Nordex SE (NDX1) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Q2 figures 2026 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication. At this time, it's my pleasure to hand over to Anja Siehler. Please go ahead.

Thanks, [ Mona ]. A warm welcome from the Nordics team in Hamburg. Thank you for joining the Q2 2026 Results Management Call. Always, we ask you to take notice of our safe harbor statements. With me are our CEO, Jose Luis Blanco; and our CFO, Ilya Hartmann, who will lead you through the presentation. Afterwards, we will open the floor for your questions. Now I would like to hand over to you, Jose Luis.

Thank you very much for the introduction, Anja. And on behalf of the management board, I would like to you to our second quarter results of 2026. We start with a overview of the key highlights of the quarter. Overall, I'm pleased to report that the second reflects continued positive momentum for Nordex. The revenue growth achieved a double-digit EBITDA margin generated healthy free cash flow and maintain a strong financial position. First, order intake reached 3.1 gigawatts, representing growth 32% year-on-year. Europe continued to be our largest region for 74% of the product order intake while Germany and the United States were the most during the quarter. Second, we continue to deliver strong revenue growth. Total revenues increased by 16% year to EUR 2.2 billion. Project revenue accounted to 90% of total revenue and grew by 18%, reflecting continued progress with execution. At the same time, our service business continued its positive development, while revenues increased by 8% year-on-year EBIT margin going to 19.7%. Third, profitability improved further. We achieved an EBITDA margin of 10.3%, exceeding the 10% threshold and driven by compared to last year. Finally, cash generation remained strong. We generated free cash flow of EUR 165 million, while capital remained stable at minus 8.3%. In addition, we strengthened our financial flexibility by EUR 2.5 billion of bank guarantee facilities on improved commercial character. At the end of the quarter, our net cash position stood at EUR 1.7 billion, underlying the strength of our balance sheet. Overall, the second quarter the most fits the continued progress we are making across the business. We remain focused on disciplined in growth and delivering our guidance for the full year 2026. Moving on. Turning to our activities in North America, particularly in U.S. on Page 5. I'm happy to report that we have successfully retired our presence in the market. Year-to-date, we have secured around 800-megawatt of orders until the end of the -- on June supported by a diversified customer mix, and we keep on working on increasing the pipeline. At the same time, the ramp-up of Iowa is progressing well, production is underway. The facility is ready to scale with and no further CapEx will be required. Combined with established service footprint and growing regional organization, we believe we are well positioned to capture future opportunity in the U.S. and Canada. And let me turn now to our operational performance, starting with of our order intake. As published in our order intake press release on the July 9th we saw a strong [indiscernible] driven by figures. During the second quarter, we were [indiscernible] as of order intake, an increase of 32% year-on-year. The growth was by major U.S. orders entering the book consequently, order intake for the first 6 months of the year reached to 5 gigawatts. In euros, turbine order intake almost EUR 3 billion. Orders were received from 10 different countries and the average EUR 0.97 million per megawatt was stable when compared to quarter of previous year. Although average selling prices are influenced by the specific project and regional mix any given quarter, we continue to see stable pricing across our markets. Effective -- Europe remain the main region and accounted for 74% of the order intake. While -- and as usual, we are not providing specific guidance for order intake 2026. We expect a good order more for the year. And with this, let's move to Slide 8, where I will discuss the development of the order book. The combined order book strengthening parts and expects EUR 18 billion at the second quarter of 2026, reflecting continued positive momentum of both our Turbine and Service business. Turbine order book reached EUR 11 trillion of the orders came from Europe, followed by North America, rest of the in Latin America. In the service sector, the order book increased to EUR 6.8 billion. By the end of the quarter, the service portfolio crossed an important milestone. For the first time, we have over 50 gigawatts under service, representing more than 14,000 wind turbines. The order book developed to [indiscernible] and the expansion of our installed base over the past years. And let us move to Slide #9 and have a closer look into the Service. The second quarter of 26 continued to show solid progress in the Service. Service sales increased by 8% reached EUR 223 million, representing 10% of total Europe revenues. EBIT margin further improved to 19.7% in terms of midterm EBIT margin target of crossing [indiscernible]. Operationally, fleet availability remained stable at around 97%, average tenure of services increased to over 14 years. Let me move to the next slide. Given insights in installation and productions in Page #10, installations debt according to plan and total 1.2 gigawatts. The reduction year-on-year was primarily driven by project scheduling with large [indiscernible] towards second half of the year. There were also some regional mix effects on customer delays as previously communicated grade-related performance in Turkey. While installations in Germany increased year-on-year, this was not fit to offset this regional mix effects. The key takeaway is that these are primarily timing-related factors. We continue to expect full year to grow compared to 2025. On the production side, turbine increased to 337 units, reflecting credit scheduling and delivery requirements. The production were stable at around 1,343 blades. And now I will hand over to Ilya to talk about the financials.

Thank you, Jose, and welcome from my side. As always, I will start with our income statement. Some of that has been highlighted by Jose already. In the second quarter of '26, sales increased 16% to almost EUR 2.2 billion, reflecting higher activity levels in both Project and Service business. Gross margin continued its year-on-year development, proving to 26.9% from 24.8% in the second quarter of 2025. As a result, EBITDA more than doubled and reached EUR 224 million with an EBITDA margin of 10.3% for the quarter. On the back of this operating performance, we reported a net profit of EUR 111 million for the quarter, representing a substantial improvement of EUR 80 million when compared to last year quarter. And with that, we're moving on to the balance sheet. Well, in analyzing the balance sheet, the overall structure remains on a very comparative level when looking at year-end '25, the second quarter ended with a strong cash level again of approximately EUR 2 billion and the equity ratio continues to improve and reached [indiscernible] at the end of the second quarter backed by further increase in net profit and equity and the increase in the total assets. And that was the next [indiscernible] KPIs open. Net cash increased and total EUR 1.7 billion at the end of the quarter, and that is exported by the operational performance that Jose Luis explained earlier. Working capital [indiscernible] EUR 663 million and remained at a stable ratio of minus 8.3% quarter. Let me now go to the next page and spend a moment on financing highlight, which is not our regular kind of slide, but we believe in order to comment on is the closing of a so-called multi guarantee facility that we signed in July, only a few days ago, about [indiscernible] billion, and it has not only been a significant development for the company, but particularly in 2, 3 that we discussed. It is a much larger facility than previous one almost in the volume of the previous MGF, which is the acronym of EUR 1.3 billion. In longer term, almost twice as long than the previous one, that was 3 years, now the new is 5 years the interest rates or the cost of response are materially lower than in the previous facility and without details, but the others in those -- in that MGF is far better than in the last one then an [indiscernible] investment-grade facility. The company is backed by 15 banks, so less than last time with larger tickets. Obviously, the volume is higher and the banks are a [indiscernible] number. So that is a substantial progress, which has made in the recent years especially in strengthening the balance sheet and the financial profile of the company, or in other words, it is a token of back to the usual flow, and that is now the cash flow on the next page. Again, on the back of the additional performance, the cash flow from operating activities before net working capital increased to EUR 267 million with working capital normalizing the cash flow from operating activities was EUR 240 million. And as a result, we generated positive free cash flow of EUR 165 million in the second quarter of 2026. For the full year, we continue to impact a solid free cash flow generation. CapEx spending amounted to EUR 46 million in [indiscernible] that is 19% above the last year, mainly due to the ramp-up of the new blade [indiscernible], which we spoke about a few times in the past calls. Then investment remains largely unchanged compared to last year and the years before, with investments primarily in blade in the cell production facilities and tooling for installations and transport reflecting the higher volume. And with that, I would like to hand it back to Jose for the next slides.

Thank you very much, Ilya. So before turning to our guidance, let me make a few brief comments on the market outlook. Overall, the medium and long-term fundamentals for onshore wind remain attractive across our markets. So we continue to see supportive policy frameworks, strong [indiscernible] and growing demand for secure and cost competitive renewal energy. One notable development since our full year results is the publication of the draft [Audio Gap] that's in Germany while both proposals are still subject to the legislative process and might change. Our initial assessment is cautiously positive. The proposal points to higher auction volumes and provide greater clarity around grid-related pigs, which could help reduce uncertainty for [indiscernible] brand investors. Beyond Germany, we continue to see encouraging elopement in the U.S., Turkey, France, Canada and other markets, supporting a healthy long-term outlook of the industry. [Audio Gap] is and based on our performance year-to-date [Audio Gap] can remain on track to reach the guidance we set out in February. We continue to expect 2026 to be a profitable year, assuming no material disruption thing from ethical developments. To reiterate, we expect a top line growth between 9% to 11%, with an EBITDA margin in the range of 8% to 11% with midpoint as the most likely outcome as of today and expect another good year for free cash flow generation. And now I go into the Page #20, where we talk about the midterm targets. As you can see on the slide, the first half of '26 provides further evidence that we are moving in the right direction. Our EBITDA margin improved 9.4%, reflecting continued progress across the business. The main [indiscernible] remain unchanged, growing volumes stronger contribution from service business and the [indiscernible] measures that we are implemented throughout the company. While there is [indiscernible] the results achieved so far give us confidence that we are on track towards EBITDA margin target of 10% to 12% and that we are building a more profitable than Chilean Nordics. And with this, hand over to Ana to open the Q&A.

[Operator Instructions] Thanks, gentlemen, for leading us through the presentation. I would now like to open the Q&A.

[Operator Instructions] This question comes from Richard Dawson from Berenberg.

Two from me. First one on the U.S. orders. So now that we've seen a restart in those U.S. orders, are you able to provide any color on any margin difference between those U.S. orders and the German orders? I'm thinking more broadly about any potential inefficiencies you have in the outwear facility just as you're starting to ramp up, but also cost differences on the U.S. compared to the European ones. And then secondly, Ilya, maybe one for you in a bit more detail on the balance sheet. If I look at production levels versus installation first half, you're running about a gigawatt ahead on production versus installations, but your inventory figure is broadly flat for the period. So just why there hasn't corresponding increase in your inventory on the balance sheet given that outrunning production? Or is look at it?

Thank for the question, Richard. So the first is quite simple. I think we have to go into details ballpark similar profitability as Germany.

And then I go to the question on the revenue recognition and on the inventory part. So yes, fair question. So maybe use the opportunity to say revenue recognition. That question is done, again, mostly cost to cost when we reduce our components, so not so much on the installations. That is why we see that revenue number to that what it might do. Why not the inventory? Because that production that outpaces also the installations is done mostly [indiscernible] large under existing contracts that we're getting paid by our customers. This is why you don't see an increase in the inventory.

And the next question comes from Vivek Midha from Citi.

Thank you very much, everyone, and good afternoon. So my follow-on Germany, you've talked about the stable turbine prices. I see weaker auction prices we've seen for the powering those auctions. Is there any reason to think that the future normalization term pricing in Germany could exceed any of the assumptions you made underpinning the mid-term normalized margin target you gave out? And do you expect auction pricing to stabilize given the further improvement involves in 2027 to '28.

Well, German pricing so far -- we see [indiscernible] the pricing. Future pricing to have to predict. What we can comment is -- what we see today and what we see today is stability. Regarding future auctions, it's going to be a new [indiscernible] is a little bit crystal ball reading, but all seems equal, if there is no market upside, prices should recover in the auctions. But again, this is crystal ball, crystal ball was reading. I mean, for me, the positive aspect is that it's going to be substantial ball and which is in line what the government needs more electricity to produce the price for citizens and industries. And this is a good opportunity to having a healthy margin for the market participants. That's our assumption.

Understood. My second question, just as a follow-up on the notes. It looks like you've had some impact of trade receivables over the year-end, including in the first half gone up from EUR 55 million to EUR 92 million. So could you just comment as to why that maybe in the case and if there's been any P&L impact on that?

[indiscernible] very follow-up question. But -- but there is basically nothing out of the ordinary. That's not because of any customer or if there is just some sanitizing of books, but nothing where our customers are able to meet its obligations, his or her obligations.

The next question from John from Deutsche Bank.

Two from my side, if you think about the Q2 Brent, you had quite a bit of production contribution to the revenue, not so much on deliveries. Are you expecting this to normalize in the second half of or is the cadence here off versus "normal" given the Turkey situation and perhaps German permitting connection delays?

I think will catch up in the second half, at least that is what our planning says. And going forward with some [indiscernible] and recovering the relay in Turkey, will normalize levels in the future. But definitely, in the second will catch up.

And if we think about the things that need to be true to deliver very strong delivery reason where are you on your factory loads? And how should we think about that in terms of cost to fulfill or OpEx?

I would say in from that aspect, the year is not that different than the previous year, very much in the second half to 60% to 65% of the activity of the year and we are well prepared. So I will say it's not new ramp-ups that we need to do, this is very much repeating the year that we did last year from the production side.

And the next question come in Constantin Hesse from Jefferies.

The first one, I'd like to focus a little bit on Germany because clearly, this [indiscernible] massive assuming that the grid package is balanced enough between government and developers. So I just want to understand what have your conversations with developers been with regards to the script package. I've heard a bank with regards to the latest draft, I heard the government just achieved an agreement a couple of hours ago. I had any new draft yet, but I'm curious to see what the announcement was because if this grid package is balanced and the developers are happy with it. I mean, I'm looking at this forecast that you have on Page 18, it's very conservative what Germany could actually go to, right? I think this forecast decline installations [indiscernible] 2030. And if this goes through, we could see growth into the early 2030s with [indiscernible] intake i.e., Nordex could even be installing low teens gigawatt numbers in a couple of years to [indiscernible]. So I'm wondering what have your discussions been? And what's your opinion on this current grid package, please?

Thank you very much, Constantin, for the I think our view and CPI to the association and to the government you need to build a ton of renewals. You need to bid a lot of grid in order to reduce the dependency and reduce the price for consumer and the industry. That's the equation. So then you can take different approaches, but delaying the [indiscernible] of wind on short because the grid is slightly delayed, is not very advisable. And second, if you are outpacing the timing of [indiscernible] versus deployment of grid, this is a temporary thing because at the end, both investment needs to be done both material impassable to synchronize the pace of those investments. So assuming that's going forward, then you put question, if there is a certain content, who should pay for that. And in our humble opinion, from a country point of view, the more you decrease the investment decisions for investors, the better for cans. If you ask every investor to put a risk premium into what the curtailment is going to cost at the end, it's going to be a higher price in the auction as [Audio Gap] price consumers. So we cannot comment much on the dropping because from the open, but at least there is a cap and it's better to have a cap and having uncapped figures to price that risk because the [Audio Gap] 20%, it's a different thing, pricing, 100% of the risk or 20% of the risk. So wish to see a low number there so as our customers as well. But at least, there is numbers really, I don't know.

But, I don't think, I mean, I would be on the danger of repeating what you said. So I think Constantin mentioned in this question, the government has announced informally in the past months that it wants to have additional 12 gigawatts on top of already, we probably agree very high gel volume enacted to be in 30 or before, and it has now put that into the draft. So knowing what finally the government decided on that one, but I guess they would have proved this, meaning that we have actions in '27 or 15 gigawatts and '28 of 15 gigawatts and in '29 of [Audio Gap] gigawatts. So that is the acceleration that [indiscernible] was moving. And when it comes to curtailment, who pays what? Let's wait what the final outcome is, but I have two points, one is which is the certainty that the government appears to acknowledge that there needs to be a certain number, and that goes especially on gas to the financing sector to make projects banking. And the other comment I would have, not knowing what happens in the future, but the [indiscernible] have worked from a system perspective. They have done price discovery. Maybe it's not even file. So there's a price discovery and that is what the system wanted. And it's based on a certain set of rules. So now if you change those rules, your price discovery will continue but it might lead to a different pricing point or while we were indicating auction bids might go up again. If the system wants to pay the cost way, that's a critical choice. What we're saying is you will ultimately at least to have bear in mind that auctions can go both ways. And from that perspective, I would say, from an OEM perspective, we're fine with it and from a system perspective, politicians need to make their decisions.

Understood. Second question, if I may, just quickly, obviously, second half is going to be pretty significant in terms of activity. So just understanding your exposure here, the markets that you're in, fair to say that you set up in terms of the local infrastructure cranes, everything? Is there any exposure to this execution risk? Or from today's perspective, you're really well placed from local infrastructure requirement to get everything built in?

I would say we have properly started if I can point that risk is maybe transportation permits in money due to the [Audio Gap] in the market. Other than that, we are less -- and in Germany, I think we are discussing with the different government agencies and want to overcome as an industry this potential bottleneck.

And the next question comes from Sebastian Growe and BNP Paribas.

First one with DRAM services. The momentum has been stronger than what I would have expected with ratio compared to the project segment orders running at a very high level compared to some. So what is the root cause for the strong service order intake? And can you talk us through the terms of the contract renewals, in particular, and how these might fit down also to your target to cross the 20% margin level, not too distant future? And secondly, on the U.S., you pointed to the 800-megawatt plus orders in the backlog. Can you give us an indication with regard to the size of your remaining pipeline? And are you pointing to a market share mostly on prior calls in the U.S., what absolute volume are you targeting in that market? And if I may, very briefly chip in one more as a clarification on earlier that was asked. It was more around pricing. I think we know that normally there's a delta on pricing, which might be better typically in the U.S., but you probably then and they have to pay for it at the expense of, let's favorable working capital terms. So if you could just -- working capital on the side of the U.S. business.

Thank you, Sebastian. So services, I would say the main rationality behind that is the higher value from Germany where most of trucks have long-term duration and the way we count the backlog is the spec revenue for those service contracts. So it's the service contract that we landed in the last quarter, the average tenor is bigger than the cumulative one and that's why that is increasing. That's the reason. Regarding U.S. be cautious here because we have a healthy pipeline to achieve and, if not even treat one what it could be volumes that we did in the past. So I don't feel confident to guide you on order intake in general and less even to do specifically into a market. But we are investing because we are optimistic about the market and optimistic that we have products and teams and solutions to harvest a decent market share in that market. Our ambition before that was previously communicated why not 20% and we stick to that. So why not 20% or more maybe. Regarding sizing [Audio Gap] conditions of the U.S. deals. You know without going into much detail, but those are not that different than the ones in Germany. So the good quality deals.

Sorry, for the 20% that you just now also asked around the 20% margin for services there's kind of a new flight level in a word. So is there anything that ...

I mean the Service business is profitability. I mean is a slow moving [Audio Gap] slightly marginal improvements and due to 10% growth year-on-year. And this is what profitability improvement. So we have reasonably [indiscernible] that we will that 20% after a slow moving journey.

Then the next question comes from Alex Jones from Bank of America.

Just following up on that U.S. order pipeline comment. Could you talk about the extent to which the fourth of July tax credit deadline was an important driver for the orders to come through in pricy sort of per your discussion with customers and whether there are any other catalysts or tariff discussions or otherwise that would capitalize more orders coming through -- from that health pipeline that you highlighted? And then the second question, just on the installation sort of back-end loaded nature of this year. You highlighted customer delays being as debris as one effect that. Could you talk about the confidence in the sort of temporary nature of those and whether you start those delays ease in July already? So regarding U.S. I don't think there is any specific milestone that trigger those orders. The pipeline one way or the other, some of them is relying on certain federal permits or they don't. I think what we see now is a substantial volume was safe harbor under current legislation, and we plan to take a share of that if cadet volume, some with the preservation agreements, others don't but we are optimistic given the momentum on the market, that we will get our share into that market. And the volume that book -- I mean, nobody knows precisely, but there are different reports on pointing into sustainable volume. And that has [indiscernible] I think regarding installations, if you look at it year-on-year, certain geographies didn't contribute like Nordics or Spain. A little less installations in North America, although this was expected to dramatically change 1 year and the delay in Turkey due to availability of plates. That was partly conversated by more installations in Germany year-on-year, but not sufficiently. And it's true that even with those increased installations, we were to do more, but customers were not ready with the sites. And we are not booking liquidated damages for late delivery. It means that we are ready to deliver, but either sites are not ready or projects are not ready. We are in a situation to change in the second half. And our assumption is that we are going to be ready when the projects are ready.

Okay. And just a follow-up on the U.S. Do you have an expectation for when Section 232 tariffs might become clearer. I know some people expect that in the next week. Is that in line with your views?

Yes.

I think we have no specific date on that. So no, the larger question that you have, I can only say it is -- when you see those orders currently or obviously not hindering too many customers from moving ahead. So it's a very important [indiscernible] M&A but customers have just decided to go ahead.