Good morning, everybody, to this presentation of the first half year numbers of Sif Holding. Good morning. My name is Fred van Beers, and next to me is Ben Meijer, our CFO. And the two of us will take you through the results and a bit of the forecast for this year and the years to come on our performance. Quite exciting half year we have had, as also shown on this introduction page here. Basically, this page tells the whole story. And we're extremely happy that our safety performance has improved. And talking about safety, also in this room, we need to pay a bit of attention to that.
No drills are planned for, so when the buzzer goes, please follow us out to the door and either through the left, there's an emergency exit, to the right there's an emergency exit, or you take the main stairs downstairs. So plenty of opportunities to leave the room, should it be necessary. But our safety performance has improved, which is a great thing. We will come back to that later on, and it seems to be sustainable, which is even more important. A very important element where we will talk a bit more about is the expansion project.
It's on schedule, and we have had a very exciting August month during which we managed to start up the production according to plan and have actually produced the first can and more cans in the line already for the Empire Wind 1 monopiles, which is a very important milestone in our view on this whole execution plan. And then I said already, we will take you through the outlook of the remainder of 2024 and 2025, 2026, what's playing there. I hand over now to my colleague, Ben, who will take you to the results of 2024. After that, I will come back on market and the expansion plan itself.
Thank you, Fred, and good morning, everybody. I would like to start with some more details about health and safety. As all of you can remember, last year the safety performance at Sif was not good, and we have taken various measures, including regular safety standstills. And what you can see over here at the safety statistics is that performance has improved on almost all key safety KPIs. If we look at the number of lost-time injuries, last year, first half year, we were at a number of seven, and immediately we took additional measures, as just mentioned. This year, for the first half year, we are at a lost time incident of one. Still one too much, but a significant decrease compared to last year.
If you relate the number of lost-time injuries to the number of hours worked, so you look at the LTIF, the lost-time injury frequency, you see a significant decrease from seven point nine to three point three. Restricted work cases, a small increase compared to last year, but then again, if you look at the number of medical treatments, and also if you look at the number of first aid cases, you see a significant drop compared to the first half of two thousand and twenty-three, which is an improvement in this case. So overall, what we see also walking around in the factories, housekeeping has improved, safety awareness has improved, and this is also being also resulting in better KPIs from a safety point of view.
Some first key highlights for the first half of two thousand and twenty-four, and I would like to start with the number of, FTEs, number of headcount. What we see over there, we see an overall increase from six hundred and eighty-seven in the first half of two thousand and twenty-three to seven hundred in the first half of two thousand and twenty-four. And what you see over there, so it's a relatively moderate increase, but you see a significant shift. In Roermond, we see the number of people decreasing, so some scaling down over there because of less production. And in Maasvlakte, we see the number of people increasing, which is exactly what we want at the moment, in relation to the start-up of the new factory. And what is good news over there is this is in line with plan.
A couple of months ago, half a year ago, it was more worrying, but at the moment, the last couple of months, we see the trend is good, and we see good people are coming in, and this is, of course, very important. We will come back to the financials later on, but also regarding the new factory, to bring in the right quality staff is a key element. Looking at the cash position, 87 million EUR at the end of June 2024. And in addition to that, so this is cash on the bank, we have an undrawn term loan. In total, the term loan was 81 million EUR. A little bit more than 60 million EUR has been drawn at the end of June, so another 20 million is undrawn.
And also the lease facility of EUR 40 million in relation to the expansion project is also fully undrawn. And then, besides that, we have a revolving credit facility of EUR 50 million, also to absorb unexpected working capital swings, in case that is the case, it's also fully undrawn at the moment. Basically, overall, the conclusion is that there is sufficient cash in the company also to complete the expansion project. We have a temporary lease contract for 20 hectares with the Port of Rotterdam, which is allowing us, first of all, for additional storage capacity and also is giving an option for future marshalling or logistics services, in the near future.
Last but not least, also repeating the word from the factory, that's the biggest statement also of today, that regarding the expansion project, we are on schedule and within budget, and this is very exciting also at this stage. The month of August, we have started ramp production for the Empire project, and we see basically that everything is working in a new factory from a technical point of view. Right now, it is scaling up, it is further optimizing, but it's working, it's on plan, and it is within budget. Brief overview about new contracts for the first half of two thousand and twenty-four. The first one is a contract for Baltic. It was moved into a firm contract from a capacity reservation agreement into a firm contract in the first half.
In total, we are talking about 100 monopiles, representing roughly 120 kilotons, mainly produced in 2025. Regarding the TPs for Baltic, we have a capacity reservation agreement, 30 kilotons in total, and we're talking about 100 TPs. Then Kavel Seven, Hollandse Kust West, or Plot Seven, Hollandse Kust West, for RWE and TotalEnergies, has been moved into a firm contract. It's the first firm contract for 2026, and at the moment, we are working on various other opportunities for 2026, and we will come back with that. It's still the expectation also before year-end, as discussed before. The tender pipeline is still huge at the moment, with still a supply-demand imbalance also for the years thereafter.
Last contract I would like to mention is the cooperation agreement with Dillinger Hütte regarding green steel and circular production for steel of monopiles. Financial highlights. First half of 2024, contribution margin went up with 10%, and what you see over there is that we have lower volumes compared to last year, but the overall contribution margin, just in EUR, is higher. So lower volumes are offset, first of all, by improved margins. Secondly, the settlement and cancellation, the settlement on the cancellation agreement with Empire Two, and additional income also from GS Entec, the license agreement. EBITDA increase went up from with 22%, from 21 million to roughly 26 million EUR, and this is driven by the increased contribution margin and also higher gross proFID levels.
What you see over there is partially being offset by higher indirect expenses. In the various departments, because you are scaling up the operation, we are also investing in operational and also other support departments to be able to absorb the future growth. In terms of volumes, we produced 53 monopiles, 64 transition pieces, reflecting in total 86 kilotons, compared to the first half of 2023, 94 kilotons. Order book: 2024, fully booked. 2025, fully booked. 2026, one firm contract, and as mentioned before, a very high tender pipeline and working on various opportunities. Over here, a brief summary. We already talked about the number of monopiles and transition pieces. In total, this reflects 773 megawatt offshore wind energy. That's roughly for 800,000 households.
The LTIF we discussed, we see the significant improvement compared to 2022, 2023 and 2024. You see just a decreasing trend in terms of safety incidents. And if we look at the CO2 emissions, we see an increase compared to last year, and this is mainly the result of Scope 2, more energy usage, which is not being fully offset by the Haliade-X, which also has some downtime. Now, I would like to hand over again to Fred.
All right, thanks, Ben. And now let's deep dive a little bit in the new factory set up, start up. And we decided to show you some pictures of what's actually working. And many of you here in the room, if not all, actually, have been at the premises, what was it? Two months ago or so, visiting us and so may recognize a few things that we show here on this picture. But just to illustrate, what we mean when we say the whole line has been starting up, that also includes the whole logistics. So the unmanned vehicles that are being, they are in operation now.
They, which you see on picture one, they are moving the tables with which we transport the steel plates. And in picture two, you can see that also the steel plates, this is how it will happen standard in the future. The steel plates for Empire Wind One are actually machined, prepared for welding and are put in front of the assembly line of the plates, which you can see on picture three. There you can see that the plate line number one is fully in operation now. It's relatively clean, it's working. But also, if you look to the right of that right-hand picture, line number two is coming close to completion as well in the assembly.
So we clearly see what we also planned for, that once line number one is up and running and the software is working, two and three will follow quite quickly, with a significant lower risk, of course, because they are all identical. And then on the far right, you may or may not see, but also line three is already in the execution of assembly. Meaning this is moving on quite nicely, and as we'd hoped for and planned for. Then, coming to the what a lot of people think is the exciting part, the rolling of the steel plates. Well, here on the left-hand side, you see the rolling of the real first plate of Empire Wind 1.
As you can see, the welding seam just coming out of the roller support on the left side is also working nicely, so the welding system, as we have considered it and thought through, is actually delivering and performing and also during the rolling process, this is all in line with the quality requirements that we've put ourselves, and more important, the tolerances we've put ourselves into, and that's coming out of the system, well, after that, the cans are welded, and then they go into the existing assembly process, so that's not new. That's proven technology within Sif, but we are expanding that part as well in our existing production hall.
And on the right-hand side, you can see that also the new outer circumferential weld machine from Haane is actually installed and will be put in operation soon now. And this is the first one that actually can handle the bigger diameter cans. And also, I think, nice to illustrate is that this machine has been built to exactly FID underneath the crane that supports. If we would go higher, we would have a collision with crane. So this one is already prepared for the biggest diameters that we foresee to be produced in our factory, eleven and a half meters, for sure.
That I think illustrates that it's not only stories, but it's actually, it's really there, and it's actually performing. And that, in our view, is a huge risk mitigation on this whole project that is now behind us. Moving a little bit on to the market, because the market has been quite exciting, to say the least, over the last year and a half. And basically, what we see as a main difference compared to half a year ago is that we now know the outcome of a few important elections that we saw happening last half year. First of all, the EU elections. And the outcome there is that the for...
With respect to offshore wind, actually, the existing strategy and rollout is being continued now with the new setup. So, with a lot of focus on first of all, materializing a system that eases the whole tender process within the European community, but also continue working on protecting the EU market to assure a level playing field marketplace. And we at Sif, we have said, and we will continue saying, that we are not afraid of competition. I mean, competition is healthy, competition is what is needed, and whether that competition comes from inside the EU or outside the EU is not so important for us, as long as it is based on a level playing field system, so to say.
There, we are very happy that the EU is continuing with their process of taking measures, trying to implement rules, looking at a very healthy balance between financial and non-financial criteria, for example, in the tender processes, which in our view, will stabilize longer term also this market. The second important one for us is the outcome of the U.K. elections. Labour has won, and Labour, I think one of the first announcements they made is that they are doubling their ambitions for renewable energy in the U.K., and immediately have increased the budgets for the CfD sixth round. That is now being judged as we speak. The results are expected to come out first half of September.
They increased the pot from EUR 800 million to EUR 1.6 billion. That, well, without saying too much, is a very important measure and indication for us when we start looking at 2026. Just to give you a little bit of a hint, but for us, the CfD sixth is an important round to follow. Then the third one, I think everybody has noticed that one, and the change in the vibes in the U.S., with Biden stepping out and Miss Harris stepping in.
Let's see what that results into, but that is, at least in our view, a hope-giving signal that the USA may continue, or when they win, and their chances of them winning have increased, I think, at least, compared to the Biden candidacy, which would be good also for the offshore wind. And we noticed this also with our customers, the customers active in the US. You may have seen, for example, that Equinor has won another plot for seventy-five million Mid-Atlantic project, which is a very decent price and a good starting point for developing another wind farm.
And it's customers like Equinor that are showing determination to continue to focus on the areas they're active in, and actually, which we also think is a good sign, stepping out of areas that may become interesting in the future, but are still too far away from realistic developments. So, focus also with our customers, I think is a good sign, and especially when those customers have a partnership agreement with a company called Sif. And then last but not least, although it's part of the E.U., still, the Dutch market is an important market. And let's see what comes out of the talks that are happening as we speak today, and what comes out of the Prinsjesdag announcements.
But the first indications show that they are not preparing to change big time the strategy with respect to offshore wind rollout. Which makes a lot of sense for various reasons, we think, but is also, I think, an encouraging message, since the ambitions in Holland are one of the biggest in the EU or North Sea field... So all in all, we are happy and with the recent developments from a political climate. And we also see that reflected now in the tender activity and the sentiments, let's say, put it that way, with our customers. So on our strategy, no changes basically. We continue to focus on helping to accelerate the energy transition. We do still see that this is definitely needed and much wanted for.
Some of you may have read the WindEurope announcement as well, and we are in very close contact with WindEurope to also from that side help setting the scene right. We continue and are on schedule to realize a volume of 200 foundations a year, and we continue to develop our strategy on offering total solutions. For example, the 20 hectares that we now rented, which we hopefully also can turn around from a temporary into a long-term agreement, is in that sense a good sign of fulfilling our strategy. Main thing for this year remains the setup of our factory. We are now in the phase for the coming four months to actually optimize the processes, get number two and three up and running, and get all integration done.
That's why you will also see in our forecast that we are lowering a little bit or have lowered expectations with an EBITDA, from an EBITDA perspective, that has basically all to do with the planned lower production output that we actually wanted in order to be able to ramp up this factory in a decent way. So that's working well. And we resumed this marshalling activity, so we have started dialogues with various customers that are interested in making use of this 20-hectare plot. Half of it is booked already with a for Dogger Bank. And the other half we are having various talks about the. But not before, that will not materialize in true sales, so to say, before 2026. That's long-term discussions.
But good that we can restart them. And we further work on our decommissioning circular solution concept where we expect to come with more news, not earlier than mid next year. That's the earliest that we can expect to take a next step in the rollout, yes or no, of that decommissioning concept. So it's a longer term perspective that we want to give there. The final drawings under the term loan and lease facility will be in the second half 2024. Ben can talk more about that when needed. But we and we focus, we start focusing also, okay, when we will repay what?
Repaying our perpetual in the first half of 2024 from free cash has been dealt with for the project with no production volume. That's basically the cancellation related aspect. The further repayments are targeted in next year, because that's the most expensive one that we want to get rid of quickest, to put it bluntly. Then the order book additions for 2026. I already lifted a little bit the secret on where do we expect the gap to be filled. But for us, the U.K. market in the short term, the 2026 term, is the most important one, to say it simply.
Because many of you know the market, there are not that many other projects up for grabs for 2026, but there is still quite something going on. And then the other focus area for us, of course, is on IJmuiden Ver for the Dutch market, but that is something for 2027, 2028. And the German projects that are coming to the market now, they will, there's a lot of activity going on on those projects as well for the period after 2026.
But we, of course, focus, for obvious reasons now on materializing the concrete, very concrete projects, we have on our list, for 2026, that underpin, and we're more and more convinced on that, underpin our, guidance, for 2026 to achieve 160 million EBITDA, at least, for that year. And, that still looks good. When will we come with announcements on this? Before the year end, this year. I said that before, and, that remains the message for 2026. Next year, output, 180 monopiles, 130 pieces. So that's the volume we're looking at. Some of you may ask the question: How many kilotons is that?
And the answer will be: I can't give you that yet, because that's for commercial reasons and competitive reasons not what we want to do, because then calculation of contribution margins become quite easy, becomes quite easy. And that's, I hope you understand, is not what we want to disclose at this stage. But it under, it supports very much our EBITDA guidance of EUR 135 million for next year. And with the factory actually doing what it's supposed to do, that should actually even be achievable. But some of you may still doubt, but that is, that's. It is gonna happen, Tijs. Yeah. That's it for now. And we would like to go open the floor. Maybe, Tijs, you want to be the first?
Open the floor for questions, remarks, open items.
Yeah. Okay. Yeah, the microphone. Tijs Hollestelle, ING. Good morning, gentlemen. Yeah, I think your explanation is quite clear, eh? The strategy, what happened in the facility, it's quite impressive that you're on time, on budget. There's always a bit of a disconnection to the stock market with the short term. How should we, let's say, model the coming four quarters? So, any help you can give us, Ben, on, let's say, specific items, accountancy impact on the numbers, would be helpful, because the share price will be very nervous in the coming quarters, of course, on cost base, reported revenues, and also EBITDA levels. So in order that we avoid too much share price volatility unneeded, as much help as possible would be, I think, helpful.
Question, well phrased there, Tijs. Thank you for that. Now, on this one, I think for the rest of the year, second half of two thousand and twenty-four is a transition period. And also what you can do, if you look at the calculation, we see a lower volume for the second half of two thousand and twenty-four because of this ramp-up period. Then also, if you look at the full year, two thousand and twenty-four, for sure the question will come, but I will give you some of the input already. If you look at first half, you did an EBITDA of 26 million EUR. Second half, you're going to do... Our guidance is around 10 million EUR, 9 million EUR to be exactly, based on our guidance. Consequence of two main elements, volumes will be a little bit lower.
Because of the scale-up and also of sizing the organization, you will have some additional cost, so some selectively cost increases. And also in the first half, the settlement with Empire, full settlement has taken place, and also the cancellation fee is fully reflected in the first half year numbers and also the numbers of last year. So nothing to come over there for the second half of this year. Then for two thousand and twenty-five, what you see over there is, first of all, volumes, of course, will gradually increase. First half will already be at a higher level, and the second half of two thousand and twenty-five will be at even a higher level. And if you look at the contribution margin per ton, I always hated to talk about tonnage, but it, it's important what we discussed before.
Tonnage is not everything, but you see an increasing trend in terms of tonnage next year. But also the margin per ton, because of the higher sizes and the higher complexity of the product, you will see a significant increasing level in two thousand and twenty-five compared to the previous years.
Aart and Ben, I think it's fair to say that we are planning for a significant step-up already in Q1.
Yeah
... for twenty-five, compared to the second half of twenty-four. So it will not be a slow sort of growth line. There will be a relative steep step-up already in Q1. But dividing hundred and thirty-five by four and,
That will not be the case.
That will not be the case. Yeah, and then depreciation levels will also go up quite steep in the coming quarters.
Yeah, you will see that also-
You're managing it quite well, because normally you see with these new factories that OpEx levels just ahead of the startup are going through the roof.
Yeah.
I'm still positively surprised that you maintain the 10 million EBITDA outlook for the second half of this year. Because your cost, the FTEs, all the equipment now moving, is getting into your cost base. But even with that.
Yeah
... you can make these statements. So it's in full control, basically, also from an accountancy point of view, on the quarters.
So far, yes, absolutely.
Yeah.
And of course, in terms of forecast, we are looking at recurring EBITDA. So if you look at specific startup costs, this will be booked on a non-recurring cost. It will not be part of your recurring EBITDA, so that is important to mention, Tijs.
Yeah, and your estimate on those one-off costs for the next twelve months?
It will be for the second half of the year. It will be comparable with the first half of the year, maybe a little bit higher.
These costs are still there a little bit in January, I guess, next year?
Yes.
And then-
During 2025, this gradually will phase out.
Yeah. While I have the microphone, so that's very helpful, and the same basically on the situation on the balance sheet, huh? Because I think the stock market can now see that indeed, the cash levels are down, because you're spending the CapEx. There's trade working capital volatility.
Mm-hmm.
How much, let's say, EBITDA, at least you need next year in order to, let's say, facilitate the redemption schedule as you have it budgeted right now? It's a bit of a long question, but do you see what this-
Yeah.
Let's say the floor in this refinancing?
Yeah, but, also in terms of redemption for next year, for the term loan, repayments will start in 2026, will not be in 2025 yet. And indeed, to repay, for example, the perpetual, which is the most expensive instrument-
Yeah
... because this will start paying interest as of January 2026, with an EURIBOR plus 5%. So on this one, we have the strong intention to repay that, okay, end of 2025. If you look with an EBITDA level of 135 million EUR, that should be more than sufficient.
Hundred and thirty-five?
135.
Yeah, that's basically the guidance.
Yeah.
Yeah. Yeah. There's a sufficient buffer in there.
There is buffer in there, yeah.
Yeah. Okay. So yeah, okay. So we didn't answer your question? Yeah.
As you will know, but I understand it, yeah.
But it's not a worry on covenants and-
No, no
... and also on the lease, let's say, the lease related to the financing-
Mm-hmm
... will become active in the second half of this year.
Yes. Yeah. So right now, as of the end of June, it was fully undrawn, and the EUR 40 million will be fully drawn during the second half of 2024.
Yeah. Okay. Yeah. Give me at least a few... Oh, yeah, and then on the trade working capital, it's just normal seasonality with pre-financing?
Yeah.
Normal budgets.
But of course, one thing you will have right now. You see an extremely negative working capital for next year. What you will see is that the advanced factory payments-
Yeah
... which are reflected in the working capital, they will phase out during 2025.
For the complete amount?
That will be for. That will be, yeah, for almost the complete amount.
Okay. Yeah, that's also very helpful. Thank you.
... Hi, Usama from ABN AMRO. Just a small question with regards to the new temporary storage facility that you guys leased. Could you give a little bit of color, when does it get reflected in the financials? How would you help us in the modeling of that going forward, 2025 onwards, 2026 onwards? If you could give some color on it.
Right now, this will result in the 20 hectares. As a consequence of that, we have a storage contract with one of the projects, and this will result in additional operating EBITDA and operating cash flow already in 2024 of roughly EUR 2-3 million, and the same amount also in 2025. That's roughly the impact it will have.
Can it be considered perpetual going forward, yeah?
Sorry?
Can it be considered perpetually going forward, or is it just for two, three years?
No, right now, it's a temporary contract we have.
I agree, yeah.
And, after that, because it is temporary-
Mm-hmm.
We have the expectation it might be for a longer term, but we cannot give 100% guarantees on that. Yeah.
Thank you.
So, just to add on to that a little bit. This is a first step in an ongoing discussion with the Port of Rotterdam to see how we can make this a sustainable long-term agreement. More news to come later on.
Yeah. Okay. Yeah, then I continue questioning. The price levels of the contracts in SIF's order book are negotiated, are give you the confidence to provide these outlook statements. Going forward, on the newly to be acquired contracts, there will be some volatility, I expect, or some competition issues, different clients. So it's back, not probably not back to normal, but if you have, let's say, the standard of your order book, twenty-five is hundred, assume, what is your internal sensitivity to the growth margin or the EBITDA, whatever you wanna call it? Is it a hundred and ten, ninety, or is it potential bigger?
I would say it's potentially bigger. That we have the robustness, I would say, on the price level. I mean, if first thing is, if you look at the pricing for the tenders for up to, for projects up till 2030, we do not see any big deviation from the levels that we are closing now.
Yeah.
So it's more about a reliable availability of capacity and close, being close to the field, 'cause in the end, that's what's important for a developer: reliability and distance. Then what is for us an important thing is that should times change, that the efficiency of our new factory is such that we can always compete on a cost leadership basis. So that means that. And that's why I'm saying it's probably more, because we, the aim here and the planning is that we should be able to really take significant fluctuations in the price levels because of volatility, without coming into a dangerous zones for the margin.
Results. Okay.
Results. How much is that? It's too early, simply too early, because we need to now learn and see how much of a buffer that we think is in there is actually materializing into efficiency gains. But that's an important one in our target setting internally.
Yeah. Okay.
Is that helpful?
Yeah, that's helpful. Yeah. Go ahead.
Martijn Bakker, Degroof. I'm a bit puzzled about 2026, and particularly by, in addition to your long-term growth projects, whereby you say, talking about 2026, you adjust EBITDA level of at least EUR 160 million, once there is manufacturing at full capacity of expanded facilities. That suggests that you believe you will not have sufficient volume to deliver upon that. During the presentation, you also stated, "Okay, we-
We're gonna expect," if I did, "we're gonna expect to write more contracts or more deals, and also for 2026." But you also mentioned particularly strong pipeline for 2027, 2028, and that doesn't mention 2026. So should we expect some kind of dip in 2026?
No, because then I think you would also see a different guidance on the EBITDA, I guess.
Yeah, but you made some kind of condition you wrote in your press release.
No, what we said is, and we said that also, I think during the Capital Markets Day, that the ramp up of the new factory is not done in a very steep line, it's a gradual improvement, eh? Because, meaning that also 2025, we guide and we say our order book is full. That does not necessarily mean that it's full to the theoretical capacity of the complete capacity, but it's full compared to what we believe is the right load of the factory that is new and still in a ramp-up phase. And what we refer to is exactly that, is that we're saying, "Okay, by 2026, then the whole thing is ramped up and has a certain expected output, that we then...
And then that is then matching with the order book that we then expect to have. So we ramp up, and the order book will match that exact ramp up... That's what we're saying. And then the question, but coming back to Tijs' point, how much more could we then effectively or eventually take? Remains to be seen, but that's something that we also work on. So it's a minimum. What we're saying is, this EUR 160 million is achievable, given exactly this planning. But if we can do more, we'll do more.
And how-
Sorry. And then coming back to 2027, 2028, that's what I tried to explain earlier a little bit as well, is that we due to all the turmoil over the last few years, we and we've shown that also in our prognoses in the market, you see this multiplier of increasing output needed has gone down. And that is translated in less input or volume for 2025, 2026 in the market in general. Still a lot, but less than two years ago expected. And that wave has been postponed for two years and is now really. You see that it for 2027, 2028 with pretty concrete projects.
Like Empire, the North Sea Cluster, now the CfD six and seven, that will come soon as well, et cetera, et cetera.
That was my additional question. It seems that for 2026, you're pretty dependent on the outcome of the AR6 CfD 6 in the U.K.
That's an important one, for sure. It's not the only one, but it's an important one.
Okay. Secondly, you mentioned that your Korean partner, GS Entec, has made a final investment decision. It's $270 million. That's substantially lower than what you have done, so I also presume that the output they will have will also be lower than what you have. But you also mentioned that you assist them in the factory design. Do you receive an additional fee for that, or that's all included in the first fee you already had?
That's included in the fee we had. We have to do something for that fee, and that is actually helping them in the design. It's their responsibility, but we support and assist with our knowledge. Coming back to your point of the EUR 270 million, indeed, the output will be substantially lower, and it's a mix of using existing facility and a mix of using old technology with new technology that we also have implemented now in at Maasvlakte.
How much output capacity will they have?
Yeah, I think that's for them to disclose. But you-
And maybe-
Yeah, I think you-
... but I've missed it.
If you would calculate with something like half, you wouldn't be far off.
Thanks.
Jeremy Kincaid from Van Lanschot Kempen. Could you just talk about the cancellation fees that came in this year, obviously, from Empire Wind Two? Is that all of the cancellation fees from that project, or can we expect more in the future?
No, right now, this is. Also, the cancellation has been fully settled, also the agreement regarding Empire Wind 2, and everything is reflected in the results by end of June.
Yeah.
So nothing more to come.
So there are no other projects that we could expect cancellation fees from in twenty-five or twenty-six?
Hopefully not.
Hopefully not, no.
No. And if then there would be that would be there, because all the contracts have these cancellation clauses in them.
Sure.
I think one important point to remember here is that part of the whole settlement is the significantly pulling forward of the Baltic Power project. That order pipeline nicely is in sequence filled up. That's part, and that is also reflected in the height of the fee.
Okay. And then also on the license agreement with the South Koreans, is there a possibility to expand the licensing to other partners across the globe, or is it just this one partner?
Yeah, it is. We're not having any concrete negotiation going on in that respect, but, and the globe isn't that big that you can go on for eternity in this. But yes, if we see an opportunity and it FIDs our- the model and the, and the logic, then we will consider it. Yeah.
Okay.
Andre, while they are looking for documents.
Andre Mulder, Kepler Cheuvreux. First question, you know, you released some details on the production and kilotons. You did it for 24. Are the metrics about in line with what you produced in H1? So you produced 86, so 79 for the second half.
Yeah.
Split is in line with what, what you did in terms of MPs and TPs for the second half?
I think it's
Yeah, it will be about the same.
Yeah.
Yeah, yeah.
Yeah. I think in the past you did mention kilotons for 2025 and 2026, as I can recall.
In the Capital Markets Day presentation?
Yeah.
Yes. What I can say, we cannot give the exact number, but in terms of trend, what I can mention already for 2025, that in terms of tonnage, it will be lower compared to the number that we mentioned in the Capital Markets Day. That's the current expectation, and this will be offset by more like higher margin per kilogram. And we would like to move away also from the tonnage, because in the end, it's more about throughput in the new factory, also what we discussed in the last meeting. So basically, we're looking certain projects, what is the throughput time in the new factory? And also based on that, you do your pricing also to the customer.
And it can be the case that you have certain monopiles which do not have a lot of weight, not have a lot of volume, but in terms of throughput time, it's quite complicated to manufacture. Then it needs to be absorbed by a higher margin per tonnage.
Any numbers you can mention for 2026?
Numbers for what?
On the MPs and TPs?
...No, what we guided for is about two hundred a year, and I think give or take, that will be something what we do, but it's too early to say because we are still discussing a few, but if I quickly add up by heart, I wouldn't be far off with saying something close to two hundred.
Yeah.
So, this Equinor project in the U.S., what was the-
Empire Wind 1?
No, you said-
No, yeah,
There was one and another one.
By heart, I may be slightly wrong, but Mid-Atlantic something, I guess.
Okay. Is this sort of automatic going to you?
No, nothing is coming automatically to us.
Okay. They decide when-
They first, well, they have won the concession-
Yeah
... for that plot. Now they need to develop a business case for a wind farm. So it's first having the concession, but then they still need to get the permits and the application rights for building actually a wind farm there. So that's... But it's always good when the concession price is relatively okay, making-
But when it's going to be MPs, it will go automatically to you.
It will not go automatically, but they will. We will be the first party to talk to, as part of the deal.
Right of first refusal or something.
Yeah.
Yeah, you mentioned about pricing. You said it's going to be about stable in the next few years. Is that the right conclusion? I would expect that-
No, we're not. It's not stable, but we do not see big issues in the price discussion. So as Ben said, customers know this. We calculate based on contribution per, basically per production week. That's what we say, this is what we need. And then, of course, there's the commercial trade-off. Okay, how do we compare to our competition? How are we positioned in the competition discussion and game?
Because you would expect-
And then we try to squeeze out as much as possible, if possible, of course.
Yeah. You would expect that the shortages will increase, with capacity about stable and more in the market in terms of demand. The shortages will likely increase, which could have a positive effect on pricing.
And then you'll. True, but then remember what we said before on this. You have to always bear in mind the alternative of jackets. For example, to be built, the alternative of Chinese imports that we need to consider, because Chinese is not-- Chinese products are not necessarily cheaper, given the combination of transport and manufacturing, but everything has its limits. And
And any signals to that it's increasing?
The prices are-
Stuff coming from China.
No, it's basically on the same level, but they are a, I would say, a respected party in the meantime, and one of the alternatives to the European suppliers.
What, what's your reaction to Sumitomo taking a stake in EEW?
I think this is a very good development. Sumitomo taking a stake in the Rostock EEW facility. I mean, we need healthy and professional competitors. And now EEW having a strong financial partner in-house will help them also invest and make sure that they can keep their market position in this field, and that's what we need.
And last question. Yeah, you mentioned, of course, a number of players in the market. Have you seen any further changes since the last statement that you made in the previous analyst meeting?
It seems that the Bladt Industries set up in Esbjerg is not, not really moving on. We have heard some rumors as if they are now considering a setup in the U.K. Let's see what happens there. We do know But Haizea has successfully started up production, but will have limited numbers as expected. We are getting still not a good feel of what CS Wind in Lindø is planning to do with the former Bladt facility for monopiles over there. They're strong in Aalborg, but there seems to be some troubles there, and we do see SeAH steadily working on ramping up their new build in the U.K. Looks like they have a little bit more delay, but they will succeed over there.
And EEW U.S. plant is still off?
The U.S. plant is still off. Yeah. Yeah, yeah.
No, no, no resumption-
No, no, no, no.
Okay, thanks.
And then the other one is Cuxhaven. As you probably know, Titan has announced that they've taken FID over there to revamp the Cuxhaven facility. But nothing more. We don't know nothing more than this on that. But again, as we did before, we constantly map all these newcomers and plot the maximum capacity when they are successful, and then still we see this mismatch.
Martijn Bakker, DNV. Initial question regarding the fee you obtained for the Empire Wind 2 cancellation. That should have resulted when you would produce it by some 174 tons, if I'm right. You yourself mentioned that you earned some 300 EUR per ton, so that could have resulted in a contribution, EBITDA contribution of some EUR 50 million.
Can you repeat your calculations, Martijn?
You mentioned that, obviously, you earned EUR 300 per ton.
... in your press release?
Yeah.
And the
On total.
Okay, this included the other activities?
Yeah.
Okay, then it should be less. But still, if I look at the contribution you obtained from Empire Wind compared to what it could be, it's much lower. It's been canceled roughly a year prior to production date. Is that a fair assumption that such a cancellation fee should be some 50% of what it should have resulted in when you would produce it?
I think on this one also, also what we discussed before, also regarding the high of the cancellation fees, what we did discuss is more like the trend. So the closer you get to production date, the higher it's going to be. The exact amounts or the percentages we cannot disclose, also based on the confidentiality agreements we have, and secondly, also because of competitive information, we cannot give that information out. So it's more like... It will be the high-level remark that the closer you get to production date, the higher amount to be able to fully offset you or compensate you for the loss in income.
If you-- And bearing in mind, I said it, give it again, the fact that if you can trade off with other projects and reschedule them, that has an impact on the actual height, of course. And that's why I think, with Equinor having a portfolio of projects, that, that makes it for them and us easier-
Yeah
... to look at a fair
Exactly. Yeah, I think it's exactly what you're saying. In the overall-
Yeah
... settlement package, also with Equinor, and I think we are, we're happy with Equinor, and also they are a good partner for Sif and also in terms of the settlement. It's, it's not only the cancellation fee, but it's also indeed thinking about how can we reshuffle the portfolio and make sure that the, the factory is fully booked also in, in the first year after full ramp-up, two thousand and twenty-five.
Yeah. I still got a follow-up on the trade working capital next year. Is there, let's say, a hard schedule, so hard agreements on the repayment of that? It's other than bank facilities or preferences.
Do you mean the advanced factory payments?
Yeah.
Or do you mean the perpetual?
Yeah, the advanced factory payments.
Now, regarding the advanced factory payments, it's more. It's related to projects, and what it will do, more like the last payment of a project, it will be set up against these last payments. So the advanced factory payments are related to the Empire project. It's related to the Ecowende project, and-
So the last, the final installments will be offset against the AF.
Exactly, yeah.
So you don't get cash in?
Yeah.
Yeah, but and it is not a cash outflow then? It's not that you see in your creditors a hundred million cash outflow spread over the quarter.
No, but less money will come in. If you would not have the advanced factory payments, normally this money would have come in, in 2025.
Yeah.
But now we have received the money already in two thousand and twenty-three.
Yeah.
Yeah.
Yeah, so you will only see, let's say, if you don't know the history, a thin cash flow on high EBITDA levels.
Exactly.
Yeah.
For next year, indeed, your cash conversion-
Yeah
... compared to the EBITDA level, will be at a lower level next year.
Okay, and it is not an actual cash outflow because that already happened. Yeah.
Yes.
Then on top of that, you have your normal, yeah, trade working capital cycles.
Yes
... which is a bit unpredictable. So therefore, for me, it's important to-
Yeah.
... fully understand the dynamic.
And unpredictable, of course. Indeed, we still have also on a project-by-project basis that the cash flow will always be positive. That means a very strict criteria-
Yeah
... that first money needs to come in before we going to pay, for example, the steel suppliers.
Yes. Yeah, that is indeed the policy of Sif.
Yeah.
So it will always be negative, but there can be swings from-
Yeah
... quarter to quarter. Okay. Yeah. Yeah. Thank you.
Andre Mulder, Kepler. Two additional questions. Firstly, how you said you were on schedule and within budget. I think staff was one of the more difficult points there. Where are you? Have you already reached the desired levels, or when do you want to get there? The second question, I'll keep it before you give an answer then.
So again, first answering the staff question.
Okay.
Yeah, thank you. No, then I'll do the staff, and then the other one, looks like it's for Ben. But-
Cu-curious, Andre.
Yeah, he's building up the,
You make it, you make it quite exciting.
A lot of people coming online now. Thanks for asking, Andre, because indeed, we didn't mention it, but or we did mention it, but yes, we are just above levels actually of staff coming in. Also, the pipeline is filled up nicely for the ramp-up that we still need for the second and the third shift, and we are at the moment at roughly 80-85 people that have come in for the factory, including so white and blue collar, and in training or already passed training.
How many do you need?
In the end, when we have a full ramp-up, we need hundred more.
100 more?
Yeah, over a year period or so.
Yeah.
Yeah.
Okay, that-
Now, now it comes.
Now, it's about this, the statement that you've sold out production in 2025 and the EBITDA of 135. The question is: where can it go wrong? Where are the blocks of uncertainty that you can state to the market? Well, this is this, and this is that. So what's the kind of degree then you could still undershoot the 135?
... Yeah, I think on this one, if I just talk you through the P&L conceptually. 2025, basically just fully booked. So up until the level of contribution margin, you can do exact calculations, also based on the pre-calculations, what will be the outcome of these projects? Well, for example, and then all of you also know, if certain raw materials are fluctuating, for example, steel prices, we have a mechanism in place that we're being fully offset. So contribution margin, pretty accurately, you can calculate what will be the outcome. Then if you look at the next big item in the P&L is direct personnel expenses. We know for next year how much staff we need, what the occupation of the new plant, the production lines, how many people do we need? We also know the direct cost per FTE.
We also have certainty at the moment on the collective labor agreement, what the increase is going to be. So also this part, you can do a pretty accurate calculation. Then subsequently, you have the production and general manufacturing cost, maintenance, utilities. Also, with the utilities, we know what the increase in electricity is going to be at the Maasvlakte. We know what the prices are going to be. You can make a pretty decent calculation. Maintenance also, you have rules of thumb. Also, with the new factory, how much money you roughly need, can also make a pretty good estimate. Then regarding the indirect expenses, what we have factored in is selective increases in certain departments to facilitate this growth, and we have already started with that. So it's based on assumptions, more in terms of also indirect headcount, how many additional heads do you need?
And then doing all these calculations with the contribution margin, basically locked in direct labor cost, you can make a pretty good estimate. You have also, you can make decent assumptions also regarding indirect expenses. What are you going to do with the various support departments? Then bottom line, you come to the calculation that we reconfirmed 135 million EUR.
Yeah. I think one element you didn't mention, but what is important and is an important risk, although a lot smaller now, is that we don't reach the efficiency as we have estimated for the new output of the plant.
Mm-hmm.
If the output isn't there, then we are in shit, because then the projects are very firm. So you what you don't want is running into a liquidated damages risk, and that is the biggest risk.
Yeah
... adding on to this. But we have knocked off a substantial part of that risk, given the fact that in this month, we actually succeeded in getting the lines technically working. Now, from technical working, it has to be efficiency and repeat factor in software systems that have to work, all these things. The biggest challenge in the setup now is software. Not challenge, but work to be done. Aligning all the software, the connections between the systems, the connections between the planning, the ERP system, what have you. That is, if you would look in our factory today, you would see a lot of laptops and people sitting behind laptops doing all these settings, which is logical, because that's the next step now.
Would you dare to give a sort of percentage of likelihood? Is it going to reach the one thirty-five?
Likely-
Ninety-five?
3.5, 3%-4%.
Sorry?
No, no, joking.
No, no, no.
You got to...
No.
No. I would say right now, and then more likely than not, can I use that phrase in terms of percentage? No.
I give it-
More like we know the order book is filled, we know the underlying details, and again, we reconfirmed 135 million EUR, and we would not do that if there is doubt, significant doubt on our end, that we cannot realize that.
Yeah.
It does be higher than 135.
It will be substantially above 75%, likely that we will achieve it.
Hi, Usama again, ABN AMRO. I have a more general question with regards to what feedback we get from a lot of investors is, they are, of course, more concerned about the Chinese presence, and their, the extent of penetration that they do, with regards to the bigger sizes that they have. Do you see something moving around in the market, you want equal footing as compared to the Chinese players? We've seen in the EV market, immediate tariffs coming in, and they, today there was a news that it has an impact on the sales already. Do you see something moving in that front already?
Yeah. Amongst others.
Okay.
I think one of the others is, for example, if Chinese parties like... I mean, there's a lot of in the news about Mingyang, the turbine builder. Now, I think two comments to that one. First is, okay, if they would invest in Europe, well, how is this investment built up? Is it subsidy? And the question mark we all have, I think, is, and how do you figure out whether it's a fair or unfair investment? But they did the same with the EVs, and I think with solar and with towers. The second one on that is the reliability during the operation and maintenance of these Chinese products, especially turbines coming to the market.
Because developers, and especially the utilities, actually, they need thirty years guaranteed support and in the operation, during the operation. And who can predict how the economic or geopolitical situation will develop over the coming thirty years with that respect? So there's a lot of hesitation with developers to step into this. On our products, like I said before, in the end, it's also always risk versus distance, which is the big dominator in all our discussions with developers. Yes, if we need to go to China, we will, but because we're forced to, since we cannot deliver. And especially for the North Sea projects, U.K., and the western part of Europe...
The competitive edge we have on our location and the reliability factor we've built up over the years is a very key, very strong asset. Very strong asset. And I think for that, I think if I can only advise you to talk to developers on this, because that's where you get the message on how they look at this risk versus price element. Quality is not an issue anymore? Quality for us has never been an issue. ZPMC was, of course, the prime example of- the Chinese, you mean- Yeah ... on the co- the, it's a matter of sending a lot of inspectors.
From a cost perspective, you have to send inspectors to constantly be there in the factory, sit on top of them, and watch it. And let's see, I mean, I'm not going to give any reflection on that, but we do see pictures, and we get the messages, but that's something to be figured out. I'm pretty sure that nobody will deliver a bad quality as long as you sit on top of it. And yes, repair cost may be a little bit higher, but in the end, they have a working solution.
Aart Bijleveld, the link to that, RWE, I do believe, has ordered Chinese,
Yeah
... turbines of about 18.5 for an Asian project, but are also keen to start or use those turbines in Europe. Will European monopile manufacturers be able to produce the required monopiles for these turbines?
Yeah. If depending on where they're put, but if, I mean, our calculations show that an 11-meter monopile can support a 22-megawatt turbine in the North Sea. Would you go and in the Baltic as well. Would you go to the east coast of the U.S., the Chinese turbines, not that likely. I think you will see a different diameter. I think the other element here is, yes, RWE is considering and is doing this, and others are as well, but the issue we haven't touched on that yet, but the big problem I've...
We see at the moment in the turbine market is the problems with the Haliade and the blades, Dogger Bank A and Vineyard, which gives a big concern to the industry, how reliable is the Haliade platform? And then basically coming to the conclusion that you have a choice between Vestas and Siemens Gamesa, and that's it. And that doesn't feel good, and that isn't good, of course. So there's also a bit of a pressurizing factor here on Vestas and Siemens Gamesa to be realistic in their price setting and in their terms and conditions, 'cause otherwise, the Chinese will come in and on GE to really solve the problems. It is.
Final follow-up from me, Jeremy Kincaid. Just with regards to the CfD round in the U.K., to be successful there, you obviously need successful bids and awards, but do you also need certain developers to win over other developers?
Correct.
Okay.
No, sorry, it's, I think for us, more less risky. It's certain projects to actually be awarded by the CfD authorities or whatever you call it, to win the project.
Okay, so it's the project that's more important, not the developer?
Yeah. Yeah.
Okay.
Again, it's not the only thing we have on our list.
Maybe a follow-up question and a very stupid one. The-
Only stupid answers,
You'd be surprised.
Not stupid questions.
Yeah, the factory, that's beautiful. But could you give a color if any of your peer has a comparable factory with this level of automation, or you're the best in class?
For sure, we are the best in class.
That also includes the Chinese?
Yes.
So-
For definitely.
Okay. So that's-
I mean,
That's a good KPI to.
I mean, without knowing all the details, I mean, and I think with a lot of respect to our competitors, because they are giving us a hard time in the commercial discussions. Let's be fair on that. But the approach, the difference between the past, also with Sif and what we have built here, is that we really build it from a process optimization, logistical optimization perspective, making use of automotive sort of technology and systems that are new to this industry but are not new to industry in general. And what we've seen so far with other of our peers, is that they have really built on and added on to the existing technology, and proven technology from the past.
And we've included proven technology from other industries and concepts, and that should be the difference and a game changer. And I think why, and mainly, first of all, from a risk mitigation perspective on quality, we do believe that the more you can control your quality and your tolerances, the better the product is, in the end, also on the bottom line of your P&L. And, and secondly, to be prepared that if, when the market does turn around, that we can really still make money, with... because we have a cost leadership position.
We're not that far yet, 'cause otherwise our customers will also ask, "Hey, you're cost leader, so you can chip off money from the top line." But there we have also been open to our customers, "Hey, we need to earn this back in three, four years, because this discussion on bigger turbines is still hanging above the market.
... On CfD six, do you have any insight in how many gigawatts are concerned? And possibly a split between fixed and floating?
You'll hear everything. Initially, it was something like seven-to-eight gigawatts, then it went down to two-to-three, and the latest is something like four or five. On bottom-fixed, eh? On bottom-fixed offshore.
All fixed.
But now bottom fixed offshore, and then there is a certain portion for floating and a certain portion for onshore. But it's quite complex because there's also the re-auctioning of certain CfD four projects, extension of CfD four projects that can be built in. So, it's a mix of quite a few things here. Let's see. Next month, we'll know a lot more. Any more questions? Any questions from the teams? Fons?
Yeah. I have one. If you can elaborate more on your maximum production capacity for the new build, especially what production you're looking at in 2025, in kilotons.
Yeah. We can elaborate a lot, but not on kilotons. And I think we have to repeat what we already communicated.
Yeah. Roughly 180 monopiles, 100 transition pieces.
Yeah.
In terms of volume, what we also indicated, if they can also have a look at the Capital Markets Day presentation in terms of tonnage that we expect to come in at a lower level compared to the Capital Markets Day presentation, but this is being offset by higher margins per ton, as just discussed.
And I think we haven't touched on that yet, and also not in our presentation, but we have a pretty steady order book and deliver and production over the coming years on the OSS, offshore steel structures, so the pin piles, structural legs-
Yeah
... coming from, Roermond, which, I think you have to, or can also build in your, calculations. No more questions? No further questions? Well, then I think I have to thank you again for a very good meeting. A lot of good questions. Hopefully, also answers that help you a little bit. And then, we look forward to seeing you again next year or in between for a visit to the premises. You're more than welcome to see what steps we've taken, let's say, somewhere in November, December, you're more than welcome. Now, we're quite busy with monopiles, as I just said, and equipment, but please come over.
Okay. Thank you.
Thank you very much.