Q1 2025 Vestas Wind Systems A/S Earnings Call
Okay.
Good morning, and welcome to our presentation of our Q1 for 2025 and.
And let me buy here also extend a huge gratitude and thank you to our customers across the world and especially in the U S for the very active discussions and also our colleagues for a very strong start of the year.
I would like to go to the key to the key highlights.
So the key highlights we ended Q1 with revenue of $3 5 billion euros, that's an increase of 29% year on year, driven by our high activity compared to Q1.
Last year and also the higher average pricing in power solutions.
The EBIT ended at positive 0.4% positive operating profit in Q1, despite normally the seasonal seasonal low activity in Q1, driven again by revenue growth and also higher project profitability.
The order intake was three one gigawatts the order intake increased by 36% year on year, driven by strong momentum in offshore, particularly and also in EMEA onshore.
The manufacturing ramp up and the service recovery plan remain key and it is absolutely key of our operating priorities also for the coming quarters. So the onshore and offshore ramp up is progressing and the service completes its first quarter of its recovery plan as we speak.
Then we have our new CFO starting first of June are we Onboarding Yagur big loss.
Speaker Change: <unk> is in the planning and he's ready he's ready to join and meet all of you when we get to D. A roadshow in August post our Q2 release.
In beginning of August.
Speaker Change: August so soon a very warm welcome to Yakov who has his official not the first of June because of extra fingers suddenly, but second of June. So yaacov, we look forward to welcome you to our twisters with that we will keep a bit more on the orders and the market we operating in.
Speaker Change: It goes without saying that the wind is still how old is the same as the key to both affordability security and sustainability as we have highlighted in here and I think we are acutely reminded of that throughout the first two full months of the of this year. If we look at the global environment inflation raw materials and <unk>.
Speaker Change: Transport costs are generally stable and but there is of course had an extra added dimension of potentially also some significant tariffs.
Speaker Change: That could increase costs in some of these we see the ongoing geopolitical and trade volatility leading to some sort of more form of regionalization and also adds to the uncertainty, especially when we look at our colleagues in the U S.
Speaker Change: The market environment and when we look at that there is a very high focus on energy security and affordability I think we have seen also in Europe are examples of that and how important it is to have societies running which stable energy supply. The good investment is prioritize.
Speaker Change: In key markets, and we see that more and more and then also the permitting improving in some markets, but overall permitting auctions in market design, a still challenging on not being discussed actively I think a positive example of some of this is also seeing a home country to us which is in Denmark, where.
Speaker Change: They have resubmitted the auctions for offshore after failing in Q4 last year.
Speaker Change: We actually now seeing new terms coming out we'd of course I'm guessing we'll attract a good good attention from the from the main European developers on the project level, we have had a quarter here.
Speaker Change: Proud to say that our team has executed well on our deliveries across the markets, but it is also clear that there is some regional disruptions to supply chain and at least at risk and particularly in this around in North America with U S. As a cool it changing for us when we.
Then look at the market share and this is the time of the year, where we look.
Speaker Change: With the numbers that has come in and of course here. We continues to lead the industry and when we look at global onshore offshore installations, excluding China and the global installation decreased from 37 gigawatt in 24.
Speaker Change: Or 247 gigawatt in 'twenty four from 40 gigawatt in 'twenty, three and we maintain our leading position and we continue to emphasize our value over volume.
Speaker Change: Secondly, also industry maturity is improving developers and turbine suppliers are being more selective and focusing on building high quality value, creating projects and also healthy backlogs you've seen our market share has gone from 28% to 30% and of course, we will continue forward, but as I say it is still weak.
Speaker Change: It is value over volume.
Speaker Change: We then go to power solution in the quarter, So I O.
Speaker Change: Order intake year on year, when we look at that your order intake of 3.1 gigawatt was up 36% compared to last year. The main reason for the increase as higher order intake in offshore and onshore in EMEA, while the U S is awaiting a policy clarity.
Speaker Change: It is the the largest offshore order in the quarter was one gigawatt, it's the North Lake One project in Germany, which will employ vistas is $2 36, a 15 megawatt turbine.
Speaker Change: The largest onshore order in the quarter was the 384 megawatt illegal project in Ukraine.
Speaker Change: Once commissioned the wind farm will generate enough clean energy to power more than 200000 homes, a year, making it the largest wind energy project in Ukraine.
Speaker Change: Personally it makes me incredibly proud to.
Speaker Change: Both have you established a relationship with D tick between D take investors through many years not also with the personal relationship to the CEO Maxim who I spent an awful lot of time in making some of these things are possible and it goes without saying our two teams and made this possible.
Speaker Change: To sign and also stocks in manufacturing and transporting into crane.
Speaker Change: D H P increase to euro 1.4 million per megawatt in Q1 compared to euro of 118 million per megawatt in the prior quarter. The increase was driven by a larger share of offshore orders and orders with a larger scope. So this is don't forget a average of many things in a quarter we have.
Speaker Change: With it and it also supports our strategy, we are laying out and following a rigorously and now for the last two years.
Speaker Change: We also see in the breakdown to the Reits That's U S. Only account for 189 megawatts in order intake in illustrating the natural await position for condition to be clearer on policy and also on tariffs in the U S. We are not disappointed over it we expected it but we can also see that we are working did.
Speaker Change: It didn't do with our customers to make that clear and that will become clearer in the coming quarters.
Speaker Change: We didn't go to service in Q1 and.
Speaker Change: We are now one quarter into the service recovery plan. So quarter here, we ended the quarter with a backlog increased to almost 47 billion up from 34 billion a year ago.
Speaker Change: The service reached 157 gigawatt under serve as compared to 149 gigawatt a.
Speaker Change: A year ago solidifying our position as the largest service business Indian industry.
Last is now one quarter into the service recovery plan, which is expected to run until the end of 2026, we'll keep you updated as we progress progress in the coming quarters, but rest assured the team is fully engaged and also committed and are fully aware of the plan across the world. So we are driving in operating that.
Speaker Change: With a with a discipline across our operations when you look to the right, especially in the middle one where we have a gigawatt on the active service contracts, stating 157, gigawatts it could deviate in the coming quarters when commercial reset takes place and we are also expanding on our customer.
Speaker Change: Conversations on Dx to them so be aware of that and then on the average contract duration still a bit more than 11 years and that also gives our strong contract portfolio. We are executing on.
Speaker Change: With that I'll go to development and its the Q1 2025.
Speaker Change: Coming out of a quite busy at year end in 2024, So I don't have a lot of saying to the development. They haven't had many order intake as you can see it says zero Omega what for the quarter. So I would just say in Q <unk> Q1, 'twenty five visitors as pipeline of development projects amounted to 27 gigawatt.
Speaker Change: Australia U S, Spain, and Brazil, holding the largest opportunities in general the strategic focuses on maturing and growing a quality project pipeline as well as conversion of mature projects into project sales and related turbine orders.
Speaker Change: During our Q1 focus was on continued development of existing projects the quarter did not release and realize any project sales nor any related order intake. So way. So we of course have a better expectations on the coming three quarters to our colleagues in development.
Speaker Change: When we then look at sustainability as stages after Q1 2025.
Speaker Change: The turbines produced and shipped in the last 12 months I expect it to avoid approximating 419 million tons of greenhouse gas emission over the course of their lifetime.
Speaker Change: Is an increase of 19 7 million tons and the improvement is primarily driven by the increased production we realized throughout Q1.
Speaker Change: You can see that on the graph to the right the carbon emission from our own operations decreased by 1% compared to last year and also demonstrate our relative performance is still improving and grows our scope one and two but it also highlights that if we have a lower activity on construction on offshore.
Speaker Change: Then of course, some part of this will be influenced by it. So I'm just saying here, we could foresee that that will increase in some of the coming quarters, while our construction activities increases etsy.
Speaker Change: Then lastly number of recordable injuries per million working hours was up from two nine to 3.2 year on year safe.
Safety remains a top priority for us as we try as we work to improve our safety performance across our value chain. Currently we are onboarding, many new colleagues across our operations in both the factories and into service. So it was more important to have every member of <unk> family arriving safely.
Speaker Change: Working safely and returning safely to their families.
Speaker Change: After carrying out the work at Vista. So this is something that we will keep focusing practicing in training with our colleagues in the field.
Osmose: Now with that I'll give it over to osmose. Please.
Okay.
Speaker Change: Thank you very much Henrik and let's start with the with the income statements, whereas as you already mentioned Henrik revenue increased by almost 30% year on year.
Speaker Change: Driven by the higher delivery volumes as well as higher prices. So I'm turbine deliveries and then a slight growth in the in the service segment gross profit increased by 47% to 359 million euros, which corresponds to a gross margin increase of 1.3 percentage points year on year.
Speaker Change: And the EBIT margin before special items, then came in at 0.4%.
Speaker Change: And what is of course traditionally are a little bit of a slow first quarter, but that is still an improvement of almost three percentage points year on year.
Speaker Change: On the table to the right here, it's also worth noting the improvement on return on capital employed.
Speaker Change: Continues to develop nicely and we'll come back to that a little bit later.
Looking at the power solutions segment revenue increased 43% year on year again, driven by primarily by higher delivery volumes in Americas, and APAC as well as by higher average pricing.
Speaker Change: And although EBIT margin was negative Ah.
Speaker Change: At yeah. It wasn't negative it's still up by by more than seven almost more than seven percentage points year on year. So a good development and all in all I mean, we continue to see profitability improve in this segment. Despite the cost related to the manufacturing ramp in both offshore and onshore in the U S that continues to.
Speaker Change: Two way on the on the segment margins.
Speaker Change: Yeah.
Speaker Change: On the service segments, we generated an EBITDA of 166 million euros in the quarter, which is corresponding to an EBIT margin of 18% and on 2% higher revenue year on year. So so fairly flattish from from that perspective, we are as Henrik also mentioned continuing to execute on these service recovery.
Speaker Change: Plan that we laid out in connection with the full year results.
Speaker Change: But it will take some time before benefits are visible in our financials.
Speaker Change: On the net working capital we see an increase in Q1, driven by an increase in inventory levels, which was then partially offset by increasing payables on decreasing receivables and working capital also I would say it reflects the typical seasonality of our business as we build inventory of high activity in the second half of the year.
Speaker Change: Although we do note that it remains at a at a pretty healthy level from from our perspective.
Speaker Change: And then going into the cash flow statement operating cash flow was positive 28 million euros in the quarter, which is a major improvement compared to last year.
Speaker Change: And the improvement was driven by the higher profitability as well as the better net working capital development that we just saw on the on the previous slide and that then takes us to an adjusted free cash flow in the quarter of negative $325 million and again. This is a significant improvement of almost 700 million compared to Q1 last year and this disc.
Speaker Change: <unk>, a higher investment level of around 100 million more and we'll get back to the to the investments in just a minutes.
Speaker Change: Overall that means we're ending the quarter with a net cash position.
Speaker Change: 366 million, which is a very very good to see.
Speaker Change: Well done.
Speaker Change: I appreciate that.
Speaker Change: Looking at the total investments are they amounted to 307 million euros in Q1 and of course. This reflects the fact that we are continuing to invest into our between three six offshore manufacturing footprint, particularly in Denmark in Poland.
Speaker Change: Nacelle facility in Poland is almost ready to start operating.
Speaker Change: And the blade factory in Denmark is adding both people and tools to ramp up production.
Speaker Change: And as you might have seen in April the first commercial V 2650 megawatt offshore turbine was successfully installed at Hittite, which is of course a.
Speaker Change: A major milestone for both the projects and fall for Vestas on our offshore ramp up journey.
Speaker Change: Going through our provisions on the lost production factor, we do see an increase of the lost production factor in Q1.
Speaker Change: As you can see on the AR on the graph here too the rights.
Speaker Change: This is caused by a few sites, including the previously mentioned offshore sites that are undergoing repair as we are as we speak and if we disregard these sites the underlying L. P. S is continuing to trend downwards.
Speaker Change: Once your cost in the queue amounted to 118 million euros. This corresponds to <unk>.
Speaker Change: Three 4% of revenue, which is an improvement on the on the full year percentage up $4 three from from last year and is also an improvement on Q1 of last year.
Speaker Change: And then going to the capital structure.
Speaker Change: We note here are just a note that the share buyback of 100 million euros has been completed and the dividend of DKK <unk> five five per share has been paid out in April.
Speaker Change: At the financial results on the main driver for the development and the net debt to EBITDA.
Speaker Change: You can see here on the graphic to the right, which ended the quarter at minus zero point too.
Speaker Change: Which of course is a big improvement compared to the $1 one a year ago and remains comfortably below our internal targets. We also maintaining our investment grade rating of B, a a two from Moody's with a stable outlook.
Speaker Change: Earnings per share on a 12 month basis.
Speaker Change: Improved to a 0.6 euro okay.
Speaker Change: Driven by the better profitability and the return on capital employed mentioned earlier is continuing to improve also on a 12 month rolling basis to almost 9%, which is in line with the the earnings recovery that we have a we have spoken to and.
Speaker Change: And with that I will pass the baton back to.
So Henry for the for the outlook.
Henry: Thank you so much.
Speaker Change: Ms.
Speaker Change: And for the outlook for the year.
Speaker Change: Keep the revenue, 18% to 21 billion Euro.
Speaker Change: And EBIT margin before special items for two 7% and services expected to generate EBIT before special items of around $700 million and then the total investments.
Speaker Change: That's with the with our guidance of approximately one point to $2 billion.
Speaker Change: It has kept its unchanged, even which is we can say it.
Speaker Change: Simply high number of variables coming and both coming and going throughout Q1, especially.
Speaker Change: It May also just take this opportunity, especially our elastomers to say thank you to you.
Speaker Change: You are doing a very good job, but also here.
Speaker Change: We plan for you and Jacob.
Speaker Change: Part of the road show at the eighth one in August so everyone can get an opportunity to meet you also together with Jacob and CD and ovaries is taking place between the two of you so with that thanks.
Speaker Change: You for listening in and I hereby passed back to the operator for the Q&A.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: Anyone who wishes to ask a question May press star and one on the telephone you will hear a tone to confirm that you have entered the queue.
Speaker Change: If you wish to remove yourself from the question queue, you May press star two.
Speaker Change: Question is on the phone I request to disable loudspeaker.
Speaker Change: Asking a question anyone who has a question you May press star one at this time.
Christian Thano: The first question is from Christian Thano C. S. EV. Please go ahead Sir.
Christian Thano: Yes. Thank you I have three questions I'll, just do them one by one so first of all it goes through.
Christian Thano: <unk> from from tariffs and especially the stakes in your outlook.
Christian Thano: Action, where if if I interpret correct in the USA the tariff creates challenging.
Christian Thano: And hence ex cost, but do you expect to be compensated for this.
Christian Thano: So what level of compensation are you expecting it's 100%, 90%, 80% if it's not 100% can you sort of give examples of the type of costs.
Christian Thano: Related to tariffs, which you cannot compensate for.
Speaker Change: First of all thank you Christian and you will probably almost expect me to say that as it is in relation to a relatively limited number of both projects and customers, particularly in the U S. It belongs to a bilateral conversation with the customers there and obviously.
Both customers projects are not the same and therefore, we worked diligently through this.
Speaker Change: It takes some time and therefore, we also have to see because as you are rightly, saying tariffs by the tariff is a category where even the amount throughout the first months of the year have deviated and very eight it's quite a lot. So I cant even set of say to you. This is exactly the signs of the number of tariff.
Speaker Change: So even that is variable so important is that innovate and enough to discussion it comes through to customer and therefore, it also come through to our customers to output with east electricity and therefore terrorists will mean higher electricity prices in the U S.
Okay fair enough.
Speaker Change: And then sort of similar question, but more to your order pipeline.
Speaker Change: So how is this impacting the discussion on future projects are you expecting a lower order intake.
So for the year or is the fact that your customers can also process.
Speaker Change: Got to keep your assumptions unchanged on autos.
Speaker Change: I think there is some of these things that have reached a level of both size of percentages and tariff.
Speaker Change: Of course, we'll have to have.
Speaker Change: Qualified discussion also in the in the output to a an offtake of electricity in the U S.
Speaker Change: That doesn't take away with the accretion that we have more than 5000 people we have factories in the U S. So for anyone we are probably the ones best suited to mitigate these things, but if we look at the order intake right. Now there are many of those things that are in reality ready to be pushed the bottom on but I just wanted to have policy clearance.
Speaker Change: And policy clarity and secondly of course, they wanted to have some sort of also clarity of what could be the.
Speaker Change: The tariff outlook. So I have a I have a commercial team that has been really really really basi.
Speaker Change: I'm happy that we have a long backlog for 25 and 26. So what comes now is is in the 26 into 27 28, and 29 and of course that requires that we also know what are the what are the policy and will be existing policy continue potentially with a different song.
Speaker Change: It goes to.
Speaker Change: Okay. So if I understood you correctly.
Speaker Change: Bit of delay in decision, making right now.
Speaker Change: What do you say, yes.
Speaker Change: I think if I was sitting at the customers to choose I would also like to know what I was signing onto an investment committee. So what I'm dancing around in my answer here is I cant say to you. If it's in Q2 of your free there'll be a policy clearance.
Speaker Change: But we are we are closer to the policy clearance because U S administration normally works with these policy clearance onto a normal assessment both in the Congress and the Senate.
Speaker Change: Understood.
Speaker Change: My last question is on the.
Speaker Change: Empire weighted or do you have in the backlog.
Speaker Change: Obviously, I'm not expecting you to know what the future of that exactly but can you just talk us through the scenario.
Speaker Change: The productivity is not being executed as planned.
Speaker Change: What it will have a financial impact to you.
Speaker Change: First of all I would say and Empire is unprecedented it's unprecedented in most parts of the world that you are you have a a infrastructure project you choose to put a stop work order or two in actually on the normal.
Speaker Change: No no when conditions aim it is a project with our partner <unk> and that also means it's it's as you would assume probably speaking a bit more regular way down as up there. These days than I would have done in the past couple of months, but that's just part of it. It is an 810 megawatt order in.
Speaker Change: In the state of New York.
Speaker Change: I saw some states yesterday, putting effing towards it we follow it you know, it's our partner and therefore, we also follow what <unk> would do and of course in normal contractual relationship like this they are certain a certain clauses that also govern.
Speaker Change: For examples like this and of course, we await that in until we also know what a what a quinoa.
Speaker Change: I want to do it.
Speaker Change: I would just say from a positive side, we didn't builds factories because offshore in the U S was not giving the transparency on the project pipeline. So for US. This would mean that we have an 810 megawatt drop out if it's canceled of our offshore backlog and at that point in time of course.
Speaker Change: We will try to see if we reallocate that to somebody else in Europe.
Speaker Change: Understood.
Speaker Change: Ultimately thank you so much.
Thank you.
Speaker Change: The next question from a cash flow pattern.
Speaker Change: J P. Morgan. Please go ahead.
Speaker Change: Yes, hi, good morning, everybody I have a couple of questions as well and I'll ask one at a time.
Speaker Change: The first one is a follow up on that if so.
I think what I wanted to understand is the gross impact.
Speaker Change: Versus net impact given your ability to mitigate.
Speaker Change: Also by putting it onto customers, but I think at this stage we are looking into.
Speaker Change: What would be the potential impact on your cost base and on that front. When we look at 2025 I mean, most of the activity that you will do.
Current tier.
Speaker Change: Addiction will it be done largely.
Speaker Change: By first half.
Speaker Change: And then more will be installation activity and given we have got some.
Speaker Change: Yeah.
Speaker Change: Pause on some of that actually appropriate.
Speaker Change: For 90 days and what I wanted to understand is that when we look at the impact.
Speaker Change: Is it fair to say that you would see a higher gross impact in 2026 and 2025.
Speaker Change: That's the first one to start with.
Speaker Change: I wish you would actually put that question to the administration that have suggested the terrorists are cast because.
Speaker Change: In that sense, we can run those I of course know exactly from components, our country of origin, what we sit with S. As tariffs, but you will also know me well enough in saying that has been a pretty a pretty changeable number throughout the first four months of this year and of course now we live on the a pulse of that regimes.
Speaker Change: And therefore, you're absolutely right if the pulse stops and the all the percentages are being reintroduced in your tariff implication for that for 'twenty six is higher than 2005.
Speaker Change: That's just a factual statement.
Speaker Change: But giving both the circumstances of that the number of projects that are being.
Speaker Change: Hit by this.
Speaker Change: Tinsley I will still keep it just like Empire. It has to be a conversation between us and the customer on the on the amount and we are doing whatever we can to mitigate that but you will not in single countries in the world have fully localized supply chain when we talk about a wind turbine.
Speaker Change: Thank you and my second one is on your manufacturing ramp up so first of all thank you for providing some details in the presentation.
Speaker Change: But the question is more on the on what is left so maybe if you can elaborate on what is still left in manufacturing ramp up and maybe timing of that by when.
Speaker Change: These ramp up should be out of the way. Thank you.
Speaker Change: I think ramp up is a definition is is <unk>.
Speaker Change: Targeted to get to a certain tech time and as long as you're not at that tack time, Youre still talking about extraordinary ramp up cost.
Speaker Change: We knew when we walked into this year that they should diminish over the year and Thats. What we are working diligently on so it also means that we have had.
Speaker Change: In a material impact negatively on the ramp up cost in Q1.
Speaker Change: Of course, we try what we what we can to dilute them over the year. So that's that's the plan.
Speaker Change: For obvious reason I don't have an interest in sharing exactly on what part of the ramp and where are we on the on the tech time right now, but we are not finished with the ramp up. So we are bringing the challenge with us into Q2, but I also have here again to two promising thank you to our colleagues they're working through it diligently.
Speaker Change: As you would I appreciate from an from an from a patient point of view it doesn't help to to stand in Jumbo bend down in and ask for more quickly because thats not the way to solve it is simply just by learning putting it through more and more on the on the onshore in the U S. And then of course on the off showing.
Speaker Change: In Europe predominantly so we're working through it it's not gone and it will it will sit there for most of this year I'm pretty sure.
Speaker Change: Thank you Henry.
Speaker Change: The next question from Gus.
Speaker Change: Thanks Keybanc. Please go ahead.
Thank you very much and I would like to start by asking a question regarding the service recovery plan.
Speaker Change: Of course, we're now only one quarter inch width, but you mentioned that you would want to keep us updated as this progresses towards the end of 2026 can you elaborate a bit on how you would want to keep us updated will you be introducing any new kpis or is it mainly for us to follow the margin development. If you can reflect a bit on that tenant that would be great.
Yes, I think we gave a.
Speaker Change: This in the beginning of February we gave what other details of the plan and I think today. We you saw the performance of Q1, which is there in there about the performance we expected in that it's an average again in 18% and of course, there are some disappointments and there are some positives in there, but as we are just saying that.
Speaker Change: We will continue from a from a margin point of view. So so what we are just saying here.
Speaker Change: In that sense is that we just walk through that and we shared with you in if there are any positives and negatives to the margin and then as I said he had to take away from this one is that you wanted to have been through it in a proper way before you also engaged with your customers on the on the model we are executing on and that's why I just said.
Speaker Change: It also said today that when you look at for instance, the gigawatt under service that might come variations to that theme when now the commercial reset starts so we're not bound to renew or things that it doesn't create any value for the owners to shareholders of Vestas and of course that he's now where we are.
Speaker Change: We see in the coming quarters that that extra and discussions with customers are increasing.
Speaker Change: Fair enough Henrik.
Speaker Change: And apologies, but just yet another follow up on the tariff discussion could you could you talk a little bit to sort of the difference between what you already have in the backlog and when it comes to new orders.
Speaker Change: Speaking to both you guys previously and also to some of the other western Oems.
Speaker Change: <unk> I've heard a lot is is change of law classes could you sort of confirm that in the in the back existing black backlog.
Speaker Change: That you have these change of law clauses and that tariffs is that by mostly something that financially could affect new orders.
Speaker Change: Are you asking a backlog of new orders, that's two different things. So as I said here and I think the world was prepared to some extent on that could be a discussion around tariffs and how you would organize that in terms of clauses in contracts.
Speaker Change: What has been developing over the last two months is of course, the tariff regime that was maybe a little bit more excessive than people could have foreseen. When when you did originally once it is there is there is clearly a discussion point around how do you govern for that and I think also to some extent some of those tariffs that have been proposed.
Speaker Change: I had a level where it probably could prevent.
Speaker Change: Some of the from the projects to be built ultimate.
Speaker Change: You had the one that are best suited for having that conversation because we have the set up in the U S already so for us. It's a it's a good discussion to have with customers, but as I say to also as you can see 189 megawatts. It has an effect until we have some sort of clearance on how we go around both the policy and tariffs.
Speaker Change: And if I'm looking at each policy right now is more important for customers to get clearance on that actually terrorists.
Speaker Change: Okay. That's.
Henrik: That's a good reflection then just the final one Henrik I understand you don't want to sort of give exact data on your tech types.
Speaker Change: But in the U S onshore ramp up could you speak to maybe how.
Speaker Change: How far along the way are you you know if you have to sort of improve by X percent, then and how much is covered and how much is left before you are where you want to be.
Speaker Change: We have we are still we are still not on it and as I sit here that goes for both the onshore in the U S. And then on the offshore that that we are managing through it we are also getting X.
Speaker Change: The capacity on on finishing and so for us so to some extent it's positive because it starts coming out but that also means that when the volume ramping up than some of the finishing conclusion on it gives you. It gives you at a point. So we're not we're not happy where we are we think we should have been further on them, but but.
Speaker Change: Here I'm talking as much two to the internet and colleagues by saying that because they know we still have a way to go and we probably would've hope we were longer.
Speaker Change: Into it but but that's how life is and and as I said the good thing is it's the market we love it we know the factories. So therefore, we will get to it.
Speaker Change: And the right timing.
Speaker Change: But I think there is a couple of quarters yet to go before we are where we.
Wanted to be.
Speaker Change: Okay. That's good enough. Thanks, a lot Henrik.
John Kim: The next question is from John Kim Deutsche Bank. Please go ahead.
John Kim: Hi, good morning.
Speaker Change: I'm wondering if you could talk a little bit about the contract assets.
Speaker Change: <unk> growth from Q4 levels can you help us unpack that a bit in relation to how inflation is working in their service contracts you did mention earlier I believe that.
Speaker Change: There's a commercial review in the backlog.
Speaker Change: My take is that you're setting new terms that you may lose some of those contracts is that the right way to think about it.
Speaker Change: Yeah, Let me take that one John So first on the on the contract assets I mean, youre right. It grows a bit sequentially from from Q1, we don't see any underlying development in the contract assets that is really worth worth calling out.
Speaker Change: Of course, we'll disclose as well as the segment split on a full year basis, and I think we've made the point on cost on service to focus right now is on on reducing reducing costs and resetting contracts as we go and of course. We also note that if you look at it on net contract balances perspective, we actually decreasing which of course is also helping us in all.
Speaker Change: Our working capital.
Speaker Change: I think the second question was on the <unk>.
Speaker Change: Contract trimming.
Speaker Change: I think it's more to say that.
Speaker Change: It is of course on the table.
We were also focusing on value over volume from a service perspective and that of course also means that if we need to to try and renegotiate or exit contracts.
Speaker Change: We are open to that because it's about the health of the of the service business on not just growing the gigawatt under service every single quarter as Henry gifts alluding to so I think it's just a.
Speaker Change: Heads up that that this might be that you can see that in the numbers at some point.
Speaker Change: Okay very helpful. One follow on if I may in the provision and L. P. F. Slide you do talk about underlying L. P. F. Continuing to trend down can you give us some color on what's happening in the repair backlog for the onshore installations and how the cadence might work this year. Thanks.
Speaker Change: I think thats, a continuing from what you've seen in the in the last couple of years, we wanted to bring it down but it's it's sticky so it doesn't change over and then of course as you've also seen in this quarter. If there are if you talk.
Speaker Change: <unk> standing then it's enough to influence that.
Speaker Change: That numbers. So we continue the underlying focus on John across what we have.
Speaker Change: And of course, when you talk of gigawatt of this nature, the onshore works and it progresses.
Speaker Change: And we haven't seen any.
Speaker Change: New major failures.
Speaker Change: Failures all components.
Speaker Change: Indeed in the last quarter.
Speaker Change: Okay. Thank you.
Speaker Change: The next question from Dan Togo Jensen Carnegie investment. Please go ahead.
Speaker Change: Yes. Thank you.
Speaker Change: Wanted to get back to this ramp.
Speaker Change: How we should.
Speaker Change: Think about you're expecting sequentially I understand of course that has an impact in Q1, but.
Speaker Change: Forward in the year of course, you should improve but also the impact and then you start to deliver more on the offshore side.
Speaker Change: It comes with a lower margin so how should we think of this going forward.
Speaker Change: The impact sort of say on par in Q2 with Q1, so there's snow sequentially worsening.
Speaker Change: And how fast should we think of sort to say sequentially.
Speaker Change: Yes.
Speaker Change: That's positive impact a few getting data tech types et cetera.
Speaker Change: <unk>.
Speaker Change: We'll penetrate throughout the coming quarters, just to get a flavor on that thanks.
Speaker Change: I could do you have attempted and for me. The good thing is I don't need to guide.
Speaker Change: Exactly on specific quarters in Hollywood those costs to materialize. They should they should they should I do it over time and to some extent for us of course, it's nice that it is here in the beginning of the year, but on the other hand. We also know we are ramping up manufacturing on both the onshore and offshore. So therefore, it will be nice if it.
Speaker Change: Bruce.
Speaker Change: In the in the coming quarter or two that's for sure. So so we worked through it then but as I said I don't want to end up in having neither an amount or are in the exact science between the individual quarters, because you are sensitive.
Speaker Change: Is that number of factories, we are talking about.
Speaker Change: Okay understood.
Speaker Change: Then just maybe some words on ESP.
Speaker Change: Increasing sequentially of course, I guess also for closer to take more offshore here, but just to get understanding is that it is.
Speaker Change: Spec between onshore and offshore.
Speaker Change: Particular white.
Speaker Change: As it is right now.
Speaker Change: Due to the scope that machine own show.
Speaker Change: Offshore and onshore ESP was closer to each other compared to what we've seen and depositors Takeda feeling.
Speaker Change: If the mix between the two no particular numbers name names, but just sort of at relative understanding.
Speaker Change: I would almost say here's who we're fitting together I will say you are clearly trying to get as close as you can to to catch that fish.
Speaker Change: Hey come on offshore ease in this in this quarter. It's two orders right. So we don't we don't comment on it and that was the reason why we also say we don't separate out because if you are able to do that then you can sit and look at each other's pricing in local markets, which we were not really and I see there is another one in the industry that have stopped providing ESP.
Speaker Change: Property same reasons. So we are very happy with the order intake we are happy with the pricing and we are continuing and you can when you see the numbers on the underlying you can see it pays off so it starts with the order intake and you get the right pricing for it.
Speaker Change: Here I will say in terms of the order intake in the quarter. There is a high variations of scope.
Speaker Change: Not only from on an offshore but also with India onshore. So therefore, there is just a variation, but we are very pleased with it and no I don't foresee that we will have things where onshore and offshore.
Unless of course you have.
Speaker Change: Loaded scope in some of your onshore orders that will be that would be the best way of saying it.
Speaker Change: Understood. Thank you.
Martin Wilkie: The next question from Martin Wilkie Citi. Please go ahead.
Martin Wilkie: Yeah. Thank you good morning, It's Martin from Citi. My first question was just coming back to tariffs and if you could remind us of your <unk>.
Martin Wilkie: Country exposure I think the industry overall is a lot less China exposed than it was in 2018 and so therefore presuming the tariff impact is mainly four countries.
Martin Wilkie: Light of China, or any comments you can keep them that would be very helpful. Thank you.
Martin Wilkie: I think at least one thing things Martin is that I don't want to add to the political discussions around good and good and friendly countries or not.
Martin Wilkie: We have a global supply chain. So there will be a number of components that will arrive from some of the places you are mentioning whether that's it that's China or other places around the world, where we have established a footprint in.
Martin Wilkie: And also the supply chain and I will say compared to previously back if youre comparing to 18 and 19 that was no doubt that in at the point in time in 18 19, you also had around the corner and cliff on the PTC, which led to that there were almost fully turbines being imported from across the world.
Martin Wilkie: Into the U S and I think today, that's just a different capacity planning and that's also the localization.
Martin Wilkie: That we have done in the meantime, so therefore most of that Super happy that we have to set up in the U S for the capacity and you can see that we've now passed our 5000 employees. We're by far the largest growth that comes from the factories in the U S for the for the capacity expansion.
Speaker Change: Thanks, that's really helpful and linked to that so obviously you have been expanding in Colorado, which will mitigate tariff risk is that ongoing expansion happening regardless of the inflation reduction act on search and team and obviously, we may find out over the course to summer weather in many of these credits continue or not but from Europe.
Martin Wilkie: Perspective.
Speaker Change: Adding that capacity in Colorado can happen, regardless, you're going to wait until we get clarity on the iron ore up before you can do anything else in Colorado.
Speaker Change: Contrary to a few other people that have I can see in some of the last quarters here I almost put wind in the U S. In the grave I'm I'm opposite there will be a solution to continuing policies in the in the U S. Because the energy generation.
Speaker Change: Strongly in as part of this program, but let's let us do it together with the rest of the industry. The normal good work to find the policy framework for it.
Speaker Change: I'm believer in the policy framework will find its balance in some of the other discussions that are going on in and around both entity in tax and other things in the US Currently so we are we are we are.
Speaker Change: Positive over the ramp in Colorado, and we don't see anything thoughts would I would we start building another factory in today's environment, probably not currently but that's up into administration to have those discussion for giving clarity to the new to the new policy.
Speaker Change: So with so much and we are still we are still positive overall U S market and also what our customers are saying about it.
Speaker Change: Great. Thank you very much.
Speaker Change: Our next question from Max Yates Morgan Stanley. Please go ahead.
Speaker Change: Mr. Yang Your line is open.
Max Yates: Can you hear me.
Speaker Change: We can hear you now.
Speaker Change: Okay.
Speaker Change: Look I understand.
Speaker Change: I understand so tariffs is a bit of a moving target, but what I wanted to ask was on your supply chain. If you look at kind of how you operate today and in terms of sort of Bolton components into the U S. What is sort of most different to the way that you operated in 2018, and 19 and I'd love to kind of any examples.
Speaker Change: Of why you've kind of moved sourcing of certain products out of China and to other regions in the world just to understand sort of some of those those changes. Thank you.
Yeah.
Speaker Change: Yes.
Speaker Change: Thanks, Bob but I think one of the biggest changes that have been since 2019 was that you literally had a full open. So in reality you shipped almost fully turbines from other parts of the world, whether that was Europe, China, and India and if you followed us on the recent years. You also sold for instance that when you have.
Speaker Change: Some of these restrictions you had an American manufacturing created as well and of course that led to that we we took capacity out of for instance, <unk> manufacturing in Denmark and of course expanded the bag in the U S. So therefore quite a lot of that has been re.
Speaker Change: Balancing or what the year over the last years and there has been an incentive for people to doing exactly that so we did that we follow that lead both from first time at the current administration was in an <unk> and the Biden administration and we strongly believe that there will be some of the things that will be an ongoing direction.
Speaker Change: Also in this administration.
Speaker Change: Okay.
That's helpful and just as a follow up obviously your warranty costs provisions were quite low this quarter.
Speaker Change: I think Tom sort of three 4%, which is obviously.
Speaker Change: Was there anything kind of one off in that any kind of positive provision releases.
Speaker Change: Or should we take kind of at least that kind of a material improvement versus last year.
Speaker Change: As the base expectation for what we should see in 2020. Thank you.
Speaker Change: Thank you so much.
Speaker Change: Makes for those who followed us in a number of years. This is a this is a long journey. It's a sticky one was never going to change from about five two to suddenly ended at two two and a half. So we are on the journey and this quarter. We are business as planned so to say there is no material in the quarter that sticks out is extraordinary.
Speaker Change: <unk>.
Speaker Change: So therefore, we had three 4% and so that's the that's a more business like business like usual I think it's I always say, it's difficult unless you have some material going on in the quarter. Otherwise. This is a good average quarter four where we see it and of course, that's a that's lower than it was on average last year.
Speaker Change: Also saw that that also had a comparison to Q4, so we do that.
Speaker Change: Both within the quarters, but also with an eye to what is the full year expectation.
Speaker Change: Okay. That's great. Thank you very much.
The next question is from Klaus Alma Nordea. Please go ahead.
Speaker Change: Thank you Yeah also a few question from my side.
Speaker Change: There's no doubt that it must be very difficult to navigate in the current tariffs uncertainty.
Speaker Change: So how do we operate with a risk of tariffs being imposed wildly components order for instance in China is on its way to the U S, but not yet.
Speaker Change: The hub of the U S that will be the first one.
Speaker Change: Okay.
Speaker Change: Cloud <unk>.
Speaker Change: You know us well.
Speaker Change: First of all we don't move factories.
Speaker Change: Factories, or we don't move things.
Speaker Change: I equate incidents between a Monday and Friday and for those who have done that have gotten a very a very bad first four months of the year, because that's not the way to treat it we built this and we build it with a certain belief then sometimes we get surprised how good it gets maybe disappointed but then we find a solution.
Speaker Change: Two deaths in general but of course, you try to route.
Speaker Change: And so those things where you are mitigating and.
Speaker Change: The least but if I'm then a little brutal here if you've seen some of the potential is coming and going.
Speaker Change: Come on it wouldn't be fair to our supply chain of partners or even our own sourcing of factories that you basically change that much within the within a few weeks. So we try to steer and keep our voices and reactions and discussions pretty calm and so far in the first full.
Speaker Change: <unk> of the year that has actually supported us because some of these things I'm pretty sure, we'll find and mitigation or a handshake.
Over the coming quarters at a level, where the world settles in and continue having a growth in the societies, we booths and so and so that's maybe the best way I can sort of say, commonly and we don't we don't we don't go to bed and we don't get up in the morning, and the first thing. We do is if it has changed because we we run vestas.
Speaker Change: With a longer view than what happened spontaneously.
Speaker Change: On a single tariff percentage in the country.
Speaker Change: Makes sense.
Speaker Change: To us asking a different way have you increased your inventories.
Speaker Change: Ahead of potential tariffs being introduced that that would be one way to mitigate at least.
Speaker Change: I think we have we are I mean, if there as opposed to we tried to get to get some of the components through.
Speaker Change: Other things, but then on the other hand.
Our assets and our components are not something that you sort of just to do in triple speed and therefore get domain by accident. So the supply chain runs with the supply chain is so therefore clouds, we do whatever we can to mitigate but there isn't sort of a quick loop, where you just bring.
Speaker Change: Blake or for that matter in the sales or.
Speaker Change: Auto hubs just across because there is a there is a window of 14 days, that's not that's not doable cows.
Speaker Change: Fair enough then.
Speaker Change: Second question goes to the pipeline and I know you are not that's you know keen to give a lot of color to this but if we talk pipeline excluding U S.
Speaker Change: Does the current geopolitical situation impact discussions and with the developers. They are also hesitant to place orders or is it very specific to the U S. When you talk about the lease in.
Speaker Change: Negotiations.
Speaker Change: I think we are all as executives we are all as as reflecting over the world. We sit in and it is clear that if we have the executive discussions right now in one part of the World, where we probably meeting potentially unprecedented decisions or discussions then of course that will have a reflection on what do we then.
Speaker Change: And is this this is end of the day. It is about how do we allocate capital in our customers and together with our customers towards it I think the positive is and people forget that we have had we have had an election in Germany.
Speaker Change: Germany has just completed the auction.
Speaker Change: Still with a target of.
Speaker Change: Alpha Tinsley 10, gigawatt onshore I wouldn't even been able to predict that it.
Speaker Change: Just two years ago. So I also think he and if theres election in Australia that has just been done and therefore, probably the entity policy now is pretty stable and therefore, the transition from coal to renewable and other energy sources will happen with the same.
Speaker Change: Same spiel, even accelerated speed. So I think the world is in an entity focus still and of course customers will benefit from that.
Speaker Change: So I think.
Speaker Change: I'm not doing that but of course, where you have policies like in the U S. There you'll have to be cautious for a period of time, because you can't go to the board in saying I don't really know the return on this one.
Speaker Change: Two what will the policy be in U S. So that that I understand fully.
Speaker Change: But as we know the customers that you complete all the things up until basically U.
Speaker Change: Yeah missed too David and Miss to make the final decision because the projects are there in the pipeline. So I'm I'm I still see some of the exactly the same but I think of course it's.
Speaker Change: A big utility or it's a big developer game right now because that's where you have availability of pipeline.
Speaker Change: Fair enough and then just the final question was you mentioned during your presentation within service. There was some commercial discussion ongoing which may create some volatility at least that's what I heard what does that mean.
Speaker Change: It just means cloud win also asthma I alluded to you alluded to here a bit earlier when you look at it.
Speaker Change: There is no automatic renewals in the in the service business.
Speaker Change: It could have been as you previously and of course, if there are contracts in the service portfolio that doesn't look to create any value for US then there will be a discussion directly with the customer and that will ultimately lead to that we find a solution and we are just sort of hits up here and saying you can't just as usually.
Speaker Change: <unk> in the service business as part of these eight quarters, just say that the gigawatt will continue go up we know it goes up because we of course install more turbines, but on the other hand, they will both be renewables and there will be some.
Speaker Change: Commercial resetting that ultimate would lead to that some of that volume either stops go somewhere else or customer it takes it in house okay.
Speaker Change: So either you know you lose volume.
Speaker Change: Termination of contracts or get better margins. If you are successful in these negotiations.
Speaker Change: At.
You are trying to make it very two dimension I think that's maybe a little too simplified cloud, but that's how we were you know some analysts but.
Speaker Change: Amy is very clear so we don't we don't we don't do the commercial reset here to put the service business in a in a position.
Speaker Change: Position that I can promise you.
Speaker Change: Fair enough all right that was all for me Thanks a lot.
Speaker Change: Yeah.
Speaker Change: The next question from Ajay Patel Goldman Sachs. Please go ahead.
Ajay Patel: Good morning, and thanks for taking my questions and thank you for the presentation.
Speaker Change: Firstly I wanted to ask on free cash flow.
Speaker Change: There was a sizable improvement in the first quarter $619 million.
Speaker Change: I stopped to think about last year.
Speaker Change: You had I think minus 917, then you delivered a $1 billion of cash flow by the yearend. So a sizable amount of cash flow generation in Q2, Q3 Q4 now.
Speaker Change: Now if we look to the next three quarters.
Speaker Change: Revenue should be stronger margin should be stronger.
Speaker Change: Is there some.
Balances between the quarters and this quarter that maybe under mine that relationship if I compared with last year is the consensus for $445 million of free cash by a full year 25, just look to life.
Speaker Change: Anything that gives me a feeling of the building blocks would be really helpful.
Speaker Change: Okay.
Speaker Change: Yes, let me take that one a J I think are of course quite quite satisfied with the cash flow in Q1 as you know we usually have.
Speaker Change: You've got a negative cash flow in Q1, as we start to build inventory and usually have a bit of a softer softer Q1, I think we have worked quite a lot with our working capital.
Speaker Change: Of course on the P&L, we usually say we have we are backend loaded and we are seasonal and I think on cash flow that has maybe been even more so so that has been a big focus area for us to try and improve on them that is basically what we're doing.
Speaker Change: You cannot necessarily take the same trends of last year, and then extrapolate that we still expect cash to be backend loaded, but we cannot say necessarily to the same extent as last year.
Speaker Change: So it's just good to have a nice Q1 and in the box from from a cash flow perspective and of course. It remains our aim to have a positive free cash flow for the year.
Speaker Change: Would be the areas.
Speaker Change: Cause the differences just setup.
Speaker Change: I understand.
Speaker Change: I E what wouldn't.
Speaker Change: And what would need to happen this year.
Roughly.
Speaker Change: Sure in terms of because I think the order profile in terms of your delivery profile similar right.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: That delivery profile, we always looking to improve right. So so milestone payments when it's the exact trigger of when are we collecting big payments cash can also be very lumpy same with our outflow try to be more even more disciplined et cetera. So we are working on all these let's call them small improvements and then that is what you are seeing coming through in Q1.
Speaker Change: And then can I just ask one other question just on orders I.
And just thinking about the year as a whole what do you.
Speaker Change: Still I expect to see order growth in onshore, we thought that <unk> would be down Q1 versus Q1 last year.
Speaker Change: There was some positive encouraging comments I think after the call a lot of activity happening, maybe some uncertainty is causing a little bit of assessing on hand, but.
Speaker Change: Is it still expected that youll see growth in onshore this year versus last year, and which are the key geographies.
Wade: You'll see here that says this is wade.
Speaker Change: We simply can't and we get and I would tell you what I the previous.
Speaker Change: A nice person here Klaus element. He always reminds me every time I try to come with a prediction of next quarter or way I travel then Klaus acutely reminded me after that didnt trends translate into any orders or something like that so I think the ability to convert and give you a guidance of where we I gave you are strong in here.
Speaker Change: We see Europe as a as an area where.
Speaker Change: All countries are all hands on deck why is that you just had it last week, where if you have outages and other stuff.
Speaker Change: Acutely reminded of you need to be in control over your any seen any dis sourcing and independency, you've just seen the election. This weekend in Australia that is a more of the same and probably with an accelerated speed and then of course, you have the whole of North America.
Speaker Change: Probably being in wait and hold so.
Speaker Change: As said, we don't see a slowdown in order intake and we don't we don't plan for that and I have none of my commercial teams that are talking to that EDA. So therefore, a J.
Speaker Change: I don't see us see that but I I'm fully aware as I also remind the cloud someday or people that are still trying to almost have a and agenda point that wind is going backwards, but that's not what we see in our parts of the world where we operate.
Speaker Change: Okay. Thank you very much very clear.
Colin Modi: The next question from Colin Modi RBC capital. Please go ahead.
Colin Modi: Alright, Thanks for taking my question.
Colin Modi: Just wanted to ask about you alluded to earlier the potential reallocation of capacity from Empire wind I just want to clarify.
Colin Modi: How feasible is considering the kind of lead times customers need on these offshore winds.
Colin Modi: Oh, sorry, sorry, I didn't mean to an offshore wind projects and I guess I want to marry up obviously, you said that you haven't got any U S factories, because we saw kind of writing on the wall for offshore.
Colin Modi: I just wanted to marry that up with your kind of comments that you'd rather be early to any kind of offshore vessels being late any issues of pockets of excess capacity and that's kind of a year or two.
Colin Modi: Thank you.
Colin Modi: And now we think we are mix mixing all topics almost in offshore calling I think what we've just said here full when you follow the timing the discussions that has happened in the U S. The way offshore unfolded was it took a hype.
Colin Modi: Coming back to 2021, where.
Colin Modi: People were guessing that U S will install in 2013, probably 812 14 gigawatt of offshore annually.
Colin Modi: I think when we came into <unk> 'twenty free it became obvious that that those plans were not going to be materialized are backed by proper permitting and others, which had also at that point in time made most of the localization is sort of.
Colin Modi: Disappear.
Colin Modi: The discussion was still there with some states, but when the state didn't get at least a minimum of one or two gigawatt in order planned executed into the backlog every year you can't localize the supply chain because you don't localize the supply chain to have to go with idle every second year.
Colin Modi: Therefore, we ended up in a situation and you know the past here that there was an outstanding on Atlantic shows and we had a firm order intake of Empire. So therefore, I feel for our partner right now aching all that is having that project and our job is that of course, we can't we can't deliver the turbines and didn't take them back because they are.
Colin Modi: They are fully designed and doing that but if it is early enough that it doesn't get or there is a change of it then of course, we work together with <unk> to how to mitigate that and potentially use parts of it in other parts of the world don't forget it's 810 megawatt it doesn't.
Colin Modi: It doesn't stop Anita at Keno.
Colin Modi: <unk> in the planning, it's a bit more than 50 turbines. So we will manage through this as we manage through many other things if if we sort of and this is it.
Colin Modi: I understand the.
Colin Modi: The headline and I understand the non precedent of it.
Colin Modi: But having said that then it is also managing before for us in both parts of the world.
Colin Modi: Sorry, sorry, I think perhaps I was a bit unclear I completely acknowledge you haven't yet you are ahead of the curve and you understood that it wasn't going to be a great deal of offshore localization in the U S, but I guess, perhaps but a different way as I would have presumed empire wind would it be would it be supplied out primarily from European factories.
Speaker Change: We have an 800 megawatt hole in your European production capacity. However.
Speaker Change: How reasonable is that you could actually reallocate your production to other projects considering the kind of lead times needed for offshore projects, perhaps is a better way of summarizing what I was asking.
Speaker Change: But do you have a you have factories, where you adjust our factory capacity and the way we work with that constantly calling so it's not like you either full capacity or capacity out in offshore. So that's part of the building block what I'm, just saying here 810 megawatt is Mitch.
Speaker Change: <unk> out of the capacity planning if it is and that's just what I'm.
Speaker Change: Trying to say there is a lead time to produce it in Europe and there is a lead time for the component.
Speaker Change: <unk> of it and that's what we that's what we are planning through.
Speaker Change: Don't forget that.
The offshore you got more than 10 gigawatt in total so in reality, we are adjusting with less than 10% of an offshore backlog.
Speaker Change: Yes that makes complete sense. Thank you.
Speaker Change: A quick follow up question.
Speaker Change: Area.
Speaker Change: Obviously your Q1 deliveries are relatively quite strong versus what the market was expecting but I appreciate it mega meaningful in terms of the full year picture.
Speaker Change: Is there anything to comment there about the kind of shape of the full year backend loaded do you have any greater comfort and youre kind of deliveries in Q4.
Speaker Change: And your execution there at this point or a bit too early to say.
Speaker Change: I think we just come out we've had a good first quarter solid.
Speaker Change: Even a bit better than what you on average expected. So therefore, we are we are doing that we kept our outlook for the year with a lot of the variables that goes on around it. So I think we actually saying here with a with a thing let's get onto the next three quarters and then we will see how far we get when we get especially into the two.
Speaker Change: The half year in the third quarter, but it is backend loaded we always said that and it is particularly as back end loaded or even more than last year. So therefore, there's still a lot for us to do in the in the last in the second half of the year with always comes with a risk.
Speaker Change: And so that's why we still highlighting that Colin but we've had a bit of a startup to yet and probably we also.
Speaker Change: Forecasted and budgeted for.
Speaker Change: Great. Thanks very much.
Speaker Change: The next question from Deepa when Cactus Warren Bernstein. Please go ahead.
Deepa: Thank you for taking my question.
Deepa: I wanted to confirm one thing and then you mentioned that the.
Deepa: So on the R&D.
Deepa: It is higher than tavis, so could you confirm that and secondly on the I R E.
Deepa: What are your customers expecting because right now the lowest and that Iot is valid so what wildwood shovel ready project not place orders is that a fair a retrospective changes.
Deepa: And then I think you mentioned something about some such that you could maybe give us your best guess of AUC IRS progressing. Thank you.
I think it has always been a discussion when you have a change between administrations and and I think.
Deepa: Our eight came at a point in time, where that was needed and it includes quite a number of details not only related to two wind. So there is clearly a.
Deepa: A policy change in some parts of that.
Deepa: So therefore until you have that questions like.
Deepa: When is the timing for it is it did 2032 or is it a a different sunset clause that is ultimate leading to that there will be a earlier delivery or an early a sunset clause always 2042, something that the industry will work with that.
Deepa: I think everyone that that has an interest in wind currently also putting resources to make sure.
Deepa: And the positive is both sides of both Congress and Senate fully recognizing the importance of getting a an energy supply where wind is part of the sourcing so that that's being that's being addressed and and you know me well enough in saying I would not do what you asked me to do what you're saying.
Deepa: What's the likelihood than what's customers because this is very well known territory for everyone that is build wind for two decades in the U S that when you have these negotiations and you have those things we put we help puts and work with it and then we see the outcome through both.
Deepa: <unk> and send it in probably the coming months potentially coming a quarter or two.
Deepa: Thank you.
Sean Mclaughlin: The next question from Sean Mclaughlin HSBC. Please go ahead.
Speaker Change: Good morning, Thank you.
Speaker Change: Note the very EMEA, a heavy mix of your Q1 onshore order intake and I also notes.
Speaker Change: The increasing volumes of China export orders in the second half.
Speaker Change: Just.
Speaker Change: To understand a little bit where we are in terms of the Chinese competition.
Speaker Change: You've kept your prices very high and you've always said that you're happy to lose share, but I mean are you seeing any.
Speaker Change: Increasingly markets, where increased price competition effectively pricing out.
Speaker Change: Just an update on this would be would be helpful. Thank you.
Speaker Change: Yeah.
So to say here, when we look across where we've taken the orders.
Speaker Change: Strongly EMEA.
Speaker Change: And then when you see that it's.
Speaker Change: Sean it's not right to do it.
Speaker Change: Big statements on a quarterly order intake because it depends on so many other things. So therefore as I said here you can either have you.
Speaker Change: You have elections, you can have critical timings of Av.
Speaker Change: Permits and other stuff. So therefore that will be that'll be wrong wrong to assume that you can read and underlying out of that I think.
Speaker Change: In terms of construction, we don't have much construction and sales in China vis vis there are parts of the world where they are they are competing but it is also clear in what you also see now a number of times the affordability and not least the security of the solution is also waiting in Av.
Speaker Change: Where we see competition and where we see less competition of that because it is underlying our priority for many markets that they want to have an independent and they also wants to have their own way of doing it. So I will so to say.
Far too early to conclude that on I know. This is this is this is probably what some of you are hitting or wants to run a hit with but I don't think it's right. So therefore, the world is a bit more focused on where do we built and if we take if we take a green building things in a war zone two actually.
Speaker Change: Create electricity I think it is it's simple format showing the importance of what we can do.
Speaker Change: In even very severe conditions and that I think people appreciate and probably in Spain and Portugal.
Speaker Change: A lot of people also I appreciate when you have a blackout.
Speaker Change: At first realize how important it is to society. So so we are not shying away from that but I think actually that well it becomes a little bit more polarized in terms of also where we get our entity sources from.
Speaker Change: Thank you.
Speaker Change: The next question from Henry Tarr.
Speaker Change: Please go ahead.
Speaker Change: Hi, there and thanks for thanks for taking my questions.
Speaker Change: Two which probably have been have been slightly touched on before but.
Speaker Change: One just on deliveries.
Speaker Change: In Q1.
Speaker Change: Backlog going into the quarter was not that dissimilar year on year, but deliveries at sort of 20% higher.
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Is it just scheduling.
Speaker Change: I think I've ever sort of fully understood. The seasonal reason why Q1 is so weak in Q4 is so strong from a delivery perspective.
Speaker Change: Is there anything else going on there I guess studies, that's kind of the first question and then the second.
Speaker Change: Just.
Speaker Change: Is it a limited number of projects ongoing that are onshore in the U S. Today, probably but all those projects just carrying on.
Speaker Change: As usual.
Speaker Change: Maybe to completion, and then theres going to be a discussion with everybody knows what the final sort of costs.
Speaker Change: Or are those projects that you are kind of operating or have started today on pause now whilst everybody kind of works out what's happening.
Speaker Change: Is that sort of happening thanks.
Speaker Change: First first things first and in that sense, no I don't think.
Speaker Change: There is a need particularly there is as you can see the delivery schedule is in here.
Speaker Change: And you can also see that if you take the first the first Q.
Speaker Change: This is a good delivery quarter on on on Europe. There is quite a lot more is almost double up.
Speaker Change: In North America and in last year, as we maybe all smile a bit about the U S. Couldnt have had a stressful time, because they deliver at 15 megawatt.
Speaker Change: In a whole quarter last year in the U S. But we also say that as an early warning of that we're ramping up to a completely different things. So there we do 619 and generally in the U S. Right now if you can get it and it's ready and we are ahead of it with construction and other things Henry we will take delivery in the U S.
Speaker Change: Because in whatever it is it is not something that from a project point of view, even with the tariffs. We are we are having is not something that will ultimate.
Speaker Change: Killer Killer project as such.
Speaker Change: So I think that's just a conversation that goes on project by project.
Speaker Change: And generally if people can have it and there is a grid connectivity ready then you will move and Thats probably back to the seasonality. There is a lot of things that I always back end loaded also from a permitting and adequate connectivity and you can't have I wish I could and it will be much smarter from an industry point.
Speaker Change: A view that we had more or less fully equal quarters, but also don't underestimate when you add the northern parts of northern part of the Globe Hemisphere, you have wintertime and you cannot do construction and complete that in Q1.
Speaker Change: As much as you can prepare construction in Q end of Q1 Q2, Q3, and then you have all of it connected so there is a there is a natural underlying reason why Q1 normally is a slower quarter.
Speaker Change: Simply due to the northern Hemisphere, and that's what we will what we will work diligently for you.
Speaker Change: And then on the on the on the U S onshore pipeline.
Speaker Change: We don't see some of that and there is nothing that stands still in that sense.
Speaker Change: But you will also appreciate NV debt. Some of these things are ongoing and some of them are variables.
That are being discussed and you can sort of say if we should change the tone of voice of the conversation with a customer depending on the variables. We have seen in the first four months then it will be a then it will be a difficult call, Indiana. So I think everyone here, it's happening on senior executive level, and therefore people will connect with this.
Speaker Change: And find solutions to get this done but again there.
Speaker Change: A lot of it has been mitigated already before they started because we have a much smaller.
Speaker Change: Packed from components that are not fully turbines imported to the U S. As described earlier in this call.
Speaker Change: That's great many thanks.
Speaker Change: Could we have the last question now operator, yes. The last question from William Mackie Kepler. Please go ahead.
William Mackie: Yeah. Good morning to you all thank you for squeezing me in.
William Mackie: My question would relate to perhaps some of the core assumptions that you've made going into the end of the quarter around the reiteration of your outlook statement and I say that with I guess specific reference to tariffs.
William Mackie: When we look at the volatility of tariffs in the first quarter, it's been extreme we're.
William Mackie: We're on pause on a number of tariffs and not in other regions. So what is your core assumption when you've reiterated the guidance about the tariff outlook for the year and the sort of adoptions youre, making.
William Mackie: And how could that perhaps be revised later in the year, one way or the other depending on various outcomes of U S policy.
William Mackie: But I can answer that shortly William if I had to give you an update on the size of the tariff in gross setting throughout the first four months, we would have had to update you quite regular and it is not fair when it's about.
William Mackie: A number of projects and if you are in a limited number of customers that are engaged in it. So we really have to focus on this one because the other side of that coin one if it is mitigated or disappeared in one or two quarters. Then we will also see that in having a similar conversation so what happened.
William Mackie: Then with that customer at that project. So therefore, we have said here that will happen that mitigation ultimate leading also to the effect to the electricity off take price.
William Mackie: For customers. So therefore it works.
William Mackie: But of course, I don't know what will be announced in five or six days from now and that of course has uncertainty and you can also see that in the way. It is not immaterial, but we also live in the uncertain world, but we so far feel confident enough that we can mitigate with the partners, we have and Thats what we were.
William Mackie: We'll aim to do but it will be wrong, especially under those circumstances to give either a fixed amount or fixed date, where things were mitigated honestly. This has been our assumptions and this has also been our discussions and as you can probably guess with quite a lot more time on details shared internally.
William Mackie: Investors.
Speaker Change: Okay. Thank you very much.
Speaker Change: Okay with that thank you so much for not only listening in but also taking the interest here and sharing with it I know we're going to see many of you over the coming days, we look forward to that.
And with that also thank you again to everyone here so speak soon and see you soon thank you.
Speaker Change: Ladies and gentlemen, the conference is now over thank you for choosing chorus call and thank you for participating in the conference you May now disconnect your lines Goodbye.
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