Nordex SE (NDX1) Earnings Call Transcript & Summary

Thank you, Maria, and also a very warm welcome from the Nordex team in Hamburg. Good morning. Thank you for joining the management call on the upgraded full year 2025 EBITDA margin. As always, we ask you to take notice of our safe harbor statements. With me are our CEO, José Luis Blanco; and our CFO, Ilya Hartmann, who will lead you through the presentation. Afterwards, we will open the floor for your questions. And now I would like to hand over to Jose Luis.

Thank you very much for the introduction, Anja. Good morning, everyone. Thank you for joining us on such short notice. As you saw in ad hoc released last night, we managed to deliver a strong performance in the third quarter and, hence, we are now raising our full year 2025 EBITDA margin outlook after careful review of the full year forecast. Today, I'm pleased to walk you through our preliminary Q3 results and the rationale behind our upgraded guidance. So let's start with our preliminary third quarter results. We delivered revenues of EUR 1.7 billion in the third quarter, broadly in line with the same period last year. This was partially driven by project scheduling mix and temporary supplier-related delays in Turkiye. On the profitability side, we exceeded expectations. Q3 EBITDA margin reached 8%, up from 4.3% in Q3 last year, driven by stronger execution and ongoing improvements in service margins. This brings our year-to-date EBITDA to EUR 324 million with 6.5% EBITDA margin for the first 9 months. As highlighted in our Q2 results, we continue to generate solid free cash flow in Q3, bringing the year-to-date total to EUR 298 million. Looking ahead, we expect to maintain positive free cash flow generation in Q4, supported by increased activity levels, continued momentum in order intake and disciplined working capital management. Let's move to the next slide, where I will walk you through the key drivers behind our margin upgrade. Over the past 3 years, we have made consistent progress in strengthening our profitability. With an EBITDA margin of 8% in Q3 and 6.5% year-to-date, we have continued that positive trend. The performance, along with our updated outlook for the remaining of the year, has led us to raise our profitability guidance for 2025. The margin improvement reflects operational progress across the businesses. Project execution exceeded expectations with some of the contingencies we had built in earlier this year not materializing. Service segment continued its recovery faster than anticipated, contributing positively to the overall margins. And not least, stable supply chain conditions and disciplined pricing also supported the upgrade. We are encouraged by the progress so far, but our focus remains firmly on the execution and disciplined delivery in the fourth quarter with record high activities. Our aim is to close the year with consistency and operational strength while continuing to manage risk carefully. Moving to the last slide to the guidance. Based on a solid 9 months performance and the review of our forecast for the remaining of the year, we now expect 2025 to register a significant step-up in profitability compared to 2024 levels, bringing us very close to the medium-term EBITDA margin target of 8%. Reflecting strong service EBIT margins and solid project execution, we have raised our EBITDA margin guidance to a range of 7.5% to 8.5%. While we are not issuing formal guidance on free cash flow, we remain confident in our ability to deliver another year of robust free cash flow generation. The strength of this performance will depend on, first, continued momentum in order intake, of course, sustained profitability improvements and disciplined working capital management. All other elements of our guidance remain unchanged. With this, I'm handing over to Anja to open for Q&A.

Thank you, José Luis, for guiding us to the presentation. I would now like to hand over to Moira to open the Q&A session.

[Operator Instructions] The first question comes from Constantin Hesse from Jefferies.

Can you hear me okay?

Yes, we can.

Well, first of all, congratulations, guys. Quite incredible, what Nordex has been doing in the last 3 years. So well deserved guidance upgrade. A few questions on the margin very quickly. So looking at the margin and the volume profile, it looks like these margins are now coming through at volume levels that were much below those 8 to 9 gigawatts that we were talking about before. So is that kind of the new volume level that we could expect this level of profitability? Then looking into 2026, I'm assuming that there are no major one-offs. So we're talking about this level of profitability now going forward into 2026. I'll start with those two.

Thank you, Constantin. I mean, this is a project business and there are always risk and chances and some materialize or not. This year I think we see better supply chain stability. So as a consequence, some risk, some contingencies didn't materialize and can be released to the profitability. But you cannot extrapolate this for the future. Today, we would like to explain you why this uptick, but 2026 is too early. I think we still have a huge quarter ahead of us in terms of activity, in terms of expected order intake and how 2026 -- we are in the middle of the budget preparation for 2026, how '26 is going to look like. We will know better beginning of next year and we will report in the schedule of the financial calendar. But I wouldn't extrapolate a quarter performance in a long-term view. Nonetheless, if all things being equal, we are confident that we can do a better year than '25.

Okay. That's understood. Can I just on -- so when you say contingencies, it's basically just risks that haven't materialized. It's not like there has relief...

Very much so, very much so.

Okay. Understood. And just on the volume levels, so it's fair to say that volume levels wise, it looks like profitability is coming through better than anticipated as levels of volumes that are lower compared to what you had anticipated previously.

Let's be cautious there. I think we were always signaling that this extra volume will boost extra profitability to achieve the 8% midterm target. And looks like we are going to achieve this midterm profitability target with a lower volume. But as said, project business risk and chances. So...

Okay. Fair enough. Understood. Last two questions. Order intake, you're still very confident that you're going to beat next year -- sorry, last year. And just on this Turkey situation, could we potentially expect any small liquidity damages in 2026 from any potential delays? Or how should we think about that?

Order intake, you know, Constantin, we don't guide order intake. So to exceed the last year performance, we need to do a good Q4. That, we expect to do. But so far, the bucket is empty. So with still 2 months to go -- no, I'm just joking a little bit. So it's still 2 months to go, and we still need to bag a big number of orders. So yes, without guiding you, we remain optimistic that we can achieve and slightly improve last year without guiding for order intake. Regarding Turkiye, the situation, as you can imagine, is quite complex. So in mind, your assumption might be correct. But I will prefer not to go into more details because complex negotiations with several stakeholders that, as we speak, we are having. So we hope that we can solve the situation. We don't know yet what the impact is going to be for '26. For '25, we know, and it's included in the guidance that we provided today.

The next question comes from the line of Vivek Midha from Citi.

I'll stick to one. Regarding the performance in third quarter and fourth quarter, the contingency that you're referring to, could you -- is it possible to be more specific on what the contingencies were? So how much was related to, say, project execution? How much was related to perhaps the warranty provisions you've been booking earlier this year? Any color would be helpful.

No, thank you for the question. I think you remember the very unfortunate situation a couple of years ago where we were missing our targets and disappointing everybody. So the situation there was quite unstable. So step by step, we tried to improve our pricing. We tried to improve our transfer conditions and we improved as well the provisions that we booked for project execution. After several quarters, you have more visibility for the year and you realize that those contingencies that were increased compared to previous years are not any longer needed, even that we could execute even below the contingencies of former time. So this released profitability to the P&L. So it's general contingencies for project execution.

And maybe to give some color to Vivek. So this is everything that has to do with the projects, if you go to logistics, sprains, installations, crane time. So all of things that can go wrong in a project and have gone wrong in the past are baked into the project contingencies. And if they don't materialize over the year, people realize that the execution goes better than they had thought. And that is the basic principle here in the project business.

Understood, understood. And just to be -- just one quick follow-up as well. On the free cash flow commentary, I fully understand it, of course, depends on the working capital developments and so on. But just in terms of what we see at the end of the year, sounds like you may do, for example, EUR 550 million to EUR 600 million or so of EBITDA. We've got the CapEx guidance, working capital. Is there anything else to be aware of when we think about what you could do for the free cash flow for this year?

Today, the way we see it, I mean, the building blocks is expected order intake, keep stable execution, which we are confident. And this is why we are guiding you. The risks are on a high activity level in project installation as well as high activity level in manufacturing in the last quarter of the year. But if everything is stable, Ilya, the math is correct.

I think so. And again, as José Luis said, we're not guiding neither for cash or free cash flow, but the two of you have done the building blocks and of those assumptions, the chips fall the right way to calibrate you, but really just calibration, could we do again the same free cash flow in the last quarter on the back of the items discussed than we've done in the 9 months, so twice as much as current. Probably, we could. If some of the things don't go away, maybe a little less, but I think that is where the math is correct.

The next question comes from the line of Sebastian Growe from BNP Paribas.

Can you hear me? Just to clarify.

Yes. There is a little bit of noise on the line, but we can hear you, Sebastian.

Okay. I'll try my very best not to have any technical issues. So the first question would be around the gross profit margin. And I would like to make some reference or get some reference to the order backlog in this case. So you mentioned currently a good execution in '25. At the same time, however, you will know what you do have contracted both from a regional and also from a gross margin perspective, I think. So against the backdrop, my question is simply, if you do see any relevant changes from either a mix or a gross profit margin quality perspective based on the existing backlog when looking into sort of the future. So it will be the first one. And the other one is -- well, maybe start there. Then we take them one by one, that would be great.

The answer is not really, not really. I would say that the -- yes, there are certain regions with a slightly better margin, but it's not -- I would say, generally speaking, 80% of the project execution, 80% of the backlog is very much with normalized margins. So we don't see a big difference in regions so far.

That sounds good. And then the other question is on free cash flow and also more higher level discussion, if I may. I would just be curious to hear your thoughts around if there's anything visible at this stage for relevant free cash flow that might change, be it the level of cash interest, cash taxes, the working capital, terms and conditions that you find in the market, also the CapEx because I think all of those items have been fairly stable now, and just curious to hear your thoughts if there might be any changes.

I'll start and then José Luis might think of any other levers. No, I think all the large building blocks, especially you touched upon CapEx, more or less, give or take, we believe, are on the run rate that we have been giving in the past years. Yes, the truth is that now with an improved standing of the company, our financial costs will go down. I mean, the cost for our bonds, which is our bread and butter. Business, of course, depends on the risk profile of the company, and that is improving as we're talking about it. So if anything, financial costs or interest for the bonds might go down. And that's probably the most relevant lever I can think of. But José Luis, have anything else?

No, no. I think the biggest building blocks, of course, expected order intake and EBITDA. And the EBITDA is mainly from keeping the stability in the supply chain. And that's it, I think understanding that there is a big activity quarter as always, winter for installation and factories fully loaded in the quarter. So the risk profile of the quarter is slightly higher. Last year, we delivered. We expect to deliver this year.

Yes. And that's actually a good segue to my last question, if I may say that. The first one is a very technical one. I'm sorry if you had answered that before. But could you quantify the impact on the revenue delays that you attributed to Turkey to the extent that is possible or give at least a rough magnitude? And would you expect the full catch-up in the fourth quarter? And on a more structural note, I'm just a bit irritated by apparently, we have seen order intake going far higher now for a couple of years really in comparison with the revenue execution volume. So when should these two lines convert? So you're running on orders of 8, 9 gigs. At the same time, the deliveries and execution are probably 6.5, 7, somewhere in that neighborhood. So how should we think about that from a timing and as I said, convergence perspective, that would be great.

No. Thank you, Sebastian, for these two questions. Regarding Turkiye, you need to allow me not to be -- I cannot be very specific there in the best interest of all stakeholders of Nordex because everything I say might impact the ongoing negotiations that we have with several stakeholders. The impact for this year is within the guidance and that has dragged revenue. And let's put it that way, the revenue we see we are guiding midpoint, but we see more risk on the revenue than on the EBITDA for this year. And Turkiye is one of the big contributor factors for that. But I really cannot be more specific there. We are dealing with that the best way we can. This might impact slightly 2026. But here, we are talking about Q3 and full year guidance for '25. Regarding the second question, it's a very good one. And what you see there is a shift in the order intake profile of the company and in execution coming from close to 50% of the volume in previous years. In the Americas, where the lead time is very, very short, so you contract Q4 this year and hit P&L execution Q4 the year after, to majority of the volume being contracted now in Europe and in Germany where the lead times is more in the range of 18 to 24 months. So as a consequence, you will see that delay. We expect next year to be a higher volume than this year because of that delay in the order intake going through the P&L, especially in Germany. And that's the main reason why the order or the book-to-bill has been increasing, so because the lead time in orders in Europe, mainly in Germany, takes twice the lead time of an order in North America, in U.S., for instance.

The next question comes from the line of Ajay Patel from Goldman Sachs.

Congratulations on the release. I have two questions. I wanted to take it a little bit high level for a second. This year, if we look at what you put out today, points to at the midpoint, an 8% margin number in terms of EBITDA. And you start to think, well, -- you haven't had the real ramp-up of Germany and typically, they're better margin projects. There is project execution or at least order intake coming on the U.S. side for the likes of Vestas and potentially that's an opportunity for you also. I find it very difficult to understand that volumes don't grow over the next 2 to 3 years. And if you're already having a base year margin of around 8% this year, that we don't see a more improved margin environment than the 7% or so margin that is in consensus for next year. Could you talk to some of the building blocks that maybe I need to think about because it feels pretty clear the direction of travel as I see it. So maybe I'm missing something. And then on the cash flow, I think Ilya pointed to the call pointed to around EUR 550 million of free cash flow -- free cash flow. That points to just over EUR 1.5 billion net cash for the full year. That's like 25% of the market cap. When are we going to get some details on what does capital allocation look like? How much do you need for the balance sheet? How much do you need to invest going forward? What can be returned to investors? And to what degree that's a consideration?

Thank you very much for the two questions. Let's do this together. I think starting with the second question, the first priority -- the answer is we will talk about that in the annual results presentation in February next year. But keep in mind that the first and foremost important thing for us is to strengthen the balance sheet. And we have -- we expect to have -- we have today and we expect to have a very solid cash position, but the equity ratio is still what it is. So we need to reinforce the balance sheet to make sure that we prepare the company for higher volumes in the future. And this goes in line now with the first question. Do we expect higher volumes in the future? I mean, we are not here guiding '26 or midterm. But if the high level, your assumption, we agree. I mean, if the book-to-bill is increasing and increasing, sometimes you need to process those orders because you cannot increase the book-to-bill forever. So all things being equal, we should be able to see growth, and we should see some profitability improvement associated with the growth. But as said before, project business, contingencies for the projects this year we didn't need or we don't need. This might not be the case next year. So I'm not saying that what we released today are one-off, but I want you to understand that this is a project business. And sometimes you consume certain level of contingencies in execution and in other moments, you consume a different level. And Eli, I don't know if you want to.

No, I think on that point of what you and Ajay are discussing on the 8% and the trajectory, that is obviously everything you said I subscribe. And to the capital allocation, a little to add. But to underline, it is a very fair question. And we've been saying in the past when shareholders have been supportive of the company that we will not forget about that once the company is doing well. And right now, it is on a healthy track, as José Luis has explained. So please bear with us until the full year results. As we said, we will come back with something on that, but it is a question that is front and center on our minds and will be discussed and explained when we do the full year call.

The next question comes from the line of William Mackie from Kepler Cheuvreux.

Can I just maybe ask some questions about the contingency process in your projects business, Jose Luis, with your vast experience. I mean, since the last 3 or 4 years, clearly, you've been nursing the business back to the health we see today. And with that adopted or allowed your project teams to adopt more caution perhaps than normally you might expect. So can you talk a little bit to how you would think the contingencies were being accrued or assessed at the beginning of the year? And then when this became visible to you? So as the year progressed and the execution and the costs, were the execution better and the costs lower, when was it clear that the contingencies were overly prudent? And when we think about how you run the business into '26, '27, to what extent do you think you'll change the way you challenge the project leaders and teams in the way that they're allowed to accrue contingencies going forward?

Yes, that's a very good question. The way we operate, we assess the risk in the supply chain. We take into consideration previous and current experience in project execution. We assess the world and the risk and the configuration of the supply chain. And based on that, during the order intake phase of the project, we build certain contingencies for executing the project. So the order intake then moves from an offer to a contract, and then we put that into the machinery of the company. And from there, it goes into a planning for the year. And from the planning goes a budget, and then you start execution. Usually, the first quarter of the year is very low activity. So very low activity. You cannot fully assess if you are conservative or optimistic in the view of the year with a quarter of low activity. So second quarter, slightly more activity than first quarter. So you start to have a better visibility how the year might look like. And then around the third quarter, you have a way better visibility to narrow what you think the company can deliver, is this process going to change for the future? I don't think so. I think we keep the same process. What we will do is after hopefully 2 or 3 years of very stable execution, if we see that our contingencies are over conservative, we might revisit that. But for the time being, we haven't done that because the macroeconomic is quite still uncertain. I mean there is trade discussions, duties, yes, no, this influences currencies. So I don't think we are in a position where we can say, well, the macro environment is fully stable. You need to be more aggressive in the way you build your contingencies for the projects.

Maybe the second is a follow-up to questions that have been asked a number of times. But I mean, the basic arithmetic suggests that your Q4 EBITDA margin is 11% and maybe the second half is close to 10%. Unless the world becomes topsy-turvy again or changes to the risk side, I guess the questions that are coming are more why shouldn't -- or why should we not assume that you can maintain a similar level of performance in '26 towards that we've seen in the H2 '25 when you're expecting higher volumes, your pricing has been stable. The supply chain is stable with the exception of Turkey. And therefore, already, you're going to be hitting above your midterm targets for adjusted EBITDA. And I guess I hear you need to go through the planning process before disclosing that more widely, but is there anything that we should be missing that should hold our thinking back for '26 on '25?

No, I think the building blocks you name them. I think the biggest -- and let's not talk '26 before time because we are in the middle of the planning. But the biggest lever is the expected order intake. So we still need to sell a lot of projects to make real the assumption that we will see a growing company next year. We expect to do so, but everything is still needs to be executed. Regarding supply chain activity, I mean, we've had years of bad surprises and years of good surprises. So if we are in a neutral supply chain and we don't deteriorate profitability in execution, is this going to be an uptick like this year or it's going to be neutral versus how we build the contingencies for the project to be seen, and the Turkey effect, we need to assess what the Turkey effect is going to be for 2026. For 2025, we know. We plan for that. For 2026 is still in discussion. And as I mentioned before, I will rather stay silent there because there are several negotiations ongoing with key stakeholders that it's important that we keep information limited. And I'm sorry for that, but I think it's in the best interest of the company.

The next question comes from the line of Alex Jones from Bank of America.

Two, if I can. First, just back on the supply chain. You talked about that being sort of more stable perhaps than you expected at the start of the year. Are there any signs apart from Turkey that, that changes going forward? I'm thinking things like the tighter EU steel quotas? Are you pretty happy at the moment with how things look going forward? And then the second question, just on service margins, which you called out specifically. Is there anything else that sort of improved the service margins other than the sort of strong execution you're talking about? Or to phrase it differently, is this a pull forward of the improvement you're expecting in service margins or just an indication that actually they can be more robust than you had previously expected?

Okay. So first question, I would say, all things being equal, there is the elephant in the room of CBAM and what the impact of that could be and who needs to pay for that impact. So this will translate into cost increases. And eventually, we would like to translate to the price. The quotas for steel is a little bit the same. Can this be a pass-through to the customers and to the tariffs and to the consumers or not in CBAM, we at Nordex, we have a clear position. I think CBAM is an environmental tool that put a lot of burden on the supply chain, and that might delay the biggest contribution to fight climate change. So every turbine we sell has a CO2 payback of 2 months. So if you put a CBAM increased prices, this might delay the installation of turbines and as a consequence, delay the net zero. So it's a tool that goes against the intent of the tool that puts a lot of pressure on supply chain and on customers and consumers. So let's see because negotiations are ongoing. If this could be extent for our sector, yes or no. The second impact, which is related with that is steel and the quotas and the prices, and we'll try to manage this portfolio in the best possible way and translate the cost increases to customers. And Turkey, we already mentioned. Regarding services margin, we are very happy with the service performance. And it's very much that you pay less liquidated damages because the company and the technology is doing well and the failure rate is moving into the right direction. And I don't think this is a one-off. I think this is sustainable. But to what extent the service business growth and what the profitability of the service business growth is a slow moving -- is a slow but steady moving business, both in the top line and in the profitability improvement and that we expect that for the future.

The next question comes from the line of Anis Zgaya from ODDO BHF.

I have only one left question on prices, they are holding quite well for quarters now. But don't you see that it could be additional pressure going forward coming from Siemens Gamesa's return to the market and increasing Chinese competition?

That's a very good question. I think we try to keep the price that we need based on our cost base to deliver a decent profitability for our company and for our shareholders. So far, we managed to achieve that. But of course, there are geographies that we suffer more. In Latin America, we suffer. In South Africa, we suffer where we compete against Chinese competitors. But the geographies where we operate in, it's not straightforward for Chinese competitors to land because it's very complex, the permitting, the characteristics of the turbines that you need and so on and so forth. So far, we have been managing to keep market share, eventually improve while not compromising in prices and margins. To what extent this could continue in the future, we just don't know. We think -- I wish that the sector behaves reasonable, but you never know what other competitors can do if they want to improve their market share. We just don't know.

The next question comes from the line of Xin Wang from Barclays.

I just want to clarify one thing. Is it possible to break out how much of the margin upgrade is underlying and how much is contingency release? Is it aiding Q3 already or will release in Q4? And also, when you say '26 margin will be better than '25, does this mean '26 underlying without a similar level of contingency release against '25 underlying? Or is it against '25 with contingency release, please?

Maybe, Ilya, I don't think we can give too much clarity there.

No, I think we can. I think we can. Maybe we do that again because I think you did a very good explanation of the contingency, how that works. So I think it's worthwhile to say that this is the underlying margin so that we're talking of an operational performance of the company. I think Jose explained quite well how we do the planning, the budgeting and then the execution. And I think William asked you about how do you think about the profile going forward. And I think for now, we're not going to change much. So this is how the company operates. It's not something special.

Yes, that's it.

So the further you progress in the year and if you have a good year of good execution and you don't see the risks materialize, the people and their projects start to release those contingencies. And if you -- 9 to 10 months into it, you do a review of the forecast again and look what do you think for the rest of the year is going to happen. So it's a project discussion. It's an operational discussion, nothing else.

Okay. Understood. Yes. So I think how contingency release works is explained very well. But I'm looking at the midpoint of your new guidance suggests potentially EUR 2.6 billion revenue in Q4. And at the same time, it's a massive margin uplift. So essentially, do we expect a similar level of tailwind going forward in Q4 next year? Is that needed for the margin in '25?

You cannot do that correlation because the portfolio of projects next year is a different portfolio of projects. So this year, in Q4, we have high activity levels and very good execution profile. So provided that we deliver these high activity levels in the factories and in the projects and provided that our view one quarter ahead of the expected cost to go goes in the direction, that releases that level of contingency and that gives you a profitability for the quarter. Q1 next year is going to be lower activity than Q4 this year. So the profitability -- I mean, I haven't seen because we are in the middle of the planning process for next year. But I bet that the profitability of Q1 next year will be substantially lower than the profitability of Q4 this year. And in Q1 next year, we will look at the year. We will assess risk and chances of the projects. And very much, we will see if we were over conservative in the contingencies bill or not or if the contingencies are needed because the execution of next year is a different profile than the execution of this year.

Okay. And maybe -- I mean, we will get the full release next week. But can we get some indication of how much of the free cash flow generation is the net working capital tailwind from order intake?

Yes. Let's discuss that in detail for -- on the quarterly call next week. But for this year and the full 9 months, the working capital is not the key driver. It is more from the operational free cash flow that comes from the profitability. But the details we'll give you and a bit of an outlook for the full year on the call next Tuesday.

Next question comes from the line of Kulwinder Rajpal from Alpha Value.

So firstly, just wanted to come back on service margins. So would it be fair to assume that we reach the 18% to 19% range this year itself and then continue from there on, all things being equal from what we see so far this year? And secondly, just wanted to understand how the discussions with customers in U.S. have evolved during Q3 and maybe what you have seen so far in the month of October? And how is that market looking for you?

Sorry, we couldn't get in full the first question. Will you be so kind to repeat, please?

Yes, absolutely. So I just wanted to confirm something regarding service margins. So is it fair to assume that we will already be somewhere between 18% to 19% for this year and then continue progressing from there on, all things else being equal?

I think, yes, service margins, I mean, you can have quarterly variations, slightly up, slightly down. But if you take the last 12 months as an indicator, this should be slowly growing going forward. So we don't see any reason why this should not be the case. So we see service business as a high single-digit revenue growth going forward and the associated profitability improvement, and you should not look at it from a quarterly because there are adjustments on the warranties on certain things, but you should look at it from the last 12 months profitability. And this, we expect to have a small improvement going forward. Regarding U.S., it's very much a moving target. I think we are in discussions with customers. And that's so far as far as we can go. We think that we will have a role in that market. And we think that, that market will have a role in the energy supply that the country needs, but discussing as we speak.

The next question comes from the line of Richard Dawson from Berenberg.

Just one clarification from me and going back to what you said about Q4 order intake and sort of needing that to give you the confidence that FY '26 margins could be a similar run rate to H2. But just given that it takes new orders sort of 18 to 24 months to really hit the P&L, why do we wait to see where Q4 order intake lands?

The line wasn't super clear. Could you help us one more time with the last part of that question? Sorry for that.

Yes, no problem. Is this better?

Way better, way better, yes.

Perfect. It was just a question on -- you had comments there about sort of waiting to see where Q4 order intake lands to really give you some confidence into where margins could be for FY '26. So just comments on why do you need to wait for Q4, given you have such a long sort of 18- to 24-month period before any of those orders actually would hit the P&L, so sort of post FY '26?

No, because it's the way -- of course, we issued the guidance in February, around February. In February, we still have expected demand in our planning process that have impact in the P&L of the year. If we advance 2 quarters, then the visibility is way lower. So we don't feel comfortable to guide the company 5 quarters ahead. We feel comfortable to guide the company 3 quarters ahead with certain level of expected demand to be closed. In other words, the expected demand to be closed today is higher than the expected demand to be closed in February '25. So the risk profile, if we guide you today for next year, we will be assuming a higher risk profile that we don't want to do.

Okay. That makes sense. And maybe just one other question, just going back to Turkey. And I appreciate you can't go into too much detail on this. But do you expect those temporary supplier-related delays to actually result in additional revenue being recognized next year as that situation reverses? Is that sort of how we should be thinking about Turkey?

I think we need to -- and we are working in a plan to produce local content blades there. To what extent that plan will succeed or not and how many blades can be produced is still to be seen and what the impact for the projects might be that might impact our revenue, and we will try to avoid liquidated damages if we can. But first, we need to have a plan of how many blades and when will be available in Turkey.

We have a follow-up question from Sebastian Growe from BNP Paribas.

One quickly around service. It's just about the attachment rates apparently in the first half of '25, that had nicely improved if I look at what is under service from the installed base perspective. I would just be curious to hear your latest thoughts about if this is continuing at the sort of mid or even higher 70 percentage sort of rates? And then the second question is in regards to the supply chain more related to specific components, rare earth apparently topic of last few days, I think. So what's the visibility here? And how many years would you potentially have secured from a rare earth perspective in particular?

Sebastian, and we couldn't really understand you. Could you maybe repeat and be closer to the microphone?

So probably just as before with a one-to-one sort of taking the questions. So the first one is on service. And the question was that the attachment rates had nicely increased. So if one just looks at what you have under service contracts as opposed to what the installed base overall is. My question is simply if these high attachment rates would have continued and if you would dare to say that probably with the higher exposure towards Germany, this is sort of also structurally improving from here? That's question number one. And maybe start there.

Sebastian, it's not about you being near to the microphone. The line is quite -- there's a lot of distortion. But let me try. I think what we gathered from the service question is whether you believe that -- or whether we believe, sorry, that by the kind of orders we have that we have a high grade of order intake that come with long-term service contracts, that at least how we understood the question. If that is the question, the answer is yes because we continue to have a geographical mix, which is very largely driven by European contracts and European contracts very, very standard come with those long-term service contracts. So then the answer would be yes. But we're afraid we're not 100% sure we got your question there. But if that was the question, that is the response.

Very close and for sure good enough. So move on to the other question that I had and that was around the supply chain and the question then for around rare earth. So I was just curious if you could share how many years eventually of the required rare earth materials you would have contractually agreed at this point?

I don't think -- we are using very limited quantities of rare earths. And so our exposure is quite limited. We are working in contingency plans to put in place to have alternative designs. But our generator doesn't use rare earths. So we only use small, very small quantities in some very minor motors that we are working on to have diversity of supply, but we rely on China. Even for those small quantities, we rely on China suppliers. But our technology can be adapted to induction motors. It will take us some time, but we are working in a plan in case needed not to use rare earths.

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