Good morning, and welcome to Vestas Wind Systems' full year 2012 result, as well as the outlook for 2013. Special welcome to everybody who has decided to join us here in Aarhus, everybody who has decided to tune in on the web and follow this. And, we will follow our normal procedures, i.e., go through the presentation, myself, and my colleague, Dag Andresen, and then later on turn to Q&A, both in the room and people over the phone.
The highlights that we would like to take you through today is, of course, apart from full year 2012, is also some of the main drivers for Vestas, both as we have seen them during the year, but also as we see them going forward with the outlook for the year 2013. And as I said, we will be two up here presenting and taking the questions. Let's start to drill into and have a little reflection on what kind of journey is it that Vestas have been on over the last 12 months. Back in November 2011, we announced a new organization that was going to focus on scalability and flexibility.
And the fact that we, unfortunately, during 2012, have had to lay off 5,000 people, is a consequence of having this kind of organization being put in place. What we did not know at the time was, obviously, that we had a significant cost overrun of the new technology related to the V112 and GridStreamer, which have haunted Vestas' financials significantly in the year 2012. The important thing here is that that had nothing to do with the fact that we were in the process of adjusting the organization. We said already back then that we would have a tough 2012, and an even tougher 2013, also related to the uncertainty in the United States, amongst other places.
The target was to reduce the cost by more than EUR 400 million in this two years period. Here, after the first year has elapsed, more than EUR 250 million of costs have been taken out. And as you will see later in the presentation, a lot of this is really starting to kick in, in the end of the year, in particular, in the fourth quarter. This also means that it is a much scalable, leaner, and agile Vestas that is entering 2013, compared to where we were twelve months ago. The scalability, flexibility, and the importance of being lean have been very important part of the operating business model, in the year 2012, and remain to be so during 2013.
We have been focusing on reducing costs through operational excellence, reducing investment, and improve capacity utilization. All this has to take place while three other main focus areas are still in place and remain in place. The focus on R&D and the advanced wind turbine technology and services, and more efficient manufacturing setup, and sales and services with two revenue streams, which were one of the very important drivers for changing the organizational setup of Vestas, are still very much in place. And thus, with the new organization and operating business model had to cater for that. Here, 12 months later, it's very important to say that the new organization is in place, and it is also demonstrating that it is much more scalable and flexible than it was 12 months ago.
These are some of the things that we are starting to emerge, in particular, in the fourth quarter. If we start just with a number of colleagues that unfortunately have had to leave us during this process, then we ended the year 2011 with 22,721 people at Vestas, and we leave the year with 17,778, i.e., nearly 5,000 have unfortunately had to leave us. If you look particular of how it has played out, then nearly 4,000 of them left us in the second half of the year, and as you can see on the slide here, in particular, in the fourth quarter. This obviously means that the total cost base for Vestas going into 2013 has been adjusted as we have gone through 2012.
And again, means that the full benefit of these changes are not really impacting the 2012 financial that much, but much more is going to have a positive effect on the 2013 financials. Apart from the reduction that have taken place quarter by quarter, it's also important to look at where in the organization have this scalability and flexibility taken place. If you look at the split, then 3,122 positions have been closed down within the salaried area, and 1,821 within the hourly paid. So there has been a lot of focus on the optimization of the manufacturing footprint, and I will come back and talk about this. But it's important to be aware of, that the vast majority of positions have been taken within the salaried area, thus far.
If we look, coming back to some of the very important objectives, have been to lower the CapEx, and thus the, the, cash, investment into, to this. And by the end of 2011, we were having a CapEx of, more than 600, or sorry, 700, EUR 700 million, and that has been lowered down to EUR 286 million. The main reason for this is that when we left, 2011, we were still developing more than one platform, in particular, the V112. And if you look into the balance sheet, you will actually see that EUR 350 million went in and started to be depreciated at that time.
So here, during 2012, the key focus have been the development of the V164 8 MW, as well as the V126, even though that actually still comes on the 3 MW platform. So the ability to lower the CapEx this much, means that we are no longer running the same amount of R&D projects, because the 3 MW platform is now going to be with us for sure, for many years to come. And also, that we, in this year, will, going forward, will still have the V164 as the main platform that we are working on. Coupled with this, should definitely be that the regionalization and focus we have had in the R&D and technology area, has definitely proven to be in the right direction to working even more focused on this development, which also have enabled us to reduce the CapEx.
Just looking a little into how important the standardization and the platform approach is for Vestas, we've just shown a little flavor of the type of turbines that we are working with. They are more and normally known as the V80, the V90, but it's important to look at how many platforms do we actually operate. If you start on the left-hand side on this chart, you will see that on the very well-known 2 MW platform, we have today, more than 10,000 turbines, related to the V80, the V90, and the V100. On the right-hand side, you see the, if I can say the word, the older 3 MW platform, more than 2,500 turbines related to the V90, and the V100.
Of the new 3 MW platform that I was just referring to, on which the V112 is built, and now also the V126, we have already seen more than 1,000 turbines. And as you will see later on, the introduction of the V112 to the market has been quite successful, not just in terms of numbers sold, but also in the performance of the fleet that you will see later on. This is very important, because this platform is going to be one of the main drivers in the years to come, for Vestas. And, the fact that we have had the challenges in terms of the cost overrun, has in no way impacted the performance of this new platform.
As I mentioned, a lot of focus has been within the manufacturing area, and just to take you through what are some of the things that we have been going through here in 2012 within that area. We have sold the tower factory in Varde, in Denmark. We have closed the manufacturing facility in Hohhot, in China. We have consolidated the manufacturing organization. We have reduced the manufacturing workforce in the United States, ceased production of the control factory in Spain, reduced production capacity at the blade factory, also in Spain, in Daimiel. We have merged the control factories in Lem and Hammel, here in Denmark, in order to optimize this, and moved part of the production to Tianjin, in China.
And lastly, but not least, we have also started supply to third parties for some of our facilities within both tower and castings, another way to improve the capacity utilization at Vestas plants. This journey is nowhere over, but we have taken a lot of important steps during 2012 in order to get to where we want to be by the end of this year. So more is to come within the manufacturing area in 2013, and decisions are gonna be taken on the manufacturing footprint. As you can see, and which Dag Andresen will talk to a little later, concerning some of the writedowns, we have put a number of facilities up for sales that could be divested. Whether or not this will happen during 2013, time will tell.
It's important to say that there's still a lot of work is ongoing within this area. As I previously mentioned, also, suppliers to third party is part of the way that we are constructing our manufacturing footprint now. Turning into the activity level during 2012. I cannot say hard enough and sincere enough what the Vestas organization have done. They have done a remarkable work in terms of increasing the shipments with 22%, and at the same time, the number of employees have gone down by 22%. As you can see, a lot of people have known that a lot of things had to happen during the year, but people have just executed according to the plans.
On behalf of management, I would really like to thank everybody at Vestas for a significant job done in a very difficult year. It's also important to say that you cannot just look at the delta between the 22 and the 17,000, for instance, year on year. It's important to see how it has evolved quarter by quarter. And thusly, we have brought it down, the cost level, step by step during the year. Talking about the quarters, there are a few things, as ever, that one needs to recognize with Vestas. Also, in 2013, that we can see huge fluctuations between the quarters. But it is maybe, if we start on the EBIT side, it is maybe forgotten that actually in Q2, Q3, and Q4, Vestas had a positive EBIT result, and of course, in particular, in the fourth quarter.
The real challenge for Vestas materialized in the first quarter, where we came out with a deficit of more than EUR 200 million, particularly related to the cost overrun on the V112 and in GridStreamer technology, which has been haunting us during the entire year. But operational-wise, it actually has been three positive quarters. Not so on the cash flow. We had hoped for a positive free cash flow in 2012, and unfortunately, we did not deliver a positive free cash flow. We changed the guidance during 2012, down to -EUR 500 million, and we ended up with -EUR 359 million. However, in the fourth quarter, we had a significant rebound with a positive free cash flow of EUR 416 million.
In a minute, I will take you through some of the deltas here that is important to be aware of as well. The point here is, huge deltas between the quarters. Just if you look at the EBIT side, it was -18% in Q1 and +6% in Q4, i.e., a delta of 24 percentage points within the same year. That, again, is important to be aware of, of how huge the swings can be from quarter to quarter with investors. Turning to the cash flow. As I said, we actually had a negative, as you can see here on the right-hand side of the slide, we had a negative free cash flow of -EUR 359, versus a positive free cash flow by the end of 2011 of EUR 79.
However, what is the main driver for this big delta between the two quarters? Or sorry, these two quarters. If you look at the middle of the slide, you will see that payables decreased with EUR 555 million. That meant that by the end of 2011, we were financed EUR 1.5 billion of our suppliers. And during 2012, because the way the manufacturing has panned out, that number now stands at a billion, meaning that the financing from the suppliers has gone down with EUR 555 million. That's important to be aware of. At the same time, the inventories did improve with EUR 300 million, and we still have 1,950 MW under completion.
We had hoped to release even more from the net working capital, but we expect to see that materializing during 2013. Due to the much lower order intake, obviously, prepayments did also have a negative impact compared to last year and was thusly impacting us with EUR -110. So when you look at the total development of the free cash flow, the important point here is actually that more needs to be done, but in particular, the payables was the main reason for the big delta between Q4 2011 and Q4 2012. A lot more financials are going to come now, so I will ask, Dag to come up on stage here and take you through some more, numbers.
Thank you, Ditlev. We go directly into the next level. It's actually the activity level of factories. The changes between 2011 and 2012 is 22%. Shipments up to 6.2 GW, and that's driven mainly by higher activity shipments in the European community. If you look into deliveries, as we said before, it's the primary revenue driver, has increased by 16%. The biggest contributor this time was US, that delivered 1.3, and relatively to last year, where US was 1.5. The growth, as we say here, is primarily driven by higher activities in Italy, Canada, Australia, Sweden, UK, and Poland.
If you look at the income statement in Q4, as Ditlev has said, we had a revenue increase of 23%, and we also had a fixed cost reduced by 19%. We had an operating profit before special items as high as EUR 155, and that's the highest operating profit for a quarter in Vestas' history. We also had big write-downs in the last quarter, impacting the profit for the period, ending at EUR -618. If you look at the EBITDA margin before special items, it improved by approximately 3%, up to 10.6%, and operating margin improved by more close to 4%, up to 6.2%.
If you look at the income statement for the full year, the income statement is, of course, heavily impacted by the write-downs that we have taken, in addition to what Ditlev has said, the 112 and the GridStreamer. In addition to this one, we managed to get EBITDA for 7.2 regarding revenue, but we just managed to get an EBIT for special items at 4, and that's disappointing. But the reason is that, we can see that the cost that we are now taking out of the organization due to the redundancy, due to the cost out of products, it starts to get an impact, but we see it more or less fully in the end of 2012, Q4.
Ending up at a profit for the period at EUR -963, and also gross margin 11%, slightly some down, and EBITDA margin 6.6%, some one point percent higher, and operating margin before special items at 0.1%. Special items. The company has decided, based on a new, more flexible operating model, to classify certain assets as held for sale, because we would like to reduce the manufacturing footprint, as Ditlev mentioned in the introduction, and also, as we said during the whole last year. It means actually that we now have classified several assets for sale, and in addition, done the necessary write-down, to be more precise, finding a balance for the sales price. If you look at the write-down of other non-current assets, this is due to other issues, both regarding scalable activities, less activities, and also closing down of factories.
The company has also, together with its external auditors and the board, decided to look over the whole balance sheet, and means also that goodwill has been under an assessment, and we have a write-down of EUR 104 million, and also of development projects and software that is naturally for the company to do an impairment testing of. Then finally, we have EUR 190 million due to the layoff, and that's actually has a cash effect together with some small other issues, ending up in a total cash effect of approximately EUR 130 million. Gross margin, let's have a little focus on the starting point. First quarter 2012, due to the situation that was mentioned before, 1 12 million in GridStreamer, we had a gross margin of 1% and 12 in gross profit.
The company is now back in the fourth quarter to the same as we had in Q4 2011, but we also see that still there is volatility. Gross margin has a specific focus, and we see this will improve over the year to come, but this has special attention from top management and the organization to secure that we can have less volatility going forward. Back to reduction of the employees. What is important to have in mind here that, approximately 4,000, of the 5,000 is actually reduced under the two last quarter in 2012. It means actually that the cost due to the reduction is actually hitting the balance sheet and the P&L, in the end of 2012.
We still keep up the guidance that we will have more than EUR 400 million with full effect as from the end of 2013, and we also say at least EUR 1,800 million more will come through reduction, divestments, continuation of hiring freeze, and layoffs during 2013. We have estimation to be maximum 16,000 people or lower during 2013. Fixed costs, if you look at the 2011, you see it was a ramp-up of fixed cost. If you're comparing the graphics here and the bars for 2012, you can see it's ramped down.
It's very clear then, if you look at Q4 to Q4, we have a 42% reduction million, and it's very clear that of the EUR 250 million cost savings with full effect, this has also impacted, cost of sales. And we see this will continue into 2013, and this is good enough according to our plans going forward. Operating profit development. What is very important to, to look into these two pictures and graphics here is actually this is nailing down both at the product cost out of the platforms that we have talked a lot of in 2012, and in addition, the reduction of fixed capacity cost is coming in the end of the year, and especially for the last quarter.
If you're comparing product volume, that is netted by product margin, comparing 2011 with 2012, you see more or less these two are netting each other out. If you go into product volume, product margin for fourth quarter 2011, comparing this quarter, 2012, you can see that the product margin is much lesser, both in real terms and in percent, and this is actually a very clear definition that product cost out is now hitting the P&L, as we said all the time. If you look into the fixed capacity cost of EUR 79 million comparing 2011 with 2012, and also comparing Q4 2011 with 2012, you can say that 77 of these EUR 79 million is hitting in the last quarter.
This is a clear evidence that the reduction of the cost in the company is going according to the plan and get more and more effects according to the quarters go on. Service. Service is the most profitable part of Vestas going forward. We had an increase by 10% compared to last quarter, 2011, and we have as much as 26% increase if you're comparing full year. We have an operating profit of EUR 147 million and a margin, as we have guided during 2012, with 17%. After allocation of group cost, we have operating profit EUR 81 million and a margin of 9%.
As we said before, we have also, in certain areas of the company, added new people in the most area where we have best growth, and this is actually now in the service area, where we have added approximately 450 new employees. As I said before, balance sheet heavily impacted by the significant write-downs for the year. Number two, impacted also by the V 112, and also the extra amortization and depreciation. If you look into the intangible assets of, and reduction there, of the EUR 526 that we have been writing down, EUR 168 is actually into the intangible assets. If you look at property, plant, and equipment, EUR 359 is impacted this post in the balance sheet.
Equity is impacted by the negative result for the year, and also net debt increase of EUR 355 million in 2012, due to the increase in net working capital. Of course, our solvency ratio is also impacted by the large deficit for the year. Change in net working capital, this is the same story as Ditlev also told you. We can see here on the left side that inventories is actually reduced by EUR 1.1 billion. Prepayments was not according to expectation, not for the year, and not actually for the last quarter. We see also payables with a positive EUR 390 million, giving a net working capital of EUR 223 million. This is according to the plans about improving net working capital, reducing inventories, and freeing up cash for the company.
And this is actually also showing that, megawatt under completion, a significant reduction in Q4, and it's very clear that this is going to be further reduced now going forward, and this will also free up net working capital, improving the free cash flow also for the company. Warranty provision, Lost Production Factor. This time is the first time that we have consumed less than we have provided for. It's also very important to, to identify that when we consume, it actually hit the direct, the cost line, but what we provide for is actually not the real cash effect. So what is important here, and the trend line we see there, is actually a very, very strong proof for the technology leadership of this company in the turbine sector, where we are operating in. If you go into the Lost Production Factor, it's below two.
This is the leading lost production factor in the sector that we're operating in, and this is creating value for the company direct on their operating profit line. Back to the performance of the wind turbine fleet. This year, we have 1.6% warranty consumption of percent of revenue. And you can also see here the reduction since 2008 to 2012, and it's very clear that this is more than EUR 200 million of savings for Vestas. And in addition, this also means much better business case for profitability for the customer that has our turbines in operation. The EUR 200 million is very easy to calculate. It's just 4.4 warranty consumption in 2008, and we deduct 1.6 for 2012.
Then we have 2.8%, and we can multiply that with revenue of 7.2, and then we have more than EUR 200 million directly saved during these years. Cash flow statement. We have an increased cash flow from operation. We have lower investments, as Ditlev said. We have actually EUR 475 million lower investments in 2012 than in 2011, and we're going to keep it on the same low level going forward, and this is a significant number. We see also that we have a stronger Q4 that is actually freeing up cash, and we have a free cash flow as high as EUR 460 million. That's very close to half the market value of the company for Q4.
This is also very strong evidence that the picture that Ditlev started with, showing that all the initiatives, freeing up cash, reducing inventory, paying our suppliers, is going in the absolute right direction, or what we used to say, according to our plan. Cash flow statement for the full year. We had, in the beginning of the year, a much higher expectation, but it's very clear that both the lower prepayments from new order intake, and also that we still have too much net working capital tied up in the company, makes the free cash flow still is at a negative level of EUR 359 million. This has very high attention for the year, and we will come back to this issue when Ditlev presents his last part. We are not satisfied with the situation, and we're going to improve the situation gradually now going forward.
We will also see an improvement here by lower activity level and also lower investments, so we can free up cash for the company. The company has concluded and agreed with its lending banks, the nine lending banks, the RCF. The company has used 2012 to revise their business plan together with the nine banks and the two multinationals. We have agreed about the new facility according to the business plan that is calibrated to the operation activities that we have until 2015. The company is very satisfied that we now have closed this, and we hope this will be positive for the company also going forward in discussion with customer, and also, excuse me, in discussion with the market. Net debt to EBITDA, we ending the year with 1.9.
We foresee that we will be below two also for 2013, and this will continue to decrease according to the other initiatives and the plans that the company have going forward. Return on invested capital, this is still not, from a company's perspective and management perspective, not at an acceptable level. We said in Q2 and in Q3, this will be positive for the year-end, and it's slightly positive. It's actually 0.2%, but it's positive, and this will now improve going forward. As I mentioned before, a reduction of EUR 475 million in investments year by year is a very, very large reduction. And we see also that we know improving the operating profit and the earnings, and that will have a positive impact.
We will not give any indication at what kind of level we would like to have return on invested capital, but it will improve, and we will come back to this. It has special attention for top management. Then I would like to leave the word over to Ditlev. Thank you.
Thank you, Dag. Turning to the order intake situation. Let me start by saying, Vestas obviously are very focused on our two revenue streams. And let's start with the order intake on turbines. We fortunately saw an improvement in the fourth quarter, 2012, compared to where we were in Q3, where it was significantly down. However, it doesn't change the fact that we have seen a significant reduction of order intake in 2012, compared to 2011, down by 49%. There are various reasons for that. The order intake, obviously, in the United States, were down due to the uncertainty in the U.S. market. China, we have seen a decline there.
One of the things that we have had a significant focus on is what we have stated in bullet point number three, namely, to keep on a very strict focus on well-balanced projects with respect to profitability, payment terms, and risk. One of the things that you cannot find in Vestas accounts for 2012, or previous years for that matter, are projects that have gone wrong. Vestas is obviously, in many ways, also a project business, and therefore, Vestas' ability to make sure that these things are well-balanced is something we pay a lot of attention to. So the fact that the order intake is down, has also been that, of course, when the market is under pressure, it can be tempting also to take some orders in, where you may not feel that they fully fulfill these requirements.
This is something we have been very strict on, despite, obviously, that we would always like to see more orders coming in. This is also reflected in development of the average sales price, where you can see that it is actually up with 3%, from 1.04-1.07. And we are actually also seeing in the market that the price level that is starting to bottom out in terms of moving forward, which again, of course, is important to recognize. It doesn't change the fact that we significantly have seen a significant drop, but also that some of it has been a conscious decision. And then, obviously, we hope with the extension of the PTC in the U.S. and others, that we will start to see this picking up in 2013.
That has meant, with the increase in revenue that we've had of 24%, in 2012, compared to 2011, of 24%, that we have been reducing the value of our backlog, down, from EUR 9.5 billion to EUR 7.1 billion on the turbines. We have, however, seen a different picture on the development within the service business, as the backlog has grown from EUR 4.2 billion in Q1 2012, ending at EUR 5.3 billion, by the end of the year. And that means that combined with- if you combine service with the turbines, we have a total backlog of 12.4 billion euros going into the year 2013. That brings us to the outlook and expectations for the coming year.
But before we look into the numbers, let's look at some, what we believe are very important enablers, for Vestas' execution in 2013. As everybody is aware of, that we every year conduct, a very big customer survey, in order to rank, Vestas as how they see our performance. And in 2011, we had a score of, 71. We had higher expectations for this year, but it basically landed at seventy, which at a benchmarkable level, is still a very acceptable score, but we had hoped higher. When you are then peeling the onion, looking at what is it that people have scored Vestas on, it is very clear that in operational performance, Vestas continue to score very, very high from the clients.
Where we've had the most negative have obviously been due to the turbulence that have been surrounding the company is obviously something that also impacted the scores of the clients of the, let's say, the certainty where is Vestas at the moment. And therefore, again, very important rebound made in the fourth quarter, coming back to a net debt EBITDA level below two, to give people the understanding of where is the company. And there are fortunately good reasons for seeing this operational performance given by the customers, which we are very thankful for. As Dag mentioned in his presentation, the warranty consumption has gone significantly down, and is at an all-time low of 1.6% of revenue on the warranty consumption.
That, of course, also reflected, too, that the LPF is down below 2, which also includes the new technology, the V112 and in GridStreamer, which is performing as good as, let's say, the more well-known turbines has been running for a while. Looking at the safety side, we have kept on reducing the number of accidents, so we are now down to 2.8 per 1 million working hours at Vestas. It is still too high. We are still striving for 0.5, which is world-class. But despite the fact that we have increased the activity level with 22%, then 2012 was still the safest year ever history. And finally, the backlog of EUR 12.4 billion going into 2013.
The market surrounding us has also definitely posed its challenges to the wind sector and thereby also to Vestas. If we start in the United States and all the discussion that has been surrounding the development of shale gas and the cost of gas, then you can see here on the left-hand side, where we were just a few years ago, when Vestas entered the U.S. market. And obviously, when you know that the wind is competitive around $6 compared to gas, then when we are now down at a level of $3, has made it, of course, extremely important that the extension of the PTC has taken place because of the huge drop in the gas prices that we have now experienced.... How this is going to evolve, time will tell, but no doubt, this has had a significant impact.
But on the other hand, also reiterate that if you want to be competitive in the United States, you have to be present over there. And we have no doubt that if we had not had our manufacturing facilities in the US, we on one hand, A, would not be competitive in the US market, and secondly, we would probably not have seen the extension of the PTC, if it was not due to the fact that 75,000 people are now employed in this industry in the United States, meaning it has become a real US industry. If we look into Europe and the carbon prices, then when the price of carbon was introduced in 2005, it costed EUR 30 per ton. In 2012, this has dropped to EUR 7.4.
This, of course, also have had an impact on the development of the wind sector in Europe. And if you look at the impact from the gas situation in United States into the market, it has also meant that we are now seeing that a lot of coal is being shipped from the U.S. to, for instance, Europe. Actually, Europe is now only overtaken by China in the increased consumption of coal, and this, of course, have impacted the whole European energy market significantly, as we are now seeing a price level of EUR 7.4, and some are even expecting to see the price of carbon go even further down, and then maybe a rebound. But these are some of the macro drivers that obviously have had a big impact on the renewable energy sector and wind. There are, however, also some very positive development.
The other day, Bloomberg New Energy Finance came with an update on the situation in, for instance, Australia, saying that wind was now cheaper than coal and gas. What we see in the wind sector is that the cost of energy keeps being lowered. You have here, all the way back from the 1980s, the cost as it started out, and how we have constantly, as an industry, reduced the cost of energy year by year. When we look into the product roadmap that we are working with and is implementing, the only thing we will see from the wind sector is that we will keep on reducing the cost of energy.
and I think if you look at some of the other things on the left-hand side of the slide, I think there's good reasons to believe, obviously, with big regional differences, that we'll start to see things trending upwards again. Again, underlying why wind is keep on getting more competitive going forward, even though we are not in any way denying the fact that right now it is tough times for the wind industry. This brings us to the outlook for 2013. We had originally anticipated shipments around 5 GW. We have changed this to 4-5 GW. And why have we done that? That is particularly related to the regulatory uncertainty that we have seen in some countries.
We know that the moment that regulatory uncertainty starts to evolve, it immediately impacts the activity level in a market, and therefore, we have said 4-5. If we look at the revenue, we expect revenues of minimum EUR 5.5 billion, of which service is expected to be around EUR 1 billion. An EBIT margin before special item of minimum 1%, and 17% on service, before the allocation of group cost. And finally, on free cash flow, a minimum of EUR 0 on the free cash flow.
If we look into other important plans to be aware of that Vestas is working on, we will continue the development of the V164 8 MW, so the first prototypes will be installed in the second quarter of 2014 here in Denmark, and we will continue the upgrade of both the 2 MW and the 3 MW platform. There are no plans to invest in new manufacturing facilities; property and plants, etc., are therefore expected to be around EUR 150 million. As I said in the beginning, we had the plan of, over this two-year period, of taking out more than EUR 400 million of the cost base, and that plan is still in place. As Dag mentioned, we are well on track.
We have delivered more than EUR 250 million by the end of 2012, and therefore, we do expect still to reduce, unfortunately, 1,700 positions at Vestas down to 16,000, but this is all in accordance to the plans that we have previously announced, so there are no changes to the already announced plans. And as I said a little early on, we will for sure also, during 2013, see huge fluctuations between the quarters concerning of the activity levels. And that, of course, is also very much related to the way we recognize revenues and earnings, that every time we hand over entire project, we get the full benefit when it happens, and therefore, we are seeing some of these big swings between the quarters. Bonus targets. We have bonus targets for Vestas employees.
Unfortunately, we have not been in a position to pay out the bonus in 2010, 2011, and here in 2012, but we still have the aspiration to do so in 2013. What are the target levels? The target level is that the low bonus target is an EBIT before special item of EUR 3.7, and a free cash flow of EUR 220. Both have to be fulfilled, and it's capped at an EBIT of EUR 5, with a free cash flow of EUR 500. You can see that the weight here is 45% on EBIT and 55% on free cash flow. Of course, if these targets are not met, and starting with the low end, then there, of course, will be no bonus in 2013.
But those are the targets set out for the organization. And as can be seen here, we have all in the past have other bonus targets as well, but it has been clearly decided that the performance on EBIT and free cash flow are the centerpieces and the most important pieces for Vestas to deliver on in 2013. Lastly, the board has decided that those are going to be the two drivers for the bonus in 2013. Let me wrap up by saying that we have spent 2012, dare I say, nearly every minute of the year, in preparing for a very tough 2013. The three core focus areas have been on reducing costs, lower the investment level, and improve capacity utilization.
What we have achieved is to reduce the number of employees with 5,000, improved by more than EUR 250 million in terms of the savings. We have lowered the investments with 62%. We are levering our platforms and utilization of the existing platforms. We have so closed and merged factories during the year, and we have now started supply to third parties. The objectives for 2013 are also equally clear, and our own assessment is that in this two-year plan, we have now basically reached a level where we do not believe that the glass is half empty. We actually do believe that after the first of the two year, the glass is half full.
A lot of work needs to be done in 2013 in order to make sure that we have totally managed to get Vestas through this challenging period for the industry. With this, we will now turn to the Q&A. If you will join me here, Dag, and then should there be some questions in the room, I will be happy to take them before we turn to the phone.
Hi, gentlemen. Jacob Pedersen from Sydbank with some questions. First of all, relating to your order intake, it seems that you've been negatively surprised by it for the past 2-3 quarters. Is this negative surprise related to your financial situation that the market became fully aware of in maybe the end of July? Or is it more a question of increased competition in the marketplace and your stricter evaluation of which projects to take on the books? That's the first question.
Okay. We can take the first one then. If you look at... There are, of course, some clients which have asked us, "What's going on? What happens to the company?" No doubt. And we, of course, have dialogues with those specific customers about the situation. And that is, again, why it's been so important to have this rebound in the fourth quarter. Because one thing is to tell some people, "Yes, we will deliver according to our plans," but I think it, it's also clear that people, of course, have to see now that it actually has happened. So those who would have had some concerns, I cannot say that I can give you projects we have lost because over concerns, but of course, we have received some questions on it. Having said that, you will see that our order intake is down by 49%.
The second largest player in the industry's order intake is down 47%. And they have, by the way, a balance sheet which is somewhat bigger than ours. So, it is not just Vestas that have seen this. Also some who are financially much bigger than us have seen the same thing. So, I would say there are also certain markets, where, as I mentioned before, where we have decided to say no, because we didn't feel that the balance of the contracts were there. So, going forward, we are now at a company with a net debt to EBITDA below 2, and I hope that that will give people a good understanding of that we are actually in a better shape also now with the new bank agreement in place, looking forward, and that's where we're gonna put our focus.
Obviously, an important focus point for the organization is to increase the order intake here in 2013. I think it could be some mixture, but we cannot recognize that it has been as critical as some have reported concerning the financials.
Okay, that leads me to the next question concerning your capital structure. Are you satisfied with your current capital structure? Your book equity has dropped quite a bit during the past year, and your debts are higher than last year.
First of all, I would like to say that we, according to the new bank agreement, that is a very important part of the capital structure-
Get closer to the mic.
We are, we are satisfied as it is today. We have gone through, the business plan of the company until 2015 with the banks, and we are fully aligned what is needed for the company regarding funding for operating with a 5 GW plan, as we now go forward. Of course, things have been, deteriorating due to the situation the companies have been in 2011, 2012. But we also are having a very, very strong plan of reducing the debt. If you look into the, the note, you will see that we have a plan of reducing debt in 2013, and that will, of course, improve certain key ratios for the company.
Going forward with an asset-light company, that is much less investments, and also repaying off certain amount of debt, will of course, make the company more robust also in 2013. This was the plans that we drew up in 2012. But I would like also to say that everything is actually based on the global demand. If we see that global demand will increase again, and we need to eventually adjust with more capacity, of course, then we need also to look into the capital structure to find the most optimal way going forward.
But no current plans of a rights issue?
No current plans for the rights issue.
Okay. My last question: your guidance state that you expect an EBIT margin of at least 1% before special items. Should we expect any special items in 2013?
I would like to say that, management cannot promise anything in 2013. What I would like to say that we have made a very, very thorough assessment, executive management with the board and with auditors based on a business plan, as we should do. We are fully aligned, excuse me, also with the new operating model of being much more, much more asset light. So I think we have done what is needed to be done in 2012. And the company, if you compare the company with January, February 2012, and January, February 2013, this company that stands from today is a much stronger company, as such. Because we have a better, better balance between the asset and what we're going to produce.
Any other questions in the room before we turn to the phone? If that's not the case, then, operator, are you ready?
Yeah. Thank you. If you have a question, please press Star and then One on your touchtone phone. Arnaud Brossard from Exane BNP Paribas is online with a question.
Hello, everyone. Hello, gentlemen.
Hello.
First, could you please tell us how much restructuring charges do you expect in your P&L and in your cash flow in 2013? And could you also please tell us how you expect working capital to evolve in 2013? And finally, could you also update us on where your discussions with Mitsubishi stand? Thank you.
I would like to take the two first. And what we can say regarding restructuring charge in 2013, we will not guide on any restructuring charge in 2013. But if you look into the special items for 2012, one of the key restructuring items that had a cash effect is the EUR 119, regarding the redundancy of people. And we have some small other posts that is actually aggregating up to approximately EUR 130 in direct cash effect regarding restructuring costs. Net working capital, as we said during the presentation, we have a plan in the company to improve the net working capital in a positive way by the initiatives and measurements that we said.
But we do not go out with any measurement, and yardstick for it in 2013. But we have given a soft guidance that this will improve during 2013. I leave the last one over to our CEO.
Yeah, that's a short one. We have no further comments on that, compared to what we have already stated to the market back in August.
Okay, thank you. Can I just ask a small follow-up on-
Sure
... the first one, the restructuring charges? Why is that you don't want to guide? Is that because you have limited visibility, some significant uncertainty on the proportion of restructuring you may charge?
I, we have decided that this is not a vital part to guide on for the company. As I said before, we're going to show quarter by quarter how much restructuring charges we, we're taking that is hitting and has cash effect, to say it so. So that's nothing, nothing more from my part here.
Okay. Thank you.
Thank you.
Claus Almer from Carnegie is online with a question.
Yeah, hi. Just a few questions. The first one is about your order backlog. If you should compare the quality of the order backlog, how it looked 12 months ago, and now, starting of 2013, i.e., should we also, in 2013, see your charts showing a negative project margin development? That's my first question.
I take it that when you say quality, you mean earnings potential.
Exactly.
Okay. Then you will have to say that what we have said all the time concerning the new technology is that the products have not been sold too cheaply, but they have been too expensive to produce. So you can say that the earnings potential of the backlog has, of course, improved due to the fact that the cost-out initiatives that we have taken are starting to kicking in. And in particular, if you look in the fourth quarter, you can see that when you have the ratio between the volume and the margins there, that you are starting to see that it is really having the improvement. So the EUR 30 million improvement that we were expected in the fourth quarter on the cost-out, on the margins have materialized in the fourth quarter.
That, of course, if you compare 12 months ago, have meant that the earnings potential of the backlog has improved.
Okay, just to be sure. So when we see the presentation in Q1, 2, 3, and 4, in 2013, we will not see a negative project margin trend like we saw in 2012. That's what you're saying?
First, we never guide on the quarters, and of course, there's always the question of which projects, of the composition of the projects. My point is that if you look them turbine for turbine, the quality of the earnings per turbine has improved, not least due to the cost-out that has already taken place, and which will continue during 2013.
Okay. And this also stands when you include, as you stated in the presentation, that the newer turbines are more expensive to manufacture?
We are not satisfied yet with the cost-out work where we need to end. But as we mentioned, we have started to see the effect of the work being done, but more needs to be done during 2013.
Okay. And then my final question, that goes to the free cash flow. After Q3, you said that the downgrade of the cash flow was only the matter of when some cash flow would come in December or in January. Should we still expect that the cash burn you had in 2012 would actually come in Q1?
...That's correct. I remember exactly that I said what you quote me on now. And I would like to say that back to we, we still see that some part of the cash flow is, of course, impacted by that we get new orders, and we get prepayments, but that goes directly into the free cash flow. That has been an, as we saw in the last quarter, Q4, we saw that the new orders was not according to our expectation. And it's still too early to give any indication if we will get the full impact in Q1, or it will be spread out during the year. So this is the key denominator, of course.
Number two is still the capacity for the company that we are on a good way is actually to free up cash to the net working capital and the inventories. That's going according to the plan. But we'll go back to the order intake, and the impact that can have for the quarters to come, and it can still be, to a certain degree, volatile, of course.
Okay, thank you so much.
Thank you.
Patrik Setterberg from Nordea Markets with a question.
Yes, hello, Patrik Setterberg from Nordea Markets. I just want some clarification on your 2013 guidance. If you make shipments of around 4 gigawatt in 2013, is that implying that we're gonna see revenue of around EUR 5.5 billion, and EBIT margin before special items of around 1 percentage point?
The shipments are not necessarily directly related to the revenue because of the accounting principles that we are following. So, the 4-5 is one side of the coin. And the other part is, of course, we at the moment have 2 GW under construction that needs to be handed over. So, that is hard to say. The only thing we can say is we expect minimum EUR 5.5 billion in revenue.
So we should not expect that margins will improve if your shipments will be in the high end of the range?
Say that again.
Is that we should not expect that the margin could be, I can say, better than the next than expected, or if we're gonna get 5 GW of shipments, it's not necessary gonna give a higher margin compared if we're gonna have shipments around 4 GW?
No, I mean, if the 4-5 obviously can have an impact on the utilization rate of the manufacturing facilities. But if you look at the earnings, turbine for turbine as such, then, that is not gonna be directly impacted by that.
Okay. Coming back to the previous questions, could you give us an indication of the cash flow profile on the first half compared to the second half of the year? What is your best assumptions at current stage?
But, as I said before, we never give guidance per quarter on the cash flow profile. And I think if you look at the past, the only thing we're saying is we will see, like we've seen in 2012, swings between the quarters.
Okay. And my last question is just relating to this incident you have been seeing in Germany regarding the service. Is that a—you can say—a one-time related item, or is this gonna impact the service earnings in the first half of 2013 as well?
It is a one-time incident, and it's just important maybe to understand how this works in terms of mechanics. We have one older turbine type that we have under service in Germany. And we can see that in Germany, for various reasons, the way that the service has been undertaken on this platform has meant a too high consumption for the cost of doing those services. And thereby, when you look at the potential earnings from that turbine type in Germany during the coming years, we've had to reassess what we think we can, what it will cost us. So it is a reassessment of that. We do expect that this particular type of turbine, we will have to spend more compared to other places in the world.
It is a one-time specific assessment on one turbine type.
Okay, thank you very much.
Daniel Patterson from SEB is online with a question.
Yes, good morning, gentlemen. Daniel Patterson here. I have a few questions. I wanna start out with the fixed cost reductions, just to be crystal clear on this. You said you had a positive benefit in 2012 on the fixed capacity reductions of EUR 79 million. I just want to be clear, those EUR 79 million, they relate to the 250 total. So therefore, all else equal, there should be around EUR 170 million extra delta for 2013 left. Is that my correct understanding?
Give or take. You are right, and your calculation in terms of the way that you're assessing it is correct, because you have obviously a combination of what you can see in the P&L and what you cannot see under the gross margin.
Okay, good. Now, so that means you have a positive benefit of these, let's say, EUR 79 million on the P&L. Could you give some indication, what has been the cash benefit? I must assume it must have been higher than EUR 79 million in 2012, the cash benefit from the layoffs.
...The cash benefits in, in principle is higher than what you see here in 2012. It comes, of course, since it's backlogged, it comes in the end of 2012, and it continues into 2013. But also, I would like to draw your attention that we have also EUR 190 million extraordinary cost for the redundancy program also, that is has a direct cash effect.
Of course. So the benefit is higher, excluding the redundancies, but not significantly higher than 79?
Yeah, that's how you like to state it.
Okay. Then on CapEx, you're guiding EUR 150 million for tangible CapEx for 2013, but I noticed you didn't say anything on intangible CapEx. What's your thought on intangible CapEx for 2013?
As we say, we'll have a total investment level going forward with the level that we indicated, as is actually for 2012. We'll not give any further regarding split on this, because it depends on many factors, to say many factors. So, we just say that we keep it at the same level or maybe a little lower in 2013, but it depends on several things, to say so. So, I would just give the clear indication that the EUR 286-290 is an area where we're going to move around in 2013.
Okay. My next question concerns your margin guidance for 2013. I guess if you're a little bit cynical, you could say the 1% margin guidance is mainly driven by the write-downs. The, the write-downs give you a lower depreciation, about EUR 50 million, this year. So excluding that, the margin will be around zero. So underlying, there's still no profit. How should we think about this?
You're right. If you take the effect from the write-downs in 2012, that has around EUR 50, as you mentioned. So, cynical or not, on the pure math side, you're right.
What does this mean? I mean, does it mean you're trying to be conservative with your 1%, or does it mean that the majority of the benefit will come in 2014, or how should we think about the 1%?
We have just said that we have set minimum, we never give feelings to the numbers. We have set minimum 1% in 2013. And then we have said that if we need to get into, for instance, where we want to go in terms of the bonus areas, we have to do significantly better, and that starts at the 3.7. But again, we have seen huge fluctuations between the quarters.
One final small question, and then I'll get back in line. You're saying you put some factories up for sale, and you have EUR 131 million of assets for sale. I just want—I have one question here. Is the Chilean project that you sold here in January to Enel a part of the EUR 131 million?
No. Hello? Okay, no, the answer... So if you're still on, Daniel, then the answer is no. Should we move on, operator? Or maybe the operator left as well. Are you there, operator? If somebody's watching on the web, I can see a lot of activity of the technicians, but.
Patrick Hummel from UBS is online with a question.
Yes. Hello, everybody. Can you hear me?
Yep.
Hello?
Yep.
Okay, excellent. Three questions, please. First one is regarding what is actually factored in your 2013 guidance. Out of the EUR 400 million total savings, the incremental savings in 2013 over where you stand as of end of 2012 would be EUR 150. How much of the EUR 150 is actually included in the 2013 number, i.e., will the cost savings come through fairly quickly in the new year, or will it be more back-end loaded? So, what's the actual savings number included in your 2013 guidance? That's my first question.
Okay, thank you. I, as I said, we, estimated approximately EUR 250 million in 2012 and additional EUR 150 million in 2013. And we're going to stick to, to the number that in the end of 2013, we're going to be in total, approximately EUR 400 million.
... we have, of course, internal plans about how much we're going to take out each quarter, but we do not make that public because that can change based on our sequencing on the different programs and operating excellence program and the reduction program. So that's why, the reason I will not go out and give quarterly numbers regarding how much it will be, to say so. The only thing is that we have a very good speed in 2013. We have done a lot of work and preparation, but also executed a lot of these initiatives, and they are in on the full operation and execution.
That, of course, give it a better performance since we started these issues and programs in 2012. It gives better performance when now entering 2013.
Right. Thank you. Second question is in regards to your cost base going forward and your capacity. Is it fair that the organization, after all the restructuring has been implemented, is capable of shipping 5 GW per year? And if so, looking at the order intake run rate, I mean, the last 12 months were at 3.7 GW. Of course, it remains to be seen whether there is a pickup in the U.S. in the course of this year or not, but still, it, it feels like if the 5 GW is your actual capacity, there might be need for further adjustment if there is no increase in the activity level. Is that fair?
The sixteen thousand employees that we expect to end the year at still stands. You also have to add to the four to five gigawatts that we expect to do ourselves this year, that some of the manufacturing facilities are now also producing for third party, which obviously you cannot see in terms of that part of the guidance. So, you're right that we have been levering out for around an activity level of five. But you also have, as I just said, remember that there are also some things that comes on top of this for third parties, which increase the utilization rates of the facilities.
Okay, thank you. And third question in regards to the CapEx guidance. Is there gonna be a higher R&D charge going forward because of a lower rate of capitalization of intangibles CapEx? Or shouldn't we see there any meaningful change going forward?
I think we go for the last one until further notice. The plan is, as we have reduced the R&D significantly, both regarding investment and activity, and we concentrate on the three platforms that it will show there, and also improving the existing platforms and system solutions that we have. So it means that we will keep to the level that we have today, and then, if there will be some changes, of course, then we're going to do it. But, until further notice, we have it as we have today.
So just to be clear, there is no negative cost or P&L effect to be expected going forward because of more R&D work going through the P&L rather than in the CapEx line?
Not as we have estimated today, no.
Okay. Thank you very much.
You're welcome.
Sean McLoughlin from HSBC is online with a question.
Yes, good morning. I just wanted to return to an earlier question. Do you expect typical seasonality in 2013, in other words, high shipments in the first half and higher deliveries in the second half?
Well, we never guide on how it pans out during the quarters. The only thing we will stick by is to say, we will always see the volatility during the quarters. And again, please understand that it's not because we just would like to tease you. It is also because that there are a lot of these things which are outside our control. If the customers does not have the grid connection ready or whatever, a lot of these things impact us, whether or not we can take the revenues and the earnings in a given quarter. So we obviously have, we believe, a view on it, but we know there are a lot of things during the year that we are not in control of that can actually impact this.
We prefer to say that it... We'll have to see how it pans out.
Okay. It looks as though you're almost fully drawn on your credit facilities at the end of the year, EUR 1.75. How confident are you that your cash balance is enough to meet working capital requirements at the higher end of your shipment guidance?
What is happening now going forward is that we are releasing more and more free cash flow in the company, but also releasing net working capital because we have a lower activity level. It means also that we have more flexibility both to repay debt, but also to utilize the free cash flow that we have. So, we feel comfortable with the situation as it is today.
Thanks. I have a final question. Just if you could provide a little bit more color on your, on divestment and outsourcing opportunities and your expectations for 2013?
I can speak a little about the divestment issues. As you know, we have classified several manufacturing areas and assets held for sale. And we're going to do this as we have been doing before, that for each time we do a divestment, we're going to come to the market, and we're going to announce the divestment, who is the counterpart and how the transaction is done. We cannot do this now, because then we will release the negotiation and the counterparts and prices and everything. So we will come sequentially to the market according to when we release and go further and execute the divestment plans. That's the first manufacturing footprint. Maybe, Ditlev, you would like to say something there?
There's not a lot to say, apart from the fact that our view on this is that, in particular also related to the service business, that quality and safety will not be compromised in the divestment process. Because our future service earnings are extremely dependent on high performance that we are seeing now here in the fourth in 2012, where we had warranty consumption at 1.6%, is not being compromised. Both for the business case certainty for the clients, but definitely also for the performance of Vestas. So quality will not be compromised in the divestment process. So one thing is to divest. The other thing is also to make sure that the future operational model is still 100% adherent to this.
Those are going to be, apart from the value, are going to be very important assessment in the process of the divestment.
Thanks.
Mark Freshney from Credit Suisse is online with a question.
Hello, morning. Just a question on the EBIT guidance and relating that to the bonus targets. There seems to be a bit of a gap between the EBIT guidance or the floor for the EBIT guidance of at least 1%, and what the target is. Can you relate the two to one another? And, you know, how achievable do you think the, I think it is a 3.7% target on the EBIT guidance on the low bonus targets. Thank you.
I think it's clear that a bonus target is obviously that you need to perform well. And that's why we have said, well, we need at least to get to the 3.7% before we feel that it has been a performance that we think is where it should be. So that's why it has been set at 3.7%. And again, as I said, it's important that it is both of them, both the cash flow and the EBIT that needs to be achieved. It's not either or, it's both.
Okay, thank you.
You're welcome.
Håkon Levy from DNB Markets is online with a question.
Yes, good morning. This is Håkon Levy from DNB Markets. Following up on your divestment and asset light strategy. As of the fourth quarter, you classified EUR 131 million as assets held for sale. Are these the only assets, or the value of the only assets that you currently expect to sell? Or are these assets are classified in this way, as they are very close to being divested? Then I have a second question.
We have been very clear internally in what kind of asset we would like to keep and what kind of asset we have decided to put on the sale list, to say so, for the year. This is a complete list regarding the assets, and this is the complete write-down down to what we think is an expected sales price for asset. So this is the full comprehensive package that we have decided on, that we will launch now and are on the negotiation with some of them, of course.
Yeah, but does this complete package include more than EUR 131 million?
Does it... Sorry, say it again. Does it include what?
Does it include more than the EUR 131 million that is currently classified as assets held for sale, or the only assets?
This is, this is the assets, so this is the number also that is related to the assets.
Yeah.
Okay. Secondly, on the U.S. PTC subsidy that was extended last month. Talking to your customers in the U.S., what kind of activity level are they indicating for 2013, after an extremely busy 2012?
It's we haven't given a guidance for the market in 2013 and 2014. What we know from our U.S. clients is that a number of them had been hoping for, expecting that probably would get an extension. So we know of various projects that our customers have been working, let's say, up to the wire, in terms of being ready in case we would see an extension. But exactly, of course, how many of them they're going to lift now to actual levels, we don't know. But I think we have a fairly good view of the kind of projects that people actually have in their pipeline. So we will wait and see whether or not they are going to materialize.
I think that the largest player in the U.S. market gave their assessment of it just a few days ago.
Okay, thank you.
You're welcome.
Klaus Kehl from Nykredit Markets is online with a question.
Yes, hello, everyone. Two questions. First of all, could you give us an update on the cost out initiatives? Ditlev , you mentioned that we have seen an effect of EUR 30 million here in Q4. So what would be reasonable to expect for 2013?
... Would it, for example, be reasonable to expect EUR 4 times 30 million? That's my first question.
You can say that, it, of course, is very dependent on, if we, if we delivered exactly the same composition, of turbines, during, all of, 2013, then you would be right. But now the activity level in 2013 is expected to be lower, than in 2012. So you can say per turbine, you could make the calculation, but of course it depends upon, the composition of the turbines that are going to be delivered. You can, put another way, the EUR 30 million that is now affected is, of course, now also filtering in to the bill of material of the turbine that are being produced.
So the turbines that we are producing at this moment are cheaper than they were 12 months ago, and we also do expect, during 2013, that to keep on lowering the bill of material costs as we produce them. When that hits the P&L, it is, of course, some can go into 2014, some will also get the benefit in 2013. So everything equal, yes, but 2013 will not be equal to 2012.
Okay. Okay, thank you. And then my second question is about the competitive landscape. Could you, yeah, could you give us some comments on what's going on in the market in terms of prices, competition, et cetera? And also compare it to the prices that you have seen in Q4. To be honest, I must say that I'm a bit surprised, positively surprised, about the prices we have seen in Q4.
I think that there is some very interesting dynamics going on at the moment. We have obviously some of the big traditional markets on one hand, and we also have some new markets coming up in particular in a lot of the emerging markets. So the competitive landscape, of course, varies depending on where you are. You have, for instance, still in China is still the largest market, you still have a very, very competitive situation with some very let's say a big number of players in that market.
If you look in other areas, it's also very much not just a pricing issue, it's also the ability to be able to execute in various geographies and have the people who can go out and develop the projects, and can execute them on time. So the competitive landscape, I would say, is still very tough because the market is under pressure. But it is, of course, very much also our ability as an organization to capitalize on Vestas' global competitiveness, and not least, Vestas' global organization, to get engaged in some of the newer emerging markets, whether it is in Middle East, South America, whether it's in South Africa, and other places that you need to get in.
Because some traditional markets, like, for instance, Chinese, we do expect that that's still gonna be, for instance, very competitive also here in 2013.
Okay, but would... A follow-up question, would it then be reasonable to maybe assume that some of the competitive pressure, perhaps in Europe, has stopped, as most of you guys are losing money?
Well, I think, as I also said earlier in the presentation, I would think it's fair to say that I think it has basically bottomed out in terms of the price pressure per megawatt. And of course, you're also seeing an effect of that as you enhance your offerings to the market with more sophisticated machines going forward, will, of course, also hopefully improve both the customer's business case, but hopefully also Vestas' business case, as you introduce new technologies into the market, like, for instance, the V126.
Okay. Thank you very much.
You're welcome.
Lars Heindorff from ABG Sundal Collier is online with a question.
Yes, hello, gentlemen. I promise I won't ask you about the seasonality in 2013, but a couple of other questions that you may be able to help me with. First of all, about the order backlog. Can you give us an indication for how much you have in order backlog for 2013 alone, not the entire order backlog? That's the first question, please.
We never give the maturity of the backlog, only the total value.
All right. Second question is about the CapEx level. Now, I mean, you're aiming for a more scalable platform, also, sort of more asset-light, business. Can you give an indication about sort of future CapEx level, which obviously, is, is bound to be somewhat lower compared to where they've been historically?
It's clear that, as I said, the V164 is a very heavy investment, also in 2013. So, that, of course, will consume a lot of the investments in this year. And, with the plans of putting it into to testing and the prototypes, in Q2 2014, then obviously that is going to have that effect. The key question, of course, then is: Will there be a set up of manufacturing facilities, et cetera, which will then obviously drive more CapEx? But then we have all the time said we're only gonna do that if we have firm and unconditional orders to back it up. So, how that is gonna pan out, time will tell.
No doubt, making a new platform, and in particular, the V164, is a huge drag on investments here in 2013.
Thank you.
Okay, operator, I think we have to close here. I would like to thank everybody who have taken the time to come and see us here in Aarhus today, everybody who decided to watch it on the web. We look forward to be back with the Q1 update when we get to May. Thank you, everybody.
Thank you.