Vestas Wind Systems A/S
CSE:VWS
Earnings Call Analysis
Q3-2023 Analysis
Vestas Wind Systems A/S
Vestas' third-quarter performance has been a comeback story, with the wind turbine maker more than doubling its order intake to 4.5 gigawatts compared to the previous year. This considerable growth was fueled by expansions offshore and in regions such as North America and Europe. The successful return to operational profit, underscored by an EBIT margin of 1.6%, was achieved through diligent execution and gradual improvements in project profitability. A narrowed outlook for the year suggests Vestas is on track to deliver positive EBIT in 2023 as it emerges from a period of losses, signaling a strong recovery and offering promise of sustained profitability.
Despite a marked transformation in 2023, the business climate for Vestas remains tough, with market design and permitting continuing to obstruct new installations. However, there's a silver lining with the EU's introduction of the Wind Power Action Plan, offering a ray of hope for smoothing out implementation hurdles. The complexity of the supply chain and inflation persist as concerns, although their impact varies across different regions. With just over 50 days left in the year, the environment demands resilience and adaptability from Vestas and the broader industry in working towards operational efficiency and scalability.
The third quarter has been particularly robust for Vestas' Power Solutions, marked by disciplined pricing strategies and a surge in order intake. Noteworthy is the launch of the V236-15MW turbine, which has garnered substantial interest, reflected by 10 gigawatts of preliminary sales agreements. While price transparency has been a hallmark, future reporting on average selling price (ASP) will be adjusted to protect commercial interests. The onshore ASP saw an uptick to EUR 1.05 million per megawatt, indicating successful maneuvers in enhancing product value.
Service remains a bright spot, with an impressive 15% year-over-year revenue increase, overcoming the challenges imposed by inflationary pressures. The Service segment's resilience is indeed instrumental to Vestas' performance, boasting an order backlog of over EUR 32 billion and sustaining profitability through strategic inflation indexation. The segment has also upheld a strong operational performance, consolidating Vestas' foothold in the services domain with an extensive contract portfolio averaging over 11 years.
Vestas' development pipeline has swollen to roughly 30 gigawatts, an expansion led by projects in Australia, the U.S., and Brazil. This growth forms a critical part of Vestas' strategy, ensuring a steady stream of future projects. On the sustainability front, CO2 emissions avoidance from products increased by 6% due to higher volume production, and the company's internal operational emissions reduced by 17% from the previous year. Maintaining a stable safety record, Vestas is also acclimatizing new recruits into a culture of safety alongside its ecological achievements.
The financials tell a story of recovery and strength, with year-over-year revenue climbing 11%, driven by higher value turbine deliveries and service segment growth. Gross margin improved by 4 percentage points, buoyed by the Power Solutions segment's increased pricing and enhanced execution. This feeds into a healthier EBIT margin before special items, showcasing the firm's financial fortitude as it marches towards a break-even point for the Power Solutions segment.
Turning to future prospects, Vestas exhibits cautious optimism. The Power Solutions segment is edging closer to break-even, growing 10% year-on-year despite some offshore activity dip and currency headwinds. Service continues to be a robust pillar, achieving an EBIT near EUR 200 million and a 21% margin for the quarter. As Vestas calibrates amidst market challenges, its financial outcomes underscore the efficacy of its strategic pivot and operational efficiency.
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Good morning, everyone, and welcome to this Vestas Q3 presentation. And let me upfront just thank every stakeholder on this call, not least also our colleagues at Vestas, as this quarter marks Vestas' return to an operational profit for the year for the third quarter. With that, let's go to the highlight of the Q3.
So order intake in Q3, 4.5 gigawatts. The wind turbine orders more than doubled year-on-year, driven by offshore and higher activity in North America and Europe. We had positive earnings from operations, as mentioned. Return to profitability reflects, first of all, the good execution in the quarter and also gradual improvements in the project profitability and the backlog.
When we look at the revenue, EUR 4.4 billion, that's a growth of 11% year-on-year driven by higher value of the turbine deliveries, stable volumes and also double-digit growth again in Service. EBIT margin, as said, 1.6%. Profitability improvement driven by higher gross margin, better pricing. And again, thank you to all our Service colleagues' solid performance and profitability in the Service business.
We also, at the time of the year here, we narrow the outlook and we are on track to deliver a positive EBIT in 2023. And everyone will, here, appreciate our notion of being back in black will happen. When we then go to the business environment. First of all, the business environment is expected to remain challenging for the rest of 2023. I'll also use here the opportunity to say we got 53 days to go in remainder part of 2023. And I think it's here that we might and should be the last time you see this chart. It served us exceptionally well since we introduced it in March, April 2020, in the beginning of the COVID breakout, and it kept our priorities for running the business throughout. Then also in this quarter, we see still market design and permitting pose a barrier to new installations, but we've also seen the positive introduction of EU Wind Power Action Plan, which is very much a step in the right direction. Now it's over to the EU-27 countries to get it into proper action and into actual implementation. No doubt the industry still needs to mature, first of all, to ensure the operational efficiency, the quality and not least scalability to the benefit of government and also our customers around the world.
The business environment has improved during 2023. We can see that the supply chain and disruption and also inflation still remain a concern, but it is mixed where we are.
So now let's go to the area of the most improvement in the quarter and also year-to-date, the Power Solutions. So Power Solutions in short. Commercial discipline and strong order intake is the heading for Q3. The highlights in here, the order intake of 4.5 gigawatt more than doubled compared to last year driven by offshore, growth in onshore activity, predominantly in the U.S., and in Germany in particular. We secured the first 2 orders for our V236 15-megawatt turbine for the Baltic Power and He Dreiht offshore projects. And I would like to thank here our customers trusting us for that solution to deliver electricity and a solution to them.
Vestas had, by the exit of Q3, more than 10 gigawatt of PSAs for the V236 at the end of that quarter.
When we look at the onshore ASP, it increased to EUR 1.05 million per megawatt in Q3, up from EUR 0.97 million in the prior quarter. And overall, with a mix that was typical in Q3, so very pleased with the price and discipline shown in the order intake.
Then we will come also to just comment on that for business reasons, very much commercial reasons, we'll adjust disclosure relating to the ASP to avoid exposing individual offshore projects in values in the future. It doesn't make sense to talk about an ASP if we only announce 1 or 2 orders in a quarter, because that actually exposed pricing to the wider world of individual projects. But that was just a heading for coming into Q4 and going forward. Then you can see the breakdown of our order intake to the right. And I would just say, here, we'll talk more about it also why Asia Pacific, in that instance, is back-loaded in the order intake.
Now also over to our Service business. So the Service business in the quarter, again, another quarter with very strong performance. And again, thank you to the wider Service team and colleagues across more than 80 countries. They maintained a high activity level. And also here, despite inflationary cost pressures, we delivered a continued strong operational performance, much appreciated by our customers and also by strong support on delivery of components.
The Service order backlog continues to grow, now more than EUR 32 billion. The inflation indexation remains a vital mechanism in preserving the profitability. And you will be able to see to the right the breakdown. So EUR 32.4 billion in Service order backlog. 151 gigawatt in active service contracts, and an average contract duration of more than 11 years. Very pleased, and thank you again.
On the development side, not that much new in this quarter. The quarter has been very much focused on pipeline quality, and again, the discipline in making projects come live. During the quarter, Vestas secured 1.2 gigawatt of new pipeline projects, primarily originating from South Korea. The focus on the pipeline quality led to closing of some early-stage projects and adjustment in project size as well as successful sale of projects in EMEA, which offsets the pipeline additions in the quarter.
At the end of Q3 2023, Vestas' pipeline of development projects amounted to just around 30 gigawatt with Australia, the U.S. and Brazil contributing the most of that. You will see the breakdown to the right. And again, here, continuation of the Vestas' development is the key.
When we then look at the sustainability. Again, here, representing the most sustainable energy company in the world throughout 2023. So by Q3, we have a lifetime CO2e avoided by product and shipped capacity that increased by 6% from Q3 2022 due to the higher produced volumes in Q3 versus Q3 last year. The carbon emission from our own operations, scope 1 and 2, decreased 17% compared to Q3 2022. And as you will all appreciate, this is now where we are coming to a level of carbon emission from scope 1 and 2, which then shows some volatility because we are at a low level. This is 20,000 tonnes of CO2 in the quarter. And as you saw in the last quarter, even short or single project construction can affect that number.
And then on the safety side, numbers in the quarter were stable compared to the same quarter last year at a total recordable injury rate of 3.5 per million working hours. It's stable, and it also reflects slightly that we are still onboarding a fairly high number of new colleagues, especially into the Service and construction.
So with that, thank you again, and over to Hans for the financials.
Thank you, Henrik. As usual, we start out with the income statement, where we can see improvements throughout many of the lines you have here. First of all, revenue increased 11% year-on-year, driven by the higher value of the turbine deliveries we had by the stable volumes as well and then by the continued growth in the Service segment. Gross margin, 8.1%, up 4 percentage points from last year. Improvement once again this quarter, driven by the Power Solutions segment, the increased pricing, but also the Service business segment contributed. We had income from JVs and associated related to our development activities, generated EUR 14 million of EBIT in the quarter. And all in all, that takes us to an EBIT margin before special items of 1.6%. And to your point, Henrik, about operational profits, which is a significant improvement from minus 3.2% last year or up 5 percentage points.
Turning to the Power Solutions segment. We are gradually approaching the breakeven point. We can see here that revenue increased by 10% year-on-year, driven by the high activity levels in the Americas and the Asia Pacific regions, that were then partially offset by a bit lower activity in offshore, but also by currency headwinds of 7%. EBIT margin before special items improved by 7 percentage points to the minus 1.1% you see. This increase was driven by the better project pricing that we've had as well also as better execution in the projects.
I think, again, to just highlight, important to see that profitability continues to improve. It's gradual. But I should also say that it remains hampered by execution of the low-margin projects we have in the backlog that still sits there.
In Service, we had a revenue increase of 15% year-on-year, driven by higher contract activity, in particular in the EMEA and the Americas regions, as well as coming from the inflation indexation. Transactional sales were actually down again for the second quarter in a row and we further had currency translation as an 8% headwind in the quarter. When you look at this, I would like to highlight again that the Service business continues to be a stronghold for Vestas, generating almost EUR 200 million of EBIT, corresponding to a 21% margin in the quarter.
That takes us to the SG&A cost, where, when you look at the chart, it's not the most dramatic one in terms of movements. We are seeing that relative to activity levels. SG&A amounted to 8.2% on a trailing basis. The improvement on the ratio is a combination of positive effects from higher revenue and lower admin costs, that are then partly offset by higher R&D and employee-related costs in the quarter.
On the net working capital, we see a pattern not dissimilar to what we have seen in the past also. So not necessarily that unusual to what we'd see ahead of a busy fourth quarter. Net working capital increased during Q3. We had a decrease in the level of down and milestone payments from customers. That was then partially offset by a reduction in inventories and by lower supplier payments in the quarter. And again, this is the usual working capital unwind -- rather, we are expecting to see the usual working capital unwind in the last quarter of the year. So that is kind of the summary on this one.
That takes us to the cash flow, where also on some of the lines here, we continue to see improvements. Operating cash flow improved substantially compared to last year to minus EUR 31 million in the quarter, approximately EUR 600 million improvement compared to last year, driven in particular by better profitability. Looking at the free cash flow before financial investments, that also improved significantly to minus EUR 251 million despite the higher investment level that we had. And that is a very good financial bridge to the next slide, where we actually do have the investments, where we can see here that they totaled EUR 220 million, which is an increase compared to last year, mainly driven by investments in the tools and moulds for our 236 platform, while the investments in intangibles remained more stable. I'd like to point also that for comparison purposes to last year, we had the disposal of the Lauchhammer facility come through. So that means also that last year, we had an unusually low number, and that's why the comparison is perhaps a little bit difficult to make outright when you just see these figures. That takes us then to provisions and lost production factor. The LPF is showing signs of stabilization, but still at high levels, mainly coming from extraordinary repairs and upgrades that are being carried out. Warranty costs stood at EUR 260 million in Q3, equal to 6% of revenue. That's a 1 percentage point increase from the previous quarter, and it reflects cost volatility across existing cases. Warranty provisions consumed in the first 9 months was EUR 346 million, which is a decrease from the EUR 486 million that we had in the same period last year.
Here, we see the capital structure slide, where we can see also how the financial leverage is decreasing as our earnings recover. Net debt to EBITDA ended at 3.6x in Q3. This is, of course, an effect of the higher profitability on a trailing 12-month basis that is, say, coming as the earnings recovery continues. We have an investment-grade rating with Moody's at Baa2 with a stable outlook.
And speaking of outlook, that takes us then to the last section of the presentation with you, Henrik. So here you go.
Thank you, Hans. And now over to the outlook for 2023. And there it is. As we look now, we narrowed the revenue guidance for the year now to represent EUR 14.5 billion to EUR 15.5 billion. Previous outlook was EUR 14 billion to EUR 15.5 billion, as you appreciate. Service is expected to grow around 10% also from what it was last quarter. And then the EBIT margin before special items, now saying 0% to 2% EBIT. Previous outlook is minus 2% to 3%, so narrowed in the positive territory. And Service margin is expected to be approximately 21%, a small adjustment from previous 22%. And then the total investment for the year sits around approximately EUR 0.8 billion, slightly down from the previous approximately EUR 1 billion.
And of course, the outlook here is based on the current foreign exchange rates, so you will be able to adjust for that.
I will also say here, the takeaway on this and the presentation here is that we are on track. We are very focused and disciplined on executing and delivering on the plan we have called back in black for Vestas. And of course, what we have here is we can also see that the plan is working. It gradually comes through. And that's probably the most pleasing effect of releasing Q3, but also something that I know many, many of our thousand colleagues have patiently waited for and contributed to.
So with that, thank you. And now over to the Q&A.
[Operator Instructions] Our first question comes from Kristian Tornøe with SEB.
I have 2 questions, of course, and we'll start with one regarding your 10% EBIT margin target. So in the report, you repeat that you still consider the 10% margin realistic by 2025. And I'm sure you're fully aware, consensus is notably lower than that. So can you just talk about the stepping stone from getting from the 0% to 2% and to the 10% margin? So obviously, hence, highlight the gradual improvement, hence the backlog conversion. But what other stepping stones do you see and what challenges do you see to get to the 10%?
Thank you so much, Kristian. On the 10%, I think we can all see now that we are into the quarters of what other people have defined as the inflection point. You will also see that part of it here comes from 2 contributions. It comes partly by the own pricing. And you will see that the pricing, as we are calling, stable to positive, still remains. So pricing discipline is a very important contributor to reach to the 10%. We are patiently and disciplined executing on the backlog. And in that backlog, there will still remain a number of projects throughout '24 that relates to the days of '20 and '21 and early '22, where we have had challenges in covering the cost and the pricing. But as you can also see, the proportion of that diminish over time. So externally, volume predictability of the markets, which we are doing. And I think you've seen that across. Clearly, right now, U.S.. Europe is changing by the quarter positively towards us, and we expect the same to happen in especially Pacific, in Asia. Then of course, on the internal, the biggest mover on the internal side contributing to the 10% is that over time we will also head towards something we say is a more natural reflection of the warranty provision that should sit around the 3%. And that we are working diligently through, simply by not having new cases and then getting through the repair and upgrade.
I won't, of course, Kristian comment on what contributes the most to that 10%, but you can definitely see the change in run rate and gross margin. And that you will have to make a guess on where the midpoint will be on that in '24. So we'll come back to that for '24.
Okay. That's understood and very clear. And my second question does go towards provisions. So you sort of see an elevated level here in Q3, but I'd say it's for the existing cases. So just an update on existing cases. How progressed are you? And are there any more negative surprises from here or has it just been more expensive? How should we view the 6% warranty ratio?
There's no negative surprises in terms of the existing cases. We have talked about them throughout the last quite many quarters. So we just diligently go through that. So there's no new cases. But I think it's also fair, as Hans reflected on, on the Service business, when you see that there is an indexation uplift and others, that also naturally flows into your warranty provisions. Because part of it, either by the components or the upgrade costs simply by paid to our colleagues doing it, of course, goes up as well. Therefore, they remain elevated in the quarter. And just again, remember, 1% is to the tune of EUR 40 million deviation in the quarter out of a total warranty provision that sits close to EUR 1.7 billion, so there is a reflection of that. So warranty, same process as the last decade and we follow that process rigid.
Our next question comes from Ben Heelan with Bank of America.
Yes. The first one I had was around offshore and how you're seeing the market. We've been through a very volatile period of news flow, most of it has been negative. So could you talk a little bit about what you're seeing? Obviously, you booked 2 decent orders in Q3. Have we seen the reset? How are you thinking about underlying activity today in offshore? That would be the first one. And then secondly, on the U.S. The order momentum in the U.S. has really been improving from a book-to-bill perspective over the last 12 months. Do you think the U.S. onshore is going to continue to show good momentum? How are you thinking about that?
Thanks, Ben. I will say on the offshore, I'll probably highlight a little bit here. Don't get caught a little bit by 1 or 2 negatives. When you do a global transformation in an important area like energy transition, come on, there will be some bumps on the road. And I think in a time where the world reestablished themselves at different macroeconomic levels and interest rates and also energy pricing, there will be some adjustment that has to be. So probably some countries, a couple of states, East Coast U.S. probably considering a reset a little bit around how we work together in the triangle between government and the developer, customer of ours and, of course, the OEM.
We can do this together. Offshore is a very attractive energy source, but it's not for free, and it's never been intended to be for free, but probably at interest rate of 0, some countries almost made that plan. And I think, Ben, I know you're based in the U.K. and U.K. CfD round 5 was an example of that as well, where you probably didn't want to adjust it because there is a legal framework around an auction. But the encouragement for the government to do something to build out in CfD round 6 is obvious.
And just a reflection in the U.K., the onshore price take on the auction was higher than the offshore price take in the auction, and that is not where the world sits in construction and cost of building in these sources. So I think here, hey, come on, it will take probably some quarters. We highlighted that 4 quarters ago that there could be challenges ahead of offshore. But this quarter, we have just announced 2 of the first firm order intakes in offshore. It works well in Poland. It works well in Germany. There's more to come. So therefore, I'm also saying I think it's down to, as we always said, also in onshore, country by country, market by market, and that is also how the offshore will build out.
So actually optimistic, but I know it's very difficult to remain optimistic in a time where we had not a lot of positive news, But I'm encouraging everyone to keep on the track of the transition. Secondly, on the U.S., hey, we passed the order intake in the U.S. for the whole of last year in Q3. Momentum is picking up. It's a pleasure to see -- it's a pleasure to talk with customers. It's a pleasure to see how projects are coming in. And I don't dare guessing of what run rate we are seeing. I can just see now that what we talked about that could happen 2 quarters ago are now happening. And now, as I said, for us, it's a pleasure to start planning for also extra shifts in the U.S. at some point in time on manufacturing.
So for us, we have it. It's what we are working on. And I can definitely confirm to you our customers are confident in the solutions we are providing them with on the onshore side.
Our next question comes from Claus Almer with Nordea.
Also a few questions from my side. I'll do them one by one. The first question is about the onshore pipeline, excluding the U.S. Maybe you could give some color on what are you actually seeing there? That would be the first one.
Yes, I would say here, it's positive in some of -- it's some of the core Vestas markets that are actually showing the strength. So we see Europe picking up, individual countries. You've seen Germany. If you take the breakdown of our orders also constructed this quarter, you can see that Germany is suddenly picking up in pace quarter-by-quarter. Germany is changing legislation to accommodate more renewable and more wind solutions, which is a reflection of a need and a demand for more electricity in a country like Germany. We have Spain. As a good example, they got their auction wrong. Now they are issuing permitting for new capacity coming on. France adjusted to the auction levels. So Claus, in the core market of Europe, we are welcoming development and the speed is picking up. That's the best way of portraying it.
I think in LatAm, it always comes in a little bit more bulky way. So LatAm is coming in and out. We have seen Canada suddenly exploring how can we actually contribute and how can we do this. So Canada's wind market seems to be a reemergence of what was almost closed down 6 to 8 years ago. And then last but not least, on the Asia Pacific. We always appreciate when we talk Pacific. Australia is a dominating factor in there. And Australia, with the very firm and good relationship we have with AEMO, the grid operator in Australia, often you get the applications and the approval end of the year. And therefore, the order intake will be back-end loaded. And that's probably one of the only guidance you will ever get for a future Q4 from me. So therefore, yes, I will be spending time in the U.S. and in Australia over the coming quarter simply to see customers and try to also be part of that in Q4.
Okay. Just to be sure what you're saying. I fully understand you're not giving guidance per quarter, at least not Q4. So I will try '24, is that could we hope for an order intake, excluding U.S., that will be growing next year?
Next year? Let's take that discussion at a later stage, Claus. We are doing diligently what we can, and we are doing everything we can in a market where customers, when they get a permitting on onshore, want to put the solution in place. And that could lead to, as you have seen quarter-on-quarter, a stable to increasing order intake, but also with a positive ASP, and that's name of the game.
Okay. That makes sense. So my second question goes to the provisions. The decoupling between what you are setting aside per quarter and what you are using seems to be widening, or at least you have a decoupling between these 2 numbers. Can you put some color to why you're not using more provisions compared to what you are setting aside?
Yes, Claus, that's an interesting question. I don't think necessarily you have ever been able to make, say, a one-to-one connection between the 2 quarter-on-quarter. I think what we are doing is constantly optimizing the plans we have for carrying out the repairs. So I mean, you can't necessarily make that conclusion that provisions and consumption should be 1:1 the same. There is a huge effort going into seeing when is the best point in time to carry out a repair, when is that it's most optimal. It takes time as well to simply plan it and to do it. Whereas from a provision perspective, you sit down and make that estimate as to what is it that you think will be the cost for doing that. So I think it's a matter of seeing that it's a portfolio of problems, if you will, that will take some time to basically get repaired. This is also what we're commenting on, on the slide you had there on the LPF, where we're saying that it is an effect of, say, the repairs that are being carried out. But as mentioned, it's not necessarily that easy to just say that there should be a one-to-one link. And I think the good thing about that actually is that, to the extent that we have the ability to plan optimally around things, typically, that also leads to better types of solutions.
Typically, as you probably also know, I think we have also discussed that in the past, if you are forced to go out and do something with a very short notice, that is typically not the kind of solutions you necessarily would want to do. So in some ways, you can say that it's a reflection of our diligent work in optimizing the work that we carry out.
Our next question comes from Sean McLoughlin with HSBC.
A couple of questions from me. So firstly, on free cash flow. Clearly, another negative quarter. Can you talk maybe just about the moving parts in Q4? I mean, is there any reason why we shouldn't expect the typical Q4 seasonality of strong positive free cash flow in the quarter, and particularly how we might think about the still very high inventory levels as we go into Q4 and as we exit the year? And I guess on that as well, I see that you're reducing CapEx by EUR 200 million. It looks like a sensible defensive move. I mean, just the implications of that. Does that actually reflect a slightly slower growth on the delivery side? Is there anything that, that delayed CapEx might hold back if we think of '24 and '25?
Yes. So on the cash flow, I mean, you're pointing to, say, a lot of the right things here. We are expecting to see a profile for Q4 that is -- I mean, we'll see how it goes by the 31st of December, of course. But again, it's not necessarily, at this point in time, something we expect to be that dissimilar to what we have seen in the past. I would say, at the same time, that we've said it before and I'll say it again, we do not expect to be in positive territory. We do expect a negative free cash flow for the year. So let's just make that clear again when we look at what has been the year-to-date consumption -- or not consumption of cash -- anyways, I guess you get my point here that it will remain in the negative territory, but of course, Q4 is expected to have different characteristics than what we've seen for the prior quarters. Then on the CapEx, yes, I would not necessarily say that it's coming from, say, adverse, say, expectations to things. Henrik has spoken quite well to some of the market developments that we are seeing. I think it is more just a matter of things taking more time than what we had anticipated would be the case in some of this CapEx. Sometimes, as you know, even with the own building projects, perhaps it takes a bit longer to get stuff done. And that's kind of the reflection we are seeing now with the adjustment that we're doing from the EUR 1 billion to the EUR 800 million. But it's not that it's a reflection of us seeing, say, an adverse market effect on something like that.
And can I just follow up and just check that the reduction on capital doesn't actually impede you in execution?
No. Because if that would have been the case, perhaps we would have taken other decisions to speed something up. So I would not see it like that.
Our next question comes from Ajay Patel with Goldman Sachs.
I have 2 questions. The first one is on the Service business and the guidance, right, so the 10% growth in revenue. You've had quite phenomenal performance over the first 9 months. The implied number for Q4 for that guide seems quite negative. I just wanted to understand what the underlying dynamics are for that guidance, or is there an element of conservatism here, so I can gauge what is what?
And then the second question is, I think you flagged a number of times that 2025 has no legacy projects in it and that '24 is the last year in the backlog of legacy projects. It's potentially an area of uncertainty for investors. Is there anything you can give here? So I know that -- I don't want a forward-looking guidance, I'm more kind of thinking, well, it's something that's visible in your backlog, can you maybe even give us a comparison to this year? So would you expect the drag on performance from legacy projects to be half the level of, say, '23? Or any sort of thing that can give us an order of magnitude, not necessarily giving us the exact number, but just help us to frame the issue better.
Thank you, Ajay. First of all, on the Service side, we gave what we know on the Service revenue. You also appreciate that we are talking about a business where a top line of plus/minus EUR 30 million gives a percent deviation on growth number. We also know that the comparison in Q4 between '22 and '23, Q4 '22 included repowering. So therefore, there is a likelihood with the current comparison that you will come out with a slightly lower number in Q4 this year compared to last year. And that's what is implied in the guidance. So there's no other things in that what we just know as a comparison.
The other thing on the backlog, as I said here again, we don't do that. You can follow it on an ASP basis. And what you and I think Kristian actually alluded to in the beginning, we also appreciate most of you on '25 has a consensus that is a deviation to the 10%. And that, of course, is that you are either seeing a different backlog or a different progress than potentially we are. We are working towards the 10%. And as I started saying is that the backlog will improve. And you can see it's actually improving. First of all, in the pricing and the backlog, but also as we stated here, the mitigations and the deviations we have had in project execution in Q3 is the least we have had this year in out of the 3 quarters.
So the more we get into a world where the supply chain things are coming on time and leaving on time to site, the better we have in executing our projects. And to your question about how we see the development and what proportion, no, they are only people that work in Vestas that know that number.
Just as a sidenote to Henrik's point on the backlog development. I think, of course, a lot of the challenges and the volatility that occurred, occurred up until the summer of last year. So if you work with this, if you sit and look at, for instance, our order intake, I think we are quite transparent in what we announced. And of course, that allows you a degree of insight into when the orders are booked, what are the volumes booked, at which point in time, and typically, we would also be saying something about what the delivery dates would be for that. So if you sit and work a bit with that, I think it would give you, say, indications at least of where things are moving. So that's at least something I would suggest you could look into. I mean, we can talk about that also in the coming days. I think we're going to meet perhaps also, and then we can pick up on that side of analysis.
Fantastic. I look forward to that.
Our next question comes from Henry Tarr with Berenberg.
I have 2. One is just on the offshore pricing and ASPs in the quarter, which if I sort of back out from the numbers you gave, aren't a great deal higher than the sort of onshore ASPs for the quarter. I wonder whether, for this particular PSA, with the -- when did you sort of commit to the pricing there? I know are you happy with the sort of that level of pricing in the offshore? I know every project is different. And then the second question is just on the competitive landscape. And I guess there are 2 sort of factors to that. One is, we've seen potentially one of your big European clients maybe taking a step back from onshore, and I wonder whether you're starting to see the impact of that. And then on the other side, perhaps we're seeing a little bit more activity from some of the Chinese players in Europe, particularly. So any comments around that would be great.
Thanks, Henry. And as always, on the offshore, offshore is a different process and a different way of doing it. You have a PSA that sets out a number of conditions in there. And then you work between PSA and that shortlisting until the firm order intake on assuring you that the project is bankable and also possible to deliver, and I think that includes both timing and other conditions in there. So we're happy with the offshore orders we have taken. It's a confirmation to it. And for both us and the customers, it's a pleasure to see that we will be putting the V236 in, what I will call, nearshore to Vestas' home in Denmark, so in Poland and Germany. So that is also why when you see that mix, you can't compare it, because scope will be different and scope will be also agreed between customer and Vestas in a completely different way between on- and offshore. So that's why the comparison, I will say, broadly doesn't make that much sense.
On the competitive landscape, we have no intention else than just to strengthen our onshore presence and keep using that. And if somebody is in a need for a solution with short notice, you can also see that we have a certain size of our inventory and then we will use it to complete orders on the onshore. We like onshore. We've been in onshore for a long time. We're just coming into offshore as that the competitive landscape, I think, part of it is also, and we just completed one large project in Scotland that was an offshore one with a customer of SSE. And I think there we also see the strength of being within the European landscape and also being able to both commission and work with the grid.
So therefore, there are a number of ways where also the solution is linked to local energy supply. There will be competitors coming and going in some of these orders. We just need to make sure that we can supply our customers with the best 30-year agreement and also the highest energy production output. And I'm pretty sure we will last a long way into that competition. And I think this quarter documents that well in both onshore and offshore.
Our next question comes from Martin Wilkie with Citi.
It's Martin from Citi. My first question is on the U.S. market. I think you mentioned that you're going to be spending some time in the U.S. soon. I'd be intrigued to hear how you're seeing that market. We've heard some slightly different comments from some of your competitors and suppliers. General Electric I think was quite upbeat about the prospects of Inflation Reduction Act linked orders happening already or very soon. TPI was maybe a little bit more prudent in when it expected to see the benefit from it, perhaps as far away as 2025. So obviously, we're still awaiting tax guidance, these kind of things. But just intrigued to hear what you're thinking in terms of the U.S. market?
Thanks, Martin. I think U.S. market is happening now and it's happening as we speak with order intake ramp-up happening as well. And I think it is not a surprise to see that there is different timings of a supply chain. Because if I look at TPI that is a dear partner of ours through many, many, many years, it is also obvious that if we have factories Vestas available, we, of course, also always try to fill them up first. So there will be a timing gap between how quickly it hits home. And then '24 in the U.S. will always be a little bit of a ramp-up year. We've talked about it before.
'24 is not going to be the full run order of the U.S. onshore market, because it has always been that we needed to have the approvals. And I don't think there is a pressure right now of having infra-out order in the year in '24 because you have a PTC that now has a framework of 10 years. So therefore, Martin, the normal timing stress around that. So ramp up happening, we see order intake and we see large projects now materializing through that. And pretty sure you will appreciate that also, as being in the financing business, that a lot of projects are coming to you to be asked to be financed as part of this. So positive outlook also for '24, will be better than '23. And of course, it's a good stepping stone in highlighting the increased activity in the supply chain and manufacturing footprint.
Great. That's very helpful. And if I can have a follow-up actually unrelated. You mentioned earlier, and it's actually on the slide, that you're looking at changing your ASP disclosure to avoid disclosing individual offshore projects, which I can understand. Does that mean you won't be giving ASPs at all from next year? Or is it more that you just give it a blended one, not separately between offshore and onshore? Obviously, it is an important metric for analysts and investors to see sort of how the order book is developing from a value perspective. So yes, just intrigued as to what you mean by that comment.
We will do our best to give you the disclosure that excludes the opportunity to sit and do individual pricing of offshore projects. That doesn't make sense, neither for you, for our individual customers, or for that matter sharing with competitors. So that is just how we need to find that is then how we see a total backlog and how we share the onshore, we'll come back with a proper measure to you on that one, Martin. But I'm sure you can understand that in a ramp-up of an offshore market, we just saw here that there is something that is not right when we talk about ASP. So we've said it for Q3, but going forward, it makes no sense to talk about an average of potentially one project order.
Our next question comes from Supriya Subramanian with UBS.
I just had a follow-up question on the margin trends into '24 and sort of the path towards the 10% margin for 2025. And appreciate, of course, that you can't share any specific numbers. But if I look at what you've guided for, for fiscal '23 and what's implied for the fourth quarter, which is about 2.7% margins at the midpoint, would that form a good benchmark for margins into 2024 and potentially sequentially improving quarter-on-quarter as we get rid of the low-quality orders?
Yes, I guess the calculation you're making there is the obvious one to make since we have like a range outcome on both the top line and the EBIT, so I can understand why you're doing that. We have a business, of course, that fluctuates quite a lot, and that's also why we have the range that we are looking at. What is then going to be the outcome for 2024, we will come back to that once we come with the guidance for 2024, as Henrik already pointed to. But of course, right now, I think what is important to stress is we see that the recovery is playing out in a good way. We are on track, I think that's the word you used at the end, Henrik. So of course, that gives us, let's say, a starting point for sitting here at our end and looking at what 2024 is going to look like. But at least the calculation you're making there, I can understand that's a natural one to make given what we are guiding. But let's see where 2024 is once we get to the point in time when we start to guide for that.
All right. All right. Fair enough. And I have a second question on pricing. I just wanted to check what is the sort of proportion of orders which -- or proportion of costs which are indexed within the orders that you are winning, in terms of what proportion is -- do you have price indexation in there? And in case of -- does it work the other way around as well? If you see your costs going down, does that mean you pass on that benefit on to your customers?
Yes. So we have not disclosed the levels of indexation that we have. That is a commercial, how do you say, secret. Something that we are debating at times heavily with our customers to which levels would you go. I would say, it's not that all of a sudden overnight, if you look at it from a timing perspective, in terms of where does the indexation sit, then on which orders, that it just changed overnight at one point in time and then we were fully covered. I think we are not at the end of the indexation journey either. But I think it is fair to say that it's a tool that has increasingly been put to use since, say, the middle of last year. That is when it really kicked off in terms of us pushing for it.
And in the beginning, I would not necessarily say that we were outright successful in achieving it, but increasingly, we are seeing with our customers that there is an acceptance that this is something -- in the situations where you have longer dated, say, schedules, that it's something that is at least up for discussion and where you then rather sit and discuss exactly what should be the structures around it. But I would not say or claim either that it's totally perfect what we're doing now, but it is definitely better than what we did if you go back 1.5 years ago. I would also say then as a last comment that -- yes, sorry, I lost it there. Henrik?
Maybe I will just say here, I mean, it's stable to positive ASP, and that is what also we are highlighting. There's still some concern to the underlying inflation. But as I said, in that pricing, we are pricing towards the EBIT of 10%. That is the scope and magnitude. And I think if you're sort of asking when will the pricing start going down and other stuff, I think it's the wrong quarter to ask that question. Because it's still a quarter where even executing on the backlog, we still sit with a small negative on delivering the turbines. So there is some way to go yet on recovering the EBIT when we look into '24 and '25, and that we are pricing for.
Now I recall what was the second point here. And of course, to your point, Henrik, that also means that if you have indexation in the contract and all of a sudden you start to see deflation on certain component groups, it, of course, works like that also in the way that it's set up. So there is, of course, an element of derisking when you introduce this and, as mentioned, that would then also have the opposite effect. I think it's important, and that's also what we have been saying in many calls, that you need to be happy about, say, the margin, the project you take if you step into taking these tools into actions.
Our next question comes from William Mackie with Kepler Cheuvreux.
So my -- I just wanted to ask a question with relation to the tightening financial conditions and how you would describe the impact of the tightening financial conditions and the changing pricing offtake agreements impacting generally the bankability of the projects that your customers are looking to execute and how in turn that is affecting the speed with which you can convert the tender pipeline into booked orders.
Thank you so much, William. I don't think the process of that in reality has changed. I don't think neither this quarter or tightening the financials. We see that around the world that there is a good discussion. But I also think that the financing industry have seen that the rapid growth of the PPA market is actually supporting both the financing industry with more clarity and transparency of the bankability of the projects. So if I look at that, I think here, there is a market that is growing and maturing in parallel. So the offtake is maturing.
Where we see there is an offtake standstill is probably where you have a conditional auction from government. But the PPA private market, that works better and better. So therefore, that's positive. And I also see there is a certain understanding of that the financing industry, if you have some of the very experienced customers, they also live with that there is an offtake that is not 100% on the offtake. So I think actually that works well on the tightening.
I think on the interest, yes, that goes up, it's -- price of money comes up. But I think on the terms around the world, we still see customers managing that quite well in that sense. So in the U.S., we've seen that progressing. We've seen customers, they are progressing it in normal time frames. But of course, there will always be things where you say, is that delayed because the grade or the permitting got delayed or something? Hey, that's name of the game working in the industry. So no change so far.
And could I follow up on the sort of price cost equation. Specifically, could you perhaps throw some color on how you see costs developing over the next 12 months or so. We can see that perhaps some of the classic items of steel and resins are falling and transport costs. But how would you see labor, logistics, specialist logistics or some of the main core tier 1 supplier complex component prices developing as we go into next year?
I think it's very, very wide. Because as you will also appreciate, there's just both the raw materials and components. There are certain components that has a reduction in price. On the other hand, there is also an underlying inflationary pressure, which is what we highlighted. A bit of a concern, you sit in and around the U.K., where you very much know if you're sourcing something from there, it is affected of that nature, and that is also partly the same if you look towards U.S. and a few other places.
So therefore, I will say it's an uneven picture. But more importantly for us, as Hans rightly said, often the cost and price runs in parallel. But what, of course, for us means a lot is also the mitigations we are doing due to extraordinary things. And those costs, the mitigation costs and potentially in many projects, the double costing we have had, those are diminishing quarter-on-quarter. So I think you need to look at cost/price ratio, one. But you also need to look at the price and the cost, extra mitigation cost, as second. Because in some cases, the mitigation costs have been bigger than the cost deviations we have had, much bigger.
Our next question comes from Casper Blom with Danske Bank.
Well, most questions has obviously already been raised. But just to sort of follow up to your guidance. First of all, on the Service margin guidance, where you sort of go from 22% to 21%. Maybe if you could elaborate a little bit more on what is driving that change. And secondly, where you sort of see a natural level for the Service margin to be once the sort of also offshore business is up to a more normalized level of activity. And secondly, on the changed CapEx guidance. It sounded as if it's sort of a postponement of cost. So should we just sort of expect these costs to come in '24 instead? And maybe if you could guide us a little bit as to what would be a fair level of CapEx to expect in '24, '25?
Yes. So on the Service guidance, what we're seeing there is that there are some inflationary pressures that are hitting us. And of course, that has the impact that you're seeing there on the 21% update that we are making. Compared to last year, there were no bonus last year, and that is also what we are seeing going into the 21%. So that also has an effect, I would say. There is quite a number of people in Service. It's a very headcount-heavy operation. So I think that is at least 2 points to mention that goes in.
And I think what's important to stress here is that we don't see this as something that will weigh in or carry over in terms of 2024. Just to highlight that, Casper. So I think that probably takes us into the other side of that question in terms of, say, the natural level for this business. I think we have previously been saying that we are aspiring to take Service up to 25% in margin levels. That is still our aspiration. There's not necessarily any change to that from what we're looking at here. So as mentioned before, we'll see what the guidance will be for 2024. But at least the update we have done here is not something that we see will weigh in when we hit the New Year in terms of where this is going.
Then on the CapEx. Yes, you could make the argument that if it's delayed, then it's just going to hit us next year. I think it's probably also to be a bit self-reflective, the situation that we also saw last year, that we were not able to spend the CapEx that we originally guided. So we'll see for 2024 how that goes. If this is like a perpetual effect, eventually, there will be a saving. But let's see. It's not at least a reflection that we are cutting CapEx because we are seeing less demand. That's not the case. I think we are simply seeing that it takes time to spend the CapEx that we would be expecting to spend.
It's fundamentally, you can argue from a cash flow perspective, a positive, at least as long as we don't see this hampering performance that we are planning to carry out. So we'll also see what our planning ends up being for next year as we progress through our budget process in the coming months. But for now, at least, it's not something I would read too much into at this stage.
Okay. If I just may follow up, Hans, on the CapEx. I assume that right now, there's a nice chunk of the CapEx that you're spending must be for ramping up offshore, preparing for the first deliveries of the 236 in 2025. I mean, should we, on that background, sort of expect structurally higher CapEx in '24, '25?
Casper, it's Henrik. No, you shouldn't do that, but it will variate around that mark what you have seen. The underlying spend of it, of course, changes, as you're rightly saying, from developing technology, prototyping into now manufacturing. And then maybe it's been up now a couple of times. Hey, if it doesn't work or there isn't the same demand forecast clarity in the U.K. on the offshore, as we said clearly on the day earlier this year, then there is no need to start digging in the ground in the U.K. for a new factory.
So you will also see that our CapEx guidance, of course, reflects to what we are doing and how we are working with our projects for establishing that capacity. So you know we have it in Europe. You know, also, we are doing and planning in Poland. That's underway, and that's in the CapEx budget and the adjustments we are making.
Our next question comes from Deepa Venkateswaran with Bernstein.
I'm going to ask you one question, and that's on offshore wind. Given that you've got a large project in the U.S. East Coast, from New York, and which is going to be renegotiating, it's unclear whether they'll get a higher price or not. Does that change anything on your planned ramp for 2025? Or are these European orders or anything else sufficient? And then I think you were also planning to invest in a factory in New Jersey, presumably given the spate of cancellations there by, not your project, but other projects. Just wondering whether you will be dealing any of the U.S. spend? Or how material is the U.S. East Coast for your near-term planning?
We have some PSAs in U.S. East Coast. We also take the same attention to some of that. But of course, the canceled projects that has so far been on the East Coast has no Vestas turbines on. So therefore, they don't affect our planning for neither manufacturing or others. But of course, it's also clear, and I think we sent that pretty clear in the sense in Europe to the U.K. early on, if there isn't a solution between the offtaker in the state and the developer, then we don't build factories if there is no need for the capacity. So that is a clear signal.
The other signal is, of course, we stand together with our customer and partner out there when it comes to the projects. And none of us are having an intention of putting up the solution and then having an impairment to do after that. So that's why it's called a PSA, it's a preferred supply agreement. And under those terms, it doesn't affect our 2025 because none of our U.S. projects were intended to come live in 2025.
Our next question comes from Akash Gupta with JPMorgan.
I have 2 as well. The first one is on financial stability of your supply chain. We can see one of your listed blade manufacturer in the U.S., but most of your supply chain is not visible to outside world. So maybe if you can talk about how do you see the financial health of your supply chain and are there any risks that we need to be aware as the industry needs to scale up in the next few years? And the second question I have is on V236. Have you received a full type certificate? And if you have not, by when do you expect to receive a full type certificate?
Yes. So first on the supply chain financial stability. Of course, I mean, there is a degree of visibility into some of our suppliers at least. I think in an industry like ours, where we have been going through across support, some of the things we've been through in the last few years, of course, there are ongoing discussions and topics related to this. What is important for us to see is that there's a recovery happening at our end. We have good close dialogues with our suppliers. I think we also have some good strong suppliers at our end. But it's, of course, like any other company who's operating in a volatile world, we are, of course, monitoring and seeing what goes on in the supply chain. If we take, say, the very high level perspective and look at where the industry is today compared to where it was 10 years ago, I would also say we have, I would say, much bigger, much more stable and professional players now in the space. So I think the industry is also transitioning into a better place when it comes to this particular topic. So yes, we had Suppliers Day a couple of weeks ago, where we met with some of our suppliers and had various types of discussions. And I think for the most part, at least people see that there's a lot of opportunity in this industry. They are also supplying to other industries and they're very keen to do more, not less, in the wind sector. So of course, that is a reflection also of where people see that things are heading right now.
I don't know if we should take the one on the type certificate as well. I guess we don't have a type certificate right now. Of course, we are planning on getting one, and I don't have any further things to say about that at this stage.
Our next question comes from Daniel Haugland with ABG Sundal Collier.
/> So you touched a bit upon this already in terms of the Service margin coming down. But I was thinking, could you maybe give a little bit more on that. Because you say that into '24, you don't necessarily think that we should take a read on the 21% margin for Service in '23, but it has continued to come down throughout the year. So maybe you could explain a bit what's happening there and how we should think about that?
So as mentioned, we are seeing, again, compared to last year, there is a bonus that is impacting the numbers. There is an effect also we have time and material business. I can't recall if we said that before, but that's also something that we're seeing having an effect here. And then as mentioned, there's also general inflationary cost pressures that are hitting the business. Again -- not again, but at least let me say that it's a business where, if you look at the revenues in the quarter, it's small, in certain cases, single-digit million euro amounts we are talking about here. So it doesn't take, say, a lot of million euros to sit and then start to interpret quite a lot on what's going on. But at least in high levels, bonus, time, materials, inflationary cost pressures is what is the effect that we are facing right now that is leading us to see the full year margin that we are now seeing. And again, let me highlight that it is something that's what is weighing in on the margin here. And of course, in particular, it's also saying it's something that we are seeing in Q3 and not least also in Q4. We don't see that playing into next year in the way that it's going to be working.
Our next question comes from Klaus Kehl with Nykredit.
Klaus Kehl from Nykredit. A question related to this EU wind power plan. And my question is, if we take the very big perspective, then I guess the politicians, they are talking about all the right things. But nothing really improves if they just keep on talking. They need to take some serious actions. So can you see any concrete actions being taken, right now being implemented throughout Europe? Yes, and could this make a difference in '24? Or are they just -- do they just keep on talking for whatever reason? That would be my question.
That's a tricky question to answer, Klaus. But I will try in the following way. I think the majority of EU-27 countries are changing rapidly. But of course, we are also changing, for instance, permitting and other local regulation in country that was decentralized and delegated to municipalities and other stuff over more than probably a decade or 2 decades ago. So you are changing local legislation, but of course, the frame and the directive comes from the EU. If I can add, because I know you're Danish, then I will say, probably the only country that still stops more than they expand is actually Denmark. But I suppose the voters in Denmark will decide on that direction in the future. So I think actually EU-27, maybe bar Denmark, is doing pretty well.
Okay. And in this respect, could you talk about the changes that you are seeing in Germany? Because I think, yes, that's kind of a major market and they are kind of running behind.
They're doing all the right things and they're doing it in a speed none of us have experienced in Germany before. But that probably also is a reflection of your point of that if you are in need and demand for the electricity, then there is a real underlying driver, and that's what we see is happening in Germany. So we welcome all of it in Germany. And of course, we welcome also that we have our technology and a long history of doing our solutions there. So a positive for Vestas.
Our next question comes from Sebastian Growe with BNP Paribas.
Two questions from my side. The first one would be a follow-up on the warranty provision question and links to the offshore profitability that might come through over time. So you pointed to the envisaged return to a 3% warranty quota sales. And I would be interested in you providing some more detail on the split between onshore and offshore going into the 9-month level of 5%. And related to it, how much of the 200 basis points reduction that you envisage here is due to a higher top line over time versus lower absolute spend? That would be the first question.
And the second question is more to come back to the Onshore outlook for the U.S., in particular. Henrik, you mentioned that you are starting the planning for additional manufacturing in the U.S. Obviously, we have seen very, very broad range in terms of volume between 2 gigawatts or so of deliveries last year as opposed to a peak of more than 6 gigawatts in 2020. So if you could just walk us through the sort of direction of travel over the next years and what you're seeing and, again, making reference to your earlier comment, that would be much appreciated.
Yes. So first of all, on the warranty topics, you can't necessarily think about warranty provision levels as, say, something that has a gearing effect in itself that you're alluding to. The warranty provisions are a reflection of what we see would be the necessary costs linked to, say, living up to those warranty commitments that we have made. And as such, if you see a business that grows, you will also expect, just by virtue of the volume increase, that your warranty level in absolute terms will go up. But you can't necessarily conclude that the percentage will then come down as you see with fixed costs, for instance. Because the warranty provisions are ultimately a function of how much is being installed. There's an element perhaps of being smarter about certain things if you have lots of volumes and having, say, a big network to carry that out. But at least I would not say that you can, say, make this gearing assumption when it comes to how the warranty provision process, how that works.
Then on the split offshore/onshore, for various reasons, that is not something that we have disclosed and that is not something we are planning to do either. So I think at our end, that's, I guess, the comments I would have on that first part of your question.
May I just quickly follow up on this? I think the backdrop of the question, obviously, is related to the warranty case we have seen the industry have almost exclusively being related to onshore. And now obviously, you're taking a revolutionary step when it comes to the V236 over the prior turbine model. So I think it's at least not intuitively easily to follow that there shouldn't be any issues going forward. And that was a backdrop of especially asking then for the offshore part going into the warranties.
Yes. And that's where, of course, we appreciate your sort of trying to split the on and off. The major change there, of course, is that the repair and upgrade goes on in a different environment than on land, because a lot of the components are also things you're testing. But of course, some of the things that has a different dimension. So we appreciate that. We are not new to the split between on and offshore. But again, there also highlighting just for the sake of it, we have -- just on the Service side, we have 151 gigawatt totally and we have 142 onshore. So we are fully aware of that we are embarking into a different journey also including offshore, but don't see a change in that as a long-term warranty provision.
All right. And then moving on to the U.S.?
Yes. And the direction of travel, I'm tempted to just say it goes up, and that's easy to say because we started low. We ran one shift and reduced days of work in the factories. So here is a leverage effect also for Vestas. Because, of course, you can get much more out of factories when they start running with shifts and they are at full capacity. So that's first step. And then what we do as next step in the U.S., I think we will talk more about when we come some quarters ahead.
In terms of your 2 gigawatts to 6 gigawatts, maybe relevant, but also not relevant in the comparison of that you have different rules applying from in the past to today, where there is a clear upside in having a manufacturing based within the U.S.
Yes. Understood. But if one just thinks of, I think, what you did produce locally in the U.S., would it be fair to say that the majority of the historical 6 gigawatts was produced in the U.S.? And then how quickly could you just sort of get back to the old established levels or the peak levels in the past?
I think that's a very good question, but I will refrain from answering that. I think the U.S. is a competitive market. We are developing it. And I think that one we keep into the bilateral discussions between ourselves and our customers on capacity planning and order intake.
Could we, with that, have the last question of the Q&A?
Okay. So our last question today is from [ Nabil Majid ] with Deutsche Bank.
I was just wondering if you are able to share any color on the timing of when you expect to book the conditional order in the U.S.? I think it was an onshore order that you announced in August, was worth around 1 gigawatt.
Nabil, that's why it's conditional. We will say something when it goes unconditional, and then we'll come back with that. But as you can -- I can assure you that everyone's eyes is on that one and how to progress with that. So customer and us are working on making it a firm order intake.
With that, thank you so much. Thanks for your support and your attention. And I will meet many of you over the coming days. So again here, thanks, and see you soon.