Nordex Se

Ladies and gentlemen, welcome to the Nordics SE Q1 2025 results conference call. I am Yusuf, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and that this conference is being 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 for broadcasting. At this time, it's my pleasure to hand over to Anja Siela. Please go ahead.

Thank you, Seth, and also a very warm welcome from the Nordics team in Hamburg. Thank you for joining the Q1-25 Nordics conference call. As always, we ask you to take notice of our safe harbor statements. With me are our CEO, Jose Luis Blanco, and our CFO, Ilja Hartmann, who will lead you through the presentation. Afterwards, we will open the floor for your questions. And now, I would like to hand over to our CEO, Jose Luis.

Thank you very much for the introduction. As always, Ania, on behalf of the Management Board, I would like as well to welcome you to our first quarter result for this current year, 2025. Let me start with a recap of the first three months of the year 2025. We are pleased to report that the first three months of 2025 have progressed as planned, marking a strong start into the year for Nordex. We have delivered improved margins and achieved a positive free cash flow this time already in the first quarter. In detail, firstly, our total order book, comprising both services and project orders grew by a remarkable 21%. We recorded a turbine order intake of 2.2 gigawatts in the first quarter, up 5%, which translates to a 12% year-on-year increase in Euro value. Secondly, profitability levels increased across all segments throughout the quarter. Our total EBITDA rose by 53% delivering 80 million euros EBITDA in the first quarter. This translates into a 5.5 EBITDA margin and a positive net income of 8 million, which is more than the total net income for the full year 2024. Additionally, our service EBIT was also up by 1.7%. achieving a margin of 16.8%. Despite a soft start into the year in terms of installation and working capital outflow, we were able to deliver a positive free cash flow of 4 million euros. We rate the rate, our confidence in achieving a positive free cash flow for the full year 2025, despite some provisions outflows yet to come. On the strategic side, the last few months, we have seen some positive developments in Europe and Germany particularly. Germany is expected to auction 12 to 14 gigawatts this year, which is another strong year after 12 gigawatts of auction volume of last year. On Europe, The commitment to the Clean Industrial Deal underlines that renewals, and wind onshore in particular, are crucial for both energy independence and also for national security. Finally, on the tariff discussions from the U.S., let me clarify again that we do not expect any material impact on our financial performance either this year or next year. Overall, we are on track to deliver guidance for this year and to achieve our EBITDA margin target of 8% in the medium term. And with this introduction, let me move to the next slide to more detail. Regarding order intake, the first quarter of 2025, we saw a strong order intake quarter in line with our expectations. Nordisk delivered 2.2 gigawatts in Q1, marking a 5% growth and a 7% increase in other intake value compared to the same period of the year before. This translates to 1.9 billion euros in value from orders across 10 countries. Strongest individual markets were Turkey, Germany and Finland. on the pricing side remain stable with average selling price at 0.87 million euros per megawatt year today up from 0.85 in the first quarter of 2024. as always while we are not providing a specific guidance for 25 we remain confident in our order momentum and we expect to repeat or better order intake compared to 2024. With this, let me move to the next slide, the order book. Driven by strong order intake in both segments, our total order book grew to 13.5 billion euros. The turbine order book increased by 12% to 8.2 billion euros in the first quarter of 2025, up from 7.3 billion in the first quarter of year 2024. Most of these orders will be installed in Europe, followed by North America, rest of the world, and Latin America. On the service side, our order book increased by 37% year-on-year, reaching a remarkable figure of 5.2 billion euros by the end of this quarter. This growth reflects the expansion of our turbine business over the past two years across multiple regions, now contributing to the service order book as well. And with this, let us move to the service business. Looking at the first three months of 2025, we can confirm that our service business continues to improve, and we are on track to return to prior profitability levels. Service revenue grew by 19%, reaching 197 million euros in the first quarter of 2025. As previously outlined, EBIT margins have started to improve, and are on track to return to our normal margin levels of around 18 to 19% in the next one to one and a half years, as we commented in previous course. Please keep in mind, though, that the improvement in margins is not linear, but the trend should be visible across the next quarters. We expect our revenues to increase further at a low double-digit percentage driven by an expanding service order book with longer tenors and increased installation activities expected in the future. Regarding other service KPIs, the average fleet availability remains stable at 97%, and the average tenor of the service contracts increased to around 12 years. Moving to the next slide, talking a little bit on installations and production, installations set slightly over one gigabyte in the first quarter down around five percent points year on year the slight decline was mainly due to customer delays with limited profitability impact for nordes but remains in line with our internal schedule for the whole year we continue to expect better installation levels compared to last year the current quarter we install a total of 100 with the majority of installations occurring in Europe, followed by Latin America and then North America. On the production side, turbine assembly increased by 3%, totaling 1.2 gigawatts, corresponding to 209 turbines, with the geographical split you see in the chart. And blade production in units increased by 14%, with 39% in-house production and 61% outsourced, as well with the split you see in the chart, slightly increasing the shares from Asia. And with this, I would like to hand over to Ilya to go over the financials.

Thank you, Rodrigo. Welcome from my side as well. And as always, I will start with our income statement. So in the first three months of 2025, sales reached slightly above 1.4 billion euros compared to the previous year's figure of 1.6 billion euros. And that was mainly driven by low installation levels and timing effects on the production side, as explained moments ago by José Luis. We again have further increased our gross margin, reaching 27.3% for Q1 compared to 23% in Q4 and 19.6% in Q1 of 2024. And the result of that uptake, we achieved an absolute EBITDA of €80 million in Q1 compared to €52 million in the first three months of last year. And this then translates to an EBITDA margin improvement from 3.3% to 5.5% year-to-date. Going forward, we continue to expect that sequential improvement in both operating margin and in absolute EBITDA levels for the next three quarters remaining in the year. and given the performance we have been describing in the first three months, as was mentioned, we ended the quarter with a positive net income of €8 million. With that, let us move on to the balance sheet. The overall structure of the balance sheet remains on a comparable level as per year end. We ended the first quarter with a cash position of more than 1.1 billion euro, almost identical to the year-end number. And like always, when you include the cash facility of around 80 million, the total liquidity level is almost spot on of 1.2 billion euro. Working capital at minus 8.3% is in line with our planning. I get to that in a second. And the equity ratio with 17.6% also remains similar to year-end levels. And now let's have a closer look on how other balance sheet KPIs have developed slash performed. And that cash level reached 824 million at the end of the quarter, up from 359 million euros in the previous quarter, or the quarter, the Q1 of the previous year, 2024. As mentioned before, working capital ratios stood at those minus 8.3%, or in absolute numbers, 593 million at the end of the quarter. And for the full year, we're keeping our guidance of minus 9% or lower. But for now, we're preparing for higher activity levels in the remaining quarters. With that, let's go to the cash flow and capex slide. Cash flow from operating activities before net working capital stood at 97 million euros at the end of the quarter, demonstrating again the strong operational performance. Working capital then saw some minor changes, absolute number 71. So the cash flow from the operating activities after working capital was 26 million euro at the end of Q1. And with that, of course, clearly above the previous year's level. As a result, we generated a positive free cash flow of 4 million euro in the first quarter. despite the working capital outflows I just described. Let me point out once again that we expect to achieve a positive free cash flow for the full year 2025. CapEx spending stood around 25 million in the first quarter, slightly less compared to the same quarter of last year, but we do clearly expect to catch up, and we maintain our view of around 200 million for the full year. Our investment focus, like most of the times, remained largely unchanged with investments in blade and cell production, logistics, facilities, tooling for installation and for transport. And with that already, I would like to hand it back to Rulis for the guidance slide.

Thank you very much, Ilya, for guiding us through the financials. And as mentioned before, the first quarter fully developed according to the plan, both operationally and financially. and hence no change to our guidance. We expect 2025 to be another year of continuous improvement in profitability and preparing orders for the growth expected in Europe, particularly in Germany in the years to come. Given our order book and project timelines, we continue to be quite comfortable getting to the midpoint of our sales guidance. We are also continuing to expect consistent step up in our EBITDA level throughout the next three quarters. Finally, we are also confident to deliver another free cash flow positive year, even considering some provisional flows in 2025. With this trend, we are confident as well to deliver on our 8% EBITDA margin target mid-term. And with this, handing over back to you, Anja.

Thank you, gentlemen, for leading us through this presentation. I would now like to ask the operator to open the Q&A session.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from said question queue, you may press star and two. Participants are requested to only use handsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from Vivek Mida, Citi. Please go ahead.

Thank you very much, everyone, and good afternoon. I have two questions, if I may. The first is around the service order and revenue growth. Again, another very strong quarter, and you guided to low double-digit revenue growth earlier. as you have in the past. Recently, your pace of service revenue growth has been a little bit higher than that, not just in this quarter. So I was just wondering if you could walk us through the assumptions behind that. Thank you.

I think, you know, of course, revenue growth in service, there are three main factors. Renewal rate on existing contracts, inflation, on the backlog that you have on the cost and on the revenue, and order intake in the turbine business. And, you know, we prefer to be slightly conservative and to guide you towards what we think could be the worst-case scenario of revenue growth and to give you a view that in certain areas is a little bit out of our control because it's very difficult for us to forecast inflation in the future, which is a big part of the revenue growth as well. But if we keep the current pace of order intake, this will translate into installations this will translate into service we are quite confident that the growth of the service business will be above double you know will be double digit that we are confident understood and just following up on that would you be willing to disclose uh how much of the recent revenue growth is being driven by inflation thank you i don't think we have that data that happy to get back to you through our investor relations to give you the information that we can.

But it's far smaller, obviously, than the order intake rate. So it's really a minor portion of regular inflation. Yeah.

Well, on a 700 million, 5% inflation is... is 35, so it's minor in a bigger scale compared to the service revenue associated with an order intake of 8 billion, which is bigger than that, but nonetheless important.

Really understood. Thank you. My second question is a broader question, high level, about your sourcing strategy. Clearly, you're not as exposed to U.S. tariffs given your smaller U.S. footprint. But just in recent years, you've been gradually increasing the share of turbine assembly taking place in China in particular, as well as India. So could you maybe walk us through how you are thinking about that sourcing strategy more broadly and how you're balancing, for example, proximity to demand and customers with things like cost optimization? Thank you.

Yeah, I think that's a very spot-on question, because this is a continuous discussion we have, what our strategy should be. So far, we have decided for diversification and optionality and having certain room to manoeuvre. instead of optimizing shorter, best configuration possible. This has the downside that you carry under utilization, but gives you the flexibility to adapt to geopolitical circumstances. And that's our strategy going forward. We don't plan to change our strategy. We plan to have foot on Europe. You know, it might be valuable in the future, depending on price criteria for auctions. Of course, we need the US for the US, and we are committed with that. We want to leverage on the competitiveness of China, and as well as on India. The share between China, India, and Europe or the global delivery outside U.S. will depend basically on geopolitics. U.S. is for the U.S. But we want optionality and higher short-term costs versus having the flexibility and the optionality to increase in one area and decrease in another area if needed.

Very clear. Thank you very much.

Welcome. The next question comes from AJ Patel, Goldman Sachs. Please go ahead.

Good afternoon. Thank you for the presentation. I've got two questions, but on two different topics. Let me start off with the first one, which is margins. So if I hear correctly today, you deliver a 5.5% EBITDA margin on a relatively light volume quarter. You're on track to delivering increased profitability on service. you're seeing strong orders in Germany from last year, but also see the same this year, giving you sizable visibility on volumes ahead of us. I'm trying to put those three things together and thinking, well, is the 7% margins that we see in consensus for next year in EBITDA look right, given what you're delivering over this year? And really, this should be the worst margin quarter over across the year, unless there's some sort of quarter-to-quarter effects that we need to take into account. And then with that sort of mindset, I just want you to maybe revisit, if you can, why 8% margins as a medium-term target is the right level for this type of business. And then the second area I wanted to tackle was just on the cash flow. Very strong cash flow, right? You're $250 million or so higher than you were Q1-24 in terms of the cash flow generation. you already started the year with a good cash position. When do we get an update on what your priorities are here? You know, is it to reduce interest costs? Is it to give dividends? Is it to invest? When are we going to get that clarity of picture to see where the journey is going to take us next?

Thank you very much for your question, Sergey. I think regarding margins, I mean, this quarter is a low activity, so we're expect next quarters to ramp up inactivity and sequentially improve our margins as well. Nonetheless, this is a project business, and different projects might have slightly different profitability, and we are happy with the order intake momentum. But what we are seeing in the marketplace is that the lead time from orders to execution is longer in the current configuration of countries that we operate than in other countries. So in the past, we used to sell more in North America. Hopefully, we will sell more in the future again. And that was order intake December year one and revenue Q3 year after. What we see in Germany especially is that the lead time takes longer, you know, permitting issues for BOP and so on. So customers are slightly delayed with the permits, which is something that doesn't concern us because the backlog is there and the backlog is improving and the revenues will be processed, but it might be processed with a little bit delay. And this is point number one. Point number two, as always, nothing, you know, business as usual. We still need to sell certain volume for a percentage of completion this year. And this may or may not come on time. So we are confident. about order intake. We expect next quarter to be as good quarter as Q1 without guiding order intake, not for the quarter, not for the year. We expect a good year in order intake, but timing might affect your ability to process those orders with percentage of completion and revenue recognition this year. So in summary, it's a quarter. So we cannot take many conclusions with a quarter. We need to let the year go and figure out where we are in three months from now. And the same reasoning applied to the 8%. I think so far we are committed to deliver that mid-term. We see now mid-term is shorter than previous quarters, but give us some time. And regarding cash flow, Ilja, you better take it.

Yeah, I'll take it. And again, just finishing on Joris' comments for this year, I think we repeat the statement. If we calibrate you for the EBITDA margin guidance around the midpoint of this, I think I think we would repeat that statement from the full year call. But to the capital allocation or what comes next question, which is a very valid one, and we got this, of course, on the full year call as well, is that the answer is a bit similar to Rosely's. It is still a bit early to say, because we have generated now a net profit in the quarter, a very small one, if things develop as we clearly expect them, that, of course, will be a very different year for Nordics in terms of net profit for the first time in many years. So that question is also coming to the front of our mind, especially with our cash positions. But nonetheless, two remarks on those. The business is also growing substantially, and we will always use our leeway to support and de-risk our operations. in supply chain and in every aspect of the project execution, also helping where needed in the order intake part, being a bit more open in terms that we can accept so it will first and foremost sustain the business. And of course, I think you explicitly asked when it comes to dividends, we're not ruling those out. Of course not. If a company goes on the trajectory the three of us are just discussing now, no one can rule this out. But I think you asked the question, when will we come back to that? And I would say with a more specific response, somewhere between when we go in front of you in the Q2 or the Q3 call. I think this is when we'll have a bit of a more detailed and strategic answer to that.

Okay. And then just, sorry, on the 8% margin, what situations... Do we look at, when we look at this, the drive you above it? I'm not necessarily asking for hard numbers here and where the margin might go. It's just that, you know, we've talked about this volume pickup that we need to get to to really kind of demonstrate the profitability of this business. You know, we want to recover margins back to where we had in previous years. What really kicks things further on? Is it really just as simple as saying it's order intake or... And then how far can you stretch this business? Any sort of qualitative things would be helpful.

Yeah, I think we gave you the building blocks in previous calls. Volume was one. Service growth was one. We are still very confident about the service one, the service contribution. We are quite confident in the volume as well. So if we keep selling similar level as last year with similar margin level, it's not a question of if, it's a question of when. And the when is a little bit, you know, I cannot be more specific because the key driver there is the timing of executing the project from our customer. And you see that in the order backlog. You see that the profitability has improved on a very low revenue level, which means that we are not paying LDs for being late delivering low volume, but we are delaying revenue recognition because customers are late. And it's very difficult for us to forecast when the company will move to the same activity in installation as we have in order intake. We're sure we will be there. We are not certain when this is going to happen. And that's, for me, the key criteria for achieving that. When the good order intake momentum is going to translate to a similar level of installation level.

OK. Thank you very much.

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

Good afternoon, and thank you for taking my questions. First question, just coming back to the customer delays in Q1, have I understood correctly that this was related to permits? And secondly, would you expect, therefore, to be recouping these revenues in Q2? That's the first question.

Yes, it's mainly driven by permits to enter the site to do the installation. Production is as per the plan. Installation is slightly delayed in the plan. We expect to recover some in the year. Overall, in the year, we expect a slightly better installation level compared to last year. But we need to, I mean, there are high level of activity quarters in installation in Q2 and Q3. Let's see how those quarters go, and let's see how much we can recover. We are, you know, we gave you comfort that we plan to deliver mid-range of the guidance on revenue, and that's our assumption today. On the profitability, we are quite comfortable as well.

Understood. Thank you. The second question on Germany, just wondering, any early conversations with the new coalition, just what impressions you have on policy continuity in Germany for onshore wind looking out over the next couple of years?

We do it together here. I think, you know, after the noise in the campaign, I think things settle after the campaign and the formation of a new government in a record time. And great to see that even the current government took the action to go for this big investment in infrastructure, which will be an enabler for many activities, for grids, for other investments in infrastructure, which are enablers for our business to prosper. And on volumes, it's too early to say. Our view is that, you know, the new government doesn't want to row the boat. So let's... that do the necessary changes that are needed with common sense and with agreement with the stakeholders to make sure that Germany keeps delivering to their targets to reduce energy dependency. And, of course, the new government sees renewals as a key role for the energy supply of the country.

I think these two... These are the two key takeaways. We're not getting any, in those early conversations, we're not getting any disruptive feedback, where this will then land in actual terms of auction loyalties and the like still to be determined. But we don't see any big changes in that sense. And I think, for what it's worth, the idea that was probably still in the campaign more prominent in the forefront of the reactivation and renewal of nuclear power

in germany i think these things are basically off the table as well so i would see those two things as positive for for the onshore wind industry that's very helpful thank you the next question comes from xinwan barclays please go ahead hi there thank you for taking my questions um i will just follow up on the germany um question uh so in the collision pipe they maintain the 2027 unsure when inflation target that talks about adjusting 2032 target lower. What would be the reason for this in your view? Could we see a scenario where inflation would peak by 2027 and hence your orders would be peaking now in 2025?

If we want to calibrate that, I think, apart from the coalition paper, so those years, like last year, we've got 14 gigawatts of permits, almost 12 gigawatts of auction volume. This year, 25, all the customers' feedback, what we're seeing, points to a direction of, again, a 14 gigawatts of permit, if not more, an auction volume of probably up to 14 or even a bit more of auction volume gigawatts. I don't think everybody has ever expected that, A, the peak would be so high. And I don't think anybody expects that this will keep on those levels beyond 25. That was always clear. So if you want to talk about a peak, I think 24, 25 in that context is as high as it will get. I think... The very relevant question was also asked in the previous round is, where will it normalize? But if you want to have it as a peak question, I think 24, 25, and then the order intakes up until early 26 will be a peaking of the industry. But we don't see that the cliff will be so dramatic.

That's very clear. Thank you very much. And then just following up on the Asian production footprint question, I just want to ask or maybe get some idea of, you know, if I look at China's turbine production, this has reached 35% in Q1 and that was 1% two years ago. Can you maybe talk about how much this production cost-based shift has helped your margin and how much room do you have to increase the reliance on Asian supply chain further

I think we cannot be so specific there. I mean, you will understand for competitive Intel, we need to be cautious there disclosing, you know, competitiveness of the different options. We are discussing with policymakers about, you know, different options options about how to configure the industry, we cannot be that specific.

Okay, no worries. My last question is on non-allocated costs. So Q1 at 104 million looks what is the highest Q1 in recent history. Can you remind us what goes in there again and whether we should expect this level at the wrong rate going forward, please?

Yeah, I mean, we have been saying that this uptick would be coming is what we see here in the actual numbers for the segment as well. I wouldn't read too much into one quarterly number, but it's a trend, yes. a line which is a certain inclination upwards, and then you have the right one, because we will see a different size. But it still remains a quarterly number.

Thank you. I'll go back to the queue.

Thank you. The next question comes from Konstantin Hesse from Jefferies. Please go ahead. Hi there.

Thank you so much for taking my questions. I've got a couple left. I want to drill down a little bit into order intake. So in, I mean, looking at Q1, 2.2, just wondering how much of that was exactly Germany, because I'm just thinking Germany auctioned 10.9 gigawatts in the last three auctions. Nordex has a 30% market share, typically tender all the way to orders take six to nine months. So we should see at least three gigawatts coming into the books in the, I would say, next couple of quarters, potentially. So if we could just discussed is a little bit i'm just trying to understand when could we see all that volume coming into your books is it i mean obviously you just you just talked about q2 being at least as strong as q1 so are a lot of these volumes that are coming into in q2 german um are these related to the german tenders what about q3 just just to get just uh trying to have a bit of an idea in terms of timing of these orders into the books because obviously the permitting data again

in march was very very strong which indicates you know tenders should continue to be pretty good in may as well so just wondering how when we should expect that to hit the books thanks yeah well thank you very much for the question constantine i think ordering take out of the 2.1 roughly 550 megawatts are coming from from germany we're coming from germany in the first quarter and on And we expect, as said, better quarter eventually, equal or better quarter next year, which will mean that in the last 12 months, end of June, we will be above the 8.3, which is a good early indicator for revenue growth in the future when this translates into installation. And out of the 500 in the first quarter, I would say the big volume from Germany is still to come. And we are optimistic. Let's put it that way. I'm not sure if your numbers are maybe slightly aggressive. The three gigawatts, let's see. We don't rule it out, but we don't guide you nor order intake. in quarters or in the year, nor order intake by markets. But, you know, if Germany is mainly, you know, three players operating in the market, and the volume option is what it is, it will be a matter of time when this option volume will translate into order intake. And share could be slightly more than one-third, slightly less than one-third, but we expect to be in that range.

But just to understand, typically from tender to your books, is the average six to nine months, roughly?

Yeah, three to six for order intake. And then three to six for order intake and for installation, Unfortunately, it's longer. In Germany, it could go from one up to two years. Okay.

That's understood. And then other than Germany, I think you mentioned in the full year call Turkey, Baltics, Nordics, any other markets that are quite interesting at the moment for you?

I would say generally the company has a fantastic position in Europe. and Europe is doing well in all European countries, not only Germany, of course, not such a growth as the one we see in Germany, but happy with Eastern Europe, satisfied with the Nordics, with Turkey, with Mediterranean, UK slightly behind, we expect to pick up, but maybe not this year, eventually the next year. satisfied as well with the development of the company in Australia, in Canada, and suffering in Latin, but still selling for profitability. So, you know, and North America, we haven't changed our plans. We're still committed to the market with U.S., but this might come slightly later in time. I think things need to settle. But all in all, very happy with the performance of the company in the markets where we operate.

Great. And then this last question, maybe more towards Ilya. Ilya, looking at the margin progression for the year, I mean, gross margin at 27%. When we look at gross margin versus operating margin, so do you expect gross margin to stay at this level? Or is it going to be as to in this case, you know, OPEX as a percentage of sales clearly comes down? Or is it going to be just a bit volatile what the gross margin is concerned?

Thanks, Konstantin. Yeah, that gives me room for two responses. So Q1 is a bit skewered by a relatively weak top line. And then, of course, you have a service margin that kind of over proportionally influences the gross margin of that quarter. So, of course, gross margins continue on the normalized basis to increase, but you shouldn't expect to see that gross margin number again in the bigger quarters, if I may call them like this. So, if I get you then, Walker, you again to the full year and your question on the EBITDA level, absolute numbers, as Josef mentioned earlier, every quarter will be better in absolute EBITDA numbers than the one before. And so, for the full year of this, Also here, midpoint of the guidance range, 6% is the midpoint from 5% to 7% is where our collaboration for you is. And then roughly, I mean, first half of the year expected to be to come, if that midpoint ultimately is true, to come in slightly below that and the second half slightly above that. And that's how we see the year. Yeah. No, that makes sense.

Perfect. Okay. Thanks so much. Thank you. The next question comes from Richard Dawson from Burenburg. Please go ahead.

Hi, good afternoon, and thank you for taking my questions. Just coming back to the margins within the service business, we've clearly seen growth coming through in the first quarter, so now it's about 16.8%. But it does appear that the rate of the sequential improvement has slowed slightly across Q4 to Q1 versus historical quarters. Is there anything we should read into this? I know there's probably a bit of lumpiness coming through on those margins, but is the time taken to get back to sort of those historic profitability levels maybe increasing to an extent? And then second question, just on CapEx, relatively light this quarter versus the full year guidance of 200 million. Are you able to provide any color on the likely staging of that CapEx across the rest of the year? Thank you.

Yeah, let's do both. So service, we expect the trend to continue. And as we mentioned in previous call and today as well in the call, in one, one and a half year, we should be back to previous profitability levels of 18 to 19%. And of course, the journey should not stop in one and a half year. The journey should continue. But this is as far as we can go with the visibility we have in front of us. We are quite confident with the order intake of this year. We don't see any reason why next year things will be completely different with the visibility we have today. And as a consequence with this visibility, give us sufficient visibility for the service business in the next two to three years and with that visibility such as far as we can go today very slow uh slow uh start of the year but we expect to catch up and to be in the guided cafes around 200 million for the for the full year, the cash out of the capex, you know, Q2, Q3, Q4. I don't have the exact expected distribution, but could we say even?

No, I'm afraid the catch-up will take us a bit, so it was too slow. For Q1, I would say you will see more. The 200, if you want to distribute them, you will see more of that capex spending in H2 than in H1.

Perfect. That's good. Thank you.

The next question comes from Sebastian Grohe from BNB Paribas. Please go ahead.

Hi, Jose Luis Fahilia in Haimia. Just two left for me on the supply chain. I would be interested in potential knock-on effects with regard to the supply chain, apart from the tariff debate. So how do you view the risk that supply chains might initially be more stretched again, and vis-à-vis to what extent might sourcing costs inflate from here? Maybe we can start there.

I would say the view we have today. The view we have today, and this might change, but it's very difficult for us to assess what are the knock-on effects or the consequential impacts of the tariff situation. Because, you know, it might be the case that tariffs bring inflation to the markets where we operate. uh and that could could impact uh you know the local the local part of the activities so if we put put us aside so us for us little volume this year so no impact apart from the little volume the the contract that we are executing we don't have impact on inflation the the the the you know the question mark in us is when is the volume going to start picking up again? And for that, I think every stakeholder is expected the situation to settle, understanding what the tariffs are and understanding what IRR changes might happen, yes or no, and what is the impact. So this is regarding US. So no impact for us shorter, this year or next year. and timing could impact the order intake expected for that region. Other than US, in the geographies we operate, mainly Europe, a little bit Latin America, South Africa, Australia, the cost base, of the product, we see stability. So we don't see a risk of tariff impacting our cost base. The local execution base is going to depend a lot of how much inflation this tariff situation will bring. If inflation stays in the current forecast, we don't expect big impact for us.

OK, that's helpful. The other one question that I had is more for Ilya, because you said in one of your earlier roundtables around the free cash flow debate we had before to keep an eye on de-risking the business and you specifically mentioned the supply chain execution and also terms and conditions. I would just be interested in some more specifics what's behind those statements.

So maybe on both, I was, I was, the question was, was, was I think when AJ asked me about future Thoughts on capital allocation. What I was trying to say is that we will always put our money to work first for operations. When you need to buy, and that's for José Luis to speak about, a new mold for putting up another line. When you have to increase the speed of your tools for transportation. So whenever there arises a need. of supporting your operation. This is where we want to put the money and the situation of the company, which I think is in good shape, to foster and support the core of the business. I wasn't trying to say that there's any specific risks we see coming our way from the supply chain. What I was saying is that before thinking of other deployments, and of course for shareholders and And for other stakeholders, we will always put the operations first and then the product, which means the investments in our engineering. That's what I was trying to say. I was trying to make the priorities of our deployment, not any specific risks.

That makes sense. If I may just follow up quickly on this one, and then I'll get you in peace from this. When it comes to the supply chain, we talked about the peak in Germany, we talked about the potential cliff that you mentioned, shouldn't be as pronounced as perceived by some, probably. How should we think about the supply chain and the ability of the supply chain to handle these ever bigger volumes, and particularly in Germany? Are you concerned that some would just sort of play a bit on time and not go all in, if you want, on the volume increase? Or how should we think about that trajectory?

I think that, let's... How can I face it? we were more concerned than we are. So every quarter, we are more confident that all the roadblocks in Germany are slightly removing the permits for highways, availability of cranes, availability of trucks, logistics, availability of people, availability of towers. We have on top a de-risk strategy to complement the very good collaboration we have with our key supplier for towers in Germany. On top, we have a de-risk strategy in case more towers are needed, we can deliver. So we have a good product that fits very much the market needs and the ability to deliver. Great. So we are, I would say, more comfortable every quarter that we can deliver.

Okay. Sounds encouraging. Thank you so much.

The next question comes from Christian Bruns, Montega AG. Please go ahead.

Yes, hello. Thank you for taking my questions. I have to admit that all my questions have already been answered. But maybe I take the opportunity to ask a different one. And in Germany, we see very strong volumes now. And what do you think? Which countries could offset lower volumes in Germany from the year 26 or 27 onwards? What do you see will be the next big markets for you?

In our planning, it's definitely US. It's Canada, although Canada is currently at very high levels. And it's definitely Australia. So in those three geographies in the long term, we should expect volume growth. to compensate the potential volume decline that we might face in 28, well, in 27 order intake, which means 28 P&L impact. With the current order intake level, we have very good visibility from a P&L perspective until 2027. So we have... We have two years to make sure that we ramp up US, Australia, and eventually even potentially increasing Canada.

Yeah, that's clear.

Thanks. Thank you. The next question is a follow-up question from ,, Barclays. Please go ahead.

Hi, again. So my next question is on provisions, just housekeeping one. So provisions continue to increase both in absolute terms and as a proportion of trailing 12-month sales. Could you confirm two things for us? One, are there any more exceptional provisions in the quarter? And secondly, have you settled part of the exceptional provisions in the quarter? How is the conversation going with customers, and do you plan to settle more this year with a better cash position now?

So I think the first part of the numbers, and then we go to the commercial part of settlements and the like. So thanks for the question. It's a good one. So maybe to clarify that, so provisions right now are only increasing with the business. There's no extraordinary further increase of any specific items or legacy issues while we're increasing. with the good order intake we have and with those contracts, that's how provisions have increased. So give or take of a gross addition number of around 3%, of course, without sharing the report, but those additions have come down and they're just in line with the business. When it comes to specific cases, I would guess, because we will say, well, I'm going to comment on this very specifically, cases but everything we had basically um discussed with you and with our customers in the past has been already factored in in all our numbers and right now it's basically going into the execution mode of this yeah i think we are satisfied with the settlements and we are executing okay good to hear my last question is on tax planning so your deferred tax asset has increased by the

almost 570 million, very material number. I think in the last call, you were talking about tax planning, which would help with your cash performance this year, if I remember correctly. Do you have any updates on that, please?

No, we don't. I think I remember that conversation. We had this on the call. I think to be able to go in those specific of the tax, we believe that, of course, now the company becoming more profitable taxes is obviously a different important topic altogether. But nonetheless, if you want to model your taxes for the full year, plugging in a number similar to this year's, minus some efforts we're going to do, I think that would be the right way to see it.

Great. That's all my questions. Thank you very much.

Thank you. The next question comes from Tor Fangman, Bank of America. Please go ahead.

Hello, good afternoon. Thank you for taking my question. Only one follow-up, maybe broadening the question on the supply chain situation, not only regarding Germany, just generally your global supply chains. How is the situation right now? Are you relaxed or are there any problems arising on the horizon? Thank you.

We are, let's say, studying options, but relaxed. I think we are happy with the stability we see. But of course, planning different scenarios to react if needed. But there is not any single indication that we see today to be worried. It sounds good.

Thank you.

Thank you.

The next question comes from Ravjal Kulwinder, Alfa Value. Please go ahead.

Good afternoon, everyone. a little bit on the sourcing question as well. So when you get a firm order intake, what part of the cost base or what part of the input cost do you already source in advance? Because when we are thinking about tariffs and the knock-on effects, is there a certain amount of cost base that you can protect from that? And also, are the contracts airtight enough beyond a certain inflation range to allow you to use the price pass-through to maintain your contribution margins?

Depends from contract to contract. A lot of contracts, we have tariff protection. But again, it's customer-specific and contract-specific. And from regarding what we lock when we have order intake, I mean, we always comment, we try to do back-to-back tower and logistics, and that depends a lot where the project is located. This could be up to 50% or more or less, depending on the composition of every specific project. Nacelle cores and blade cores, we usually, for offers with a delivery time of two years, we give a fixed price for those.

OK, thank you.

The next question comes from Anis Dzigaya from AutoBHF. Please go ahead.

Yes. Thank you for taking my questions. Good afternoon. So I have two questions. The first one is regarding Enercon and RWE agreement on long-term partnership to jointly realize and show wind projects in Europe. So how do you see this partnership? Do you see this as a threat for your market share? in Germany and in Europe. And my second one is on supply chain again. So could you please come back to the question to... I think you said that higher local inflation could impact supply chain. Could you elaborate, please, more on this? As I'm not sure I fully understand the point. Thank you.

Yeah, let's try. So first on RWE is... Super good customer for us. And we were very happy to be their supplier. But you need to understand that it's not very sustainable to be their supplier. Everybody wants to diversify. So RWE as well. And Enercon is a very good supplier. It's a very good company. So no more to comment. I think we are still confident that given our size, footprint, market presence in many countries in Europe and Australia and Canada, US, we can keep our order intake volume as commented. We expect a better year this year. or slightly better, or at least similar volume as the previous year. And we don't see any reason why next year should be different with, of course, with the caveat of the visibility we have today. And this is very much as far as I can comment there. Regarding supply chain, let me try to explain. I mean, today, you lock a price for delivery 2026. I say the cost of components, with the visibility we have today, we are quite comfortable that we are going to see stability. What is a little bit potential risk, which, by the way, we don't see, because we see people talking about deflation in Europe, but not about inflation. But it could be the case that tariffs bring inflation to the US. No impact for us. and bring inflation to Europe. That's a knock-on effect. If inflation comes to Europe, the local execution, people, cranes and so on, for the projects that you are executing might deteriorate slightly your profitability, which hopefully we expect to compensate with improvements in supply chain on the goods that we import from Asia. So all in all, we don't see a risk, if any, the risk would be local inflation.

Thank you very much. Very clear. Thank you. Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Anna Zieler for any closing remarks.

Thank you, Youssef. So as usual, I would like to give the final word to the Louis. This is key takeaways.

Thank you to all of you for the time and the questions, and let me outline our key takeaways for this quarter. First of all, we delivered a strong start into the year in terms of order intake. We are confident of achieving another good year, a better year, with total order intake expected to be similar or above last year's level. Our focus is on improving our financial year-on-year and delivering a positive and sustainable free cash flow. And finally, we confirm our guidance, and we are well on track to deliver on margin improvement and are also reiterating our medium-term margin of 8% EBITDA. So thank you very much. Wish all of you a fantastic weekend ahead of us.

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