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Ladies and gentlemen, welcome to the Q2 Figures 2024 conference call. I am Moira, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcasting. At this time, it's my pleasure to hand over to Anja Wieler, Head of Investor Relations. Please go ahead.

Thanks, Moira, and also a very warm welcome from the Nordics team. Thank you for joining the H1-24 Nordics Conference Call. As always, we ask you to take notice of our safe harbor statements. With me are our CEO, Jose Luis Banco. our CFO, Ilja Hartmann, and our CSO, Patil Landa, who will lead you through the presentation. Afterwards, we will open the floor for your questions. Just a small housekeeping topic, you might have seen that we added some appendix slides in the presentation, giving you a broad breakdown of the key operational and financial KPIs. These are for informational purposes only and are not part of today's presentation. Now, I would like to hand over to our CEO, Jose Luis. Please go ahead.

Thank you very much for the introduction, Anja. I would like as well to welcome all of you on behalf of the entire management board. As always, I would like to start with our executive summary for the first half of 2024. half of 2024, we secure an order intake of 3.4 gigawatts up from 2.6 gigawatts in the first half of 2023. The pricing has been stable and our order intake ASP stands at 0.89 million euros per megawatt. The same level as the last year. Installations picked up since quarter one 2024 with 1.9 gigawatts in the second quarter. As a result, the total installations reached three gigawatts in the first half of the year. Probably same level compared to the previous year. We continue to expect higher installation run rate during the second half of the year, similar to previous years. Regarding our financial performance, first half and second quarter developed according to plan with gross margins of 19.5%, stable now, unexpected for the quarters ahead. We achieved an EBITDA margin 3.4% in the first half, which is a substantial improvement over the last year. Within this year, the EBITDA margin has remained quite stable with the Porter 2 margin reported as 3.5%. This is again in line with our communication during the last call. On the liquidity side, we were able to improve liquidity since the last quarter and have closed the quarter with a healthy level of 827 million. On the strategic part, we have finalized our U.S. re-entry plan with first reactivating our Nacelle and drivetrain production facilities in West Branch, Iowa. And second, we recently launched our US-tailored turbine, Nordex 1695.X. The new turbine will be a better fit for grid cross-train areas and will put us apart with the other market participants in the US market. Lastly, given our stable H1 performance and the visibility we have today, we have decided to tighten our guidance to the upper end of the corridor namely 3% to 4% EBITDA margin. And last, we remain on track to achieving our mid-term 8% EBITDA margin subject to stable market environment and continuing price discipline in the industry, as well as market growth. Moving to the slide number five, let me provide you a summary of how we see it. This slide provides an overview of the drivers and projected onshore capacity additions based on external forecasts. As you can see, both our core regions, Americas and EMEA, are expected to experience healthy growth in the coming years on the back of unusual long-term demand drivers. Despite some recent political developments in some markets, we believe The positive trends and developments in EMEA and Americas outweigh the negative ones on the whole. For example, fantastic performance on Germany is in the permitting rules and increasing volume in auctions, as well as kickstart of the onshore demand in UK after the elections. And with this introduction, I would like to hand over to Pachi for market and order intake discussions.

Thank you, José Luis. On the first half of 2024, order intake grew by 27% to 3.4 gigawatts. This robust increase was mainly driven by the strong order intake in Q1. Out of total orders from 17 different countries, largest orders were booked in Germany, but also South Africa, Lithuania, and Turkey. Pricing continues to remain stable. HSP stands at .89 million euro per megawatt, which is similar to last year. For the full year, we continue to expect a good order momentum. In the second half of the year, with stable pricing, assuming continued pricing discipline in the market. Moving on to the next slide. Service revenues grew by 12%. from 305 million Euro in the first half of 2023 to 343 million Euro in the first half of 2024. Service EBIT margin increased year on year from 13.2% to 15.3% and also recorded the slide that take quarter of a quarter. We expect the revenues to keep increasing at a healthy pace driven by an increase in order books longer tenures and increased installation activities. On the margin side, we expect a recovery in the next two years, mainly driven by the increase of the share of the Delta platform in our service fleet. Average availability of the fleet was stable at 97%. Moving on to the next page. Turbine order book increased by 8% to €6.9 billion during the first half of the year, on the back of improving ordering days. Out of this order book, majority of orders will be installed in Europe, followed by the Americas and the rest of the world. On the service side, order book increased by 21% and stood at 4.1 billion euro for a combined order book of 11 billion euro at the end of June. And now I'd like to hand over to Ilia for the financials.

Thank you, Patrick. As always, I will guide us through our latest financial figures. Starting with the income statement. So in H1, sales increased by 25% compared to the previous year period. In total, sales of 3.4 billion in this first half. And that was driven by higher activity levels in both installations and supply chain. Cost margin reached 19.5% at the end of June 2024 compared to 10.7% in H1 of the previous year. For the fourth consecutive quarter, we have now seen a stable development of our gross margins. As a result, we achieved an absolute EBITDA of 118 million euros in the first half year, compared to minus 114 million in the previous year period. That translates into a margin improvement from minus 4.2 in H1 last year to plus 3.4% in the first six months of this year. On a quarterly basis, absolute EBITDA was 66 million euros, representing an EBITDA margin of 3.5% in the second quarter, in line with our indications during the last call. With continued stability in our costs and pricing, we maintain our stance of a more stable margin profile for the rest of the year. And with this, let us jump to the balance sheet. The overall structure remains in substance unchanged when compared to year end 2023. We ended the second quarter 2024 with a cash level of 747 million, up by around 80 million from last quarter. In addition, we have a cash facility of 80 million euro, which brings our overall liquidity levels to around 827 million at the end of H1. While our liquidity levels have slightly increased versus Q1, it continues to be influenced by higher but stable working capital as we prepare for high activity levels in the remaining quarters of the year. And that brings me to the next slide, the working capital. The working capital ratio stood at minus 7.4%, and absolute numbers minus Euro 530 million at the end of the second quarter. fully in line with our expectations in operational activities. We expect working capital to improve in line with the acceleration of our activity levels in the second half of this year. To summarize, for 2024, we continue to expect a working capital ratio below minus 9%. And on the next slide, we go to the cash flow. Cash flow from operating activities before net working capital stood at 144 million euros. This very much reflects the more stable margin profile of our orders and is also evidence that our operational performance has further improved. In preparation, again, for the high activity levels in the second half and the resulting changes in working capital, cash flow from operating activities ended at around minus 72 million euros. There's little to mention about the cash flow for investing activities, which totaled around minus 88 million euros, a slightly higher level compared to the previous year, period reflecting the execution of our investment priorities in line with our planning. When looking at the quarterly development, it is worth to highlight that the business generated a positive free cash flow of 94 million in the second quarter, and we expect this trend to continue in the second half of this year. And with that, let's move on to the CAPEX slide. CAPEX spending of around 70 million in the first half compared to around 50 million in H1 of 2023. The focus again of our investments reflects the execution of our internal investment program. Main priorities were the investments into blade and nacelle production facilities and tooling for installations and transport, including the reactivation of the Iowa plant in the U.S. and the development of a new turbine type for the United States. We expect H2 to see a higher level of total investments and confirm the $175 million of CAPEX guidance for this year. And that brings me to my final slide here, which is the capital structure. Net cash levels slightly improved to around $446 million compared to the end of the first quarter, but decreased compared to year-end 2023. As mentioned before and already indicated in our last call, this development reflects our higher working capital levels as we prepare the company for high-end salvation run rates in Q3 and Q4. And let's remind us, being a project company working capital swings during quarters is part of the typical business cycle and has a typical seasonality. Equity ratio stood at nearly 18% and remains on a similar level compared to the end of last year. And with those statements, I hand it back to José Luis, who will guide you through our operational performance in the first six months.

Thank you, Miguel. Moving to the operations. After a week installation quarter in the first quarter of this year, activity level bigger up and we were able to install nearly two gigawatts representing 365 turbines in the second quarter of 2020. In total, in the first half of the year, we installed 592 turbines, leading to a total of 3 gigawatts of installation. Most of the installations took place in Europe, followed by Latin America. We continue to expect higher installation run rate for the second half of the year, in line with our past years. On the production side, both turbine assembly and blade production increased by 5%. in the first half of 2024 compared to the prior year's level. Overall, we assembled 3,023 megawatts in the first half and produced 2,333 blade chefs. Compared to the first half of 2023, the share of house of production in glaze decreased and stood at 73% in the first half of 2024 compared to 77% in the first half of 2023. I said 2,333 sets. No, it's 2,333 blades, blade units. Moving to the next page, talking about the outlook. Given the strong start into the year and the stable performance quarter on quarter, we have decided to tighten the EBITDA margin corridor to the upper end of the range. We now expect an EBITDA margin of 3 to 4% up from our initial guidance of 2 to 4%. Sales expectations, capex guidance, and working capital ratio. remain unchanged. And now I will hand it over to Anja to open Q&A.

Thank you, gentlemen, for leading us through the presentation. I would like to hand over to Moira, to the operator, to open the Q&A session. Please go ahead, Moira.

We will now begin the question and answer session. Anyone who wishes to ask a question may press the star and 1 on the touch-tone telephone. You will hear a tone to confirm that you've entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. We kindly ask you to limit yourself to three questions. Anyone who has a question may press star and one at this time. The first question is from Kim John from Deutsche Bank. Please go ahead.

Hi, it's John from Deutsche. Thanks for the opportunity. Can you talk to us about how the legacy backlog is progressing? I think the last time we spoke, we were looking for this to deliver mostly in 2020, this fiscal year. I'm wondering if that's the case in Q2. And does your three to four percent guide for the year have a different view on how the backlog goes through this year versus the start of the year? Thanks.

No, thank you for the question. Yes, that is the plan. I think the execution of the backlog is slightly more back-ended, but very much stable during the whole year. And yes, we expect the big majority of those legacy orders to be completed in this calendar year, yes.

Okay. A second question. Percentage of completion or POC revenues, about 80% in your H1 numbers. That seems a bit high. If I think about your full year rev guide and your production figure or installation figures, is it fair to say that POC will be smaller in your H2 numbers on a percentage basis?

I think we are going to have more activity in the second half in all areas of the company. Not sure if we can, if we have that detail on the, but maybe yeah.

Yeah, I would say I think probably especially industrial activity and manufacturing will not be as backloaded as it was last year. So that stick, it will be back unloaded, but not as much. So the activity in H2 where we recognize revenue and margin will not be as such a steep step up as it was in, for example, the previous year.

Okay, thanks very much.

The next question is from . Please go ahead.

Thanks very much, everyone, and good afternoon. So my first question is just a bit of a follow-up on the last one. You commented that installations in the second half should be similar year on year. Second half last year was very busy. I believe you had a slippage of around 100 turbines in Q4. So how comfortable are you with your ability to execute well on that high level of activity in the second half? Thank you.

We are, I would say, as the operation side of the company has improved a lot, and the major roadblocks that we had in previous year are easing. I think we are better equipped to deal with the activity level of the second half. So our plan is, I would say, is robust.

The next question is for Konstantin Hess from Jefferies. Please go ahead.

Thank you very much for taking my questions as well. I've got three. So one, I'd like to just quickly do a quick discussion on the regulatory environment, both in the U.S. and in Europe. I mean, obviously, you must already be doing some of your homework in the U.S. potentially with the Trump win over there and Republicans coming around, the announcement of his VP, J.D. Vance, being a bit noisy around, being rather negative on wind overall. So what's kind of your view on If Trump comes around, what are some of the key changes that we could potentially see there? Because, I mean, historically, Trump, he did extend the PTC and the ITC when he was president. So, I mean, could it mean that we could see them getting rid of the manufacturing credits but keeping the PTC, ITC? So what's kind of the scenarios that you're working with there? And then on the regulatory environment in Europe, what are you seeing there, I mean, the announcement of the wind power package. It's already almost a year old. I think the European Commission announced it back in October, and we haven't heard anything else around it. So I'm just wondering what is being done in Europe at the moment. If you have any view there, that would be great. That's my first question. Thanks.

Thank you, Konstantin, for the question. I think regarding the U.S., of course, we did talk to many stakeholders before taking the decision to reopen our facilities and invest in an American product. We are reasonably convinced that regardless the results of the presidential election in the U.S., we know and sure will not dramatically, in a dramatic sense. I heard candidate and former President Trump talking about wind offshore, but I didn't hear much about wind onshore. Second, most of the wind onshore expected activity, the big majority, is in Republican states. So, you know, we don't have a crystal ball there. But we are quite confident because the economics of wind onshore are quite robust in U.S. Expected demand growth driven by artificial intelligence and data centers and so on are quite strong. The commissioning plans for coal are ongoing. So the country needs to substitute this huge amount of energy that is going to be needed. And we're not sure it's quite a competitive solution. So we are, I would say, moderately optimistic that no big change is going to happen in the US. But of course, we don't know. Regarding Europe, I would say, I think it's great that the new European elections bring a Parliament that very much there is no substantial change about European wing targets. So the political parties supporting the Commission are very much unchanged. And this is stability. So we expect the policy to continue. And, you know, many things have happened last year, especially in the implementation of several policies, especially in Germany, thanks to the implementation of some of those policies, like overarching and overriding public interest. huge amount of that were adopted freshly by Germany. We see Germany producing a huge amount of permitting projects and we see the auctions with very good volume and we are participating in those auctions and growing with the market there. So let's see once the new commission starts to work, But I wouldn't expect any change in the European targets. Now in discussion is, you know, many things about resilient criteria for supply chain, pre-qualification criteria for participants in the public tenders and so on. And it's expected as well a market reform, but not radical changes are expected. also in the positive side, UK, and looks like France is going to be supported as well for deployment in , so we don't see any downside or negative change in the political arena in Europe.

Okay. That makes sense. Thanks. Then if we could quickly just talk about the service margins, I mean, obviously, You're getting quite a bit of scale now at 40 gigawatts in the portfolio. When you look at the current backlog that you have, what kind of margin trajectory could we be expecting here into next year?

I think we communicated in previous call and we keep with the same view long term that over the next, you know, two, two and a half years, we should come back to the previous margins on the service business. And the drivers for that is more volume, majority of the volume with Delta products, majority of the volume in geographies where we have a big service network. and where you can harvest the synergies on the volume.

That makes sense. Thanks. And then lastly, just, you know, maintenance question here on warranty. And, you know, if you look at your entire fleet, I think this entire situation with the blade that fell off the turbine of GE offshore, which seems to be a serial issue again, you know, obviously caused some negative sentiment in the market again around reputational risk. When you look at the Delta 4000 range today or maybe any of your previous models, is there anything at all that you highlight or that potentially you've seen as a potential risk there in terms of components or nothing really?

I think we just passed the infancy mistakes of our new platform and we are still quite equipped with this platform. What I can share with you without going into much details, that the non-quality cost that we have in this platform is lower than in legacy platforms. So, so far so good. So I think we don't see any major issues in this Delta 4000 platform currently. And that's a great relief because it's the big majority of the volume of the company. And out of the legacy platforms that the company is selling, the majority are 117 and 131, which have a very good trust record as well. So we are quite happy with the situation of our company. Okay.

That's great. Thanks for the update.

The next question is from Sean McLaughlin from HSBC. Please go ahead.

Good afternoon, and thank you for taking my questions. Firstly, on price discipline, I noticed that you've stressed price discipline as a condition. for the second half, you're assuming that continues. You've also stressed that as a prerequisite for your 8% midterm target. I mean, could you maybe talk about how you're seeing current conditions for pipeline? Are you seeing any differences in developed versus developing markets in terms of price pressure? And yeah, any differences I guess nuance in that respect will be helpful. Thank you. That's the first question.

Thank you for your question. We are quite pleased, actually, with the situation with respect to pricing. We see that in, for the most part, I would say in all of the markets, discipline is kept, that we are behaving very rationally as the competitors and setting the reasonable price level that deliver the margins that we need to get to the mid-term profitability target. So I wouldn't, so I would say, I would state that we have a stable pricing that we are satisfied with how the competitive landscape is in most of the markets is going on at this point in time.

Very good. If we maybe just move to the US market, I mean, just I get now with the new turbine, you're effectively on a level footing now with the main competitors there. I mean, how quickly are you looking at order growth? And by when might we see, you know, you back at full capacity and also high capacity utilization in the US?

Yeah, as we speak, we are entertaining commercial discussions with projects with customers. Even the sales cycle timeline that you can ordinarily expect from projects, I wouldn't rule out to get some deals in 24, but I wouldn't expect them. And I would expect the deal flow starting already in 25. And hence, depending also on the product, line that we sell, because let's not forget that the current product portfolio fits some niche segments in the market as well, we may see the flow of those projects into the P&L of 2026 already. But we expect to your question that the flow starting in 2025 next year. Thank you.

My last question just on the Margin progression through the second half. I'm just wondering around the revised guidance. I mean, are you comfortable with a steady margin through the second half or do you expect to see further incremental improvements as we go through the second half given higher volume or is the legacy issue going to impact that?

I would say the legacy projects are more back-ended slightly, a little bit more activity of legacy projects in the second half. The non-legacy projects, we are quite happy. I mean, we are happy with the results. We are happy with the stability, and we should expect only slight improvements in the second half.

Thank you.

The next question is from Ben Halen from Bank of America. Please go ahead.

Yes. Afternoon, guys. Thanks for the question. I just wanted to get a bit more color from you in terms of the cost environment and, you know, key buckets of cost and how you've seen them progress and if you have any views on that into the second half of the year. And then a follow-up is on some of these margin comments. How should we think about the timeline for getting to that 8% EBITDA margin and how you are thinking about that after a fairly solid H1? Thank you.

Thank you very much for the question, Ben. I think the cost environment, I would say, like in the previous call, you see the stabilization in global supply chains. We see global supply chains more delivering on time, which was not the case last year and for many years. And we still see inflation in the Western world due to wages, due to services inflation. But all in all, I would say we are quite positive that the margins expected can be delivered. So we provide for inflation. We expect the inflation in the Western world to stay within the expectations. And we expect the international cost base to remain stable and delivering on quality and on time. So from that point of view, positive. I think we see stability, better stability than in the previous quarter. And of course, again, changes compared to the previous years. From the margin timeline to the 8%, I mean, the prerequisites have not changed. I mean, we think we can grow with the market. So if the market picks up in Europe and we keep the market share, this is a big lever for profitability improvement. We don't see reason why we should not do that. Of course, the volume in North America plays a big role in growing the company above and beyond this 8 gigabytes per year. The second prerequisite, as we always mention, is cost stability, which we see it now, and margin stability. So if the price is stable, the cost is stable, We have more volume to manage. This will improve profitability combined as well with the plan to improve profitability of the service business over time. So same prerequisites. I will say the key driver is market growth, market growth in Europe and recovering of the market share that we used to have in North America. And as long as this materializes, we will deliver.

Okay, great. Thank you.

The next question is from Ajay Patel from Goldman Sachs. Please go ahead.

Good afternoon, and thank you very much for the presentation. A couple of questions, please. The first one is going back to this margin evolution point. So typically in the past, As we went through the financial year, you would experience higher volume, you would get the benefit of operational leverage, and you would have a shape of margin that sizably improves. And I'm trying to understand why the margin is as flat as it is. Is that more just the distribution of legacy assets, or is it that there's an element of conservatism in here? Just trying to get a feel for what are you actually assuming for the second half of the year? Because it feels... Given that first half performance you've just done, the second half does feel like it's conservative. Then the second question I wanted to ask is, if you think about your markets that you operate in, Latin America has been pretty quiet relative to your history. I just wondered if you could just give us a feel for if you look at your pipeline, look at the second half of the year, which markets do you expect the most activity? And when would you see, in particular in LATAM, a potential turnaround in volume?

Thank you very much. The first question, how can I express it? I would say a combination of the two. So a combination of the two comments that you made, a little bit more backlogged legacy issues. And why not, you know, let's not... over-promise and under-deliver. So, you know, let's make sure that how things go, that we are comfortable with the second half. And regarding the markets, first, Latin America is low, and Pachi will explain more in detail. But despite Latin America being low, the overall volume is expected to be good and the overall margin is expected to be good. So there is a positive side of a negative news that you concentrate the volume in low-risk, high-profit markets. Which is mainly Europe.

That will continue to be the majority of Europe. of our activity looking forward, but not only. Also North America, we are very active in Canada, very successful there. Picking up in the U.S. as we starting next year already, as we explained before, but also South Africa, Australia, and other important markets where we are going to have a position. With respect to your specific question on LATAM, it is true that the markets are down. Mainly 80% of the continent is Brazil, and Brazil is very low at this point in time. We have not changed the view that we communicated to you in previous calls, where we see the electricity prices being really low, activity being extremely low at this point in time. We continue to have the view that mid-term the market will pick up, but one quarter further down the line, we cannot confirm that we see the market coming back. We will expect that to happen, but it's not happening at this point in time.

May I have one follow-up? Is it okay? Yes, please. I also look at the order intake this first half of the year, and it's very strong, right? And it makes me wonder how much of it is just seasonality or effects over the course of the year. So would you expect a weaker order intake in Q3, Q4 to partially offset some of that strong performance in Q1 and Q2, or, you know, we should see continued strength in the second half as you see the pipeline. Typically, I think maybe volume growth is sort of 7% to 9% was thrown, I think, by Vestas for this year for the industry. Does that feel like the right sort of order of magnitude in terms of a market or would you be more pessimistic?

I think what we can share with you is that from an order perspective, we see a strong second half of the year. And probably what we could share is that we see a stronger second half than the first half that we have seen. And that's as far as we can share with you at this point in time.

Wow. Okay. Thank you very much. That's very helpful.

The next question is from from . Please go ahead.

Yes, sir. Good afternoon. Thank you for taking my questions. I have two questions. So the first one is on volumes installations, on installations volumes for Q3 and Q4. I'm just wondering if you could give us more granularity on your expectations for volumes for the next two quarters. And my second question is on the energy project issues in the US. Is there any news or update to chair regarding this topic? Thank you.

Thank you for the question regarding installations. We don't guide quarterly evolution or annual targets, but I can share with you is the rank of quarter expected in the year is Q3. and Q4 is slightly lower than Q3, which is good because usually the closer you go to the winter, the more difficult it is to install. So we are, I would say, reasonably happy with the installation profile and with the risk of the installation profile. Let's see if we don't see delays. not to the magnitude that we had last year. And regarding energy, not much to comment at this point other than, you know, we are discussing that this is how far as we can go. And as we mentioned in the previous call, that we have provided for in the numbers and in the guidance.

We have a follow-up question from, I'm sorry, sir.

Go ahead, please.

We have a follow-up question from Kim John from Deutsche Bank. Please go ahead.

Hi, thanks for the opportunity. It looks like you had very strong order intake growth in service in Q3. I was wondering if you could just comment on that.

mainly order intake driven, duration of the service contract associated with the order intake, pricing, because, I mean, in the market where we operate, there is a substantial inflation in the costing of the services, which translates to the price of the services activity and renewal rate. I don't think you should expect this growth in the future, but definitely the service business has a low double-digit growth long-term. And this is how we see it. We see a low double-digit growth long-term with, as mentioned, the profitability improvement that we expect going back to normal in two, two and a half years.

Great. And as a quick follow-up, can you give us a sense on the average length of contract in the backlog and how that would have changed over the last three years?

Oh, I fear I don't have that detailed data with you, but more than happy that either myself or my IR team reached back to you and gave you this information. Thanks very much.

For any further questions, please press star N1. The next question is from Togo Jensen-Dan from Carnegie Bank. Please go ahead.

Yes, thank you, Dan Togo, Carnegie here. A question on US. You are now putting up production over there, and you are alluding to that you expect to go back or hope to go back to US. where you previously were in terms of market share. Can you please maybe just remind us where have you been in the U.S. market in terms of market share and what is, so to say, the threshold for success either in terms of market share or in terms of absolute installations in the U.S. market once you get up and running in order to say that it has been a success to step into the U.S.? ? That's the first question. The second question, could you, and that's more household, where are you hovering around right now in terms of warranty provisions on your platform now compared to, let's say, maybe a year or even two years ago? Thanks.

Okay. So, regarding the, I would take the first question to whether with Patsy and India the second. I mean, traditionally in U.S., we deliver from 12 to 18% market share. We don't have the expectations to have a 40% market share like we have in Europe and US, to be clear. So for us, in US, we are planning to be the third supplier, or we are targeting to be the third, not the first, not the second. And going back to the previous market share that we used to have from 12 to 18%, the market share that will be for us success. The more we approach the 20%, the more successful, the more we go to the lower end, the less happy and successful.

And the market is expecting that too. And when talking to customers, this is a current duopoly. And a third player is wanted and needed, and we are that player. We were that player in the past with a significant market share, as was previously mentioned. The product that we have recently announced fits perfectly well to the U.S. We have the customer relationships. It will not take us too long to be back where we were in the market.

And where do you actually see the market in terms of installations, let's say, Maybe not this year, but .

We take the assumption.

And bear in mind that the dynamics are different, that the cycles right now are much longer. It's not the past boom and bust cycle where decisions, investment decisions were taken, and there was some pressure to take them. I think the market is taking decisions with a moderate need to long-term view. So we may see the numbers that Woodmark is publishing, or we may even see some delays in the market. So I think we have a little bit of expectations on the markets for the next two years. The market is going to develop moderately, we would say. What numbers are finally there, we can refer and go back to the Woodmark published ones.

Right. And on the provisions, well, sorry, go ahead.

Yeah, just on the warranty provisions, I was just reminding, yeah.

Yes, it's on that list. We'll get into that. When it comes to warranty provisions, we spoke a bit about the technology and especially the Delta 4000 platform, which is now the workhorse in all its variants. So there is nothing special to report there. For the rest, we continue... to provide for, in this case, increasing provisions as the activity levels continue to grow. We still have to record or have recorded some of these for delays to that installation catch-up we discussed earlier on the call. Then we are updating some of our cost assumptions, especially in some markets and customers, the US and elsewhere. But again, that is all in. to that updated and upgraded margin guidance for the full year in all our numbers. So there's nothing so specific that sticks out as a topic or especially as a new topic.

And where is the level relative to sales, for instance? Say again? Where is the actual level of warranty provisions relative to sales in terms of percentage?

We have done a jump in that H1 now again. I think if you only look at H1, I think we're at the level of 5, 5.2 or so. Of course, it's a bit lumpy, so typically we do this on annual values. Last year it was 3.2, 3.3. I mean, it's early to say, but I would expect over the year that this is a very similar number as we've seen that in the past on total sales.

Understood. Thanks a lot.

Thank you.

Any further questions, please press star and 1.

As there are no further questions, I would like to hand over to Jose Luis for his final remarks.

Thank you very much. So the key takeaways from our view of the market is first that we see and a stable operating environment continue, stable selling price, and largely stable supply chains. And this is great. Second, we are making progress in rebuilding our market position in U.S., and we expect to harvest as well success in Canada, as well maintaining market position in Europe. The first half of this year continued to show a stable margin profile, building confidence in the sustainability of the margin recovery of Norvex. Free cash flow turned positive in the second quarter and is likely to remain positive in the second half of the year. Plus, our margin guidance for 2024 tightened it to the upper end of our mid-term strategic margin target of 8% remains in place, as always, subject to an stabilized environment and market growth in the markets where we operate. And with this, I will thank all of you for your participation in the call. Wish you a nice afternoon and a nice summer break. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Coruscall and thank you for participating in the conference. You may now disconnect your lines. Goodbye.