Cadeler A/S H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 25, 2025

There are 8 speakers on the call.

Operator

Good morning, and welcome to Cadila's twenty twenty four annual result report presentation. Presenting today are Miguel Girup, chief executive officer, and Peter Progard, chief financial officer. Please be reminded that the presenters' remarks today will include forward looking statements. Actual results may differ materially from those contemplated. The risks and uncertainties that could cause Cadila's results to differ materially from today's forward looking statements include those detailed in Cadila's annual report on form 20 f on file with the United States Securities and Exchange Commission.

Operator

Any forward looking statements made this morning are based on assumptions as of today, and Cadila undertakes no obligation to update these statements as a result of new information or future events. This morning's presentation includes both IFRS and certain non IFRS financial measures. A reconciliation of non IFRS financial measures to the nearest IFRS equivalent is provided in Cadila's annual report. The annual report and today's earning presentation are available on Cadler's website at cadler.com/investor. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session.

Operator

As a reminder, this call is being recorded today. If you have any objections, please disconnect at this time. Mikhail Glirap, you may begin.

Speaker 1

So good morning, good afternoon, and good evening, and thanks for listening in to our presentation, Daniel Report twenty twenty four. Very pleased to be joined by all of you and are looking forward to go through our annual results from 2024. So, that's a disclaimer. I would recommend everybody to read the disclaimer at a convenient time, but we will dive directly into the 2024 highlights for our catalog. So in 2024, we had very strong financial performance, and we believe that it was consistently strong through the year and that we were able to narrow the guidance that we had for 2024 in our q three presentation.

Speaker 1

And also as we have now shown in our final results that we are at the at the the upper end and actually above the upper end on the on the EBITDA. We also give a guidance for 2025 that shows that we are on our trajectory for the growth in 2025 and as such, I'm very pleased with that. In terms of our new builds, we have delivered windpeak in 2024 on time and on budget and we have also in this year in January 2025, we have delivered the first M Class vessel from Hanwha on time, on budget and are also at a point where we can say that we are on track to deliver the remaining vessels on or ahead of time target on budget. And we are, I would say, within hours from delivering the next vessel, which will really put us to 50% of the twenty twenty five deliveries completed. In terms of our backlog, we continue to build the backlog, and we will go more into that in the presentation itself, but we are now standing at a backlog of €2,500,000,000 as of today.

Speaker 1

We have also, in 2024, been executing our projects incredibly well, and we are highlighting just one project here where we are saying that we also included we installed successfully the sixty, fourteen point seven megawatts Siemens turbines on the Mori West project. The reason we highlight this is that this is the first project installation in the world for this platform from Siemens, a next generation turbine, and we did that with one of our O class vessels with its new crane. So very proud of that performance and the team behind that project as we are with all the projects that have been executed during 2024. Verso on balance sheet remains. We have refinanced the M Class facility on what we say is materially improved terms and we have increased our capacity on our unsecured hold core facility.

Speaker 1

And we have also extended our revolving credit capacity and raised equity to fund our third A Class order. So we are very, very pleased overall with the year, and we'll go more into the detail now. So on commercial highlights, I think that most of the people that are following the call know what we have been doing during the year, but we we have been installing on on on Demore West. As I said before, the first installation of the 14.7 megawatt platform, then followed up after the completion of that with O and M. We have also on Osprey, we have completed the Golbin and Baucom project for including a release of the vessel from the project to go and do an O and M for one of our clients on a different project, which is really something that is also important for the overall way we operate with our clients in the industry and show flexibility in the fleet.

Speaker 1

After that completion of the project, we also started to do O and M with the vessel together with one of our clients. Vanzilla, we started the year with with a big overhaul project of the vessel because we knew that she was going to The US, and hence, we wanted to ensure that the vessel was up to a very, very high standard before arriving in The US due to the complexity and doing any maintenance when we are over there and really preparing the vessel for a very strong performance on Oster's revolution wind project. On Saratan, we completed the Unlin project and also then started to do an O and M phase with the vessel and also pleased to say that we have also secured a significant portion of the year on Saratam for 2025 on continued O and M services. On Windpeak, delivered on time on budget, transited back to Europe and immediately after coming back to Europe started an O and M campaign for an undisclosed customer. And the windmaker, the first M class vessel from Korea delivered in January 25 on budget and then transiting to Singapore for mobilization of the project equipment and now in Taiwan ready to start her first project on time.

Speaker 1

So I think in in summary, really on time delivery of assets, on time delivery for projects, but also a lot of O and M work out there. If we look at the this slide is one we have shown before in connection with these presentations, and we will just see that these numbers are growing. So we have installed more. We have installed more foundations, more turbines. We have more vessels operational.

Speaker 1

We have fewer on order because we are starting to deliver, and we are growing the team not only, the the team in the office, but also the team of offshore crew that are taking delivery of these assets and ensuring smooth operation after having either been trained internally with Catler or had been been shipped from a Catler vessel to one of the new builds. So in general, we're very, very pleased with how we have also been able to build the team and continue to deliver for our clients. Kentler today is positioned in the worldwide map for offshore wind installation as the leading pure blade T and I company. We continue to work very closely with our clients and partners, and we believe that with the orders we made back in 2021, the merger we have completed the following orders, we are incredibly well positioned and are very, very pleased with the platform we have built. And together with our clients, we will continue to secure strong utilization on this platform and making sure that we can build as much renewable energy as possible.

Speaker 1

We are very much focusing on the European market. We will show a little bit later in the presentation how strong the European market remains, and we are seeing that the European market is continuing to be really the driver of offshore wind in the world, and this is also where our cattle has been focusing most of its efforts. The Asia Pacific market is also very busy, and we do see that for us, the market really consists of Taiwan, Japan, Korea as the key markets with development in Australia as well and other countries that are also building, what could at some point in time become a pipeline. Asia, for us, is a market that is today strong enough to have an asset in the market and to ensure a pipeline of projects, and that is really what we have said all along that when there's a market that is strong enough to build up a pipeline, then KETLA will be there with a capable vessel to support our clients. The North American market has, of course, received a lot of attention since the American election in November 2024.

Speaker 1

And I would say that we, we remain, of the same view as we have had all along. This is a decision that was made pre COVID where we said that we are taking a cautious approach to The US market. We take a project by project approach where we need to see that the project in its own right can can basically support itself both in terms and conditions, financials, and also overall engagement with our clients. So there are political headwinds in the market, but I think that in the short term, the market remains attractive for Catalan. We have documented that by also having the next new build that is delivering, heading straight straight into The US market to work.

Speaker 1

And that marks our third contract in The US market, and really the third project we will work on in The US market, and where we believe that we have a very strong cover on terms and conditions and also very, very sound financials on the projects. We remain having a relationship with Dominion Energy that we support, and, of course, we'll continue to do that for their benefit as well. In the South American market, we are building relationships because we do believe that the South American market has some fundamentals that are interesting. But, again, we we we are not jumping the gun or anything like that. We are remaining, let's say, as as an outside in view on the market, but but but building the necessary relationships to react should the market suddenly, have a pipeline of projects that need services like the ones that are offering to the market.

Speaker 1

In terms of, how we see the market at the moment and and and how the pipeline is growing, We do see, as I said before, that the European market is really the the the growth. We see an enormous amount of projects that are currently under discussion with our clients, everything from final stage tenders to final stage negotiations, open tenders and commercial discussions with clients, but really a lot of activity. And I will go as far as to say that we have probably never been as busy as we are in the European market. Asia is steady state, and we remain, of the same view as we had when we presented this a year ago that Asia will be able to form a pipeline of projects for for for at least one of the assets out there. In The US market, we are probably more active than than most would probably think, but there is, of course, an urgency at the moment in The US market to complete projects, and we are doing our utmost to support our clients and partners in that market to ensure that projects are completed as close to on time and on budget as possible, for them.

Speaker 1

But we do see, increasing demand in Asia as we expected that the region would ramp up in these years. Europe remains really as the driver of the offshore wind market globally and also an increasing, or let's say, continuing development in terms of longer term agreements with our clients and where we see, especially amongst the biggest of our clients that they are, to a greater extent, requesting long long term agreements. The backlog today stands at more than €2,500,000,000, and that is a growth of 47% since we did the the the annual report on 2023. I think what is worthwhile noting on the backlog today is that 94% of our backlog has a final investment decision, and and that is, of course, really what matters. We have talked about it before, that there is this period of time from selecting a project that we are working on to having a vessel reservation agreement, getting contract on that vessel restoration agreement, and then a final investment decision by the client.

Speaker 1

That is really the process that is important to follow and really to better the projects that are having the highest likelihood to reach that that final investment decision from its original development stage. And I think that our percentage of projects in the backlog with final investment decision is a testament to that, strategy at least and really being selective on which project we are working on. As we've said before, we are not including vessel restoration agreements in the contract backlog and they will be added when they have reached the maturity stage as we have discussed in the past. In addition, talking about, you know, what the what it is that we are we are adding to the backlog, we have added an on-site to Serratan, where we are starting. I actually think there's a mistake here.

Speaker 1

It says q four twenty five. That is not correct because we will be installing, for a last part of 2025 on, on, Saratane in the market, and and very happy to see that we continue to build strong O and M projects on. In terms of the the the O class and the P class, multiple wind farms, again, five O and M projects, and really looking into more and more O and M projects, filling out the white spaces between the installation projects. And on the Twin Pace, also an O and M project where we are seeing the B class needed for a project in The US and also securing utilization from its arrival back in European waters and until delivery to the first installation project. We also continue to have a strong development on vessel restoration agreements, and we continue to see a very strong demand for our services amongst our clients and also, especially as we have discussed before with our investors that the redundancy that we can offer to the clients, that is something that the clients continue to see as a benefit and something that they really want to explore more with us and different ways of offering the assets to maybe not only one project, to a range of projects rather.

Speaker 1

As I said, O and M, we do see the O and M space as a continued strengthening factor in the market with a bigger installed fleet of turbines out there. We see also that both the developers and the turbine OEMs, they are requesting our services to make sure that the turbines are continuing to spin out there and generate renewable energy to the people. And for us, we have tried to be as flexible as possible and to really ensure that the vessels, they are available to our clients for these services as much as possible. And we have just tried to show you here a snapshot of how we do it, where we are adding O and M campaigns in between the installation projects, which all in all ensures a very high utilization level on investments, and we will continue to see that going forward, but also an overall improved financial performance in the company along the lines of what we have discussed in the past where we are saying that we are in for very high utilization on our assets. We also celebrated the Wind PACE naming ceremony.

Speaker 1

This is the second vessel from, Costco, Chirong shipyard, and we were out there on the March 12 where we named the vessel. And and, again, a vessel that I would say, some of the lessons learned we had from WindPeak has been incorporated on WindPeak, and we see that the yacht continues with a very, very strong performance. We are ahead of schedule with the delivery of WindPeak. And as I said in the beginning, we are more hours away from delivering than we are days from delivering, and that is, of course, very, very positive. So strong performance from the yacht that deliver ahead of schedule, and we do see that also for the follow on deliveries from the Chinese shipyard.

Speaker 1

In terms of the next vessels that are coming from, from from Costco, Chidong, the wind ally has already been launched, has already been sailed out of the dry dock, and are being now outfitted alongside. We had the benefit when we were out for the pace naming ceremony. We could see ally as well. Just a few hundred meters down the same, yard. And, that is really important for us because the wind allies, the project the vessel that we go on, the Hornsea three project, and the long term agreement we have in our pipeline with us still.

Speaker 1

So it's really important that we are following the the building schedule there. And on Wheel Airline, we are significantly ahead of schedule already in terms of delivery. On Wednesdays, the second A class, we have also had the steel cutting ceremony, and we have some pictures from that, and the same for Windmover as well. If we look at the overall track, we are seeing that on WindAlly, we are at a very, very high completion rate at the moment, and we are looking to take the vessel on sea trials around the summer this year. On WindMove, also strong performance, we are set for delivery in Q4 at '25.

Speaker 1

And on the win days, we are looking still at q three twenty twenty six and q two twenty seven on win Apex. So overall, very strong performance on the on the new build program. And as I said, in a very, very short time, we have delivered 50% of the newbuilds in 2025, which, I believe is a very strong performance. And as we have shown you before, the fully delivered fleet, 11 vessels, consisting of a smaller unit that will focus mainly on the O and M segment, vessels that are focusing on turbine installation and vessels that are focusing on foundation installation. In terms of synergies, we are continuing to deliver on our synergies from the merger, and we are saying that we are approximately at 30% of the twenty twenty six targets, but the follow on synergies are really starting to materialize now with the new vessels being delivered.

Speaker 1

We continue to be optimistic and positive around delivering the synergies that we discussed already at the disclosure of the business combination agreement in June 23, and believe that the two entities now working as one will deliver these synergies. At this point in time, I will hand over to Peter for a deep dive on the financial results. So please go ahead, Peter.

Speaker 2

Yes. Thank you very much, Willy. This is key financial highlights for 'twenty four. You can see revenue doubled from 'twenty three to 'twenty four. SG ratio went a little bit down but still very solid balance sheet.

Speaker 2

The reason for it is, of course, that we are drawn down on our loans when we're getting the vessels delivered. Utilization was 83% adjusted. And now, Michel, I think it's for the first time, we saw both an adjusted and unadjusted utilization. And the utilization, which is adjusted, that is where we adjust for planned drydocking or fire and for transit from the yards in China and to Europe. So that gives a better number of what kind of utilization do we have on the vessels that we have operating.

Speaker 2

The reason why we see also a drop is that Saratine due to the Taiwan waters, they operate at a slightly lower utilization rate. But I think still a very good result with the Oakley's Oakley's Oakley's upgrades in Q1 'twenty four. Volume cap is $1,700,000,000 EBITDA, $126,000,000 tripling the level from 'twenty three, very satisfied, but also shows the scalability in our business that we are able to triple EBITDA while revenue with Stockbridge. Cash flow from operating activities started at $93,000,000 and as Emil said, backlog was $2,500,000,000 3 months daily. Average turnover is $6,800,000 in euro.

Speaker 2

I think what you cannot see from this slide with these financial numbers is that there's also quite an achievement on the SOX compliance side where we after one year of SOX compliance, we are are delivering an annual report without any material weaknesses or significant deficiencies in our interim control framework over the financial reporting. I think that is quite remarkable. For Q4, we saw revenue going significantly up. Please remember that we have in Q4 'twenty three where the O class crane or the O class vessels were out for crane upgrades. Hence, there was a lower revenue in 'twenty three on the fleet.

Speaker 2

And of course, this year, we have also full quarter. We have Cybertin and Scylla into the numbers. So we had a number of lessons. We had five as compared to four. But in 'twenty three, we only had nine days of legacy EMEA in the financials.

Speaker 2

EBITDA significantly up, 55,700,000.0 in a quarter, which is a solid number. We see SG and A costs also not significantly as compared to '23 because we also had some lot of recurring costs due to the merger with NALIC. But we see cost going up as we ramp up the organization. Full year again, EUR $249,000,000 as compared to EUR 109 full growth consolidation with the legacy inertial, and utilization rates 66% again, Q1 without the O class versus I think it's solid and also with the wing sales and vessel which carries a lower utilization rate than the weather. So also 83% adjusted is quite good.

Speaker 2

Cost of sales are, of course, increasing with the number of vessels. You can see that the vessel OpEx is more or less the same as last year. The vessel OpEx that we show here is without the project costs included. So with that, we have communicated several times that it's around $40,000 if we take also the project cost into the rubles per day. But to compare without that, it's more or less the same as last year.

Speaker 2

Income tax expense, it's a small number, 2.4 for the full year. It is now under UK electronics tax in The UK and the Danish Chinese tax regime in Denmark. So the fleet is covered by Chinese tax to a very large extent, but we are paying some taxes in the on the Taiwanese projects, and we have some different taxes being expensed on the Saratak, which is Japanese owned and on the Japanese corporate income tax. EBITDA, a solid improvement from $42,000,000 to $126,000,000. If we look at the outlook, we had hours in the market and from Q3, Revenue is in the middle of the race that we communicated to $243,000,000 to $253,000,000 and EBITDA in the or end of the race a little bit north of the operating of the EBITDA we had, of course, driven by the increased revenue.

Speaker 2

SG and A and other expenses, 55,000,000. We are continuously ramping up. A number of employees are going up in order to be able to have the support to drive, especially the foundation projects both for the the center for the foundation projects, but also on the execution of it. So we see costs coming in now, whereas revenue coming in, in 'fifty six and onwards. So that is an investment.

Speaker 2

Balance sheet continues to be very strong. Balance sheet that we have is not mentioned here, but goodwill is still €17,000,000 from the PPA. When we did the merger with Inelini, that means that we have not that that is closed now once for twelve months where you can adjust the the take over balances. And we didn't see any surprises in the in the balances that we took over from the event. So that is really also good news to be able to maintain that.

Speaker 2

So we we still have the €17,000,000 of goodwill. Non current assets, of course, going up with the additions of business and investment in the newbuilds. And equity goes up with the end of the year. We did a year ago and, and, with the result for the year. The payments program, now you can see that we closed the A Class financing.

Speaker 2

We did that last Friday, and that was with a €450,000,000 facility plus €70,000,000 in the in the missing equipment. So that is we possibly try to be on basis and improve the loans that we have with our lenders, and we agreed with the strong support that we have from lenders that we could pull in also financing of further missing improvement for the first project that the A class vessels are going into and also free delivery financing on on the, wind ace. So so at this similar price, we've got better terms and, the conditions. So now we have only outstanding the third A class versus with Apex. We expect to be able to to sign a bid for that for €240,000,000.

Speaker 2

And, the vessel is delivered in in '27, so it's it's really not meaningful for us to to bundle that with the A Class business and then secure that financing yet because we have then go to the commitment fees for a rather long time, and we are not concerned about getting financing for that. So we have shown this slide many times, but I think it's obvious that we have the funding in place, and it is committed. Most of it, we have the funding committed in place for the the Chemex program that we are looking into and then and even with significant surplus, we have 50% of the US dollar exposure. Last part of the remaining, installers through the YAS are in dollars, and we have 50% of that, I think, which has been beneficial for us. And with the recent weakening of the dollar, then the chemical program is actually newer now than it was at the December 31 when the news was stronger.

Speaker 2

But that is, of course, something that can be that goes up and down as the time passes. So net news is the A Class financing. We have utilized the A Class transfer when the labor was delivered in February, and we have requested the transfer for the wind pace, which is going to be delivered here in March. Thank you. This is the financing note you chose to come in at 1.9.

Speaker 2

We have utilized $5.86, but since we're anywhere where this discussion is from, we have now utilized the case, part of the P class facility and and half of the M class facility as well when when makeup was was getting off. Then the last slide is to the full year outlook for '25, and the the, you can see the address here, but the outlook is for revenue $4.85 to $5.25. And an EBITDA of $2.78 to $3.80. I think what is worse to notice is, of course, it will be impacted by timely investment deliveries. We have always delivery of two vessels, so mitigating some of that risk.

Speaker 2

Then it's sequence answering that being deployed, and we have signed a contract for that. And then there is, of course, some timing in a business like ours when we move from being your TCE business that is it's easy to to plug into an Excel sheet to become more project based, more foundations. So we would like to put the attention towards a couple of. None of we kind of items, I think, even though we had a very, very strong result for '24 with a detail of 126. Actually, we there were some project costs to the two of €2,000,000, I believe we pushed into '25.

Speaker 2

We have six six extra crew on the legacy, PetLab, and so you know, to train the crew for the new buildings, and that that will amount to €4,000,000 in the in

Speaker 1

the sorry?

Speaker 2

We didn't touch anything. Sorry. Sorry about that technical issues here. And in our end, and so so that amounts to €4,000,000. That is also another record.

Speaker 2

So there you have €6,000,000, you you could say, which is impacting year '25, but it's it's nonrecurring our investment in the future and then not really, you know, impact the business case. And then also, one of the last bullet point here is the revenue cost from from basin process started to be recognized by Moab. And by that, we we mean that some of the time t and I score on the one g three is already starting in '25. But as we have talked to many times, then the t and I, some of the t and i's scope that is not the the the the vessel. It's a crew itself had a lower margin.

Speaker 2

And then that starts in in in '25, and then then it comes in with a lower margin in '25, but it has nothing to do with the the the total profit of the project over the project period, but something that you should be aware of. And also, we have a as I said, we have ramped up the organization and continue to do that because we want to be able to to to develop this foundation business. So where we before have said we are around €60,000,000 in the SG and A. We will be around the €70,000,000 to €72,000,000 in SG and A going forward. So that means EBITDA in this range, which I think it's pretty good when you when you look at such a transformative year, you know, with four vessels being delivered and starting executing on the foundation projects.

Speaker 2

And back to you, Wolfgang.

Speaker 1

Thank you, Peter. And I think that we can definitely say that from our experience now that the annual report that is being delivered here is really a company performance with all the soft controls and all of that, but also really good to see that we are now starting to execute on our first foundation T and I project. And obviously, as Peter said, the bulk of the benefits comes when the vessel starts to install. This is where we see that these projects really start to be meaningful for catalog. But good to see that we are starting the projects and that we are on time on these projects and ready to really make really an impact on on that quartet as well and the follow on quartets.

Speaker 1

In terms of sustainability, also to bring your attention to that, that, of course, bring that is a very, very important point for catalog. Obviously, working in renewable energy being a pure play company in our industry, this remains really central to us. And we have in the period since we last reported, we have promoted our sustainability manager to chief sustainability and performance officer in the company and lifted her up to the senior leadership team. We are expanding the team because we do believe that there has a lot of benefits for us as a company in really being at the forefront of this curve and also working with our clients to continue to develop strategies of how to minimize our own footprint. We have also surpassed the targets for female representation on our board, but also in our leadership positions, which is something that we are proud of.

Speaker 1

But I'd also like to say that that for us, it's not a tick mark exercise. It's really because we believe it gives us a better and a stronger company with better results at the bottom line to the benefit of our investors. We have also done a human rights impact assessment in 2024 and really providing a human providing a roadmap to strengthen our human rights management. Also, something that we see more and more of our clients focusing on and and hence, better to be where we need to be in that. So we we we make sure that we can deliver what our clients expect as well and also what is right for the world.

Speaker 1

We also implementing a electronic screening tool to strengthen our supplier due diligence, which is, of course, important also when we go into these TNI contracts and foundations where we are having much more selection of suppliers that are supporting us on these projects. We have also the first year CSRP compliant, and we have submitted the the stability report, eligible for EU taxonomy and first year alignment. And we have also carried out the double materiality assessment, which are all really, really big jobs. And I have to say that as with the the source controls and and and and the Cesar B report, really, really important that we have we have made this, but also a huge, huge effort by everybody in the team and and really thank you to everybody in the team for having worked so hard on all of this. It's also been in 2024 and in Q1 twenty five, a lot of interesting things going on.

Speaker 1

We have done testing of biofuels on board one of our vessels together with our clients. And we are working on the expectation of really being able to increase the green offering to our clients in terms of in 2024, in terms sorry, it's 2025, in terms of these learnings we have from some of this. And we have also signed an LOI for a methanol, e methanol offtake from 2028. We do take this very, very serious, and we do believe that the clients that are taking this serious will be set for success in our industry because at the end of the day, if we don't take this serious in renewable energy, who should? So we are really trying to be doing the utmost for what is right and also to continue to explore new solutions.

Speaker 1

And that is also what we are looking at in the second bullet here. Really, we have launched these dashboards on our vessels where we really can analyze real time how the vessels are performing and what is the right solution together with the clients. So we don't just take the standard solution, which is return to port as fast as possible, really really try to see what is the best solution for for the current schedule we have. Also around training with the crew, we believe a lot of the saving will come from behavioral initiatives, and that is something that we we we we continue to work on with also with all the new crews that we are getting into the company. And then also shore power upgrades on the old class vessel so we can, utilize shore power to the extent that it's available to us.

Speaker 1

We also set scope three targets for reduction for twenty twenty two thousand and thirty five and also calculate and report on the life cycle assessment in the scope three environment. In terms of how Pat's net zero, we are, of course, starting with an increase because we are adding a lot of vessels to the fleet, and that means that our overall emissions are increasing. But we are setting ourselves up to to to to to decrease this. And by all the things that we are doing, we are really attempting to be having a very ambitious strategy of how we bring our footprint down and ensure that we can deliver what we do believe that the clients will expect from us in not a very distant future. And the three key decarbonization levels are optimizing energy consumption, adopting green fuels, and really enabling electrification.

Speaker 1

In terms of continuing the growth journey, as I said in the beginning, if we look at the markets, the European market continues to be the very, very strong market. Asian market is also very interesting, and The US market is still, as we have said in one of the previous presentations, the the the peel on the orange. And we are interested in The US market, but we will continue with our approach to that market that that it has to be the right decision for that one project. And then that is how we will continue in The US market as well for now. When we look at the future turbine installations by capacity, we do believe that and see also from the tenders we are involved in and from the projects we're winning that there is a trend towards bigger turbines.

Speaker 1

And, that is something that is good for catalog. We have a a fleet of the most capable assets in the industry, and, hence, we are able to supply our clients on bigger turbines, with the installation services that they need. In terms of other things we have talked about before and we continue to see these trends is that the distance from shore on the vessels continue to increase. It is pretty spread out, but the trend line is clear. It continues to go up.

Speaker 1

That is good when you have the vessels in the industry that can carry the most payload. At the same time, in terms of water depth, we also see that the water depths continue to increase and it's also spread out, but the trend is very clear. And that is very important because this really discusses also these two metrics, how many of the legacy assets will be able to compete in the future. We don't disqualify any. That is up to our clients to do that, but we believe that the overall supply in the industry is probably lower than most analysts currently have in their models.

Speaker 1

In terms of the continued growth, I think that our focus is really around the transport and installation scope and the O and M scope, where we continue to grow the company with the vessels we have in the fleet. We believe that we have a very, very strong platform and a very strong foundation. And with these assets, we are able to continue to work closer and closer with our clients. And by doing so, generating more work on these vessels, but also on the contracts we have already secured. We do see clients that are approaching us for discussions around additional scope, whether it is managing sub suppliers from their side or whether it is additional testing pre project that is beneficial both to us because we kind of, like, get to tie out the equipment before we get to the real project execution, but the same does the client or really, you know, supporting the clients in in in the overall management of a project.

Speaker 1

And And that is something that we are seeing and really where we believe that the business model has room to expand and to take more scope for the client based on the very, very strong platform and foundation we we have built. And we see that that is, an enabler for us as a company to continue to work closer with our clients. We've said it before. We focus on, on on partnerships. We want to have the the long lens, in focus with our clients.

Speaker 1

So we are talking to our clients more and more about ranges of projects, projects that are further out. We are discussing installation projects now also out into twenty thirties, and we are talking with a very wide range of different equipment, different geographical locations and also different ways of doing projects with our clients And we really believe that that is the partnership that we want to form with our clients. And as we have said before, we are not concerned about utilization at all. We believe that the narrative is stronger than the reality in the industry at the moment. But what we see internally and what we have shown you on these slides here is that we are incredibly busy, busier than ever, and working closer with our clients.

Speaker 1

We believe that we will continue to focus on on what we are good at, and that is really deliveries, not only deliveries of of assets, new bills and all of that, but also really delivering the client's projects because at the end of the day, that is what will form the successful journey for the company going forward, continue to deliver for our clients and offer the clients to do additional scope if they need us and their partner to do that. In terms of the O and M market, we have discussed this at length before, but we do see an increasing demand for major component replacements on the turbines. There's a growing fleet of turbines out there, and we are installing more turbines every day. And, hence, this opportunity is something where we would love to support our clients because, of course, if you install a lot of turbines, it's important to keeping them spinning. And that's, that's something where everybody in the industry is in the same boat, both the developers, the OEMs, and and also as contractors.

Speaker 1

And and we need to to make sure we have solutions ready and in place, for the turbines when they do need major component replacements. And for us, we can see from the previous slides that we are able to fill white spaces. Most of our assets had O and M work during 2024 and in 2025. And that is an area that we as a company want to focus on because at the end of the day, it ensures very high utilization and, hence, overall improved economy for for for us as a company. And then it's also important that we work close with our clients.

Speaker 1

We have had meetings recently with our clients, but also where we are being asked to, to to support them in the O and M journey of the industry and also for them as companies. In terms of what it is really, you know, as we say, growing as the number in each of operational turbines increase and the defects materialize, we do see increased tendering activity also on longer term contracts with our clients. It varies a lot, but we do believe that it's, it's a space where we are adding a lot of value to clients, both the developers, but also the turbine OEMs. And that is something that we are focusing on. We we are we are a company that are here to to, to work on relationship and partnerships, and and we believe that O and M is one of the very strong levers, to really make sure we do that.

Speaker 1

And and it needs a focus. That's what we can say. I think that, we see more and more that the the O and M campaigns, they they are dealt with by by individual teams, on the client side. And for us, it's important that we're able to respond to their demands when incidents occur, where they need our support. And then also, we need, of course, to work on the cost side of the mobilization because that can be a driver for whether O and M will be done or not done And that is why we are at the moment looking at innovative models for vessel mobilization to make sure that we are as nimble as possible supporting our clients in this space.

Speaker 1

So in terms of the investment highlights in the overall catalog case, as we say, we have the largest most capable and most versatile fleet in the industry. We believe that the complementarity in the fleet really enables a lot of cross cross fleet utilizations, which will drive very, very high utilization and efficiency for our clients, but also, practically derisking for our clients. Our team continues to grow and continue to build experience, both on people that have been with us for a long time and people that have not been with us for for that long. But, we continue to see that we can recruit and and and retain the critical know how and skill that we need to continue to grow our company. And the relationship that we are building with our clients and partners is something we still hold incredibly dear in the company.

Speaker 1

We believe that we have a global platform now where we can continue to really benefit from the enabling capacity and factor that our industry leading fleet has. And we still see an undersupply of capable assets as we have discussed before, and that is really around some of the metrics that we discussed in this presentation where we do see that the distance to shore the carrying capacity of the of the vessels, but also water depth and and and and sheer size of equipment that we are installing will mean that some of the legacy assets will be struggling to, to efficiently compete in the industry going forward. And then we believe that, we we have a very strong track record now, but also a record high backlog that has gone up significantly since we reported last time. Today, standing at 2,500,000,000. And we do believe that that provides a lot of earnings visibility with a 94% final investment decision on our backlog.

Speaker 1

I think that that is very, very important for our overall case. And then, of course, as we have said for a long time, we really want to be a good custodian of capital and hence, have focused as we have strong utilization, strong backlog building, and very strong execution. With that said, we are moving into q and a.

Operator

Thank you. At this time, we invite those analysts wishing to ask a question to click on the raise hand button, which can be found on the black bar at the bottom of your screen. You may remove yourself from the queue at any time by lowering your hand. When it is your turn, you will hear your name called and receive a prompt to be promoted. Please accept, wait a moment, and once you have been promoted, you may unmute yourself and ask your question.

Operator

We encourage you to turn your video on as well. We will wait one moment to allow the queue to form. Our first question will come from Martin Husby from DNB. Please go ahead and ask your question.

Speaker 3

Thank you. First, a question on the O and M market. Such demand has clearly been important to fill gaps and keep vessel utilization high for 2025, but could you also talk how we have seen any changes from your clients related to secure access for such vessels into 2026 and and also beyond? And also, what type of contract economics are you seeing on our member?

Speaker 1

Yes. I think we have discussed it before with investors that we do see an increase in contract economics profile on the projects. It, of course, is is is it can vary a lot because you can have very short term opportunities and you can have longer term opportunities as well. But we do see that it is very strong and it it is very similar to the installation market at the moment because the the the O and M business at the moment is is is, I would say, arguably struggling with the same supply demand equation that we have seen in the in the in the insulation market. So we are seeing that many of the clients are discussing longer term commitments, frame agreements, but also, let's say, overall support structures from companies like ourselves, to key O and M, but also to more feedback OEM, O and M, on their on their platform.

Speaker 1

So we believe it's it is an area that that needs more focus.

Speaker 3

Good. Second question on newbuilds. So the industry had quite a high number of newbuilds ordered back in 2020 and 2021 and even into 2022. While there's been quite or there's not been too many newbuilds ordered in recent years, Can you talk a little bit to what prospects you see for the industry to add more newbuilds? And also, how do you see newbuilding prices and delivery times developing?

Speaker 1

Yeah. I I think that deliveries are are challenging at the moment because I think that the the amount of yards that can complete a a new build like this is is is is certainly very limited. And some of the yards that can do it, they are focusing elsewhere and and hence not willing to to to bid on projects like these. And that, that means together with with many other factors that the prices have gone up significantly, and we speculate at the moment that the prices are somewhere between 30% to 45% higher than when we ordered in 2021, the p class vessels, which, of course, makes it, let's say, a different environment to all the vessels in. And at the same time, my view is that it's it's probably as hard as it has ever been to go into the boardroom and ask for capital to order new vessels because if if one does not have an active name in the industry, it is probably hard now with the challenges that the industry have been through with lack of deliveries on projects, but also current narrative and very, very high prices and arguably longer lead times than we saw back in the days.

Speaker 1

So I think it is a challenging environment to add new builds in for most companies.

Speaker 3

Thank you. I'll turn it back. Thanks.

Operator

Our next question comes from Jamie Franklin with Jefferies. Please go ahead and ask your question.

Speaker 4

Hi, guys.

Speaker 1

Hi, Damian.

Speaker 4

Hi, there. Thank you for taking my questions. So firstly, I just wanted to ask on 2025 guidance. How should we think about the moving parts in reaching the top end of that range? Is it primarily a function of timing for the remaining two new builds due this year?

Speaker 4

And then just kind of follow on question from that. So your first new build for 2025 Windmaker was delivered in January. That was obviously on the early side of the targeted 1Q twenty twenty five delivery. And now you said that your second newbuild this year, Windpayce, is scheduled for delivery imminently versus a previous target for 2Q 'twenty five delivery. So just trying to get a sense of what your base case is for delivering the next two vessels.

Speaker 4

Should we assume it is the midpoint of each quarter that you have outlined? Thank you.

Speaker 1

I think we will just keep the delivery to the quarter for now. But of course, we indicate that we believe that the the Ally is somewhat ahead of schedule in Kosovo, and that we believe that that that that that mover will deliver as we have discussed in the past. I think that that there are, of course, still some moving parts in the overall year, but a lot of, let's say, the utilization capacity has been locked down already. So on Saratan, as we discussed, we have locked down a very significant portion on O and M, but there is room for more if that is available out there in the market. And we do believe that there is opportunity out in the market for that.

Speaker 1

And as I also discussed during the presentation, we are, at the moment, also in a situation where we are discussing certain options with clients in terms of delivering additional scope on projects, and and that can also impact the year. So we believe that we are we are at a good point, but the guidance, we are at a place and time and where on the let's say at the junction in the journey where where where we where we want to be and also where we expect it to be. As Peter explained in his presentation, with these foundation TMI contracts, a lot of the services that are being delivered, we can say that the the difference between the income and the cost curve is lesser. And then when we start installing the foundations, then it opens up those two curves because at the end of the day, that is really where where we are starting to to to to see the meaningful impact of the foundation T and I project when we start to put the the foundations in the water. And then so so so it is a function of of, let's say, time and and also solid execution and and then continuing to keep a very strong focus on on on on the front end of the business, you know, making sure that our clients know that we are here, we are in to support them if they need us, with anything.

Speaker 1

And then I think the team overall, the whole team has done incredibly well in ensuring very strong utilization, strong execution, strong reporting, strong, everything, you know. So very, very, very pleased with how the team has gone through '24 and how we have already entered into '25 as well.

Speaker 4

That's great. That's very helpful. And then second question, just on the European market, obviously, you talked about the strength and that being the primary driver of growth for Cadillac. So can you talk maybe about the specific countries within Europe that are the greatest near term opportunity? And I know you've announced a contract in Poland back in January that was a particularly attractive contract and you've built backlog quite considerably there over the last few years.

Speaker 4

Maybe if you can touch on that as well. Thank you.

Speaker 1

Yeah. I think that we see basically that, it's, of course, the North Sea region and the Baltic Sea region that is growing very fast. UK remains the leading country in wider Europe, as I should say, without offending anybody, I hope, that that is the leading. But but we do see around the Baltic Sea a lot of activity, but also Germany and and Denmark. We we had a missed auction in Denmark.

Speaker 1

I would say for most industry people, it was not the biggest surprise in the world. And, and and I'm sure that we we we will be seeing something pretty different in the in the upcoming Danish auction where we have seen the Danish government moving more to, like, a CFD style auction type. And I think that this is just reinforcing the picture that Europe remains very focused on delivering this and very strong growth demand continuously.

Speaker 4

Okay. That's great. Thanks, guys. I'll hand it over. Thank you.

Operator

Our next question comes from Benjamin Nolan with Stifel. If you'd like to ask your question.

Speaker 5

Great. Hopefully, you guys can hear me. I wanted to ask, Peter, you had mentioned that you had you guys were taking people and adding them to some of your existing vessels in preparation for the delivery of the new builds. I'm curious, you're taking delivery and the industry is delivering quite a bit of equipment very quickly. Can you maybe talk to the availability of skilled labor?

Speaker 5

And is that at all a challenge in being able to execute for the industry or for you guys specifically?

Speaker 2

It has not been a problem for us up to now. We we still have, unsolicited, applicants coming in from the industry and, and oil, offshore, so so on. Generally speaking, it has not been a problem and we do not see an issue. Maybe you can add maybe Yes.

Speaker 1

I'm happy to do that. I think that we are benefiting from many different factors at the moment where we see, let's say, skilled people coming in, but maybe skilled people from different areas of offshore where we believe that the right thing to do is also to give them the best possible preparation by having them on some of our existing vessels before we send them potentially to a new builder, before they take over any existing vessels and we send some of the experienced people from that vessel to a new build. So it is really, one of the bigger questions we get from from investors many times is what keeps you awake at night, and we we often talk about safety, right, and and and in order to to operate these very sophisticated assets, training is important. And that's why we're doing it. We are doing it because we want to ensure that we are working with one safety standard, with one culture on board, and and and overall best possible preparation for for what we are executing for our clients.

Speaker 1

So that's why we're doing it. So you can basically say that the reason behind it is really just a reason of caution and and and and being prepared.

Speaker 5

Okay. Thank you. And then my next question, I wanted to mention, I appreciate the adjusted utilization measure that you'd put in there. As you're thinking about the guidance for 2025, can you maybe talk through what sort of is being considered or modeled in that adjusted utilization into your numbers?

Speaker 1

Yeah. We are not giving guidance on the utilization for '25. So, but we can say that the reason that we are doing it is because we have, of course, discussed in the past that where we want to see the fleet in terms of utilization. But but but when you have two vessels, for example, out for crane upgrades, you you can't operate them. And hence, it's not relevant to talk about that time.

Speaker 1

And that's why we decided that this time it's relevant to have an adjusted number where we can also show you guys kind of like this is just time that it's not available to us. And if we discount that, then actually the utilization was pretty good. We also made an active decision that we discussed with you guys and with our investors last year where we said, we will really do everything we can to prepare Sella to go to The US because in case we need to do any maintenance on Sila in The US, it will be much more complicated and much more expensive. So, again, under the same umbrella of being cautious, you can say, we decided to do an extra effort on Sila before we sent her to The US, and that that reduced the number of days we had available. Had we not done that, we could maybe have squeezed in an O and M project prior to her leaving to The US, but we decided, no, we're not going to do that.

Speaker 1

And the same umbrella there, you can say that on on Wind Ally that we are delivering from Cosmo, we are not planning any utilization on Ally before we start the the rest of the project because we just want to make sure that we start that project as well equipped as early as with as much buffer as possible because that is a very important project to us that we have also discussed with our our investors and clients and suppliers a lot. So so we are currently not planning anything on with Ally prior to going on the on the on c three project.

Speaker 5

Okay. That's helpful. And and lastly, if I could, just you're speaking about the sella and now you have two assets in The U. S. Miguel, you said that there's a real sense of acceleration in The U.

Speaker 5

S. Trying to get things done quickly. Do you anticipate those assets or at least one of those assets remaining in The US for some time in order to, you know, meet those customer needs?

Speaker 1

That that is that is very possible. And we know that the PACE has to come back again because it has another commitment. So so there's a drop dead based on that, and and PACE will return back to Europe to do that commitment for our clients. No doubt there. But of of course, could this continue in The US for some time?

Speaker 1

Yes. That is very likely, and we are monitoring the opportunity. I think we we can also say we are harvesting the opportunity because we we came out from being probably the most cautious on The US market to now being the ones that are operating a lot over there. And and I think that that is also sometimes how the world develops. If you if if your client has a a confidence in you being able to deliver what they need in that market, then I think that that that you can be the chosen one.

Speaker 1

And I think that we we have at least put ourselves in a situation where we're working very, very efficiently together with our clients to try to to deliver what they have in the pipeline over there as best possible. But but but there there is a lot of complexities in the market on in in terms of operations, and and and it also means that it it requires a lot of effort to ensure efficient installation in The US market. But we are we we want to support our clients there as long as we we are able to protect the company in the right way in terms of terms and conditions, and that the projects on a stand alone basis is is good enough to meet our criteria.

Speaker 5

Excellent. I appreciate you taking my questions. Thank you.

Speaker 1

Of course, Ben. Thank you, Ben.

Operator

Our next question is from Pet Billing from SEB. If you'd like to go ahead and ask your question.

Speaker 6

Yes. Hello. Can you hear me?

Speaker 1

I'm good. Great.

Speaker 6

Great. Great. I have, two questions. The first one is tax related. You mentioned, Peter, that, most of your current business is covered by by tonnage taxation in in The UK and and Denmark.

Speaker 6

Once you move into becoming a sort of more of a project driven business with the T and I services for the foundations, should we think any differently about taxation for your business going, going forward?

Speaker 2

No. Then that is also covered by the both charges tax regimes, so so will.

Speaker 6

Okay. Great. And the second question, again, also also related to the O and M market. What do you see in terms of how developers think about utilization or using more high spec vessels compared to lower spec vessels also for lower size turbines? Do you see any sort of mechanic where even for smaller turbines that they prefer to use, more highly spec vessels?

Speaker 1

I think what we can say is that the higher spec vessels has the benefit that they can work across different platforms, and that gives an efficiency increase for some of the clients in the industry that hence has that as a priority. But I think that it's not necessarily always a choice because we tend to get focused on the turbine type and say, can this vessel do this turbine type? Yeah. Obviously, it can because it installed this turbine type. But it might be that the water depth is too high for that vessel, for example.

Speaker 1

So we have seen O and M jobs in the industry that has been waiting, for a long time for execution due to the lack of availability of vessels with, for example, long enough legs. And and and that is why I argue that that that a higher spec vessel is always a more attractive option, for the client if it is available. The challenge has really been that they have not been available, and and that is also why we are arguing that the O and M space is a space that could do with more focus and and and more commitment both from clients and from from contractors like ourselves because at the end of the day, there is a a rather big, let's say, challenge to solve in in in overall keeping all the turbines globally spinning. And and that is something that we need to work together to to solve that, that that that that equation. And and we are we what we are saying is really that we are we are committed to play our our part in that in that, that problem solving together with our partners from the O and M space, OEM space and also in the developer space.

Speaker 1

And we do see that sometimes they take a different approach to that market.

Speaker 6

Understood. Thank you. That's all from me.

Speaker 1

Thank you.

Operator

Our next question is from Asni Olsen from ABG Sundal Collier. If you'd like to ask your question. Hi. Can you hear me?

Speaker 1

Yes. Loud and clear.

Operator

Great. Thanks for taking my question. I was wondering about the wording on your dividend comments. You say that you do not expect to make any dividend payments in the medium term. How would you define a medium term?

Operator

Can you tell me We

Speaker 2

define it like that. We define it like the second A class visit being delivered in '26. And that is because the whole conversation we have, there's a there's a covenant around not paying out dividends before that vessel is delivered. But it does cover the third A class vessel being delivered at '27. So that is what we mean by that in midterm.

Speaker 2

Yeah.

Speaker 1

I think what we can say in addition to that is that the discussion around, the whole topic is something that has started now, together with the board and that, that we think that that is something that we continue. And when we are ready, we'll recommunicate clearly to the market. But but it is obvious that, you know, we we we we will be in a position at some point in time where we we have the ability, for example, to pay a dividend.

Operator

Definitely. Yeah. I think I'll give off the the microphone. Thank you.

Speaker 1

Thank you.

Operator

Due to time constraints, this will be our final question. Our next question will be from Roald Hartvigson from Clarksons. If you'd like to go and ask your question.

Speaker 7

Thanks. Hey, guys. Congratulations on another strong order. We have saw seen some kind of consolidation in the space over the last month with the the key one probably being the announced Saipem and Subsea seven merger. And, obviously, offshore wind is not the only market for those players today, but do you believe that merger will have any meaningful impact on market dynamics?

Speaker 7

And, how do you see prospects for further consolidation in the space ahead? Thanks.

Speaker 1

I I I don't think it will be I don't think it will drive anything. I think it's it's probably good for these two companies. You know? I think that there's a lot of synergy between these two companies to to do consolidation, and I I I we congratulate them on on on the efforts. We have said it before that there is still some degree of fragmentation in the industry.

Speaker 1

The problem is also in the industry, there is there is a lot of assets that arguably will not be installing for for very long. And hence, it it depends a little bit how you want to consolidate and why you want to consolidate. But I think that we are, from our side at least, very, very pleased that we were moving on the opportunity that we saw back in 2023 and and and successfully concluded that merger with an 80. We believe that we have created a company that that that didn't have a lot of overlaps at that time, and that is the additional challenge to most of the of the other companies out there that there is probably too many overlaps to make it super reasonable to to to see how a merger would happen. So so it depends a little bit how why one company wants to merge and and how, yeah.

Speaker 3

Perfect.

Speaker 7

Thanks. I'll leave it there.

Speaker 1

Thank you.

Operator

We have no further questions at this time. Thank you for your participation. I will now hand the floor back to Mikhail Girup for any closing remarks.

Speaker 1

Thank you. Just wanted to say thank you to everybody for listening in and spending your time here in the morning or afternoon or evening with us. Another year is now concluded and a year is already well underway, and we are really looking forward to take on this challenge and and to deliver. And that really just brings me to really thanking the team, our investors, our clients and partners for all the support during 'twenty four and all what we have seen in 'twenty five. And we are super ready to take on this year and to continue to build on our promise.

Speaker 1

So thank

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Earnings Conference Call
Cadeler A/S H2 2024
00:00 / 00:00