Third quarter 2017 - Vestas

1 Third quarter 2017 Vestas Wind Systems A/SCopenhagen, 9 November 2017 Classification: PublicDisclaimer and cautionary statement9 November, 2017 Third quarter 2017 (Public)2 Thisdocumentcontainsforward-lookingstate mentsconcerningVestas financialcondition,resultsofoperationsan dbusiness. Allstatementsotherthanstatementsofhistor icalfactare,ormaybedeemedtobe,forward-lo okingstatements. Forward-lookingstatementsarestatementsof futureexpectationsthatarebasedonmanageme nt scurrentexpectationsandassumptionsandinv olveknownandunknownrisksanduncertainties thatcouldcauseactualresults,performance, oreventsto differmateriallyfromthoseexpressedorimpl iedin ,amongotherthings,statementsconcerningVe stas potentialexposuretomarketrisksandstateme ntsexpressingmanagement sexpectations,beliefs,estimates,forecast s,projectionsandassumptions. A numberoffactorsthataffectVestas futureoperationsandcouldcauseVestas resultstodiffermateriallyfromthoseexpres sedintheforward-lookingstatementsinclude dinthisdocument,include(withoutlimitatio n): (a)changesindemandforVestas products; (b)currencyandinterestratefluctuations; (c)lossofmarketshareandindustrycompetiti on;(d)environmentalandphysicalrisks,incl udingadverseweatherconditions; (e)legislative,fiscal,andregulatorydevel opments,includingchangesintaxoraccountin gpolicies; (f)economicandfinancialmarketconditionsi nvariouscountriesandregions; (g)politicalrisks,includingtherisksofexp ropriationandrenegotiationofthetermsofco ntractswithgovernmentalentities,anddelay soradvancementsintheapprovalofprojects; (h)abilitytoenforcepatents; (i) productdevelopmentrisks; (j)costofcommodities; (k)customercreditrisks; (l)supplyofcomponents; and(m)customercreateddelaysaffectingprod uctinstallation, Unduerelianceshouldnotbeplacedonforward- lookingstatements.

2 Additionalfactorsthatmayaffectfutureresu ltsarecontainedinVestas annualreportfortheyearended31 December2016( ) Vestasdoesnotundertakeanyobligationtopub liclyupdateorreviseanyforward-lookingsta tementasa resultofnewinformationorfutureeventsothe rthanasrequiredbyDanishlaw. Inlightoftheserisks,resultscoulddifferma teriallyfromthosestated,impliedorinferre dfromtheforward-lookingstatementscontain edin highlightsSolid performance in Q39 November, 20173 Increased order intakeOrder intake in the quarter reached 2,615 MW up 48 percent compared to Q3 2016 Revenue of EUR 2,743mRevenue 9M 2017 of EUR 6,834m on par with 2016 EBIT of EUR 355mEBIT decreased 18 percent compared to Q3 2016 Service revenue continues to increaseRevenue increased 18 percent with an EBIT margin of percentFree cash flow reached EUR 193mFree cash flow improved 25 percent year-on-yearOutlook 2017 Guidance for 2017 adjusted mainly based on visibility for the remainder of the year Third quarter 2017 (Public)9 November, 20174 Third quarter 2017 (Public)Agenda9 November, and and questions & answersQ3 Interim financial report, Third quarter 2017 Third quarter 2017 (Public)

3 The wind power industry continues to evolve9 November, 20175 Market is transitioning quickly to more competitive tenders and auction systemsEU introducing auctions and discussing electricity market better adapted for First two of three total auctions in Germany in 2017 with high shares of citizen wind with longer realisationtimes, resulted in stricter rules for the first two rounds in 2018 Auction expected in France in Q4 2017 And positive signals in MEA Steady growth and continued commitment, but coming from a low base 400 MW wind auction launched in Saudi Arabia results expected in early 2018 EMEAAsia PacificAmericasPTC timing in Strong US demand driven by current PTC structure and competitiveness of wind Proposed House Tax legislation creating uncertaintyAnd several auctions coming up in Latin America Auctions expected in Brazil and Mexico for Q4 Auctions recently completed in Bolivia and Chile Colombia expected to announce an auction in 2018 Continued commitment in 13th5-year plan wind target of 210 GW cumulative installations by 2020 Curtailment being addressed in some marketsIndia is Target of 60 GW by 2022 remains in place First auctions executed and three more expected before end of February 2018, although delays creating uncertaintyAnd broader Asia Pacific region on the move Renewable targets in most markets Auction expected in Australia in Q1 2018 Asia PacificAs the market continues its transformation and as competition accelerates.

4 Vestas maintains its global leadership remains committed to its strategy, and continues to lower the cost of energy and optimiseproducts and service Q3 order intakeOrder intake at 2,615 MW, with an average selling price of EUR per MW in the quarter9 November, 20176 Order intakeMWQ42016Q320174,532Q220171,769Q320 16+8462,615Q120172,6672,049 Average selling price of order intakemEUR per Q3 2017 order intake was 846 MW higher than in Q3 2016, an increase of 48 percent Mexico, USA, France, and UK were the main contributors to order intake in Q3 2017 , accounting for approximately 60 percentKey highlights: Price per MW in Q3 negatively impacted by highly competitive markets,leading to price pressure Notwithstanding the competitive markets, price per MW depends on a variety of factors, wind turbine type, geography, scope, and uniqueness of the offeringKey highlights : Third quarter 2017 (Public)Strong order intakeOrder intake 9M 2017 increased 23 percent compared to 9M 2016, mainly driven by developing markets9 November, 201773409M9M3,3023,4351,0972,7992,3209M+ 48%+223%-15%20162017 AmericasMWEMEAMWAsia PacificMW Increase primarily driven by strong order intake in USA, Mexico, and Argentina Strong order intake across Europe,primarily driven by Germany and Sweden Increased order intake in France, UK, and Denmarkpartly offsetting decline from 1 GW Statkraftorderin Q1 2016 Strong development in China, India, and Thailand Also good order intake in Australia, Mongolia, and South KoreaThird quarter 2017 (Public)

5 Regional delivery splitQ3 deliveries down 14 percent, mainly driven by the Americas9 November, 201781405049092314051,7339M1,0259M-20%Q3 2,676-41%Q31,148+65%-17%Q3+26%-1%2,6512, 7359M3,30720172016 AmericasMWEMEAMWAsia PacificMW Solid US market deliveries, albeit at a lower level Good activity in Brazil and Canada Strong development in Germany and France,driving increase in Q3 Increased deliveries in UK compensating for 9M drops in South Africa and Sweden Positive development in other Asia Pacific markets such as Mongolia, South Korea, andJapan in Q3 China and India remainfairly stableThird quarter 2017 (Public)* Compared to Q2 backlog remains at a high levelCombined backlog of more than EUR 20bn9 November, 20179 Wind turbines:EUR :EUR ( )bn* Third quarter 2017 (Public)EUR + *JV continues positive developmentFirm and unconditional order for the 252 MW Deutsche Buchtproject announced 9 November, 201710 Near-term project execution Final installation of Rampion (UK) and Blyth (UK).

6 The last MW turbine installed in record low time, showing the great learning curve of the installation teams Announcementof the 252 MW Deutsche Buchtprojectas firm and unconditional Preferred supplier announcement of the 860 MW Triton Knoll (UK) and950 MW Moray East* (UK) projects ( MW turbine)WalneyExtension (UK)330 MWProjects currently in progressThird quarter 2017 (Public)BorkumRiffgrund (DE)450 MW~ GWAnnounced conditional & preferred supplier agreements*~ GWAnnounced FOI*Since JV Bay (UK) MWKey highlights* As at 9 November 2017 * Announced in Q4 20179 November, 201711 Third quarter 2017 (Public)Agenda9 November, and and questions & answersInterim financial report, Third quarter 2017Q3 Third quarter 2017 (Public)12 Income statementLower activity in Q3 resulting in weaker marginsmEURQ3 2017Q3 2016% changeRevenue2,7432,903(6)%Production costs(2,217)(2,312)4%Gross profit526591(11)%SG&A costs*(171)(158)(8)%EBIT355433(18)%Incom e from investments in associates and joint ventures(18)(20)10%Net profit253309(18)%Gross ( )%-ptsEBITDA ( )%-ptsEBIT ( )%-pts9 November, 2017 Revenuedecreased6 percent, primarily driven by Power solutions segment; partlyoffset by higherrevenuein Service Gross profit down by percentage points, mainly driven by decreased volumes and lower average margins in the Power solution segment EBIT down by 18 percent, mainly driven by lower gross profitKey highlights:* R&D, administration, and distribution.

7 * R&D, administration, and distribution on trailing 12 months costsSG&A costs continue to be under control, providing leverage YoY9 November, ( ) % (TTM)*mEURand percent of revenue SG&A costs slightly down YoY Relative to activity levels, SG&A costs amounted to percent a decrease of percentage points compared to Q3 2016 Relative to activity levels, SG&A costs saw an increase of percentage pointscompared to Q2 2017 , primarily driven by distribution costsand lower revenueKey highlights: Third quarter 2017 (Public)14 ServiceStrong service performance driven by high activity levels9 November, 2017369372312368371+18%Q32017Q32016Q4201 6Q12017Q22017 Service revenue increased by 18 percentcompared to Q3 2016, mainly driven by higher activity levels Q3 2017 EBIT: EUR 66m Q3 2017 EBIT margin: percent Service order backlog growth of EUR compared to Q2 2017 Service revenuemEURKey highlights: Third quarter 2017 (Public)15 Balance sheetBalance sheet remains strong9 November, 2017 Assets (mEUR)Q3 2017Q3 2016 Abs.

8 Change% changeNon-current assets2,7782,5572219%Current assets7,7846,7801,00415%Total assets10,5629,3371,22513%Liabilities (mEUR)Equity3,1633,073903%Non-current liabilities1,11398612713%Current liabilities6,2865,2781,00819%Total equity and liabilities10,5629,3371,22513%Key figures (mEUR)Interest bearing position (net)2,6092,11649323%Net working capital(1,053)(787)(266)(34)%Solvency ratio (%) Net cash position increased to EUR 2,609m Positive net working capital development of EUR 266mKey highlights: Third quarter 2017 (Public)* Construction contracts in in net working capitalSatisfactory net working capital management despite impact from high activity levels9 November, 2017 (787)57 NWC endQ3 201628 Receiv-ables11(727)(306)InventoriesOther liabilitiesPre-paymentsPayables671 NWC endQ3 2017 CCP*(1,053)CCP*(1,053)(226)29 Pre-payments22 Other liabilities(11)Payables(29)NWC endQ3 2017 Inventories387 NWC endQ2 2017 (1,225)Receiv-ablesNWC change over the last 3 monthsmEURNWC change over the last 12 monthsmEUR Improvementdriven by prepayments, and tradepayablesmainlyoffset by higherinventoryKey highlights: Net workingcapitalincreasedby EUR 172min Q3, due to higheractivitylevels Development mainlydriven by timing of receivablesand tradepayablesKey highlights.

9 Third quarter 2017 (Public)0123456 Dec 2014 Dec 2013 Dec 2015 Dec 2010 Dec 2012 Dec 2011 Dec 2016 Dec 2009 Sep 201717 Warranty provisions and Lost Production FactorWarranty consumption and LPF continue at a low level9 November, 2017413510052543623262741Q32017Q42016Q32 016Q22017Q12017 Provisions madeProvisions consumedLost Production Factor (LPF)PercentWarranty provisions made and consumedmEUR Warranty consumption increased, in line with past provisions made Warranty provisions made correlates with revenue in the quarter , corresponding to under 2 percent in Q3 2017 Key highlights: LPF continues at a low level below LPF measures potential energy production not captured by Vestas wind turbinesKey highlights: Third quarter 2017 (Public)18 Cash flow statementSolid underlying cash generation from operating activities; positive NWC developmentmEURQ3 2017Q3 2016 Abs. changeCash flow from operating activities before change in net working capital493563(70)Change in net working capital*(173)(295)122 Cash flow from operating activities32026852 Cash flow from investing activities*(127)(113)(14)Free cash flow**19315538 Cash flow from financing activities(177)(122)(55)Net decrease in cash and cash equivalents1633(17)9 November, 2017 Free cash flow improvement of EUR 38m, driven by changes in working capital partly offset by lower earnings and higher investments Higher cash outflow from financing activities due to acquisition of treasury shares, as per the announced 2017 share buy-back programme More than 50 percent of the share buy-back completed, the largest in Vestas history* Change in net working capital in Q3 2017 impacted by non-cash adjustments and exchange rate adjustments with a total amount ofnet EUR (1)m.

10 ** Before investments in marketable securities and short-term financial highlights: Third quarter 2017 (Public)19 Total investmentsTotal investments in line with expectations9 November, 2017226127116918722+14(99)Q32016(12)Q220 17Q42016Q12017113Q32017 Other acquisitions and divestmentsCash flow from investing activitiesTotal investments*mEURKey highlights: Investments increased byEUR 14mcompared to Q3 2016, primarily driven by tangible blade investments* Before investments in marketable securities and short-term financial quarter 2017 (Public)20 Capital structureNet debt to EBITDA well below threshold; solvency ratio declined due to share buy-back9 November, 2017 ( )( )Q32016Q42016( )Q22017( )( )Q12017Q32017< debt to EBITDA, financial targetNet debt to EBITDA, last 12 ratio, financial target rangeSolvency ratioSolvency ratioPercentNet debt to EBITDAxEBITDA Net debt to EBITDA remains at low level of( ) in Q3 2017 Key highlights: Solvency ratio of percent in Q3 2017 Decrease driven by share buy-back programme Key highlights: Third quarter 2017 (Public)21 Return on invested capitalROIC at very high level of percent9 November, , last 12 months ROIC increased to percent in Q3 2017 ,an improvement of 290 percentage points compared to Q3 2016 Development primarily driven by lower net invested capital due to working capital elementsReturn on invested capital (ROIC)PercentKey highlights.