Vestas Wind System's (VWDRY) CEO Anders Runevad on Q4 2015 Results - Earnings Call Transcript

| About: Vestas Wind (VWDRY)

Vestas Wind Systems A/S (OTCPK:VWDRY) Q4 2015 Earnings Conference Call February 9, 2016 4:00 AM ET

Executives

Anders Runevad - President & Chief Executive Officer

Marika Fredriksson - Chief Financial Officer & Executive Vice President

Analysts

Kristian Johansen - Danske Bank

Phuc Nguyen - Citigroup Global Markets Ltd.

Claus Almer - Carnegie Bank

Sean McLoughlin - HSBC Bank Plc

Patrik Setterberg - Nordea Bank

David Vos - Barclays Capital Securities

Pinaki Das - Merrill Lynch

Dan Jensen - Svenska Handelsbanken

Jacob Pedersen - Sydbank

Fasial Ahmad - SEB Enskilda

Mark Freshney - Credit Suisse

Shai Hill - Macquarie Capital

José Arroyas - Exane BNP Paribas

Klaus Kehl - Nykredit Markets

Casper Blom - ABG Sundal Collier Norge

Anders Runevad

So good morning, everyone. Thank you for calling in. And welcome to this Full Year 2015 and Q4 Presentation. As usual then, we start with the disclaimer statement and then move straight into the highlights of the year. And we said that the solid execution have produced strong financial and operational result on a high activity level globally. And 2015 was, in several aspect, a record year for Vestas.

On the financial and operational side, the guidance met or exceeded on revenue, €8.4 billion; EBIT margin, 10.2%; and free cash flow, slightly over €1 billion.

Also really encouraging that our profitability continues to improve and we could actually record the highest-ever net profit for full year. Also very encouraging is the highest ever order intake of close to 9 gigawatts and the fact that we got orders from 34 countries on five continents.

We have a solid order backlog, €16.8 billion, so also there, a good development. ROIC at a very high level, 117%, and the board recommends a dividend of DKK 6.82 per share, very close to a payout ratio of 30%.

Since this is the full year, we also will talk a bit about the strategy and the strategy execution, and we've done a strategic review, concluded that we are firmly on track and that the key objectives remain in place, but the programs underneath those objectives have been updated to reflect both the strong execution and current market condition.

So, if I then go over to the agenda, I will start with the orders and a bit about the market situation. Marika will talk about the financials, then I will come back with a brief strategy update, and we will end with summary outlook and Q&A.

So, starting with the orders then in Q4. Order intake at approximately 2.7 gigawatts, 18% year-on-year improvement. If we look at the quarter, the main contributor to the increase were U.S., China, and Germany. The average selling price on order intake was €0.90 million in the quarter, so I would say a continued stable development, very much in line with what we saw during the other quarters. And as I said also in the other quarters and in Q3, we will see variations between quarters depending on mix and, overall, in a competitive market, we continue to see a fairly stable price development.

In Q4, we had a bit higher than normal order intake from China that typically has a lower scope confidence than other markets. Looking at the order intake and for the full year and Q4. As I said, a very solid overall record-high order intake of close to 9 gigawatts, 37% increase. And also encouraging to say that all our regions delivered growth, leveraging the global reach that we have in Vestas. Also, the strategic markets pinpointed in the strategy is on track.

A bit more in detail, substantial growth, of course, in Americas both year-on-year and in the quarter, 50% and above, to a large extent, driven by the U.S. but also for the full year and in the quarter, Brazil, from a low level. But the 14-fold increase in Brazil is very encouraging. And actually, good growth in most Latin American countries.

Looking at EMEA then, we had a 9% growth for the full year, fairly broad-based as I have also talked about in the quarter throughout the year. Germany, Nordics, especially Finland, strong Poland, France saw a good, solid broad-based increase in orders. In the quarter, we were down year-on-year 17%, very much due to a large booking of Lake Turkana in the quarter a year ago.

Also encouraging development on the order side in Asia Pacific, of course, from a percentage point view, extremely impressive but it is from a low base. Encouraging here to say that the year-on-year increase in China, which has been one of the focus market for Vestas and we say that both in the full year and in the quarter. But I must say also, generally speaking, increased order book in most Asia Pacific markets.

I talked about the strategic markets and it is encouraging to say that for the full year, both China and Brazil are now in top five markets for Vestas when it comes to order intake. Looking at delivery, up 20% year-on-year, close to 7.5 gigawatts, and here a good strong performance in Americas and EMEA, where we had a lower development decline in Asia Pacific basically due to the lower order intake in 2014.

So, a bit more in detail then, very much following the order situation, very solid development in Americas, we are clearly gaining market share, but also good activity level and increases in Latin America. In EMEA, up 8% for the full year and 31% in the quarter. Here, it is - markets such as Poland, very strong delivery market during last year; Turkey, another good delivery market; Finland and Italy. And when it comes to Q4, again Poland speaks out on its strong delivery.

As I said, Asia Pacific down both full year, 16%, and in the quarter, very much due to the weak order intake that we had in 2014. But with the situation in 2015, of course, we hope to reverse that trend. So to summarize, we have to assess the unique global reach, and we continue to leverage that in 2015. A well-balanced order intake across 34 countries in five continents. And we have also added additional countries into our presence and we are now present in 75 countries globally.

Leading to a strong combined backlog of €16.8 billion, second highest backlog that we've had in Vestas. And the sequential development was an increase in the service backlog of €0.7 billion, so now close to €9 billion and a decrease in the turbine backlog of €0.3 billion and now close to €8 billion.

A very positive event by the end of last year was, of course, the multi-year PTC extension in the U.S. And this bodes well for a continued high activity level and a solid future for the wind energy and of course for Vestas in the important U.S. market. The activity levels continue to be high and we expect it to stay that way. We took firm orders in 2015 of 3.1 gigawatts. And I must say I'm really pleased with our performance and our market share growth in the U.S. market.

Looking a bit closer on the PTC extension, I'm sure you're aware of the rules. So it's from 2015 to 2019; 2015 and 2016 with 100% and then a deduction of 20% each year. What this table assumes then which is still not clear or clarified is that the installation period follows the same qualification as previous has been the case. And we and I would say the rest of the industry is currently waiting for IRS to clarify the rules around the installation process timing.

Okay. A few words also then about the joint venture we have with Mitsubishi Heavy Industry for Offshore Wind. Well on track and a busy year overall for the joint venture. On the sales side, good traction and well received in the market with announced firm orders of approximately 1.2 gigawatts, further announced conditional orders of 450 megawatts.

Also internally from an operational point of view, very good progress. All milestone payments has been received by the joint venture that was figured for both commercial and technical milestones. And manufacturing is ramping up and first deliveries then will happen this year to the Burbo Bank project extension. That's first delivery of the 8 megawatts, to be clear. Of course, the 3 megawatts the offshore continues to deliver.

So with that, I hand over to Marika to talk about the financials.

A - Marika Fredriksson

Thank you, Anders. And we are, as you can hear from Anders, very consistent in delivering on our strategy that was stated and set in 2014. And that is also clearly reflected in our financials, not only the P&L, but also the balance sheet. What you can see here if we have a look at the full year is that we are increasing our revenue by 22%. We have also improved the gross profit by 28% in absolute terms and in margin from 17% to 17.9% for the full year.

We continue to leveraging on the fixed costs. We'll also come back to how we are leveraging in the different quarters for the fixed capacity costs. But I think an increase of only 4% in an environment where the revenue increase is 22% is a very good achievement. Consequently, we have a very high EBIT that improved by 54% to €860 million and also again very well reflected in an EBIT margin of 10.2%, so 2.1% up compared to last year.

And to comment on the special items, you see a benefit of €46 million. That is our facilities in the U.S. that, because of the latest PTC extension, we wrote up as we're using also for the future the facilities in the U.S. and have a clear path going forward.

Income from investments account is the joint venture with MHI, you have a positive of €34 million. That is primarily ToR of projects and a small loss I think of €1 million in the joint venture as such. And you see here a net profit improvement of 75%. And as Anders stated earlier, it's a record-high level for Vestas.

If we then have a look at the Q4 numbers, I should say here as a general comment it was a very good quarter from an execution point of view. And that is also again reflected in the revenue, that increased by 23% in the quarter. Gross profit also grew by 38%. And that is mainly driven by, obviously, the higher revenue, volume and also good project margins.

We should also highlight here that in the margins, as Vestas has a legacy, we have written down €50 million in our inventories. And also remember that, for the full year, we have written down inventory in the service business. But the €50 million you see here in the quarter is entirely on the inventory side for projects. We also here have the special items, as the write-up of the facilities in the U.S. occurred in Q4. And here in Q4 you also see a negative impact of €10 million from the joint venture with Mitsubishi.

So in the quarter, again, we delivered €298 million, an improvement of 54% on the net profit side. So on the EBIT margin, you see an improvement by 3.1%. So really in the high territory. We are at 13.3% in the quarter. You also see the improvement on the gross margin despite the write-down of €50 million in the quarter.

If we go to how we're leveraging on the fixed cost, you see we are increasing. We have a negative impact from the currency on the fixed capacity costs, but still we are leveraging and we are now down to 7.7% of revenue in fixed capacity costs. So really well controlled and well maintained despite the very high activity level, both in Q4 and for the full year 2015.

If we have to look at the service business, we are clearly delivering on our strategy here. We are improving year-over-year the revenue by 20%. And that is primarily driven by organic growth and also impact from currency, but organically it has been a great improvement in the service business. Remember the UpWind acquisition that took place in the latter part of the year, it's only included with a very, very small part as the overall result was impacted only in a few days in December.

EBIT continues at stable margins. We are now at 17.7% for the full year. And as you recall, we did very high write-offs in the service business throughout 2015, but primarily a very high level in Q3 of €19 million. And we have also grown the service business backlog by €700 million compared to Q3 in last year.

To comment on the balance sheet, we continue to have a very strong balance sheet that, again, as we've said previously, we're very happy with and have worked hard to achieve. And you can see our net cash position is improving further compared to 2014 and is primarily driven by high cash flow also in 2015. Net working capital improved, so we are clearly very efficient in this high activity environment. And our solvency ratio was actually reduced compared to 2014, down to 33.8% compared to 34%, but still at a very good level.

If we look at the change in net working capital, we see positive improvements for the full year, but also over the last quarter. And it is for the full year primarily driven by high payables and prepayments. You see a slight offset in the inventories simply because the activity level has been very high and continued to be high. And if you look at the changes over the last three months, you see improvement of €600 million and that is the regular flush out that you see in Q4. And, again, it's been a very, very high activity level and a very flawless execution of Q4.

If we continue to the warranty provision and the Lost Production Factor, this is the outcome of a very consistent work on the quality, and we continue to consume less than we provide for. We have the same methodology, so no changes. And the good quality is also reflecting in the Lost Production Factor that continues to be very stable below 2%.

Cash flow. If you look at the full year, cash flow - we have achieved, and we have said that for numerous of quarters now, that you see that cash flow is, to a very large extent, driven by the results from our operating activities. You see a positive from the net to the change in net working capital. And if you look at the cash flow from investing activities, that also includes the UpWind Solutions, and consequently lead to a free cash flow of over €1 billion for the full year. The cash flow from financing activities is the share buyback program and also the dividend that we paid out in April of last year.

So if we have look at the Q4 numbers on the cash flow, I would say it's the same pattern. You see a very good operating result, good changes in the working capital. And here you have cash flow from investing activities. It is also, again, UpWind taking place in Q4 of last year, free cash flow very high in the quarter. Cash flow from financing activities is primarily the share buyback took place in November of last year.

If we have a look at the total investment, that also have an impact on the cash flow as previously seen. We have separated the acquisition of UpWind. That is €55 million of the €425 million. So it is an increase, but if you look at the percentage year-over-year, we are consistent at 4%. The vast majority of our investments is investments in molds for the blades, as well as capitalized R&D. So no changes in our investment pattern apart from the UpWind acquisition.

So capital structure, we continue to be very low on the net debt-to-EBITD or, a negative territory in the markets where we are operating in. The solvency ratio that is one target that we have changed. We had increased our target to 35%. But over the cycle, we think it's more appropriate to be in between 30% and 35%. So that is the new target for solvency.

If you look at the capital structure development in more details, you see our cash position end of 2015 compared to 2014. And the development is, as we have stated earlier, primarily driven by the cash flow from our operations. So very efficient delivery of cash flow in the company.

And if you look at the solvency ratio and the development they are under, it is - development is fairly driven by a net profit and that is, to a certain extent, offset by a working capital effect on the balance sheet. And we have also distributed money to our shareholders. So we delivered 33.8% compared to 34% last year.

And if we have a look at the capital allocation and what we have done, we did a share buyback in 2015 amounting to €150 million. We are proposing a dividend payout based on the 2015 results of €205 million, so an increase of €80 million. And the total distribution in 2015 consequently is €355 million compared to €116 million based on the 2014 numbers.

If we have look at the return on invested capital, as Anders said earlier, it's very, very high territory. We are at 117%, and this is driven by our effectiveness on both the P&L, as well as the balance sheet. So we are really in the high territory. And remember, over the cycle, we have said that we will continue to deliver double-digit ROIC.

By that, I'll leave the word to you, Anders.

A - Anders Runevad

Thank you, Marika. So let's go and talk a bit about the strategy update. And starting then with the overall environment that we see, and I must say that from a policy and market environment overall, we see a positive picture. Clean energy investment according to Bloomberg New Energy Outlook was at an all-time high in 2015, very much driven by positive policy developments, but also then the increased competitiveness and direct investments.

So starting with the policy then. We see, of course, the PTC extension is very, very positive, and also there on the Clean Power Plan that was released last year. The COP21 Paris Accord, I must say, was for the longer term. Probably have less of an impact in the midterm, but for longer term positive, the fact that majority of the countries have a renewable energy target in their plan. China and India continue to be committed to installation of wind and have not really changed their plans.

We also see that the market is moving to a more market-based system. Auction and tender-based, we already have this in many markets but we actually see that as a global trend. And I think we have reported, for example, about the German plans during the year last year. So all in all, a positive long-term outlook in the market.

At the same time, the cost of energy for wind continues to decline, and that is both technological improvements but also scale improvements and pure cost improvements And I think that this is very vital for the continued market development. And for new installed wind power, we now see in many markets that it is on par with fossil fuel. I think one clear indication of that is that wind is estimated or accounted for approximately 20% of all new electricity generation during last year.

The third block is about investments, and we see major corporations like Google, IKEA, Apple investing directly into wind. We also see investment houses like Goldman Sachs and BlackRock that increasingly invest directly into wind powers. This is, of course, a number of different reasons: to power their own operation, but also for the attractiveness as a pure investment case.

Looking at the - the long-term forecast then also - and this is an estimate by IEA about the new electricity generation build up to 2040. And what you can see here is that the majority of that new build is actually estimated to be renewable and within the renewable space. Wind is estimated to take the majority of those installations. And actually this prediction is that by 2030, renewable will pass coal as the largest power source in the global market.

A bit more detail on the cost of energy for renewable and the competitiveness, and here we see this is again from Bloomberg New Energy Finance. On a global scale, onshore wind is now competitive with fossil fuel and that is actually also true for many regions. I think it's the only region where you see a bit of a gap between coal and onshore wind is in Asia Pacific. But of course, these numbers will vary regionally and country-wise. But overall, I think a good representative picture of the increased competitiveness of wind.

Going into the strategy. And as I've said, we maintain our visions to be the undisputed global wind leader, which means market leader in revenue, best-in-class margin, strongest brand, and continue to lowering the cost. We also maintain our mission on how to deliver and sell to our customers. Our four key strategic initiatives also remain. And I will, in the next slide, go a little bit more into detail on the execution as we see it.

So starting with our market strategy, leveraging our strong global presence and a good performance on our ambition to grow faster than the market in 2015, order intake in 34 countries and presence in 75. Also from a level with order intake up 37% and delivery up 20%. So I am convinced that we, during 2015, have grown faster than the market. We have greatly improved our market share in the U.S., we are a market leader in Europe, and we see year-on-year growth in China, India, Brazil.

Our efforts to work closer with our customer, and of course to serve our customer is also paying off. We do yearly customer satisfaction study and we have increased that index to 78, which is a good improvement year-on-year.

Going forward, we will continue our growth strategies in both mature and emerging markets. We need to early engagement as customers gets bigger, and the bigger part of the pipe is locked in. We have plans on how we can engage earlier and closer with our customer. And then, of course, we execute on the local plans that are in place.

Second would be actually on the service business. We have revised our growth ambition in the midterm from 30% to 40% due to the solid performance that we have delivered and the outlook that we see. During 2015, we saw a 20% increase in revenue and service backlog up by close to €2 billion, so a very positive development. We've also done strategic acquisition of UpWind during last year and Availon that is subject to final closing in Q1. This provides additional revenue, of course, but also scale and service offering know-how, and also know-how around third-party turbines, strengthening our overall fleet optimization business. And during last year, we served a bit more than 5 gigawatt of the third-party turbines.

Looking ahead, focus will, of course, be to deliver on the new target of revenue growth. Also, to continue to leverage the scale, enhance the service offering, and of course, now also integration of the two acquired companies. An absolute key enabler for us to execute on the strategy is to continue to reduce levelized cost of energy. It is very much about the competitiveness of our product portfolio, and we will continue R&D investment in that portfolio.

During the year, we introduced 336, about 10% improvement from the previous 3-megawatt platform. 2-megawatt platform also a very competitive platform. Almost 4 gigawatts sold in 2015, and really, a flagship product in the U.S. market.

During last year, we also did an upgrade on wind classes for the complete 3-megawatt platform that, if you look at it historically - actually now we have improved the annual energy production between 18% and 35% since introduction. The focus will be continue to lower the levelized cost of energy and of course working with a continuous improvement and new releases of our turbines.

Operational excellence is the combined name of all the earnings improvement programs that we're all running in the company. Again, a good solid execution in the year with improvement in both EBIT on productivity level and a well-managed net working capital. Also, the underwriting is strong cash flow.

Going forward, we continue with our accelerated earning program with new targets, of course. Also, to counteract the natural increases we have with the expansion in fixed cost, we continued the implementation of shared service centers, outsourcing and site simplification program, working capital management and overall leveraging the scale of the operation. And that leads me to the key differentiators that remains intact that we leverage on and that we need to continue to leverage on to execute on our strategy.

It is about global reach, the market presence. It's about technology and service leadership, being able to offer turbines in all wind classes across platforms with best-in-class quality and a world-class siting and forecasting capability.

And it is about scale, the simple fact that we have more people dedicated to wind than everyone else. Of course, we have the largest volume. We now also have an installed base of 74 gigawatts and 57 gigawatts on the service.

Our ambition for the midterm remain, as I said, to be the undisputed global wind leader to generate - to be the market leader in revenue, bring wind on par with coal and gas, deliver best-in-class model and have the strongest brand. Our midterm financial targets also remains with the exception or the update that Marika talked about on the solvency ratio in the range of 30% to 35%.

So to summarize, a little bit where we started, a strong eye on execution, on our four key objectives and on our - for P&L for the full year. And continue then to improve our financial and operational performance throughout the year, evident in the solid order intake or the record high order intake actually, a good increase in delivery for the second year, improvement in EBIT, a good strong balance sheet and a very high ROIC.

That leads me down to the outlook for this year. So on the revenue side, minimum €9 billion. On EBIT margin before special items, minimum 11%. Total investments, and that is then including the planned acquisition for this year of approximately €500 million, and the free cash flow also with the same inclusion of the acquisition for this year of minimum €600 million. We also maintain our outlook on the service business, which is expected to continue to grow with stable margin.

If I look a little bit further into the year, I think, it's our assumption, it's fair to say that we continue to see a back-end loaded year. And that is, of course, the normal pattern of our business, but we see actually a fairly low activity level in Q1 and an activity level in Q1 that is lower than Q1 last year. But for the full year, we will have the normal back-end loading profile. And those of you who follow us knows that we didn't expect to get into a very busy Q4 with the natural external environment, like weather and wind and grid connection that can influence our result. So we think it's a good strategy to start the year with the same guidance principle as before, and that is then the minimum guidance.

So, with that, thank you very much. And then we move over to the Q&A. [Operator Instructions]

Question-and-Answer Session

Operator

And the first question comes from the line of Kristian Johansen from Danske Bank. Please go ahead. Your line is open.

Kristian Johansen

Yes, thank you. First, in terms of the solvency ratio, you lowered your target and, at the same time, guide for at least €600 million in free cash flow. But you are not launching a new share buyback. What is your thinking behind this decision?

Marika Fredriksson

Well, first of all, if I comment on the share buyback, we prefer the same methodology as we had last year. So we'd rather base our share back on delivered results rather than anticipated results.

And when it comes to solvency ratio, the higher end remains, but we think it's more adequate for how we want to treat the balance sheet also going forward to be in the range of 30% to 35% solvency, as that is the target also over the cycle. And that's basically the conclusion why we have made the amendment.

And I would also like to say as we have been discussing this back and forth that we are very happy with the very strong balance sheet that we have and we also use the balance sheet to continue to invest in the strategy that we have for the company.

Kristian Johansen

Okay. Very clear. And then my second question in connection with the Q3 results. You stated that you have 2 gigawatt in U.S. framework agreements. How should we think about these now? Are they still in play, or were they cancelled in connection with the five-year PTC extension?

Anders Runevad

That's correct. Roughly approximately 1.5 gigawatt remains out of those frame agreements that we talked about. The frames are obviously still there with our customers, but of course it's also a new situation, a complete new situation. So with the five-year extension, I think fair to say we probably [indiscernible] the customer had, a lot of different scenarios. A five-year extension was probably not one of the most likely scenarios for either us or the customers. So we have to wait and see how they play out.

But I think it's fair to say that they are still there. There are still agreements with our customer. But, of course, when and how they we expect them to be realized and how the whole market will change with this good, stable mid-term outlook, I think it's a bit hard to say.

Kristian Johansen

Okay. Thank you very much.

Operator

And the next question comes from the line of Phuc Nguyen from Citigroup. Please go ahead, your line is open.

Phuc Nguyen

Hi. It's Phuc from Citi. Thanks for taking my question. The first one relates to your guidance, to your EBIT guidance of minimum 11%. Can you give us some color what assumption you are making around fixed costs? And also the gross margin, are you assuming a flat year-on-year gross margin to get to that minimum 11%?

Marika Fredriksson

Well, we are obviously not guiding on the margins when it comes to gross margins or the fixed capacity cost. I think what we can say is that when we have set the guidance, we have used the same principle as previously, the same methodology. So we are doing a best estimate on what we see as an activity level in the company. What I can say is obviously the activity level and the volume have a positive impact on the gross margins. We have a healthy order backlog in terms of gross margins and we continue to have the accelerated earnings program. Our aim is obviously to continue to be as efficient as we have been on the fixed capacity costs, so the focus remains on being efficient overall on the P&L.

Phuc Nguyen

Okay. Sure. To maybe just to follow up, when you came up with this guidance, did you use the same conservativeness of last year, or would you say this year you're more optimistic?

Marika Fredriksson

We have never been negative or overly optimistic. We base our guidance on the best assumptions that we have at a given point.

Phuc Nguyen

Okay. Sure. And my second question is on strategy. Obviously, we know you have very high cash levels. You've made a few strategic acquisitions of service providers. Is it fair to assume you will continue down this path going forward, or would you also consider buying manufacturing capacity in markets where you're not present at the moment?

Anders Runevad

I think overall, as I said, our strategy is based on organic growth and that is the base of our strategy. As you also had pointed out, we have done two good acquisition in the service business. If you look at the top line of them compared to our service business, there's definitely a positive effect, but of course not substantial. They also have capabilities that we think fit very good with our strategy.

So coming back to your main question, our strategy is and will continue about organic growth. We are the market leader, so of course if we find opportunities in the market that we have seen during last year that we think brings value to Vestas, we are always prepared to look at them.

Phuc Nguyen

Okay. Thank you.

Operator

And the next question comes from the line of Claus Almer from Carnegie. Please go ahead. Your line is now open.

Claus Almer

Thank you. And first of all, congratulations with the very strong report. My first question goes to the guidance. I know and Marika just said that you have never been over-optimistic or over-negative, but the statement has also been in the past that you would prefer the underpromise, over deliver strategy, so to speak. Is this still the case for 2016 guidance?

Anders Runevad

Let me start and of course just echo what Marika is saying. We use the same principles as before. Marika and I are still here. We are the same people as we have been before. Having said that, of course, we also have seen improvements in our internal processes within the company. We have a strong order intake during last year, actually a record high order intake during last year and we have now two years of execution behind us. But we have used exactly the same principles. It's still Anders and Marika here, so we haven't changed anything on how we look at it and how we estimate it.

Claus Almer

That makes sense. My second question goes to the order intake. And of course I know you don't guide on order intake, but can you give some flavor to the cycle of U.S. orders in 2016, given the PTC extension, when should expect these projects turn firm and unconditional. And maybe on top of that, how important is order intake in 2015 for your 2016 guidance?

Anders Runevad

If I start with your last question, again, we have had a strong order intake during last year and we have a good coverage. I will not give a percent, but we have a good coverage of orders for this year.

Your question about U.S., I think it remains a little bit to be seen because currently, as I said before, the discussions with the customers are very intense for the moment because this is a new scenario and, again, a very, very positive scenario that we get a stable U.S. market, but nevertheless, a new scenario with a five-year extension of PTC. So I think it's hard to forecast exactly how orders will pan out in the U.S. It will be different from if it was just one year, where you would have seen the sort of normal rush and PTC components and all of those things, so it will be a more normalized market.

At the same time, a lot of the orders and a substantial part of available projects in the U.S. of course feel benefits from an early construction, because that's part of the financing of the different projects. But we need a little bit more time to finish the discussions with our customers to get a clearer picture, and hopefully also, the IRS rules to be released.

On an overall global market point of view I think it's fair to say that of course, last year, if you compare the growth 2014 to 2015, it was a very favorable overall market. And I think, we, an external panelist, don't project the same year-on-year growth in the overall global market between 2015 and 2016 as we saw between 2014 and 2015.

Claus Almer

Okay. Thank you so much.

Operator

The next question comes from the line of Sean McLoughlin from HSBC. Please go ahead. Your line is now open.

Sean McLoughlin

Good morning. Thanks for taking my questions. Firstly, on service, you've raised the top-line ambition, but you're talking about stable margins. Have service margins peaked? Secondly, on offshore, just, if you could give - I mean, you had a successful year, first 8-megawatt order's coming through. How are you feeling about - your potential thought for orders in 2016 in offshore? Thanks.

Anders Runevad

It was, probably a fairly bad line. I don't think I got everything, but let me try to - I think the first question was around the service growth and margins. And if I start with the growth there, I mean, the reason for us to stretching our ambitions 40% is a reflection of what we've done so far. I think it's important that we always have a stretched ambition.

And on the margin side, we definitely see stable margins on a yearly basis. I think it's fair to say that they have varied between - in between the quarters, as we have also commented on. But if I look at this on a year basis, we see stable margins in services. And that was - is also what we guide for this year.

I think on your questions on offshore - and I'm sorry, it was a fairly bad line, I didn't quite get them. But when it comes to order book, and more specific on offshore and 8-megawatt, those questions really they're going to be answered by the stand-alone company entity responsible for the offshore business.

Sean McLoughlin

Okay. Thank you.

Operator

And the next question comes from the line of Patrik Setterberg from Nordea. Please go ahead. Your line is now open.

Patrik Setterberg

Yes. Good morning. I have two questions. The first question is related to your free cash flow guidance for 2016. I'm just wondering what kind of assumptions are you making to the net working capital progress during the year?

Marika Fredriksson

Well, we have guided for the cash flow. We are not guiding for the net working capital. But what I can say is that you've seen a tremendous good development on the net working capital. And I think what you're asking me, will we be in the negative territory also for end 2016? We are continuing to deliver and working on the working capital. That is why we have been very consistent and continue to deliver on the activities that were in place.

I personally see it's very difficult to improve from the levels we are at right now. So, if we can maintain, I think we should be very proud in this high activity level that we foresee for 2016.

Patrik Setterberg

I just have to follow up, you say you will be proud if you can maintain it but if the goals were maintained, the absolute level of working capital you're having now?

Marika Fredriksson

When I say maintain, it's really maintaining the activities. The absolute level is hard to predict. Then, it is really in very, very low territories now end of 2016.

Patrik Setterberg

Okay. My second question is relating to your recent acquisitions and what kind of acquisition we should expect you making going forward. Do you have - or just to get a sense of what kind of acquisitions do you want to make in 2016? Will it be solo within the service area? Or could you look for business activities relating to your project business as well?

Anders Runevad

Our strategy is based on organic growth, and that is still our strategy and still the basis of our strategy and so it hasn't really changed. And as I've said before, we of course follow the market if we will find something that we feel brings value to Vestas, of course we are prepared to take a look at that. But I just want to emphasize, our strategy is about organic growth.

Patrik Setterberg

Okay. Thank you then.

Operator

And the next question comes from the line of David Vos from Barclays. Please go ahead. Your line is now open.

David Vos

Yeah, good day. Good morning, guys. A couple of questions from my side. So, if I look at Germany, it appears to me that you've lost a bit of share there. You're down kind of 30% versus the market 20% year-on-year. Can you just explain what's going on there? Is that a shift from high-speed wind to low-speed wind? Are there sort of regions where you've experienced some permitting, for example? And if you could also comment on what the backlog looks like in Germany. That would be question one.

Anders Runevad

Yeah, I don't agree with you. I don't feel that we have lost share in Germany. I think if you look at Germany overall, both from a delivery point of view and all the points of view. We knew that the overall market from a delivery point of view was going to be lower last year, which I think I talked about as well.

You're right. In a given year or given quarter, there will be regions with more permitting or less permitting. And if you look at the thermal supply or strong parts of Germany, that will also differ a bit quarter-to-quarter. But if I look at Germany as a market, I think, we have to see a little bit what the final installation will be. I'm confident with our position and our market share in Europe.

And we will not comment on the backlog on individual markets, but if you look at the order intake on Germany and also in Q4 coming back up, I would say, that it is a good development and the book-to-bill will be number one.

David Vos

Okay, that's clear. And then secondly on Brazil, you've booked quite a few orders in Q4 it seems, but the country is kind of going into a tailspin. And if nothing else, electricity demand is now firmly in negative territory, and there's some question around the financing availability from the development bank there. So, all those things put together from the outside, it could seem that it doesn't look great for Brazil for the coming years. In that light, it's quite surprising to see you've kind of ramped up your orders again. So, I was just wondering if you could provide a little bit more color on what you're seeing on the ground there.

Anders Runevad

Yeah. First of all, I don't - I need to come back because I don't think Q4 was specifically Brazil-heavy. But it was 99 megawatts. But if you looked at this earlier, we were 300-something megawatts, almost 400 megawatts in Brazil, which I think is a good development.

And you're absolutely right. The macro economy in Brazil doesn't look too promising, and - but if I look at the more midterm development in Brazil and if I look at the need for electricity generation in Brazil in the near term and the competitiveness of wind, I must say I'm confident to be in that market. We have always said for both Brazil, India and China that our ambition was continued year-on-year improvement, and we have also always said that we will not sort of prioritize market share ahead of profitability when entering those markets. And I think we have followed those principles when we improved our situation in Brazil during last year.

David Vos

Understood. Thanks very much for answering the questions.

Operator

And the next question comes from the line of Pinaki Das from Bank of America Merrill Lynch. Please go ahead. Your line is now open.

Pinaki Das

Hey. Good morning. Thanks for taking my questions and congratulations on the good results. I've got three questions. The first one is on 2016 order outlook. From my understanding, talking to many investors, is that people want to have some confidence around the 2016 order outlook. I know you don't guide on 2016 orders, but it would be great if you could give us some color in terms of what are you seeing on the ground in terms of commercial activity. Do you feel you can maintain the very high level of orders that you've seen in 2015? So, that's my first question.

My second question is relating to cost and optimization. You have put on your slide 35 some comments around optimizing the cost base and outsourcing. So, I just wanted to understand, do you have more opportunities within your cost base now that you have a better outlook in the U.S. or more visible outlook in the U.S.? Are there opportunities to optimize the cost base and improve your margins there? That's my second question.

And my third question is again relating to the U.S. During the discussion today, you've mentioned that things are still evolving in the U.S., you're discussing very intensively with your customers. You're waiting for [indiscernible] and overall you see a positive environment in the U.S. I wanted to understand if it makes sense for Vestas around Q3 to hold some sort of Capital Market or Investor Day looking at the midterm outlook once you have more clarity in the U.S. So those are my three questions.

Anders Runevad

Okay. Let me thank you and let me start with the last. First of all, I must emphasize that I'm very positive and actually very pleased that we got the five-year PTC extension. That should straighten out a lot of question marks that we always have had around the U.S. market and different scenarios. That definitely makes our life a lot easier because, of course, we can now start to work with one scenario for the U.S. instead of two, three.

I mean, U.S. is, for any business, a substantial market. And for sure, for - when it comes to electricity, electricity generation and renewable also a substantial market and most likely the second global - globally the second biggest market overall. So, on a midterm perspective that we now get a stable framework on PTC and actually also then have a clean power plant that has the potential to, so to speak, kick in at the end of the current PTC cycle. I must again say it's very, very positive for us.

Vestas have invested in the U.S. We have a good manufacturing capability in the U.S. And if you look at the head count increase that we've done during the last two years, a lot of that has gone into the U.S. market. So, what we are currently working through and that we do very much together with our customer is to understand the timing of the market in this new scenario, and timing about the projects.

So, we definitely have a look at, if it makes sense, one, as we have gotten the clarification from IRS and once we have finished these dialogues that we intensively have now to come back with a more detailed update. But currently, this happened late December and I think it's fair to say that this was probably not the most likely scenario. It's actually more positive both for us and the customers. So, I think it's actually better that we take the time now when we have the time to work through it.

On the operational cost base, again, I think we have said consistently that, of course, with the high activity level, more than 30% increase in delivery the year before and then another 20% and actually a bit more on delivery this year, of course, we see parts of the organization where we have to increase our fixed cost. And therefore, to counteract that and have it totally well balanced, it's extremely important to also continue on the cost-down efforts on the fixed costs. And that is why we continue with the shared service center where we continue with the outsourcing activities that we've done.

One good example is that we changed our blade manufacturing also to rely more on outsourcing. But those program is, of course, to counteract the natural increase that you will see and you would need in other parts of the company. And we will continue to work on that. The variable cost programs will also continue. We see good traction in them and we will continue to drive them.

Last question, I will not comment too much. We don't give any guidance on orders outlook. We have a clear policy of announcing order. I can just echo what I said before, if I look at the external and our view of the overall market growth compared to last year year-on-year, we see a stable market, but not the market that has the same kind of year-on-year growth that we saw during last year, but a stable market.

Pinaki Das

Thank you so much. That's really clear.

Operator

And the next question comes from the line of Dan Togo from Handelsbanken. Please go ahead. Your line is now open.

Dan Jensen

Yes, good morning. And a few questions from me as well. I would like to address what you've touched on before regarding acquisitions, and especially within services. Maybe you can give some color on what drive the decision to acquire companies within services? Is it geographical exposure, is it technical skills, et cetera? And do you have any blind spots, so to say, to give an indication of where we could or where you need to, so to say, ramp up going forward? That's the first question.

Anders Runevad

Yeah. Now, the two acquisitions we've done in the service space are all fairly similar, so that they fit the same description so to speak. One is strong in the U.S. The other one is strong then in Europe. And they are ISPs with - and if you look at the ISP markets, there are not that many sort of sizeable ISPs service companies. They tend to be either very local or fairly regional.

So, the benefit that we see for Vestas is both, of course, ongoing revenue and installed base. But it's also capabilities on the technical side; on the commercial side, being an independent ISP, but also then, when it comes to fleet-wide service maintenance and management, which of course, is a competence requirement from our side.

Then, we also feel that, of course, it has to fit us, so we have to perform and execute on the integration plan. And what we bring then is, of course, the scale, the scale of operation from the Vestas' side, and the scale of our service organization, the scale of our spare parts and so on. So, it's the combination there that makes them attractive acquisitions on the service part.

If we look at the overall market, we actually see the service market also growing, stable and showing a fairly good growth, so it's also an attractive market to be in from a growth perspective.

Dan Jensen

Yes. And then are there any blind spots in this market for you right now? And how does the pipeline look like out there in the marketplace? Is there abundance of companies for you to look at, or is it very few and select that is actually suitable for you?

Anders Runevad

There are a very few black spots if I compare us to the competition. We have 56 gigawatt under service, so we are fairly ahead when it comes to presence globally and the gigawatt under service.

Dan Jensen

Okay. And then just on to the U.S. and the PTC extension here. The declining scale or declining compensation in PTC, will that change, so to say, the pattern of the orders we're going to see in the next few years here? I could imagine maybe more challenged areas would be pushed forward in order to get the higher PTC. And what kind of product would you offer in such cases?

Anders Runevad

Yeah. Again, I think it's hard to speculate now. I think let's wait for the market to conclude on this good news and also get clarification on the IRS rules.

Dan Jensen

Okay. And when can we expect that? Is that within the next quarter, two quarters, or do we need to be more patient?

Anders Runevad

Now, from our point of view, as soon as possible. And of course, together with the industry, that's what we are lobbying towards the IRS.

Dan Jensen

Okay. But no doubt that the U.S. order intake will be very back-end loaded in 2016? Is that how we should look at it?

Anders Runevad

As I said, we don't have an outlook for U.S. orders in 2016.

Dan Jensen

Sure. Okay. Thank you.

Operator

The next question comes from the line of Jacob Pedersen from Sydbank. Please go ahead. Your line is now open.

Jacob Pedersen

Yeah, hi. Just a quick question. You guide for a higher CapEx level. Can you comment on the uses of the CapEx? Are you investing to facilitate growth that's reflected in your backlog, or is this really an investment in growth beyond what's already implied in your backlog, a further growth ahead in the future?

Marika Fredriksson

Well, I think I said that on the CapEx there's no change on how we have been forecasting compared to previously. It is investment in malls, which we need to do. Not only do we need to invest in new ones to meet the capacity, but also as we depreciate them fairly quickly, that will be on an ongoing basis if the activity level is high.

We have also continued to capitalize on the R&D, as we have done previously. And on top of that, we have the acquisition of Availon in Q1 amounting to €88 million. So, there's no change.

Jacob Pedersen

Okay. Maybe another question on pricing. You talked about quite stable pricing. But you must have had some kind of tailwinds from the U.S. dollar strengthening. You invested in your production. Are your competitors doing the same in the market where the growth is probably not going to be as big in the coming year as it's just been? How do you view competition in the next quarters and the effect on pricing?

Marika Fredriksson

Well, we have guided for stable pricing previously. I think what Anders have been very clear on also in previous quarters is that, yes, we saw an impact from the currency. And going forward, we're not overall guiding for prices. I think what is most important for us is that we are satisfied with the projects that we have delivered so far and that also shows in our margins. So I think it's managing cost price, deliveries and being overall effective in what we're delivering. That is what makes the difference in the result that we're delivering.

Jacob Pedersen

Okay. Thanks so much.

Marika Fredriksson

Thank you.

Operator

And the next question comes from the line of Fasial Ahmad from SEB. Please go ahead. Your line is now open.

Fasial Ahmad

Yeah. Hi, Anders and Marika. A few questions from my side specifically on the margins. How would you like us to think about the Q4 profit margins and maybe if you could relate it to your backlog? As far as I remember, you mentioned that Q3 profit margins were very good and it seemed that you're getting very substantial leverage on volumes in Q4. So how should we think about the profit margins?

Marika Fredriksson

Okay. Again, we don't guide on the project margin. But if you look at Q4, Q4 is a very good quarter from an execution point of view. So, volumes obviously have an impact. We also have good projects in the quarter. We have continued the cost out on the products. So all of that as a whole delivered a good Q4.

What we can say and have commented on is that we're very happy with the order backlog. We're also using the same methodology in what we approve and not approve of, so there's no changes to that. So we're happy with the backlog, but we don't comment on the levels in the backlog.

Fasial Ahmad

Sure, Marika. Maybe another question also relating to the margins and your margin guidance in 2016. The accelerated earnings program, how substantial will the benefits from that be in 2016? If you could try and give us some flavor on that.

Marika Fredriksson

Okay. So I will be a little bit boring on that one as well. We have accelerated program, that continues. And obviously improvements under that program will also follow the volumes. Cost is a very high focus and high on the agenda. But obviously, with high activity level, you can also see drawbacks if we are not 100% efficient in our deliveries in 2016. But all-in-all, accelerated program has delivered and continue to deliver and it's a high focus because remaining cost conscious will be a clear competitive advantage in the market.

Fasial Ahmad

Okay. And just a follow-up on accelerated case program. Will the full benefits of that program be in the bag in 2016, or will there also be additional benefits beyond that?

Marika Fredriksson

Sorry, I don't think I heard the last one.

Fasial Ahmad

I was just asking the benefits from accelerated earnings program. Will the full benefits from that be visible in 2016, or will you have additional benefits impacting beyond 2016?

Marika Fredriksson

Okay. The programs that we have run for a number of years. But I think to get more into that details, maybe we can discuss that at the meetings later.

Fasial Ahmad

Okay. And then just one final question to Anders. Anders, if you could, maybe elaborate about your ambitions for lowering the cost of energy. Maybe give us some flavor on how and how much and by which means and if your ambitions for doing this cost of energy have changed during the last 6 months to 12 months.

Anders Runevad

Sorry.

Marika Fredriksson

In all honesty, we can't hear you. So we can't really hear the question. So if we can take those questions later when we meet would be much appreciated.

Fasial Ahmad

Sure.

Marika Fredriksson

Thank you.

Operator

And we kindly remind you, ladies and gentlemen, to limit your questions to two questions at a time. The next question comes from the line of Mark Freshney from Credit Suisse. Please go ahead. Your line is now open.

Mark Freshney

Good morning. I have a question on credit. When you work with your customers, very often you'll have to present business plans to banks and so forth. What are you seeing and what are your clients seeing on credit and availability of credit for turbines and the ability for those clients to get financing for those turbines?

Marika Fredriksson

Well, so far we have - as you know, we don't have any captive financing, so we have been successful in helping the customers with external financing. What I think is beneficial going forward is that overall wind projects are very bankable. We also talk to banks that have abandoned certain resources of energy, and therefore looking more and more into financing wind. So, I would say, for the wind industry as a whole, I see that there is a clear interest from the banks to finance the projects.

Mark Freshney

Okay. Thank you.

Operator

And the next question comes from the line of Shai Hill from Macquarie Securities. Please go ahead. Your line is now open.

Shai Hill

Yes. Thank you. Shai Hill from Macquarie. I just want to ask firstly about some of the assumptions behind your revenue growth guidance. You're guiding for a minimum 7% growth year-on-year. So, I appreciate the uncertainties you talked about a lot, Anders, but I just wanted to probe a couple of things. You delivered 3 gigawatts in the States in 2015. Do you think that you will do more from that in deliveries in 2016? I appreciate some customers might push out now given things are more relaxed on the PTC, but you must have made an assumption to give us revenue guidance.

And also in Europe, I note that the order inflow towards the end of last year was pretty strong. Markets like Poland, Germany very meaningful for you in total revenues. Are we seeing stock in before we move to an auction system? That is to say, do you expect another strong year of deliveries in Poland and Germany?

And my final question is something different. Strategically, you say that the pinnacle of your strategy is the wish to be the undisputed global wind leader. If Siemens and Gamesa merged, you won't be. But did you, Anders, this morning rule out - Bloomberg is saying you've definitively ruled out a bid for Gamesa in an interview this morning. Could you just clarify on this call please, Anders, if that's the case? Have you ruled out a bid for Gamesa?

Anders Runevad

Okay. If I start with your first question on the guidance on revenue, it's - again, we have record-high order intake, close to 9 gigawatts during 2015. We have a very solid order backlog. And, of course, there are orders at hand and a certain assumption on orders to flow through as delivery in the year is the basis for our minimum revenue guidance.

I think I talked a lot about the U.S. and how we see it, so I would not go into the data itself.

On your strategic question, as I said, I mean, our strategy is about organic growth and that remains. We have a clear ambition to be the wind leader, which we are today. And our definition on that is on revenue because I think that's a good parameter to define it on.

I will not speculate in Siemens-Gamesa. No, there are no mergers. I mean, I can comment on that once we know anything. I don't really know if there will be a merge or not, so I can't really comment on that. So, again, our strategy is about organic growth. And as I said, being the market leader, if there is an opportunity in the market as we have shown with the service acquisition where we think it brings value to Vestas, we will surely look at it. But the strategy is about organic growth.

Shai Hill

Okay. I'm sorry to be boring, Anders, but I just want to absolutely clarify because Bloomberg is quoting you as saying we will not bid for Gamesa. Did you make that quote this morning, please?

Anders Runevad

We have no intention of bidding for Gamesa.

Shai Hill

Thank you very much.

Operator

And the next question comes from the line of José Arroyas from Exane BNP. Please go ahead. Your line is now open.

José Arroyas

Good morning, gentlemen. I have a couple of questions, both related to the U.S. market I'm afraid. The first one is on the U.S. framework agreement. You mentioned that you have still an outstanding amount of 1.5 gigawatts [inaudible] (1:24:33) to see what these orders can mean. Can they be delayed beyond 2016 now or may they be cancelled? And also, can you update us on your outstanding - the value of your outstanding orders with yieldcos in particular, with SunEdison. That's question number one.

Anders Runevad

Yeah. I think, again, if you look at last year, we took 3.1 gigawatts in the U.S. Half of that was within frame agreements and half of that was outside of frame agreements. As I've said, the frame agreements still exist. I will not go into how they look from a timing point of view. But there is definitely ample of time for the customer as well to decide. So, it is very new market in the U.S. with the multiyear PTC. So, we are currently in close dialogue with our key customers in the U.S. on how they see the market pans out.

If you look at last year and, actually, also in 2014, I must say I'm extremely pleased with our performance in the U.S. market. I think we have clearly taken market share. And that we, today, are a very, very, very, very relevant player in the U.S. market and have a broad customer base, both where we have frame agreements with and as we have shown last year, with half of the orders coming from customers without frame agreements that we are comfortable with our situation in the U.S. And I will not give more sort of precise estimate of order intake either globally or specifically in the U.S.

José Arroyas

Okay. That's my question number one. Question number two is on the competitive environment in the U.S. We have heard, over the past few past weeks, several manufacturers reallocating to the U.S. market, and that makes sense given the longer term visibility we may now have. We have heard about [indiscernible] wind power maybe opening a plant. And we may even have a stronger Gamesa if Siemens and Gamesa eventually merge. How confident are you of keeping your current very high market share in the U.S.? Thank you.

Anders Runevad

I think it's a competitive market overall actually in all geographies, so I don't expect that to change significantly. We'll continue to be a competitive market. I think for the U.S., I can just repeat what I said. If I look at our current performance, if I look at the performance over the year, investors in the U.S. and the market share gains we've done, I'm really satisfied with our performance. Also, if you look at the manufacturing capability we have on the ground in the U.S., I'm also very confident in that.

José Arroyas

Thank you.

Operator

And the next question comes from the line of Klaus Kehl from Nykredit Markets. Please go ahead. Your line is now open.

Klaus Kehl

Yeah. Hello. Klaus Kehl from Nykredit Markets. Two questions. First of all, could you help us a little bit about these one-offs that you have? And especially, I'm thinking about Q4 because on slide number 14 you write something about a €50 million write-down on inventory related to development and construction activities in prior years. And just to be absolutely clear, is that one-off a negative one-off included in your gross profit? And secondly, the write-up of the U.S. factory, is that the €46 million that we can see on the special items?

Marika Fredriksson

Yeah. And you're actually - it's a simple answer. You're right on both - in both your assumptions.

Klaus Kehl

So, just to be absolutely clear then, the EBIT before special items is actually understated by €50 million in Q4.

Marika Fredriksson

That depends on how you want to see it. But obviously, the €50-million write-down on the inventory has a negative impact on the gross margin.

Klaus Kehl

Okay. Excellent.

Marika Fredriksson

Thank you.

Klaus Kehl

Then my second question if that will be about the overall market outlook, given what we're seeing with the oil price and the gas prices et cetera, could you just give us a little bit of flavor of what kind of feedback you get from clients outside the U.S.? I'm not really interested in the U.S. And what kind of feedback you got in Q4 and perhaps here in the beginning of 2016? Are they worried or are they not really concerned about that?

Anders Runevad

I mean, of course, overall, from a macro point of view, I guess it's no news to anyone that it's fairly turbulent times, I mean, overall, on the macro environment. And of course, part of that or a big reason for that is, of course, the low oil prices and the volatility of the oil prices. So, of course, it's fair to say that I think despite that volatility and also uncertainties on the macro environment that we already saw last year, that we delivered a very solid result. So, of course, there is discussions in the overall energy sector on what impact this will have on economic growth and in the end, of course, on electricity consumption in the current macro economy that we have.

So far, if I then jump to the discussions we have with our traditional customers and so on, and a little bit back to what Marika is saying, we have not sort of seen that project has gone away from wind to oil, so to speak, or some of the pipeline that our customers are working on has moved out to gas instead of renewable, instead of wind. We haven't experienced that at all and I think that's also quite evident in our orders growth.

But having said that, from a macro point of view, the oil prices' impact on overall macro development is there. But from a mid-term or short-term point of view, I would say that we haven't seen a big or any impact at all.

Okay, I think last question.

Operator

Yes. And the last question will come from the line of Casper Blom from ABG. Please go ahead. Your line is now open.

Casper Blom

Thanks a lot. A lot of questions today, so just a little bit of follow-up. Thanks. Anders, I think you mentioned that you're expecting a relatively low activity in Q1 with the 2016 being back-end-loaded. Could you just clarify that low activity in Q1? Are you referring to your deliveries or to orders? That's one. Thanks.

Anders Runevad

Yeah. I'm referring to deliveries. So, we see a low delivery level in Q1 compared to last year.

Casper Blom

Thank you. And then secondly, I understand that you cannot comment on the Gamesa-Siemens speculation. But maybe you could give a little bit of flavor about your general thinking about the consolidation in the industry? Thank you.

Anders Runevad

Yeah. I think, I mean, as I said before, it's a competitive industry. I think that we are coming from a situation with quite a lot of players. Some of them very local, some of them a bit regional, and some of them or very few of them truly global. So, I think it is a natural development in the industry that we see consolidation where local - more local type of players try to combine.

I think that is probably healthy that the industry is consolidating. So, yeah, it's something that, of course, we monitor closely. From a Vestas' point of view, again, we have I would argue the best global reach organic company. We also have the widest product portfolio in both the 2- and the 3- and 8-megawatt platforms, so I'm confident with our position.

Casper Blom

Excellent. Thanks a lot.

Anders Runevad

Thank you very much. And that was then the last question, and again, thank you so much for your interest and your calling in. Thank you.

Marika Fredriksson

Thank you.

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