Ladies and gentlemen, welcome to the Vestas Conference Call. For the first part of this call, all participants will be in a listen-only mode, and afterwards there will be a question-and-answer session. Just to remind you, this conference call is being recorded. Now I would like to hand you over to your hosts, Henrik Andersen and Marika Fredriksson. Please begin your meeting. Thank you so much, and a warm welcome to this call on January 26th. So good morning and welcome to everyone. First of all, as today clearly our industry continues to go through a challenged time, as we have also experienced, especially in Q4. Supply chain instability are still causing not only the material costs inflation, but also challenging us in significant delays in logistics and others. Therefore, as a consequence of that, it has not been possible for us to mitigate all of those when we executed Q4, and especially on the cost side, in order for us to deliver the EBIT within our guidance issued in the back end of Q3 around the 4%, means also that's the reason for the call today, and that's also the reason for us being on this call. So and again, we are coming out on the January 26th. We are sharing extended numbers in this, so therefore also bear in mind that some of the numbers are still preliminary and unaudited, which, of course, we will share with you on the normal scheduled one on the February 10th. I will also say in this context, first of all, very impressive that the colleagues, the partners, and customers around the world have managed to deliver this record high revenue and, first of all, honored our commitments to our customers across the world. For that, to our partners and also the more than 29,000 colleagues of Vestas, I absolutely thank you for your commitment in doing so in Q4 because delivering 16.6 GW under those circumstances is a testament to the resilience we have built, but also a testament of finding mitigating ways to deliver on it. If we then go to the income statement, revenue increased 5% year-on-year, mainly driven by the increased service activity and offshore, and it ended at EUR 15.6 billion, which is up 5% a little bit more than 5% compared to last year. The EBIT margin before special items decreased by 2.1% year-on-year to 3% for the full year of 2021. First of all, both being impacted by the supply chain instability, it's caused, for sure, some of the significant cost inflation we've experienced over the year, but probably more importantly also causing the delay in especially the execution in the many number of countries where we have delivered and executed on projects in Q4. We've also seen a continued impact on the warranty provisions, which remain at a higher level, mainly ending at 4.4% for the full year 2021. This is still related to the cases we addressed in 2020, but now with simply a significant challenge on the same topics, the logistics, the cost, and also how to get upgrade and repair done. Positive side, free cash flow ended at EUR 183 million, and again, it highlights, first of all, our operational strength and also discipline to execute on the EUR 15.6 billion. And of course, as you appreciate, cash for us is still one of the key and main drivers in this as well. I'll also just shortly comment on because we give you some more details and insight to the Order Intake. We ended lower in Q4 with an order intake impacting the full year level, ending at 13.9 GW. We shared some of that with you on the Capital Markets Day that if there is a choice, it's getting the right orders in rather than focusing on the market share. If we look at it, there's no doubt that the uncertainty around, especially the short-term cost volatility is not still fully reflected in the PPA levels, and that also poses a certain gap into what is being seen in just the day-to-day electricity prices, not only in the countries you are in Europe, but across the world, currently. I think, as we also would say here, there's no doubt that these market and prices on electricity will nearer or come to a point in the market where it finds a better balancing. But right now, I think it's fair saying that it is an opportunity for customers, customers that are right now sitting and looking at increasing PPA levels. For most part of Europe, you will have seen either in the last couple of weeks or even forecasted in the next couple of weeks that you will see areas of electricity being traded somewhere nearer the EUR 400 per MWh, which is more than 10 × up compared to where we were just 18 months ago. If we also look at the average selling price to ASP per MWh, we did 0.86 in Q4. Q4 compared to Q4 2020 means it's an increase of 21%. So, beyond any doubt, we are increasing prices, and we do the pricing that also symbolizes what is actually the current costing required to make our offer and the solution to customers profitable for investors. I think here it is important that not only the industry but also the full value chain of the renewable energy appreciate this is an importance of making this to work because if not, then we will see part of the supply chain probably going out of deliveries at some point in time. That then lead us to also releasing our guidance for 2022, where we have said that revenue will be between EUR 15 billion and EUR 16.5 billion. We will have an EBIT margin between 0% and 4%, and we will have total investment of approximately EUR 1 billion in the coming year. These are the headings. There'll be more details when we get to the normal annual report released on the February 10th. We, of course, invite you to take part in the February 10th and will today give fewer details of both conditions and also our assumptions into that, but we will do more time together when we get to the February 10th. It's also clear that the ranges both on turnover and EBIT right now send a signal of that it is a market where we also, as we said after Q3, foresee that the current instability across our markets will continue throughout 2022, and therefore we have built scenarios into this guidance that also align with that uncertainty. So, with that, I think, first of all, thank you for listening in, and we will take a few questions today, respecting also that we still have a few more weeks to give you a complete overview and issue the annual report. With that, back to the operator, please. Thank you. If you have a question for the speakers, please press zero one on your telephone keypad. We ask you kindly to limit your questions to two at this time. So hold until we have the first question. We have a first question. It's from Kristian Johansen at SEB. The line is now open for you. Yes, thank you. So my first question, in your quoted remarks, Henrik, in the announcement, you're calling out for the industry to be more disciplined. And I guess your ASP in Q4 with the uptake, it's approved that you aim to be disciplined. But obviously when we compare your order intake volumes to the competitors who have reported, it also seems that this strategy is causing you to lose a bit of market share. So my question is, how long are you willing to stick to this strategy if competitors doesn't change their behavior? Kristian, that's, I think we saw each other at Capital Markets Day. I think you can see it clearly for us. If market share is a question about having an ASP that doesn't cover your cost on the project, the direct cost on the project, then it doesn't make any sense of talking about market share. So for us, market share is a secondary measurement in these discussions. ASP is important. And at the end of the day, ASP doesn't pay, but profitability pays on the projects. And that's also why you have been able to see that walk the talk throughout the ASP, throughout the quarters. If that pushes out some of the order intake, we will rather have a limited or lower activity than we would sit and execute on potentially onerous projects, which we won't accept. Understood. That's quite clear. Thank you. And then my second question is on the same topic. So just this EUR 0.86 million per MW in Q4, how does the margin then for that compare to what you took in, say, Q2, Q3? So this uptake in ASP, does that also mean that the margin on this order intake is better? You can sort of say, just from a little bit of a mathematical exercise, I will say point to the simple factor of the average ASP for the year is EUR 0.81. The ASP for Q4 is EUR 0.86. Had we known what we know in Q4? Of course, the average ASP for the year should have been higher because that's a fair reflection of one of the challenges in the industry that we at any given point in time cannot reprice back in time. Therefore, if we have known that, but then I'm also sure there will be some of the things where we will have been standing out throughout the year. So yes, we are more happy with EUR 0.86 in Q4, but that also reflects the market conditions we are having right now. Understood. Thank you so much for your answers. The next question is by Deepa Venkateswaran. Bernstein. The line is now open for you. Thank you for taking my questions. My two questions are, one is, on the margin assumptions, Henrik, you mentioned you're looking at a range of scenarios, and maybe you are reserving this for February 10th, but could you maybe give us some pointers on, you know, under what conditions you'll be at the upper end, what conditions at the lower end of your, margin guidance, which is break-even. And, secondly, on the ASP increasing so when you're negotiating with customers, you've indicated it take it's taking longer. What is your sense in terms of what your competitors are doing? And are you facing, more irrational competitors, or, or what's the level of, you know, tenders that you're up against? And are you sensing that they are also putting their prices up? Thank you. First of all, on the guidance level, our way of working with guidance and for that matter, our budgets and underlyings are exactly the same as we've always done. There are scenarios taken into account, and we have been working on these assumptions since we came out of Q3 in terms of this will remain throughout 2022. So there are assumptions that relates to, as you can see, EUR 1.5 billion euro range in top line. And of course, that links the backlog also towards the EBIT. And in that, there are certain both positive or negative scenarios on some of the challenges we'll be faced with in 2022. So as always, robust. And as you can see, we are just reflecting that in a wider EBIT guidance for the year because it is troublesome and challenging out there. And I can share more with that when we get to February 10th on examples. When we then look at the industry's ASP, I won't comment on the industry. I comment on what we do, and I sincerely hope you can see our say-and-do gap is relatively minimum. But of course, it has an effect. And if we don't do that, then happy to answer it. But I know how we do projects and how we negotiate with customers. And some of it is, of course, tense because you have that big variations. I think also important here for customers, it's also in a market if you have secured yourself with PPAs and you go get the project to deliver electricity on the day you start your PPA, then you also have a very big challenge because then you have to cover your PPA potentially with electricity prices on a day-to-day market. And that is definitely not, particularly value-creating for a customer with the gap currently between PPAs and, and day-to-day electricity prices. So market is right now in parts of it unbalanced in, in these discussions, but we will make it. I think the most important thing here is so many customers have throughout 2021, throughout an enormous, sacrifice for many of our colleagues around the world, managed to see their solutions come up and working on time. Thank you. The next question is by Gaël de-Bray, Deutsche Bank. The line is now open for you. Thanks very much. Good morning, everybody. So the first question I have is on the bridge to the targeted margin range for 2022. Could you just be a little bit more specific about some of the assumptions you've used there? In particular, maybe the assumptions you're using for warranty provision levels, both at the upper and the lower end of the range. The second question is on the pricing dynamics that obviously look pretty strong this quarter. But given the extended lead times, how long do you think it will take for these better pricing conditions to flow through the P&L and really help margins to recover? Maybe to help us here, could you give us an idea of the average pricing you have in the backlog for delivery in 2022 and also for 2023? If I start with, first of all, our guidance assumptions, we don't give you clear details of the outside of the guidance levels here. On the warranty part of your question, I will just answer here. We're not happy with the 4.4% of warranty provision. But we are on the journey which you all listened to in the December Capital Markets Day. We will trend towards the 3%, and then we will work with that also in this year, adamantly on how we do it. I will say a lot of people are focusing right now on only price development in everything: price development on transport, price development on raw materials, price development on components. But I think right now it's also worth noticing it's not always only the price, but it's also the actual physical delivery to sites and to factories. And that is probably equally important to have in when you factor your scenarios right now. So, we are doing that, and we are doing that in the guidance for the year. And then we have to get into it. And let me just remind you, guys, it's just a week and a half ago since we had Tianjin in China finding a limited number of COVID cases, which meant that we had a 48-hour full testing of 17 million people in Tianjin where we have our manufacturing hub. This is actually what causes some stop-and-go and simply just disturbance to how we are trying to achieve what we set out to do. So that's at least for the guidance. The ASP, some of those are very close, but I will just refer again for that. We can take some of those when we get to February 10th because we need to have time to go through our normal process and come out with our proper annual report where you will find some of those details. And there we can discuss more of those details on the February 10th if you would allow me to answer that. Okay. Understood. Thanks very much. The next question is by Dan Togo of Carnegie. The line is now open for you. Yes. Thank you. I'd like to return to the ASP part here. 0.86 here in Q4, how should we think of this going forward? Are you at a level now where you know can take in orders clearly, but does 0.86 reflect what we should expect going forward, or do we actually need to see ASP go even higher in order to, for you to so to say to recover costs further, or do you need to rely on, you know, technology improvement in logistics, etc., for margins to improve? So that's the first question. Okay. Dan, I think your question becomes incredibly right. Our model is not broken. The way it works is definitely not broken to customers. I think I will reverse it a little bit. I don't want to give you our prediction of ASPs quarter by quarter because you then ask me on how costs will develop quarter by quarter. And to be honest, we have our assumptions, but we don't and we have seen this year that what we set and said in the beginning of Q1 2021 is not what we ended sitting and looking at in Q4. And that actually has almost a 21% difference, if you just compare that and assume the average is okay. So 21% higher indicates that we have learned quite a lot in four quarters of 2021. So I won't embark into the journey of trying to give you any predictions of that, but we are happy with the ASP in Q4 that otherwise, we wouldn't have taken the orders, and that's what we're working on. When we come out with the guidance here, it's also a good indication of that it's not going to change as such, because that's our walking point from where we were in Q4. From there, all depends a little bit around how the world develops. Thanks for that color, Henrik. Then, on the Q4 numbers, is there anything here that we could consider one-off? You allude a bit to some delays in some projects. Are there any penalties reflected in that? And how much MW are we talking about being, so to say, pushed into the first quarter or 2022 in connection with that? Anything else affecting one-off here? You know, our philosophy around one-off. They are part of running Vestas overall. And as you can see here, when it comes to cybersecurity and other stuff, we work through that, and then we fix it, and then we run, and it's part of our operating result when we release that. So then there will be some of that, but there aren't any specific issues around that. And we don't have any specific issues around onerous contracts or anything else if that's what you're asking for. Okay. Thanks a lot. The next question is by Akash Gupta of JP Morgan. The line is now also open for you. Yes. Hi. Good morning, everybody, and thanks for your time. My first question is on offshore. The question here is that if you look at the supply chain instability, have you seen that in offshore business as well given you have different supply chain there versus onshore? Maybe a follow-up to that is that some of these framework agreements that you have signed in offshore, could there be some impact on margins because of these cost pressure that we have seen in the year? Then the second question is on production ramp-up. A couple of your competitors have highlighted issues with production ramp-up in the course of 2021. Was that an issue at Vestas as well, or was it more related to do with other inefficiencies and higher warranty cost? Thank you. I think on the offshore, we don't specifically judge between. We are using that. You will appreciate we are executing on a backlog. We have taken over, mainly from our MHI acquisition, carried out end of 2020. Pleased to see the progress we have done. And there aren't any other specific terms on the offshore. But if you estimate the same cash at turbine, blade, nacelles, and others, we'll have exactly the same challenge and troublesome in getting backward and forwards in and out of factories if that's what you're asking. In terms of production, I will just say, production and ramp-up, we haven't seen a production. We've managed to start production lines almost virtually within 2021. As we also discussed, that leaves us with some efficiencies still to be gained and remain outstanding, but we haven't seen other things. We don't have any parts of our either technology or production that is not working to plan. But as we said, we've provided more in warranty to cope for the two cases we also talked about already back in 2020. Thank you. The next question is by Casper Blom, Danske Bank. The line is now open for you. Thank you very much. Henrik, there was, I think Kristian's question touched a bit about this, about how willing you are to accept a lower order intake. I don't know if it's stretching it too far, but can you talk a little bit about how far you can take this? I mean, how low can your deliveries and revenue order intake go before you start facing real problems with your cost and cost absorption? That's the first part. Secondly, just wondering how the service business is doing in all of this. Are you also facing any kind of delays and specific challenges there? Thank you. I think we'll come back here. If I start in this one reverse order, we will give you more details on the service when we have done the full audit and the full annual report. But I will say here that there's nothing wrong with the service business as such, guys, outside that, of course, they have been challenged by some of the ability issues, and they're also carrying out some of the things we're doing. But outside that, service works as service should be working, so we are very pleased with that. In terms of your cost absorption, yes, that's right. But we are also having a relatively good insight into what time will that be. And we are not in the business of where we keep factories running just to avoid potentially having an idling of a factory. That we cannot and we should never be afraid of because if we do that, then we stick exactly to our own discipline of how we operate. So again, back to the say-do gap, if that comes, Casper, we will tell you about it, and then we will also address it. And we will address that internally, before we come out and tell about it externally in that sense. But we have a very good visibility both in terms of locations and also order book, on the various platforms. Okay. If I just may follow up a little bit, if we don't have to go back more than three years to 2018 where you did EUR 10 billion of revenue, can you maybe talk a little bit how the cost base might have changed from there till today? I think you cannot compare a business of our size, 60% higher in some of the continents where we have done. We didn't have in 2018 particularly much in Latin America. Today, it's an independent region. So I think that one we won't single out as just a general answer because that the answer lies in how we run our operating model and how we have localized the supply chain as such. There's one thing that changed, the game here is that both your inbound and outbound from the supply chain is materially differently in 2021 than it is in 2018. But as we also say, don't take too rapid or too overly tense decisions in a logistic and transport world that potentially, for sure, is not in balance where it is today. Okay. Thanks a lot, Henrik. Looking forward to further details. Yep. We look forward to hear that on the February 10th. The next question is by Rajesh Singla of Société Générale. The line is now open for you. Oh, hi. Thanks, and good morning, everyone. Thanks for taking my questions. My question is regarding the hedging part of your backlog. On any given day, like, can you share please what percentage of your order backlog remains unhedged for raw material cost, and what percentage remains unhedged for logistic cost? Yes. I think I've said that before. It's a very small world. We don't give those details. It's fun. We talk. We work as we always said when we get the firm order intake. And on the level of details, as I said, don't get lost in looking at only price, but it's also physical delivery. That is the name of the game in both 2021 and 2022 and going forward. So let's wait with further details till we get to February 10th on that, as well. Okay. So maybe a follow-up question on the logistics and raw material cost. So what are the key assumptions which you have built in, in your guidance for raw material cost and logistics cost, are you seeing these pressures easing by the end of this year and maybe not hurting next year? Because if I look at the consensus EBIT margin, which is like 7%, currently in 2023, so can you please share your insights regarding your view on the raw material cost and logistics cost going into this year and how that can impact 2023 as well? Yes. I won't give you any guidance on 2023 by this call at all. And as I said here, it is such an industry right now where I won't give you breakdown publicly here on transport and transport indexes. We are not doing bad at all, but we are hit by the logistic instability in the sector. And that I think we are dealing with in a fairly robust and efficient manner, but we don't intend to share that widely how we are dealing with it. But you can see we are not too bad when we managed to deliver 16.6 GW in a year where we had all sorts of challenges against us. Okay. Thank you very much. Thank you. The next question is by Sean McLoughlin, HSBC. The line is now open for you. Good morning. Thanks for taking my questions. Just coming back to capacity, I mean, you are right-sized to 16-17 GW of delivery levels in 2020-21. So how do you compensate for lower factory loading and lower capacity utilization in 2022 and particularly 2023? That's my first question. Secondly, on cash flow, EUR 1 billion of investments, potentially zero EBIT suggests you could be cash negative in 2022. Again, what measures do you have to protect cash flow? Could you maybe reduce that CapEx figure or other working capital moves that might protect your cash balance? Thank you. Sean, thanks. First of all, in terms of getting the planning, as I said, that's something we do on a very frequent and regular basis. That's the view we have. You would fully appreciate that with the supply chain setup we have, we can always try to get more out of certain parts of our supply chain. We can also ask to get a little less out of certain parts of the supply chain from a factory. That comes down to shifts, and it comes down to output from some of those. I think there we are in good position, and we are in good progress with that. But starting to speculate on something in 2023 is simply not right with the visibility. We have a good visibility for 2022 that we are addressing and we are running with. Cash flow. In terms of your cash flow, you're absolutely right. When you have an and if you're having a scenario of zero in, in EBIT, then you also do your planning, both for CapEx, and you do your adjustment to that. And as we have been saying all along, we plan and we work towards a cash flow that is positive throughout the cycle and that we will also do in, in, in 2022. Nothing has changed, in, in, in that sense, Sean. So we're fully cash-focused. You can also see that from how we ended 2021 with the challenges. So we are we actually that one is a discipline. We know in details. Sean, with that, maybe I will just say, could we take the last question and also at least leave a few more questions for February 10th? I'm sure we will have. So, could we have the last person on the line for questions? The last question is from Martin Wilkie, Citi. The line is now open for you. Yeah. Thank you. Good morning. It's Martin. Thanks for taking the time for the last question. So the first one was really just on the warranty. I understand you can sort of give guidance for that for this year. But just to get some sense as to how far through the process you are fixing this. Obviously, these relate to 2020. I'll be now sort of 50% done. Just to get some sort of sense as to what portion has now been completed. So that's the first question. Thank you. I think on the warranty, Martin, we will come with the details again on the February 10th of what we have consumed and what we are completing. You will appreciate fully that, when we look into a warranty provision in the way we are doing, that's the future look on where we are in the warranty. That doesn't entail what we are. We are working through that. We have all along said that we do provisioning, and then we are spending it. You can see it in the last few quarters that we have been spending more than we were actually provided for. That, of course, is part of where we are. We are pleased and satisfied with the progress. I think being able to do the upgrades and the repairs under the circumstances and how far we've gone is pleasing to see. It's not pleasing to see that we are 4.4% warranty provision. For sure, not. And that's also why when we set in looking at 2022 and onwards, it will be more towards the 3% as we always talked about. And ultimately, it has to come below 3% when we get further into it. Thank you. And my second question is, obviously, you talk about volatility in the industry. You know, it's just been mentioned in the release about regulatory stimulus, but obviously, in the U.S., there's still the possibility of PTC extensions and so forth. Do you think that's also caused lower level of order intake, or do you think it's much more to do with energy price volatility and raw materials and deliveries and these kind of things that's caused the order intake to be perhaps a little bit lower than you might have thought a few months ago? Yeah. No, as I said, we looked at each other on mid-December, and I think most of us that looked into the PTC extension in the U.S. probably had a slight bias towards an expectation of having a at least somehow an agreement on it, within the first months of this year. I think it's still being discussed. It's been discussed in various forms. Would it have affected it negatively? I don't know. I don't know how much and people would have banged on it between when we spoke about it December 15th towards the last 14 days. We saw some of the PTC arrangements being done but not particularly high. And that's probably is a little indication of people didn't want to bang on it too early. They are lining up because everything from a PTC point, electricity and energy prices, comes actually positive together for order intake. But we need to see it in place before we start talking more about it, Martin. Great. Thank you very much. Okay. With that, I can first of all say thank you for your time. Thank you for your attention and also your understanding. And I'm sure we will leave more of it to also Mathias. And otherwise, we look very much forward to see and talk to you when we get to the February 10th. Speak soon.