Full Year 2024 Vestas Wind Systems A/S Earnings Call

Good morning to everyone and welcome to our presentation of full year 2024.

And let me before we go further just to extend a heartfelt. Thank you to our partners our customers shareholders and not least outstanding colleagues for a very strong into 2024 and a very strong execution also F. Also very successful in Q4.

In 2024.

It is remarkable just to put it in perspective that Q4.

Just on top of 6 billion euros is as big as Vista's was back in 2013 and also Q4 is the best quarter, we've had since 2017 as a single quarter.

With that let's go to the key highlights.

So the key highlights for the full year 2024, we ended with a revenue of $17 3 billion euros, and an EBIT margin of four 3%.

This is achieved its outlook for the year and continued the positive trajectory in 2024.

The service the service EBIT.

I'll say.

And sorry here, we just once.

Slow in the slides, but decided to EBIT of 448 million.

Ended the year rising costs caused a challenging year for service, but the scrutiny is now complete for the business and our recovery plan is in place and we are being executed and executing on it.

Order intake of 17 gigawatt gave a 19 billion of euro add in value of the order intake that is a record year in terms of order intake in terms of value with a high as P and strong momentum in both the onshore and the offshore.

We see continued ramp up in the U S onshore and in Europe, particularly in offshore so the manufacturing ramp up challenges are driving additional cost as we prepare to deliver on our record order backlog, especially in the onshore U S and in offshore.

We also hear mentioned returning value to our shareholders. So thanks for the loyalty of the last years. So we propose a dividend of 0.55 per share.

For the AGM in April and we will initiate a share buyback of 100 million euro with immediate effect as you will see Sunday announcement.

We'll also go through the outlook 2025. The revenue is expected between 18 to 20 billion euros EBIT margin before special items is expected in the range of 4% to 7% and more details to come.

With that let's go to T.

Update of the business environment.

I think for the business environment, one of the headings that are very important to remember. These days is when the entity is still key to the affordability security and sustainability.

The Gaylord political uncertainty.

Best illustrated in the year in the charter of the figure below to the right.

We also see that the affordability in any comparison, the liberalized cost of energy of wind is competitive and in most cases the lowest.

When you see also establishing new entity assets for 30 years.

We will still remain fully committed to our entity sustainability journey and the world needs more of that so how do we talk about the greenhouse gas avoided it.

And not least how do we make sure that the NTT assets you are building remain yours and independent for the lifetime 30 years of it.

That's when we look at the global environment goes without saying raw materials and transport costs are mainly stable.

Across our our markets and we.

Looking at the ongoing geopolitical and trade volatility I am sure. We will have a question or two but it is of course actual discussed also addresses these days.

The overall inflation is stabilizing and I think one very important takeaway here is that the indexes are now converging and we've seen that we've seen for instance in some of the weights agreements now in central Europe that data settling in around two 5% increase on average over the coming two years, which is very much in line with you.

Overall public inflation as well.

When you look at the market environment I think the great investment is a priority and in most key markets. It's also the one that are being discussed most intensively.

Let me talk about the permitting when we told the permitting and improving in some markets mentioning here, Germany U K U S.

But overall permits in auctions and market design is still challenging.

Denmark delivered one of those examples that are not to be followed and of course. They are now trying to reset how the next or shouldn't regime will be introduced.

I think when it comes to the wind entity. It again shows that strength both in terms of the affordability security and sustainability and that of course is one thing we take away also from 2024.

When we look at the project level the regional disruption continues to Fred in supply chain, we've seen that seen also access ships supply chain.

But on the other hand, our low margin legacy projects did complete end of end of last year.

Even in a in a Q4, where we did really really well in the power solution.

We talked along about when it will change and we'll come back to that but I think Q4 is one of the best execution quarters. We have seen in recent times. We're also we've seen the lowest pre and post kind of gap Inc.

Actually in many years, so I have here to shout out well done to investors and to our partners executing on that in Q4.

When it comes to power solutions in Q4, we had a strong into the year. So the strong Q4 order intake of six and a half gigawatt with continuous momentum across all regions in onshore and good market activity in offshore in EMEA in Asia Pacific.

When we see the order intake that was down compared to last year due to a very very tough comparison with an all time high quarter in Q4 2023.

D E S. P. A new orders was in the quarter, one point 18 million per megawatt in the quarter that was up one from 1 million.

<unk> megawatts last year in the same quarter.

The order backlog in power solution increased to a record high of 31.6 billion euros up $5 6 billion compared to last year. This also is a testament that our any of these solutions continue to have good traction with customers across our core markets and there are many often when.

We look at the charts to the right you can see the comparison versus the U S last year, where we had one or two customers, placing large orders in Q4, which we always say, sometimes you have to see the average of dose and also what is that coverage. We had one six gigawatt all the way up to the last banking day.

The U S and we think the team and also the customer for trusting us to do that.

You can also see the offshore here good traction and then on the E. S. P positivity underlying even with the usual influence an adjustment for scope and geography very pleased to see the ASP is positive.

And at least stable at a higher level. So now let's go to the service business.

So heading off the service business in Q4 is we spent the time well the scrutiny of the service business is complete so wild when service have had a difficult year in 2024 discrete any of the businesses over and then recovery plan is in place and being executed.

Service reaches 155 gigawatt on the service compared 249 gigawatt, a year ago solidifying our position as the largest service business in the industry.

The service order backlog continues to grow now almost 37 billion euros up from 34 billion in end of 2023.

You'll see the breakdown here to the right.

And you will also see in my strategy update that we'll spend a bit more time that.

Both in the details of the plan and also how we are going to execute it and in what timeframe.

Yeah.

When we looked at the development in Q4, a strong order intake of new secured pipeline.

And here really well in Q4 versus development generated 612 megawatt of order intake for Vestas from two development projects in the U S.

At the end of Q4 versus pipeline of development projects amounted to 28 gigawatt with Australia U S, Spain, and Brazil, holding the largest opportunities.

Throughout 2020 for business development continue to generate value with approximately two gigawatts of exits in that timeframe you.

You'll see the breakdown of the development business here and again really thank you for insisting in continuing all the way to the large banking day of the year.

Then we go to the sustainability.

And in terms of the sustainability I think here, it's appropriate to say that we stand tall globally for sustainability. It is absolutely the right thing to do and it will remain the right thing to do for us to come and the generation two follows. So when we look at the highlights here the lifetime emissions avoided.

By produced and shipped capacity increased by 59 million tons compared to a year ago, you will see that in the chart to the right.

In terms of the number of recordable injuries per million working hours was stable around 3.0 by 2024 was marred by five fatalities, including what investors employee.

We tie as they work to improve our safety performance across our value chain.

Those experiences in the fatalities I, absolutely five too many and we of course are doing our deep dive of how we can improve from that this is not good enough.

While we will not reach our 2025 targets for scope, one and two carbon emission we continue to make progress.

You will see that over here in the scope, one and two it's 105000 tons of Cotwo.

Excluding the business, we bought enough 2020.

So therefore, excluding the offshore business, we would have achieved a reduction of 44% compared to 2019.

I would just comment on that we have not left our commitment to reduce scope, one and two contrary to some quotes in the press. So therefore here you can see the results, but it is not possible for us to predict if we buy a business that changes to C. O two emissions and offshore is absolutely the right thing both to invest in and also.

To have as a business investors.

We also honor to yet again be heralded as the most sustainable entity solution company by corporate Knights and I will say here that also led to our wealth number free in sustainability and of course, it's a pleasure to see that and we also congratulate Schneider electric with being number one.

With that it's a pleasure to welcome osmose.

Speaker Change: Our engineering group CFO to the financials.

Cosmos.

Speaker Change: Thank you very much Henrik Hello, everyone really really good to be here.

Speaker Change: And we start with the income statement for the full year were for 2024 revenue increased 12% year on year to $17 3 billion euros, which is in the upper end of the guided range and the growth was primarily driven by turbines delivered at higher prices. The EBIT margin before special items came.

Speaker Change: At four 3% also within the outlook range.

Speaker Change: And if we are actually adjust for the sale of our controls and converters business in 2023 and the improvement in the EBIT margin is three eight percentage points year on year compared to the two the two 8% you can see in the table on the AR on the right.

Speaker Change: Return on capital employed continues to improve and is now at 8%, which is an improvement of more than than five percentage points from from last year.

Speaker Change: When looking at the the quarter revenue increased by 29% year on year, driven by higher revenue in both the power solutions and service segments gross margin improved by more than seven percentage points to 18, 1% as the turnaround in the power solutions segment is now is now really visible in.

Speaker Change: The numbers and with SG&A cost being fairly stable. This means that the vessels generated a 12.4% EBIT margin Q4, showing double digit profitability and as Henrik mentioned that one of the strongest quarter said that we have seen for many many years.

Speaker Change: Okay.

Speaker Change: Looking at the power solutions segment revenue increased by 28% year on year, driven by higher megawatts delivered in both the onshore and offshore as well as higher average prices.

Speaker Change: EBIT margin in the quarter was 12, 9%, which is up almost 10 percentage points compared to last year and leading to the highest quarterly profitability since 2017, and again cementing the the tremendous turnaround achieved and in power solutions.

Speaker Change: The improvement was driven by better project execution, lower warranty costs and the benefits from the operating leverage in what was still a very backend loaded year and here maybe just a reminder, that we expect 2025 to two follow a similar profile and of course looking at the chart to the right you can see that that historically is this.

Speaker Change: Has been also the trend.

Speaker Change: And also importantly, the quarter also marks the completion of the low margin legacy backlog.

Speaker Change: Orders taken from mid 2022 and before.

Speaker Change: Service revenue increased by 30% year on year, driven by a record high transactional sales in the quarter and also a currency.

Speaker Change: Currency tailwind and if you look just on the underlying contract revenue that increased 12% year on year, just to give yourself some flavor on that.

Speaker Change: The service generated an EBIT of 250 million euro in the quarter equivalent to a margin of 18% which was as expected.

The cash flow statement for Q4 operating cash flow was $2 2 billion euros in the quarter an improvement compared to two also a strong Q4 last year driven by higher profitability and net working capital improvements.

Speaker Change: Adjusted free cash flow was $1 8 billion Euro, which is also an improvement year on year. Despite the overall higher investment levels.

Speaker Change: And for 2024 for the full year adjusted free cash flow amounted to $1 1 billion compared to slightly negative last year.

Speaker Change: And we're ending the year in a net positive cash position of more than 800 million.

Speaker Change: That's a really good number right Russell's that's a pretty good number thank you.

Speaker Change: Looking at our working capital in the quarter working capital decreased considerably in Q4.

Speaker Change: Not unusual and this was driven by a reduction in inventories, while higher customer down and milestone payments were largely offset by higher receivables and he had to say it is also worth noting that we actually had the 'twenty 'twenty four with lower inventories and net contract assets than last year, despite activity level being higher.

Speaker Change: Okay.

Speaker Change: When looking at our investments in the quarter, we made investments of 403 million euro in the quarter.

Speaker Change: Which is an increase compared to last year and and as also mentioned by Henrik we're continuing to prioritize the manufacturing ramp in both the offshore and the four megawatt platform, particularly in the in the USA.

Speaker Change: As we have now begun zero manufacturing of our IV to three six turbine across our European sites.

Speaker Change: Order to deliver the first projects here in 2025, and but there's also a cost triggers and higher depreciation and amortizations.

Speaker Change: Yeah.

Speaker Change: Looking at the provisions and L. P. F. We continue to have a heightened focus on quality in order to to help L. P. F improve and of course, what's your provisions to come down so overtime and improved L. P. F should lead to lower warranty provision levels we.

Speaker Change: Do you see a slight increase in the L. P F in AR in Q4.

Speaker Change: And which was driven by downtime at the two specific offshore sites that we also addressed in Q3, but we are actually seeing in the underlying L. P. F continued to improve.

Speaker Change: Warranty costs amounted to 162 million euros in the quarter, which corresponds to two 6% of revenue and.

Speaker Change: But maybe more importantly for the full year warranty costs came in at four 3% of revenue.

Speaker Change: <unk> grew five 3% in 2023 and six 4% in 2024.

Speaker Change: Yeah.

Speaker Change: And looking at the capital structure, the combination of <unk> of what we saw in terms of strong free cash flow and improved earnings. This leads to a further decrease of the net debt to EBITDA ratio to now negative 0.5.

Speaker Change: Well below our internal target of less than one and on the back of this set 'twenty 'twenty four numbers. We then propose a payout of a dividend of Teekay 0.55 per share.

Speaker Change: Well S. A S initiating a share buyback program of 100 million euros in order to return value to our shareholders and all of this corresponds to a payout ratio of around 35%.

Speaker Change: And with that I would like to pass back to Henrik for a strategy update.

Speaker Change: Thank you so much.

Speaker Change: Not the worst set of numbers you could you could do your first presentation for today's audience.

Speaker Change: When we then look at the strategy updates.

Speaker Change: I will try to keep this.

Speaker Change: When we look at this this is what it's all about how do we actually get the C. O two emission down to also control and and at least now damage control. The temperature rise. The planet is is facing I think we will just show. This in the chart here and you can see the various a set of scenarios with it gives.

Speaker Change: This was probably the worrying thing for all of US is that the stated policies will actually increase the temperature to.

Speaker Change: With two around two and a 2.4 degrees we already know know another data point, which was the 2024. It gave us a rise to now historic high of 1.6 degrees above preindustrial Eh things. So therefore this is what it's all about.

Speaker Change: So when we then look at that also sets the both the scene and and to some extent to tee up for what it what I is the growth potential for wind.

Speaker Change: The charts to the to the less you know very well. This is T. A energy consumption in 2020 free for the for the for the planet and here, we see electricians. He still is around 20% witness approximate one 6% of electricity generation that means energy from wind comes to somewhere.

Speaker Change: Around 1.6 and in total of electricity, 8%.

Speaker Change: When we then needs to look to towards the right. Then you can see both the stated policies. We can see the <unk> policies and we can see the net zero and how much of that needs to come in for instance for the wind and what proportion of we will have.

Speaker Change: Then we are not talking about a doubling of the capacity annually. We are talking about a quadrupling of the capacity towards the 2050 and if I may just draw your attention to this this is not sort of a.

Accumulated.

Speaker Change: The 300 gigawatt. This is an annual.

Speaker Change: Construct it's a target towards 2050, so we have a steep ramp ramp up in front of us.

Speaker Change: That also means when we talk about our global priorities first thing first.

Speaker Change: You know very well we had a target there was back in black for 'twenty. Three we are now operating in the two years 24, and 25, which is back on track, we had six strategic priorities onshore offshore quality cash efficiency and people and not surprisingly we have added service to that so we have seven strategic.

Speaker Change: Priorities and I will say in in actually right now for investors and for the financials. The free onshore offshore and service are they feed key ones also we will talk more about in both the journey to 10%, but it's also what gets really D. Right now attention for the financials.

Speaker Change: That also means when we come out and we still have a long term sustainable growth view in terms of our strategy towards 2030, Hasnt changed we still see ourselves being a global leader in the sustainable entity solution based on our strong foundation and off onshore.

Speaker Change: Wrong Foundation in service, we are establishing the same similar strong foundation and offshore and of course, we are well supported and helped by our colleagues in development and our interested customers for the practice coming out of development.

Speaker Change: I'll just double click here, because the onshore and offshore we talked about and I would also encourage you to read much more about these things in our annual report, but on the service recovery plan, let me double click on that.

Speaker Change: So the scrutiny and the cost challenges in 2024.

Speaker Change: Hatch and did lead to a revised operating model.

Speaker Change: We did a scrutiny of our service business and it is now complete.

Speaker Change: As previous mentioned excuse me need highlighted free main cost challenges equally important is the unit cut costs is the operational inefficiencies and as the quality related effects.

Speaker Change: Not surprisingly Edo of the free and when we look through it we just try to give you. Some examples of it here to the right.

Speaker Change: We had a net contract assets in 2024.

Speaker Change: I E. The unbilled revenue that amounted to 912 million euro or around 3% of the service backlog.

Speaker Change: The new service operating model is implemented as of first of January 2000, and twenty-five to strengthen the accountability and also the regional engagement and also ownership of the service business.

Speaker Change: That was completed by our group C O O for service taking position by the first of January and they are now in full operating a floor, but when we look at the service business across.

Speaker Change: You can see the charts over here and also the five year development in both backlog and the net contract assets.

Speaker Change: What does it entail to have a recovery plan for a business that is still very strong first of all it's about getting the service back on track. It involves the faulty investors and also the full value chain, but as you've probably guessed out of some of these points, it's not only about service colleagues and the service business at all.

Speaker Change: Also linked to the technology is linked to our digital part of Vestas and not least links to our technology colleagues and that also has the responsibility together with everyone else around the quality of the product.

Speaker Change: So the series one plan is cross functional and it is about regional collaborations and it's about delivering for Udi customer at your site.

Speaker Change: Global priority list of initiatives, we will share some of them here, but it includes a list of priorities that people will be measured on and we're also saying here. It's a strategic priority list that runs in 2025 in 2026. So in reality, it's four to eight quarters ahead from where we are today.

Speaker Change: We have not had any.

Speaker Change: Doubts dead when we review the business that our long term ambition of 25% EBIT is still the same way.

Speaker Change: We are not at 25% you saw our Q4 numbers is set by Osmose is currently sitting at 18% and that's probably a fair run rate of the business and therefore, we are building that on top when an oncoming Ah the four to eight quarters and then we will see how quickly we can get to the 25%.

Speaker Change: EBIT.

Speaker Change: When we then look at some of these things.

Speaker Change: First heading is the commercial resetting we will drive commercial excellence with photos on price scope billing profiles and contract trimming.

Speaker Change: We are mentioning here contract training for the first time. It also means similar to what we have been through in power solutions. When you do this you could call. It a turnaround you will also allow yourself if it doesn't jive and doesn't solve itself in other ways than contract training can be the only way out like can also be that we simply choose.

Speaker Change: Not to extend or renew some of those countries.

Speaker Change: As already mentioned I think one of the most important things at least on the external side is that the wage inflation in mainland Europe is now settling around 2.5% in annual wage increase which is very much in line and therefore connected to the underlying inflation indexes that are so important for the service business.

Speaker Change: Not a point is the intelligent work order scheduling that is very much addressed towards the person in the colleague that is in the field every day. So it introduces automatically until it and work schedules based on commercial and operational profiles. So youre actually doing what you expected and also.

Speaker Change: What you are painful.

Speaker Change: The standardized cost control that means that's the reading on cost control <unk> for teams is to practice, a benchmark and use a standardized AI enabled tools, which means it's just comparing people and standards of how we work and how we do that and I think that will make a lot of sense in the basis.

Speaker Change: Last but not least T advantaged troubleshooting software, which means also we have to become better in using the AI tools to reduce the turbine visits but also to deactivate some of the false alarms and improve the predictive maintenance.

Speaker Change: Is one of the things one of the other things we mean by the inefficiencies we have found you.

Speaker Change: You will see over here in short little Oh of U S as to the left.

Speaker Change: What points to the commercial resetting.

And of course, the commercial resetting is very much about the unit cost.

Speaker Change: On the on the operational inefficiency in quality related effects, we have to get that endpoint you can't have that commercial discussion unless we perform at our best.

Speaker Change: The Intel it and work order scheduling touches all three points to standardized cost control touches to two points.

Speaker Change: Unit cost and operational inefficiency and then he advanced troubleshooting Shelfware.

Speaker Change: Absolutely addresses the operational inefficiency in the quality related effect.

Speaker Change: I will say there is a four to eight quarters journey ahead.

Speaker Change: Specified and and I know from being now and seeing many of the service colleagues. This is a committed team, but they will also have a fair bit of of watching and all the attention they need to get the execution away over the coming four to eight quarters. So I'll only wish them. Good luck with that and we are all in.

Speaker Change: As a team Mr supporting the service business.

Speaker Change: That also means when we look at our long term ambitions. This is also for US important you'll also be able to read much more about that in our annual report, but we haven't found reason to change any of it so revenue still we grow faster than the market and the market leader in revenue.

Speaker Change: On the EBIT side best in class earnings are at least 10% EBIT margin and that's in industrial related.

Speaker Change: And then return on capital employed 20% return on investment over the cycle of course rose and EBIT closely goes hand in hand, and when we see the free cash flow free cash flow positive and therefore osmose wonderful number for 2024, and a testament to the global team.

Speaker Change: And our customers that have supported that a long way.

Speaker Change: And then as I say it a shout out on E. S T a carbon neutrality across our own operations and 45% scope reduction by 2030.

Speaker Change: We got to keep an eye on this because we gave ourselves a very hard time for scope, one and two but it is on the scope free we have a ratio.

Speaker Change: That is much higher we speak more about that.

Speaker Change: In our annual report and I really encourage you to read more about our initiatives and how well we're doing contrary to just a a hitting india in the papers.

Speaker Change: With that I'll give you a bit more on the on the 10% EBIT margin.

Speaker Change: And you'll see in here will bills will share the building blocks and we will also share them in a loyal way of saying there is there is a different size of the building blocks shown below.

Speaker Change: It doesn't state win and it doesn't state how much. So we will like to encourage you to use your imagination.

Speaker Change: After listening to that lease this call, but also in our meetings in the coming days.

Speaker Change: So we start with the 2025, which is the midst of the guidance range five 5% that means in reality, we need to build a not only a bridge, but also are critical building blocks to get to 10%.

Speaker Change: If I look to the far left.

Speaker Change: I think under project profitability, we have come a very very long way when.

Speaker Change: When we went through both 'twenty, one 'twenty two and to some extent twenty-three. This was probably one of the biggest building blocks, we had but also with our comments today and what we have seen for Q4 in 'twenty four we can say that Germany still has a basis points in it but it is not the same size of.

Speaker Change: Basis points that we started with you can see that and that is probably one of the main contributors of why we are now solidly talking about plus 4% EBIT in what Vestas is achieving.

Speaker Change: On the onshore volume the operational leverage and the better absorption of fixed cost is still a very obvious.

Speaker Change: I also needs in the onshore volume to mention here the ramp up we are doing in the U S. It's a ramp up in onshore and onshore, particularly that causes challenges because it looks it looks easy when you split shifts and you run many more shifts and you did 18 or 20.

Speaker Change: Four months ago, but it does not give the tech time imagined that you came from with one shift that's not detect time you have for to shift and therefore, you'll keep investing both in additional capacity and Youre also keep investing through a lower tech time until the factory will run a.

Speaker Change: Fully efficient.

Speaker Change: That's not true and therefore part of both exiting 'twenty four and also coming into 25 gives us further <unk> basis points to have on the onshore volume, but also in the basis points. We can recover from the onshore ramp up in the U S.

Speaker Change: I think we probably all in all have a bit better fixed point here together when we talk about the service services expected to labor on its recovery plan and of course it sits right in the middle you can calculate it if the differences between 18% to 25% you can make your assumptions on the service business and how much it will go.

Speaker Change: So in the coming years, it will still grow.

Speaker Change: And therefore, it's fair to assume that they are some building or building block in here that service contributes to the overall group our 10% target.

Speaker Change: In the range of.

Speaker Change: Leave it to you.

Speaker Change: But that you can you can definitely do the calculation off.

Speaker Change: In terms of quality.

Speaker Change: I will say often when we talk quality, we bring it down almost in the discussion with you to one single slide which means is what is the what is the warranty provision in the quarter and whats the warranty provision for the year. The truth of it is the cost of poor quality for a manufacturer like us is throughout the whole value chain. It is what goes on in the factories at what goes on.

Speaker Change: And the site, but it is also what goes on of course in the warranty provision.

Speaker Change: So as you've seen in the last years, we are trending in the right direction, but we're not there yet we're not there yet in terms of warranty provision we have seen variances between the quarters, but we are still at 4.3%. It's the lowest warranty provision annually. We have had in the last five years, but it's not where we think the business should be running.

Speaker Change: Neither in onshore and offshore therefore.

Speaker Change: Therefore, the warranty provision contributes but equally important and to some extent as important or more is the cost of poor quality that sits outside that that's the scrap it's the waste that goes on from the factories or even at site, where we lose as things that doesn't work in the quality of the value chain.

Speaker Change: So that bubble is actually bigger than what we can see our sales improving in the run rate from the service.

Speaker Change: And then last but not least here is the the biggest thing which is T offshore ramp up.

Speaker Change: We continue to scale offshore you know that we are entering a year, where we are putting the new turbine in play.

Speaker Change: We are ramping up the serial manufacturing of it but even with the two projects. We have this year. It is not able to reach margin on par with the onshore at all why is that.

Speaker Change: Two projects or a similar size business is not able to absorb that now beginning of the amortization and depreciation we said that all along that sits at least in the amortization and depreciation of 200 million increase for this year equal to in round numbers around 100 basis.

Speaker Change: Points, but includes quite a bit more the ramp up of offshore that is happening predominantly in Europe predominantly across our four manufacturing sites is absolutely going on as we speak but it also means there is a huge investment going on in this outside just the one on the under.

Speaker Change: Depreciation and amortization. So he is it's a number of 100 of basis points, which of course some of them will go away in terms of the ramp up it gets better and others will simply pay diluted when we eight years, where we can use the capacity. We are building two and no for those who are interested.

Speaker Change: We're not here.

Speaker Change: He is saying what capacity we are building two and how we are building it but we are advanced in it but we are definitely not at the run rate and this is the year, where we need to make that investment. If you add those five building blocks together most of you will come to something that is well in excess of 450 basis points, we do as well we also learn.

Speaker Change: And one thing external world, sometimes cause a bump or two on the road. So therefore, we feel comfortable that we have built and we have building blocks here that contains more than the usual 450 basis points to get to 10% and I think we can also which taking 2024 results to you also say we have.

Speaker Change: Something and evidence to have it in because what we have done in the onshore and the power solution. There is a testament, but it takes time investors because the backlog takes time as always so with that thank you for taking time to listen to this strategy update I will now go to the outlook for 2025.

Speaker Change: So the outlook for 2000 and twenty-five a further increase in revenue from.

Speaker Change: From this year so to 18 to 20 billion euros are we said at an EBIT margin before special items of 47%.

Speaker Change: And that includes a service that is expected to generate an EBIT before special items of around $700 million.

Speaker Change: The investment continues its around the same level of $1 2 billion, which of course, we also talk more about in police courage you to reach through our annual report, where we also write more about what kind of investments we are doing but it is mainly also now in manufacturing ramp and tooling for especially the offshore.

Speaker Change: With that Ah.

Speaker Change: Oh, just remember to say that to 2025 outlook is based on the current foreign exchange rates and I think that's where we are we are sitting currently so with ACH.

Speaker Change: So with that the financial calendar for the for the coming months. So we had the ATM.

Speaker Change: Each of April with the dividend proposed is hospice was mentioning we.

Speaker Change: We got the disclosure in May August and November for the year, So with that I will just leave it to the operator and the Q&A. Thank you so much.

Speaker Change: We will now begin the question and answer session anyone who wishes to ask question you May press Star and one under telephone you will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the queue if I start.

Speaker Change: Question is on the phone a request to the Staples allows us to promote while asking a question anyone who has a question you May press star one at this time.

Speaker Change: First question comes from Klaus Adama from Nordea. Please go ahead.

Klaus Adama: Thank you first of all congratulation with a very strong Q4 performance.

Klaus Adama: The first question goes to the 2025 EBIT margin guidance.

Klaus Adama: Could you please help us better understanding the underlying.

Klaus Adama: Margin progression so.

Klaus Adama: There's a bit of more color on how much offshore is pulling down the margin both at the low end and the high end of the guidance range there'll be the first question.

Klaus Adama: Okay.

Klaus Adama: Oh.

Klaus Adama: Do that close first of all.

Klaus Adama: Exited the year well as you said and thanks for that and you will also see here, we exited on the onshore and we are moving with some of the same momentum in the 225, but as just a walk through on the on the offshore. Some of it is is very straightforward, that's the depreciation and amortization and <unk>.

Klaus Adama: And as I said on the on the ramp it has a price to it right now and for obvious reason I'm not I'm not going to give you that but of course. It is a significant investment that sits in the year in the factories and the ramp between prototyping and serial manufacturing and.

Klaus Adama: The underlying on the onshore very strong and you can see from the from the service. So I would rather go in the other way around you can count on the onshore and you can count on the service then you know approximately what are what are what we are investing in the offshore.

Klaus Adama: Maybe I am sure the math is pretty difficult for me so, let's just say.

Klaus Adama: The offshore argues very close to the 10% EBIT margin.

Klaus Adama: We will probably not have guided the 10 to 13 Klaus if we didn't have the offshore so I will I would rather again in a highlight if we assume a five and a half in the middle and then you can do it and you can assume we are spending significant a basis points in India offshore this year.

Klaus Adama: And that's right, there's nothing else to say about that on the other hand, we also have to say as much as we had a flawless execution on onshore in Q4, and I, sometimes to remind people of 6 billion euros in excess where a lot of it also nearly 5 billion comes from the from the power solution onshore.

Klaus Adama: Sure.

Klaus Adama: There is there is that there is there is a lot in here that as has happened well and of course that we don't just run a trajectory in saying it will it'll be flawless in in the following four quarters and so take that as a positive and and also see the operational leverage you have from onshore and in Q4.

Klaus Adama: Fair enough.

Klaus Adama: My second question goes to the U S.

Klaus Adama: Market currently.

Klaus Adama: Current political situation.

Klaus Adama: Does that mean, we shouldnt expect any Jewish orders being announced in the coming quarters or before any clarity comes.

Klaus Adama: And you were saying what is actually your pipeline, Chile, the talks with the customers.

Klaus Adama: I think U S is is let's put it this way it's it's an interesting one to follow.

Klaus Adama: Not only on a weekly but also on a daily basis. I think we are we in the cloud we have more than 5000 people in the U S. We are ramping up we have done and done that for many decades the investment in in the solutions. There we see the onshore LNG offshore very differently I think the offshore has.

Klaus Adama: Come to a stop.

Klaus Adama: More or less with immediate effect.

Klaus Adama: And you've seen a reflection on that both from.

Klaus Adama: New Jersey and others.

Klaus Adama: But when it comes to the to the onshore.

Klaus Adama: Backlog, we have we are well covered for 25, we will come out well covered a long distance into 'twenty six and right now I will say the cost the dialogue with customers are.

Klaus Adama: Really really well there so I'll be surprised if we don't continue that can be stopped for weeks in some of the consideration right now, but at least over the weekend I'll say confirmed many people are still sticking to the projects the pipeline and also not to forget the states generally appraised.

Klaus Adama: The eight to build outs and also needs the electricity generation.

Klaus Adama: Okay.

Klaus Adama: So that means we're cushy mod.

Klaus Adama: In the first half and extra C. Some of the projects that slipped.

Klaus Adama: Q4 into 2025 total orders at certainty or is it more a bear.

Klaus Adama: Backend loaded 2025 order intake for the U S onshore market.

Klaus Adama: Cloud only well enough a I would definitely not exclude autos coming in Q1.

Klaus Adama: And that is a fair way of saying I think it's interesting to see it on the call here and in February and almost should defend wind.

Klaus Adama: As sort of the pendulum has swung and I think right now affordability a D. A I drive for demand in the U S is so strong that there is more electricity and energy needed.

Klaus Adama: And funny enough the renewable sources us amongst the fastest to bills and they are all well positioned into Q and they also by the way approved four for all of the legacy Tiv.

Klaus Adama: Created so therefore, let's go.

Klaus Adama: Sounds very cool.

Klaus Adama: Well done and that was all for me. Thanks.

Speaker Change: The next question comes from the line of our cash flow from Jpmorgan. Please go ahead.

Speaker Change: Hi, Good morning, Henrik and thanks for your time and my first one is on <unk>.

Speaker Change: Assuming dividend and share buyback at the time when you have a big offshore ramp up also.

Speaker Change: Hi, uncertainties in the U S from Trump administration policies. So are you, giving a signal that these headwinds.

Speaker Change: That's significant and showing your confidence in pulling through adult should ramp up which will still lead to a meaningful profitability for the year.

Speaker Change: The first one thank you.

Speaker Change: Thank you Kash and I think it's a it's a it's a signal to everyone that we are comfortable with it with what we are looking into in 'twenty, five and 26 and for that matter in the backlog.

Speaker Change: We have seen that progress coming and it's also fair, saying, Oh gosh, we feel strongly for our shareholders and listen to that is not a is not everything that has been linear in the last year. So therefore, it is it's an appreciation.

From both board and executive management in saying there has to be both dividend and share buyback and of course, we wouldn't have done that if we didn't believe we had ramp up before in both onshore and offshore and we believe we will we will work through that and they will disappear at a point in time ramp is often.

Speaker Change: About repeating things often enough then you become good at in the factories and that's what we're working on.

Speaker Change: Thank you and my follow up question is about <unk>.

Speaker Change: <unk> cost of electricity in onshore in general when we look at your ASP.

Speaker Change: Kind of flat or maybe up in the past couple of years.

Speaker Change: Can you tell us how much reduction in <unk>, you are able to generate with this.

Speaker Change: At prices that we see.

Speaker Change: Order intake.

Speaker Change: And are your customers have certain expectations for LTE and addiction, when they discuss orders that will be delivered in few years down the line.

Speaker Change: And maybe expanding your question a bit further how do you see some of these long term market forecast for wind that still rely on continued declining life cost of electricity.

Speaker Change: I always think it's interesting when we talk about wins and we talk about other renewables. The liberalized cost of energy has to come down constantly and ultimate their hit zero and that would be the worst thing that could happen for any industry, because if entities for Sarah everyone will.

Consume entered itself. It. So therefore, let's let's pause for a second and just talk about the level of <unk> cost of energy.

Speaker Change: Different from different parts of the world, where I'm, just saying here off need sits well whenever you're in Australia, and the U S. Youre in the Latam Youre in Europe that there is a much better way of doing this.

Speaker Change: By prioritizing it and also doing it.

In wind you can see right now Germany in the last two years has suddenly gone from very little to more than potentially 10 gigawatts in both 'twenty four 'twenty five and still leaning towards 26, that's not because TLC <unk> necessarily has gone down but it is still the best.

Speaker Change: Turning to for Germany, both in terms of time in the levels of the security for Germany, and secondly, also in in reality, how big you can built how quickly.

Speaker Change: Thank you.

Speaker Change: The next question comes from the line of Christian <unk> from Seb. Please go ahead.

Speaker Change: Yes. Thank you I have two questions to them one by one so first one goes to your service business.

Speaker Change: Appreciate the details of your recovery plan, but focusing on slide 24, and the net contract assets, which you also show has increased.

Speaker Change: And 'twenty call yes.

Note in the lower right of the slide here a.

Speaker Change: Contract drilling profiles have not yet caught up with the revised cost plan.

Speaker Change: You will likely continue to carry the net contract assets on the balance sheet.

Speaker Change: So maybe if you could elaborate on this in particular one thing is that you will continue to.

Karen: Karen net contract asset.

Karen: But when should we expect that net contract assets to <unk> and start declining.

Speaker Change: Thank you Christine for that I think the net contract assets is in here and as rightly, saying it is about catching up is both in terms of the billing profile of the contracts. So some of it will will equal out over time simply because the <unk>.

Selling increases secondly of course the recovery here is also part of bringing some of the cost down and as I said one of the best one from the external world is that you see the wage inflation at a substantially different one I cant give you a exact quarter of that's where the.

Speaker Change: The contract asset is going down we will continue working on it.

Speaker Change: We might we might still see some variations and slight increases this year.

Speaker Change: But but from a business point and how it relates to the individual contracts and sites I'm very comfortable after we've scrutinized the business.

Speaker Change: Understood.

Speaker Change: Then my second question.

Speaker Change: Oaktree offshore business.

Speaker Change: And I guess pocket to believers on the road to the 10% drop 10, so I'll take you.

Speaker Change: It made it fairly clear that there is a notable impact 2025, so for more curious for 2026 and 27.

Speaker Change: Current offshore backlog that you have both in terms of volumes and in terms of.

Speaker Change: Pre Calgary market backdrop, Matson, whatever you want to call it.

Speaker Change: Visibility does that give you to sort of a.

Speaker Change: Improvement on the on the offshore market in 'twenty six 'twenty seven.

Speaker Change: Thank you so much.

Speaker Change: And I think it's a this call. It is always interesting because we probably have to appreciate here and this is also one of the markets where we are we are not that many are participating in so I will I will I will answer the following at least 426, we will come back to 'twenty six when needed to guide on that but it goes without.

Speaker Change: Saying that every time you add some additional topline to it it has a lot higher degree of operating leverage of both the business. We are building, but also the depreciation and amortization. That's just a math game in that sense, but it's much more in mass game also to connect with the customers and we are we.

Speaker Change: Blessed with customers that are trusting us towards to 2030 and of course that backlog you will see a halving.

Speaker Change: Having the P S A's and order intakes are building them so I.

Speaker Change: I will say its 26 look better than 25, and 27 look better than 25 and 26, that's the best way of looking at that.

Speaker Change: And so there isn't anything else to do there's some patient required here to see your investment materializing in a in a better in a better balance and an icon and I will not give you the quarter of when it's not margin dilutive because because that will be in the in the latter part of the yes.

Speaker Change: We are discussing.

Speaker Change: Fair enough and then definitely wasn't expecting that answer either but clarify I just may follow up so.

Speaker Change: You clearly highlighted volumes, that's an important element.

Speaker Change: Leverage.

Speaker Change: Market potential significant enough for you to secure that volume.

Speaker Change: Going forward.

Speaker Change: To support the necessary markets you need an offshore.

Speaker Change: I think we work with.

Speaker Change: With exactly the same both loss of fixed <unk> and also our supply chain and I. Welcome here that it seems like everyone has gotten very sensible about what order intake, they're putting in the backlog in offshore.

Speaker Change: And it doesn't make any sense for anyone to built a offshore turbines or wind parks and having.

Speaker Change: Either half or billions of losses of EBIT, and we don't try to achieve that EDA, but on the other hand, when we are scaling in investment until we have the volume required then.

Speaker Change: And then it will be a profitable business.

Speaker Change: Understood. Thank you so much.

Speaker Change: The next question comes from the line of Dan Togo Jensen from Carnegie. Please go ahead.

Speaker Change: Yeah. Thank you congrats from my side as well.

Speaker Change: With the with the finish in Q4.

Speaker Change: A question on the service business and the guidance of $700 million in.

Speaker Change: 25.

Speaker Change: Are there any sort of say one off costs.

Speaker Change: Cost from this transition in a changing up the organization et cetera contract trimming as Louis mentioned, Henry that is weighing down and the guidance for FY 'twenty.

Speaker Change: Patricia.

Speaker Change: The first question.

Speaker Change: Any organizational changes and other things have been taking fully into 24. So there's none of that nature. When we then look at a when we didn't look at a business, where we don't know how the year will unfold. That's why we are saying around 700 million. So there's of course risk elements in any in any plan you executing and in the service recovery plan.

Speaker Change: And of course, if they are one offs in there we will we will show them and she had them like we do always done in a quarterly basis, but I think a good good starting point is the run rate, we're coming out with from Q4.

Speaker Change: So contract training necessary, but not trigger.

Speaker Change: <unk>.

Speaker Change: One offs now than we would have said it we are not at peak and <unk>.

Speaker Change: Anyone who follows our accounts will know that we are not a big spend neuro special items or anything like that so we have no. We have no. It's not like you are seeing a big camouflaged restructuring program with special items and contract Dream, that's not what we do but I'm just saying here we in the commercial resetting we won't shy away from if there are places in the world.

Speaker Change: Old where people can't agree on having a proper value of the year service contract it will either not be extended or it will it will have an exit at some point.

Speaker Change: But that would take Nashville as an ordinary.

Speaker Change: And a question on ESP, increasing sequentially could you give some flavor on the progression here how much of the impact of this.

Speaker Change: Offshore wishes kind of obvious but is there anything we should be aware of on the onshore side that potentially list prices she asphalt.

Speaker Change: And this one it's a it's a big good average of six and a half a six and a half gigawatt. So of course, there is a there is a fair balance between offshore and onshore.

Speaker Change: And that gives it and and as you will appreciate we don't give.

Speaker Change: The breakdown of that because there are only a few projects in the in the offshore pipeline. We are encouraged by this probably most encouraging I will say here that we work enormous to close with the customers that have put orders in here and it's not like one takes a bigger part of the pie or others, we work constantly on trial.

Speaker Change: To optimize the projects together with our customers.

Speaker Change: We don't win it all.

Speaker Change: And and that's in many ways a good thing.

Speaker Change: So therefore, the Asps we are seeing.

Speaker Change: He is supporting very much the Brits, we also shared with you, but I'm, saying here that compared to where we came from the.

Speaker Change: The biggest step in that are in that a S. P is file over now it's more optimizing from project to project and potentially also from country country. We got to also be aware the ASP cant continue upwards just like it has done because then the project doesn't become a viable for our customer.

Speaker Change: To invest in.

Speaker Change: So stable positive trend still and we liked it.

Speaker Change: Okay. Thanks, and just one question remaining here.

Speaker Change: The two offshore fact that are driving up the <unk> in Q4.

Speaker Change: When are they back on stream. So we can see the Lps come.

Speaker Change: Down the.

Speaker Change: The cost of 25%.

Speaker Change: It's a is this case, we talked about in Q3 and as it is only two sites I E. I will prefer to have that conversation with my two customers.

Speaker Change: Yeah.

Speaker Change: Okay. Thank you.

Operator: The next question comes from the line of Casper Blom from Danske Bank. Please go ahead.

Thank you very much.

Operator: I have a couple of questions as well and I'll also try and take them one by one starting with the.

Operator: You are.

Operator: Final illustration of the five leave us to get towards the 10%.

Operator: One of them is onshore volume and obviously youre getting more onshore volume here in 2025.

Operator: Looking into 'twenty six 'twenty seven can you be a little bit more sort of specific.

Operator: Specific on where you expect to find that volume growth.

Operator: Because it seems as if there are areas of the world that are not growing much. These days South America. For example is it that you will find more growth in Europe and in the U S.

Operator: That's the first one.

Operator: Sometimes we simply don't know the answer to your to your to the question and.

Operator: Kasper I think it's it's it's 226 and 27. We are we are doing what we can right now and you know very much delivers to that it's Europe. It's U S. It's Australia, It's it's Asia Pacific and then of course, we see parts of Latin America developing differently than other parts, so Brazil it seems to be.

Operator: Very low but that auto parts of Latin America that are considering so so I will say before we sort of point to a specific one we still see a lever there and we also see a lever in some of the core markets, where it seems like that there are definitely more ramp in capacity needed and I just want you to who set of also remain.

Operator: When doing the same is is not going to do it in terms of the electricity build outs and <unk> and the capacity build out. So you also have to assume that there is a quite an underlying growth from some of the existing markets.

Speaker Change: Sure, but I suppose that's been the case for some time.

Operator: My second question My second question is.

Speaker Change: Why don't you probably prepared for that.

Speaker Change: A lot of talk about tariffs. These days could could you remind us to how sensitive you ought to potential import tariffs in the U S. Both when it comes to.

Speaker Change: Onshore and also on the one offshore projects that turned into a firm order late 'twenty four.

Speaker Change: I think here.

Speaker Change: The tariffs that are currently being either introduced or removed.

Speaker Change: It happens sort of a bit in the timeframe, where we hardly can manage to change our global supply chain. I mean, we have a backlog two to five years out we have done that for supporting the build outs and normally it's what we've learned both when it came in.

Speaker Change: In 19 and also in the last five years.

Speaker Change: I think we need to take it one by one and see where it comes from its clearly right now as of today and as of probably now are we.

Speaker Change: We haven't had any challenges when it comes to U S EU.

Speaker Change: But of course, we can't rule that out and then we will have to sit down and do that discussion on the on the individual either projects.

Speaker Change: Or wait and see it's scheduled to come from and we are well prepared for that and we have dealt with it before.

Speaker Change: So I think these days when somebody asked me earlier do we have scenarios. There's no one that can have scenarios for what is being right now put on the table and different parts.

Speaker Change: But I think we have good ways of mitigating it and that's probably for US the most important thing don't.

Speaker Change: Don't forget we have our factories, we have a supply chain already inside the U S. And we are very busy in the end, we will try to stay that way.

Speaker Change: May I follow up on asking to what degree you have tried to make this a risk that customers carry rather than you given that eight years ago. We also saw higher tariffs. It must have been something that you are sort of have sort of been more prepare for and contracts to date and eight years ago too.

Speaker Change: A very large degree its a it sits between the us and the customer of course and that of course, we have also.

Speaker Change: <unk> been used to and we have certain ways of dealing with that and we will try to mitigate that with customers and to some extent. It can also means that there'll be projects that will then have to be scheduled or rescheduled in in either size of where it comes from so we are fully prepared for that.

Henrik: Okay. Okay. Thanks, a lot Henrik.

Suppress O'Brien: Next question comes from the line of suppress O'brien from UBS. Please go ahead.

Speaker Change: Yes. Thank you.

Suppress O'Brien: Couple of quick questions.

Suppress O'Brien: Just wanted to get your thoughts on that.

Suppress O'Brien: Market outlook in terms of the level of inquiries that youre seeing especially with a focus on U S onshore.

Suppress O'Brien: A few of the executive actions that's assigned in lead Gen.

Suppress O'Brien: Yes, just wanted to get your views on how you're seeing demand progress shortly.

Suppress O'Brien: Thanks.

Suppress O'Brien: I think.

Suppress O'Brien: The U S and in terms of executive orders around federal leases and others I think it goes well now already realized that it will stop or D offshore build outs.

Suppress O'Brien: Very much in very soon and you've seen.

Suppress O'Brien: New Jersey, taking immediate action on that and and others and of course.

Suppress O'Brien: Can only regret that but on the other hand.

Suppress O'Brien: I think also it's an appreciation of the actual and factual things happening in the U S East coast over the last two to three years, probably stopped that they themselves some time ago because it wasn't.

Suppress O'Brien: Transparent and it didn't give a sort of a straight how to build a pipeline. There on the onshore are very different it's been thought of legislation since.

Suppress O'Brien: 1992, and therefore.

Suppress O'Brien: The build out is in many ways are already committed and in the pipeline and at least a lot of the grids and and the off takers are relying on that offtake. So I think we talk about lots balances of supply and demand and if you bring that into question.

Suppress O'Brien: You actually run the risk of creating a smaller.

Suppress O'Brien: Energy crisis, if you if you don't get the build out you would expect.

Suppress O'Brien: Alright. Thank you and then just a quick follow up on the on the tariff question is well how much of the U S supply chain would be dependent on Mexico and Canada.

Suppress O'Brien: Sort of going from Mexico and Canada.

Suppress O'Brien: Yes.

Suppress O'Brien: Is there any sort of.

Suppress O'Brien: Mitigation.

Suppress O'Brien: Action that you have that could help.

Suppress O'Brien: Help you in that.

Suppress O'Brien: <unk> put in place on <unk>.

Suppress O'Brien: So Brian we liked the exchanges here, but the split there is simply not on a on a call like this we have that we are working with and we're working to improve it of course to our advantages. That's why we also have a factory.

Suppress O'Brien: <unk> set up already and we have a supply chain set up inside.

Suppress O'Brien: But of course, there will be parts like anyone else in the U S that is depending on trade so that will pose a limit not two versus or our customers, but to the society U S.

Suppress O'Brien: With the rest of the world So.

Suppress O'Brien: And giving the given the set up in the U S on onshore.

Speaker Change: I don't want to comment on the split and how we see it.

Speaker Change: Because there's there's not that many others in there and let's keep that for vistas thing.

Speaker Change: Fair enough. Thank you and congratulations on a strong end to thankful. Thank you. Thank you so much.

Speaker Change: The next question comes from the line of Jeff at that.

Speaker Change: From Goldman Sachs. Please go ahead.

Speaker Change: Good morning, and thank you very much for the presentation.

Speaker Change: Look we're going to be completely focused on your onshore business right. I think there was uncertainty on service last year and I think <unk>.

Speaker Change: Well articulated your ambitions with a 19% margin in your guide and an improvement thereafter, I think an offshore you've been quite clear that it will have an impact on 25 and it will weigh on numbers for 25% in 2006 as being dilutive to margin, but you will see sort of improvement beyond that.

Speaker Change: <unk> is just how much do we celebrate onshore here because if we look at 2024, you attained a 5% margin in your OEM side now if I remember back to your presentation at the 2020, which I bet you.

Speaker Change: You were talking about breakeven on offshore for that yeah, and I would imagine if anything it would be breakeven maybe even negative. So that's quite a pick up on the margin for 2000 and for especially when you look at the Q4 margin which is 13%.

Speaker Change: So when you look into 'twenty five.

Speaker Change: No legacy projects any more on that side, we should have seen a tick up on onshore.

Speaker Change: And then I'm thinking well, it's the right way to think about it is that margins.

Speaker Change: What's the sort of high single digit Mark in 'twenty five and then we should really be giving you credit the onshore business, which is a vast quantity of your business is improving quite sizable.

Speaker Change: But it's been harmed on 25 by offshore by things like the 200 million of amortization and.

Speaker Change: Depreciation you were talking about the fact that maybe you are carrying fixed costs on your offshore business because the revenue for that year with less than maybe you anticipated a few years ago, possibly you're carrying more warranty cost for the ramp up because I think it really does kind of.

Speaker Change: Really stomach it's already on how good the numbers. These are so any clarity or at least to tell me what are the negatives on the onshore that should be thinking about in 'twenty five.

Speaker Change: I'll set that mindset that I'm painting.

Speaker Change: You said that you should actually I've done my presentation to the board yesterday.

Speaker Change: Yes.

Speaker Change: So.

Speaker Change: The NDA here.

Speaker Change: I can't disagree and I from from celebrating the onshore.

Speaker Change: <unk>.

It's really it's really nice and I can't it's not it's not Mr. Zone. This is this is this is the partners. It's the supply chain as well so the shout out to onshore on the execution on the other hand.

Speaker Change: Also been waiting for that I think we all discussed at Q.

Speaker Change: Q2 last year was to turn off the onshore performance and also the backlog and seeing the execution. In Q4 was just absolutely outstanding. So therefore, the strengths of the onshore business should be evidence and uncontested for most people here that Unfortunately also shows and this is where I come back to <unk>.

Speaker Change: I won't tell you how well the onshore business is doing as a separate business in the in the outlook for 425, but as you can see on our set of building blocks, we're not shy of saying where it needs to look for ways to reinvest it and of course that for us is.

Is is quite an interesting one because you will you will not be able to see that.

Speaker Change: Either in our quarterly because of course, we will remain with the onshore, but we will have a lot of the cost.

Speaker Change: Cost to the ramp up of offshore without necessarily a lot of turnover at the same quarters. So this is an investment it is a drag and we are on it and we have it is absolutely one of the top priorities next to the service maybe.

Speaker Change: Maybe you can give me in a financial sense, but could you give me in a qualitative sense.

Speaker Change: If I think about the leave us on onshore and to 'twenty five.

Speaker Change: No legacy less less.

Speaker Change: Margin projects through legacy so that should be margins up.

Speaker Change: Maybe you've had some quite strong performance in 2004, so maybe you should adjust a bit down ports for maybe a bit of a normalization.

Speaker Change: But the net effect for onshore should be up versus 25 versus 24 is that fair.

Speaker Change: Am I missing a negative adjustment.

Speaker Change: I can't I can't have this conversation Ajay if if it's fair.

Speaker Change: The onshore is performing better we have had.

Ticks in 'twenty four there was dilutive, but on the other hand, a I'm just saying to you. Please don't walk in OSM is already want you will have full quarters Super back end loaded Q3, Q4 and that means actually in Q1 and Q2, we will we will struggle to carry the business grew with also the.

Speaker Change: We are doing so when you didnt see the power solution in Q1, and two you will see its still in saying or is it really right onshore is performing really well the asps as underlying doing that and I would keep pointing you towards the turn in the corner that turned was after Q2 24.

Speaker Change: And I will not give you a basis points.

Speaker Change: Comp blame me for trying.

Speaker Change: Okay.

Speaker Change: The next question comes from the line of Martin Wilkie from Citi. Please go ahead.

Speaker Change: Thank you good morning, it's Martin from Citi, just coming back to service on the commercial reset can you talk about drilling profiles and so forth just to clarify are those changes on new contract. So it was just on the sort of incremental backlog that you've built or have you been able to change that profile and so forth on commercial terms.

Speaker Change: On the existing backlog.

Speaker Change: And you've already said that backlog scrutiny is complete but is that commercial renegotiation recasting and so forth is that still ongoing and how long would that take if were still ongoing with that thank you Cosmos is simply jumping up and down to answer that one so I'll leave Austin was to to it.

Speaker Change: Okay. Thank you Henrik and thank you fulfilling most of the questions so far.

Speaker Change: I think the commercial discussion of any of our contracts on the health and the cost profile is over.

Speaker Change: But the commercial resetting is of course part of the plan and I think two to Hendricks point, we're simply saying, we will not shy away from taking those decisions and having those conversations with our customers. If of course, we need to do it and of course, there's a difference between a contract expiring and then a contract that is status that is younger and of course. These conversations will be different based on that what we're saying is we're going to do.

Speaker Change: Do what's right for the for the full backlog for the profitability and the health of the backlog and that's one of the levers that we're going to apply for <unk> for the for the recovery plan.

Speaker Change: Great. Thank you and if I could have a second question unrelated on the margin guidance. Obviously again in 2024, you saw benefit from the 45 X advanced manufacturing credits in the U S. Obviously has all sorts of debate in the U S about what may or may not happen to the inflation production, but does your 2025 guidance.

Speaker Change: Assume a continued benefits of our advanced manufacturing credit in 2025.

Speaker Change: Oh say here.

Speaker Change: I think whatever we have lived through in the world. We always rely on legislation until the legislation is not there anymore margin. So we assume we assume that we can count on that we will then see what happens doing during the year and that's how we see it.

Speaker Change: Most countries will always stick to their legislation they put in place themselves.

Speaker Change: Great. Thank you very much.

Speaker Change: The next question comes from the line of Deepak <unk> catalyst Fernand from Bernstein. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Thank you for taking my question.

Speaker Change: I have two questions one is on the U S.

Speaker Change: To start with the executive order on permitting that.

Speaker Change: Primarily applies to offshore wind, but could you confirm that there could be any implications on onshore maybe at any other permits such as FAA permits et cetera, anything that you see that might hinder.

Speaker Change: The execution of.

Speaker Change: Of getting new orders.

Speaker Change: This executive order and second one just going back to the 2025 guidance range.

Speaker Change: It is it is quite wide the range that you have so could you give us.

Speaker Change: Maybe other than the offshore then ramp up what would cause you to be at the lower end versus the upper end of the guidance given that consensus is sitting towards the upper end.

Speaker Change: Yes. Thanks.

Speaker Change: Deepa.

Speaker Change: In terms of the U S.

Speaker Change: I think the U S in terms of that and the orders are.

Speaker Change: Your question sort of got a little extended to future orders and other stuff and I simply can't answer on that one I know whats out there right now which is it has an effect on the offshore which you've seen the effect of already I think the general impression in perception of it in the onshore is it is to some extent rather.

Speaker Change: Limited because some of the federal leases, but there will still be federal permitting or.

Speaker Change: Also approvals that needs to apply on the debt. So therefore, I will sort of say here.

Speaker Change: So far so good but it's probably will pose some questions.

Speaker Change: To either the process and there'll be some sitting in some of those authorities that will also question almost the same as what you you raised so I think we will be spending time in the U S. Both with customers and authorities.

Speaker Change: No the ACP and the American Clean Power Association is also doing a good job in trying to help the markets not to stall or stop because I think actually here. The stalling of stuffing is what is probably a bigger risk to the U S build outs and the in the U.

Speaker Change: As Eddie market.

Speaker Change: In terms of the margin for two 7%.

Speaker Change: And the risk in probably more to the low end, which is of course, we see a we see a back end loaded year.

Speaker Change: Had a backend loaded year as well this year, but particularly also next year very back end loaded. It means that you and you will be for most of the year. After the two first quarters sitting and saying you are very busy in the second half of the year and can you do that and that of course, we will we will have to copy and paste for what we did in 'twenty free.

Speaker Change: 24, but it is oh.

Speaker Change: Always a risk.

Speaker Change: Other thing of course is.

Speaker Change: That sort of post that we will throughout the year see hopefully the ramp up.

Speaker Change: Improving so that means you start the year with most of the challenges in ramp up and then they shoot.

Speaker Change: Minutes or dilute over the year. So there are a couple of things here that we only know when we are further into the year and how that is going so that's that is the underlying reason why we have four to two 7%.

Speaker Change: And I know on behalf of divestitures team I know, where everyone is putting their mind and working towards but that's not always how it works.

William Mackie: The next question comes from the line of William Mackie from Kepler.

Speaker Change: Please go ahead.

Speaker Change: Good morning, Thank you very much for the presentation and for the questions.

Speaker Change: Two areas of questioning.

Speaker Change: First one.

Speaker Change: Henrik would be with regard to your plans on installations or delivery in 25, given the visibility from the backlog. If we just think about Brazil U S and Germany that accounts for about 45% of your installation in 2004 can you.

Speaker Change: Frame or could you frame your thinking around instead of delivery volumes in each of those key markets, which have quite different drivers.

Speaker Change: And I guess the second question comes back to Germany, one of your important markets I know a lot of uncertainty politically because of the elections, but there have been a number of changes in proposed changes in laws. There. So what is your sense of the thinking or mood of developers at the moment in Germany is that still.

Speaker Change: Wait and see despite the very encouraging auction volumes that we've seen thanks a lot.

Speaker Change: I think the upside in that to some extent is of course, you have a great visibility.

Speaker Change: Answer that also in in terms of why are we doing the following on dividend and share buyback because we got good visibility of twenty-five in and Youre right. There are great markets in terms of the U S Germany and.

Speaker Change: Australia.

Speaker Change: Also Brazil and Latam so in most of that we enter the year.

Speaker Change: With a high or a coverage for our outlook of the 18 to 20 billion, which of course is a.

Speaker Change: Really nice position to be and so in that sense, you're absolutely right in the visibility. There is is good on 25, and we execute on it and it is in market, where we have executed project before.

Speaker Change: The political change is not going to I think.

Speaker Change: Disturbed the backlog, maybe with some there could be questions or delays in the U S. I can't I can't say much about that but I can't see that is sort of bringing orders out of the out of the backlog or out of the execution. It might delay it and then we will talk to it as <unk>.

Speaker Change: The year unfolds well.

Speaker Change: Thank you a quick follow up if I may related to the development.

Speaker Change: Rather unusual and your use of the development business compared to your peers.

Speaker Change: Could you just talk a little bit given the pipeline of what you think the contribution might be in.

Speaker Change: In the year ahead and at least what it was to EBIT in 2004. Thank you.

Speaker Change: I will say here, we never guide on on it in a in that sense. It is it is I will say it is it is not material and that always hurts. The colleagues in development. So is it it's material in the sense of we do the best we can but the timing of it is always difficult to predict I think in 2024.

Speaker Change: We had a project mid year in Australia, and we had two projects significantly project in the U S and that gave us.

Speaker Change: Positive on that and part of it comes in 'twenty four and part of it comes in the following years, because we probably also work with the customer to optimize further.

Speaker Change: We see development differently, everyone knows here on the call that it's early development.

Speaker Change: We don't own the balance of it it's a pure exemption we haven't we will name the <unk>.

Speaker Change: One we I think we have left in there, but outside that no. We work with this and customers generally at least for the ones that buys the project seems to be very pleased with it and the ones that don't get it sometimes get get a bit upset that it wasn't them. So so this is how we run our development business and it works well.

Speaker Change: And that did well last year as well.

Speaker Change: But no no.

Speaker Change: Nothing, particularly lots in the in the outlook.

Speaker Change: Thank you great end to the year.

Speaker Change: Thank you so much.

Speaker Change: With the live in 'twenty could we operate I have the last question now.

Speaker Change: The last question comes from the line of Colin Modi from RMB RBC capital markets. Please go ahead.

Colin Modi: Thank you very much for taking my question.

Colin Modi: I appreciate there are variations of this question's been asked.

Speaker Change: This angle.

Speaker Change: In the U S market given the recent executive order.

Speaker Change: Offshore particular.

Speaker Change: Has this affected the ramp up or what kind of total ramp up of the speed of the ramp up of your offshore facilities.

Obviously in Europe.

Speaker Change: I know you've made comments previously about preferring to be early rather than late and perhaps just a quick squeeze on the Germany situation.

Speaker Change: Could you just remind us what kind of typical lead time is from kind of permitting or auction results to actually receiving orders. Thank.

Speaker Change: Thank you.

Speaker Change: Yes on the U S a.

Speaker Change: I think I commented implied in the sense that I think the offshore U S. Probably stop themselves 18, 24 months ago, because it didn't give the visibility and it didn't get didnt give the traction on auctions coming out on a frequent basis between the six states and of course somebody has taken a bit of an advantage of that.

Speaker Change: And probably stopped most of it I feel strongly for the people that have spent now working lives 356 years in working on offshore projects and of course, we know at least one project very well and in Atlantic chosen and <unk> for that matter both the shale in the end the EDF colleagues there.

Speaker Change: So that is that is we haven't built factories or things like that to accommodate that because that decision probably went a bit away.

Speaker Change: When there wasn't a detraction to 18 24 months ago. So what we are talking about resources is mainly the competencies and the knowledge. We have in key personnel, we will try to redirect to other parts of the offshore market in terms of Germany, you follow that when the auction comes out typically with permitted projects.

Speaker Change: And I think the latest legislation only supports that it puts the legislation much more clear.

Also in the allocation of land and the government allocated together with the with the with the.

Speaker Change: Not in the municipalities, but the regions in Germany. So therefore, typically one to two years of lead time from what happens in the auctions to you see it in not only our backlog, but also projects being constructed and is Tijuana.

Speaker Change: Thank you very much and congratulations again.

Speaker Change: Thank you so much.

Speaker Change: No we probably hear have further people on the line that would I hope we see all of you.

Speaker Change: Over the coming days, so the coming weeks, either here or in the U S where some of us will be spending some time.

Speaker Change: So much for your support thank you so much for your interest in <unk>.

Speaker Change: Again. Thank you for 2024, we are now in 25, so see you soon thank you.