3,232 | 2,025 |
| Number of R&D employees, | ||||||
| end of period | 2,052 | 2,277 | 1,490 | 1,345 | 650 | 519 |
Neither audited nor reviewed.
$2)$ Calculated over a 12-month period.
Vestas is managed and developed with a long-term perspective. Accordingly, Vestas should not be judged on the basis of its quarterly results as they may reflect fluctuations in the level of activity and capacity utilisation as well as changes in projects handed over. A key factor in Vestas' further progress is the improved ability to identify, control and price risks at all project stages and during the operational period of a wind power plant. This work is organised under a Contract Review function, which reports to the CFO. Together with the CEO, the Contract Review function reviews all projects in excess of EUR 15m. Smaller projects are handled in the individual sales business units.
New products, such as the V112-3.0 MW, the V100-2.6 MW, the V100-2.0 MW and the V100-1.8 MW turbines and services like the AOM 5000 (Active Output Management) will together with everimproving productivity and quality, regionalisation and more balanced output be the drivers behind the improved competitive strength. The regionalisation, most recently exemplified by Vestas' investment in an assembly facility in Brazil, also brings Vestas closer to its customers, allowing it to make faster deliveries. Vestas will continue to invest large amounts in production facilities, but the investments will be relatively smaller as the business volume is expected to rise and the sub-contractors will make a larger proportion of the investments. Going forward, Vestas also expects its headcount to rise at a significantly lower rate than its business volume because of enhanced efficiency, improved turbine performance and economies of scale. Vestas will therefore be able to maintain a competitive return on invested capital.
In connection with the disclosure of the third-quarter results for 2011. Vestas will provide the promised elaboration of the Triple15 targets.
Randers Interim f Compan Page 5 o s, 17 August inancial repo ny announcem of 33 2011 ort, first half y ment No. 37 year 2011 /2011
– o –
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The mee The tele +45 702 eting may be phone numb 6 5040 (DK) e attended e bers for the c . lectronically, conference c , and questio call are +44 ons may be 208 817 930 asked throu 01 (UK), +1 7 gh a confere 718 354 122 ence call. 26 (USA),
A replay y of the inform mation meeti ng will subse equently be a available on vestas.com/ /investor.
The pres newly bu sentation of uilt headquar the financia rters in Aarhu al results for us, Denmark the third qu k, and not as uarter on 9 N previously a November w announced in will be held a n New York, at Vestas' USA.
Y Vestas Yours sincere Wind Syste ely ems A/S
Ben Chairman of nt Erik Carlse f the Board o en of Directors
P Ditlev Enge President & C el CEO
This inte erim report is s available in Danish and English. In c case of doub bt, the Danish h version sha all apply.
Vestas Win nd Systems A/S
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011
Page 6 of 33
Financial highlights for the Group
| mEUR | Q2 $2011^{1}$ |
Q2 $2010^{1}$ |
1 half year $2011^{1}$ |
1 half year $2010^{1}$ |
Full year 2010 |
|---|---|---|---|---|---|
| Highlights | |||||
| Income statement | |||||
| Revenue | 1,401 | 1.032 | 2,461 | 1.881 | 6.920 |
| Gross profit | 248 | 12 | 348 | 113 | 1,175 |
| Profit/(loss) before financial income and expenses, depreciation and amortisation (EBITDA) before one-off costs |
150 | (101) | 150 | (88) | 747 |
| Operating profit/(loss) (EBIT) before one-off costs |
77 | (180) | 8 | (219) | 468 |
| Profit/(loss) before financial income and expenses, depreciation and amortisation (EBITDA) |
150 | (101) | 150 | (88) | 684 |
| Operating profit/(loss) (EBIT) | 77 | (180) | 8 | (219) | 310 |
| Profit/(loss) of financial items | (1) | (17) | (50) | (35) | (72) |
| Profit/(loss) before tax | 76 | (197) | (42) | (254) | 238 |
| Profit/(loss) for the period | 55 | (143) | (30) | (182) | 156 |
| Balance sheet | |||||
| Balance sheet total | 7,144 | 8,332 | 7,144 | 8,332 | 7,066 |
| Equity | 2,707 | 2,372 | 2,707 | 2,372 | 2,754 |
| Provisions | 314 | 359 | 314 | 359 | 370 |
| Average interest-bearing position (net) | (1,075) | (637) | (966) | (436) | (593) |
| Net working capital | 872 | 655 | 872 | 655 | 672 |
| Investments in property, plant and equipment | 110 | 129 | 201 | 211 | 458 |
| Cash flow statement | |||||
| Cash flow from operating activities | 126 | (309) | (141) | (707) | 56 |
| Cash flow from investing activities | (189) | (202) | (353) | (351) | (789) |
| Free cash flow | (63) | (511) | (494) | (1,058) | (733) |
| Cash flow from financing activities | 63 | 248 | 346 | 768 | 568 |
| Change in cash at bank and in hand less current portion of bank debt |
$\mathbf 0$ | (263) | (148) | (290) | (165) |
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 7 of 33
Financial highlights for the Group
| mEUR | Q2 $2011^{1}$ |
Q2 $2010^{1}$ |
1 half year $2011^{1}$ |
1 half year $2010^{1}$ |
Full year 2010 |
|---|---|---|---|---|---|
| Ratios | |||||
| Financial ratios 2) | |||||
| Gross margin (%) | 17.7 | 1.2 | 14.1 | 6.0 | 17.0 |
| EBITDA margin before one-off costs (%) | 10.7 | (9.8) | 6.1 | (4.7) | 10.8 |
| EBIT margin before one-off costs (%) | 5.5 | (17.4) | 0.3 | (11.6) | 6.8 |
| EBITDA margin (%) | 10.7 | (9.8) | 6.1 | (4.7) | 9.9 |
| EBIT margin (%) | 5.5 | (17.4) | 0.3 | (11.6) | 4.5 |
| Return on invested capital 3) (ROIC) before one- off costs (%) |
2.7 | 0.4 | 2.7 | 0.4 | 10.8 |
| Solvency ratio (%) | 37.9 | 28.5 | 37.9 | 28.5 | 39.0 |
| Return on equity 3) (%) | 2.9 | (0.1) | 2.9 | (0.1) | 5.9 |
| Gearing (%) | 47.2 | 47.0 | 47.2 | 47.0 | 33.2 |
| Share ratios 2) | |||||
| Earnings per share 4) (EUR) | 0.4 | 0.0 | 0.4 | 0.0 | 0.8 |
| Book value per share (EUR) | 13.3 | 11.6 | 13.3 | 11.6 | 13.5 |
| Price/book value | 1.2 | 2.9 | 1.2 | 2.9 | 1.7 |
| Cash flow from operating activities per share (EUR) |
0.6 | (1.5) | (0.7) | (3.5) | 0.3 |
| Dividend per share (EUR) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Payout ratio (%) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Share price at the end of the period (EUR) | 16.0 | 34.3 | 16.0 | 34.3 | 23.6 |
| Average number of shares | 203,704,103 | 203,704,103 | 203,704,103 | 203,704,103 | 203,704,103 |
| Number of shares at the end of the period | 203,704,103 | 203,704,103 | 203,704,103 | 203,704,103 | 203,704,103 |
$\begin{pmatrix} 1 \ 2 \end{pmatrix}$
Neither audited nor reviewed.
The ratios have been calculated in accordance with the guidelines from "Den Danske Finansanalytikerforening" (The Danish Society of Financial Analysts) (Recommendations and Financial ratios 2010).
$3)$ Calculated over a 12-month period.
$4)$ Earnings per share have been calculated over a 12-month period and in accordance with IAS 33 on earnings per share.
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 8 of 33
Non-financial highlights for the Group
| Q2 $2011^{1}$ |
Q2 $2010^{1}$ |
1 half year $2011^{1}$ |
1 half year $2010^{1}$ |
Full year 2010 |
|
|---|---|---|---|---|---|
| Key figures 2) | |||||
| Occupational health & safety | |||||
| Industrial injuries (number) | 26 | 45 | 63 | 84 | 201 |
| - of which fatal industrial injuries (number) | $\overline{0}$ | $\mathbf 0$ | 1 | 0 | $\Omega$ |
| Products | |||||
| MW produced and shipped | 1,417 | 588 | 2,051 | 975 | 4,057 |
| Number of turbines produced and shipped | 722 | 283 | 1,080 | 461 | 2,025 |
| Utilisation of resources | |||||
| Consumption of metals (tonnes) | 49,962 | 38,025 | 90,509 | 66,261 | 171,024 |
| Consumption of other raw materials, etc. (tonnes) | 23,819 | 27,059 | 52,654 | 45,291 | 107,485 |
| Consumption of energy (MWh) | 136,461 | 128,754 | 294,181 | 278,186 | 578,063 |
| - of which renewable energy (MWh) | 45,674 | 63,624 | 94,904 | 128,176 | 241,930 |
| - of which renewable electricity (MWh) | 44,191 | 57,794 | 86,376 | 108,441 | 209,351 |
| Consumption of fresh water (m 3 ) | 138,236 | 160,748 | 241,009 | 281,963 | 598,258 |
| Waste disposal | |||||
| Volume of waste (tonnes) | 24,079 | 19,528 | 41,784 | 35,765 | 88,663 |
| - of which collected for recycling (tonnes) | 14,543 | 7,988 | 23,955 | 14,837 | 35,410 |
| Emissions | |||||
| Emission of CO 2 (tonnes) | 14,340 | 11,340 | 33,330 | 27,236 | 56,547 |
| Local community | |||||
| Environmental accidents (number) | $\mathbf{0}$ | $\mathbf 0$ | $\mathbf 0$ | 0 | 0 |
| Breaches of internal inspection conditions (number) | 0 | 0 | $\overline{2}$ | 3 | 3 |
| Employees | |||||
| Average number of employees | 21,717 | 21,650 | 22,167 | 21,149 | 22,216 |
| Number of employees at the end of the period | 21,700 | 22,392 | 21,700 | 22,392 | 23,252 |
Alsvej 21, 8940 Randers SV, Denmark
Tel: +45 9730 0000, Fax: +45 9730 0001, [email protected], www.vestas.com Fank: Nordea Bank Danmark A/S, Reg. No.: 2100, Account No.: DKK 0651 117097 - EUR 5005 677997
Company Reg. No.: 10 40 37 82
Company Reg. No.: 10 40 37 82
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 9 of 33
Non-financial highlights for the Group
| Q2 $2011^{1}$ |
Q 2 $2010^{1}$ |
1 half year $2011^{1}$ |
1 half year $2010^{1}$ |
Full year 2010 |
|
|---|---|---|---|---|---|
| Indicators $2)$ | |||||
| Occupational health and safety | |||||
| Incidence of industrial injuries per one million working hours |
2.6 | 4.6 | 3.2 | 4.5 | 5.0 |
| Absence due to illness among hourly-paid employees (%) |
2.2 | 2.4 | 2.5 | 2.8 | 2.6 |
| Absence due to illness among salaried employees (%) | 1.3 | 1.0 | 1.5 | 1.2 | 1.3 |
| Products | |||||
| $CO2$ savings over the lifetime on the MW produced and shipped (million tonnes of CO 2 ) |
37 | 16 | 54 | 26 | 108 |
| Utilisation of resources | |||||
| Renewable energy (%) | 34 | 49 | 32 | 46 | 42 |
| Renewable electricity for own activities (%) | 61 | 78 | 65 | 84 | 74 |
| Employees | |||||
| Women at management level (%) | 18 | 19 | 18 | 19 | 19 |
| Non-Danes at management level (%) | 52 | 47 | 52 | 47 | 49 |
| Management system | |||||
| OHSAS 18001 - occupational health and safety $(\%)^3$ | 97 | 97 | 97 | 97 | 98 |
| ISO 14001 - environment $(\%)^{3}$ | 97 | 97 | 97 | 97 | 98 |
| ISO 9001 - quality (%) | 97 | 98 | 97 | 98 | 98 |
$\binom{1}{2}$ Neither audited nor reviewed.
Accounting policies for non-financial highlights for the Group, see page 74 of the annual report 2010.
OHSAS 18001 and ISO 14001 certification audit took place at the production facilities in Xuzhou, China, in June $3)$ 2011. Final certificate is expected within the second half of 2011.
Randers Interim f Compan Page 10 s, 17 August inancial repo ny announcem 0 of 33 2011 ort, first half y ment No. 37 year 2011 /2011
Manage ement report
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Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 11 of 33
because it would provide industrial and financial investors with a higher degree of predictability than the present quota system, which leads to large fluctuations in the price of $CO2$ .
Still more people are giving high priority to sustainability. Consequently, Vestas has taken the initiative to launch the WindMade™ consumer label, which allows consumers to choose products manufactured using wind. On the global wind day on 15 June 2011, the first criterion for WindMade™ was announced. Participating companies must cover a minimum of 25 per cent of their electricity consumption using wind power. The standard has been submitted for a public hearing and is expected to be finalised during the third quarter of 2011.
Failure is not an option
Vestas' mission, Failure is not an option, expresses the organisation's commitment to constantly seeking improvements and to constantly following up on and rectifying errors in a structured manner.
The mission also mirrors Vestas' uncompromising stance on safety, which is given top priority no matter what the context, because the customers demand it and the employees are entitled to it. Vestas has thus succeeded in reducing the incidence of industrial injuries from 25.3 per one million working hours in 2006 to 2.6 in the second quarter of 2011.
The ambition to attain a 6 Sigma quality level throughout the value chain no later than in 2015 underlines Vestas' commitment to constant improvement. At the end of 2010, Vestas and the vast majority of its suppliers had reached 5 Sigma, against 4 Sigma in 2008, which is one of the prerequisites for the long-term improvement of profitability. Vestas regularly establishes relations with new suppliers with a commitment to reach 6 Sigma in a joint effort with Vestas.
Vestas currently monitors more than 20,000 turbines, or more than 34,000 MW, round the clock, and this opens up for effective maintenance planning, higher uptime and performance for the turbines. This benefits customer earnings and Vestas' expenditure, as Vestas' service technicians are now able to service more than twice as many turbines as they were at the beginning of 2008. Knowledge about the vield and general maintenance condition of each turbine is the cornerstone of Vestas' future growth.
"Lost Production Factor", which is the share of the potential wind not harvested by the turbines, has been substantially reduced in recent years. Measured over the past 12 months, the average Lost Production Factor has dropped to less than 2.5 per cent.
The Willpower
Vestas is driven forward by its employees, whose willpower, imagination and ability to constantly develop the technology and the organisation have made Vestas the industry leader. This is expressed in the sculpture entitled the Willpower, which has been placed at a number of the Group's locations. Reaching for the sky, it symbolises the willpower and passion possessed by the employees. Vestas seeks to promote a culture characterised by independent initiatives and collaboration across professional and organisational boundaries in which the dynamics and sense of responsibility that usually characterise a small company are retained. The solid foundation of the sculpture reflects the reliability, common sense and trustworthiness that is the cornerstone of all Vestas' activities.
Vestas' Code of Conduct is to ensure that all employees and other persons acting on behalf of Vestas know what is correct Vestas behaviour. In the second quarter, Vestas was granted permission from the relevant authorities to extend the existing EthicsLine so that the company's business partners can also use the system to ask questions and to report any suspicions about violations of Vestas' Code of Conduct. Vestas' standards and goals build on recognised framework agreements established by international organisations such as the UN. ILO and OECD. In 2009. Vestas joined the UN Global Compact initiative and follows the ten generally recognised principles in respect of human rights, labour rights, the environment and anti-corruption. In January 2011, Vestas became one of about 50
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 12 of 33
elite companies in the Global Compact LEAD. The companies in the global Compact LEAD have committed themselves to leading the way within sustainability, and being the leading company within renewable energy and one of the originators behind WindMade™, Vestas is ready to assume this responsibility.
Every year, Vestas issues a progress report on its Global Compact performance in the form of a sustainability report, which is published on vestas.com. The sustainability report also serves as Vestas' statutory statement on corporate social responsibility.
Management focus
Vestas' Management's overall focus is on customers, colleagues, Cost of Energy and shareholders. Success in these areas is a prerequisite for retaining the leadership position in competition with a number of the world's largest industrial conglomerates.
Customers
Wind power is gaining support in more and more countries, with new customers as well as large international players investing in wind power plants. As wind power comes to represent an evergrowing proportion of the energy supply, considerably larger customers will account for a growing share of demand. In 2010, when energy companies and utilities accounted for 46 per cent of revenue compared with 58 per cent in 2009 and 45 per cent in 2008, Vestas' revenue was distributed among 212 customers. The figures for 2009 and 2008 were 201 and 228, respectively. In the past, Vestas was better organised to serve small, local customers, but in recent years the company has made adjustments so that it now also cooperates with large utilities with international operations. One of the initiatives at Vestas is the introduction of Key Account Management, which is intended to improve services provided to the largest customers by offering them direct and swift access to Vestas through a central Key Account Manager. The EDPR order in 2010, the framework agreement with ENEL Green Power in 2010 and the EDF EN agreement in 2011 are results of the ever-closer relations with the customers across Vestas.
Vestas aims to provide its customers with the lowest cost per MWh produced and optimum security for the capital invested in a wind power plant - Vestas delivers as promised. Vestas also endeavours to become a more flexible and knowledgeable business partner because significantly improved customer satisfaction is a prerequisite for Vestas to retain its market-leading position.
The customer loyalty index for 2010 was unchanged at 64, after a large improvement in 2009. The improvement in 2009 was due to much better turbine performance and sharply intensified collaboration with customers, improvements of a number of in-house processes and the launch of new products and services. All of these measures have helped build the foundation for the necessary increase in revenue and profitability in the years ahead. The target for 2012 is an index of at least 75, which matches the level of the best in the world.
Vestas retains its strategy of not relying on any single market or customer.
Colleagues
At the end of the second quarter of 2011, Vestas had 21,700 employees. Vestas will continue to apply the "people before megawatt" principle, because the costs of well-educated excess capacity are lower than the costs of remedying faults due to a rushed staff inflow caused by strong MW growth. Lay-offs will be a measure of last resort for Vestas due to the substantial loss of know-how and experience associated with such lav-offs.
Due to enhanced efficiency, improved turbine performance and economies of scale, going forward Vestas expects its headcount to rise at a significantly lower rate than its business volume. This also
Vestas Wind Systems A/S Alsvej 21, 8940 Randers SV, Denmark Tel: +45 9730 0000, Fax: +45 9730 0001, [email protected], www.vestas.com Bank: Nordea Bank Danmark A/S, Reg. No.: 2100, Account No.: DKK 0651 117097 - EUR 5005 677997 Company Reg. No.: 10 40 37 82 Company Reg. Name: Vestas Wind Systems A/S
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 13 of 33
applies to investments in new production capacity as Vestas regularly increases factory output. In addition, the suppliers will henceforth account for a larger part of the production than is the case today.
All Vestas employees are covered by a bonus scheme. For employees in the business units, 70 per cent of the bonus depends on targets specific to the business unit, whilst 30 per cent depends on the Group fulfilling announced targets for the year, including developments in customer satisfaction. For employees in the Group staff functions, bonus depends exclusively on the fulfilment of announced targets. When calculating the bonus for 2011, each component is weighted as follows: An EBIT margin of 8.4 per cent (35 per cent weighting), a free cash flow of EUR 200m (30 per cent weighting), revenue of EUR 7bn (15 per cent weighting) and a customer loyalty index of 72 (20 per cent weighting). In the longer term, bonus payments will be more closely linked to the day-to-day performance of each employee. Vestas' global bonus scheme did not lead to disbursements for 2010.
As part of Triple15. Vestas aims, in terms of cultural versatility, to become a more international business with a much higher proportion of both non-Danish nationals and women employed in management positions. At the end of the second quarter, non-Danish nationals held 52 per cent of the positions in the upper management level, and 18 per cent were women. Another aim is to have many nationalities represented at all locations.
Cost of Energy
Vestas' wind power plants must have the lowest Cost of Energy and ensure that the price of wind power continues to fall. Conversely, the price of fossil fuels is expected to rise, thus steadily increasing the competitiveness and resulting value of wind turbines. Through large-scale investments in development and test facilities around the world, Vestas will seek to consolidate its leadership position within wind power. At the end of the second quarter of 2011, 9 per cent of Vestas' staff were employed with Vestas Technology R&D, which is now organised in specialised centres around the world and managed from Aarhus, Denmark. In addition to improved design, which also facilitates the work of service technicians, lighter materials and the possibility of recycling all turbine components, Vestas is also investing large resources in optimising the location of each turbine in a wind power plant with a view to fully harnessing the wind.
In the years ahead, many new products and services will contribute to ensuring that Vestas accomplishes Triple15. All of the new products are designed to provide the customers with Business Case Certainty and the lowest Cost of Energy. On 30 March 2011, Vestas announced the specifications for its V164-7.0 MW turbine. It is the first dedicated offshore turbine in Vestas' product range and will become the largest single investment ever in Vestas Technology R&D. If demand for the turbine leads to a sufficient order intake in the coming years, Vestas will commence serial production in 2015. For this purpose, Vestas has secured an option for 70 hectares of land at the Port of Sheerness in Kent, UK. The first prototype will be built towards the end of 2012. Accordingly, the V164-7.0 MW turbine will not have a positive earnings impact until after 2015.
During the first half of the year, Vestas also launched its V100-2.6 MW turbine based on the thoroughly tested 3 MW platform and a V100-2.0 MW turbine to complement the 2 MW platform. This represents a further expansion of Vestas' broad product range, which in recent years has been expanded also by the V112-3.0 MW, V100-1.8 MW and V60-850 kW turbines.
The motivation behind Vestas' development initiatives is the goal of having increasingly robust wind power plants built by easily accessible and environmentally friendly materials and the necessity of increasing output per kilogramme turbine for the benefit of the environment. As part of these initiatives, under the "As green as it gets" principle, Vestas has stepped up its efforts to minimise the consumption of resources. One result of the intensified efforts is that, from the second quarter of 2009. Vestas has reported on quarterly developments in its non-financial highlights in order to give prominence to the performance in achieving its environmental and safety targets.
Randers Interim f Compan Page 14 s, 17 August inancial repo ny announcem 4 of 33 2011 ort, first half y ment No. 37 year 2011 /2011
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Shareho olders
At the en registere Danish s BlackRo shareho and to nd of June 2 ed sharehold shareholders ock Inc., USA lding that ex inform this 011, Vestas ders held 91 s owned abo A, and Capita xceeds five p group open had 162,720 per cent of t out 44 per c al Research per cent. Ves ly about the 0 registered the company cent of Vest and Manag stas seeks to e company's shareholder y's share cap tas, which h ement Comp o have an in s long-term s, including c pital. At the e has a free fl pany, USA, ternational g targets, prio custodian ba end of June, loat of 100 have both re group of shar orities and anks. The , 157,738 per cent. eported a reholders initiatives
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 15 of 33
conducted with due consideration to the short-term opportunities and limitations. The Group most often presents its interim reports in London, UK, and New York, USA, as part of roadshows, which cover more than 25 capitals and financial centres in North America, Europe, the Middle East and Asia in 2011. In addition, Vestas arranges a large number of meetings with private investors in Denmark.
Development, second quarter 2011
Activities and order backlog
In the second quarter of 2011, Vestas produced and shipped wind power systems with an aggregate output of 1,417 MW (722 turbines) against 588 MW (283 turbines) in the second quarter of 2010. Final capacity delivered to the customers amounted to 1,127 MW, an increase of 34 per cent from the second quarter of 2010.
| Europe and Africa |
Americas | Asia Pacific |
Total | |
|---|---|---|---|---|
| MW under completion, 1 April 2011 | 990 | 301 | 463 | 1.754 |
| MW delivered to customers in the period | (384) | (647) | (96) | (1, 127) |
| MW produced and shipped in the period | 595 | 712 | 110 | 1.417 |
| MW under completion, 30 June 2011 | 1.201 | 366 | 477 | 2.044 |
At the end of the quarter, turbine projects with a total output of 2,044 MW were under completion. The quarterly order intake was 2,265 MW, of which 65 per cent has been announced publicly. For the first half-year, the order intake was 2,895 MW, of which more than 25 per cent were for V100 or V112 turbines. The order backlog amounted to 8,306 MW at the end of June 2011. Europe and Africa accounted for 55 per cent and the Americas and Asia Pacific accounted for 31 and 14 per cent, respectively. The value of the order backlog was EUR 8.0bn at the end of June 2011.
Income statement
Europe and Africa accounted for 45 per cent of revenue in the second quarter of 2011. The Americas and Asia Pacific accounted for 46 per cent and 9 per cent of revenue, respectively. Second-quarter revenue amounted to 20 per cent of the expected full-year revenue, against 15 per cent of actual revenue in 2010. Service revenue amounted to EUR 169m, an increase of 6 per cent on the second quarter of 2010. Service revenue for the first half-year amounted to EUR 342m. The service business comprises among other things the sale of spare parts and repair, quaranteed uptime for a fixed fee and general service and maintenance work on an hourly basis.
Vestas recorded a gross profit of EUR 248m in the second quarter of 2011, against EUR 12m the year before. The gross margin thus rose to 17.7 per cent from 1.2 per cent, reflecting the projects handed over and the improved capacity utilisation. Revenue and earnings may show major quarter-on-quarter fluctuations depending on the type of projects handed over and therefore recognised as income. EBITDA was EUR 150m and EBIT amounted to EUR 77m, equal to an EBITDA margin of 10.7 per cent and an EBIT margin of 5.5 per cent.
Positively affected by exchange rate adjustments, but adversely impacted by a higher net interestbearing debt, financial items amounted to a net expense of EUR 1m, against an expense of EUR 17m in the second quarter of 2010. Vestas' average interest-bearing net position in the second quarter of 2011 amounted to EUR (1,075)m, against EUR (637)m in the year-earlier period.
The net profit has increased to EUR 55m, against a loss of EUR 143m in the second quarter of 2010.
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 16 of 33
Balance sheet
Vestas had total assets of EUR 7.144m at 30 June 2011, against EUR 8.332m the year before. At the end of June 2011, Vestas' interest-bearing net position amounted to EUR (1,071)m. On 22 June, Vestas signed a EUR 1.3bn revolving credit facility with nine international banks. In addition, Vestas has substantial bilateral facilities, a EUR-denominated corporate bond with a principal amount of EUR 600m, a loan for EUR 250m with the European Investment Bank and a loan for EUR 55m with the Nordic Investment Bank. Financial debt obligations rose by EUR 163m to EUR 1,277m relative to 30 June 2010.
Net working capital
Vestas' net working capital at 30 June 2011 amounted to EUR 872m, against EUR 655m at the end of June 2010. Prepayments, which include payments on account for turbine projects that have not yet been recognised and prepayments on orders, declined in step with the inventories as a number of projects were handed over. Trade payables and trade receivables rose relative to 30 June 2010. During the second quarter, net working capital fell by EUR 38m, driven primarily by an increase in trade payables, whilst the decline in prepayments is offset by a corresponding drop in inventories. Vestas is working structurally to further reduce its inventories.
Trade receivables and construction contracts
Trade receivables amounted to EUR 629m at 30 June 2011, compared with EUR 470m at 30 June 2010. Construction contracts amounted to EUR 98m, net, against EUR 136m the year before. Construction contracts comprise projects in progress, for which income is recognised in step with the completion of the projects.
Warranty provisions
In 2011. Vestas expects to make warranty provisions of less than 3 per cent of annual revenue. Provisions are made for all costs associated with turbine repairs, and any reimbursement is not offset unless a written agreement has been made with the supplier to that effect. Warranty provisions of EUR 29m in the second quarter, equivalent to 2.1 per cent of revenue, cover possible costs for remedy and other costs in accordance with specific agreements. Provisions are based on estimates, and actual costs may deviate substantially from such estimates.
Changes in equity
Vestas' equity amounted to EUR 2,707m at 30 June 2011, an increase of EUR 335m on 30 June 2010.
Cash flow and investments
As a result of the slowing order intake from the autumn of 2008 to the end of 2009 and the timing profile of the orders received, Vestas draws on its credit facilities. Longer term, Vestas will to be able to finance its organic growth through operations. Cash flow from operating activities before changes in working capital rose to EUR 88m in the second quarter of 2011 from EUR (247)m in the second quarter of 2010. Cash flow from operating activities including costs for warranty commitments amounted to EUR 126m, against EUR (309)m in the second quarter of 2010. Cash flow from investing activities amounted to EUR (189)m. The investments were made primarily in buildings, plants and development projects.
Randers Interim f Compan Page 17 s, 17 August inancial repo ny announcem 7 of 33 2011 ort, first half y ment No. 37 year 2011 /2011
Disclaim mer and cau utionary stat tement
This doc operatio deemed expectat known a differ ma cument conta ns and bus to be, forw tions that ar and unknown aterially from ains forward iness. All st ward-looking re based on n risks and u those expre -looking stat tatements o statements n manageme ncertainties essed or impl tements con other than s s. Forward-lo ent's current that could ca lied in these cerning Ves tatements o ooking state t expectation ause actual statements. tas' financia of historical f ments are ns and assu results, perfo al condition, r fact are, or statements umptions and ormance or results of may be of future d involve events to
Forward exposure forecasts operatio looking s Vestas' competit including countries terms of (h) ability risks; an -looking sta e to market s, projections ns and could statements in products; (b tion; (d) env g changes in s and region f contracts w y to enforce nd (l) supply o tements inc risks and st s and assum d cause Ves ncluded in th b) currency a ironmental a tax or accou ns; (g) politic ith governme patents; (i) p of componen lude, among atements ex mptions. Ther stas' results his document and interest and physical unting policie cal risks, inc ental entities product deve nts. g other thing xpressing ma re are a num to differ ma t, including ( rate fluctua risks; (e) leg es; (f) econo cluding the ri s, and delays elopment risk gs, stateme anagement's mber of facto aterially from (without limita ations; (c) lo gislative, fisc mic and fina sks of expro s or advance ks; (j) cost of nts concern s expectation ors that could those expre ation): (a) ch ss of marke cal and regu ncial market opriation and ments in the f commoditie ing Vestas' ns, beliefs, e d affect Vest essed in the hanges in de et share and ulatory devel t conditions i d renegotiati e approval of es; (k) custom potential estimates, as' future forwardemand for d industry opments, n various on of the f projects; mer credit
All forwa statemen forwardannual re factors a documen statemen these ris looking s ard-looking s nts containe looking state eport for the also should b nt. Vestas do nt as a resul sks, results statements c statements c ed or referen ements. Add year ended be considere oes not unde t of new info could differ contained in t contained in nced to in th ditional factor 31 Decembe ed. Each forw ertake any o rmation or fu materially f this documen this docume his statemen rs that may er 2010 (ava ward-looking obligation to uture events from those s nt. ent are expr nt. Undue re affect future ailable at www g statement s publicly upd others than stated, implie ressly qualifi eliance shou e results are w.vestas.com speaks only ate or revise required by D ed or inferre ed by the c uld not be p contained in m/investor) a as of the da e any forwar Danish law. ed from the autionary placed on n Vestas' and these ate of this rd-looking In light of forward-
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 18 of 33
The Vestas Group Interim financial report for the period 1 January 2011-30 June 2011
| Contents | Page |
|---|---|
| Consolidated income statement | 19 |
| Consolidated statement of comprehensive income | 20 |
| Consolidated balance sheet - Assets | 21 |
| Consolidated balance sheet - Equity and liabilities | 22 |
| Consolidated statement of changes in equity | 23 |
| Summarised consolidated cash flow statement | 24 |
| Accounting policies | 25 |
| Management's statement | 26 |
| Company announcements from Vestas Wind Systems A/S | 27 |
| Sales | 29 |
| MW overview per quarter 2011 | 30 |
| Warranty provisions | 31 |
| Segment information | 32 |
The interim financial report has neither been audited nor reviewed.
Randers Interim f Compan Page 19 s, 17 August inancial repo ny announcem 9 of 33 2011 ort, first half y ment No. 37 year 2011 /2011
Consoli dated incom me statemen nt
| mEUR | Q2 2011 |
Q 2 2010 |
1 1 half year 2011 |
1 half yea ar 2010 |
|---|---|---|---|---|
| Revenu ue |
1 ,401 |
1,032 | 2,461 | 1,881 |
| Cost of sales |
(1, 153) |
(1 1,020) |
(2,113) | (1,768) |
| Gross p profit |
248 | 12 | 348 | 113 |
| Researc ch and deve lopment cos ts |
(39) | (44) | (72) | (62) |
| Selling and distribut tion expense s |
(50) | (46) | (101) | (90) |
| Adminis strative expe enses |
(82) | (102) | (167) | (180) |
| Operati ing profit/(lo oss) |
77 | (180) | 8 | (219) |
| Income from investm ments in ass ociates |
0 | 0 | 0 | 0 |
| Net fina ancials |
(1) | (17) | (50) | (35) |
| Profit/(l loss) before e tax |
76 | (197) | (42) | (254) |
| Corpora ation tax |
(21) | 54 | 12 | 72 |
| Net pro ofit/(loss) fo r the period |
55 | (143) | (30) | (182) |
| Earning gs per share e (EPS) |
||||
| Earning gs per share for the perio d (EUR), bas sic |
0.27 | (0.70) | (0.15) | (0.89) |
| Earning gs per share for the perio d (EUR), dilu uted |
0.27 | (0.70) | (0.15) | (0.89) |
Randers Interim f Compan Page 20 s, 17 August inancial repo ny announcem 0 of 33 2011 ort, first half y ment No. 37 year 2011 /2011
Consoli dated statem ment of com mprehensive e income
| mEUR | 1 half year r 2011 |
1 half year 2010 |
|
|---|---|---|---|
| Profit/(l loss) for the e period |
(30) | (182) | |
| Exchan ge rate adjus stments rela |
ting to foreig gn entities |
(13) | 37 |
| Fair val ue adjustme ents of deriva the peri od |
ative financia l instruments s for |
18 | (41) |
| Fair val ue adjustme ents of deriva transfer rred to the in come statem |
ative financia l instruments s ment (cost of sales) |
(6) | 8 |
| Tax on derivative fin nancial instru |
uments | (3) | 8 |
| Other co omprehensiv ve income af |
fter tax for th he period |
(4) | 12 |
| Total co omprehens ive income |
for the perio od |
(34) | (170) |
| Vestas Win nd Systems A/S |
Alsvej j 21, 8940 Rander rs SV, Denmark |
||
| Tel: + 45 9730 0000, Fa ax: +45 9730 0001 1, vestas@vestas |
.com, www.vestas s.com |
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011
Page 21 of 33
Consolidated balance sheet - Assets
| mEUR | 30 June 2011 |
30 June 2010 |
31 December 2010 |
|---|---|---|---|
| Goodwill | 320 | 320 | 320 |
| Completed development projects | 170 | 128 | 169 |
| Software | 87 | 73 | 88 |
| Development projects in progress | 568 | 379 | 457 |
| Total intangible assets | 1,145 | 900 | 1,034 |
| Land and buildings | 904 | 747 | 867 |
| Plant and machinery | 314 | 262 | 304 |
| Other fixtures, fittings, tools and equipment | 235 | 240 | 248 |
| Property, plant and equipment in progress | 302 | 456 | 285 |
| Total property, plant and equipment | 1,755 | 1,705 | 1,704 |
| Investments in associates | $\overline{4}$ | 1 | 4 |
| Other receivables | 18 | 20 | 25 |
| Deferred tax | 268 | 393 | 224 |
| Total other non-current assets | 290 | 414 | 253 |
| Total non-current assets | 3,190 | 3,019 | 2,991 |
| Inventories | 2,545 | 4,135 | 2,735 |
| Trade receivables | 629 | 470 | 624 |
| Construction contracts in progress | 113 | 136 | 40 |
| Other receivables | 379 | 238 | 277 |
| Corporation tax | 82 | 116 | 64 |
| Cash at bank and in hand | 206 | 218 | 335 |
| Total current assets | 3,954 | 5,313 | 4,075 |
| TOTAL ASSETS | 7,144 | 8,332 | 7,066 |
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 22 of 33
Consolidated balance sheet - Equity and liabilities
| mEUR | 30 June 2011 |
30 June 2010 |
31 December 2010 |
|---|---|---|---|
| Share capital | 27 | 27 | 27 |
| Other reserves | 5 | (29) | 9 |
| Retained earnings | 2,675 | 2,374 | 2,718 |
| Total equity | 2,707 | 2,372 | 2,754 |
| Deferred tax | $\Omega$ | $\Omega$ | 6 |
| Provisions | 121 | 117 | 139 |
| Pension obligations | 2 | 2 | 2 |
| Financial liabilities | 1,273 | 1,109 | 910 |
| Total non-current liabilities | 1,396 | 1,228 | 1,057 |
| Prepayments from customers | 1,437 | 3,137 | 1,546 |
| Construction contracts in progress | 15 | 0 | 15 |
| Trade payables | 1,090 | 873 | 1,120 |
| Provisions | 191 | 240 | 223 |
| Financial liabilities | $\overline{4}$ | 5 | $\overline{4}$ |
| Other liabilities | 252 | 314 | 323 |
| Corporation tax | 52 | 163 | 24 |
| Total current liabilities | 3,041 | 4,732 | 3,255 |
| Total liabilities | 4,437 | 5,960 | 4,312 |
| TOTAL EQUITY AND LIABILITIES | 7,144 | 8,332 | 7,066 |
Randers Interim f Compan Page 23 s, 17 August inancial repo ny announcem 3 of 33 2011 ort, first half y ment No. 37 year 2011 /2011
Consoli dated statem ment of cha anges in equ uity – six mo onths 2011
| mEUR | Sha are capi ital |
Trans slation reser rve |
Ca ash flow he dging res serve |
Retained earnings |
Total |
|---|---|---|---|---|---|
| Equity at 1 January y 2011 |
27 | 3 | 6 | 2,718 | 2,754 |
| Acquisit tion of treasu ury shares |
- | - | - | (17) | (17) |
| Share b based payme ents |
- | - | - | 4 | 4 |
| Total co omprehensiv ve income for r the peri od |
- | ( 13) |
9 | (30) | (34) |
| Equity at 30 June 2 2011 |
27 | ( 10) |
15 | 2,675 | 2,707 |
Consoli dated statem ment of cha anges in equ uity – six mo onths 2010
| Sha are |
Trans slation |
Ca ash flow he dging |
Retained | ||
|---|---|---|---|---|---|
| mEUR | capi ital |
reser rve |
res serve |
earnings | Total |
| Equity at 1 January y 2010 |
27 | (35) | (6) | 2,556 | 2,542 |
| Acquisit tion of treasu ury shares |
- | - | - | - | - |
| Share b based payme ents |
- | - | - | 0 | 0 |
| Total co omprehensiv ve income for r the peri od |
- | 37 | (25) | (182) | (170) |
| Equity at 30 June 2 2010 |
27 | 2 | (31) | 2,374 | 2,372 |
| Vestas Win nd Systems A/S Alsvej j 21, 8940 Rander |
rs SV, Denmark |
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 24 of 33
Summarised consolidated cash flow statement
| mEUR | Q2 2011 |
Q2 2010 |
1 half year | 1 half year |
|---|---|---|---|---|
| 2011 | 2010 | |||
| Profit/(loss) for the period | 55 | (143) | (30) | (182) |
| Adjustments for non-cash transactions | 69 | (128) | 146 | (122) |
| Corporation tax paid | (25) | 33 | (32) | (56) |
| Net interest | (11) | (9) | (25) | (9) |
| Cash flow from operating activities before | ||||
| change in working capital | 88 | (247) | 59 | (369) |
| Change in working capital | 38 | (62) | (200) | (338) |
| Cash flow from operating activities | 126 | (309) | (141) | (707) |
| Net investment in intangible assets | (78) | (70) | (159) | (136) |
| Net investment in property, plant and | ||||
| equipment | (110) | (129) | (201) | (211) |
| Other | (1) | (3) | 7 | (4) |
| Cash flow from investing activities | (189) | (202) | (353) | (351) |
| Free cash flow | (63) | (511) | (494) | (1,058) |
| Acquisition of treasury shares | (10) | 0 | (17) | 0 |
| Raising of non-current liabilities | 73 | 248 | 363 | 768 |
| Cash flow from financing activities | 63 | 248 | 346 | 768 |
| Change in cash at bank and in hand less current portion of bank debt |
$\bf{0}$ | (263) | (148) | (290) |
| Cash at bank and in hand less current portion of bank debt at 1 April/1 January |
201 | 459 | 332 | 479 |
| Exchange rate adjustments of cash at | ||||
| bank and in hand | 2 | 19 | 19 | 26 |
| Cash at bank and in hand less current portion of bank debt at 30 June |
203 | 215 | 203 | 215 |
| The amount can be specified as follows: Cash at bank and in hand without disposal |
||||
| restrictions | 173 | 200 | 173 | 200 |
| Cash at bank and in hand with disposal restrictions |
33 | 18 | 33 | 18 |
| Total cash at bank and in hand | 206 | 218 | 206 | 218 |
| Current portion of bank debt | (3) | (3) | (3) | (3) |
| 203 | 215 | 203 | 215 |
Alsvej 21, 8940 Randers SV, Denmark
Tel: +45 9730 0000, Fax: +45 9730 0001, [email protected], www.vestas.com
Bank: Nordea Bank Danmark A/S, Reg. No.: 2100, Account No.: DKK 0651 117097 - EUR 5005 677997
Company Reg. No.:
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 25 of 33
Accounting policies
Basis of preparation
The interim report comprises a summary of the Consolidated Financial Statements of Vestas Wind Systems A/S.
Accounting policies
The interim financial report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and additional Danish disclosure requirements for interim financial reports of listed companies.
Apart from the effect of new IFRS/IAS implemented in the period, the accounting policies are unchanged from those applied to the annual report for 2010 prepared under the International Financial Reporting Standards (IFRS) approved by the EU. Reference is made to pages 85-91 of the annual report for 2010 for a complete description of the Group's accounting policies.
New IASs/IFRSs implemented in the period
With effect from 1 January 2011, Vestas implemented amendments to IAS 24 regarding related party disclosures, to IAS 32 regarding financial instruments presentation, to IFRIC 14 regarding the limit on a defined benefit asset and to IFRIC 19 regarding extinguishing financial liabilities with equity instruments.
Vestas evaluates the changes and interpretations not to have any material impact on Vestas at present.
Reference is made to page 132 of the annual report for 2010 for more details of the aforementioned standards and interpretations.
New IAS/IFRSs issued in 2011 to be implemented in future accounting periods
In 2011, the following new standards or amendments to standards have been issued:
- IFRS 10 Consolidated Financial Statement $\bullet$
- IFRS 11 Joint Ventures/Joint arrangements $\bullet$
- IFRS 12 Disclosures of Interests in Other Entities $\bullet$
- IFRS 13 Fair value measurement $\bullet$
- IAS 27 Separate Financial Statements $\bullet$
- $\bullet$ IAS 28 Investments in Associates and Joint Ventures
- IAS 19 Employee Benefits $\bullet$
- IAS 1 Presentation of Items of Other Comprehensive Income
The standards have not yet been approved by the EU. Vestas is at the moment evaluating the impact to the financial statements
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 26 of 33
Management's statement
The Executive Management and the Board of Directors have today discussed and approved the interim financial report of Vestas Wind Systems A/S for the period 1 January to 30 June 2011.
The interim financial report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and additional Danish disclosure requirements for interim financial reports of listed companies. The interim financial report has neither been audited nor reviewed.
In our opinion the interim financial report gives a true and fair view of the Group's assets, liabilities and financial position at 30 June 2011 and of the results of the Group's operations and cash flow for the period 1 January to 30 June 2011.
Further, in our opinion the Management's review gives a true and fair review of the development in the Group's operations and financial matters, the results of the Group's operations for the period and the Group's financial position as a whole and describes the significant risks and uncertainties pertaining to the Group.
Randers, 17 August 2011
Executive Management
Ditlev Engel President and CEO
Henrik Nørremark Executive Vice President and CFO
Board of Directors
Bent Erik Carlsen Chairman
Torsten Erik Rasmussen Deputy Chairman
| Carsten Bjerg | Elly Smedegaard Rex | Freddy Frandsen |
|---|---|---|
| Håkan Eriksson | Jørgen Huno Rasmussen | Jørn Ankær Thomsen |
| Kim Hvid Thomsen | Kurt Anker Nielsen | Michael Abildgaard Lisbjerg |
Sussie Dvinge Agerbo
Randers Interim f Compan Page 27 s, 17 August inancial repo ny announcem 7 of 33 2011 ort, first half y ment No. 37 year 2011 /2011
Compan ny announc ements from m Vestas Wi ind Systems s A/S
Disclose ed during th he first quar rter of 2011
| 17.01.20 011 |
01 | Major Shar reholder ann nouncement – Central Ba ank of Norwa ay |
|---|---|---|
| 09.02.20 011 |
02 | Annual rep port 2010 |
| 10.02.20 011 |
03 | Major Shar reholder ann nouncement – Central Ba ank of Norwa ay |
| 11.02.20 011 |
04 | Rumours in n the market t regarding o order in Swed den |
| 28.02.20 011 |
05 | Rumours in n the market t regarding o offshore orde r from PNE W WIND AG in Germany |
| 28.02.20 011 |
Convening g for Vestas W Wind System ms A/S' Annu ual General M Meeting |
|
| 02.03.20 011 |
06 | Share base ed incentive programme 2011 |
| 18.03.20 011 |
07 | Rumours in n the market t regarding a a wind farm p project in Mex xico |
| 21.03.20 011 |
08 | Vestas nam med as a def fendant in a lawsuit in the e USA |
| 28.03.20 011 |
09 | Vestas Win nd Systems A A/S' Annual General Mee eting on 28.0 03.2011 |
| 30.03.20 011 |
10 | Vestas lau nches next g generation of ffshore turbin ne |
| 31.03.20 011 |
11 | Vestas rec ceives 150 M MW order in B Brazil |
Disclose ed during th he second q quarter of 20 011
| 08.04.20 011 |
12 | Rumours in n the market t regarding o offshore proje ect in Belgium m |
|---|---|---|
| 14.04.20 011 |
13 | Major shar reholder anno ouncement – – Central Ba nk of Norway y |
| 18.04.20 011 |
14 | Major shar reholder anno ouncement – – Central Ba nk of Norway y |
| 20.04.20 011 |
15 | Vestas rec ceives 104 M MW order in C Canada |
| 26.04.20 011 |
16 | Major shar reholder anno ouncement – – Central Ba nk of Norway y |
| 03.05.20 011 |
17 | Vestas rec ceives 100 M MW order for China |
| 04.05.20 011 |
18 | Interim fina ancial report, , first quarter r 2011 |
| 06.05.20 011 |
19 | Vestas rec ceives 102 M MW order in C California, US SA |
| 11.05.20 011 |
20 | Vestas rec ceives 72 MW W order in Tu urkey |
| 13.05.20 011 |
21 | Vestas rec ceives 80 MW W order in Br razil |
| 18.05.20 011 |
22 | Vestas rec ceives 200 M MW order in U USA |
| 24.05.20 011 |
23 | Rumours in n the market t regarding o order in India |
| 27.05.20 011 |
24 | Vestas rec ceives 219 M MW order in C California, US SA |
| 30.05.20 011 |
25 | Vestas rec ceives 149 M MW order in C Canada |
| 09.06.20 011 |
26 | Rumours in n the market t regarding o order in Cana ada |
| 20.06.20 011 |
27 | Vestas rec ceives 78 MW W order in Sw weden |
| 22.06.20 011 |
28 | New syndic cated facility y well receive ed by the loa n market |
| 30.06.20 011 |
29 | EDF Energ gies Nouvelle es will purcha ase a minim um of 50 per r cent of all it ts future onshore w ind installatio ons in Europ pe and a mini imum of 30 p per cent of a ll its future onsh hore wind ins stallations in the US from m Vestas for d deliveries in 2012 to 2014 |
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 28 of 33
Company announcements from Vestas Wind Systems A/S
Disclosed after the interim reporting period
| 01.07.2011 | 30 | Vestas receives 60 MW order in Brazil |
|---|---|---|
| 05.07.2011 | -31 | Information in the market regarding 180 MW frame agreement in Sweden |
| 08.07.2011 | 32 | Information in the market regarding order in the USA |
| 15.07.2011 | 33 | Vestas receives 90 MW order in Brazil |
| 26.07.2011 | 34 | Vestas receives 92 MW order in Asia Pacific |
| 09.08.2011 | 35 | Vestas receives 92 MW order in Spain |
| 15.08.2011 | 36 | Vestas receives 202 MW order in the USA |
Randers Interim f Compan Page 29 s, 17 August inancial repo ny announcem 9 of 33 ort, first half y ment No. 37 year 2011 /2011
Sales (d deliveries)
| Sales in MW |
Q2 2011 |
Q2 2010 |
1 half year 2011 |
1 half year 2010 |
Full year 2010 |
|---|---|---|---|---|---|
| Germany y |
87 | 66 | 238 | 140 | 261 |
| France | 56 | 66 | 148 | 108 | 212 |
| Romania a |
55 | 0 | 57 | 0 | 228 |
| Great Bri itain |
45 | 183 | 49 | 197 | 533 |
| Italy | 44 | 44 | 78 | 90 | 248 |
| Sweden | 29 | 26 | 75 | 102 | 358 |
| Greece | 29 | 30 | 37 | 50 | 155 |
| Ireland | 28 | 68 | 28 | 68 | 118 |
| Portugal | 6 | 0 | 6 | 0 | 10 |
| Poland | 4 | 85 | 4 | 87 | 87 |
| The Neth herlands |
1 | 0 | 10 | 0 | 6 |
| Turkey | 0 | 15 | 98 | 42 | 96 |
| Spain | 0 | 0 | 60 | 82 | 179 |
| Bulgaria | 0 | 40 | 11 | 217 | 219 |
| Denmark k |
0 | 3 | 1 | 3 | 77 |
| Belgium | 0 | 0 | 0 | 0 | 183 |
| Cyprus | 0 | 0 | 0 | 0 | 82 |
| Hungary | 0 | 4 | 0 | 4 | 21 |
| Switzerla and |
0 | 0 | 0 | 0 | 16 |
| Czech Re epublic |
0 | 12 | 0 | 14 | 14 |
| Austria | 0 | 0 | 0 | 0 | 6 |
| South Afr rica |
0 | 0 | 0 | 0 | 2 |
| Total Eu rope and Afric ca |
384 | 642 | 900 | 1,204 | 3,111 |
| USA | 647 | 2 | 784 | 59 | 1,093 |
| Canada | 0 | 48 | 26 | 48 | 172 |
| Mexico | 0 | 0 | 0 | 0 | 102 |
| Brazil | 0 | 0 | 0 | 74 | 74 |
| Uruguay | 0 | 10 | 0 | 10 | 20 |
| Jamaica | 0 | 0 | 0 | 0 | 18 |
| Chile | 0 | 3 | 0 | 3 | 3 |
| Total Am mericas |
647 | 63 | 810 | 194 | 1,482 |
| China | 65 | 70 | 160 | 70 | 857 |
| India | 28 | 64 | 85 | 129 | 242 |
| New Zea aland |
3 | 0 | 36 | 0 | 0 |
| Australia | 0 | 0 | 0 | 0 | 150 |
| Total As ia Pacific |
96 | 134 | 281 | 199 | 1,249 |
| Total wo orld |
1,127 | 839 | 1,991 | 1,597 | 5,842 |
Alsvej Tel: + Bank: Comp Comp j 21, 8940 Rander 45 9730 0000, Fa Nordea Bank Da pany Reg. No.: 10 pany Reg. Name: V rs SV, Denmark ax: +45 9730 0001 anmark A/S, Reg. 40 37 82 Vestas Wind Syst 1, vestas@vestas No.: 2100, Accou tems A/S .com, www.vestas nt No.: DKK 0651 s.com 117097 - EUR 50 005 677997
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011
Page 30 of 33
MW overview per quarter 2011
| МW | Europe and Africa |
Americas | Asia Pacific |
Total |
|---|---|---|---|---|
| Q1 | ||||
| MW under completion, 1 January 2011 | 1.246 | 291 | 447 | 1,984 |
| MW delivered to customers during the period | (516) | (163) | (185) | (864) |
| MW produced and shipped during the period | 260 | 173 | 201 | 634 |
| MW under completion, 31 March 2011 | 990 | 301 | 463 | 1,754 |
| Q 2 | ||||
| MW under completion, 1 April 2011 | 990 | 301 | 463 | 1,754 |
| MW delivered to customers during the period | (384) | (647) | (96) | (1, 127) |
| MW produced and shipped during the period | 595 | 712 | 110 | 1,417 |
| MW under completion, 30 June 2011 | 1.201 | 366 | 477 | 2,044 |
Randers Interim f Compan Page 31 s, 17 August inancial repo ny announcem of 33 2011 ort, first half y ment No. 37 year 2011 /2011
Warrant ty Provision ns
| mEUR | 30 June 2011 |
30 0 June 2010 2 |
31 Dece mber 2010 0 |
|---|---|---|---|
| Warrant ty provisions s, 1 January |
283 | 339 | 33 9 |
| Exchan ge rate adjus stments |
0 | 0 | 0 |
| Provisio ons for the pe eriod |
56 | 96 | 19 4 |
| Warrant ty provisions s used during g the period |
(85) | (132) | (253 3) |
| Adjustm ments relating g to the chan nge in discoun nting of warra anty provisio ns |
0 | 0 | 3 |
| Warran nty provision ns, 30 June e/31 Decem ber |
254 | 303 | 28 3 |
| The pro ovisions are e expected to b be payable e as follows: |
|||
| < 1 yea r |
152 | 209 | 17 1 |
| > 1 yea r |
102 | 94 | 11 2 |
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 32 of 33
Segment information
| mEUR | Europe and Africa sales units |
Americas sales units |
Asia Pacific sales units |
Production units |
Total reportable segments |
|---|---|---|---|---|---|
| Q2 2011 | |||||
| External revenue | 627 | 646 | 125 | 3 | 1,401 |
| Internal revenue | 52 | 19 | 6 | 1,163 | 1,240 |
| Total segment revenue |
679 | 665 | 131 | 1,166 | 2,641 |
| Reportable segments' operating results (EBIT) |
(18) | (61) | (41) | 82 | (38) |
| Total assets | 1,952 | 732 | 560 | 2,325 | 5,569 |
| Q 2 2010 | |||||
| External revenue | 628 | 109 | 292 | 3 | 1,032 |
| Internal revenue | 124 | 27 | 16 | 640 | 807 |
| Total segment revenue |
752 | 136 | 308 | 643 | 1,839 |
| Reportable segments' operating results (EBIT) |
123 | 3 | (12) | (139) | (25) |
| Total assets | 2,693 | 721 | 991 | 2,515 | 6,920 |
| Reconciliation | Q2 2011 | Q2 2010 | |||
| Reportable segments' EBIT | (38) | (25) | |||
| All other operating segments' EBIT *) | 115 | (155) | |||
| Consolidated operating profit (EBIT) | 77 | (180) |
*) Includes parent company income (management fee, service, royalty and other rental income from group companies) reduced
by costs related to Vestas Technology R&D and Group staff functions.
Randers, 17 August 2011 Interim financial report, first half year 2011 Company announcement No. 37/2011 Page 33 of 33
Segment information
| mEUR | Europe and Africa sales units |
Americas sales units |
Asia Pacific sales units |
Production units |
Total reportable segments |
|---|---|---|---|---|---|
| H1 2011 | |||||
| External revenue | 1,289 | 835 | 333 | 4 | 2,461 |
| Internal revenue | 183 | 35 | 10 | 1,529 | 1,757 |
| Total segment revenue |
1,472 | 870 | 343 | 1,533 | 4,218 |
| Reportable segments' operating results (EBIT) |
(21) | (66) | (30) | 37 | (80) |
| Total assets | 1,952 | 732 | 560 | 2,325 | 5,569 |
| H 1 2010 | |||||
| External revenue | 1,377 | 195 | 306 | 3 | 1,881 |
| Internal revenue | 277 | 56 | 28 | 960 | 1,321 |
| Total segment revenue |
1,654 | 251 | 334 | 963 | 3,202 |
| Reportable segments' operating results (EBIT) |
142 | $\mathbf 0$ | (23) | (199) | (80) |
| Total assets | 2,693 | 721 | 991 | 2,515 | 6,920 |
| Reconciliation | H1 2011 | H1 2010 | |||
| Reportable segments' EBIT | (80) | (80) | |||
| All other operating segments' EBIT *) | 88 | (139) | |||
| Consolidated operating profit (EBIT) | 8 | (219) |
*) Includes parent company income (management fee, service, royalty and other rental income from group companies) reduced
by costs related to Vestas Technology R&D and Group staff functions.