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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome and thank you for joining the Q1 Figures 2023 Conference Call of Nordics. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may do so by pressing star and 1. Press the star key followed by 0 for operator assistance. It is my pleasure and I would now like to turn the conference over to Felix Zanders. Please go ahead, sir.

Thank you very much for the introduction. I would like to welcome you on behalf of Nordics to our analyst and investor call for the first quarter. Our board members, our CEO Jose Luis Blanco, our CFO Dr. Edgar Hartmann and our CSO Pachi Landa will guide you through our presentations, sharing information about the latest developments business operations, financials, and markets. As you've heard, we'll follow the Q&A afterwards, and I'd like to ask you to limit yourself up to three questions. And now I'd like to hand over to our CEO, José Luis. Please go ahead, José Luis.

Thank you very much for the introduction, Félix. I would like as well to welcome you on behalf of the entire board. Pachi Landa, CSO, Ilya Harman, CFO are in the call guiding you with me through our presentation and will take your questions later. As Felis mentioned, we have prepared a regular agenda for you today. Starting with the executive summary. Let me start with the summary of the first quarter of 2023. We achieved an order intake for the first quarter of 1 gigawatt, being slightly below last year's level. Average selling price also increased from 0.78 to 0.9 million per megawatt. Order pipeline continues to be strong, although we see some temporary delays in some cases mainly outside of Europe. Our revenues increased by more than 30% to 1.2 billion euros compared to last year, 933 million euros. This development was mainly driven by higher installations of 1.3 gigawatts compared to 870 megawatts last year. As you can see, our installation run rate is almost back to normal levels, however, It is still lower than our expectations and it does not cover the delays of the last year. This will be one of the key focus areas in the quarters ahead. During this quarter, unfortunately, the gross margin was further impacted by extra costs connected to delayed installations from last year as a consequence of the cyber incident and the consequence impact of the Ukrainian war. These costs sting from usually more difficult installation and schedules, mainly in North Europe in winter times, and trying to catch up on top of the normal schedules, as well as further LD provisions for that. To make this clear, our installation run rate has improved substantially, but we still need to do more in the next few quarters. an even more active Q2 and second half of the year for our installation schedules. Despite these costs, the gross margin increased to 8.9% after 2.6% in the fourth quarter of last year and should improve further in the next quarters ahead. On the margin front, we had a negative EBITDA of approximately 115 million euros, a bit And in the first quarter of last year, this includes some liquidated damages because of project delays from last year, as we had indicated in our last call. This has impacted our underlying gross margin by around 4%. And in addition, our margins also include impacts of lower margin projects and higher cost of execution in winter times. As a result, our EBITDA margin stood at minus 9.4% compared to minus 9.5% a year ago for the same period. Overall, as expected, we have a soft start to the current year, and we expect to keep improving our margins as we go forward from here. Our working capital was at minus 10.6%, and thus well below our target. Ilya will share additional information with you later. Last quarter, our finance team was quite active with FEZ, repayment of the high yield bond in February, conversion of the shareholder loan into equity after having received the approval from the EGM in March 2023. Since this week, this conversion is completed. and our number of shares increased to 236.5 million, with ACCIONA reaching 47%. And third, with the issuance of the convertible bond of €333 million by the beginning of April to further strengthen the balance sheet in the current environment. Ilia will provide you additional information later. Finally, let me also confirm our guidance for 2023 and our mid-term strategic EBITDA target of 8%. And now I would like to hand over to Pachi to discuss markets and order intake.

Thank you very much, José Luis. As you mentioned, we sold one gigawatt of new turbine contracts in Q1 compared to 1.2 gigawatts in the same period last year. All orders came from Europe, largest markets being Estonia, Germany, and Lithuania. ASP grew to 0.90 million euro per megawatt, up from 0.78 million euro per megawatt in the same period last year. Service revenues were 152 million euro in the quarter, representing 12% of group sales, a 31% growth with respect to Q1 last year. If its margin was 15% due to a temporary inflation effect, an average availability of the fleet was 97% with 31.6 gigawatts on the service. Turbine order backlog grew 3% to 6.5 billion euro at the end of quarter. And service order backlog grew 12% to 3.4 billion euro for a combined order backlog of 9.9 billion euro at the end of quarter. And with this, I give it back to Ilya.

Thank you, Pachi. Good afternoon also from my side. And now before starting you through the financials for the first quarter, 23, I'd like to give you, as Roselies announced, a brief update on the convertible bond we completed at the beginning of April. See a few details on the slide. And we placed this green convertible bond of about 330 million to strengthen our capital structure and to add a layer of safety to operations and financials. Because even though we're coming from the solid cash positions over the last quarters, we still see risks in the overall environment, despite some recent stabilization. This convertible has been the first transaction in this category for Nordics, and it was good to see a new set of investors putting their trust into our company, and we are grateful for that support. Now, after this, let me go into the regular slide deck and move to the first slide, the income statement of the quarter. The quarter closed, by and large, as we had expected. When we were together for annual calls a few weeks ago, we already mentioned that H1, and especially Q1, would be weak in terms of margins and EBITDA, but we have some more details for you. around what José Luis was explaining, because we delivered sales of 1.2 billion compared to 930 million in the previous year. This is around those 31 percent higher year-on-year. The key driver was the substantially high installation level in the first quarter when we compare it to the last year's same period. But as José Luis mentioned, despite that positive development, our installations have not yet reached the levels we need to make up for the past underperformance. Our gross margins stood at around 9 percent at the end of Q1 compared to around 13 percent at the end of the previous year period. This is mainly due to the extra cost that we had to incur for catch-up in winter conditions in northern Europe and some further LD recognition, as José Luis explained. The overall impact, again, of these costs was around 3.5 to 4 percent in the quarter. Without those costs, our gross margins would have been on a similar level compared to last year's quarter. As a result, we recorded around minus 115 at EBITDA level, with an EBITDA margin of minus 9.4 percent. This is more or less in line with our report at EBITDA in Q1 2022. Going forward, it was mentioned we expect margins to increase sequentially each quarter with a stronger performance in the second half For this, let me move to the balance sheet. Briefly looking at the balance sheet, overall structure remains in substance unchanged compared to year-end 22. We repaid the high-yield bonds by the shelter loan end of January. The shelter loan interns have now been successfully converted into equity when the new shares were registered just this week. And obviously, that improves further the balance sheet. We ended that first quarter with a cash level of around $520 million. In addition, we had our cash facility to the tune of $80 million, which brings altogether our liquidity levels end of Q1 to around $600 million. For the sake of completeness, please note that the proceeds of $330 million from the green convertible bond are not reflected in these Q1 figures. The transaction was only executed, as we said, in the beginning of the second quarter. And with that, I'm jumping to our working capital slide. Working capital ratios stood at minus 10.6. In absolute terms, 636 million. That is a further improvement to the year-end level of minus 10.2, and also in absolute numbers. And as we've mentioned it, where that was staying below our guided working capital number of below minus 9%. That brings me to the cash flow slide. As we can see, the cash flow from operating activities very much reflects the soft start in Q1. The negative operating results are compensated by a positive effect from working capital, partially. Cash flow from investing activities that have minus around 40 million euros, slightly above the level of the previous year quarter and reflect the execution of our investment program as per the plan. And that brings me to the investment slide. Of course, there's a bit of a difference between creation and investment. We can see there that the total investments amounted to around 25 million in the first quarter. That is below our first quarter last year of south of 50 million. But all in all, we executed our investment program as planned, and we expect to see a catch-up in the CapEx run rate over the coming quarters to our guided number of around 200. And that already brings me to my last slide. I'm doing a bit of pro forma here. The pro forma cash level after including the shelter loan conversion, but again, without including the convertible bond, stood at around 450 million, and our pro forma equity ratio stood at minus 23, around minus 23%. Those figures should improve slightly again once we account for the convertible bond in the next quarter. So in summary, start of the year has been as expected and similar to the last year, and also when it comes to the seasonality of margins we expect. We see the second half to be stronger than the first half. Of course, and accordingly, margins will gradually pick up to each quarter into the year. Second, balance sheet reinforcement by the repayment of the high yield bond and the conversion of the shareholder loan. And then, again, another reinforcement by the green convert and also further strengthening of the financial position in an environment that still appears to remain at least uncertain for a while. And with this, back to you, José Luis.

So let's jump to operational performance. Let me provide you a quick overview of the first quarter. As I said at the beginning, our installation run rate has improved materially compared to last year. However, as was mentioned before, we would like this figure to be even higher to catch up with the delays of the last year. In total, we have erected 276 turbines in 18 countries with around 1.3 gigawatts, with the biggest share of 54% in Europe, 14% in North America, 25% in Latin America, 7% in the rest of the world. Our nacelle production, we assembled 217 units, demand-driven, below last year's level, and reaching a capacity of 1.1 gigawatts. Of course, we plan to substantially increase activity in a cell assembly rest of the year as per the project execution demand. In our plate production, our output increased by 15% to 1.1 gigawatts, with 79% of the blades manufactured by external suppliers. Moving to the next slide, we have summarized the figures for the first quarter, comparing them with the guidance for 2023. In summary, we can say we are on track, as I said at the beginning. Revenues are in line with expectations and working capital is within the guidance area. Our EBITDA margin is likely to pick up gradually every quarter. With this, I will hand over to Felix to open the Q&A.

Thank you very much for the presentation, and now I will give it to you. Please, the floor is open for Q&A.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star, followed by one. If you wish to remove yourself from the question queue, you may press star, followed by two. In the interest of time, please limit yourself to two questions only. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. Our first question today is from Vivek Mitha from Citi. Your question, please.

Thanks very much, everyone. Good afternoon. I have two questions, please. The first one, Could you maybe give us an indication with these delayed projects of how much there is still left to do in the second quarter and beyond just to help us understand the risk of any further liquidated damages in the rest of the year? Thank you.

Okay. I think I would say end of next quarter, we should be able to catch up. I mean, as mentioned before, And as we commented as well in the Q4 call, last year we were substantially delaying installation, not in production due to the cyber attack. We put a lot of resources to work in winter. Unfortunately, we couldn't catch up. And these additional resources, the productivity is very low. This is gradually improving and substantially improving in the spring, and we plan substantial higher activity in this quarter, eventually catching up end of the quarter. Understood.

Thank you very much. And the second question on your cash flow and working capital. I noticed there was a noticeable drop in contract assets from projects in the first quarter. Could you maybe help us with the driver of that? Thank you.

I think, Louise, I'll take that one. You're going back to the report, isn't it, Vivek? That's correct, thank you. To answer that question, then let's look up some details. I think what we're seeing is in the payments that are advanced by the customers, we have a slight increase there. But then from the contract asset perspective, I think that is still something from the work out of that inventory that still has to be done and is related with those installations that Jose Luis mentioned. I think between those, that should be the drivers for it. Understood. Thank you very much.

The next question comes from Sean McLoney from HSBC. Please go ahead, sir.

Thank you. Good afternoon. Two questions from me. Firstly, just understanding the change in margin as we go through. Clearly, your guidance does suggest that at some point you will be in positive territory. So could you maybe just give us confidence in that step change? Can you walk us through maybe the components of how you expect things to improve quarter on quarter. That's the first question. The second is around Germany. Just to understand really how you perceive the government's position. Do you expect any change, any support to be coming through? And yeah, just what we are in that process and how material it might be to your business. Thank you.

Yep. Thank you very much, John. So taking the first question, I mean, the drivers for the profitability improvement quarter on quarter is first, less extra costs and less LDs. Second, that the low profitability projects are going to be diminishing quarter on quarter. Third, we have more activity level in production, substantially more activity level in production in the second half for projects with better margins and ramping up the production in Asia with better costs. So those are the key drivers of the profitability improvement. Project mix or better backlog, More activity, less extra costs, less LDs. And the planning is taking, of course, is taking that into account. Regarding Germany, it's one of the markets that we were suffering last year because lack of power, lack of chips, lack of cabinets due to the cyber attack and so on. We are recovering gradually. and I would say that we are not yet perfect in execution, but we are planning to be there in the next quarter. Despite and regardless that last year we were market leader in installation, the order intake in Germany is promising, and Germany is slowly picking up volume So we expect the German market to give us more volume, both in installation and in order intake this year than previous year. And we expect more volume in order intake and installation as well the subsequent year after. So optimistic, cautiously optimistic about Germany.

Thank you. And if I could just a quick follow up on the order intake. I mean, you've guided previously that the latest orders are coming in line with your 8% margin. Can you confirm that's the case? And is there potential for these to be even beyond that figure?

It's the case. Patrick, can you elaborate more, please?

Yes, I can do that. Every quarter, the orders that we book, we have always repeated in previous courses, that we focus very much in pricing discipline and in maximizing margins for the orders that we take. And as a consequence of that policy, we see that every quarter the margins for the as-sold projects are increasing and increasing the overall profitability of the backlog. So that, at this point, continues to be the case.

Thank you.

The next question comes from Sebastian Glow from BNPPE. Please go ahead.

Hi, everybody. Hope you can hear me well. So it's two questions from my side. The first one would be on the US. If you could just share with us what you're seeing there, how much of a pickup you are seeing, at least in the kind of discussion and interest level, and how far really it might be out until you really see a pickup also in order activity for your business in particular. And the other question is around the operational development. You mentioned a couple of times that the low margin orders are gradually phasing out. Can you just put a date behind it? So what would be the quarter, the first quarter when you would see sort of just the new mix? And could you also give us the sense how much of a delta on the gross profit margin level we are talking here from what you're currently taking and compared to what you're executing on these old low margin contracts that would be pretty much appreciated. Thank you.

Yeah, I will take the second question and then patch the first. So according our planning Q4, That's the quarter where almost all the low-margin projects have been already processed. The delta, unfortunately, we don't disclose quarterly forecasted profitability, but the trend is that Q2 is going to be substantially better than Q1. but of course not to the levels of Q4. That is where we start to see pointing to the right mid-term direction.

And with respect to the U.S. and a bit in contrast with what José Luis has just mentioned with respect to Germany where we already see increasing in volumes already now and this year, we see a different evolution. Yes, mid-term IRA will have a significant impact in volumes. However, our view today is cautious, and I would say that 2023 and even 2024 will continue to be not reflecting significant increases in volumes. We do see that after that the market will pick up, but this is the current view that we have today with the U.S.

If I may just follow up on the statements you made, just starting with you, Pachi, on the U.S., is this more function really of, I don't know, the higher interest rate environment, people are waiting for the IRS guidance, what is really holding people back? And when you're talking about the 23, 24 soft market as we speak, then this is really the execution part, I would assume, so you would then expect 2024 to be the first real year with an order push in the US? Is the right way to think of it?

Not necessarily. I would say the way we see it, given all the mix of reasons that you have mentioned and some others, we see really a, I don't want to call it a sluggish market, but it's true that the market is not very active at this point in time from an order perspective, hence installations 2024. And also, at least for the first part of 2024, from an order perspective, we expect it to be also relatively quiet. This means that from an installation slash P&L perspective, either very late in 24 or 25, we would start to see the effects.

But I would say, if I may complement, it's a combination of not 100% clear legislation yet, and the development machine has started, has been restarted. So they still need to produce the pipeline of project development for those projects to go to the finance, to the finish line, to be contracted and executed. So I think it's a mix of both. Let's see the feeling we get in two weeks in Aguea in US. And let's see. Let's test the sentiment of the market more indirect there.

Yeah. Okay, that's super helpful, very much appreciated. And then the last one, sorry, to just follow up on what you said before, Jose Luis, on the EBITDA trajectory. So from your wording, I would assume that you would then confirm what you said on a prior call that the sort of target margin, you mentioned the midterm 8%, that is what you ultimately are striving for in the fourth quarter. Is that the right understanding?

Well, I was not so precise. I said that that is pointing into that direction. I know we mentioned the prerequisites for that meter profitability target, which is selling more or less around 7 gigawatts with the gross margins that we are currently selling in an execution-based stable. We have improved a lot. but it's not fully stable. I mean, you see suppliers filing insolvency, you see some inflation in Europe, so the stability has improved, but it's not fully, fully 100%. stable. And the third is that you don't screw up in execution, so that you don't need to pay a lease and delays and so on. So if those three prerequisites are met, yes, we will be delivering that profitability. Is that going to be Q4? Don't know. We cannot We cannot be more specific there. Definitely, it's pointing into that direction, the evolution of the profitability Q3, Q4.

Yeah, okay. Now that's super helpful. And then the very last one around guiding to the extent you cannot want to provide it. If you say quarter two is materially better, would you go as far as saying it could be a break even already, which would be even on a clean basis compared to quarter one, a remarkable step up?

Let's put it that way, in that range. No? I mean, in a short distance to that.

Okay. Okay. Okay. Very good. Thank you.

The next question comes from Constantine Hesse from Jefferies. Your question, please.

Hi. Thanks for taking my question. Can you hear me? Yes. Oh, great, great. Thanks for the presentation. So just following up on Sebastian's question, I think it's pretty much clear that you still expect, I mean, it doesn't even have to be Q4, but 2024, probably talking about something close to 8% potentially here, given all those terms that you put just now given around execution. So that's my first one. You're just basically just trying to feel if you're really feeling comfortable around medium term margin, potentially already being rich in 24. And second question on provisions very quickly. Can you just remind us how conservative or not you are really when booking these provisions? What are they primarily related to? And just thinking about the improvement that we're seeing in the operating environment, especially across the supply chain as well. Could we see some releases potentially here?

Thanks. Let me try to elaborate on the first question. I mean, when I mentioned the first prerequisite is selling more or less seven gigabytes at current gross margin. We have sold one. So still to make this 8% in 2024 that you mentioned, we still need to sell a lot, which we don't know, we don't guide our order intake. but a lot of work still needs to be done in the order intake side. From that end, we feel very positive in Europe. I think we are competing well, and the demand in Europe is strong and is profitable. We are not that positive temporarily, in the in the u.s for the reasons that that patchy mentioned we are not that positive in in latin which was an important geography for us as well temporarily because high high capital costs low electricity prices and a substantial increase in asp of the turbines makes the the investment case temporary more challenging in latin so all in all positive momentum in Europe, positive outlook mid-term in the US, as well an optimistic mid-term in Latam, but the short-term situation in Latam is challenging. So we need to see how the order intake goes in the year, eventually not compromising margins if the industry follows the price disciplines that I hope they follow. and that's going to be the key driver for your comment or assumption. And regarding provisions, Celia?

Let me take that and you might jump in on that question, valid question, Konstantin, if we are conservative. I think probably the business environment of the past two, three years has taught a lot of us that the meaning of being conservative or too conservative has really changed against what we've been seeing. So I would really say we're balanced. I think we're pushing the teams hard to give their best view. We're not trying to be overly cautious, but finding the right balance between the two. Could there be an improvement or release of those? Theoretically, yes. Some of those are subject to discussions with customers, and there's always ways you can find solutions with several aspects, new business, whatever. So there is a possibility, but today that's really how we see it.

That's perfect. Thank you very much.

Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star and one. Seems to be no further questions at this time, and I hand back to Felix Sander.

Thank you very much. Thank you, Mero, for your participation. And now I say goodbye to you, but before leaving the call, I'd like to hand over to José Luis. Please go ahead with your final remarks. Thank you.

Thank you. Thank you very much. Thank you very much, Félix. So key takeaways, as usually, I would like to close the presentation without you. So the good news is that the macro environment is improving, further delivering a very promising outlook for our industry, although the planning and permitting process across Europe continues to be improving at a slow pace. We discussed about US IRA still needs to deliver volume. and the temporary low demand in Latam. In addition, the industry is still exposed to some shorter headwinds, such as high inflation in Europe, increased interest rates, and continuing issues with the supply chain reliability, although situation substantially improved. The order intake, as well as our order pipeline, continue to be healthy. very strong in Europe and in Germany. The margins have also stabilized at the current level. However, we see some delays in order intake from the customer side on account of some macro challenges mainly outside Europe. The start of this year was soft as expected and indicated in the call on March 31st. We expect a sequential recovery of margins over the coming quarters and a stronger second half of 2023. Our latest financial measures, the debt to equity swap and the convertible, will further strengthen our balance sheet and our liquidity, providing us with more flexibility and protecting us against short-term volatilities. We confirm our guidance for full year 2023 and our mid-term strategic target which is subject to a stabilized macro environment. In this case, we think supported by the strong and profitable expected demand in Germany and in Europe. Thank you very much. We wish you a wonderful rest of the day and a wonderful weekend. Thank you.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone.