Good morning, everybody, here in this room in Amsterdam, online or on Teams. My name is Fred van Beers. I welcome you to this Interim 2025 Result Meeting, which I can imagine for many of you is a, let's say, exciting one given the press release we did this morning. Today, in this session, we want to have the discussion, but also update you on the reasons why we published what we published. Of course, explain why we come with this message now and not at another moment, because we understand very well that this is coming as a surprise to quite a few in this call and outside this call. Next to me is Boudewijn, who I'd like to introduce or can introduce himself maybe.
Before I do that, just for the safety reasons, there's no safety drill planned for us, so for the people in this room, when we hear the buzzer, we go out and follow the green screens to the outside. Thanks for that. Boudewijn, maybe a short word from your side to introduce yourself before we go into the details.
Sure. Thanks, Fred, and thanks everybody who's here and online. It's a pleasure to be here today. I think, as Fred mentioned, obviously we have a lot to talk about today and a lot to explain. We look forward to an interactive discussion and hopefully we can address all of your questions and concerns during the call today.
All right. Thank you, Boudewijn, and welcome also for you.
Thank you.
Next to me here in this meeting. Let's start this meeting with a few key messages to set the scene. Of course, we will dive into many of these items later on. The facts of life are the following. First of all, in everything we've done, in every decision we've taken so far and will take in the future, we always will continue to follow the number one priority: safety at first, quality second, and output last. Even in situations like this, where we are clearly behind on our initial plan, this is the follow order of what we do and what is the basis of our decision taking. Secondly, I think on an operational result, we see that the contribution margin is developing according to the plan, which is a very important signal and sign that the anticipated EBITDA and contribution margin is there once the volume is there.
We produced 80 kt, which is more or less comparable to last year. I think a very important one for all of us, because we are here for continuity, is that the market is very difficult at the moment. We are very happy to be able to announce that a 200 kt, what was it, preferred status volume that we announced earlier is now geared up towards exclusivity and will be produced in 2027. By this deal, as a result of this deal, we see clearly that 2027 is looking in line with what we have guided for when it comes to EBITDA results in the business plan. Continuity in a very difficult market is there. We have short-term challenges, definitely. However, on the market, before we go into the factory, the market is tough. We clearly see that deals are being postponed or canceled.
We've seen last week the, I think, stupid example of revolution in the U.S. can go that far that a project 80% ready is stopped. Also, in the EU market, we see governments throughout Europe struggling, but, and then we come back to that later, also clearly positive signs on the mid to long term on that market, given the fact that everybody starts realizing that something has to change in order to continue the ramp-up of green electricity and independent electricity in Europe. In all this, we should not forget that we have customers. We need to deliver our projects in line with the installation schedules of customers. Our launching project, Empire Wind 1, was finished or will be finished, I have to say, in the coming week, with a few last welds being done, in order to meet that installation schedule in the U.S.
You can imagine, in the present U.S. market situation, you have to be on time in order to not have Mr. Trump reacting on a glitch in a schedule. That is a very important one for us, and it's also an important one in our decision taking yesterday on what course we will follow short term versus long term. The ramp-up of the plant is lagging behind. We come back to that later on. That's the biggest challenge we are facing. Besides market challenges, that is the biggest challenge we are facing, although confident that we will solve.
We made a very conscious decision yesterday, based on two schedules that we worked out in the last few weeks, to not go for the short-term result because we would be able to meet the EUR 90 million mark by simply pushing everything and prioritizing everything in the remainder of this year on that volume, which would give us, in our eyes, too high risk that something would go bust in that period or later on, which would create serious damage to the delivery schedule of customers. That is the main reason why we, yesterday, as Executive Board and Supervisory Board together, went through these schedules and decided to go for the course that we have communicated this morning and will explain more on today. Our adjusted EBITDA, as a result of that decision, is dropping significantly.
We halve the minimum of our guided EUR 90 million to EUR 120 million to EUR 45 million for 2025, as we focus fully on the long-term stability of production to deliver our order book. As simple as that. We do, however, underpin our midterm guidance of at least EUR 160 million analyzed EBITDA also for the years to come. Based on the good contribution margin that we see, the volume we have in our order book, we see no reason to adjust that at all. For 2026, we are cautious based on the experience we have had so far, but also the very clear rollout plan for the ramp-up.
We see that a minimum of EUR 135 million EBITDA in 2026 is the goal, with a target that is, of course, unchanged at EUR 160 million, but that all depends on the success of the further continuation of the ramp-up that could run into the first half or will run in the first half of 2026. It's simply too early to make more firm commitments on that, but we will follow that up. Already now, I can say that intermediate messages will come out on the further progress of this by the end of this year, latest. On that, I'll go on to the next sheet, and that is the safety part.
I said already, safety is and will remain our first priority, and we have had a glitch on that in the second quarter, simply because of the fact that a new team is slipping on the safety standards if you don't repeat the message and don't repeat an investment, which we have done, in production stops, toolbox meetings, and also safety days that we will do in September this year again. Of course, when you do that, you don't produce because we stop the whole production. We have everybody gathered together in the building in order to make sure that our safety standards remain in place as they should be. It has been, and I think reality has shown that if you don't do this and continue to do this, you will drop on that.
That is a very important qualifier in our business with customers to do business with them. If we don't focus on that and put that as a first priority, we ourselves, but also our customers, will see you deteriorating trust in Sif on that. A very important part for us. Of course, we also have, and it led to a situation that we have to replace staff because of performance also on this, which is, I think, a very clear indication that we take this very serious. Sick leave remains high. I think to give more flavor on that, please bear in mind that the sick leave percentage is based on the payroll people. In the Maasvlakte new setup, all new people come in initially as hired-ins, as temporary workers. Only after a year or half a year, we turn them into payroll people.
The percentage of payroll people on which this percentage is based is very small. In the case we have in the Maasvlakte, where we have quite a few longer-term illness cases not related to Sif, but we simply have to honor also private circumstances, that means that your percentage will stay high. The short-term sickness leave has dropped quite dramatically. I think that's good to have as background information. Are we satisfied with that number? No, of course not. There is a nuance to the number to be bear in mind. Going to the main topic, this ramp-up of the Maasvlakte. Without doubt, we are slower than initially anticipated. The main thing here is not the concept of the factory or the process that we designed and have implemented.
The main thing here is stability and consistency on the performance of basically two things: the equipment itself, it's doing the job, but there are certain breakdowns and modifications to be done that hinder a stable production at this moment. It's the consistency with people. I think the best example there, again, is also on safety. When you don't repeat the training, when you don't repeat the way how the process needs to be managed, you simply start slipping. That is the cycle we've been going through quite a bit. We have compensated on that by overtime, by additional people, by hiring in subcontractors. In the end, of course, you need to stabilize and show a stabilized growth in order to be consistent for the longer term. That means we have implemented the stabilization plan for the remainder of 2025.
We had the choice of simply pushing through, like we've done on Empire Wind 1 and others, to make it simply happen and go for the short-term result. We think that is not the right way to go in the present situation. We will implement the stabilization plan for the remainder of 2025 to ensure, again, a safe working place where we deliver the right quality and then, as a result, the predicted outcome with the stance, and I'll come back to that later again, that deadlines for our customers are holy. Besides the safety, it's the deadlines for our customers, and we will honor and will respect those deadlines in all cases. That means, and that I think is to be we have to bear in mind as well, that by the end of this year, we will be, and we expect to be at four monopiles a week.
In the last month, we have produced 11. We are ramping up on that. Please remember that the monopiles we're producing today are the biggest we have ever produced. We actually couldn't have produced them in the old setup of Roermond and Maasvlakte. We needed this factory to build those monopiles. That means also that we will accelerate production in the first half of 2026 based on the stable performance that we want to expect to achieve this year. That is the first big milestone that we are now working towards with the priority we have, which is also very important in relation to the further guidance into next year. I think we need to remember that last year, when we sat here for the first half-year numbers from 2024, we had one line just starting up and the rest of the lines still in, what is it, installation phase.
Today, we have the full factory running with all equipment going, having passed the tests, but we need to stabilize it. The other important thing to mention here is all equipment has shown that it can reach the design output when it comes to dimensions and quality that will give us a significant advanced position in a market that is quite tight. When it comes to designs of monopiles and output of monopiles, with this factory, we have seen that it has proven that we can be second to none compared to the rest of the industry. We are very confident in the success of this ramp-up plan. What are we doing? Just to mention a few things. Again, the process has performed as planned. It's not in the design. It's simply in the consistency. That is not that simple to achieve.
We have brought in, in-house, a team of external experts globally working on ramp-up of factories to support our teams in this process because it's a matter of capacity related to the size of what we need to do and the job we have to do. We have seen already the first good examples on this with certain parts of the equipment that were a worry or a bottleneck that are not a bottleneck anymore, simply because of their experience in ramping up factories, because it's a specialized skill we also, unfortunately, have noticed in the meantime. We have extended the middle management in our production layers so that we have more fighting power in the shifts to deal with the training and coaching of our employees on the shop floor, which is expected to give more steady performance on the people side.
We are strengthening our top management as well. Already last year, Frank, who is the present CEO, and I had a discussion on his last part of his career. He's 62, and he wants to retire in a smooth way. He had expressed already then, when the moment is there, I think I should fully focus on the ramp-up of this factory, but I'm simply not able at this moment to follow up on my task as the CEO. Together, we decided to do two things: start a search for a new CEO, COO, and also work out a clear plan for him to work together with this new COO on the ramp-up of the factory. By doing this, we have actually strengthened the work, the force on the top management level, as well as on the middle management level.
We are expecting to announce soon a Business Unit Director for the Maasvlakte so that we have also more fighting power from a top management point of view over there. What are the operational highlights for the first half year? I can imagine there are quite a few questions, but we will address them later on. First of all, the completion of Empire Wind 1. Let's not forget, it's 54 monopiles. Sounds little, but it's quite a lot of kilotons. They are the largest monopiles produced ever by Sif. As I said already, we were not able to produce these monopiles in the existing setup. If we hadn't built this factory, we simply had delivered nothing this year. We wouldn't have order book either. Not to be forgotten, the factory is fully complete. All the equipment, processes, people in operation, they are there. It's working. It's not stable.
That's what it is. Based on that, and I think everybody that visited or was attending our opening ceremony week in May has seen that it's not just a story. It's actually there, and it's working. That has also resonated with governments and customers that support very much the setup that we have built, that trusted us in giving us orders, also in a government that is pushing now hard for more, I would say, level playing field criteria in the future tenders in at least the Netherlands, also in Brussels. The spin-off of simply a simple opening week was quite impressive in our view when it comes to governmental support, also long-term tenders, and customer support, which will help us boost this energy independency and energy transition ambition.
Let's not forget that there is a factory in Roermond as well, where people very passionately are assisting the Maasvlakte in the ramp-up and transfer of know-how and technology. Besides that, also have delivered on their promise when it comes to their part of the order book for transition pieces of your steel structures and top sections, for example, for Ecowende. A job well done. With that, I'm through my part of the presentation and explanation. I hand over to Boudewijn for the financial and order performance numbers. Boudewijn, sorry.
Very good. Thank you, Fred. Just looking at the financial and non-financial KPIs. As we mentioned in the earlier part, the volumes have come down in terms of the absolute production, kilotons, the number of monopiles, and the numbers of transition pieces. It's not an apples-to-apples basis because what we're producing today, we would not have been able to produce had we not done this expansion in the Maasvlakte. It's not simply as binary as saying, why didn't you just do it in Roermond? Clearly, the impact on EBITDA is large. We've had to invest a lot. We had to take a lot of measures, particularly in Q2, additional costs, hiring external resources, weekend work, extra shifts. That had a big impact, particularly on the Q2 numbers. These are the reported EBITDA numbers. If I look at the adjusted EBITDA numbers, the impact's a bit less.
It's EUR 13 million in half year 2025 versus EUR 26 million in half year 2024. What we do there is we adjust for costs, which we say these are really just related to the startup and the ramp-up of the plant. Once we get into normal production levels, those costs should flow out of the P&L and won't be recurring in the long term. I think an important metric is contribution. In the past, we've always focused on contribution per ton. As we see the changes in the fabrication we do, the sizes, the complexity, it makes more sense for us to report on that on a monthly basis. I think here again, even though the number per ton went up, as Fred earlier mentioned, also on a monthly basis, we see that going up.
Even on lower production volumes, we see a consistent increase, and it's now just a volume game. Once we ramp up the plant with the contribution margins we have, we'll see these numbers increasing significantly. On the non-KPIs, if you look at our CO2 emissions, those have come down quite considerably from last year. The main contributor to that is the Haliade, the wind turbine that we have on site, which has been intermittently working for us, resulting in a significant reduction in our CO2 emissions. Just recapping, our contribution has gone up despite the struggles we've had with the ramp-up in production. Revenue is significantly up, and obviously, the adjusted EBITDA number has come down with the additional costs that we've been incurring this year. The good news for 2027, indeed, is the exclusive status on the project for 200 kt.
That gives us a lot of confidence in our order book going forward and to continue delivering results that we anticipate. I am repeating some of the things that Fred said, but I think it is important that even though we've had struggles with the ramp-up, even though the first half didn't go as planned, we have still delivered significantly. Empire Wind 1 is a big project. It was a complex project. We've been able to deliver that within the client's milestones. Despite the challenges, I think the teams have done a fantastic job in making sure we get that done.
The decision we took yesterday was we cannot keep working, or we don't want to keep working in a way that jeopardizes the long term, that we're forcing, forcing, forcing just for a short-term win, as long as we can do that with the installation windows of our clients going forward. That's a big balance, but an important one that we have taken in this decision. On the cost side, driven largely not just by the complexity in the production, but also by employees. We've had a significant increase in employees, which is largely related, or almost primarily related to the startup of the plant. 200+ people in Rotterdam flowing in for the startup. We see that coming back through the costs. We've strengthened the team.
With the new COO starting, that's going to bring a lot of senior management expertise together with Frank to support the continued operations and ramp-up of the plant. If we look at our covenants, we have the leverage covenants on the left. As you can see, reporting so far, historically, we've reported a net leverage of zero, which is the cash and the actual debt setting each other off. The covenant we're focused on is the solvency covenant. As we've been investing in the plant, as we've been incurring costs, and clearly the profitability has been lagging there. The asset side of the balance sheet is growing because we've got this plant on the balance sheet now, whereas the equity side is coming down due to the retained earnings. We see the solvency covenant coming under pressure. We made the covenant in half year, which we've reported.
Going forward, we're obviously closely monitoring it together with the banks where we have a constructive dialogue. We'll continue reporting on that as we go forward. We're seeing now that the performance of the plant is improving. Profitability will go up, but it's a timing question there. That is one we'll closely monitor and keep reporting on. Fred, back to you.
A summary. Then we'll open the floor for questions, remarks, and what have you. A few things. First of all, our strategy to accelerate the energy transition and energy dependence is focusing on the U.K. and the EU. It remains unchanged. The market, although very challenging mid-term, we believe it does underpin our ambition for this growth. We do also see that being reflected in the tender activity for 2028 onwards. Especially the AR7 round in the U.K. is a quite big round; a big part of that should land in our order book, is our expectation. Besides that, of course, we are very interested to see what the Dutch government, the first tender, will do later this year on NATO WEEC. Although we have no, I think the expectations should not be too high on that one.
The Dutch government.
On which, what government are we talking about? In all seriousness, I think the Ministry of KGG still and AZK is putting a lot of effort in making sure that this tender will be successful, especially that the tender criteria for the next rounds will be set in a market-conformed way without losing sight on what is definitely needed, a system approach on green energy via wind farm through the grid, which has some congestion issues and offtake prices that are good enough to make a business plan for the offtakers. We see this market mid to long term definitely in a more positive way than maybe some others may see them. Short term, it's without saying that it's tight.
The good thing, although we are struggling and are looking at a six to nine , maybe 12 months delay on the ramp-up of our factory, our factory is set and has the capacity to deal with this new market environment that we will see coming, also in relation to the Chinese competition. There is Chinese competition. Although Brussels is doing their utmost to create level playing field conditions in relation to that competition, we do also see that the position Sif has, with its unique location in Rotterdam and the features we're bringing in with this factory and the volume that we are bringing in with this factory, does set us in the right way for the future. Without saying, we are also disappointed by the ramp-up. Everybody is working their ass off in order to get this thing up and running.
We do make steps, but the steps are simply slower and smaller than we anticipated. We do see that we will need till the spring of next year, but we want to do a good job. We're not going to push for the short-term result, as said before. Despite all this, when it comes to market setbacks, our order book is healthy. We are very, very happy with the order book we have now. That brings us to 625 kt up till the end, a little bit into 2028. That gives us the stability we need after the ramp-up to deliver on our promises. That means that with all this, our expected full year will land at a disappointing EUR 45 million. We fully understand the sentiment on that. Again, it's based on the expected continuation of the ramp-up into the first of 2026.
We now see a provisional minimum adjusted EBITDA of EUR 135 million as a result of our decision, together with our Supervisory Board, to prioritize this long-term stability over short-term profit optimization. With these words, I'd like to hand over to the floor in this room to start with, to ask questions, make comments, express your feelings about what we just presented and have published this morning. Thijs, can you open the floor?
Are you serious?
Yes, yes, yes.
Okay. Congrats with the new contracts or contracts for 2027.
Sorry?
Is it one contract?
It's one contract.
Seven?
Yeah.
Fully monopause?
Counted.
Was it fully monopiles transition pieces?
We've published what we published, and we are in agreement with our customer to not publish anything on details of that project. I'm sorry. This is an agreement with our customer.
It's a mixture. Okay.
Those are your words.
Equinor or not Equinor?
Same answer.
Okay. Can you confirm that the contribution, you're saying 2027, you're targeting the same, let's say, EUR 160 million as in 2026, which implicitly then suggests that the contribution margin you're contracting is also more or less similar to the 2026 contracts.
Yeah.
Is that right?
Yeah. Yeah.
Okay.
Bear in mind, Thijs, that this 200 kt is not the only order that will be delivered in 2027.
I hope so. Otherwise, you won't make it.
Or have a damn good price. This is okay.
Yeah. No, fully understandable. In kilotons, what was the mixture, monopiles, transition pieces in H1? Do we have that, the 80 kt?
We have the total number. No.
We have the total number.
Primarily MPs.
Yeah, bear in mind, it's a mixture of the three piece and top sections of monopiles.
Yeah, okay.
You know.
Yeah.
Yeah.
The numbers in the release of the E.P.
Yeah, the numbers are there now with the kiloton, the split of kiloton between the two sides. I think that's the question.
Yeah, yeah.
Maybe just to add, because I think what you're alluding to as well is, is this going to be work for Rotterdam or is this going to be work for Roermond in the order book?
Yeah.
What we see in a lot of the projects now is that we do, for example, top sections of the monopiles in Roermond, and the bulk of the sections in Rotterdam. There's always a split of work. Even if it's just monopiles, there's still work going to Roermond.
Okay.
That's the standard. Yeah, that's a good addition. It's always a spread over the two units.
Yeah. Didn't they hire any third parties to produce your monopiles in H1?
We did not produce monopiles with third parties, but we do now and then outsource parts of a section or a part of.
Transition pieces then? No? Okay. The GS NTEC contribution in H1, roughly?
Minimal rest hall under construction.
Yeah, they are now in the installation phase, so there is no contribution there.
Okay. Yeah, just to have that clarity. Probably after the warning this morning, main focus on solvency. Do you need to raise new equity? What will happen with the financing, the financing conditions, interest rates on the financing? Can you give us a bit more clarity there?
Certainly. I can say right now there's no need for additional equity as it stands today. The financing, we have a revolving credit facility, which is undrawn, which has a leverage grid on pricing. That will obviously move, but it's undrawn, so it's just the commitment fee that will be impacted. Under the financing for the plant, it's a fixed interest rate of which just over half is also hedged, three months Euribor. The margin is fixed as well, so that won't change.
The Equinor outstanding debt?
That is only going to start next year. If we don't repay it, it'll start accruing interest. That's a payment in kind capitalization, so it's a non-cash impact.
Yeah. Shortly, coming back on the 200 kt for 2027, you also agreed with that customer that they will prepay?
As always, you mean on the order?
Yeah.
There is no advanced payment arrangement like we had on the financing.
What should we expect to happen with operating working capital now, minus EUR 180 million? What should we roughly model for, let's say, end of 2026?
Yeah.
Is that going back to zero, roughly, or what?
No. I can't give you a guidance on where it's going to in that sense, but the advanced payments will start flowing out as we complete the projects where there were actual advanced payments for. What we always have is capacity reservation fee or sort of cancellation fees that customers pay up front to reserve their slot. Those will keep coming in for new contracts. There's always going to be that element of working capital on our balance sheet. The AFPs will start flowing out as we complete those projects.
On the order itself, is cash neutral or positive?
Yeah.
Like before?
We're always going to have that contract liability because the customer is always going to pay more up front than the work we've actually done on the IFRS.
Yeah, okay. Thanks.
Yeah.
True. Next, please.
Please. Jeremy Kincaid, Venn Angela Kempen. Just sticking with the theme of free cash flow, I think last time we had the earnings call, you said you had the perpetual bonds, I think there was EUR 30 million remaining there, and you're planning to pay that in 2025. Is that still the case? We're going to keep looking at that. We have the flexibility in our capital structure, which is great. We have the optionality. Ideally, we want to clean up the capital structure. We're not a company that should carry a heavy debt burden, but there's no obligation for us to pay it in 2025. If cash allows for it, I think we'll stick to the original plan. If not, we have the flexibility to just keep it on the balance sheet.
I think you also guided to EUR 15 million of maintenance CapEx then as well with the additional works that need to be done. Do you think that number stays the same?
No, I would suggest that that number is going to be higher with the plan we have now. We're going to be doing more maintenance through the stabilization phase. The question is whether we capitalize that, how much of that is warranty work from customers or from suppliers, sorry. That balance needs to be made up.
I mean, if I may add, I think a big chunk of that is on the suppliers, our partners' cap because it relates to warranty modifications related to debt and the depth with debt. It's a mixed bag, but the majority is with the suppliers.
Okay. On the solvency ratio, do you think that your banking partners have much flexibility in adjusting that for a short period of time? Also, what would happen if you did breach that threshold? Under the loan documentation, breaching a covenant is an event of default. We would have to have a conversation with the banks. Did we breach it? With our bank group, we have a super constructive dialogue on these themes. If you look at the numbers, 35% solvency is very high, especially for a company like us with very little leverage. It means our balance sheet is extremely healthy. Even when it used to be at 25%, I think that's still a very acceptable solvency level. I think the banks are very constructive from that perspective as well. They see our business. I think they see our order book. They see where we're going to.
Should we need to have a conversation, I don't think that's going to be a very thorny topic with the banks. On the factory, you obviously made the comments that you're choosing to reduce output to get everything working. It's an active decision, but you could have made EUR 90 million if you wanted to. There's a big gap between EUR 45 million and EUR 90 million. Why is it so big? Is there any color you can give around that? Or is there a midpoint in there, particularly if we do get into covenant issues? Is there flexibility to change that? I can take a crack at it and fill in where you want to. It is a very good observation.
I think what we've looked at is, and we've looked with the production team, we've said, okay, guys, if you want to get to a stable, consistent production, what is it going to take in the next few months in terms of maintenance, training, taking it slow, making it consistent to get there? We challenged that. We've had a lot of conversations around that. Eventually, we agreed on a case where we said, look, this is realistic. This is a plan that says we produce consistently in the coming period, we stabilize it, and then we ramp up in a very structured, stable way, something that we believe we can achieve. The outcome of that is the guidance that we've given today. Is there upside in there? Absolutely. With a plant like this, it has produced at the levels it needs to in certain sprints, just not consistently.
If we can get to a more consistent, stable level earlier, and we think it's justified and it's responsible to say, okay, let's ramp up, that potential is in there. What we don't want to do is guide for that potential and then have to say later on, oh, we were hoping, but it didn't happen. We have taken a very conscious decision with the supervisor. We say, let's just be not conservative, but consistent, pragmatic, stable. This is where we want to be. This is the outcome. Is there upside? Certainly. There's also still downside risk. We have to be aware of that as well.
To add on to that, another element, of course, is that we are pushing certain order volume with a certain margin from 2025 into 2026. We're pushing contribution also out, which is the starting point of.
Yeah. Sure. Thank you.
Okay. With all in line with customer obligations, I want to repeat that because we need to deliver. That could lead to a decision that you do something else to speed up again at a certain moment to make sure that the load-out schedules are met.
If I may continue on that, because you mentioned we're going to push volume from 2025 into 2026. How much volume are we talking about?
In kilotons or?
Yeah, whatever.
In whatever?
Yeah, I wouldn't mention a specific number. I think what's important is if you look at a year ago or even, I think, six months ago, we said we still had a gap at the end of 2026 in our order book. With the shift we see now, that gap's gone. The production moves in and we filled 2026 production completely.
I think we did mention numbers on 25 kt initially. I think you're looking at something like 50 kt, 70 kt.
You made a nice bridge for that because actually you are clearly lowering your outlook statement for next year, because you're now pushing off its into next year, which wasn't there yet. You had your selective memory, Martin.
Good question. Yeah, because what we've always said is that we have certain slots available in 2026 that we need to fill in the original schedule. Every disadvantage has an advantage. We worked on that and said, listen, 2026 is 160 minimum is the number. We need to still fill in certain slots. Now, with the shift, we filled in those slots. We could do that because the agreements with the customers, luckily, when we booked them, we always anticipated certain unexpected surprises in the schedules. We have built in sufficient float to play with that volume into 2026 without jeopardizing installation schedules of customers. That is the answer to your question. By moving that into 2026, we've nicely filled up 2026 to meet the initial set guidance within the customer slots. Also, for 2027, we have a nice connection.
Not pushing volume from 2026 to 2027 as well.
Could be.
Could be.
Yeah, not.
Not affecting.
Guidance right now.
No, no, no, no, no.
160, at least 160, that's more or less the run rate target. That should also actually be for 2025. Obviously, you had your ramp-up, startup, or whatever. You took a cut of EUR 25 million to arrive at EUR 135 initially. After the full year, you lowered it down. Now we are at EUR 45. Taking it from the original side from EUR 100 and then leaving even aside this initial ramp-up cost of EUR 25 million, we're now going down from EUR 135 to EUR 45. That's EUR 90 million.
I know.
Could you break that up in buckets?
Volume.
Just.
Higher than you work longer on smaller volumes. That's a cost impact. Yeah, on the non-recurring and recurring, that's a cost impact of EUR 20 million, EUR 30 million, EUR 30 million. The rest is a volume shift. That's why we have highlighted this contribution per kiloton. If the contribution margin per kiloton would have been substantially lower than planned, then we would have a margin, a contribution erosion. That's not the case.
Adjusted, you're targeting now at EUR 45. The exceptional part, but also clearly higher this half, first half compared to the first half of last year. How much cost do you expect to take this year, adjusting your effort to adjust every year?
Yeah, I think in line with first half.
Another EUR 11 million?
Yeah.
Okay. I don't know if I understood you well, but initially, you mentioned that you were very eager to pay down on the perpetual bond because that's a very expensive tool. I didn't really get your answer because if it was talking about this one or the preferred shares, will you still be envisioning to pay down on this expensive perpetual bond?
Absolutely.
That is the plan that was announced, to do it at the end of 2025, the ambition. If our cash allows for it, that remains the plan.
Okay. Okay.
Sorry?
That's it for the moment. Thanks.
Is this one on? I hope. I was just wondering whether the microphone was on. Is the microphone on? Yeah, it's on.
Yeah, okay. Phillip Mingards, a capital of Chauvet. I just want to spend a bit more time on understanding everything with the ramp-up because you started saying as well that safety is one of the most important things in the whole process. The Q2, unfortunately, wasn't a good safety record. At the same time, I see actually what you write in your press release is that since May, because of all the actions that you took since May, there haven't been any long lost time injury incidences. I would read, I would think that's actually a good performance, right? You haven't had any issues. That's already since May, the case. What has happened between May and, I mean, if that's one of your main priorities, safety, it seems you have achieved that.
No, what I'm trying to understand, because exactly.
The message I try to bring across is that by not paying the right attention and spending time on that, we saw this increase, both locations.
That was in April, before May.
Yeah, I understand.
April, May. We said now we don't need to do one-off toolbox safety stops and what have you with the continuous one. We have built in now a lot more moments to have people checking in on the safety rules and guidelines. That has led to a situation that we have more constant awareness now in that whole period. Yeah, we are focusing on to avoid another spike in the.
Yeah, why I'm asking is also I'm trying to understand, first, the last time we spoke, of course, what has changed since then? It seems like, in terms of safety, you already, some achievements were made already.
Actually, last year was very good.
Yeah, last year was good. During Q2, early in the quarter, in April, May, you actually achieved it as well. At least it was better than since then.
Yeah, in May, we had this high number still. When we.
It's only June.
Yeah, it's June, July.
You're still continuing to save the issue since June, July.
It's definitely come down compared to Q2.
It has definitely come down, only because we put a lot more effort on it. I try to get the question behind the question.
Yeah, the way I read it is that the safety issues were very much in May.
April, May.
I thought, okay, that means that at least the second half of the quarter, things have been better. If that was the case, and one of the reasons you say that you're adjusting the guidance is just making sure that safety is also.
No, no, no.
I would think, okay, the second quarter, the second half of the quarter, you're actually performing right. Yeah, there's an improvement. Why now?
I get your question now. When things get tight on delivery schedules and volumes, there is a tempting sort of pressure in an organization to sort of bypass safety requirements in order to push for volume or let go or dilute on quality just to get the volume. What we try to say here is, irrespective of how high the pressure is, either from the stock market, from the customer market, from inside, never ever will dilute on the priority safety first, quality next, and then volume. Even although, I mean, our loadout schedules are tight, if we see a certain quality issue in a monopile that needs to go on board of a vessel to meet the installation schedule, we stop it. That is so important because if we would send that monopile, say, we'll do to see.
Six, seven years from now, that specific quality issue results into a breakdown, we have a major issue. For the short-term performance, it's very tempting to say, let go. I think that's from our side, but that's also the dialogue with our customer on this, that irrespective of how high the pressure is on the projects, and we're talking for an Empire Wind 1 project of billions of euros effect if something goes belly up. Still, also in the relation we have with the customer, they also say, don't. Good that you make the remark, either it's on safety or on quality, but don't send it out. As a result, you will see a slower, what is it, revenue taking than initially planned for. That's what I mean. That was the message I tried to bring across here.
Has that been the case in June, July, and August as well, that you run into quality issues on?
Yeah, because that's what we mean with stability in the people. If you start rushing and the quality goes down, we stop.
You've seen quality come down in.
It goes up again.
July, August.
That goes in days, and then we stop, do a new instruction. Within these days, you don't produce.
Okay. When did the external team come in to help with this?
The preparation work started in inventorizing our issues of value and what can we do, to prepare for what we have now announced started just before the summer break.
Okay, they're just recently.
They are now in the ramp and the rollout of their schedule together with us.
How long do they normally take with these kind of things to?
To give you a bit of flavor on that, you sort of define certain sprints over, let's say, two to three months with clear targets per week, how you monitor a ramp-up, but also monitor a sort of under-the-radar issue that could surface on the radar four weeks later. Their skill is to sort of monitor that in very early stages so that you can countermeasure on that already now instead of waiting five, six weeks. It's really a specific skill.
Okay. Is it fair to maybe rephrase it a little bit that you could have chased that EUR 90 million, EUR 220 million adjusted EBITDA target that you initially had?
EUR 90.
Yeah, EUR 90. That would have been at.
Expense.
At the expense of quality, is it?
And safety.
And safety.
We are wearing out people. What you then basically do is go full-fledged for a seven-day working week. You have to stay within the labor law, get more people in from Roermond, get more people in from outside, which will jeopardize your safety and quality or increase your quality and safety risk. Yes, you would push out the EUR 90 million, but you will have the risk of having a, and that I think everybody can imagine, having a massive drop early next year. It is basically pushing a problem forward, but with a lot more damage than just taking the hit now and deal with it as we should, I think.
Okay, clear. Other question on that contract where you're in exclusive negotiation. Again, I'm new to the story, but just remind me, I mean, what's the chance of this maybe then still not?
Basically, what that means is that we are final.
Yeah, I understand.
Sorry. We're finalizing the details of the contract. Yeah, whether it will be materialized or not is also subject to the customer, yeah, making final investment decision and go ahead of the project.
Okay. Can I maybe then just ask, are you able to share in kind of what region maybe the project is or what kind of revenue? Does the contract have revenue support?
What's the answer?
Europe or U.K.?
Europe.
Okay. Does it have revenue support in terms of, you know, for example, CFD contract or, you know, revenue support from the government?
Comments.
Okay, because that gives maybe an idea of how risky.
I understand. Let me say it like this, without disclosing anything. It's with a reputable customer in a reputable country.
Reputable customer doesn't always mean that I've seen projects being canceled with still very big customers.
Everything is relative in life, especially today. What else can I say?
Not the U.S.
It's not in the U.S.
No, no, no.
It's not in the Asia.
Okay.
It's in traditional.
Okay. Maybe one last question on the Chinese competition you mentioned as well. What are you seeing there really? Is it how much more projects are they winning? Are they really more active in the region? At the same time, we saw, I think it was last week or this week, also Japanese cancellation for a large offshore Wind project. More and more you're seeing cancellations everywhere globally. If there's more competition coming through, it's your home markets as well.
Yeah. The Japanese projects were very much linked to either GS NTEC or Chinese players.
Yeah, if those Chinese players don't have.
The Chinese have built explicit capacity for the European market.
Yeah.
The thing is, it's in China. Set aside the geopolitical situation, there's always the transport issue. They need to transport these big monopiles on heavy lift vessels to Europe, which is not cheap, whether they build them themselves or operate them themselves or not. Somebody has to pick up the bill on that. That's one thing. I come to the EU and U.K. Despite all the changes in the world we see and the priority setting that we see, the ambitions and the goals that the European government set on offshore wind remain more or less unchanged. You could argue, yeah, the Dutch government did lower the number for 2040.
I think it's a huge challenge for the supply chain, not alone, and the government to release the tenders in time and for the supply chain to gear up for that volume that needs to be installed still to make this 30. I'm not even counting the 40. I'm looking at the 30 GW. It's a massive task. You see the same in the U.K. You see the same in other countries. The Danes had a failure of their auction round. They immediately started readdressing issues. Coming back to China again, the big challenge now for the governments is, or the big ask, and we see them picking it up to the EU, is make sure that the tender criteria are set in such a way that it's economically viable and that there is a good balance.
CFD, but that there is an offtake and a grid connection because you need a system approach here. Otherwise, it doesn't work. The criteria are well balanced between financial and non-financial, so carbon dioxide and what have you. In the end, this energy transition, we tend to forget it, needs to happen. The driver at this moment is energy independency because of the geopolitical situation. The focus on the volume is there, whether it's Mr. Wilders running the show or Mr. Timmermans.
Okay. That's that I completely agree with as well. Just last question on this, on the Chinese competition, to what extent has that maybe led to also pricing pressure also on the new tenders that you're bidding for or that exclusive contract that you have in your?
Good question. Here I come back to what we communicated earlier in these sessions. We have a certain philosophy on what tender we jump on and what not. Even in the times that we live in today, there are certain developers that have a very short-term focus on price with a different, I would say, risk analysis on the total project than others have. Those go for Chinese tenders. We don't join them. There are others that have exactly the opposite. They say we need a reliable supplier because if you do the math on the price difference and on the total effect of the CapEx for a Wind farm, it's below 1%. That effect, 1% is a lot in today's world, but still, it's not that we talk double-digit differences on a Wind farm development. The risk assessment is done and risk calculation is done.
We clearly see that the more mature, experienced, and I don't dare to say reliable developers take a different approach in Chinese than others. However, having said that, if they can continue to push in our market without action being taken in Europe, then yes, you get more competition also on price on this. We are up to that task. We know that because we have seen in certain tenders that we can match without going into the wrong side of the zero on Chinese competition. Sorry, it's a long answer, but it's a good question. I come to the point of the potential of this factory and the location we have. Don't underestimate the advantage of that in close to the wind farms, the volume we can deliver. We have to prove it still, but we can deliver.
The design criteria that the designers can now take into account in their designs.
Okay. Thank you.
It's a lot of words, but I hope they help. Yeah, they're of help.
Yeah.
Okay. Edwin Leon, Edison Research, on the timeline. You have a production of two monopiles now more or less per month, last month. You need to get to four. Can you maybe explain a little bit on the timeline on which you see that happening and also what exactly needs to be done? What kinds of things need to be done in the fact to make this happen?
We have a few questions there. This is, of course, part of some modification and stabilization on certain parts of our equipment. Certain parts of our equipment are not stable. That leads to stops, and when you have a stop, you can't produce.
That's still happening.
Those modifications are taking place now. That is why we have lowered the forecast because we said we take these modifications now in order to work towards this stability later on. With those modifications being executed, and we will see in the coming months how successful that is, we see a gradual ramp-up that should lead to these four monopiles, I would say, in the last month of this year.
Okay, already last month.
Yeah, that's December.
Yeah.
I know.
Okay. Okay. In your delivery schedules to the clients, you have strict deadlines, as you said. What kind of setbacks can you still have? What kind of flexibility is there still?
Are our setbacks our flexibility to meet these schedules, you mean?
Both, actually.
Yeah, because we have slowed down and went to go through this modification with these deadlines in mind. If for whatever reason we are faced with an unexpected extra delay on that, we have a few tools in the toolbox. One of them is to gear up to these weekend shifts again because we have planned now the remainder of the year at 24/5. No overtime in the weekends because we use that for maintenance.
You can go to the Sif.
There we can push. The other one is, because you can do that in a limited way, bring in the Roermond people again. Roermond is well on track with their order book. They're really, that's a running, what is it, sewing machine? We can still rely on those people to come to Maastricht, but we have to be cautious with that because these people live in Roermond and we can't constantly keep it alive. That is another one. The other one is that we do know that we can, in certain parts of the, like we do always, let's see where we can use subcontractors or partly outsourcing to help us in that as well. We can do that only limited because you need a factory for a reason. There is a certain overcapacity now for the remainder of the year in the assembly and coating.
Okay. Okay, you still have some overcapacity.
We have some tools in the toolbox to deal with that.
Remind me, when you don't meet the deadline, what happens?
You run into liquidated damages.
You get just a penalty.
Yeah.
Okay. Getting back to the problems that were there, can you maybe give a little bit of an indication of what the difference was between the people part, the machine part, and the process part, or is that difficult?
That's very difficult. I think I would like to approach it in a different way. We have an explicit program on the equipment stabilization. We have an explicit program on the people stabilization. We have an explicit program on process stabilization because the process is stable, but it is not to the, what to say, the capacity it has yet. This company has a background, like many of our colleagues, where technical skills of individuals are very helpful in delivering a project. The factory is designed according to a certain process. For us, it's new people, as well as the old Sif people. It's a different world where you have to sort of stick to the process, although it's very tempting to do something different. That's very logical, but we have seen that as a result of that, you can derail very slowly from the total process.
We bring that back in there. In that sense, it's like a car manufacturing factory where the line process is leading what you do.
Okay. Thanks.
Hopefully, that clarifies a bit.
Yeah, absolutely.
Thank you very much.
Guys, Barak Elder again, Amin Amro, Calder BHF. I'm missing in the slide deck the overview of, let's say, the competitive landscape, capacity, supply-demand picture, especially on competition. Yeah, what is happening in Spain at Haizea and Navantia? Seaside problems. CS Wind in Denmark, Cuxhaven, More Titan, Starship, Steelwind. You can name them.
You can name them all as well.
You are the Chairman nowadays, so you should know they all prepared for a big U.S. offshore wind market, which is no longer there. There is going to be overcapacity, so that must give pressure on prices going forward.
Thanks, Thijs, because yes, we did not put it in the slide pack because we felt we needed to focus on our own challenges now before going into the more broader picture. I think a certain humbleness in that sense was in the right spot here. Yeah, to answer your question, of course, we do follow that and we see what's happening. We probably all know that CS Wind in Linden has closed down, is laying off 220 people now because of lack of order book. On the other hand, we see that our colleagues in Rostock with the whole pipeline in the Baltic are doing very well. They're filled up. Like it was five to 10 years ago, the more, I'd say, longer-term reliable companies are doing well. Steel Wind is doing a great job on their order book in Nordham.
We see clearly for us also Titan and Cookhaven is a question mark. What we do is we take every announcement they make on, I believe, being able to produce in 2028, very serious, and follow them in that respect, but we're not part of that team. We don't know what's happening. Sea Wind has now, a few weeks back, the first steel cutting. Let's see when the first monopiles come out. They invested a lot of money. I think their delay in comparison to the original schedule is already over a year, which we understand.
Yeah, we have some good people.
The same motions our friends in Spain went through. They are delivering monopiles. Let's see how their order book fills up in today's shortage of projects. Overall, I think the emotion is that there is more capacity than orders that we need to fight for short term. Longer term, you know, and then we come to the next time the picture will be in again, but we have this famous bow wave of projects that we see coming two years from now that consistently is two years ahead of us.
Yeah.
I think that's the market situation as it is.
How do you, as Sif, stand towards, let's say, potentially being owned or co-owned by an Asian owner? I would say in the UK now, CSWin tried, they are in Portugal, tried to penetrate Denmark and Titan, of course, in Germany. Is it logical to, for the long term, to partner with an Asian owner, USGS, then kind of as a partner?
As an Asian partner, correct, yeah. No, I don't know, to be honest. I think we are strong enough as Sif, given the position we have, to work from strength in the landscape that we see. Having said that, I think we as management also will, and we don't see that happening before next year because we first have to get this one going. From that position, we want to make an evaluation of our position and see what are the right choices on a more long-term level we need to take. For now, we are pretty happy with the structure we have, with the position we have in the market, and the position, how we are perceived in that market, also by Asian players.
Thanks.
Thank you. Any other questions from the table? Otherwise, okay, Martin.
The idea. I'd like to get back to one of your first sentences you made that you're on the crossroads, had to make a decision between two schedules, and yesterday you decided to take the long-term approach, therefore affecting short-term profitability. However, if I look at your outlook statement of EUR 45 million, we already did EUR 13 million, if I'm correct. That means EUR 32 million in the second half. Actually, when you take a very cautious road, you lower your volumes, but you're still going to produce 2.5X more EBITDA.
Correct.
I'm a bit puzzled about those two.
We're not, in absolute terms, we're stabilizing. We never said we're going to reduce volumes, but we're going to stabilize production relative to the delivery schedules that we have with our customer. In that stabilization, there will be growth in production. We mentioned now we produced 11 monopiles in a month. Ambition is to be producing 40 monopiles by the end of the year. There's certainly growth in that production, but first stabilize. We're not pushing for growth. We first want to take the time to stabilize production at a certain level and then increase production.
If we also look at what you mentioned, steady increasing volumes, if you then look at the EUR 32 million expecting in the second half of the year, should we then pencil in for Q3 some EUR 10 million and the remainder for Q4 in that?
That makes it difficult to give any view on that. I can't give you guidance, but we don't accrue revenue based on volume. We accrue it based on hours spent over the total projects. We work on hourly rates, hours spent on projects, and that's our percentage of completion revenue recognition method, not when we actually produce monopiles.
You said you might also have to do some modifications to your current facility. Does that also imply more CapEx this year? Or what's your CapEx for this year?
If it's CapEx, it's maintenance CapEx. Most of it will be expense. Some of it may be capitalized if it's structural improvements to equipment, but it's all equipment related. It's not that we're going to expand the factory or raise the roof or do things like that. It's all very much equipment related.
Could you remind us how much you expect to spend this year on CapEx?
We guided for EUR 15 million maintenance CapEx.
Yeah.
As I said before, a big part of what we're doing is also the cap of the suppliers.
You have, since the start of this year, three stages in your order book, order whatever, how you want to call it, the firm one, obviously, the exclusive negotiations, and with the one which has now become exclusive negotiations, you labeled that a preferred status, which was initiated for the first time this year. Are there more projects in which you are labeled or are on talks on the preferred status at this moment?
We are, and I'm not going to disclose what or where or whatever, but we are in, so to say, shortlisted stage with quite a few projects for the period 2028 onwards.
Okay.
The market for 2027 is empty.
They don't have, they're not in a stage yet like what you had with the ones you made exclusive this year. If we look at your depreciation that tripled, that's solely due to your new facility, or there's no additional impairment, or there's purely.
There's no impairment. It's purely the new plant, yeah.
Okay. All right. Any questions online?
This line dropped. Go ahead, Rob.
We're on mute.
Not anymore. Hello? Can't hear him.
Do we have volume?
Should have come to answer them. Got an offense. Were we on him? He's still on mute.
No.
No, Rob's not on mute.
Yeah, we'll be here too if you meet Jürgen.
I have a second. What?
Probably.
What? Probably.
Okay. Hello, hello. Test?
Robert, can you ask your question again if you can hear us?
Go ahead. We have a number of remaining parties in the property here made unmutable.
Yeah, I was mixing it up.
Adverse developments pointing to higher risk for the developers, which they now carry largely themselves. The question is, do you in contract negotiations now see any push from the developers to sort of add more flexibility from their side to mitigate the risk of high termination fees or changing timelines, or do you expect contract structures to remain broadly the same going ahead?
We do still have these discussions on, and I think constructive, and also building them in our contracts on termination and delay fees. However, the moment where they start kicking in is delayed more towards FID or after FID. This capacity, what we had before that we could agree that on the capacity frame agreements ahead of the game, that has gone given the options the market has at this moment with other suppliers.
Thanks.
That's it from my side today.
All right. Thank you very much. Sorry for the technicalities.
No worries.
Any more questions? If not, I'd like to thank you for being here, for spending the time on preparing your questions and asking them, and the good debate. I look forward to the next press release in which we would be thrilled to announce somewhat different messages next time. Thank you very much.
Yep.
Good.