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

All right. Good morning, everybody, to this presentation of the first half year numbers of Sif Holding. Good morning. My name is Fred van Beers. And next to me is Ben Meijer, our CFO. And the two of us will take you through the results and a bit of the forecast for this year and the years to come on our performance. Quite exciting half year we have had, as also shown on this introduction page here. Basically, this page tells the whole story. We're extremely happy that our safety performance has improved and talking about safety also in this room we need to pay a bit of attention to that. No drills are planned for. So when the buzzer goes, please follow us out to the door and either through the left, there's an emergency exit to the right, there's an emergency exit or you take the main stair downstairs. So plenty of opportunities to leave the room, should it be necessary. But our city performance has improved, which is a great thing. We will come back to that later on and seems to be sustainable, which is even more important. A very important element where we will talk a bit more about is the expansion project. It's on schedule, and we have had a very exciting August month during which we managed to start up the production according to plan and have actually produced the first can and more cans in the line already for the Empire Wind 1 monopile which is a very important milestone in our view on this whole execution plan. And then as said already, we will take you through the outlook of the remainder of '24 and '25, '26, what's playing there. So I hand over now to my colleague, Ben, who will take you through the results of '24. After that, I will come back on markets and the expansion plan itself.

Thank you, Fred, and good morning, everybody. I would like to start with some more details about health and safety. As all of you can remember, last year, the safety performance at Sif was not good, we have taken various measures, including regular safety standstills. And what you can see over here at the safety statistics is that performance has improved on almost all key safety KPIs. If we look at the number of lost time injuries, last year, first half year, we were at a number of 7. And immediately, we took additional measures, as just mentioned. This year, for the first half year, we are at a lost time incident of 1. Still 1, too much, but a significant decrease compared to last year. Well, if you relate the number of lost time injuries to the number of hours worked, so you look at the LTIF, the lost time injury frequency, you see a significant decrease from 7.9 to 3.3. Restricted work cases, a small increase compared to last year. But then again, if you look at the number of medical treatments and also if you look at the number of first aid cases, you see a significant drop compared to the first half of 2023, which is an improvement in this case. So overall, what we see also walking around in the factories, housekeeping has improved, safety awareness has improved, and this is also being -- also resulting in better KPIs from a safety point of view. So first, key highlights for the first half of 2024. And I would like to start with the number of FTEs, number of head count. What we see over there, we see an overall increase from 687 in the first half of 2023 to 700 in the first half of 2024. And we see over there. So it's a relatively moderate increase, but you see a significant shift. In Roermond, we see the number of people decreasing. So some scaling down over there because of less production. And in Maasvlakte, we see the number of people increasing, which is exactly what we want at the moment in relation to the start-up of the new factory. And what is good news over there is this is in line with plan. So a couple of months ago, half a year ago, it was more worrying, but at the moment, the last couple of months, we see the trend is good, and we see good people are coming in. And this is, of course, very important. We will come back to the financials later on. But also regarding the new factory to bring in the right quality staff is a key element. Looking at the cash position, EUR 87 million at end of June 2024. In addition to that, this is cash on the bank. We have an undrawn term loan and total term loan was EUR 81 million, a little bit more than EUR 60 million has been drawn at the end of June. So another EUR 20 million is undrawn and also the lease facility of EUR 40 million in relation to the expansion project is also fully undrawn. And then besides that, we have a revolving credit facility of EUR 50 million also to absorb unexpected working capital swings in case that is the case, is also fully undrawn at the moment. Basically, overall, the conclusion is that there is sufficient cash in the company also to complete the expansion project. We have a temporary lease contract for 20 hectares with the Port of Rotterdam, which is allowing us, first of all, for additional storage capacity and also is giving an option for future marshaling or logistics services in the near future. And last but not least, also repeating the words of factory. I think that's the biggest statement also of today, that regarding the expansion project, we are on schedule and within budget. And this is very exciting also at this stage, the month of August, we have started can production for the Empire project, and we see basically that everything is working in a new factory from a technical point of view. Right now, it is scaling up, but it's further optimizing, but it's working, it's on plan and it is within budget. Brief overview about new contracts for the first half of 2024. The first one is a contract for Baltyk and was moved into a firm contract from a capacity reservation agreement into a firm contract in the first half. In total, we are talking about 100 monopiles, representing roughly 120 kilotons mainly produced in 2025. Regarding the TPs for Baltyk, we have a capacity reservation agreement. 30 kilotons in total, and we're talking about 100 TPs. Then VII Hollandse Kust West or plot VII Hollandse Kust West for RWE and TotalEnergies has been moved to a firm contract. It's the first firm contract for 2026. And at the moment, we are working on various other opportunities for 2026, and we will come back with that is still the expectation also before year-end, as discussed before. And tender pipeline is still huge at the moment with still a supply-demand imbalance also for these thereafter. Last contract I would like to mention is the cooperation agreement with Dillinger regarding green steel and circular production for steel monopiles. Financial highlights. First half of 2024, contribution margin went up with 10%. And what you see over there is that we have lower volumes compared to last year, but the overall contribution margin just in euros is higher. So lower volumes are offset first of all, by improved margins. Secondly, the settlement and cancellation -- the settlement on the cancellation agreement with Empire 2 and additional income also from GS Entec the license agreement. EBITDA increase went up from -- with 22% from EUR 21 million to roughly EUR 26 million, and this is driven by the increased contribution margin and also higher gross profit levels. And what you see over there is partially being offset by higher indirect expenses. And in the various departments, because you are scaling up the operation, we are also investing in operational and also other support departments to be able to absorb the future growth. In terms of volumes, we produced a 53 monopiles, 64 transition pieces, reflecting in total, 86 kilotons compared to the first half of 2023, 94 kilotons. Order book, '24, fully booked, '25, fully booked, '26, 1 firm contracts. And as mentioned before, the very high tender pipeline and working on various opportunities. Over here, a brief summary. We already talked about the number of monopiles and transition pieces. In total, this reflects 773-megawatt offshore wind energy. That's roughly for 800,000 households. The LTIF we discussed, we see the significant improvement compared to 2022, '23 and '24. You see just a decreasing trend in terms of safety incidents. And if we look at the CO2 emissions, we see an increase compared to last year, and this is mainly the result of Scope 2, more energy usage, which is not being fully offset by the Haliade-X, which also had some downtime. Now I would like to hand over again to Fred.

All right. Thanks, Ben. And now let's deep dive a little bit in the new factory, setup, start-up. And we decided to show you some pictures of what's actually working. Many of you here in the room, if not all, actually, have been at the premises, what was it, 2 months ago or so, visiting us and so may recognize a few things that we show here on this picture. But just to illustrate what we mean when we say the whole line has been starting up, that also includes the whole logistics, so the unmanned vehicles that are being operation now, which you see on picture 1, they are moving the tables with which we transport the steel plates. And in Picture 2, you can see that also the steel plates. This is how it will happen standards in the future. The steel plates for Empire Wind 1 are actually machined, prepared for welding and are put in front of the assembly line of the plates, which you can see in picture 3. There you can see that number -- the plate line #1 is fully in operation now. It's relatively clean. It's working. But also if you look to the right of that, right-hand picture, line #2 is coming close to completion as well in the assembly. So we clearly see what we also planned for that once line #1 is up and running, and the software is working, 2 and 3 will follow quite quickly with a significant lower risk, of course, because they are all identical. And then on the far right, you may or may not see, but also line 3 is already in the execution of assembly, meaning this is moving on quite nicely and as we'd hoped for and planned for. Then coming to the -- what a lot of people think is the exciting part, the rolling of the steel plates, well, here on the left-hand side, you see the rolling of the real first plate of Empire Wind 1. As you can see, the welding team just coming out of the rolling support on the left side is also working nicely. So the welding system, as we have considered it and thought through is actually delivering and performing and also during the rolling process, this is all in line with the quality requirements that we've put ourselves and more important, the tolerances we've put ourselves into and that's coming out of the system. Well, after that, the cans are welded and then they go into the existing assembly process. So that's not new. That's proven technology within Sif, but we are expanding that part as well in our existing production hall and on the right-hand side, you can see that also the new outer circumferential weld machine from HAANE is actually installed and will be put in operation soon now. And this is the first one that actually can handle the bigger diameter cans. And also, I think, nice to illustrate is that this machine has been built to exactly fit underneath the crane support. If we would go higher, we would have a collision with Cranes. So this one is already prepared for the biggest diameters that we foresee to be produced in our factory, 11.5 meters for sure. So that I think illustrates that it's not only stories, but it's actually -- it's really there and it's actually performing and that, in our view, is a huge risk mitigation on this whole project that is now behind us. Then moving a little bit on to the market because the market has been quite exciting, to say the least, over the last 1 year, 1.5 years. And basically, what we see as a main difference compared to half a year ago is that we now know the outcome of a few important elections that we saw happening in the last half year. First of all, the EU, the elections and the outcome there is that the -- with respect to offshore wind, actually, the existing strategy and rollout is being continued now with the new setup. So with a lot of focus on, first of all, materializing a system that eases the whole tender process within the European community, but also continue working on protecting the EU market to assure a level playing field marketplace. We at Sif, we are -- have said and we are continuing saying that we are not afraid of competition. I mean competition is healthy. Competition is what is needed and whether that competition comes from inside the EU or outside the EU, it's not so important for us as long as it is based on a level playing field system, so to say. And there, we are very happy that the EU is taking -- is continuing with the process of taking measures, trying to implement rules, looking at a very healthy balance between financial and nonfinancial criteria, for example, in the tender processes, which, in our view, will stabilize longer term also in this market. The second important one for us is the outcome of the U.K. elections. Labour has won and labour, I think one of the first announcements they made is that they are doubling their ambitions for renewable energy in the U.K. and immediately have increased the budget for the CfD 6 round that is now being judged as we speak. So the results are expected to come out first half of September. They increased the pot from EUR 800 million to EUR 1.6 billion. And that well, without saying too much, is a very important measure and indication for us when we start looking at '26. Just to give you a little bit of a hint, but for us, the CfD 6 is an important round to follow. Then the third one, I think everybody has noticed that one and the change in the vibes in the U.S. with Biden stepping out and Ms. Harris stepping in. Let's see what that results into, but that is at least in our view, a hope giving signal that the U.S.A. may continue or when they win and their chances of them winning have increased, I think, at least compared to the Biden candidacy, which would be good also for the offshore wind. We noticed this also with our customers. The customer is active in the U.S. You may have seen, for example, that Equinor has won another plot of 75 million Mid-Atlantic project, which is a very decent price and a good starting point for developing another wind farm. And it's customers like Equinor that are showing determination to continue to focus on the areas they're active in. And actually, which we also think is a good sign, stepping out of areas that may become interesting in the future, but as there too far away from realistic developments. So focus also with our customers, I think, is a good sign and especially when those customers have a partnership agreement with a company called Sif. And then last but not least, although it's part of the EU still the Dutch market is an important market. And let's see what comes out of the talks that are happening as we speak today, and what comes out of the Prinsjesdag's announcement. But the first indication show that they are not preparing to change big time the strategy with respect to offshore wind rollout, which makes a lot of sense from various reasons we think, but it's also, I think, an encouraging message since the ambitions in Holland are one of the biggest in the EU or North Sea field. So all in all, we are happy with the recent developments from a political climate. We also see that reflected now in the tender activity and the sentiments, let's put it that way, with our customers. So on our strategy, no changes basically. We continue to focus on helping to accelerate the energy transition. We do still see that this is definitely needed and much wanted for. Some of you may have read the WindEurope announcement as well, and we are in a very close contact with WindEurope to also from that side and help setting the scene right. We continue and are on schedule to realize the volume of 200 foundations in a year, and we continue to develop our strategy on offering total solutions. For example, the 20-hectare that we now rented, which we hopefully also can turn around from a temporary into a long-term agreement is, in that sense, a good sign of fulfilling our strategy. Main thing for this year remains the setup of our factory. We are now in the phase for the coming 4 months to actually optimize the processes, get #2 and 3 up and running and get the whole integration done. That's why you also see in our forecast that we are lowering a little bit or have lowered expectations with an EBITDA from an EBITDA perspective that has basically all to do with the planned lower production output that we actually want in order to be able to ramp up this factory in a decent way. So that's working well. And we resumed this marshaling activity. So we have started dialogues with various customers that are interested in making use of this 20-hectare plot. Half of it is booked already with Dogger Bank. And the other half, we are having various talks about there, but not before -- that will not materialize in through sales, so to say, before '26, that's long-term discussions, but good that we can restart them. And we further work on our decommissioning circular solution concept where we expect to come with more news, not earlier than mid next year. That's the earliest that we can expect to take a next step in the rollout yes or no, of that decommissioning concept. So it's a longer-term perspective that we want to give there. The final drawings under the term loan lease facility will be in the second half '24. Ben can talk more about that when needed. But we -- and we focus -- we start focusing also, okay, when we will repay what, so repaying our perpetual in the first half of '24 from fees has been dealt with for the project with no production volume. That's basically the cancellation-related aspect. And the further repayments are targeted in next year because that's the most expensive one that we want to get rid of the quickest, to put it bluntly. And then the order book addition for '26. I already listed a little bit the secret on where do we expect the part to be filled. But for us, the U.K. market in the '26 term is the most important one to say it simply because many of you know the market, there are not that many other projects up for grabs for '26, but there is still quite something going on. And then the other focus area for us, of course, is on Noirmoutier for the Dutch market, but that is something for '27, '28. And the German projects that are coming to the market now. They will -- there's a lot of activity going on, on those projects as well for the period after '26. But we, of course, focus for obvious reasons now on materializing the concrete, very concrete projects we have on our list for '26 that underpin and we're more and more convinced on that underpin our guidance for '26 to achieve EUR 160 million EBITDA at least for that year, and that still looks good. When will we come with announcements on this, before the year-end, this year. I said that before, and that remains the message before '26. Next year, output, 180 monopiles, 100 TPs, so that's the volume we're looking at. Some of you may ask the question, how many kilotons is that? The answer will be, I can't give you that yet because that's for commercial reasons and competitive reasons, not what we want to do because then calculation of contribution margins become quite easy, -- becomes quite easy. And that's -- I hope you understand is not what we want to disclose at this stage. But it supports very much our EBITDA guidance of EUR 135 million for next year. And with the factory actually doing what it's supposed to do, that should actually even be achievable. But some of you may still doubt, but that is -- that's -- it is going to happen. That's it for now. And we would like to open the floor maybe Tijs, you want to be the first. I'll open the floor for questions, remarks, open items.

Tijs Hollestelle from ING. Yes, I think your explanation is quite clear, the strategy, what happened in the facility. It's quite impressive that you're on time, on budget. There's always a bit of a disconnection to the stock market with the short term. How should we, let's say, model the coming 4 quarters? So any help you can give us, Ben, on let's say, specific items, accountancy impact on the numbers would be helpful because the share price will be very nervous in the coming quarters, of course, on cost base, reported revenues and also EBITDA levels. So in order that we avoid too much share price volatility needed as much help as possible would be, I think, helpful.

Question well phrased. Thank you for that. Now on this one, I think for the rest of the year, second half of 2024 is a transition period. And also what you can do if you look at the calculation, we see a lower volume for the second half of 2024 because of this ramp-up period. Then also, if you look at the full year 2024, for sure, the question will come, but I will give you some of the input already. If you look at the first half, you did an EBITDA of EUR 26 million. Second half, you're going to do, our guidance is around EUR 10 million, EUR 9 million to be exactly based on our guidance. Consequence of 2 main elements: volumes will be a little bit lower because of the scale up and also of sizing the organization, you will have some additional cost, some selectively cost increases. And also in the first half, the settlement with Empire, full settlement has taken place and also the cancellation fee is fully reflected in the first half year numbers and also the numbers of last year. So nothing to come over there for the second half of this year. Then for 2025, what you see over there is, first of all, volumes, of course, will gradually increase. First half will already be at a higher level, and the second half of 2025 will be at even a higher level. And if you look at the contribution margin per ton, I always hate to talk about tonnage, but it's important what we discussed before, tonnage is not everything. But you'll see an increasing trend in terms of tonnage next year, but also the margin per ton because of the higher sizes and the high complexity of the product, you will see a significant increasing level in 2025 compared to the previous years.

And Ben, I think it's fair to say that we are planning for a significant step-up already in Q1 for '25 compared to second half of '24. So it will not be a slow sort of growth line. That will be a relative steep step up already in Q1. But dividing 135/4 and...

That will not be the case.

That will not .

Yes. And then -- and also -- and then depreciation levels will also go up quite steep in the coming quarters. So they're managing it quite well because normally, you just see with these new factories that OpEx levels just ahead of the start-up are going through the roof. I'm still positively surprised that you maintained for the EUR 10 million EBITDA outlook for the second half of this year because you have cost, the FTEs, all the equipment now moving is getting into your cost base. But even with that, you can make these statements. So it's in full control basically also from an accountancy point of view on the quarters.

So far, yes, absolutely, yes. And of course, in terms of forecast, we are looking at recurring EBITDA. So if you look at specific start-up costs, this will be booked on a nonrecurring cost. It will not be part of your recurring EBITDA. So that is important to mention that, Tijs.

Yes. Your estimates on those one-off cost for the next 12 months?

It will be -- for the second half of the year, it will be comparable with the first half of the year, maybe a little bit higher.

And these costs are still there a little bit in January, I guess, next year?

Yes. And then during 2025, this gradually will phase out.

While I have the microphone, so that's very helpful. And the same basically on the situation on the balance sheet because you could -- I think the stock market can now see that indeed the cash levels are down maybe because you're spending the CapEx. There's trade working capital volatility. How much, let's say, EBITDA at least you need next year in order to, let's say, facilitate the redemption schedule as you have it, budgeted right now, it's a bit of a long question, but do you see what is, say, the kind of the floors in this refinancing...

Yes. But also in terms of redemption for next year for the term loan, repayments will start in 2026. It will not be in 2025 yet. And indeed, to repay, for example, the perpetual, which is the most expensive instrument, because this will start paying interest as of January 2026 with an early boarder plus 5%. So on this one, we have the strong intention to repay that, okay, end of 2025. If you look with an EBITDA level of EUR 135 million, that should be more or less efficient.

EUR 135 million.

EUR 135 million.

That's basically the guidance. Yes, there's a sufficient buffer in there.

There is buffer in there, yes.

So we didn't answer your question.

Yes. I understand it. Yes. But it's not a worry on covenants and also on the lease, let's say, the lease related to the financing will become active in the second half of this year?

Yes, yes. So right now, as of the end of June, it was fully undrawn and the EUR 40 million will be fully drawn during the second half of 2024.

And then on the trade working capital, it's just normal seasonality with refinancing?

Of course, 1 thing you will have right now, you see an extremely negative working capital for next year, what you will see is that advanced factory payments, which are reflected in the working capital, they will phase out during 2025?

For the complete amount?

That will be, yes, for almost a complete amount.

[Sama from ABN AMRO. Just a small question with regards to the new temporary storage facility that you guys leased. Could you give a little bit of color when does it get reflected in the financials? How would you help us in the modeling of that going forward '25 onwards, '26 onwards. If you could give some color on that?

Right now, this will result. The 20 hectares as a consequence of that, we have a storage contract with one of the projects, and this will result in additional operating EBITDA and operating cash flow already in 2024 of roughly EUR 2 million, EUR 3 million and the same amount also in 2025. That's roughly the impact it will have.

And can it be consider perpetual going forward?

Sorry.

Can it be considered perpetually going forward? Or is it just for 2, 3 years?

No. Right now, it's a temporary contract we have, and after that, because it is temporary, we have the expectation, it might be for a longer term, but we cannot give 100% guarantees on that.

So we are -- just to add on that a little bit. We are -- this is a first up in an ongoing discussion with the Board of Rotterdam to see how we can make this sustainable long-term agreement. More news to come later on.

The price levels of the contracts in Sif's order book are negotiated to give you the confidence to provide these outlook statements. Going forward on the newly to be acquired contracts, there will be some volatility. I expected, or some competition issues, different clients. So it's back -- probably not back to normal. But if you have, let's say, the standard of your order book, '25 is or not, I assume what is your internal sensitivity to the growth margin or the EBITDA, whatever you want to call it? Is it 110, 90 is it potential bigger?

I would say it's potentially bigger that we have the robustness, I would say, on the price level. I mean the first thing is, if you look at the pricing for the tenders for up to -- for projects up to 2030, we do not see any big deviation from the levels that we are closing now. So it's more about reliable availability of capacity and close -- being close to the field because in the end, that's what's important for a developer, reliability and distance. Then what is, for us, an important thing is that should times change, that the efficiency of our new factory is such that we can always compete on a cost leadership basis. So that means that -- and that's why I'm saying it's probably more because we -- the aim here and the planning is that we should be able to really take significant fluctuations in the price levels because of volatility without coming into the dangerous zones for the margin. How much is that? It's simply too early because we need to now learn and see how much of a buffer that we think is in there, is actually materializing into efficiency gains. But that's an important one in our target setting internally. Is that helpful?

Yes, that's helpful.

Mark Baker here. I'm a bit puzzled about 2026 and particularly by an addition to your long-term growth projects, whereby you say talking about 2026, the adjusted EBITDA level of at least EUR 160 million. Once there is manufacturing at full capacity of expanded facilities that suggests that you believe you will not have sufficient volume to deliver upon that. During the presentation, you also stated today ,we can't expect to write more contracts or more deals and also for '26, but you also mentioned particularly strong pipeline for '27-'28 and that doesn't mention '26. So should we expect some kind of dip in '26?

No, because then I think you would also see a different guidance on the EBITDA, I guess.

But you have to make some kind of condition you wrote in your press release.

No, what we said is -- and we said that also, I think during the -- already said that during the Capital Markets Day, that the ramp-up of the new factory is not done in a very steep line. It's a gradual improvement because -- meaning that also '25 we guide and we say our order book is full. That does not necessarily mean that it's full to the theoretical capacity of the complete capacity, but it's full compared to what we believe is the right load of a factory that is new and still in a ramp-up phase. And what we refer to is exactly that, is that we're saying, okay, by '26, then the whole thing is ramped up and has a certain expected output that we -- and that is then matching with the order book that we then expect to have. So we ramp up and the order book will match that exact ramp-up. That's what we're saying. And then the question coming back to Tijs' point, how much more could we then effectively or eventually take remains to be seen, but that's something that. We also work on. So it's a minimum, what we're saying is this EUR 160 million is achievable, given exactly this planning. But if we can do more, we'll do more. And then sorry, and then coming back to '27-'28. That's what I tried to explain earlier little bit as well is that we -- due to all the turmoil over the last few years, we -- and we've shown that also in our prognosis in the market, you see this multiplier of increased output needed has come down and that is translated in less input volume for '25-'26 in the market in general, still a lot, but less than 2 years ago expected. And that wave has been postponed for 2 years and is now really -- you see that for '27-'28, with pretty concrete projects. Like I might refer the North Sea list, now the CfD 6 and 7, that will come soon as well, et cetera, et cetera.

That was my additional question. It seems that for 2026, you're pretty dependent on the outcome of the CfD 6 in the U.K.

That's an important one for sure. It's not the only one, but it's an important one.

Okay. Then secondly, you mentioned that your Korean partner, GS Entec has made final investment decision. It's USD 270 million. That's substantially lower than what you have done. So also presume that the output they will have -- will also be lower than what you have, but you also mentioned that you assist them in the factory design. Do you receive an additional fee for that? Or that's all included in the first fee you already had?

That's included in the fee we had. We have to do something for that fee. That is actually helping them in the design. It's their responsibility, but we support and assist with our knowledge. And coming back to your point of the EUR 270 million, indeed, the output will be substantially lower. And it's a mix of using existing facility and a mix of using all technology with new technology that we also have implemented now in Maasvlakte.

And how much output capacity will they have?

Yes, I think that's for them to disclose. If you would calculate with something like half, you wouldn't be far off.

Jeremy Kincaid from Van Lanschot Kempen. Could you just talk about the cancellation fees that came in this year obviously from Empire Wind 2. Does that -- is that all of the cancellation fees from that project? Or can we expect more in the future?

No. Right now, this is -- also the cancellation has been fully settled. Also the agreement regarding Empire 2, and everything is reflected in the results by end of June. So nothing more to come.

So there are no other projects that we could expect cancellation fees from '25 over '26?

Hopefully not.

Hopefully not. No, and if then that would be there because all the contracts have these cancellation clauses in them. I think one important point to remember here is that part of the whole settlement is the significantly pulling forward of the Baltyk 2, 3 projects. So that our pipeline nicely sequenced filled up. So that's part -- and that is also reflected in the high of the fee.

And then also on the license agreement with the South Koreans, is there a possibility to expand the licensing to other partners across the globe? Or is it just this 1 partner?

We're not having any concrete negotiation going on in that respect. But -- and the globe isn't that big that can go on for eternity in this. But yes, if we see an opportunity and it fits our, the model and the logic, then we will consider it.

Andre Mulder from Kepler. First question. You released some details on production and kilotons. You didn't for '24, are the metrics about in line with what you produce in H1? So you produce 86, so 79 for the second half split is in line with what you did in terms of NPEs and TPs for the second half?

It will be about the same.

I think in the past, you did mention kilotons for '25 and '26. Sorry, I can't recall.

In the Capital Markets Day presentation, yes. What I can say we cannot give the exact number. But in terms of trend, what I can mention already for 2025 that in terms of tonnage, it will be lower compared to the number that we mentioned in the Capital Markets Day. That's the current expectation. And this will be offset by more like higher margin per kilogram. And we would like to move away also from the tonnage because in the end, it's more about throughput in the new factory, also what we discussed in the last meeting. So basically, we're looking certain projects what is the throughput time in the new factory and also based on that, you do your pricing also to the customer. And it can be the case that you have certain monopiles, which do not have a lot of weight, not have a lot of volume, but in terms of throughput type, it's quite complicated to manufacture. Then it needs to be absorbed by a higher margin per tonnage.

Any numbers you can mention on '26?

Numbers on what?

On NPEs and TPs?

What we guided for is about 200 a year. And I think give or take, that will be something what we do. It's too early to say because we are still discussing. If I quickly add up by heart, I wouldn't be far off with saying something close to 200.

The Equinor product in the U.S.? What was the...

Empire Wind 1?

No, you said another one.

By heart, I may be slightly on Mid-Atlantic, something, I guess.

Is this sort of automatic going to you?

No, nothing is coming automatic to us.

Okay. They decide...

Well, they have won the concession for that plot. Now they need to develop a business case for a wind farm. So it's first having the concession, but then it still need to get the permits and the application rights for building actually a wind farm there. So that's -- but it's always good when the concession price is relatively okay.

Okay. But when it's going to be MPs, it will go automatically to...

They will not go automatically, but they will -- we will be the first to talk. As part of the deal.

Right off first, something. You mentioned about pricing. You said it's going to be about stable in the next few years. Is that the right conclusion?

It's not stable, but we do not see big issues in the price discussion. So as Ben said, we are -- and customers know this. We calculate based on contribution per -- basically, per production week. That's why we say this is what we need. And then, of course, there's the commercial trade-off, okay, how do we compared to our competition, how are we positioned in the competition discussion end game. And we try to squeeze as much as possible if possible, of course.

You would expect that the shortages will increase with capacity about stable and more in the market in terms of demand. The shortages will likely increase, which could have a positive effect on pricing?

And then you would -- true, but then remember what we said before on this, you have to always bear in mind the alternative of jackets. For example, to be built the alternative of Chinese imports that we need to consider because Chinese is not -- Chinese products are not necessarily cheaper, given the combination of transport and manufacturing, but everything else is limited.

Any signals to that, that it's increasing?

The prices?

Stuff coming from China?

No, it's basically on the same level, but they are, a, I would say, a respected party in the meantime, one of the alternatives to the European suppliers.

What's your reaction to Sumitomo taking a stake in the Dillinger?

We are -- I think this is a very good development. Sumitomo is taking a stake in the Rostock EW facility. We need healthy and professional competitors. Now EW, having a strong financial partner in-house will help them also invest and make sure that they can keep their market position in this field, and that's what we need.

And last question. You mentioned, of course, a number of players in the market. Have you seen any further changes since the last statement that you made in the previous analyst meeting?

Well, it seems that the Baltyk steel construction setup in SBR is not really moving on. We have heard some rumors as if they are now considering a setup in the U.K. Let's see what happens there. We do know that Haizea has successfully started up production, but we'll have the limited numbers as expected. We are getting still not a good feel of what Sif win in Linde is planning to do with the former plot facility for monopile over there, they're strong in , but there seems to be some troubles there. And we do see SEIA a steadily working on ramping up their new build in the U.K. It looks like they have a little bit more delay but they will succeed over there.

And AW U.S. plant is still off?

The U.S. plant is still off, yes. And then the other one is Cuxhaven as you probably know, Titan has announced that have taken FID over there to revamp the Cuxhaven facility. But nothing more -- we don't know nothing more than this on that. But again, our -- as we did before, we constantly map all these newcomers and plot the maximum capacity when they are successful, and then still we see this mismatch.

Mark Baker, the initial question regarding the fee you obtained for the Empire Wind 2 cancellation. That should have resulted when you produce it by some 174 tons, if I'm right. Yourself mentioned that you earned some EUR 300 per ton, so that should -- could have resulted in a contribution of some EUR 50 million?

Can you repeat your calculations?

You mentioned that obviously, you mentioned that you earned EUR 300 per ton in your press release.

Yes. On total.

Okay. This is not included the activities.

Yes.

Okay. Then it should be less. But still, if I look at the contribution you obtained from Empire Wind compared to what it could be, it's much lower. It's been canceled roughly a year prior to production date. Is there a fair assumption that such a cancellation fee should be some 50% of what it should have resulted in when you would produce it?

I think on this one also and also what we discussed before, so regarding the high of the cancellation fees, what we discussed is more like the trend. So the closer you get to production, the higher it's going to be. The except amounts or the percentages, we cannot disclose also based on the confidentiality agreements we have. And secondly, also because of competitive information, we cannot give that information. So it's more like -- it will be the high-level remark that the closer you get to production date, the higher amounts to be able to fully offset you or compensate you for the loss in income.

And bearing in mind, I said, to give it again, the fact that if you can trade off with other projects and reschedule them, that has an impact on the actual high, of course. And that's why I think with Equinor having a portfolio of projects that makes it for them and us easier to look at a fair.

I think exactly what you're saying in the overall settlement package also with Equinor, and I think we're happy with Equinor and also, they are a good partner for Sif and also in terms of the settlement, it's not only the cancellation fee, but it's also indeed thinking about how can we reshuffle the portfolio and make sure that the factory is fully booked also in the first year after full ramp-up 2025.

Yes, I still got another follow-up on the trade working capital next year. Is there, let's say, a hard schedule, so hard agreements on the repayment of that? It's other than bank facilities or...

Do you mean the advanced factory payments? Or do you mean the perpetual?

Yes, the advanced factory payment?

So regarding the advanced factory payments, it's more -- it's related to projects. What it will do more like the last payment of the project, it will be set up against these last payments. So the advanced factory payments are related to the Empire project. It's related to the Ecowende projects.

So the last and final is almost, it will offset against the...

Exactly.

So you don't get cash in.

Yes.

Yes, but -- and it is not a cash outflow then. It's not that you see in your creditors EUR 100 million cash outflow spread over the quarter?

But less money will come in. If you would not have the advanced factory payments, normally, this money would have come in, in 2025. But now we have received the money already in 2023.

Yes. So you will only see, let's say, if you don't know the history, a thin cash flow on high EBITDA levels?

Exactly. For next year, indeed, your cash conversion compared to the EBITDA level, it will be at a lower level next year.

Okay. And it is not an actual cash outflow because That already happened. And then on top of that, you have your normal trade working capital cycles which is a bit unpredictable. So therefore, for me, it's important to fully understand...

And in production, of course, indeed, we still have also on a project by project basis that the cash flow will always be positive. That means a very strict criteria that first money needs to come in before we go in to pay, for example, the steel suppliers.

Yes. This indeed is a policy of Sif. It will always be negative, but there can be swings.

I'm Andre from Kepler. Two additional questions. Firstly, you said you were on schedule and within budget. I think staff was one of the more difficult points there. Where are you? Have you already reached these harder levels? Or when do you want to get there? The second question, I'll keep it before you give an answer there.

Again? First answering the staff, okay. I'll do the staff and then the other one, it looks like it's for Ben. A lot of people coming online now. No, thanks for asking, Andre, because we didn't mention it -- oh, we did mention it. But yes, we are just above levels actually of staff coming in. And we do also the pipeline is filled up nicely for the ramp-up that we still need for the second and the third shift. And we are at the moment at roughly 80, 85 people that have come in for the factory, including white and blue collar. And in training or already past training.

And how many do you need?

In the end, when we have a full ramp-up, we need 100 more over a year period or so.

Okay. No, it's about this -- the statement that you've sold out production in '25 and the EBITDA of EUR 135 million. The question is, where can it go wrong? Where are the blocks of uncertainty that you can stay to the market? So this is this and this is that, so what's the kind of degree then you could still undershoot the EUR 135 million?

Yes. I think on this one, if I just talk you through the P&L conceptually. 2025, basically just fully booked. So until the level of contribution margin, you can do exact calculations also based on the precalculations, what will be the outcome of these projects, for example. And then all of you also know if certain raw materials are fluctuating, for example, steel prices, we have a mechanism in place that we're being fully offset. So contribution margin pretty accurately, you can calculate what will be the outcome. Then if you look at the next big item in the P&L is direct personnel expenses. We know for next year how much staff we need, what the occupation of the new plant, the production lines, how many people do we need. We also know the direct cost per FTE. We also have certainty at the moment on the collective labor agreement, what the increase is going to be. So also this part, you can do a pretty accurate calculation. Then subsequently, you have the production and general manufacturing cost, maintenance, utilities, also with the utilities. We know what the increase in electricity is going to be at the Maasvlakte. We know what the price is going to be. You can make a pretty decent calculation. Maintenance. Also, you have rule of thumb also with a new factory, how much money you roughly need can also make a pretty good estimate. Then regarding the indirect expenses, what we have factored in is selective increases in certain departments to facilitate this growth, and we have already started that. So it's based on assumptions more in terms of also indirect head count, how many additional heads do you need. And then doing all this calculation with the contribution margin basically locked in direct labor cost, you can make a pretty good estimate. You have -- also you can make decent assumptions also regarding interest expenses. What are you going to do with the various support departments. Then bottom line, you come to the calculation that we reconfirm the EUR 135 million.

I think one element you didn't mention, but what is important and is an important risk although a lot smaller now is that we don't reach the efficiency as we have estimated for of the plant. So if the output isn't there, then we are in s*** because then the projects are very firm. So what you don't want is running into a liquidating damage risk. That is the biggest risk, adding on to this. But we have knocked off a substantial part of that risk given the fact that in this month, we actually succeeded in getting the lines technically working. Now from technical working, it has to be efficiency and the repeat factor in software systems that has to work all these things. The biggest challenge in the setup now is software, not challenge but work to be done, aligning all the software, the connections between the systems, the connections between the planning, the ERP system, what have you. That is if you would look into our factory today, you would see a lot of laptops and people sitting behind laptops doing all these settings, which is logic because there's a next step now.

Would you dare to give sort of percentage of likelihood going to reach the EUR 135 million...

3% to 4%. No, no, I don't know.

I would say right now, more likely than not, can I use that phrase in terms of percentage? No. More like -- you said, sitting over here. We know the order book is filled. We know the underlying details. And again, we reconfirmed the EUR 135 million, and we will not do that. If there's doubt, significant doubt and we cannot realize.

Those will be higher than EUR 135 million?

It will be substantially above 75%, likely that we will achieve it.

Sama again, ABN AMRO. I have a more general question with regards to what feedback we get a lot of investors is they are, of course, more concerned about the Chinese presence and the extent of penetration that they do with regards to the bigger sizes that they have. Do you see something moving around in the market, you won't equal footing as compared to the Chinese players, we've seen in the EV market immediate tariffs coming in. And today, there was a news that it has an impact on the sales already. Do you see something moving in that front already?

Amongst others. I think one of the others is, for example, if Chinese parties like -- I mean there's a lot of in the news about Mingyang, the turbine builder. I think 2 comments to that one. First is, okay, if they would invest in Europe, how is this investment build up? Is it subsidy? And question mark we all have, I think, is and how do you figure out whether it's in fair or a fair investment. But they did the same with EVs. And I think the solar and with towers. The second one on that is the reliability during the operation and maintenance of these Chinese products, especially turbines coming to the market because developers and especially the utilities, actually, they need 30 years guaranteed support in the operation, during the operation and how will -- who can predict how the economic or geopolitical situation will develop over the coming 30 years with that respect. So there's a lot of hesitation with developers to step into this. On our products, like I said before, in the end, it's always risk versus distance, which is the big dominator in all our discussions with developers. Yes, if we need to go to China, we will. But because we're forced to since you cannot -- we cannot deliver. And especially for the North Sea projects, U.K. and the western part of Europe, the competitive edge we have on our location and the reliability factor we've built up over the years is a very key -- very strong asset. Very strong asset. And I think for that, I think I can only advise you talk to developers on this because that's where you get the message on how they look at this risk versus price elements.

Quality is not an issue anymore?

Quality for us has never been an issue.

example?

The Chinese, you mean? It's a matter of sending a lot of inspectors. From a cost perspective, you have to send inspectors. Constantly be there in the factory, sit on top of them and watch it. Let's see, I mean, I'm not going to give any reflection on that, but we do see pictures and we get the messages. But that's something to be figured out. I'm pretty sure that nobody will deliver a bad quality as long as you sit on top of it. I guess, repair cost may be a little bit higher, but in the end, they have a working solution.

Dealing to that. RWE has ordered Chinese turbines of about 18.5 for an Asian project, but are also keen to start or use those turbines in Europe. Will European monopile manufacturers to be able to produce the required monopiles for these turbines?

Depending on where they are put. But if I mean our calculations show that a 11-meter monopile can support 22-megawatt turbine in the North Sea. Would you go and in the Baltyk as well? Would you go to the East Coast of the U.S., the Chinese turbine cannot take likely. I think you'll see a different diameter. I think the other element here is, yes, RWE is considering and is doing this and others are as well. But we haven't touched on that yet. But the big problem we see at the moment in the turbine market is the problems with Haliade, the blades, Dogger Bank and Vineyard, which gives a bit concern to the industry how reliable is the Haliade platform and then basically coming to the conclusion that you have a choice between Vestas and Siemens Gamesa, that's it. And that doesn't feel good. And that isn't good, of course. So there's also a bit of a pressurizing factor here on Vestas and Siemens Gamesa to be realistic in the price setting in the terms and conditions because otherwise, the Chinese will come in and on GE to really solve the problem.

A final follow-up from me, Jeremy Kincaid. Just with regards to the CfD round in the U.K., to be successful there, you obviously need successful bids and awards, but do you also need certain developers to win over other developers?

Correct. We need certain developers to actually -- no, no, it's -- no, sorry, it's I think for us, more less risky, it's certain projects to actually be awarded in the -- by the CfD, what is it, authorities or whatever you call it, to win the project.

Okay. So it's the project that's more important, not the developer?

Yes. And again, it's not the only thing we have.

2 Question and stupid one.

Only stupid answer, not stupid questions. .

The factory that's beautiful. But could you give a color if any of your peer has a comparable factory with this level of automation or you're the best in class?

For sure, we are the best in class.

And that also includes the Chinese?

Yes. Definitely. .

So that's with KPI to...

Without knowing all details, I mean -- and I think with a lot of respect to our competitors because they are giving us a hard time in the commercial discussions. Let's be fair on that. But the approach, the difference between the past also with Sif and what we have built here is that we really build it from a process logistical optimization perspective, making use of automotive sort of technology and systems that are new to this industry, but are not new to the industry in general. And what we've seen so far with all of our peers is that they have really built on and added on to the existing technology, and proven technology from the past. We've included proven technology from other industries and concepts. And that should be the difference and the game changer. And I think why -- and mainly, first of all, from a risk mitigation perspective on quality, we do believe that the more you can control your quality and your tolerance is the better the product is in the end also on the bottom line of our P&L. And secondly, to be prepared that if and when the market does turn around, that we can really still make money with -- because we have a cost leadership position. We're not that far yet because otherwise, our customers will also ask, hey, you're cost leader, so you can chip off money from the top line. But there, we have also been open to our customers. Hey,we need to earn this back in 3, 4 years because this discussion on bigger turbines is still hanging on above the market.

On CFD 6, do you have any insights in how many gigawatts are concerned and possibly a split between fixed and floating?

You'll hear everything. Initially, it was something like 7 to 8 gigawatts, then it went down to 2 to 3, and the latest is something like 4, 5 on bottom fix offshore. But now bottom fixed offshore and then there is a certain portion for floating and certain portion for onshore. But it's quite complex because there's also the reauctioning of certain CfD 4 projects, extension of CfD 4 projects that can be built in. So it's a mix of quite a few things, yes. Let's see. Next month, we'll know a lot more. Any more questions? Any questions from the teams?

If you can elaborate more on your maximum production capacity for the new build, especially what production you're looking at in 2025 in kilotons?

Yes, we can elaborate a lot, but not on kilotons, and I think we have to repeat what we already communicated.

Roughly 180 monopiles, 100 transition pieces. And in terms of volume what we also indicated, they can also have a look at the Capital Markets Day presentation in terms of tonnage that we expect to come in at the lower level compared to the Capital Markets Day presentation, but this is being offset by higher margins per ton as just discussed.

And I think we haven't touched on that yet and also not in our presentation, but we have a pretty steady order book and deliver -- and production over the coming years on the OSS offshore Steel Structure, so the pin piles structural lags coming from Roermond, which I think you have to -- or can also build in your calculations. No further questions. Well, then I think I have to thank you again for a very good meeting. A lot of good questions. Hopefully also answers that help you a little bit. And then we look forward to seeing you again next year or in between for a visit to the premises. You're more than welcome to see what steps we've taken let's say, somewhere in November, December, you're more than welcome. Now we're quite busy with laptops, as I just said, in equipment. But please, come over. Thank you very much.