Nordex SE
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Nordex SE
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Yes, thank you very much for your introduction. Good afternoon, ladies and gentlemen. It is a pleasure for me to welcome you on behalf of Nordex to our today's analyst call for the full year results 2017.
And our members of the board are all here, and I would like to welcome our CEO, José Luis Blanco; our CFO, Christoph Burkhard; and our Chief Sales Officer, Patxi Landa. They will give you a presentation, sharing information about the business development, markets, financials and our guidance for 2018 with you. Afterwards, as already mentioned, there will be time for your questions. We will start to answer the questions here in our audience in the room, and then we will switch over to the call. [Operator Instructions] And this event today is supposed to last for around two hours.
So, and now, I'm happy to hand over to our CEO, José Luis. Thank you. Please go ahead.
Thank you, Felix. Thank you, ladies and gentlemen, for your participation, and welcome to the full year 2017 Nordex Result. As Felix mentioned, here with Christoph Burkhard, CFO; Patxi Landa, CSO; and we three together, we will guide you through the agenda that we have prepared for today.
First, I would start with an introduction of -- and brief comment on '17 execution numbers and guidance for '18. Patxi will share with us the evolution of the markets, orders and installations. Christoph will dig deeper into the financial performance of the company. I will take it from there to share with you the strategy going forward as well as the guidance for the year. We will open for Q&A. And after Q&A, I will summarize, which in our view, are the takeaways for the year.
So, if we move to the introduction, executive summary. We would like to deliver and to share with you that 2017 results are very much in line with the previously announced guidance. Sales, close to €3.1 billion; guided numbers, €3.08 billion, as previously reported in Q3; EBITDA margin, excluding restructuring costs, 7.9%, within the guided figures; working capital ratio, 5.3%, with evolution in the last quarter thanks to the good order intake and cash collection procedures of the company; CapEx, slightly below the guided numbers, €144.3 million, CapEx invested primarily in developing more competitive products and more competitive supply chain for our company going forward.
It's fair to remark as well a very good 1.6 gigawatts order intake in the last quarter of 2017. It was, by far, the strongest quarter in order intake execution. We would like to share with you that we successfully complete the 45-by-18 cost-reduction program that was announced to you one year ago, we've completed successfully before December. We are running 2018 with €45 million versus the total costs compared to '17. Very important as well to mention that although it was not probably properly communicated, it was very high in our agenda as management team to refinance the company in order to avoid a repayment milestone in the middle of our turnaround. This was successfully prepared in the last quarter of the year and successfully accomplished in early 2018. So overall, we did it. We are happy with our performance in 2017 in preparing the company for the challenges we have in front of us. With this, we will like to share with you what is the guidance for '18. Sales, we plan executing sales in the range of €2.4 billion to €2.6 billion, EBITDA margin is going to be in the range of 4% to 5%. Despite the drop-in sales and in profitability, we expect working capital to remain below 5%. And we plan to run our normalized CapEx in the range of €110 million, which we plan this will be the level of CapEx going forward, high double digit, low triple digit.
With this, I will hand over to Patxi. Patxi is going to share with us his view on customers, markets and other issues.
Thank you very much, José Luis, and good afternoon, ladies and gentlemen. This is Patxi Landa speaking. I will lead you through markets, orders and installations part of the presentation. With respect to the market, what we saw in 2017 was a continuation of the transition into Auction System globally. I would say that, generally, the transition to Auction System base was almost completed globally. And one as a final example of that was actually France, where the first auction took place in December 2017, where we had a very good result from a Nordex perspective, 1 in 3 megawatts that were awarded was awarded to Nordex as well as some other main European markets, like Spain, where a significant amount of megawatts were awarded, and we will see the outcome and the impact in P&L kicking in 2019 and 2020.
Then with Turkey, with the rush to the old feed-in tariff projects to get executed before 2020, we expect a positive evolution of the market. And as well, in December last year, there were auctions that took place and that were awarded that will see and will sustain the Turkish market 2020 and beyond. And with Germany, where auctions continue to take place as per the plan and where delayed effect of the installations, with which we will have spoken in previous calls we will see and we are pretty confident that 2020 onwards, the installations in the market will peak to a sustained and normalized level. In the Americas, U.S. continued with the PTC cycle. Orders were turning into the normal flow. We see that the market will increase installations in 2019 and 2020, up when that PTC cycle currently at 100% value expires. We will see a trend towards increase in activity towards the end of next period. Brazil was a positive surprise last year. After two to three years of downturn out of the macroeconomic situation in the country, auctions took place, and a significant amount of volume was awarded. But we'll see, as late as 2019 and 2020, impact in installations and in market size. Brazil is back in the game. Same with other very relevant markets for us in the Americas like Mexico, Argentina and Canada that had very sizeable auctions, 600 megawatts-plus in each of those markets last year that will also support the potential of those markets in the next years.
Rest of the world, worth to mention the situation in India where the very radical PPA price drop has fueled short-term demand. And there are announcements already of auctions that will take place this year and next year but will -- could put in play a significant amount of volume into the market. As well as South Africa that we will have discussed in past calls and the recurring topic in this call, but where the government change is making a difference to expand the vote, and we expect, truly expect this year that Round four projects will see finally through financial close and therefore, that we will be in a position to install the contract that we have won into that one.
If we go then to the analysis of the order intake there for last year, there was a significant drop in terms of million euro, 33% to €2.2 billion in the year, and that was mainly driven by the performance in the German market and the situation in the German market. In fact, if you take out Germany as a comparison basis, in megawatt terms, order intake was slightly above 2017 with respect to 2016. So, the German effect was the main driver behind the growth in order intake.
Then from a regional breakdown, we continue the trend towards deals Europe-izing the footprint of the company and becoming an even more a global footprint company. More importantly, the transformation of our customer base that traditionally in Nordex, we were mid to small type of customers. I can share with you that over 60% of the order intake realized last year was done with large utilities and outside the place that play a global game. And that is a radical transformation that puts us in a very good position to compete in the future as, in our perception, these types of customers will have a winning hand into the new auction world.
If we move to service. Service sales grew by 14%. In comparison to the figures here, we had an average term of over 10 years in our term in the service contracts, every contract, turbine contract that we sell goes hand-in-hand together with the service contract renewal rate, we have 84%. So, we have a pretty stable and profitable part of the business that we'll continue to do so in the foreseeable short term.
With respect to the combined order backlog, it stands at 3.7 billion at the end of 2017. The split between turbines and service is €1.6 billion on the turbine side. The decrease explains same as in the order intake due to the German factor that was actually the lack of German orders, explaining the decrease in backlog of turbines. With respect to services, very good performance with respect to new order intake that made the backlog of services increase by 17% to €1.9 billion end of the year.
With respect to installations, there was almost flat performance to slight increasing '17 versus '16. The activity in these 17 different countries with almost more than half of it in Europe and the rest already in the Americas. In Q4, we saw a split in installations given the activity profile of last year, where it was significantly back-ended with respect to the previous quarters. With respect to turbine assemblies, 16% increase, blade production, 16% increase to serve the ongoing projects that as we do the execution during the 2018 year.
And with this, let me pass through to Christoph Burkhard that will lead you through the financials.
Thank you very much, Patxi. Good afternoon, ladies and gentlemen. I would like to guide you now through our 2017 financials. As a starting summary, I want to say that we have fully reached our target for 2017. Considering the shortfall of 22 million from our 2.1 billion revenue guidance, representing less than 1 percentage point being negative. And the slight deviation was also anticipated and communicated throughout our Q3 call. With 242 million EBITDA before our 41 million one-off costs related to our cost-reductions program, we achieved a margin of 7.9%.
Looking now at the delta between the two, 2016 and 2017 EBIT number, I think it's worthwhile to do a bit of a like-for-like comparison by adjusting the 2017 number, adding the one-off restructuring costs of 41 million and the delta of 21.5 million between the 2017 and the 2016 PPA depreciation, and that is leading to an adjusted comparable EBIT of about 106 million instead of the 43 million.
The tax rate, excluding the special effect from the U.S. tax reform, stood at 30.8% at year-end. And what do I mean by the special effect coming from the U.S. tax reform? The special effects come due to the fact that, of course, that tax rate was lowered and that our tax assets, of course, got depreciated accordingly because simply, the value went down due to the lower tax rate going forward.
If we now move to the Q4 income statement. There, what I would like to add here is obviously that the Q4 results were driven by the one-off costs related to our 45 by 18 program. The PPA depreciation in Q4 amounted to 13.5 million. And maybe just to take the occasion just to comment on the one-off costs in 2017, we might have to question to what extent are those costs -- cost savings real already or not. And I can tell you the half of the cost savings have already been realized through the staff reductions that already took place, roughly the other half reductions in the OpEx arena are firmly entrenched in the budget and are materializing over the years. So, the only way those costs would not happen would be us losing budget discipline, and I can reassure you that this is not going to happen.
If we now move to the balance sheet. Going through the balance sheet, I believe the solid structure of our balance sheet remains unchanged compared to year-end 2016. The equity ratio stands at a decent 32.7% compared to 31.4% in 2016. And as always, the comments, they refer to year-end of the previous year.
And I would like to mention here that our cash position at year-end 2017 of €623 million after our Q4 strong [indiscernible] home run was a bit lower compared to 2016, with an overall cash position of €649 million. And that, of course, also caused by the fact that, as Patxi mentioned, our order entry in 2017 was significantly lower than 2016. As a result, we do have now a net debt position of €60 million at the end of 2017 compared to slightly less net debt cash position of €6 million in 2016.
With this, I would like to comment now on the working capital development. Working capital development with a year-end percentage of 5.3%, very positive here again towards the lower end of the guidance. And when considering for a moment significantly reduced order intake in 2017 compared to 2016, I believe the delta of just 1.2 percentage points between the 2016 ratio and the 2017 ratio is fairly small. And this development already reflects the positive effects coming from our working capital program. So, the lower overall prepayment levels in 2017 compared to 2016 could already partially be compensated by an improved receivables collections and improvements on the payable side. With this, now moving to the cash flow statement. After our Q3 call -- or in our Q3 call, I mentioned that we will see our free cash flow further improving, getting us from the minus €206 million in Q3 to minus €54 million at year-end 2017.
Now looking at the direct comparison between 2016 and 2017, obviously, influenced by the execution of willpower. So, if you adjust the free cash flow number for 2017 by the acquisition effects, you would have a comparable number of plus €50 million compared to the minus €54 million at year-end 2017. With this, now moving to the investments. Total investments spent at year-end stood at €144 million and being slightly below our maximum guided value of €150 million. And as José Luis already mentioned, in line with our new guidance for 2018, we want to develop our total CapEx to just put it like that, a mid-term normalized level of high single-digit and low triple-digit million budget. That's clearly how we see CapEx development happening in the near future. With this, I would like to go to our capital structure. Looking at the capital structure, the chart over the previous 12 months indicates further unchanged solidity and stability of our capital structure, and that, despite all the volatility and ongoing changes in the industry. The development of the KPIs over the previous quarters had been very stable. And complementing our 2018 guidance, we want to communicate here our ambition and expectation to stay within our leverage sustainably below 1.5 despite the expected lower profitability in 2018, hence, continuing with the solidity of our overall capital structure.
Now moving to a specific topic at the end of the financials. I would like to spend a few words on the effects of the introduction of the new accounting standard, IFRS 15. So, I'd like to take the opportunity to give you some explanations here in the context of that mandatory introduction, which is basically starting or has started January 1, 2018. The main change triggered by the new standard comes from revenue recognized at a later point in time of a turbine project compared to the previous IAS 11 standard. Whereas we previously started to recognize revenues and the related profit according to the percentage of completion method usually at the beginning of production, we now in almost -- in most cases, only start revenue recognition at erection/mechanical completion of the turbines. And that leads -- will lead to a couple of effects. Firstly, it will initially lead to a spillover effect of revenues into 2018 because we will recognize revenues, again, for turbines being erected in 2018. At the same time, the spillover effect will be offset throughout 2018 due to the missing POC revenues for the period up until erection. And by the way, you will see them when we talk about the Q1 numbers and show the Q1 numbers. We will see the same effect happening in the order backlog number in Q1 2018, also being offset against throughout 2018.
And now finally, the effect, total transition effect in 2018 will depend on the final project installation and erection timing at year-end. So just as an example, any execution delays happening over two reporting periods will now, in the future, always result in the shift of all project-related revenues into later periods, where previously all POC-related revenues were unaffected by such delay and distributed evenly across both reporting periods. So, in terms overall planning going ahead, of course, we will have to much more focus on a specific point in time, hence, by way we expect really the erection/mechanical completion happening compared to previously where, of course, POC always made sure that you have a very constant distribution of revenues over time. Now eventually, that change of accounting standard will also have a technical effect on the balance sheet. Since due to the revenue recognition at a later point in time, we will see a prolonged balance sheet due to a growing work in progress and a corresponding prepayment position on the balance sheet, and that will simply lead to a reduced equity ratio, which is a purely technical effect. I do expect for today with the best -- my best know-how that this reduction will amount to roughly 5 percentage points. And this is simply a technical matter since the balance sheet positions will grow. Now very important, finally, to note that the change to IFRS 15 has no effect on cash flow at all since any contractual milestone, payment, etcetera, that -- those remain unaffected. So, the introduction of the new accounting standard is entirely cash neutral.
And with that, let's move to the refinancing. Because before handing back to José Luis, I would like to speak about our successful refinancing and the placement of our green bonds in the amount of €275 million. As you can imagine, one very frequently asked question in the context of our placement was about the timing of our refinancing. And my answer to that is the following when we, José Luis, Patxi and myself, took over as the new management team a year ago, we basically selected four top objectives to be accomplished within 2017. José Luis has already talked about them. It was the easy acceleration of the new product development, it was the comprehensive overall cost reduction program, it was the comprehensive working capital program and it was really to adjust the existing refinancing structure in order to fully match the need of the ongoing critical transformation phase of the entire wind industry and to create the predictability and transparency needed throughout 2021. And we are convinced that we could effectively achieve that by placing the green bond, removing the 2019 repayment for us and still benefiting from an overall favorable macroeconomic environment, which might already start to change compared to previous months. I mean, just to mention, concerns around future trade policies, interest rate developments and the likes. And in this context, we also believe that we could pick the right window of opportunity for us.
Now with the new refinancing structure in place, we could achieve both, having a favorable new repayment profile and also still benefit to the maximum from the favorable Schuldschein terms that we still maintain in the later years, leading to a blended annual interest rate of slightly above 4% from now onwards until 2020. And last but not least, with this structure, we did further enhance our transparency and predictability towards all our external stakeholders, our customers, shareholders, bondholders and suppliers. And so, we believe that we are well prepared for the transition phase.
And with this, I'll hand back to José Luis.
Thank you, Christoph. A little after two years from the merge and working as one company, despite the last year's needed restructuring, we would like to review with you the merger rationality that was -- merger rationality was creating a stronger and more competitive company.
From a market focus, we are truly global now. And as we saw from Patxi's presentation in terms of order intake, in terms of markets and in terms of supply chains to deliver these markets, we are now 50% non-European company with non-European competitive supply chain and a 50% European company, market company with 50% supply chain to deliver our competitive projects in Europe, so truly global footprint.
From a customer focus, it was mentioned as well, the big development with large global customers while keeping the very important and loyal small and midsized customers that we have, mainly in Europe. So, we grow there substantially the customer base of the joint company. We grow competencies as well to do different-sized projects, big-sized projects in non-European market; small-sized, very numerous projects in the European market. And we, as well, have a stronger company in terms of IP and technology competence.
In summary, we are leveraging the global market presence to further expand our business with key global accounts and increase sales in the growth markets. We are already in all the markets where the volume is expected, other than China. We don't need to plan to be there. We don't need to execute to be there. We are already there with things, with supply chain, with factories, with the possibility to leverage increasing demand expected in those markets.
We developed our comprehensive and cost of energy-optimized product portfolio despite they already forecasted a new drop in revenue and profitability, we decided one year ago to accelerate the product development and the supply chain development to prepare the company to be competitive in the long run in the industry. We are optimistic about how these new products are received and perceived from our customers.
In line with the above, what was mentioned as well, we are transforming the supply chain from being European-centric to being Germany for Europe, Spain, China and India for global, so transformation that is more towards the end and to the beginning, reducing capacities in Germany, increasing capacities in India and China.
As was mentioned before, preparing the company to be sustainable in a different future market, a future market with volume but with eventually, lower margins than before. So, we are reducing the white collar structural cost of the company. We did it last year, 45 million less structural cost without endangering the possibility of the company to grow and then back in 2020, when the market comes back to Germany, and as well, leveraging on service as a stable and attractive offering globally.
Going to the product development. We mentioned that despite the shorter volume drop, mainly due to Germany, we decided to invest, as never before, high amount of resources in a new and more competitive platform, both for Europe -- demand in European market as well as for non-European markets. We successfully launched the new 4 to 4.5-megawatt machine, 149-meter rotor with double-digit COE reduction, sales release in September.
We are quite optimistic and happy of how this product can support the recovery in the German market 2020 onwards. We are back in the terminus. We are back in customers' traction. And there is very little doubt that the German market is going to come back, and there is very little doubt that today with this product, we will have our share in the German market 2020 onwards.
The same applies for non-European products. We are continuously enhancing our offering, and more to come, especially developing products to be competitive in India in a new already demanding, low COE environment. We are today using the Indian supply chain for global demand. And very soon, we will have products as well to leverage the possibility to develop a very important market for us in the future in India.
With this, I will -- we will say that strategic outlook is confirmed. The view that we have today versus the view we had almost 6 months ago is slightly more positive 2020 onwards due to mainly two aspects: one, German market looks like we're going to have more volume than previously expected. This is not factoring our business plan. And orders, other than that, '18, we are guiding today, very much '18 in line with what somehow, we could foresee in Q3. At that time, we didn't have sufficient visibility. But today, we see that it's a fact that Germany is going to drop roundabout that number in terms of revenue, and this is going to feed our top line. The price pressure deteriorates the profitability that we announced in the guidance for the year. And with the structural cost reduction, we are not capable to compensate the volume and price pressure effect. So '18, very much they are all show what we see today in the guidance. Regarding '19, of course, too early to comment. But all other things being equal, we see a slight recovery in some markets. But the real change is going to come in 2020 onwards, with a new product and market coming back in Germany and we recovering our previous market share in the recoverable market in Germany.
The price pressure assumption from '19, we see not the stop in price pressure but slightly decreasing the tendencies. So hopefully, we will see a stop there in the price pressure shortly, which very much substantiate our assumptions that in 2020, we won't -- we will see a stabilization. So, we will be capable to reduce cost of energy at the same speed that the market is going to demand us to reduce price. In terms of structural costs, it was mentioned, job done, thanks to the -- to good relations with the Workers Council, and thanks to very cooperative former colleagues. But unfortunately, we cannot keep them onboard. That was successfully accomplished in a very good way. We don't plan to increase our structural costs despite the increasing volume expected in -- to a certain extent, in '19, and to a big extent, in 2020, thanks to the recovery in Germany. During the next three years, service is expected to profitably grow at around 10% per year. We have, as you know, a solid pipeline that was, and as Patxi mentioned last December, big winner in the French auction. So, this solid pipeline of projects is going to support the business positively as well within the next three years. And as Christoph -- and as was mentioned before, very important focus in working capital management, especially in '18 and '19.
With all these mentioned, we have the view for the year, and we are here to guide you to what -- the way we see 2018. As mentioned before, sales, €2.4 billion, €2.6 billion. We have a reasonable coverage of firm and unconditional orders to deliver these sales expectations. EBITDA margin, in the range of 4% to 5%. Working capital, despite the drop-in revenue and profitability, we expect to have a good working capital development during the year. And we plan to run the company in a normalized CapEx. We invest record high last year because it was the time to do so, to launch a new platform, to be very aggressive in recovering markets here, 2020 in Germany. But going forward, what we plan to do is entrenchment of the platforms that we already have, so low triple-digit CapEx in a sustainable basis is what we very much plan to execute.
This is very much what we have for today. So, we would like to open the microphone and the floor for Q&A.
That's it for the presentation, ladies and gentlemen. Thanks for the good presentation.
And let's take the first question from Sebastian Growe. Sebastian, please.
I have three. Surprisingly that these -- I have fairly well-distributed questions for everybody at least. So, let's start with Patxi then. On the ASPs and the competition level in general, more from a higher-level view eventually, we've seen obviously that quarter 4 ASP was sharply down compared to the first three quarters. So, on my math, something like 0.7 kilos per watt compared to almost one in the first three quarters. I guess the U.S. had an impact for sure. Maybe you can just a little bit talk about what has happened since? So, do you see -- and you mentioned that you see a certain normalization, but also in terms of what competitors are doing because we do hear some statements that some other competitors are saying that you see a stabilization and simply you see some irrational behavior throughout of some competitors, maybe establish some color, okay?
The ASPs, okay, first of all, [Indiscernible] statement, Q4, so a very significant share of U.S. orders into the mix and that was affecting the ASP of the quarter. On top of that, the safe harbor effect, which we do not account, it was accounted previously, which in turn drops additionally slightly the ASPs for U.S. orders. So, taking that into account, it's true that the company took the quarter's ASP, it went sharply down. And we do see, even if we see price pressure, we do see some softening in some of the markets of -- for price pressure, and that is true to statements that some of our peers have made in that respect. We do see the price pressure happening, but we do see the intensity of the pressure easing, especially in some of the markets. So therefore, sustaining the view that we were sharing -- keep sharing to you before that stabilization, we do expect stabilization kicking in around 2021 onwards.
And it couldn't have been really for the year, orders then pricing wasn't really that necessarily down in quarter four compared to the other quarters or not?
No, that was -- so the evolution of the pricing reflected the evolution in the market in the year and what I can foresee as well in the market and moving forward. I believe that we maintain to be extremely competitive into the market. We do see some price pressure still happening but softening with respect to previous periods.
Okay. And then the normalized run rate will be rather like 5% then going forward. So is it hard to say...
It's really hard to say and very hard to quantify really upfront.
Okay. Maybe then we move on to the [Indiscernible]. My projection on working capital, on my numbers, I think free cash flow should be somewhere between flat or even -- breakeven and 50 million profitable pro forma. Maybe you can just correct me if that is about right from your point of view. And more specifically on working capital, I think you stressed that this program is ongoing. And I think you have taken out something like 400 bps on the working capital that's excluding the prepayments. So, it seems really, on what is your trade receivables and the charge severed, you've done a good job. So, what's really your own leeway that you still have in terms of improving things, all else equal, no deterioration in payment terms, etcetera, etcetera, by just doing a better job, so to speak? And if you modeled anything into the working capital target for the year '18 from prepayments done?
Let's start with the cash, with what you said about cash. I do not want now to hand out of the firm, let's say, additional cash guidance. But what I can say is that, as you can see now, our working capital guidance, we want to become better than 2017 and the same is true for cash. We want to become better in 2018 compared to 2017. Now at that point in time, I don't want to become more specific. It's really hard then -- but let's put it like that, we want also to improve on the cash flow. Now with respect to working capital and prepayments, our working capital planning, of course, it's also based on certain assumptions around order intake for the year because obviously, prepayments also do play a role. And we haven't provided an order entry guidance. I would like to put it also there in a way that we all believe that we will do better than 2017. I think without issue, in the guidance, we can say that. And those assumptions have also gone into the working capital planning on a conservative basis.
And then lastly, if possible, on the capacity leeway, you have obviously done quite a lot to the footprint into the German operations. And you said that you expected a slight recovery in 2019 but really a big recovery in 2020. So, with the current setup, how much of a leeway do you really have? And should we expect some additional capacity ramp-up again once these things should get better? And how should we simply think about utilization, et cetera?
I mean, today, this supply chain transformation is supporting working capital program as well because the more close we are to the market, the less time to deliver and the less working capital involved. Very much, our strategy is Germany for Germany and neighboring countries; India, China and Spain for Rest of the World. Doing further consolidation of the capacity is not a good investment for the company. So, this is the best setup that we can run for the expected volume that we have in front of us. But we can share with you is that no substantial investment needed for the growing volume expected in 2020 onwards. We are running, in the last year, we produced roundabout little bit more than 1,000 units, 500 in Germany, 500 for European consumption, 500 in Spain, India and Brazil for non-European consumption. This is very much half of our available capacity if we run 24/7, reducing more on consolidate Nordex business case from a cash flow perspective and from the ability to be competitive in the future, possibility to do more business, substantial without investment. And the supply chain transformation is going to support as well the cost of energy program. We will do more China and India, less Europe, and this will have a bottom line impact as well for the company.
Have I heard you correctly say you could double as much as we produced last year. So, from the thousands you could renew, produce 2,000 units [indiscernible], okay.
And with minimum investment in blade most, initial capacity is there for those volumes.
Douglas Lindahl.
Three again from my side. The first one, on your order intake development in general, do you believe 2018 is going to be similar to last year in terms of that it's going to be very back-end loaded? Or do you believe orders will come through in 2018 on, let's say, on a more regular basis? That's the first one. Maybe if you could just...
It will certainly have a different shape. And you will see that already in Q1 where we expect a substantially larger amount of orders kicking in when compared to the same period of last year. So, we have a much stronger beginning of the year and much more levelized order intake inflow into the year, less than last year.
Great. And then as follow-up maybe on the South African orders because you elaborated on that already earlier. I'm not going to ask you when the elected minister going to sign the PPA. But if they sign the PPA, how quickly can you convert those conditional orders into firm orders?
Relatively quickly, it's going to be a matter of -- certain orders is going to matter of weeks; and some orders, a matter of a few months.
But no major renegotiations necessary?
None.
Okay. And then maybe the last one, on your goodwill position. Obviously, following the merger with Acciona Windpower, you have a sizeable goodwill on the balance sheet. Has there been any uncertainties over the last months that could be an impairment, could be necessary or anything like that?
After it was very, very solidly investigated with our auditors at year-end, with the usual attention, and there is no such development expected off of it. So, the model is intact.
Do we have some more questions here? Okay. Then operator, please go ahead. We are now ready to take also questions from the call. Hello? Operator, could you hear me?
Yes, we can -- I can hear you. We will now begin our question-and-answer session via the telephone lines. [Operator Instructions] The first question is from Pinaki Das, Bank of America Merrill Lynch.
I've got three questions. The first one is on your guidance. I saw some comments from Luis on Bloomberg saying that headed for a loss in '18, maybe also in 2019. So, I just wanted to clarify that -- the possibility that the earnings don't recover in 2019, just reading your thoughts on Bloomberg, so I would like some color on that. The second question that I have is relating to your cash flow statement. I can see the Slide number 14 where you have shown the cash flow from operating activities before net working capital at €108 million. And the last year, it was €287 million. The last year numbers compare quite well with the EBITDA number of €285 million. But this year's number of €108 million is materially below the €200 million EBITDA that you've reported. So, I wanted to know what is the sort of €92 million gap between EBITDA and cash flow from operating activities before net working capital? And does it actually have an impact going forward as well? Is there some change in accounting or something which might impact the conversion of EBITDA in 2018 as well? So that's my second question. And the third question is I -- some of the comments earlier on the Q&A, they were not very clear, so forgive me if I didn't follow-up properly. Just wanted to get your comments around, given we are pretty much close to the end of the quarter, can you give us a little bit of color on what do you've seen in terms of volumes and the pricing in the first 3 months of 2018?
Okay. Thank you for your question, Pinaki. I'll take the first one. I mean, '18, very much with the guidance, you can make your assumption about bottom line. So, it's not unlikely that we are negative bottom line. '19 is just too early for us to -- it's too early for us to comment on '19. Where we see real change for the company performance based on market expectation, market evolution and based on customers' interaction is in 2020. All else being equal, 2020, we expect volume from Germany because Germany is going to deliver volume in 2020 onwards. And this is based on available market, and this is based on ongoing conversations going on with relevant players that will execute projects in 2020 onwards. This German effect, we do not plan to have in 2019, but as we said, too early to comment in '19. We see positive market developments, as Patxi mentioned, in South Africa and in other markets. But all else being equal, the real change for the company, the real reason of the drop in '18 is Germany. The reason of the recovery of the company in 2020 is Germany. And '19 is going to be a transition year. But I am not in a position to further comment because I don't have more visibility. And with this, maybe you can complement here, Christoph, and take the second question?
On the cash flow statement, compare '16 to '17, let me focus on the major effects that I do see creating that delta. And the big-ticket items, so to say, in that delta calculations are: number one, the one-off cost related to the -- to our 45-by-18 program. Then you need to appreciate that also compared to '16, and that was also one reason, of course, why that program was reinforced as we do see in '17 overall higher structural costs, so that, basically, you put on top of the one-off effects that we had to incur in 2017. And the third big ticket effect is that if you compare financially '16 to '17, then financial year '16 is reported without Q1 Acciona Windpower. And that is also, of course, heading to the number in 2017 in terms of structural costs. Those are the three big ticket items that immediately come up my mind. But we can certainly follow-up to be even more specific [indiscernible]
Can I ask a clarification on that? Isn't your EBITDA already reflecting the costs, some of the restructuring costs already in the €200 million, also some of your structural costs already in the €200 million of EBITDA, why should there be a gap between EBITDA and the cash flow from operations?
I would now -- in the €200 million, it is, of course, reflected. But wouldn't that -- let me think about it. Having compared to the cash flow level in 2016, yes? If you say this is largely reflecting, it's largely reflecting the EBITDA or it's a very rough calculation, you see basically it's in line with the number. Yes.
But it's not in line in 2017, so I just wanted to understand what the gap is. You can come back a little bit later if you wish that's -- if it is easier.
Let's take a differentiated view and offline then, Pinaki. Thank you. And the third question was with respect to expected order entry in Q1 2018, we do expect a significantly higher order intake with respect to same period 2017. I believe 2017 was €623 million out of memory. We do expect a significantly higher number this quarter. And by the way, we will be reporting order intake moving forward in megawatt terms then with our peers, the megawatt terms will be expecting a much stronger beginning of the year 2018.
And on the ASP trends?
Similar as explained to -- as [Indiscernible] before. We do see some ASP deterioration but less than what we have seen in the past.
The next question is from Sean McLoughlin, HSBC. Your line is now open.
Firstly, just following on from Pinaki's question. If I can ask, I mean, what is your visibility on generating positive free cash flow in 2018? Second question, coming back to your comment on more China and India in your supply chain. Can you talk more about this? Maybe quantify the cost saving you have in mind and comment on how quickly you can realize these reductions?
Thank you, Sean. Christoph here. I'll start with your first question. Visibility on positive cash flow generation in 2018. Well, my response will be similar to what I've said before. It is at that point in the year notoriously difficult to be very specific. However, visibility, I think it's higher than last year. And we do have, I think, a good planning visibility in terms of working capital program that will contribute to the cash flow generation. We have a better visibility on the order side compared to last year. That is, all in all, I believe we are confident to say that we will also improve on the free cash flow side compared to previous years. And I don't want to be more specific because I think that's too early.
And regarding the second question, the supply chain transformation, we are coming from two European based supply chains for supplying the world, Europe -- and European markets and customers. I will state, it's very difficult to quantify, but I will try to summarize that by 2020, 100% of non-European market is going to have 75% cost base in Asia. But that's very much our goal, coming from a very much European base for non-European demand, who are 75% Asian base or non-European demand by 2020 -- for deliveries in 2020.
The next question is from Michael [Indiscernible]
Two questions from me. I want to push you more on this free cash flow statement. I mean, 110 million of CapEx, 10 million of taxes, 30 million of interest, your EBITDA guidance is somewhere between 96 million and 130 million. I don't know what you're going to spend on cash restructuring this year, maybe you could share that with us? And then I guess, the balance is working capital. But exactly how do you get there?
We do not plan to incur further restructuring costs in 2018, and to answer your first remark. And secondly, can you please be more specific, what is exactly then the question going beyond?
No, no. I guess what I'm saying is, if I look at your guidance, I don't get you to be free cash flow positive. Clearly, you expect something to come back from working capital. But the cash generation isn't going to be significant, I don't think. Is that fair or not?
Again, I don't want to be more specific now around free cash flow generation as I just was. Again, we believe that working capital program will still significantly contribute. You saw our guidance around to become better in 2017. And we also want to further improve on the free cash flow side here.
Okay, sorry. And then my second question is around working capital. I mean, all of these businesses have the same working capital profile, very significant outflows in the first half of the year with very significant inflows in the second half. Can you talk to -- given that you will have a lower revenue base this year, can you talk to how volatile you see working capital being through the year compared to other years? And sort of what sort of swing in liquidity we can expect maybe?
Now of course, you are asking for kind of working capital profile over the quarters to come, and...
No, I guess what I'm asking is, you have 600 million of liquidity. Working capital historically, in the first quarter of last year, was 135 million outflows. And you suffered outflows in the second quarter, and then obviously, you saw significant inflows in the fourth quarter. Should we expect the same seasonal profile this year or...
No, I would expect a slightly changed pattern here, also influenced by what Patxi mentioned before. We expect the prepayment profile obviously following our order entry profile. Therefore, last year was extreme, with a very, very back-end pattern here. And I mean, we cannot exclude, of course, certain peaks due to seasonal patterns in production. But nevertheless, I think it's fair to say that we would expect a more even development compared to last year, yes, less of a peak development.
The next question is from Stefan Binder from Palmerston Capital. Your line is now open.
It's Stefan Binder. I have follow-up on the cash flow question, similar to the first question here. In your cash flow statement, you note a 110 million outflow decrease -- increase in other liabilities not attributed to investment and financing activities. So, I'd like to understand where this is all coming from? Quite a big number on the debt side, we are concerned about that.
There's no reason to be concerned about it. I think if you look very closely at the notes in the statement, you will also find an explanation. This is due to the fact that in the context of the merger that effect is largely happening at the previously Acciona Windpower, that is that we have become much more precise in allocating invoices that was previously booked under that big -- in that big bucket, other liabilities, into a specific operational bucket. So, this is a reclassification of invoices to projects, and that has to do that we have become more precise in allocating those further other liabilities into specific liabilities, and thereby, including it in the working -- in the operational working capital calculation.
Okay, but that -- means -- because that was an outflow, and you reclassified it into working capital, that without the reclassification the working capital would have been more an outflow this year? Is that fair to say that?
I mean, there are many effects counterbalancing that as well. But I think that as an overall statement, it really has to do that we have become simply more specific here and are able to assign those liability to the specific projects, particularly on the Acciona Windpower side.
Okay. I'll have a close look and probably follow-up separately. One more question, if I may? You mentioned the IFRS 15 adjustment. So, is that kicking in when you reported Q1, Q2, Q3 or just at the end of the year?
No, no that -- you will already see in Q1.
And related to that, you mentioned that, basically, revenue you realized in 2017, you will realize again in 2018. So, 2017 is past. You -- basically, you know already the number, which you'll realize again in '18. Could you probably share that with me? Or do you have -- have you made some calculations around that?
Yes, yes, sure. The number that is basically will be -- will spill over into '18, and then be -- basically be offset over the months is about €600 million, €630 million.
€630 million. And what's the EBITDA impact as well on the...
That -- I mean, there, I would simply, you know...
Average margin.
Average margin, I think that's the most prudent thing to do, yes.
Okay. And just on the timing, the spillover, will that all happen in Q1 or Q2? Or could you give me any...
No, no, no. That's not going to happen only in Q1. What you have to imagine is this is, of course, following the pattern of the projects, meaning you have PoC portions that have been -- that where we just started the project to recognize. At the end of 2017, then we [indiscernible] that's six months before, you have basically the entire average PoC happening and spilling over into 2018. So, depending of the stage of each respective project, yes? That is still not installed, that portion, of course, will also translate into 2018. So, it's -- I can't say that it's exactly evenly distributed, but it's distributed over the quarters.
My third question, you mentioned that the German market coming back in 2020, so maybe help me to understand, you have that -- you say you have that good visibility towards 2020. What makes you so confident that it will actually come back to us? Does this approach have such a long lead time? Or maybe you can elaborate a bit on that, that will be helpful.
Yes, because [indiscernible] installation in 2020 operators are actually being permitted during 2018, and that will get through order intake financial closure toward the end of 2019. Those potentially are projects that 1 PPA under community wind farm setup, and that will eventually see the light in 2020. We are in direct talks with very relevant customers that were awarded under such premises, PPAs and that are actually tendering and taking turbines permits and decisions as we speak and is in light of those close contacts with customers that we have an optimistic view that many of those positions will turn into our favor and therefore turning into a P&L impact in 2020.
So just to sum up like you will see that in the order intake this year, the 2020...
No in 2019. We will see order intakes in 2019. For 2020, revenue impact into P&L.
The next question is from Doug [Werner] Handelsbanken. Your line is now open.
Just three questions, maybe. One is on the mix. If you could talk anything about profitability between like U.S. and Germany since it's a big difference in profitability per megawatt? And also, the service margin seems to be down in 2017. Could you talk a little bit more on that? And also, are you thinking about increasing production significantly compared to your backlog growth? That was all three.
So, I will take the first and the last, and Christoph the second one. We don't see radical difference in profitability across the market. That's the first statement, other than maybe France that we have a very good lever there with the project development and activity. To the question number three, we are increasing the production because we are installing -- this is demand-driven. We are increasing market share worldwide with and without Germany. So, we are decreasing the supply in Germany. And even with the decrease of market share of new installations in Germany, we are increasing market share globally. So, the company is competing well globally in a very tough market environment. And other things being equal, as Patxi mentioned before, the recovery of Germany will bring more volume from us -- for us, other things being equal. So, increasing production is driven by demand and is driven by our obligations to install the turbines that we have already sold.
Talking about German profitability, you see the decline in the service profit could be very specific in, happening in Q4 compared to Q3, reason for that is that when we basically do the segment reporting and that's only due to the segment reporting, we also apply an allocation of the one-off effect. And we took the one-off effect of our cost out program in Q4, and there was a third allocation also to the segment service. So that is the reason for it. There is no change in the underlying fundamental profitability of the service. That's a one-off effect.
The next question is from [Indiscernible]. Your line is now open.
The first one is regarding potential headwind with higher steel pricing in 2018, if you can help us to think about the sensitivity of higher steel price for your business? And the second question is, again, you're not giving or sharing any specific guidance for 2019. But you are -- but what you're saying is you're pointing to potential improvement in 2020. So, we're just seeing conceptually in 2020 -- sorry in 2019, the EBITDA should be relatively similar to what you're guiding us for 2018?
Okay. So, question number one, steel prices and taxes and duties. So, our assessment of current evolution, no impact for us in 2018. Duties do not apply to us in the way we have configured our supply chains as of today. This is always subject to change, but as of today, no impact. The import terms that we used to import to the U.S. are not affected by duties. And regarding, eventually, the steel price increases due to a reconfiguration of the steel industry, our cost structure -- our steel-base cost structure and aluminum-base cost structure for 2018 is locked. So, we don't have -- our suppliers do not have possibilities to review the prices, and we have very much locked most of the activity already for 2018. So that's regarding question one.
Regarding question two, again, it's just too early to comment on '19. Other things being equal, we don't see the positive effect of German recovery in '19 because despite good -- the very good acceptance of our new turbine and the very good competition that this turbine brings to the German customer and the German market, very little is going to be built in Germany 2019 because we are today fighting to be on the permits, and being on the permits means having permit ready project, best case scenario, one year from now, so not real installations of these permits in '19, but 2020 and 2021.
So, without this German effect, we still see positive effects in some markets and negative effects in others. It might depend of South Africa, its big volume -- I mean, big volume. We don't know yet when this is going to materialize and what impact for installation and revenue is going to be for 2019. So too early to comment. I don't see a negative effect that could worsen in '18. And positive effects, let's see what South Africa brings. Let's see the new auctions in Mexico, the newest auction in Germany. It's just too early for us to comment.
There is a follow-up of Pinaki Das. Your line is now open.
I have a couple of more questions. The first one is on your 2018 guidance. You've based it on, obviously, your order backlog. And so, the question is, in the order backlog, you've mentioned some adjustments due to the IFRS 15. I didn't follow the full comments. If you could explain it again on Slide 8, you've got 60 million and 70 million of backlog as of December '17. And then there are some adjustments to be made because of IFRS 15. Just wanted to again clarify those adjustments from your side? And then related to that question, then related to the guidance, if I take your 60 million, 70 million on face value, and assuming that maybe there are some 2019 orders in there, so if you've got 1.6 billion of revenues locked in there for '18, and you've guided for about 2.5 billion and I take out 300 million for service, you've kind of need to get another 500 million, maybe 600 million of new [infra-out]orders in '18, intra-year orders within the year. Could you give us an idea of which markets those intra-year or infra-out orders could come from? That will be really helpful.
Okay, Pinaki. I'll start with the order backlog and IFRS 15 question. Again, what is going to happen is that we will see due to recognized revenues now at a later point in time, that the installations that are happening starting 1st of January will all lead to a full recognition of revenues until the point in time, until that installation point in time. And this is going to be the spillover effect that will positively influence 2018, the beginning. And that, of course, that revenue portion will also increase the order backlog, because obviously, as you know very well, order backlog is going to be reduced over time by recognition of revenues. So, it has to be a mirroring effect. The spillover in revenues has to -- lead to a mirror effect on the order backlog side, and that's why also order backlog is affected. Having said that, and the same way the order backlog again will basically be reduced and that spillover effect will go away and will be offset throughout 2018.
If you assume that you have the same turbine revenues in Q1 compared to the orders in Q1, would the 60 million, 70 million, be 60 million and 70 million at the end of Q1 or would it be something different?
At the end of Q1, you will see an increase order backlog, but not by the full 600 million effect that I've said, I mentioned, because by then, you already have also a reduction and offsetting effect of all the, basically, the formerly the PoC revenues that you are missing going forward. So, you will see the increase. At the end of Q1, you will see an increase order backlog number, but not by the full amount that I've mentioned, not by the €600 million, but by a lower amount. And that, again, will then reduce over time over the year, and that effect then will basically be neutralized until end of 2018.
Are you saying that some of the revenue you've already recorded in '17 will have to be recorded again in '18 or...?
That's exactly point. That's exactly the point, yes.
So, we actually are underlying your guidance for 2018, already includes that impact but the full year number is not impacted by this, okay, fair enough.
Not affected by that. So yes, there is, initially, by the shift it's double counting effect. However, that effect is also offset and the guidance is not affected, so there's no whatsoever -- this IFRS 15 disclaimer whatsoever included.
And on the [infra-out] orders during the year, which countries do you expect it to be from?
It's matches very well our footprint. We will have again, I say, the strong Q1. So, diminishing the need for new orders that we recognize revenues within the year, and it will match very well the footprint that we have provided.
At the moment, there are no further questions. [Operator Instructions]
Okay. So, we have one other question here in our meeting and I'd like to hand over to you [indiscernible].
Yes, just one on the German wind market because obviously, it's one of your -- the most important market for you. We have spoken about the fact that, obviously, you expect a recovery for 2020, however, what is the potential impact if we should see additional tender volume happening this year because there have been some discussions by German politicians to raise tender volumes this year by actually 50%. Would that in some way change your view for 2019? Or in general, what will be the impact for you?
I would say that it will change our view 2020 onwards. I mean, the business plan assumption is based with the assumption that Germany delivers what is written today in legislation, so no further volume was built into the business plan. And is built into the assumption that with the new product and with the new supply chain, we can have market share that we already have in the market. So, if there is good news coming that we expect same as everybody else in the market, it looks like it's going to be in the right direction. That's going to be an upside for us 2020 onwards, very little impact expected in 2019 because the same criteria are going to apply. It's going to be projects with building permits ready, and this has very limited effect short term.
So, we have [indiscernible] here.
[Indiscernible] with clear strategies for market share growth [indiscernible] in market share?
So, to the first [indiscernible] turbine is permit ready [indiscernible] same as [indiscernible] competitor [indiscernible] with similar turbines technology [indiscernible] delivery [indiscernible] And [indiscernible] to that based on very good reception by the customers on having a great technology that we basically [indiscernible] for Germany. With respect to [indiscernible] specially [indiscernible] leaning back to the position [indiscernible] market. But generally speaking, right now, not so much in strongly winning back market share. We do see more [indiscernible] into the market [indiscernible] market right now being [indiscernible] in the [indiscernible] and we expect to remain that way [indiscernible].
Did you have 11% market share last year? [indiscernible] sale of gigawatts, that means contracts last year remains to be seen what 2018 actual installations in the market [indiscernible] to assess whether [indiscernible] markets in the future [indiscernible] the figure is that we sold [indiscernible]
So, we plan not less installations in the U.S. compared to last year.
Yes, we have. Next question is from Paul [indiscernible] Imperial Capital. Your line is now open.
It's [indiscernible] Imperial Capital. I just have a quick question on the [indiscernible] leverage cost, is that tested quarterly, and that steps up to 6.75 times at the end of this year, right? Do you see any issues with meeting that covenant especially in the light of IFRS 15? And the second question, you started your 45-18 cost-saving program. Looking at the management accounts from the last couple of months, have you seen any positive impact from that? Can you give us a little commentary on that?
Starting with the first question, the leverage of 6.75 times that you are mentioning here is the leverage according to the bank definition. We do report throughout the entire period of the financing the covenant only according to old GAAP. So that is the agreement with the bank. So, there is no impact whatsoever from IFRS 15. And we are very confident that we will keep below that covenant. Your second question, I couldn't fully understand. Could you please repeat?
You started your cost-saving program the 45-18 the plan. And I just wanted to know how that's panning out for you in the first few months of this year?
The project was fully executed last December. Cash out has been [indiscernible] 2017 books. Organization is running with less cost since January, with [indiscernible] organization, no impact for the business. So, we plan -- we are very optimistic that we are not going to endanger the business despite the structural cost reduction that we will have -- that we're having now in '18 compared to the one we had in '17.
The next question is from [Indiscernible] Berenberg. Your line is now open.
I just wanted to have a clarification here because, I think with all the questions we had before it became a bit unclear to me. Does the new guidance for 2018, with 2.4 billion to 2.6 billion reflect the change towards IFRS 15, which means looking backwards at the end of 2018, you will have restated all the statements from 2017 and that's why you're speaking about the spillover effect? That's the first question.
The guidance for 2018, consideration the IFRS 15 effect, so we will not see at the end of 2018 any kind of asterisks or whatever. And at the end of 2018, as mentioned, we expect that the transition effect, the introduction effect of IFRS 15 will have been offset completely or largely completely so that there will be no significant impact. So, the guidance is basically fully appreciating the IFRS 15 introduction if I could answer your question with that.
Yes, yes, it definitely helps. And then the second question is, does the change in accounting system towards IFRS 15 will also have an impact on how you report your net working capital or your net working capital ratio actually will be changed with that? And is your target of 5% also taking into account the change in IFRS standard.
It will also account for the change in the standard, yes, it does. So again, also here, there will not be any kind of qualification with hindsight saying we quoted or we guided below 5%. However, now looking at the IFRS 15, it turns out to be whatever. This is not how the guidance is based or has been calculated. It is -- it has been calculated based on the new IFRS 15 standard.
The next question is from [Indiscernible]. Your line is now open.
The question I have for you is, you were talking before about showing your confidence for the order book, etcetera, in 2019. Can you just -- sorry, the German -- the recovery in Germany. Can you just give us a little bit more depths of what's driving that and why you have such confidence? I mean, if you look at the auctions that we had in 2017 with the end markets, with your suppliers, it seems that each of the auctions we had, sort of had price declines and longer delays. Has anything happened so far, thus far here in 2018 that you've seen some type of change where you see higher prices, some type of change in the auctions?
So, there was specifically last auction and in the coming auction, rules [Indiscernible] have changed that only permitted projects are allowed to participate in the auction, thus, not forward-looking technology, but all technology participating in the auction as a consequence, prices were less competitive. This is higher prices, higher, bigger prices. We see that as a [indiscernible] to that trend. Because then as the system is today and that is subject to change, again, non-permitted [indiscernible] may compete in future auctions. If that is to happen, we do see, we do expect that prices will deteriorate slightly moving forward.
Say again? Deteriorate going forward?
Yes, become more competitive as that is the very direct relationship between technology that supplies, that participates in auctions and levelized cost of energy that technology drives, being all the rest of the same being equal.
And on your liquidity, you have a onetime 1.2 billion LC facility, your MGF facility. There seems to be like some type of an overdraft component of that. How much could you draw from that on the cash side?
This is up to 200 million.
Up to 200 million of cash. And then how much for the LCs? So, the remainder?
No, no. It's 1.2 billion plus 200 million.
Plus 200 million. Okay.
The next question is from [indiscernible]. Your line is now open.
Just a further question on German market. So, the February auction actually required the bidders to have a building permit in place, and I believe the main one is of similar conditions? And what about the third and the fourth? I thought there were talks in the parliament to actually have those with the similar conditions to the first and the second, and hence, maybe rolling out community wind farms. Is there any update on that?
There is no update on that. There is talks in that respect. But as far as we know, no change so far at this minute.
Okay. And let's take that February 1 as an example. So basically, what you're saying, those ones already have the building permits, but the order intake would come earliest in 2019 and then those will be converted into revenues in 2020. Is that right?
Those particular ones could come slightly earlier given the fact that the permitting process is already due and therefore, as soon as they go through the financial process, it could come earlier in time. That is not significant volume in the context of the discussions that we have today.
Okay. By earlier, you mean end of '18 or '19?
They could come even end of '18, yes.
End of 18, okay. And when the other orders you expect to come in 2019? You said the order book would go up, the order intake. That would have an impact on working capital, I guess, in terms of getting advance payments or not really?
Matter of fact it would have direct impact of order inflow with respect to working capital, yes.
There is a follow-up of Sean McLoughlin. Your line is now open.
I'm comparing the Q3 slide on your outlook with the slide you presented today on Slide 22. And I'm just trying to put my finger on what is really driving your more cautious outlook on 2019. You were talking about positive developments in 2019 onwards. You're now talking about 2019 onwards. You're now talking about 2019 as a transition year following 2018 as a transition year. Yet all the individual components of '18, '19 and '20 guidance, the direction of the arrow is all the same. So, what is it that is really driving your more cautious outlook for 2019 and the recovery only to 2020?
Yes, that's a very good question. I mean, we see a very positive effect from Q3 presentation to now in terms of acceptance for our new Delta4000 project, but Germany only 2020 revenue effect and eventually some 2019 order intake effect. Other than Germany, we see a slight delay in some of the big markets and projects for this product shifting to 2020. And we don't have -- I will say that today, we don't have a more negative view on 2019 versus the one we had a couple of months ago. What we have is a slightly better view on 2020 based on recent development and customer interactions, especially in Germany. And we will face it this way, so slight delay in some of the projects, but no major changes there, better outlook 2020 based on current interaction with German customers.
Okay. So, do we have additional questions? Okay, then. Then I would like to close the Q&A session for today and would like to thank you very much for a very good session. And before I'd say or we say goodbye, I would like to hand over to our CEO for his final remarks and key takeaways. Go ahead, sir.
Thank you, Felix. Thank you all of you for your participation and for your questions. As closing remarks, I will -- we would like to convey the message that 2017 we identified and addressed in time, even proactive, the main challenges that our company was going to face. We increased the CapEx development far more efficient products for the company remains competitive [indiscernible] in the marketplace. The acceptance of this product that we launched in September was very good. We did prepare the company with a lower structural cost base to be sustainable in the long run. We're optimistic that the volume is going to come back to the market. We don't see previous margins coming back to the market. So, we need to deal with that circumstances in having a leaner and more efficient organization, which we have today. We complete that very successfully. We addressed in time, as well, the refinancing of our company, removing the repayment [indiscernible] that was due in the middle of the turnaround of the company. We kicked off very comprehensive working capital program that is bringing results. Supply chain transformation, more Asia, less Europe support not just better landed cost, but as well shorter time to deliver and more efficient working capital. Nordex is a global, well-diversified player perceived as a top global player from the customers and the geographies that we operate. We are present to harvest the growth opportunities in many parts of the world, India especially, but not just; Brazil will come back; South Africa, as well as many other customers. We have a best-in-class product portfolio with significant barriers in some markets that we mentioned permitting in France, ready to permit [indiscernible] in Germany for the next cycle, local content in Brazil, local content in India. It's not so easy to develop in a shorter [indiscernible] this position. We have a clear focus on cash and working capital and balance sheet utilization. We are executing more towards the end global supply chain transformation and having a different CapEx focus. And wind energy is becoming a very competitive sector to deliver the lowest cost of energy to society. And Nordex is there to harvest these long-term opportunities.
So, thank you very much, and good afternoon, and see you hopefully soon. Bye-bye.
Thank you very much.