Sif Holding N.V. (SIFG) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for tuning in to the interim 2021 results webcast presentation of Sif Holding. My name is Fred van Beers, and I'm the CEO of Sif. I'm accompanied by our recently appointed CFO, Ben Meijer, and with us are analysts of the brokers that follow the shares of Sif. This morning, we published our '21 interim report, which you can find on our website. The slides for this presentation can also be found on our website. And 2 days from now on, you can read back this session in the transcript that will be also posted on our website. Let me start with the COVID-19 update. At Sif, we applied strict rules for social distancing and testing to minimize the risk of a COVID outbreak on our sites. As a result, we could assure close to normal continuation of our manufacturing. We have seen a small outbreak on both sides during the second quarter of this year, but we were able to contain them swiftly. It hardly affected our production but required strict quarantine measures. Actual situation today is that everyone returned to work healthy again. Like all of you, we also hope that life returns back to normal soon, if not yet the case. Let's go to the next slide, please. In '20, we saw the effects of the COVID pandemic in basically everything and also in energy consumption. 2020 total energy use in exajoules was, according to the bp Statistical Review of '21, more than 4% lower than in '19. Fossil still is the dominant energy source, but, contrary to more sustainable sources, could not keep up its relative market share. For a long time, the sense of urgency to transit from fossil to sustainable was not felt and only discussed by implication. As we see on the next slide, however, the topic is rapidly and with increasing urgency climbing up the agendas of politicians. So let's move on to the next slide. The Paris Climate Agreement already dates back to '16. Unfortunately, it has not resulted in firm action in most of the countries that signed the agreement. More recently, the European Union and the U.S. administration announced plans for radical reform, and the recently published IPCC climate change report expressed an increased sense of urgency for radical reforms. I guess most of us have seen the catastrophes due to fires, floodings or extreme heat various parts of the world did face due to severe weather conditions as a result of climate change. Energy transition is one of the key elements to soften certain effects of climate change. And with ample opportunities for solar and wind, we need to get to work and speed up the transformation from plans into action. Sif, as a member of various coalitions like the EU Offshore Wind Foundations Alliance, is actively participating in discussions with local and EU members of parliament to help politicians to speed up the decision-making at local and EU levels on this important topic. Next slide. Offshore wind is still a relatively new source of energy. In Europe, 700 gigawatt is installed onshore compared to only 34 gigawatt offshore. Of this 34 gigawatt, more than 5 gigawatt was added in 2020. Offshore wind is a realistic opportunity for rapid expansion. Of course, not all seas and oceans can facilitate wind farms, but with the development of floating devices, opportunities for developing near-shore deepwater wind farms increase. We consider floating wind energy an important and noncompeting add-on to the existing bottom-fixed wind farm solutions. Secondly, the technical development of up to 16-megawatt offshore wind turbines offers better opportunities compared to the relatively small 6-megawatt onshore turbines. Sif, like others in our industry, constantly develop monopile solutions for these bigger turbines and for deeper waters which allows us to either build further offshore or in areas with less favorable soil conditions. As long as this results in a healthy levelized cost of energy as well as a healthy return on investment for the total supply chain, this development assures that offshore wind will remain a sustainable and competitive alternative to almost any other energy source. This is reflected in the current global initiatives, whereby offshore wind capacity is expected to grow sevenfold to 234 gigawatt by 2030 and in Europe alone to 300 gigawatt by 2050. Let us take a look at how the geographical spread of these offshore wind initiatives works out in more detail. With 99 gigawatts, the majority of the 234 gigawatt in 2030 is projected in the North Sea. Subsidized projects are nonexistent or downscaled in quite a few of the European countries that apply offshore wind, and the levelized cost of energy has dropped and is competitive to other energy sources. Other areas like Asia Pacific, more specifically Japan, Taiwan, Korea, and U.S. are speeding up the execution of their ambitions, but still lack infrastructure for serial manufacturing and installation or have obstructing legislation in place like import duties or -- on special steel or, for example, the Jones Act in the U.S. for installation vessels. In order to meet the plans, these areas will have to rely on overseas manufacturing for a while despite various initiatives to set up local supply chains. The choice of the foundation for offshore wind turbines depends on physics, like wind and wave impact. It also depends on water depth and, finally, on financial feasibility. Nowadays, solutions are available for water depths until 300 meters, more or less. Taking the already mentioned constraints into account, the monopiles until 60 meters and from 2030 onwards, we expect floating devices, for the remainder, are the solutions of choice. Floating wind farms are facing practical and cost price issues, but numerous initiatives, both political, commercial and technical, are taken to solve these challenges. Despite all this, all these good developments, the demand is such that still 70% to 80% of the installed base is expected to be based on monopile foundations long term. As we have stipulated many times, Sif is following the market for floating solutions closely, and we participate in initiatives to commercialize floating offshore wind. At the same time, we continue to work on optimizing the monopile design and production working methods. An important element is the interpretation of the design and production rules in the production process as this has a significant effect on the product cost price and, as such, impacts the levelized cost of energy. Again, I'd like to refer to the EU Offshore Wind Foundations Alliance. In the alliance industry, parties with a proven production track record not only draw attention to the key role that offshore wind foundations play in the sustainable development of offshore wind farms in Europe, they also bundle their joint expertise in the field of engineering and production of offshore wind foundations to make sure the interpretation of design and production rules is crystal clear and ultimately laid down in EU regulations. Is about a clarity on design and production rules the only determining factor for further LCOI optimization? And the answer is clearly no. The overview of the development of offshore wind gear on this slide shows that during the last 20 years, diameters have more than doubled, lengths have tripled and turbine capacity has sixfolded. This development is expected to continue. We are now calculating tenders for monopile foundations facilitating 14- and 15-megawatt turbines, and initial talks are going on for even larger turbines. We expect that by '24, '25, 80% of the new wind farms will require foundations beyond 9-meter diameter, bottom diameter, and the effect of steel design and production methods will be critical to ultimate price increase of the foundations. Our combined Sif-KCI engineering team is working hard on the design challenges for these bigger systems, while in parallel we have been working hard with production process experts on a further optimized production layout for the efficient production of these future extra-large monopiles. Let me explain more about this in the next slide. In previous presentations, we talked about the studies we execute. We, in the meantime, have a very good and detailed understanding of how we should set up a production line for bigger than 9-meter monopiles at a pace of 4 a week and with diameters up to 15 meters. We, however, also understand very well the practical and economical challenges that go hand in hand with this plan, and therefore, we have also started an extensive 360 degrees forward-looking market and business plan study to map the various production plant scenarios against various market scenarios. This total integrated business plan, we make together with a renown external consultant in order to basically test and verify our own conclusions. Ultimately, by the end of this year, we will be able to take a well-balanced decision on our response to the growing demand of monopiles and how that works out for our customers as well as from an investment and return perspective for our shareholders. The next slide reflects the current competitive landscape, and a lot has been published lately. Of this group, Haizea, Steelwind, Sif, EEW and Bladt do currently operate manufacturing facilities from monopiles and a few have initiatives to extend the capacity. Haizea, specialized tower producer in Spain, has just completed its first order for 10 small monopoles. Other companies have announced to open new facilities. SeAH, U.K., should be operational from '23, '24 onwards. EEW, U.S., Windar-Navantia are aiming for the same time frame. And Titan in Germany is still an unknown factor, Titan in Chinese hands. The combined capacity of this total group is assessed at approximately 500 to 600 kiloton and up to 15 meters in diameter as announced. Although more important than tonnage and diameter is actually the number of products that the respective factories can manufacture. That still remains to be seen. For now, we will -- we still anticipate that assuming all these initiatives to materialize successfully, that the market will be in a situation whereby supply and demand are more or less balanced long term and will tilt to undercapacity short to midterm. Like in any fast-growing relatively young market in which technological developments follow each other in a rapid pace, Sif needs to stay cool and in control of its daily operation, but at the same time has to be agile, adaptive and innovative to maintain or expand its position. To be earlier involved in the design process, we acquired KCI the engineers. The proof of this being a good move is reflected in a number of requests for design proposals received as we speak. Our product and business development teams are involved in several innovations on a Sif stand-alone basis or in participation with others. Our Skybox concept will see an important next milestone this year when the first real test will be done with a light version before testing with a full dimension version next year. Other innovations currently on our design tables are related to floating and decommissioning solutions. The first offshore wind farms are over 20 years old and approaching the end of their lifetime. At this moment, there are no 100% material recovery solutions for the decommissioning of these fields. At Sif, we are looking for a circular decommissioning solution for foundations. Together with our steel supplier, we also look at the production of green steel and how demolished foundation materials can be integrated in that process. In Rotterdam, we teamed up with the NPRC group who started a promising project to develop hydrogen-fueled inland to waterway vessels, and this will help to make our steel and internal transport CO2-neutral. All these initiatives underline our commitment that Sif is actively working towards a solid, green and cost-efficient sustainable future in offshore wind foundations. In the first half of '21, 2 projects kept our people and equipment busy. The 140 Hollandse Kust Zuid foundations and the marshalling activities for the Kincade project. The first picture here shows the foundation for Hollandse Kust Zuid on a multi-wheeler just before load-out on the installation vessel. When up-ended, the rusty part will be driven in the seabed, the white gray part will be in the water and the majority of the yellow part will be above the water line. This foundation is a so-called TP-less monopile design. The transition piece is integrated in the monopile, the appendages like switchboards, boat landings, ladders, et cetera, that normally are attached to the transition piece will be installed on or in the monopile after it has been installed in the seabed. Okay. That's it. And after this update from my side, I'd like to turn now to the next slide, whereby I hand over for the first time in these sort of meetings to Ben, as our new CFO. Good luck, Ben. Go through it.

Thank you, Fred. Let me start by resuming the COVID impact on Sif during the first half of 2021. We had 2 small marginal outbreaks amongst our factory and office staff. This did not materially impact production or costs. Overall, sickness leave, including COVID-19-related quarantine stints, was 4.5% compared to 6.7% for the first half of 2020. We hereby return to industry levels and the levels we saw before 2018. The safety record for the first half is not where we would like to see it. We had 7 recordable injuries that brought the total recordable injury frequency at 15.7%. Next slide, please. Now how did all this translate into numbers? Fred already mentioned the 88 kilotons production output with 44 kiloton production in Q2. This was equal to the first quarter. Contribution for the first half year 2021 amounted to EUR 57.7 million and was 26% higher than the first half of 2020. This results in EUR 655 per ton compared to EUR 602 in the same period last year. If we correct this for engineering and marshaling activities, the contribution per ton was EUR 614 compared to EUR 580 million during the first half of last year. EBITDA improved by almost 77% compared to the EBITDA of the first half of 2020, reflecting an increase of around EUR 9 million. The acquisition of KCI the engineers was completed on March 15, and results are consolidated from that date on. Working capital was negative with EUR 56.9 million. This is a snapshot situation and may vary over time depending, amongst others, on status of projects, invoicing and payment behavior. We have no external debt, excluding IFRS 16-related lease liabilities, and net cash excluding these lease effects was at EUR 61.7 million. As mentioned before, the banking arrangement have been extended by another 2 years with unchanged conditions. If we look at the contribution per ton, this is seen as a good indicator for the commercial environment and the pricing levels. The chart above shows the historical movement in contribution per ton. For 2021 and 2020 numbers, these numbers include marshalling and engineering activities. And what we see in this graph is that as of 2018, we see that contribution per ton is showing an increasing trend. And also when we correct for marshaling and engineering, we see the same trend visible. And this is also something that has been communicated in previous sessions, that the expectation was that contribution per ton would move up above EUR 600. If we move to the outlook slide. We expect for 2021 a total production output of between 180 and 185 kilotons. Taking this into account and also the better-than-expected results during the first half and the latest outlook information we have available, we expect EBITDA to come in significantly above the 2020 level. Our order book increased following one project where we entered the exclusive negotiation phase, and this project is totaling 130 kilotons. And this brings our total order book to 400 kilotons for 2022 and beyond, extending our [ work ] log into 2024. And with that, we finish the presentation and we are happy to take any questions. Thank you.

Who likes to start? Yes, why not.

Okay. Thijs Berkelder, ABN AMRO, ODDO BHF nowadays. Good results. Can you maybe explain how many monopiles you shipped in the first half? What kind of utilization that is on your maximum capacity?

Shipped or finalized?

Maybe better is constructed indeed in percentage of maximum utilization and maybe as an absolute number. Because you explained, in the new setup in the future, you plan to -- or you plan a capacity for monopiles per week with large dynamics.

Parameters?

Yes.

Yes. So we -- in the first half of this year, we worked predominantly on Hollandse Kust Zuid. And we -- I think started from this February on, we were at a pace of 5 monopiles a week. But bear in mind that these monopiles are at the 8-meter and 7.5-meter diameter sort of level. But yes, we did 5. So this -- I think it's a good question because it actually illustrates that when you talk about 4 a week, that's a nominal sort of number. Depending on the actual size of the monopile, you can either do more or less per week. And this is an example where we did more per week.

And that's theoretical maximum capacity? What is possible with current diameters?

With current diameters, theoretical nominal, we calculated 200 a year.

Yes. And that's based on 24...

420 kilotons, 200 a year, and that assumes a full year of production.

24/7?

24/5.

24/5. Okay, yes. Just to have it clear. And that's also the planning the 4 per week on the larger diameter is also 24/5-based?

Yes. We explained that in the past that we always need the weekend. First, it's a cost element, but secondly, to -- a catch-up moment for small repairs or eventual delays to catch-up again to not delay completely the process.

Clear. A small question. Who is the strategic consultant you hired?

We've decided not to disclose that name. But you can...

So -- the reputation is so dubious that it's...

It's so good that...

It's Fons, certainly.

[indiscernible]

Fons has always been our main consultant. If we don't know anymore, we'll contact Fons. But this person, these teams know us well.

Yes. You haven't said anything on expected CapEx. Can you maybe give more clarity maybe for this year? And probably the new strategic plan, then we'll give more towards the future. But for this year?

Yes. I think for this year, what we saw during the first half of the year, we had a CapEx amount of roughly EUR 5 million. For the second half of the year, it will just be normal CapEx levels. We have some additional CapEx to do with -- in Rotterdam regarding marshalling activities, but it will be more at a normal level.

But I would say if you -- a ballpark number, roughly EUR 10 million.

Yes.

Yes. Okay. And then in oil and gas, no change, nothing?

You haven't heard anything on oil and gas in my presentation. So -- but also there, I think it's important to stipulate that we haven't seen any change there. And we've also decided to basically focus on small diameter pipes for like pin piles for wind. And we don't foresee that we -- no, I have to put it differently. We're not actively acquiring any oil and gas business anymore. We feel and see that we have to set our priorities on wind and wind-related products.

Okay. Well, then phrased in a different way, what part of the order book is then for pin piles specifically?

1.01% or so, neglectable. The order book for marshaling is bigger.

Yes. And that's primarily floating wind related or...

Marshalling is -- no, no, it's the Siemens deal that we have in the order book for the Hollandse Kust Zuid turbines towers and assembly and load-outs or load-ins, that will start December, probably January next year, end of this year then. And that will run for 1.5 years, and we are talking with all the prospects for further marshalling -- big marshalling [ activities ], yes. Andre?

Andre Mulder, Kepler. Two questions. First question on these marshalling activities. If I look at the current margins, they are quite high. What kind of pattern would you expect for the next few years in terms of both sales and margins on that respect? And also the item of Other is becoming quite large. Same question there. What kind of volumes do we expect? What kind of margins do we expect there? Then a question on your statement of not actively seeking orders in oil and gas, that sounds quite mysterious. Does that mean that you've thrown in the towel?

Well, there is no travel to be thrown in because there is no business where you can throw the towel and the basket is not there.

But does that mean that you're thinking of, let's say, demolishing that part or doing something else with it?

What we do with it is, as said, for example, pin piles on substations for offshore wind for -- pin piles for jackets. If those orders are on the market, we actively pursue it. But since there are no oil and gas -- real oil and gas projects that suit our production facility, we have decided to also not look for them or try to market or push for that. We'd rather put our sales effort in wind where there's plenty of work, because we are short of resources and we better use our resources to the benefit of the business that's most beneficial for Sif. On the marshaling, we're more or less on plan. When we started marshaling 1.5 years ago, we said it will take a few years before we come into the double digit. And there is good reason to believe that next year, we should come into that area as according to plan based on a healthy workload for the Siemens deal.

Regarding the other segment, Andre, your question is indeed -- please note that also as of March this year, this also includes KCI. And the impact of the overall numbers of Sif is relatively limited, but this is included in the Other segment.

Any statement you can make on the margin in those areas?

Healthy and according to plan.

Double digit?

Double-digit sales that -- and single-digit margin.

And a question on your -- the floating part. How do you feel your competitiveness in that part compared to the fixed?

For now, I mean, we -- as I said, we don't even know. The whole industry doesn't know what the real solution actually is. But for example, you have to think of what role can we play in manufacturing the floating bodies, the big diameter floating bodies. There are initiatives to see how our production method could match on an economically viable basis with the requirements for offshore wind solutions. And that would mean that we, like basically in the old days for oil and gas, become a supplier of components to floating wind producers. We, in all honesty, don't foresee, at least not on the midterm, not even longer term, I think, a role to manufacture complete floating solutions. And another example is, thanks to our key site facilities, we could do jobs like we did on the Kincade project, where we did final -- or facilitated the final assembly of the turbines, deepwater [ in Rotterdam ].

And last question on the study. Any amount that you can mention there? I think in the past, I think it was referred to EUR 40 million or so. And also, do you also include monopiles with thinner walls?

To start with the last question, we do include the full design rules, but we have set in our assumptions that if a thicker wall has a better effect on the total cost of the monopile, then we will limit the production on that somewhat thicker wall. Because in the end, I think the customer has more benefit of a lower total cost than a suboptimized steel part. That's one thing. And especially when you look at the development on green steel mid- to long term, that would also lower the burden of a CO2 penalty. On the CapEx level, of the EUR 40 million, that was at that time the shaping tomorrow, that's 2 years ago, I think. 2 years ago that we sort of published that. Not totally overseeing the full effect of the diameter growth. At that time, CapEx was fully focused on the wall thickness, the PISA effect. We have implemented part of that. And the coating effect. So we did implement the coating part partly on the wall thickness part until we realized that there are other elements now coming to the market, and that's the reason why we stopped that investment program because the other elements, we said is we only invest when we have the orders. Orders worked out slightly different. The thicker wall thickness and the CapEx level for the new study or the outcome of this, that we will publish later this year. But let me put it this way. There is a reason why we are making such extensive studies and take the time required for that. And one reason I think we always should bear in mind is our order book is full until '24. So we also allow ourselves the time to follow the market as long as possible before we make any decision or announcement. But we'll do announce before the end of this year.

That seems to suggest that the number will be higher than EUR 40 million.

That is an interpretation worthwhile looking at. And I think if you look at the publications in the market and see what orders -- what number of orders are published on CapEx for capacity and increases, I think it's a fair statement to make.

Questions from Turner Holm, Clarksons. Management of pricing for tenders now compared to the orders executed in the first half of this year.

Depending on competitors' availability and dimension of the monopile, it's either at the same level or higher. Is that answering the question, Fons, do you think?

For me, it does.

Henk Veerman, Kempen, a couple of questions from my side. In the first half of the year, the price per ton, excluding the other activities, was EUR 640, given that you'll [ approach the end ] of Hollandse Kust Zuid in the second half of the year, should we assume that the pricing per tonnage is markedly higher in the second half of the year?

It will -- well, there's a few elements here. I think it will be higher or at least the same. If you look at total for the year, bear in mind that we have actually now finished the production of the steel part of Hollandse Kust Zuid already. It was last week, we did the last monopile. And we have, during the summer break, used our time to completely reshuffle the factory layout to start Dogger Bank A. So we have had a few weeks of idle or low production now on that. But the total price should be showing the same trend as we saw before.

Okay. Then on next year, 2022, when you look at the order book today, I think you only gave a total order book number. But should we assume that production is closer to the 180 to 190 that you guide for this year? Or is it close to the 220 that you see as your, let's say, max capacity?

Yes, good question. At least level we saw this year. We both said to each other we should be able to do a little bit more, but not reaching the 220. And that simply has to do with the dimensions of the real product we need to produce. But...

And I think it's also good to add, if you look at the capacity, you have a theoretical capacity. But also, always between 2 projects, it's not like you finish one project on Monday, then you can start with the other one on Tuesday. There is also always a period that you have to transfer between one project to the other.

Yes, that's clear. Third question is on the cost, the operational cost in the first half of this year. I think it was somewhat higher than last year's same period. But are there any like one-off cost items in the cost base in the first half of the year related to COVID or other things perhaps?

I think regarding COVID, there is a marginal impact, as mentioned indeed. But for example, what we did see also during the first half of the year, also regarding the external study we are doing at the moment, that is bringing in some additional cost.

Yes. Okay. That's fair. So let's say if I look at your cost base in 2022 versus this year, are there any projects that are still running? I think previously it was mentioned that there were some projects related to cost efficiencies as well.

Yes, yes. And they have paid off or will pay off. And then our -- we're pretty confident that next year we should be able to again increase our return. We will be producing next year the final part of Dogger Bank A that we just started and continue with Hollandse Kust Noord and those -- but they can both be produced on the same production lines and production layout, so we do not anticipate major installation costs or one-off project cost to start a project. So that it should all help to further improve our [ mine ].

Two remaining questions, if I may. So you recently had a lot of discussions with your clients related to the strategic plan, and I think you will continue to do so. Next to the, let's say, discussions on the products, on the monopile itself. You already mentioned that a lot of competitors are also stepping in with capacity, and they -- I think they often have not that much operational experience. Have your clients expressed any worries related to these, let's say, relatively inexperienced parties? And have they asked you to expand your capacity? That's the last question.

The last question, yes. Yes, what's the plan? More or less the same question as you asked, what's the plan of shift to counteract on this growing demand? And we give the same answer. And no, customers do not express to us their concern on [ start-up ] because they actually say that everybody is able to make monopiles. That's, of course, part of the game they're playing on the commercial side. But indirectly, we do get a request for, how to say, becoming a security or an insurance for them that we do partially -- that we can partially produce on projects that they like to outsource to others, or do the testing with us, what is the pricing level that we ask for, whether that matches to the other parties they talk to. And we are, of course, trying to avoid that sort of discussions or help them out on that sort of discussions. We prefer to talk on taking the lead in making complete projects. And that's how we approach it at the moment.

Last question is on your innovations. I think you shared a couple of innovations. And the one that stood out for me was the Skybox, which I think you've been mentioning for quite a while now already. Can you maybe share some more details on, let's say, what the business plan for that innovation looks like?

I'm happy you asked, because I think what this illustrates is how long it takes before a product or an ID is actually marketable. And the certification -- now we are in the certification process for that business. And yes, there is interest with customers, but no real concrete tenders still open, simply because they -- customers are risk-averse, want to be 100% sure that the solution is a working solution. And that's why we have -- it takes 2 years, more or less, to go to full certification of this product. And the first major step is happening this summer when we will install a set. This light version, that's a 1 to 2 scale or so of the actual size, will be done here at the North Sea. Testing, then there will be some extra tests on how the holding capacity is, how will it work out during installation, et cetera. Then next year, we have to do a full-scale test with another, and we have to make a complete new Skybox again. That's all investment upfront just to get the certification done. And then only after that certification is done, we can start offering the product. Now we have to prove, and that's part of your question on the business case, how -- what is the actual saving that you accomplished by using this layout.

And this will be included in your strategic plan as well, I guess, maybe allocate some capacity to that innovation as well?

No, this is a separate product and a separate process or business case, so to say. It will not affect our business plan on monopile production. [ We'll go to ] Tijs.

Tijs Hollestelle, ING. Yes, I've got a question about the order book for 2022 and beyond. It increased, that's positive. I think it's not a major surprise given all the activity levels. I think you mentioned that 130 kilotons was one single project. If you look at the current, let's say, production setup for this, how, let's say, set in stone is it? Because if one of your clients is facing a bottleneck somewhere, they probably have the power to say to you, "Sorry, guys, but we have to move the production." Or how is it?

It's very solid. And it's solid in 2 ways. This project has passed basically all the stress tests financially at the customer side. Secondly, included in this deal is a penalty for delay and -- or cancellation. And up to the level that you could ideally say that if they cancel at the right moment, it's a better order than actually making it.

Yes, okay. That's good news.

So -- and this, I think, shows a few things. One, the confidence customer has that he will release the project according to plan, otherwise they wouldn't have signed up to that penalty clause. And for us, the good news is that we can actually firmly plan for it and take it into our long-term planning, [ pre-provide and materialize ] so that we can optimize our -- the outcome of this order.

Yes. So that's a big change versus, let's say, the last couple of years.

Absolutely. Absolutely. Yes, yes.

It's not your fault, but you're depending on these big customers.

And I think it's also fair to say that because it's running up until '24, but we do have capacities still available for some other projects, either smaller MP orders or transition piece orders. And just to give you a ballpark number, but for that specific period and those few tonnage that we -- tons that we can still book, we have roughly 600 kilotons now in very serious stage of discussion. We cannot book them all, let me -- for that period, because simply we haven't got capacity for that. But it shows to what extent the market is heated, if not overheated.

Okay. That's very interesting. Because my second question is, and that's -- I think myself it's a difficult one because on Page 3 of the press release in the second to the last paragraph, you gave a very clear outlook for this year. But you're also kind of talking about, for the years beyond 2021, we see a similar pattern, limited number of large projects. And we discussed with the order book impacting, let's say, the production and earnings for the year. And then upward potential, you specifically mentioned the marshalling, the engineering services, small project, pin piles, et cetera, and I do understand that. But I'm trying to read between the lines. And then also, from our perspective, the equity case, I mean, some of the forecasts are expecting, let's say, EUR 70 million to EUR 80 million of EBITDA next year. Is this kind of an indication from your side from based on the order book, "Guys, be at ease," and there might be some additional upside? Or is it really already reflecting, yes, massive additional upside on pricing and more efficient production levels? Because, yes, maybe for you guys it's less relevant, but we are estimating on this side of the table. But for the -- yes, for the discussions with investors, it's quite important to have that clear.

Yes -- no. I think I said it already that -- we said already that we do -- we're pretty confident that next year, we can go up to a similar percentage levels as we expect for this year. But always bear in mind that the oil and gas is 0 and that EUR 60 million, EUR 70 million that we once accomplished had about EUR 20 million oil and gas in it and was based on one site factory with diameters substantially smaller than we have today. So we have seen 2 big changes, oil and gas disappeared and the small diameters for wind have disappeared as well. So we are only -- we are making our full profit on the top end of our production capacity. And that's why we come to 210 kilotons only. And the additional businesses in marshaling, engineering and what have you, for the time that we have not implemented, or first decided and then implemented on our next step to accommodate even bigger diameters. And that is the reason why I think it's only fair indeed to bear that very well in mind and fully focused, as we said before, on how efficient can we produce, how well are the projects connected, how well can we negotiate these penalties clauses so that we do not see big moves in our order book, which are all elements to optimize our margin, but not to overreact, let's say, or over expect that you can go immediately back to levels or beyond. Are we aiming for similar levels or even beyond, I would say, in the mid to long term? For sure. Do we think it's needed to actually have a healthy business case -- and others in this industry are expressing this as well. I mean, it's a huge potential that lays ahead of us. But if it's only the project developers that make money, this will never materialize. The whole supply chain has to make this money to facilitate the level of investment that's needed. Otherwise, this business will not grow as it should. But it has to grow because we need to.

Yes. And you being experts in the industry, what do you think are the biggest bottlenecks in the total supply chain of offshore wind in the coming years? And then assuming the U.S. indeed comes through with this...

For U.S., as mentioned, it's really the supply chain, the local supply chain. The first few years, it has to come from Europe still. If they want to materialize the ambitions they have or the even increased ambitions, they never ever can supply that...

Yes, by themselves.

By themselves, that's one. But that's a temporary one. We do see that picking up. So we -- in our European planning, we have to bear that in mind. That means that you will increase in Europe. But unless you can earn it back in 2 years' time for the U.S., you will not increase to the levels for Europe plus the U.S. in Europe because, in the end, it will be the U.S. that produces for the U.S. itself. So that's one. Then for the U.S., of course, it's the insulation vessels that we all know. There is -- there are initiatives. Dominion is building its own vessels, et cetera, et cetera. So it will come up. But also there is some reluctance, on the other hand. And then we need to see how quickly the turbine builders can build up there, ramp up their production capacity.

So basically, everywhere is a risk?

There's a risk. And the overall joint risk is people, can you find the right people in all these businesses to gear up in a responsible way to the levels that we need. And then as I said also, as we also presented, political. Last week via the Alliance, we had a discussion with one of the members of parliament in Brussels. And there's a big political struggle still going on, on ratifying the Green Deal, the 55-plus [ trim amount ] plan that's now on the table. And it's really at 50-50 levels. So they haven't gone through this yet. And we have -- we tried to help them with all means in our small area, but also the turbine builders do, et cetera, to speed up that sort of decision-making process because that gives clarity to the industry. How high will the CO2 bonds will be, what sort of mechanisms are in place to actually help ramp up the European industry, what sort of bonds can be put in place to support this industry, et cetera, these are all important elements. Everybody is willing to do it or a lot of people are willing to do it, but there's a lot of objection still there as well in EU.

Okay. That's quite helpful. I had a few other things. You mentioned the -- you're helping looking at decommissioning solutions.

Investigate.

Yes, but I don't understand it. Is that -- will that be a business for you or is it just service to the overall...

No, no. We see that as a -- being 100% active in renewables, I think we have an obligation to also seriously look at circularity. That's one thing. I think the social element here and -- is an increasingly important element. But it's also -- it can only work if it's a business. And we have reasons to believe that cutting off the monopile at 5 meters below the midline is not the sustainable long-term solution that we should aim for. So we are indeed doing some tests and working on some initiatives to see how we can pull out the entire monopile, bring it back to Maasvlakte and do a de-coating, cutting in pieces action in the green way and bring it, and then together with our -- with Dillinger in this case, with our steel supplier, see how the scrap can be an important base material actually for green steel.

Okay. It's a joint effort. You're not going to, let's say, put CapEx in a vessel that...

No, no, no. It will be a joint effort. But we will focus on the part that we are good at. We believe we can add value, so to say. But we're not going to invest indeed in a scrap vessel and what have you to...

Just from your strategic update, you'll never know.

You never know and it's always good to keep an open eye on opportunities, but this may be a bit too stretched.

Yes, a bit too stretched. Okay. And is there any problem in your own mini supply chain? I mean, Dillinger Hütte is able to support everybody with the steel plates.

Yes, they are -- I would say also thanks to the ration we have, we have a strong, so to say, confident and long-term agreement on the supply SKU. And -- but we're also investigating, of course, other areas like flanges of -- you need for transition pieces or the top of the monopile. And -- but we take that, for example, in relation to what extent will TP-less monopiles become the favorable solution or will it be with TPs. If you have a TP solution, you need, normally speaking, maybe up to 3 flanges, whereas with the TP-less design, you have only 1 flange. And that has an effect on the capacity and -- for flanges, [ so to say on that ]. All sorts of aspects that play a role in this study.

Yes. So not [ obviously an ] issue. Also, with the [indiscernible], I mean, relatively enough people.

People is an issue. That's why in our study, we also look at the level of optimization. To what extent can you do more with less people. So the whole production process, Industry 4.0 technology is -- are areas that we are looking into to really, well, ramp up a little bit the production technology as well in -- compared to the existing process.

I have some additional questions. Thijs Berkelder, ABN AMRO. Just to be clear on the strategic new plan on the new strategy, is it fully focused on your existing Rotterdam and Roermond sites? Or does it also include studies into potential expansion in other locations?

The study -- the specific study we executed is a study on production methodology and volume ramp-up in Europe, but it will also fly for eventual expansion outside Europe. But that's a different study. I mean we're not doing a strategic study, we're doing a study on how to increase diameters and volume for the bigger monopiles. So that's a different one from geographical initiatives.

So that's not in the cards yet?

It's on the map. But let me put it this way, we said it also before, Europe is our main market, and we are not going to invest big time with limited resources in Asia or the U.S. before we have assured that our European foothold remains intact and in place and our position in Europe remains intact and in place. That's where -- and then you have to make choices on priorities.

Clear. Then on technology. On floating, you talked about big diameter steel, or looking at floating and big diameter steel, I can only think of Equinor's Hywind solution. [ This ], I think, doesn't really fit your production...

So I think your question illustrates that there are no real concrete projects or solutions yet that we put our bets on.

Yes. But simply looking at all technologies, most of them are really smaller components, standardized serial production -- types of predictions, not typically Sif's also, than Hywind...

Solution, type of solutions is probably the sort of solution you look at, yes. But at Kincade, we did now recently for where we did the final assembly, that's also on 3 big -- based on 3 big floaters around. And they're built in a traditional shipbuilding technology, and the question there is, can you replace that with a typical Sif technology.

Yes. Okay. Clear. Then I checked the decommissioning solution, then we'll be done with the BLUE Piling Technology? Is that the plan?

No, because that's piling. The blue piling...

Yes. But blue piling can be reversed. So it's the BLUE Piling Technology can draw the monopile out of the -- or shake the monopile out of the ground. That's at least what I understood from the inventor. So -- and that's still...

That's not necessarily our first choice.

Okay. So then it's a Vibro...

It can be Vibro. It can be flushing. It can be air. There are a few other alternatives there.

Okay, clear. Then your FTE amount right now, what can you say on the plan for the coming 1.5 year? Where do we need to be in 1.5 years' time?

1.5 year time, I think you're more or less looking at equal levels as we have today.

I think on that one, Thijs, I don't know if you had time to read that. Indeed, if you look at the increase in FTEs compared to prior year, this is mainly impacted by KCI, which is now included. There's an impact of roughly 50 FTEs if you compare the numbers with prior year.

Yes, bear that in mind.

Okay. Clear. Then this year, you will be generating quite some free cash flow. I presume it will be reserved for your potential investment plans and not be a returned to shareholders? Or how should we look at that?

I mean we have our rules of the game in place there, and there's no reason, I think, at this moment for us to divert from those rules. On the other and, indeed, part of the study is probably that we need some money. We will definitely need some of that to invest. On the other hand, we also do not want to disappoint or push away our investors.

Are you also looking at M&A, concrete?

We just completed one.

Yes. But let's say, you had a whole slide with all kinds of competitors. And when you came to the stock market, yes, simply the market was dominated by 2 players, EEW and you, each, let's say, having a 40%, 50% share or 45% share. And of course...

At this moment, we're not...

The market is maturing and, let's say, challengers regularly make mistakes. So that could be the moment to indeed, via M&A, return to the, let's say, 40% of the market. But that's not a...

No, we haven't seen any advantage so far in trying to pursue one of these options.

Okay. So Dillinger still wants to continue also with Steelwind adventure. Yes. Okay.

Questions by Turner Holm from Clarksons. On the marshalling business, what's the reasonable expectation for contribution in the near and midterm, and the same for engineering?

Yes. We -- on the marshaling, I think we stick to what we said when we introduced this, we have no reason to deviate from that. So -- and as Andre already tried to ask as well, I mean, next year, it should be double-digit. And we have always said that margins should be healthy up to 50% of revenues. But also for commercial and competitive reasons, I'm not going to give actual numbers here.

And beyond the plans by competitors for new European and American monopiles factories, is there any risk of monopiles coming from Asia to Sif markets?

We do take into account that there will be attempts in that, and we also follow that. But on the other hand, we know that the ambitions in Asia are such that -- and that's also the feedback we have so far, that Asian, especially the Chinese players and -- are focusing on the Asian, what is it, market and developments there and not necessarily for Europe. And that simply has to do with the transport costs, the increasing CO2 penalties that affect the European market. All right. Thank you.

Andre Mulder, Kepler. A question on this 600 kilotons that you mentioned. In the past, you used to mention the names of the products that you're gunning at. Any information you can mention there? How logical is it that after A, B and C, you also gained Sofia?

Gained A, B, C, Andre? We have one A and B. We just signed an exclusivity on a project of 130 kilotons. Then we're working on -- I mean, the list is simply too long, to be honest. I mean there are so many projects at the moment. I mean we will see Hollandse Kust West coming to the market. We will see [ hydrate ], Moray West, East Anglia Hub, Dominion, there is US Wind, there is -- all these projects are active on the market and also customers we actively talk to. Then there is also Sofia, but I wouldn't count too much on that one for us. It becomes a bit too Sif-loaded Dogger Bank otherwise.

I've got a question on the trade working capital. I know it's volatile, but for us modeling it towards year-end, do you have already any visibility on even more prepayments coming your way, let's say, before year-end? Or do you expect, let's say, a gradual decrease as you also start spending on the prepayments?

The last one, indeed. So if you look at the current position also, the cash position during the first half of the year, we had quite some prepayments indeed, and the supplier payments will come a little bit later on. That is materializing -- expected to materialize during the second half of the year. Also towards the end of the year, cash position and also working capital positions will return back to more normal levels.

Yes. And you don't have any visibility yet on additional prepayment coming in the second half? The jump from Q1 to Q2 was quite significant.

That's right. And no, that will not happen during the rest of the year.

Okay. And in the tax line? What is -- what can we expect for the second half?

I cannot answer that question at this stage. Something I need to come back to you on that.

Okay. That's good. Okay, yes.

And based on this one, Tijs, what I've seen so far, I would just expect normal levels. But let me check and come back to you on that one.

Fons, do we have more?

No, [ I'm not seeing any ].

Last question from my side. The follow-up on the taxes got me thinking. The tax rate, it was, let's say, 13% to 15% in '19 and '20, but that will normalize towards 20%, 25%, right, with the innovation box in decline?

That's what I would expect, yes.

All right. If that's it, Fons, no more questions. Nothing coming up? All clear? Then I think we need and like to thank you all for your interest, for your questions. And let's work towards another meeting half year from now or a bit more. See each other then. Thank you very much.

Thank you.

Thanks, everyone.