So, good morning, everyone. Thank you for calling in. And, welcome to this, full year 15 q4, presentation. As usual then, we start with the disclaimer statement and then move straight into the highlights of the year. I would say that the solid execution, have produced strong financial and operational results on a high activity level globally.
And, 2015 was in several aspects, a record year for Vestas. On the financial and operational side, the guidance met or exceeded on revenue, €8,400,000,000, EBIT margin 10.2% and free cash flow, slightly over a €1,000,000,000. Also really encouraging that our profitability continues to improve and we could actually record the highest ever net profit for a full year. Also, very encouraging is the highest ever order intake of close to 9 gigawatts. And the fact that we, got orders from 34 countries on 5 continents.
We have a solid, order backlog, 16,800,000,000 so also there are a good development. ROIC at a very high level, 117%. And, the board, recommends a dividend, of 6.82dkk per share. Very close to a payout ratio of 30%. Since this is the full year, we also will talk a bit about the strategy, and the strategy execution.
And, we've done a strategic review. Concluded that we are firmly on track and that the key objectives remain in place. But the programs, underneath those objectives have been updated to reflect both the strong execution and current market condition. So if I then go over to the agenda, I will start with the orders and, a bit about the market situation. Micah will talk about the financials.
Then I will come back with a brief strategy, update, and we will end with summary outlook and Q And A. So starting with the orders then in Q4. Order intake at approximately 2.7 gigawatts. 18% year on year improvement. If we look at the quarter, the main contributor to the increase were, US, China, and Germany.
The average selling price, on order intake was 0.90 in the quarter. So I would say a continued stable development very much in line with what we saw during the other quarters. And as I said also in the other quarters and in Q3, we will see variations between quarters depending on mix, and, overall, in a competitive market, we continue to see a fairly stable price development. In Q4, we had, a bit higher than normal order intake from China that typically, has a lower scope content, than other markets. Looking at the order intake then for the full year and, and Q4.
As I said, very solid overall record high order intake of close to 9 gigawatts, 37% increase and also encouraging to see that all our regions deliver growth, leveraging the global reach, that we have investors. Also, the strategic markets being pointed in the strategy is on track. A bit more in detail, substantial growth, of course, in in Americas. Both year on year and in the quarter, 50% and above. To a large extent driven by the US, but also for, in for the full year and in the quarter, Brazil, from a low level, but a fourteenfold increase in Brazil.
It's very encouraging and actually good growth in most Latin American countries. Looking at the May, we had a 9% growth for the full year, fairly broad based as I have also talked about, in the the quarter throughout the year. German in Nordics, especially Finland strong, Poland, France, So, a good solid broad based, increase in orders. In the quarter, we were down year on year 17%, very much due to a large booking of Lake Turkana in the quarter a year ago. Also encouraging development on the auto side in Asia Pacific of course, from a percentage point of view, extremely impressive, but it is from a low base.
Encouraging is to say that the year on year increase in China, which has been one of the the focus market investors, and we see that both in yeah, in the full year and in the quarter. But I must say also, generally speaking, increased order booked in in most, Asia Pacific markets. I talked about the strategic, markets And, it is encouraging to see that for the full year, both China and Brazil are now in, top 5 markets for Vestas when it comes to order intake. Looking at delivery, up 20% year on year, close to 7 point 5 gigawatts and here, a good strong performance in Americas and EMEA. While we had a lower development or decline in Asia Pacific basically due to the lower order intake in 14.
So, a bit more in detail. Very much following the auto situation. Very solid development in America. We are clearly gaining market share, but also, good activity level and increases in Latin America. In EMEA, up 8% for the full year and 31% in the quarter.
Here it is, markets such as Poland, a very strong delivery market during last year, Turkey and other good delivery market, Finland, and, Italy. And when it comes to Q4, again, Poland sticks out, on its strong delivery. As I said, Asia Pacific down, both full year 16% in the quarter, very much due to the weak order intake that we had in 'fourteen, but with the situation in 50 we'll of course hope to reverse that trend. So to summarize, Vesta has a unique global reach and we continue to leverage that in 2015. A well balanced order intake across, 34 countries in 5 continents.
And we have also added an additional countries into our presence and we are now present in 70 five countries globally. Leading to a strong, combined backlog of 16,800,000,000, a second highest lock that we've had in Vestas. And the the sequential development was, an increase in the service pack log of 0.7000000000. So now close to 9 and the decrease in the turbine backlog of 0.3 3,000,000,000 and no close to €8,000,000,000. A very positive event by the the end of last year was of course the multi year PTC extension in the US.
And and these bodes well for a continued high activity level and and a solid future for the wind end of the end of course for Vestas in in the important US market. The activity levels continues to be high, and we expect it to stay that way. We took firm orders in 2015 of 3.1, and I must say I'm really pleased with our performance and our market share growth in the US market. Looking a bit closer on the the PTC extension. I'm sure you are aware of the rules.
So, it's from 15 to 19, 15 16 with a 100% and then a deduction of 20% each year. What this table assumes then, which is still not clear, or clarified is that the installation period follows the same qualification as previous, has been the case. And We, and, I would say the rest of the industry is currently waiting for IRS to clarify the rules around the installation process timing. Okay. A few words also then about the joint venture we have with the Mitsubishi Heavy Industry for offshore wind.
Well on track. And, a a busy year overall for the on the sales side, a good traction and well received in the market with announced firm orders of approximately 1.2 gigawatts further announced conditional orders of 450 Megawatts. Also internally from an operational point of view, very good progress All milestone payments has been received by the joint venture that was triggered of both commercial and technical milestones stones stones. Stones. And manufacturing is ramping up and first deliver is then will happen this year to the Burbank project, extension.
That's first delivery of the 8 Megawatt. To be clear, of course, the 3 Megawatt the offshore continues to deliver. So with that, I hand over to Marika to talk about the financials.
Thank you, Anders. And, we are, as you can hear from Anders, very consistent in delivering on our strategy that was stated and set in 2014. And that is also clearly reflected in our financial not only the P and L, but also the balance sheet. What you can see here, if we have a look at the full year is that we are increasing our revenue by 20 2%. We have also improved the gross profit by 28% in absolute terms.
And in margin from 17 percent to 17.9 for the full year. We continue to leveraging on the fixed costs. We we'll also come back to how we are leveraging in the different quarters, for the fixed capacity costs. But I think an increase of only 4% in an environment where the revenue increase is 22% is a very good achievement. Consequently, we have a very high EBIT that improved by 54% to 860.
And also again very well reflected in an EBIT margin of 10.2%. So 2.1% up compared to last year. And to comment on the special items, you see a benefit of 46,000,000. That is our facilities in the U. S.
That because of the latest PTC extension, we wrote up as we're using, or for the future, the facilities in the U. S. And have a clear path going forward. Income from investments account is the joint venture with MHI. You have a positive of 34,000,000.
That is primarily TUR, of projects and a a small loss, I think, of 1,000,000 in, the joint venture as such. And, you see here a net pro an improvement of 75%. And as I understated earlier, it's a record high level for Vistas. If we then have a look at the Q4 numbers, you I should say here as a general comment, it was a very good quarter from an execution point of view. And that is also again reflected in the revenue that increased by 23% in the quarter.
Gross profit also grew by 38%. And that is mainly driven by, obviously, the higher revenue volume and also, a good project margins. We should also highlight here that in the margins, as Vessa said has, a legacy. We have written down €550,000,000 in our inventories. And also remember that for the full year, we have written down, inventory in the service business.
But the 50 you see here in the quarter is entirely, on on the inventory side for projects. We also here have the special items as the right up of the, the facilities in the U. S. Occurred in Q4. And here in q 4, you also see a negative impact of 10,000,000 from the from the joint venture with Mitsubishi.
So in the quarter, again, we delivered 298,000,000, an improvement of 54% on the net profit side. So, on the EBIT margin, you see an improvement by 3.1%. So really in the high territory, we are at 13.3%. In the, in the quarter, you also see the improvement on the gross margin, despite the write down of 50,000,000 in the quarter. If we go to how we're leveraging on the fixed cost, you see we are increasing.
We have a small We have a negative impact from, from the, the currency on the, fixed capacity costs, but still we are leveraging and we are now down to 7.7 percent of revenue in fixed capacity costs. So really well controlled, and, well maintained despite the very high activity level, both in q 4 and for the full year. 2015. If we have a look at the service business, we are clearly delivering on our strategy here. We are improving year over year.
The revenue by 20% And that is primarily driven by organic growth and also impact from currency, but organically it has been a great improvement in the service business. Remember, the upwind acquisition that took place in the latter part of the year It's only included with the, very, very small part as it was impacted the the overall result it was impacted only in a few days, in December. EBIT continues at stable margins. We are now at 17.7% for the full year. And as you recall, we did very high write offs in the service business throughout 2015.
But primarily a very high level in Q3 of 19,000,000. And we have also grown grown the service business backlog by 700,000,000 compared to a q3inlastyear. To comment on the balance sheet, we continue to have a very strong balance sheet that we again as we said previously, we're very happy with and have worked hard to achieve. And then you can see our net cash position is improving further compared to 2014 and is primarily driven by high cash flow also in 2015. Networking capital improved.
So we are clearly very efficient in this high activity environment. And our solvency ratio, was actually reduced compared to 14 down to 33.8 compared to 30 4%. But still at a very good level. If we look at the change in net working capital, we see positive improvements for the full year, but also for the last over the last quarter. And it is for the full year mainly driven by high payables and prepayments.
You see a slight offset in the inventories simply because the activity level has been very high and continue to be high. And if you look at the changes over the last 3 months, you see improvement of 600,000,000 and that is the regular flash out that you see in Q4 And again, it's been a very, very high activity level and a very flawless execution of Q4. If we continue to the warranty provision and the loss production factor, this is the outcome of a very consistent work on the quality and we continue to consume less than we provide for. We have the same methodology no changes. And the good quality is also reflecting in the loss production factor that continues to be very stable below 2%.
Cash flow, if you look at the full year, cash flow, we have achieved and we have said that for numerous of quarters now that you see that cash flow is to a very large extent driven by, the result from our rating activities, you see a positive from the net change in net working capital. And if you look at the cash flow from investing activities, that also includes share buy That also include the upwind solutions. I'm sorry. And consequently lead to a free cash flow of over a 1,000,000,000 for the full year. The cash flow from financing activities is the share buyback program and also the dividend that we paid out in April of last So if we have you see a very good operating result, good changes in the working capital.
And here you have cash flow from investing activities. It is also, again, upwind taking place in Q4 of last year. Free cash flow very high in, in the quarter. Cash flow from financing activities is primarily the share buyback that took place in November of last year. If we have a look at the total investments that also have an impact on the cash flow as previously seen we have separated the acquisition of Upwind.
That is 55,000,000 of the 425 So it is an increase, but if you look at the percentage year over year, we are consistent at 4%. The vast majority of our investments is investments in modes for for the for the blades as well as capitalized R and D. So no changes in our investment pattern apart from the upwind acquisition. So, capital structure, we continue to be, very low on the net debt to EBITDA or in negative territory in the market where we are operating in. The solvency ratio that is one target that we have changed.
We had increased our target to 35%, but over the cycle, we think it's more appropriate to be in between 30 35%. So that is the new target for solvency. If you look at the capital structure development in more details, you see our cash position, end of 2015 compared to 14. And the the development is as we have stated earlier primarily driven by the cash flow from our operations. So very efficient delivery of cash flow in the company.
And if you look at the solvency ratio and the development they're under, it is development is clearly driven by net profit and that is to a certain extent, offset by working capital effect. On the balance sheet. And, we have also distributed money to our shareholders. So we deliver 33 0.8% compared to 34% last year. And if we have a look at the capital allocation and what we have to have done, we did a share buyback in 2015 amounting to 150,000,000 we are proposing a dividend payout based on the 15 result of 2 105.
So an increase of 80,000,000. And the total distribution in 15, consequently, is 355 compared to 116 based on the 14 numbers. If we have a look at the return on invested capital as Andre said earlier, it's very, very high territory where are at 117% So, and this is driven by our effective effectiveness on both the P and L as well as the balance sheet. So we are really in the high territory and remember over the cycle, we have said that we were the deliver continue to deliver double digit ROIC. By that, I'll leave the word to you, Anders.
Thank you, Maika. So, let's go into talk a bit about the strategy update. And starting then with the overall environment that we and I must say that from a policy and market environment overall, we see a positive picture. Clean energy investment, according to Bloomberg by new, energy outlook was at the all time high in 5th team. Very much driven by positive policy development, but also then the increased competitiveness and direct investments.
So starting with the the policy then we see, of course, then, PTC extension is very, very positive. And also then the clean power plan that was released, last year. The COB 21, Paris recalled, I must say also for the longer term then probably have less of an fact in the mid term but for a longer term positive. The fact that the majority of the countries have a renewable energy target in their plan. China and India continue to be committed to installation of of wind.
And have not really changed their plans. We also see that the market is moving to more market based system. Auction and tender based. We already have this in in many markets, but we actually see that as a as a global trend. And I think we have reported, for example, about the German plans, during the year last year.
So all in all, a positive, long term outlook in the market. At the same time then, the cost of energy for wind continues to decline. And that is both technological improvements but also scale improvements and pure cost improvements. And and I think that this is very vital for the continued, market development. And for new installed, wind power we now see in many markets that it is on par with the fossil fuel.
I think one clear indication of that is that wind is estimated to have accounted for approximately 20% of all new electricity generation during last year. The 3rd block then is about investments and we see major corporations like Google, k, Apple, investing directly into wind. We also see investment houses like Goldman Sachs and BlackRock that increasingly invest directly into wind parks. This is of course a number of different reasons. To power their own operation but also, for the attractiveness, as a pure investment case.
Looking at the fork, the long term focus then also and this is an estimate by IEA, about the new electricity generation build up to 2014. And what you can see here is that the majority of that new build is actually estimated to be renewable and within the renewable space, wind is estimated to take the majority of those installation. And actually this prediction is that by 2030, renewable will pass call as the largest, power source in the global market. A bit more detailed on on the cost of of energy for renewable and the competitiveness and here we see this is again then from Blum by New Energy Finance. On a global scale, onshore wind is now competitive.
With, fossil fuel and that is actually also true then for many regions. I think it's the only reading where you see a bit of a gap between coal and no one's sure wind is in Asia Pacific. But of course, these numbers will vary, regionally and country wise. But overall, I think a good representative pictures of the increased competitiveness of wind. Going into the strategy and as I said, we maintain our vision to be down dispute to global wind leader, which means market leader in revenue.
Best in class margin, strongest brand, and continue to lower in the costs. We also maintain our our mission on how to deliver and serve our customer. Our 4 key strategic initiatives, also remain. And I will in the next slide go a little bit more into detail on on the execution as we see it. So, starting with then with our market strategy.
Leveraging our strong global presence and a good performance on our ambition to grow faster than the market in 2015. Order intake in 34 countries and presence in 75. Also from a a level with the order intake up 37 cent and delivery up 20%. So, I am convinced that with your 15 have grown faster than the market. We have greatly improved our market share in the US.
We are market leader in Europe and we see year on year growth in China, India, Brazil. Our efforts to to work closer with our customer. And of course to to serve our customer is also paying off. We do yearly customer satisfaction study. And we have increased that index to 78 which is a good improvement year on year.
Going forward, we will continue our growth strategies in both mature and emerging markets. We need to, early engagement as customers get bigger and the bigger part of the pipe is locked in. We have plans on how we can engage earlier and closer with our customer and then of course execute on the local plans. That are in place. Second will be active on the service business.
We have revised Our growth ambition, in the midterm from 30 to 40% due to the solid performance. That we have delivered and the outlook that we see. During 15, we saw 20% increase in revenue and and a service backlog up by close to 2,000,000,000. So a very positive development. We also done strategic acquisition of upwind, during last year, and the value on that is subject to final closing then in Q1.
This provides additional revenue, of course, but also scale and, and the service offering know how and also, know how around third party turbines, strengthening our overall fleet, optimization, business. And during last year, we saw a bit more than 5, gigawatts of the, third party turbines. Looking ahead, focus will of course be to deliver on the new target on revenue growth also to continue to leverage the scale, enhance the service offering, and of course now also integration of the 2 acquired companies. An absolute key enabler for us, to execute on the strategy is, to continue to reduce levelized cost of energy. It is very much about the competitiveness of our product portfolio and we will continue R and D investment in that portfolio.
During the year, we introduced the 336, about 10% improvement from the previous 3 Megawatt platform. 2 Megawatt platform also. They're a competitive, platform. Almost, 4 gigawatts sold in 15 and really a flagship project product in the US market. During last year, we also did an upgrade of wind classes for the complete free Megawatt platform that if you look at it historically, actually now we have improved annual energy production between 18 35% since introduction.
The focus will be continue lower the levelized cost of energy and of course, working with a continuous improvement and new releases of our turbines. Operational excellence is the combined name of all the, learning improvement programs that we are running in the company. Again, a good solid execution in the year with improvement in both airbit on productivity level and a well managed networking capital. Also, generating a strong cash flow. Going forward, we continue with our, accelerated earning program, with new targets, of course, Also to counteract the natural increases we have with expansion in fixed costs.
We continue the implementation service centers, outsourcing and site simplification program. Working capital management an overall leverage in the scale of the operation and that leads me to the key differentiators that remains intact that we leverage on, and that we need to continue to leverage on to execute on our strategy. It is about global reach. The market presence. It's about technology and service leadership being able to to, to offer turbines in all wind classes on across platforms.
With best in class quality, and a world class sighting and forecasting capability. And it is about scale. The simple fact that we have more people dedicated to wind and everyone else. Of course, we have the largest volume. We now also have uh-uh an installed base of 74 gigawatts and 50 7 gigawatts under service.
Our ambition for the midterm remain as I said, to be the undisputed global wind leader to generate, to be the market leader in revenue, bring wind on power with coal and gas, deliver best in class margin, and have the strongest brand. Or mid term financial targets also remains with the, sorry, with the except all the update and that Micah talked about on the solvency ratio, in the range of 30 to 35%. So to summarize then, a little bit where we started. A strong eye on execution on our 4 K objectives and on our for P and L for the full year. And continue then to improve our financial and operational performance throughout the year evident in the solid order intake old record.
High order intake actually a good increase in delivery for the 2nd year. Improvement in in EBIT, a good strong balance sheet and a very high. That leaves me then to the outlook for this year. So, on the revenue side, minimum €9,000,000,000 on a bit margin before special items, minimum 11%. Total investment and that is then including the planned, acquisition for this year.
Of approximately €500,000,000 and the free cash flow also with the same inclusion of the acquisition for this year of minimum 600,000,000. We Also maintain our outlook on the service business, which is expected to continue to grow with stable margin. If I look a little bit further into the year, I think it's our assumption. It's fair to say that we continue to see back end loaded year. And uh-uh that is of course the the normal pattern of our business.
But we see actually a fairly low activity level in Q1 and activity level in Q1 that is lower than Q1 last year. But for the full year, we will have the normal, back in loading profile. And, those of you who follow us knows that we didn't get expect to get into a very busy Q4 with, the the natural external environment like weather and wind and grid connection that can influence our results. So, we think it's a good strategy to start the year with the same guidance principle as before and that is then the minimum guidance. So with that, thank you very much and then we move over to the Q And A.
First question comes from the line of Christian Johansen from Danske Bank. Please go ahead. Your line is open.
Yes, sir. Thank you. 1st, in terms of the solvency ratio, you you lower your target. And at the same time, guys, for at least, and in free cash flow, but you are not launching a new share buyback. And what is your thinking behind this decision?
Well, first of all, on on the if I comment on the, the share buyback, we prefer the same methodology as we had last year. So we'd rather base a share back on delivered result rather than anticipated result. And when it comes to solvency ratio, I mean, the higher end remains, but We think it's more adequate for how we want to treat the balance sheet also going forward to be in the range of 30 to 35 percent solvency as that is to target also over the cycle. And, well, that's basically the the conclusion why we have made the amendment. And, I would also like to say as we have been discussing this back and forth, that we are very happy with the very strong balance sheet that we have.
And we also use the balance sheet to continue to to invest in in the strategy that we have for the company.
Okay. Fair clear. And then my second question, inclination with the Q3 results, you stated that you had 2 gigawatts in in US Spring World Agreements. How should we think about these now? Are they still in play, or will they cancel in connection with the 5 year PDC extension?
Yeah. That's correct. I mean, roughly approximately 1.5 gigawatts, remains out of those frame agreements that we talked about. The the frames are obviously still there with with our customers. But of course, it's also a new, a new situation, a complete new situation.
So, with with a 5 year extension, I think fair to say we we am probably the market and the customer had a lot of different scenarios. A 5 year extension was was probably not one of the most likely scenarios for either us or or the customer. So we have to wait and see how they they play out and and I but I think it's fair to say that there is they are still there. We they are still agreement with our customer, but of course, when and how they we expect them to be realized and how the whole market will change with the the this with this good stable midterm outlook. I think it's a bit hard to to say.
Okay. Thank you very much.
And the next question comes from the line of Paul Nutrien from Citigroup. Please go ahead. Your line is open.
Hi, it's Sue Crops City. Thanks for taking my question. The first one relates to your guidance, to your EBIT guidance of minimum 11%. Can you give us some color what assumption you are making around fixed costs and also the gross margin. Are are you assuming a flat your gross margin to get to that minimum 11%?
Well, we are obviously not guiding on on the margins, when it comes to gross margins or the fixed capacity costs. I think what we can say is that when we have set the guidance, we have used the the same principle as previously, the same methodology. So we are doing a a best estimate on what we see as an activity level, in in the company. What I can say is obviously the activity level and the volume have a positive impact on the gross margins. We have a healthy order backlog in terms of gross margins.
And we continue to to have the ex accelerated earnings program. Our aim is obviously to continue to be as efficient as we have been on the fixed capacity costs. So the focus remains on being efficient overall on the the the P and L.
Okay. Sure. Maybe just to follow-up, Did you when you came up with this guidance, you said that you used the same conservativeness of last year, or would you say this year, you're more optimistic?
We have, never been a negative or overly optimistic. We base our, guidance on the best assumptions that we have at the given point.
Okay. Sure. And my second question is on strategy. Obviously, we know you have very high cash levels You've made a few strategic acquisitions of service providers. Is it fair to assume you sort of continue, you will continue down this path going forward or would you also consider buying manufacturing capacity in markets where you're not present at the moment?
I think overall, as I said, our strategy is based on organic growth and and that is, yeah, that is the base of our strategy. As as you also point out, we have done, to, good acquisition in the service business. If you look at top line of of them compared to our service business. They are definitely a positive effect, but of course, not substantial. They also have capabilities that we think, fits very good with our strategy.
So, but, I mean, your main question coming back to your main question, our strategy is and we'll continue about, organic growth. I mean, we are the market leaders. So of course, if we find opportunities in in in the market that that we have seen during last year, that we think brings value to Vestas. We are always prepared to look at them.
Okay. Thank you.
And the next question comes from the line of Claus Elmer from Carnegie. Please go ahead. Your line is now open.
Thank you. And first of all, congratulations. It was a very strong report. My first question goes to the guidance. I know Emily just said that you have never been over optimistic or over negative, but the statement has also been in the past that you would prefer the on the promise over deliver, strategy, so to speak.
Is this still, the case for a 2016 guidance?
I mean, let let me start and and of course, just echo what what Mike is saying. I mean, we we used the same principles as before. Mike and I are still here. We are all the same people as we have been before. Having said that, of course, we also have seen improvements in our internal processes, within the company.
We have a strong, order intake during last year, actually a record high order intake during last year. And of course, we have no, 2 years of execution, behind us. But we have used exactly the same principles. We are, it's still, Anderson maker here. So, we haven't changed anything on how we look at it and how we estimate it.
That makes sense. My second question goes to the order intake. And, of course, I know you don't guide on order intake, but can you give some flavor to the, cycle of U. S. Orders in 2016 given the P2C extension, when should we expect these projects turning firm and unconditional.
Or maybe on top of that, how important is order intake in 'sixteen for your 2016 guidance?
I mean, if if I start with your last question, of course, I mean, again, I mean, we we we have had a strong order intake during last year. And and of course, we have a a good coverage I would not give a percent, but of course, we have a good coverage of, of orders for for this year. If I know if your question about US, I think it remains a little bit, to be seen because, of course, currently, as I said, before, I mean, the the discussions with the customers are very intense for the moment because this is a new scenario. And and again, a very, very positive scenario, that we get the stable US market, but nevertheless, a new scenario with, with the 5 year extension of of PTC. So, I think it's hard to forecast exactly how orders will, pan out in in the US.
I don't expect of course, it will be different from if it was just the 1 year where you would have seen the the sort of normal Rush and PTC components and and all of those things. So it will be a more normalized market. At the same time, a lot of the the orders and and a substantial part of available projects in the US, of course, still benefits from an early construction because that's part of the financing, of the different projects, but But, we need a little bit more time to to finish the discussions with the our customers to get a clearer picture, and hopefully also there the IRS rules to be released on an overall global market point of view. I think it's fair to say that, of course, last year, if you compare the growth, 14 to 15, it was a very favorable overall market. And I think we and external, analysts don't, predict the same year on year growth in the overall global market between, 15 16 as we saw between, 1415.
Okay. Thank you so much.
The next question comes from the line of Sean McLoughlin from HSBC. BC. Please go ahead. Your line is now open.
Good morning. Thanks for taking my questions. So firstly on service, you raised the top line ambition, but you, you're talking about stable margins. Service margins peaked Secondly, on Offshore, just if you could give any of the successful year, first eight megawatt orders coming through. How are you feeling about, your potential for for orders in 2016 in, in offshore?
Thanks.
Yeah. It was probably a fairly bad line. I I don't I don't think I got everything, but let me try to I think the first question was around the the service, growth and margins. And and if I start with the growth there, I mean, the reason for us to stretching our our ambitions 40% is a reflection of of what we've done so far. I think it's important that we that we always have a stretched ambition.
And on the margin side, we we definitely see, stable margins on on a yearly basis. I think it's to say that they have varied between in between the quarters as we have also commented on. But if I look at this on on a year basis, we see stable margins in services, and that was is also what we guide for, for this year. I think on on your questions on offshore and and I'm sorry. I it was a fairly bad line.
I didn't quite get them, but when it comes to order book, and and more specific on offshore and the 8 megawatt. Those questions really have to be answered by the joint venture that is the the standalone company entity, responsible for the for the offshore business.
Okay, thank you.
And the next question comes from the line of Patrick Stetterberg from Nordea.
Yes, good morning.
I have two questions. The first question
is relating to your free cash flow guidance for 2016. I'm just wondering what kind of assumptions are you making to the networking capital progress during the year?
Well, the we have guided for the cash flow. We are, working capital. But what I can say is that you see in a tremendous good development on the on the net working capital. And I think what you're asking me, will we be in the negative territory also for end, seek 16. We are continuing to deliver and working on the working capital.
That is why we have been very consistent in, in continued to deliver on the activities that that were in place. I personally see it's very difficult to improve from the levels we are at right now. So if we can maintain, I think we should be very proud in this higher activity level that we foresee for 2016.
I just have to follow-up. You say you will be proud if you can make saying it, but is is it the goal to maintain the the the absolute level of working capital you're having now?
As I when I say maintain, it's really maintaining activities. The absolute levels is, is hard to predict and it it is really in very, very low territories now end of 15.
Okay. My second question is relating to your recent acquisitions and what kind of acquisition we should expect you're making going forward? Do you have, or just to get a sense, what kind of acquisitions do do you want to make in in 2016, will it be solo within the the service area, or could you look for, for business activities relating to your project business as well?
I mean, our strategy is based on organic growth. So the and that is, still our strategy and still the the basis of our strategy. And So it hasn't really changed. And as I said before, we of course, follow the market if we would find something that, we feel brings value to Vestas, of course, we are prepared to take a look at that. But I just want to emphasize our our strategy, is about, organic growth.
Okay. Thank you, Dan.
And the next question comes from the line of David Wells from Barclays. Please go ahead. Your line is now open.
Yes. Good morning, guys. A couple of questions from my side. So if I look at Germany, it appears to me that you've lost a bit share there. You're down kind of 30% versus the market 20% year on year.
Can you just explain what's going on there? Is that a shift from high speed wind to low speed winds, like a certain regions where you've experienced some permitting, for example. And if you could also comment on what the look looks like in Germany? That will be question 1.
Yes. I don't agree with you. I don't feel that we have lost share in Germany. I think if you look at at Germany overall both from a delivery point of view and, an order point of view. I mean, we knew that the the overall market from a delivery point of view was going to be lower last year, which I think I I talked about as well.
You're right. I mean, in a a given year on giving the given quarter, there will be regions, with more permitting or or less permitting. And if you look at the the turbine supplier strong parts of Germany. That will also differ a bit quarter to quarter. But if I look at the Germany as a market, I think we have to see, a little bit what the final installation will be.
I'm confident with our position and our our market share in in Germany and and we will not comment on the backlog on on individual markets. But if you look at the the order, intake on your money and also in Q4, coming back up. I would would say that you see, a good, the mail open and and the book to bill will be about 1.
Okay. That's clear. And then secondly, on Brazil, you've booked quite a few orders in Q4. It seems country is kind of going into a tailspin. And if nothing else, electricity demand is now firmly negative territory And the there's some question around the financing availability from the development bank there.
So all those things put together, from the outside, it could seem that it doesn't look great for Brazil for the the coming years. In that light, it's quite surprising to see you, you kind of ramp up your orders again. So I was just wondering if you could provide a little bit more color on what you're seeing on the ground there?
Yeah. First of all, I I don't I I need to come back, but I don't think Q4 was specifically Brazil heavy, but it was 99 Megawatt. But if you look at the full year, we booked 300, something. Almost 400 Megawatt in Brazil, which I think is is a good development. You're absolutely right.
The macro economy in Brazil doesn't look too promising. And But if I look at the the more mid term, development in Brazil, and if I look at the need for, electricity generation in Brazil in the midterm and the competitiveness of wind I I must say I'm I'm confident to be in that market. We have always said for both Brazil, India, and China that our ambition was a continued, year on year improvement. And we have also always said that we will not sort of prioritize market share ahead of them, of profitability when entering those markets. And I think we have followed those principles, when we improved our situation in Brazil, during during last year.
Understood. Thanks very much for answering the questions.
And the next question comes from the line of Vinankita from Bank of America Merrill Lynch. Please go ahead. Your line is now open.
Hi, good morning. Thanks for taking my questions and congratulations on the good results. I've got three questions. The first one is on 2016 order outlook, from my understanding, talking to many investors that people want have some confidence around the 2016 order outlook. I know you don't guide on 2016 orders, but it would be great if you could give us some color in terms of what are you seeing on the ground in terms of commercial activity?
Do you feel you can maintain the very high levels of orders that you've seen in 2015? So that's my first question. My second question is relating to, costs and optimization. You have a you have put on your slide 35, some comments around, you know, optimizing the cost base and, you know, outsourcing,
so, I mean, I
just wanted to understand, you know, do you have more opportunities within your cost base now that you have a better outlook in the US or more sort of visible outlook in the U. S. Is there opportunities to optimize the cost base and improve your margins there? The second question And my third question is, again, relating to the US, during the discussion today, you've mentioned, that things are still evolving in the US, you're discussing very, intensively with your customers, you're waiting for the through then, you know, overall, you see a positive environment in the US. I wanted to understand, you know, if if if it makes sense for Vestas, you know, around Q3 to to wholesale some sort of capital markets during Investor Day looking at the midterm outlook, once you've got more clarity in the US.
So you have to have more questions.
Okay. Let let me thank you and, and let me start with the last 10. I mean, I I first of all, I I mostly emphasize that I've I I'm I'm very positive and and an actually very place that we got the 5 year pay to say extension. Uh-uh that that should straighten out a lot of question marks that we always have had, around the US market and different scenarios. That definitely makes, our life a lot easier because of course, we can now, start to work with one scenario for the US in in there of the of 2, 3.
I mean, US is for any business a substantial market and for sure for when it comes to electricity, electricity the generation of renewable, also a substantial market. Most likely the 2nd global globally the 2nd biggest market overall. So on a midterm perspective that we now get, a stable framework on on PTC and actually also then have a clean power plant that has the potential to to, to so to speak, kick in, at the end of the car and PTC cycle. I I must again say it's very, very positive for us. Vestas have invested in the US.
We have, a lot, a good, manufacturing capability in the US and if you look at the headcount increase that we've done during the last 2 years, a lot of that has gone into the US So, what we are currently working through and and that we do very much together with our customer is to understand the timing of the market in this new scenario and and timing about the projects. So we we definitely have a look at if it makes sense once we got we have gotten the the clarification from IRS. And once we have finished these, dialogues that we are, intentionally have, no, to come back with a more detailed update. But I mean, currently, this happened late December, and and I think it's fair to say that, this was probably the most lie not the most likely scenario. It's actually more positive both for us and the customer.
So I think it's actually better that we take the time now when we have the time to work through it. On the operational cost base, again, I think, we have said that consistently that Of course, with a high activity level, more than 30% increase in delivery. Last the year before, and then another 20% and, and actually a bit more on delivery this year. Of course, we see parts of the organization where we have to increase our fixed cost and therefore to counteract that and have the totally well balanced. It's a extremely important to also continue on on the cost down efforts on the fixed cost.
And that is why we continue with self service center where we continue with the, the the outsourcing activities that we've done. I mean, one one good example is that we changed our blade manufacturing also to to rely more on outsourcing. And but those program is, of course, to counteract the natural, increase that you will see, and you would need in other parts of the company. And we will continue to work on that. I mean, the variable cost programs will also continue.
We see good traction in them and we will continue to drive them. Last question, I I will not comment too much. We don't give any guidance on on orders outlook. I mean, we have a their policy of announcing order. I can just echo what I said before.
If I look at external, and or, view of the overall market growth compared to, compared to, last year, year on year. We we see a stable market, but not the market that has the same kind of year on year growth that we saw, during last year, but a stable market.
And the next line next question comes from the line of Dan Togo from Handelsbanken. Please go ahead. Your line is now open.
Yes, good morning. And a few questions from you as well. I would like to address what we touched upon before regarding acquisitions and especially within services maybe you can give some color on what drives the decision to acquire companies within services. Is it the geographical exposure, the technical skills, etcetera? And do you have any blank spots, so say, to give them an indication of where we could or where you need to ask sort of a ramp up going forward?
That's the first question.
Yes. No, the 2 2 acquisitions we've done in the service space or fairly similar. So so that they fit the same description so to speak. 1 is is strong in in the US. Uh-uh the other one is strong than in in Europe and and they are ISPs with and and if you look at the ISP markets, they're all not that many sort of sizable ASPs.
Service companies. They they tend to be either very local or fairly regional. So so the the benefit that we see for Vestas is is both. Of course, ongoing revenue and installed base, but it's also capabilities on on the technical side, on the on the commercial side being an independent ISP but also then when it comes to fleet wide, service maintenance and and and management, which of course, is the competence, that is the competence requirement from our side. Then we also feel that of course it has to fit us.
So we have to perform and execute on the integration plan. And and what we bring then is, of course, the scale, the scale of operation, from, from the Vestas side and the scale of our, service organization, the scale of our, spare parts and so on. So it's the combination there that that, makes them attractive to, attractive acquisitions on the service part. If if you look at the overall market, we actually see the service market also growing. Stable and, and and, and, and showing a fairly good growth.
So it's also, an attractive, market to be in from a growth perspective.
Yes. And are there any bank spots in this market or for you right now? And how does the pipeline look like out there in the marketplace. Is there abundance of companies for you to look at, or is it very few and select that it's actually suitable for you?
I mean, there are very few, black spots if I compare us to to, the competition. I mean, we we have 56 gigawatts under service. So so we are fairly, ahead of, when it comes to to presence globally and, megawatt under service.
Okay. And then just on to the U. S. And the P2C extension here, the declining scale or the declining compensation in the PTC, will that change, so to say, the pattern of the orders we're going to see in the next few years here? I could could imagine maybe more challenged areas would be pushed forward in order to get the high frequency and what kind of product would you offer in such cases
Yeah. Again, I I think it's it's,
hard to speculate. No. I think, let let's wait for the market to to, to, conclude on this good news and, and also, of course, guest clarification on the IRS rules.
Okay. And when can we expect that? Is that, I mean, Is that within the next quarter, 2 quarters, or do we need to be more patient?
Now from our point of view, of course, as as soon as possible. And of course, together with the industry, that's, what we are lobbying towards IRS.
Okay. But no no doubt that, US online check will be very back end loaded in in 2016. Is that is that how we should look at it?
As I said, we don't have an outlook for for US orders in 16.
The next question comes from the line of Gajka Pilsen from Sylvain.
Yeah. Hi. Just a quick question. You guide for a higher CapEx level.
Can you comment on on
the uses of of a CapEx are you investing to facilitate growth that's reflected in your backlog? Or is this really an investment in growth beyond what's already implied in your backlog further growth ahead in the future?
Well, I think I said that, on on the CapEx, we there's no change in in the 4 on how we have been forecasting compared to previously, it is investments in molds, which, which we need to do. We also not only do we need to invest in new ones, but to meet the capacity, but also as we depreciate them fairly quickly, that will be on an ongoing basis if the activity level is high. We have also continue to capitalize on the R and D as we have done previously. And on top of that, we have the acquisition of a Vailen in Q1, mounting to 88,000,000. So there's no change.
Maybe another question on pricing. You talked about a quite stable pricing, but you must have had some kind of tailwind from the dollar U. S. Dollar sprinkling, you invest in, in your production set of your competitors do the same, in a market where the grocery it's probably not going to be as big in the coming years as it's just been. How do you view competition, in, in, in the next, in the next quarters?
And and the and the effect on pricing?
Well, we have got it for stable pricing. Previously, I think what Andres have been very clear on. Also in previous quarters is that, yes, we saw an impact from the currency. And going forward, I mean, we're not overall guiding for for prices. I think what is more most important for us is that, we are satisfied with the project that we have delivered so far.
And, that also shows in our margins. So, I think it's managing cost price deliveries and being overall effective effective in what we're delivering. That is what makes the difference in in the result that we're delivering.
And the next question comes from the line of Vasil Ackman from SEB. Please go ahead. Your line is now open.
Yeah, Hi. Hey, Anderson, America. A few questions from my side, specifically on on the margins. I mean, how how would you like us to think about the q 4 margins and maybe if you could relate it to to your backlog. As far as I remember, you mentioned that q 3 margins were very good and it seemed that you're getting very substantial leverage on the volumes in Q4.
So how should we think about the margins.
Okay. Again, we don't guide on the project margin. But if you look at q4, q4 is a very good quarter, from an execution point of view. So volumes obviously have an impact. We also have a good projects in the quarter.
We have, continued the the cost out on the product. So all of that as a whole, delivered a g a good Q Four. What we can say and have commented on is that we're very happy it, with the order backlog. We're also using the same methodology in what we approve and not approval. So there's no changes to that.
So we're, happy with the backlog. We don't comment on the levels, in the backlog.
Sure, Rachael. Maybe maybe another question also relating to the margins and your margin guidance in 20 2016. And the accelerated earnings programs, how substantial will that, the benefits from that be in 20 team. If you could try and give us some flavor on that. Okay.
So I I will be a little bit boring on that one as well. We have accelerated program that continues. And obviously, improvements under that program will also follow the volumes. Cost this, a very high focus and high on the agenda. But obviously, with high activity level, you can also see, drawbacks if we are not 100 percent efficient in in in our deliveries in, 2016.
But all in all, accelerated program has, delivered and continue to deliver, and it's a high focus because remaining cost conscious will be a clear competitive advantage in the market.
Okay. And just to follow-up on, on, the rate case program. So the full benefits of that program, being a bag in 2000 seen, or will will there also be additional benefits on that?
I'm sorry. No. I don't think I heard the last one.
Yeah. I I was just asking, the benefits from accelerated earnings program. So the full benefit from that to be visible in 16, or will you all have additional benefits, impacting beyond 2016?
Okay. I mean, the the programs that we have run for, a number of years, but I think, to get more into that details, maybe we can discuss that at the meetings later.
Okay. And then just one questions, one quick question to Anders. Hans, if you could maybe elaborate about, your ambitions for, during the energy. Maybe give us some flavor on how and how much and and by which means. And if your ambitions for doing this call energy have have changed during the last 6 to 12 months.
Sorry. Yeah.
We can't. We we in all honesty, we can't hear you, so we can't really hear the question. So if we can take those questions later when we meet, would be much appreciated.
Sure.
Thank you.
The next question comes from the line of Mark Freshney from Credit Suisse. Please go ahead. Your line is now open.
Good morning. I have a question on credit. When you work with your customers, very often you'll have to present business plans to banks and so forth, what are you seeing and what are your clients seeing on credit and availability of credit for turbines and the ability for those clients to get finance for those turbines?
Well, so far, we have, as you know, we we don't have any captive financing. So we have been ful in helping the customers with the external financing. What what I think is beneficial going forward is that overall, wind projects are very bankable. We also talk to banks, that have abandoned a certain, not, sources of of energy and therefore looking more and more into financing, wind. So I would say, for the wind industry as a whole, I see that there is a clear interest from the bank to finance the
next question comes from the line of Shai Hill from Macquarie Securities. Please go ahead. Your line is now open.
Yes, thank you. Shai here from Macquarie. I just want to ask firstly about some of the assumptions behind your revenue growth guidance, your guiding for a minimum 7% growth year on year. So I appreciate the uncertainties you've talked about a lot, Anders, but I just wanted to probe a couple of things. You delivered 3 gigawatts in the States in 2015.
Do you think that you will do more of that in deliveries in 2016. I appreciate some customers might push out now given things are more relaxed on the PTC, but you must have made a an assumption to give us revenue guidance. And also in Europe, I know that the order inflow towards the end of last year was pretty strong. Markets like Poland, Germany, very meaningful for you in total revenues, are we seeing suck in before we move to an auction system that is to say, do you expect another strong year of deliveries in Poland and Germany? And my final question on something different.
Strategically, you say that, the pinnacle of your of your strategy is is the wish to be the undisputed global wind leader. If Siemens and Gamesa merge, you won't be. But did you and does this morning rule out? Bloomberg is saying you've definitively ruled out a bid for Gamesa in an interview this morning. Could you just clarify on this call, please, Anders, if that's the case.
Have you ruled out a big ticket later?
Okay. If I if I start with, your first question on the guidance on revenue, it's Again, we'd we'd take we have a record high order intake because to 9 gigawatts. During 2015. We have a very solid, order backlog and and of course, the orders at hand and a certain assumption on on, orders to flow through as delivery in the year is the basis for our minimum, revenue guidance. I think I talked a lot about the the US and and how we see it.
So I would not go into to the the data. It's there. On on your strategic question. As I said, I mean, our strategy is about organic growth. And, that remains.
We have the clear ambition to be the, the the wind leader, which we all today, and And our definition on that is on revenue. So, because I think that's a good parameter to define it on. I will not speculate in, in the same as, Gamesa merger or no mergers. I mean, I can comment on that when once we know anything. I I I don't really know if there would be a merger or not.
So I can't really I can't really comment on that. So again, our strategy is about, organic growth and, as I said, being the market leader if we if there is an opportunity in the market as we have shown with the service acquisition where we think it brings value to Vestas. We will surely look at it, but the strategy is about organic growth.
Okay. I'm sorry to be boring, Anders, but I just want to just wanna to clarify because Bloomberg is quoting you as saying we will not bid for Gamesa. Did you make that quote this morning, please?
We have no intention of bidding for Gamesa.
Thank you very much.
And the next question comes from the line of Jose Arias from Stane BNP. Please go ahead. Your line is now open.
Good morning gentlemen. I had a couple of questions both related to the U. S. Market. I'm afraid The first one is on the US framework agreement.
You mentioned that you have still an outstanding amount of 1.5 gigabytes. I'm unclear with an UPDC. What the disorders can be. Can they be delayed beyond 16 now, or maybe may they be canceled? Can you update us on your, outstanding, the value of your outstanding orders with deal cost in partner with synergies on that?
Question number 1.
Yeah. I I think, again, if
you look at last year, we took 3 point one gigawatts in the US. Half of that was, within frame agreements and half of that was outside the frame agreements. As I said, the frame agreement still exist. I will not go into how they look from the timing point of view. But there is definitely ample of time for the customer as well to to decide.
So it is a very new market in the US. With the, the multi KTC. So we are currently in close dialogue with our key customers in the US on how they see the market plans out. If you look at last year, and actually also in 14, I I must say I'm extremely pleased with, our performance in the US market. I think we have clearly taken market share.
And that we today, are a very, very, very relevant player, in the US market. And, have a broad customer base, both where we have frame agreements with and as we have shown last year with whole of the orders coming from from customers without frame agreements that we that we are but with all situation in the US. And I will not give, more sort of precise estimate of order intake either globally or specifically in the US.
Okay. That's a question number 1. Question number 2 is on the competitive environment in the US. We have heard over the past few weeks several manufacturers reallocating to the US market, and that makes sense. Given the longer term visibility we may now have, we have heard about long action of wind power, maybe opening a plant.
We may even have a stronger gamma size if Siemens and gamma 7 to emerge. How confident are you of keeping your current very high market share in the U. S?
I think
It's a competitive market overall. In in actually in in in all geographies. So I don't expect, that to change significantly. We'll continue to be a specific competitive market. I think for the US, I can just repeat what I said.
I'm if I look at our current performance, if I look at the performance over the year, investors in the US and the market share gains we've done. I'm really satisfied with our performance. I also, if you look at the manufacturing capability we have on the ground in the US. I'm also very confident in that.
Thank you. And the next question comes from the line of Klaske from Nicrodiet Markets. Please go line is now open.
Yeah. Hello, Kowski from Nuclear Markets. Two questions. First of all, could you help us a little bit about these one offs that you have? And especially I'm thinking about Q4 because on slide number 14, you write something about $50,000,000 write down on inventory related to development and construction activities in prior years.
And just to be absolutely clear, is that one of negative one off included in your gross profit? And secondly, the right write up of the US factory, is that the 46,000,000 that we can see on the special items?
Yeah. And you're, you're actually, it's, it's a simple answer. You're right on both, in both your assumptions.
Just to be absolutely clear, then the EBIT before special items is actually understated by 50,000,000 in Q4.
That depends on how you wanna see it, but obviously the 50,000,000 write downs on on the inventory has a negative impact on the gross margin.
Excellent. Then my second question, if that would be about the overall market outlook, even what we're seeing in with the oil price and the gas prices, etcetera, could you just give us a little bit of flavor of what kind of feedback you get from clients outside the U. S. I'm not really interested in the U. S.
And what kind of feedback you got in Q4 and perhaps here in the beginning of 16. Are they worried, or are they not really concerned about that?
I mean, of course, overall, from a Mac, point of view. I guess it's it's it's no no news to anyone that it's it's fairly turbulent times. I mean, overall for for on the macro environment and and of course, part of that or a big reason for that is of course the the oil prices and the volatility of of the oil prices. So of course it's fault it's fair to say that that, I think despite that, volatility and those uncertainties, on the macro environment that we already saw last year that we deliver very solid results. So of course, there is discussions, in the overall energy sector on, what impact this will have on economic growth and and in the end, then of course on electricity consumption, in the current macro economy that we have.
So far, if I if I then jump to the discussions we have with our traditional customers, and so on and and a little bit back to what Mike I say. We we have not sort of seeing that project has gone away from wind to, oil, so to speak, or some of the pipeline that our customers are working on has moved out to gas instead of of renewable or instead of wind. We haven't We haven't seen seen experienced that at all and I think that's of course also quite evident in in our orders growth. But having said that from a macro point of view, the oil prices impact on overall macro development is, of course, there. But from a mid term or short term point of view, I would say that we haven't seen a big or any impact at all.
Okay. I think we are last question.
Yes. And the last question will come from the line of Caso Blanche from AB Please go ahead. Your line is now open.
Thanks a lot. A lot of questions, Stacy, just a little bit of follow-up. Anders, I think you mentioned that you were expecting a relatively low activity in Q1 with the 2015 being back end loaded. Could you just clarify that low activity in Q1? Are you referring to your deliveries or to orders.
That's one thing.
Yes, I'm referring to delivery. So we see a low delivery level in Q1. Compared to, last year.
Thank you. And then secondly, I understand that you cannot comment on the seamens speculation. But maybe you could give a little bit of flavor about your general thinking about the consolidation in the industry. Thank you.
Yeah. I I think,
I mean, as I said before, it's a competitive industry. I think that, we are coming from a situation with, quite a lot of players. Some of them very local. Some of them a bit regional and some of them or very few of them truly global. So I think it is a natural development in the industry that we see consolidation where local, more local type of players try to to combine.
I think that is probably, healthy, that, that, the industry is consolidating. So, yeah, it's something that, of course, we we monitor closely. From a investors point of view, again, we have, I would argue the best global reach of any company. We also have the widest product portfolio in both the 2 and the 3 and the 8 Megawatt platform. So I'm confident, with our position.
Excellent. Thanks a lot.
And that was then the last question. And again, thank you so much for your interest and you're calling in.