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Dear ladies and gentlemen, welcome to the Nordex SE report Q3 telephone conference. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Mr. Zander, who will lead you through this conference. Please go ahead, sir.
Good afternoon. Thank you very much for the introduction. Good afternoon, ladies and gentlemen. Herewith I would like to welcome you on behalf of Nordex to our call regarding our results as of September 30. Our members of the board, José Luis Blanco, Christoph Burkhard and Patxi Landa, will give a presentation, sharing our financials and the latest information of our company with you. Afterwards, as you have heard, there will be a Q&A session. [Operator Instructions] And now I'm handing over to our CEO, José Luis Blanco. Please go ahead.
Thank you, Felix. Good afternoon, ladies and gentlemen. Thank you for participating in our Q3 result call. The agenda that, together with my colleagues, Christoph Burkhard, CFO, and Patxi Landa, CSO, have prepared for you is as follow. I will start with introduction and executive summary of situation of the company. Then Patxi will share with us the situation in markets and orders as well as service evolution. Christoph will guide us through the financial performance of the company. I will take it from there to share with you development in supply chain transformation and technology transformation to conclude with a guidance for 2018. And as last year, we will share with you our view of the market and our view of Nordex Group within the market to conclude, as always, with Q&A.With this, let's start with the executive summary. Year-to-date 2018 results are we have sales in EUR 1.773 million (sic) [ EUR 1.773 billion ], a drop from the EUR 2.32 million (sic) [ EUR 2.32 billion ] in the same period last year. No surprise, this is as planned. The EBITDA margin is at 4%, dropping from the 7.8% in the same period of last year. As well, no surprise, this was our planning. Working capital, 5.4%, good evolution versus 8.6% in the previous year same period. And order intake, very good development at 3.1 gigawatts year-to-date compared to 1.1 gigawatt in the same period of last year and 1 gigawatt in the last quarter compared to 0.2 gigawatts in the same period of last year. It's worth to mention that Q3 '18 is the fourth quarter in a row with around 1 gigawatt of order intake. It's fair to know as well to point out that we have landed substantial orders of the new Delta4000 turbine, turbine that support the future volume growth for the company. And this is relevant as the market is expected to grow and as well is important because it's relevant success in Germany once Germany recovers. We like to mention as well that we see very good order momentum expected as well in the last quarter of the year. And we expect as well big orders coming from Delta4000 product.With this, I would like to mention that Q3 '18 is in line with the guidance. And full year guidance for the company, we are confident that we will deliver narrowing to the lower end of the range.With this, I would like to hand over to Patxi, to talk about customers and orders.
Good afternoon, ladies and gentlemen. We continue to show a strong commercial activity with a significant increase in order intake in the first 9 months of 2018 when compared to the same period last year. An important factor to support this growth has been the recovery of some important markets that, for different reasons, were dormant, like Brazil, Spain or South Africa. As well, we start to see demand supported by corporate PPAs in some of our key markets. In Germany, we are delivering as planned. We see a positive penetration of our newest product into the permits that will expectedly yield orders in 2019 with associated revenue impact in 2020 as planned. The recent agreement of the governing parties to increase volumes to be auctioned in the next 3 years can only be judged positively, however, compensated short term by the slow pace of project permitting in the country. We continue to renew our customers' trust, and as a result, we delivered over 3 gigawatts of new turbine orders in the 9 months to September 2018, up 169% over same period last year. Average selling price in the 9 months to September 2018 was EUR 0.76 million per megawatt. All geographies have contributed to this strong performance with Europe and North America almost doubling volume and Latin America and rest of the world increasing volume 3x with respect to the previous year.Service sales increased 14% of the same period last year. All margins, average availability and renewal rates remained stable with respect to the previous period.The total order backlog was in excess of EUR 5.2 billion at September end, of which EUR 3.1 billion corresponds to turbine backlog, up 186% as a result of the strong commercial activity. And with this, I hand over to Christoph who will lead you through the financials.
Thank you very much, Patxi. Good afternoon, ladies and gentlemen. Welcome also from my side. I would like to guide you now through our 9 months 2018 financials. As a starting summary, I want to say that our third quarter financials have developed according to plan. As already mentioned by Patxi and José Luis, after our decent order intake performance in H1, we expect to continue at a similar level in Q3, which we were able to fully accomplish.From the order intake for the first 9 months of 2018, the book-to-bill ratio in the project segment amounted to 1.54 versus 0.53 a year ago, pointing to growing revenues in 2019. In a nutshell, the first 9 months of the year have come without any surprise and with the confirmation of the 2018 guidance narrowed to the lower end.If we now look at the income statement, we see sales sharply rising in the third quarter compared with the first and second quarters of the financial year. This increase is mainly attributable to the higher installed capacity, particularly in the United States. With EUR 815 million in Q3, sales were only slightly down compared to the prior year level of EUR 818 million. Gross margin is showing with 26.6% normalized 2018 level. Our structural costs, hence, the personnel costs and the net -- other operating income minus expenses, fell by 9% -- 9.2% versus last year to EUR 400 million versus EUR 441 million at the same time a year ago. This development clearly shows evidence of the successful realization of our 45-by-18 measures assuming a similar run rate for the final quarter to come this financial year. Hence, I'm referring to the EUR 41 million lower overall costs. And if you then put basically a run rate, an equal run rate for the fourth quarter on top, then we are far beyond the EUR 45 million. Finally, the PPA depreciation of EUR 45.5 million is almost exactly in line with the expected annual PPA depreciation of EUR 60 million.Now going to the balance sheet. Our balance sheet remains solid and does not show any significant change compared to previous quarter except the reduction of inventories in the context of higher installations in Q3. With a position of around of EUR 477 million cash and cash equivalents, the Nordex Group is showing a very stable cash position. Otherwise, the balance sheet is displaying the impact of the introduction of the IFRS 15 accounting standard with the resulting balance sheet prolongation, as explained in the previous quarters.And now I would like to comment on our working capital development shown on the next slide. Working capital ratio on September 30 was -- stood at 5.4% compared to 8.6% a year ago. The overall pattern of the working capital development is precisely following the underlying business development. This development is mainly driven by lower inventories following high installations in the third quarter 2018, partially being offset by lower prepayments and moderately lower payables as well as higher receivables, respectively. Taking the usual seasonal patterns in consideration, the overall working capital development is showing the expected progress compared to the higher 2017 levels. And we do expect further improvements towards year-end and having full focus on all working capital levers. As every year, the final working capital number for 2018 will strongly depend on order intake performance in the fourth quarter.This brings me to the cash flow statement. Cash flow from operating activities since last quarter has improved by EUR 35 million from EUR 92.8 million to euro minus -- so minus EUR 92.8 million to minus EUR 57.7 million, and this is in line with increased EBITDA contribution in Q3 as well as with the lower working capital or reduced working capital.Cash flow also improved from Q2 to Q3. Free cash flow was -- improved from Q2 to Q3 by EUR 17 million. And the 9-month comparison with 2017 is showing an improvement of EUR 121.3 million. And as already mentioned, our cash position stood at solid EUR 477 million at the end of September.Now going to the total investments and looking at CapEx in Q3. Our total investment at the end of Q3 stands at EUR 60.4 million. During the first 9 months of 2018, investments in the amount of EUR 31.3 million were made in property, plant and equipment mainly related to the procurement of production equipment in Spain and the establishment of rotor blade manufacturing in India. Development projects of EUR 26.8 million were capitalized. And just for your information, the current capitalization ratio stands at roughly 64%. Since we still have a couple of back-ended investments planned in Q4, we do expect to catch up with our CapEx spend as planned, exploiting the frame set by our guidance of approximately EUR 110 million in financial year 2018.Now last, but not least, looking at our capital structure. We do see a temporary increase of the leverage ratio to 1.8 as a result of the lower 12-month rolling EBITDA kicking in, in this quarter. But we expect the leverage ratio to decrease again in Q4 towards the average ambition level set by ourselves of around 1.5.Now in order to sum up the 9-month financials, I would like to highlight the following 3 takeaways. Firstly, Nordex Group's 9 months 2018 financials are fully in line with our plan and expectations, showing an increase of the overall activity level in Q3, as previously communicated. Secondly, working capital and cash development continued to point into the right direction and follow the communicated trend. We expect to reach our working capital guidance and to further improve cash position. Thirdly, we confirm our 2018 guidance at the lower end of the range. Root cause for our expectation is the foreseen delay of a couple of installations from December 2018 into 2019. And due to the fact that as per IFRS 15 revenue recognition takes only place at the time of turbine erection, the entire revenue portion of those delayed installations will shift into the following year. And maybe let me add one thing. At that point in time, maybe also to anticipate questions, this is due to the logic, and we have discussed it in the past, of IFRS not triggered by a single big delay -- actually, we are not talking big amounts here. This is rather taking a few -- from a forecast perspective, only few turbine-related delays into 2019, which in absolute amounts is not really big, but we thought as -- since we believe that we already know it now, we're going to be precise here at that end and narrow it down accordingly.And with this, I'll hand back to José Luis.
Thank you, Christoph. We're moving now to supply chain. In the supply chain, installations are very much driven by lower project demand in a downturn, resulting of the order intake 2017 drop 14% year-on-year. We have installed 564 turbines in 17 countries at the end of the 3 quarters: 44% in Europe, 19% LatAm, 29% North America, 8% rest of the world. The high focus for the installation for the operation team is, as Christoph mentioned before, securing the revenue of the last quarter without building buffers in inventory, so trying to stick to our pool system to minimize inventories.Regarding production, the challenge for this year was downsizing capacity to adapt to a lower demand. And in consequence, we assemble 29% less nacelles, 1,736 megawatts in the 3 quarters, 561 units in total. Out of those, 278, Germany; 248, Spain; 29 Brazil; 6 in India. And we have increased the in-house production of blades to 648. This is mainly driven because we managed to phase out successfully third-party blades supplier in Europe. At the same time of downsizing the supply chain of the company to adapt to a lower -- to a temporary lower demand, we are preparing the company for substantial ramp-up in 2019 and 2020, ramping up mainly best competitive countries like India, and that's the reason of the CapEx invest there among other plans that we are preparing as we speak for the growing demand expected in the years to come. So in general, I will summarize that successfully adaptation to a lower demand without endangering the capability of the company to tackle increased demand in the next year to come and having this in consideration to do it in best competitive countries.Regarding technology, I will say that we are executing, as planned, the product transformation road map for the company to a more competitive product portfolio. The products that are supporting the recovery of the company have been prototyped and are certified. This is a great milestone and we are among the frontrunners in 150-meter rotor onshore machines 4 to 5 megawatts, certified products. We talked about Delta4000. The market introduction as per plan. First prototype installed and running since September, stable operation and maximum power. Second prototype installed in November. Certification for both the standard version as well as the low-rotor version received as planned. And as we speak, we are ramping up blade capacity and we are starting serial production for nacelles Q1 2019. As we mentioned before, very good market acceptance and more expected to come in the next quarter.Regarding machines for low COE markets, low wind, AW140. This was, as well, successfully prototyped and certification obtained and serial production available as we speak. We are producing those machines in India and in Spain. Overall, we are proud and is a good achievement in transforming not just the supply chain of the company, but the product portfolio of the company to a very competitive product portfolio comparable with the leaders of the industry.With all this, we're moving to the last part of our presentation regarding guidance for the year. Just to reiterate that the guidance for 2018 is confirmed. Sales will be between EUR 2.4 billion to EUR 2.6 billion; EBITDA margin, 4% to 5%; working capital expected to be lower than 5%; and despite the very, I will say, control on CapEx, we plan to accelerate investment in the last quarter to land around EUR 110 million. This is what we have prepared for today as a standard agenda on top, as we did last year. We will like to share with you the strategic outlook. Just to refresh the memory, the strategic outlook that we showed you 1 year ago that was reiterated in March. One moment, please. It's taking some time to upload. But 1 year ago, we shared with you our view of the company and we gave you the 3 main blocks and the evolution of the 3 main blocks over time, '18, '19 and '20. Three main blocks were volume effect, were price effect and were structural costs.Regarding volume effect, it's a combination of megawatts installed multiplied by price. The price effect, gross margin is a function of cost of energy reduction that the company's capable to achieve, combined with the price pressure that we see in the market. And the structural costs is path of the overhead that we need to use in order to deliver this volume.Regarding the first block, that was volume effect. We told you that '18 was going to drop, mainly the drop in Germany, EUR 600 million. '19, that we were expecting not very much German volume recovery but recovery in many other markets. And as we learned from Patxi, we are on the right track to deliver to our previous expectations and even maybe slightly more. And 2020, all things being equal, Germany is expected to come back and we do expect -- we just confirmed that view. And on top, we are slightly more optimistic about our share in the 2020 German market with our newest and more competitive products. So no big changes in the volume block.In the price effect block, we shared with you that the COE program ambition, that is high single-digit cost of energy reduction year-on-year, cannot compensate price pressure, and we were expecting 3% to 5% net effect in '18; 1% to 3% net effect on '19 and flat in 2020. I will say that our view today for the price effect is confirmed. The view on '18 is slightly more negative. So instead of 1% to 3%, we see more in the range of 5% for '19. And we are confident that with the supply chain transformation and with the new products available in the market the company has -- going to have in the market, this will be more than enough to compensate the 2020 price pressure.In structural costs, as it was mentioned by Christoph, cost reduction, EUR 45 million, was successfully execute and, as we have proved, delivering the expected results. The effect for the structural cost in '19 and in '20 is that we plan to deliver higher volume in '19 and in '20 with the same white collar costs. So this will have consequently a benefit for the company.So very much summarizing in the last slide that we have prepared for you today. Volume, same view as 1 year ago or slightly better. As you saw in the 1 gigawatt per quarter in the last 4 quarters in a row, plus Germany 2020 recovery expected and new and more competitive products, we are confident that our view can be executed. Second, price pressure, slightly more intense than expected 1 year ago and you see the yellow arrow slightly more pointing to the downturn in the range of 5% in '19. But with the new products and with, very important as well, a stabilization that we now see in the marketplace, we are slightly more confident and positive about 2020. Structural costs, unchanged. So the key takeaways is that, in our view, Nordex is back in the market with growing top line and competitive products supporting 2020 recovery, not just products but a way more competitive supply chain for those products. Gross profit margin in 2019 is affected by the price pressure of 1 year ago. We see stabilization now, but 2019 is a result of the intense price pressure in the last 4 quarters, I will say starting '17 until half of this year as well '19. You need to keep in mind that the product mix is not the best. I mean, we are ramping up, as we speak, the most competitive products that have been prototyped, that have very good sale expectations. But some of these orders -- or most of these orders are going to be installed in 2020. On top, as reported by our competitors, U.S. import duties have an impact for us in '19. When we were asked a quarter ago, is U.S. import duties affecting your company, the answer was at that time no. But legislation changed in September and this do have an impact for us in the low double-digit million in 2019. But we have action in place to reconfigure the supply chain to be a one-off only cost in 2019. So -- and no change in the structural costs. So in summary, we are on the right track to become the top 4 global supplier of choice and benefiting long term with an increased volume in a market that should recover. And we expect that the market -- margins in the market, our view, I mean everything being equal, the sector is so competitive that, in a normalized view, margins should be normalized as well 2020 onwards and the company will benefit from a substantial increase in volume, achieving eventually this top 4 global suppliers of our industry.With this, thank you very much, and we open the microphone for questions.
Thank you very much. And yes, now I'd like to hand over to our operator, and please open the lines for the Q&A. Thank you.
[Operator Instructions] We received our first question from Mr. Sebastian Growe, Commerzbank.
Three questions actually from my side, the first one is on the gross margin development. [indiscernible] said you had guided to a 300 to 500 basis points gross margin contraction in the year 2018. As things stand today, it does not appear that we have seen any gross margin pressure in these very first 9 months of 2018. I think that's also a function of the strong growth in services. So the question is the 500 basis points headwind that you do pencil in for 2019, is this including or excluding any offset factor from services? And also from the timing expectation, we be prepared for potentially weak H1, i.e., that you see the gross margin had to be the highest in that particular period and then gradually phasing out with the new machines hitting the market, getting into serial production, et cetera, et cetera. And then I would have one more on OpEx and one more on free cash flow, but eventually we can take them 1 by 1.
Okay. The first one regarding gross margin, the year-to-date, there are -- in the year-to-date, there are some product mix, market mix and scope mix and you cannot fully interpret-ate the price pressure result of the severe competition in the marketplace 2 years ago and 1.5 years ago. So we do see this 3% and this is very much included in our planning for '19. And the deals that we landed maybe not in the last quarter but in the previous quarters, we do see as well this price pressure expected for 2019. So the cost of energy program is -- has limitations eventually when doing the volume with existing products. This will change in the future with more competitive products. We will have a cost of energy a big jump, and a consequence, we will recover profitability.
Okay. And just to clarify, the indications on the 500 basis points gross margin headwind in 2019, that is excluding services, only applying to the project business.
It's excluding service.
Okay. The second part of the question is on OpEx. I've realized that on the employee side, the staff level was overall up 350 heads quarter-on-quarter at the end of quarter 3 compared to quarter 2, which is a bit counterintuitive given that you are trying to trim down obviously the activities levels. So they have obviously come up quite significantly. So I was just asking myself if that is a reflection of the higher activity levels in Brazil and India while, in parallel, you are ramping down, I think, the German production plant not at least. So is it just an unfortunate timing aspect that you have sort of a double function here in place and that should come to an end soon?
This -- Sebastian, this we need to, eventually, in the future, explain a little bit better. I think we have one activity in our company that is concrete tower production that is very heavy in terms of labor force. It's a project business. So if we do a big project in Brazil, this may employ 500 people, like this case, and this is going to trigger a big fluctuation in full-time employees. So we need to separate and eventually explain that in the future what is overhead and what is production-driven and what is project-driven full-time employees. Overall, the white collar and the SG&A is very much under control and reducing as expected in the program 45-by-18. And we are hiring in India, we are hiring in Brazil. And depending make or buy decisions for this -- especially for this concrete tower activities, we will see big fluctuations. But it's not fixed employees, it's temporary employees associated with the project activity to do concrete towers. And as we are going to see substantial more activity in concrete towers, because this is a very competitive product, especially in times where steel is increasing price, we will see big fluctuations in blue collars associated with this activity.
Okay, understood, helpful. And then the last one is on free cash flow. On [indiscernible] and saying now, it sounds like there is little upside potential obviously to the margin trajectory going into 2019. And the question in this for me, is there anything that comes to help? Be it that CapEx is dropping eventually from the EUR 110 million that you have guided for 2018, do we see any improvement eventually in working capital? Or asked differently, is there anything that you can proactively do to bring working capital to levels that are lower than the 5% of sales in order to just free up and improve the free cash flow generation going forward?
Yes, Sebastian, Christoph here. This is a combination of things. Obviously, we have been talking -- and not only talking, but managing for quite a while, our working capital program and some of the levers are just about translating into reality. So this is really a kind of mid- to long-term exercise and I think we will still continue to have improvements here on that side. Secondly, we do expect in terms of the, I would almost say, normal seasonality with the heavy Q4 home run, we do expect help there and support on the prepayment side for -- as far as cash flow is concerned. And otherwise -- I mean, also what José Luis has been explaining about supply chain transformation, this goes hand-in-hand with working capital levers, wherever we can further improve in terms of traveling times of components within the company with respect to improved or optimized logistics, et cetera. So I don't think that we have reached the full potential here. So despite, as we mentioned, what is profitability, we are full speed working on all the other levers.
But CapEx, very unlikely that this is a lever because you need to take into account that we are preparing the company for substantial growth in volume in '19 and '20. We are investing in best competitive country and we are investing in transforming the product portfolio. So all the 3 combined is not to underestimate the complexity to do that with EUR 110 million.
We received our next question from Mr. Ji Cheong, Citibank.
Ji from Citi. My first question would be on your revenue guidance for this year. So to hit the lower end of your revenue guidance, assuming service growth is at similar levels, this would imply a Q4 revenue drop in projects. So can you give us some insight on what the cost of this could be? Would it be coming from the megawatt delivery drops? Or would it be substantially lower ASPs? I'll get to second question later.
Christoph here, Ji. Thank you for your question. The narrowed guidance in terms of revenue has really only to do with the implications of the IFRS 15 revenue recognition. Again, I can only repeat that a year ago, that was not really a topic because if you would have seen some shifts of turbines into next year, we would have lost only a minor portion of revenues here according to percentage of completion. We simply -- we took a management judgment here based on our forecast and we believe that we will not be able to get higher in terms of revenue. And again, this is not due to a single specific project, but there are a few installations where we, for various reasons, assume that we will not be able to get the turbine erected right to a point before 31st of December. And again, we are not talking big amounts here necessarily, but -- and this is a consequence here, and therefore, we wanted to communicate that as early as possible.
Got it. And the second question would be on your leverage ratio. So you did mention that you're expecting your leverage ratio to drop to 1.5x. Can you let us know if you're still comfortable with these levels versus the covenants you have for your guaranteed facilities? And if...
Yes.
And if possible, if you can just give us -- say what levels your covenants are.
Concerning your first question, a clear yes from our side here. Concerning the covenant levels that we have in our syndicated facility, I would not like to broaden that information beyond what we have done in the offering memorandum to you. And I hope you understand that. I think we gave some kind of clear indications of the maximum levels and I can only reconfirm that we are comfortably in the range.
Our next question is from Mr. Sean McLoughlin, HSBC.
Firstly, you comment on the Q4 order intake momentum being strong. Could you help us understand which particular markets and how you're seeing rising development in Q4?
So we expect a level of new order entry in Q4 slightly above what we have seen in the previous quarters. And as you have seen in the previous quarters as well, all geographies contributing. We do expect, however, a significant share of new orders coming from European markets with a new Delta4000 turbines. And with respect to pricing, I would only comment that we do see stabilization in average selling price. Price depends a lot on regional mix, product mix scope, but we do see stabilization in the marketplace.
My next question is on volume. Obviously, we're looking -- I mean, if I look just at how your order book on the turbine side has grown through the year, we're looking at very strong megawatt volume growth in 2019. I mean, what kind of level of growth are you comfortable with looking into 2019? And what are, in your view, the biggest risks to the execution side of this?
This is José Luis. I will say that you need to -- I mean, it's not to underestimate the risk of the growth, but I think we have the company and the teams well prepared to do that. Our biggest activity growth is going to be in India, it's going to be ramping up Argentina, some activity in Brazil and I will say record high levels of activity in Spain and a very good activity level in Germany. So Germany very much is repeating business. So it's not the volume that we do this year, but it's slightly more than the volume that we did 1 year ago or a couple of years ago. So no big challenge. Spain, no big challenge. It's moderate growth. India, we've been operating there for 2 years and we are confident with the teams and with the supply chain to deliver the expected volume that we plan. Brazil, as well, the job view is business as usual. I will say what is new for us is Argentina, but I think we have good plans in place to secure that this is a success. We are operating there. We are quite happy with the performance, with the execution, with the margins. So we don't see big operational risk to deliver the expected growth. And the CapEx is very much already planned. So I mean, we are -- on top of that, what we are doing in 2019 is reallot in the supply chain to the U.S. because some of our Chinese supply chain strategy, China for global, might not work long term to the U.S. due to import duties. So we need to, on top of the growth, reconfigure the supply chain to the U.S. So ramp down China and ramp up other source to be competitive in the U.S. But again, we have a plan for that.
Got it. And one last question, if I may. Just thinking about your indication on the 2020 margin, obviously, if you're guiding down more strongly for the 2019 gross margin, are we also to extrapolate that the recovery of the margin will be more difficult from that lower level in 2020?
No, I will say that 2020, there are several factors. I mean, the -- I will say one of the 3 factors that are causing the situation today and in 2019 is drop in Germany, price pressure in the market, I will say not as competitive current products as the products of the future. If you take into consideration the actions that we are taking, investing in more competitive products, this will have an impact on 2020 versus '19 because the share of new and way more competitive product is going to be -- I mean, we are going to more than double the capacity in 2020 versus '19 on the most competitive products. Second, there is no this U.S. duty effect because during '19, we will reconfigure the supply chain. 2020, Germany is coming back and is coming back to stay with big volumes and we are -- this is our home turf so we will take advantage of that. And as well, in 2020, we will be a company with a substantial better global supply chain. So better supply chain, better products, more volume, more volume in Germany is why we are optimistic that the 2020 outlook is even slightly more optimistic than the way we saw it 1 year ago. Because 1 year ago, we needed to deliver, we needed to deliver the supply chain, we needed to deliver the product and all of these activities we tick as planned. So less risk ahead, and slightly better news regarding the volume in Germany.
Our next question is from Mr. Philippe Lorrain, Berenberg.
Philippe Lorrain from Berenberg. Just a quick question to start. You were speaking about the stabilizing pricing environment. Do you really mean stabilizing in the sense of the pricing is really stable? Or do you mean a normalization of the deflation rates? That's the first question.
It's more a normalization of the deflation and it's towards stabilizing and this is the trend that we are seeing in the last quarters.
Okay. And then the second question is obviously you've done a very good job in your order intake already for the first 9 months. If I understand correctly that there will be slight acceleration in the order intake run rate in Q4, I could probably figure out that next year's revenue might come into the tune of perhaps EUR 2.8 billion to EUR 3 billion. Now my question is more you guide now for a 5-percentage point headwinds coming from the gross margin. I get the point that it's related to the project business, so perhaps we can make that a 4%, 3.5% headwind at group level if we assume stable to slightly increasing, let's say, margin in the service business. Is my calculation that you're implicitly guiding for, let's say, around EUR 100 million of EBITDA next year, is it correct or is it far off?
I mean, it's too early for us to guide next year because our -- out of the order backlog, a substantial portion is for delivery in 2020, the same substantial portion of what we plan to land in last quarter is going to be for 2020. So we still need to figure out what is the expected volume in '19. And as Christoph mentioned before, the new rules, IFRS 15, this has -- timing is the essence here. But definitely, we see substantial more volume. The coverage ratio of our ambition volume is, I would say, normalized, similar as 1 year ago. So we will benefit out of this extra volume in operational efficiency and we will deteriorate profitability because of the headwinds in the price pressure 3 quarters ago or from 1 year ago. The final number, we will see in February. But if our aspiration in gross number will be better than '18, but without going into more details because we don't have information.
Okay. And then the last one is really the comment that you are making on this increasing headwind on the gross margin. Is it really more pricing pressure related? Or is it related also to these tariff discussions that you have and that you mentioned at the bottom of the slide? Because in the -- just in the cell, which is mentioning this 5-percentage point headwind, it seems like it's pricing related, but I'm just wondering if that's only the case.
No, it's both. I mean, it's pricing and it's what you mentioned as well. I mean, I will say that our levers to deal with this price pressure were, I would say, more limited in '19 than in '20 because of the product mix. I mean, we are somehow phasing out from product generation and phasing in new product generation, which is substantially more competitive and this has temporary effects on profitability. But important thing for us, as a management team, is that Nordex is back on the market with substantial market share, growing -- getting the trust from the customers. And we will improve the company, all things being equal, by execution, by ramping up the product, by ramping up the supply chain. And on top of that, what we see now is that this price pressure looks like is unnecessary in a sector that is competitive as never wished or thought. So if the sector is very, very competitive in delivering green electricity to society and top 5 players have a big share in the sector, what the rationality to keep deteriorating value. And eventually, we are start seeing this effect in the marketplace and without being so specific. But even in some cases, similar scope, similar geography, year-on-year, we see then slightly recovering in some market prices.
[Operator Instructions] We received another question from Senan Kiran, Muzinich.
Just wanted to clarify your comments on the 2019 guidance. If I understood you correctly, you're saying anything you received the new orders in Q4 will be for 2020 anyways. So what is it that you really need to know to give a more precise 2019 guidance? Seems like you have the orders already for '19.
I would say the guidance, we deliver the guidance in the normal financial calendar of the company. What we can share with you is that, today, we have the same level of visibility for the year to come as 1 year ago. So there is no difference. And even more, with the new accounting principles where schedule is everything, it's not percentage of completion, I mean, we don't want to mislead and we don't have that information. And the Q4 order intake, I mentioned that some of it is going to be for delivery in 2019, some of it for 2020. Which portion one, which portion other, we still need to see. And even in Q1, in Q1 '19, we usually land deals with execution within the calendar year. This is the case of Spain where there are projects that still haven't selected wind turbine company. Those projects by regulation needs to be installed in the calendar year. So even the volume is unclear because we have ambition to land some of those volumes.
Okay. So you are saying the orders from Q4 and potentially from Q1 '19 still can be installed in 2019.
Yes, yes.
Okay. And this U.S. import duties, did I hear you right, you said that's a double-digit EBITDA impact for 2019?
Yes, low double digit, low double-digit impact, one-off 2019 because we have, as we speak, plan in place to reconfigure the supply chain and limit very much China to the U.S. in 2020. 2019, we just didn't have sufficient time to prepare the supply chain to deal with this unexpected situation, and as a consequence, we will have a one-off hit, low double-digit million EBITDA impact.
Okay. And lastly, you're not giving any precise guidance on the 2019 CapEx. Are you like in reference to the EUR 110 million for 2019?
No, I will -- we will refer to the strategic outlook that we mentioned in several calls and we plan a company long-lasting, sustainable with low triple-digit normalized CapEx. It could be slightly more than this year, it could be in that range. But we cannot be more precise today.
Okay. Somewhere between flat to higher for next year basically. Okay.
Our next question is from Mr. Sean McLoughlin, HSBC.
Just a follow-up, if I may, on your comment you made just now. You say you have the same level of visibility on deliveries as 1 year ago. 1 year ago, your turbine backlog was EUR 1 billion at the end of Q3. It's now gone up to EUR 3 billion. You're guiding to more or less EUR 2 billion of turbine deliveries this year. So I guess you picked up EUR 1 billion of Q4 orders that will end up in -- or Q4/Q1 orders for this year. This additional EUR 2 billion that you have currently in the order book that are for delivery post-2019, is this already your visibility on 2020, i.e., you have better visibility on 2020 deliveries than you have on 2019? Any clarity appreciated.
Well, I don't have the full data in front of me. We have a reasonable level of, I will say, slightly better level of visibility 2 years ahead than the one that we had 1 year ago and a similar coverage 1 year ahead as the coverage that we had 1 year ago. I mean, it's a year ahead versus the expected volume that we cannot disclose today, but in the range of 55% this very same time in the year. And 2 years ahead, it's true that we have more visibility. We have better visibility for 2020 than the one we had for 2019 1 year ago, substantially better.
Our next question is from John Sykes, Nomura.
Appreciate the time. Question is I know you aren't giving -- or you can't give specific 2019 guidance, even kind of give us ballpark figures. But my question is more to cash flow because I'm sure that as you look out into 2019, you've run various scenarios in terms of what cash flow would be and what your liquidity would be. So really, just trying to -- in terms of liquidity, you guys feel relatively comfortable, I'm assuming?
Yes, John. I mean, I mean, if you want to have basically a feedback from myself how comfortable we are, yes, liquidity, we are definitely comfortable, absolutely. I mean, cash flow planning specifically, you know it's obviously very much dependent on the -- also on the overall revenue planning and pattern. We have been saying that we expect to grow top line and volumes, and therefore, I mean, we cannot, at that point in time, give a cash flow forecast. We have also talked about the profitability development that we potentially see. For me, it's still too early to give a more concrete outlook here. What I can tell you now looking at the overall ambition level, I would really now rather focus on year-end. That's our objective, and we still do expect to further improve in that respect.
Okay. And then so I assume like Q1, you'll have a better idea...
Absolutely.
Okay. So I guess by then we should kind of have a better idea of what you're thinking about in terms of margin, volumes and cash flow.
Yes, sure.
Okay. Thank you very much. Felix speaking, this now concludes our Q&A session for today. Thank you very much for participating and for all your question and interest in our company. And now I'm happy to hand over for José Luis for his last and final remarks for you and for your key takeaways. Thank you very much.
Thank you, Felix. Thank you, everyone, for their participation and the questions. I will repeat the takeaway. I mean, we were, 1 year ago, presenting to you a turnaround plan. We are delivering to our promises. We have a better view for the future of the company. We are in the market. We are recovering trust from our customers. We are developing competitive -- very competitive products compared to our -- comparable to our competitors. And we are in the middle of a supply chain transformation. So overall, more optimistic by the transformation of this company than we were 1 year ago. So '19 is not going to be as the normalized profitability of the company, but you need to take your view on the big picture and what we are doing. And we are optimistic about our transformation. Thank you very much.
Thank you very much. Bye.
Bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.