Cadeler A/S H1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 27, 2024

There are 7 speakers on the call.

Operator

Good morning and welcome to Caterpillar's Earnings Presentation for the First Half of twenty twenty four. Presenting today are Mikkel Glierup, Chief Executive Officer and Peter Brogaard, Chief Financial Officer. Please be reminded that their remarks today will include forward looking statements. Actual results may differ materially from those contemplated by these forward looking statements. The risks and uncertainties that could cause Caterpillar's results to differ materially from today's forward looking statements include those detailed in Catler'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 Catler 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 Catalyar's half year report. The half year report and today's earnings presentation are available on Catalyar's website atcatalyar.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. Mikkel Glarep, you may begin.

Speaker 1

Thank you very much. And good morning, good afternoon and good evening depending on where you are in the world. Very happy to be able to present here from the New York Stock Exchange on our first half year result in 2024, which also is coherent with the strategy we have laid out that we want to visit different parts of the world with these reports that we are going to go out on a quarterly basis and meet our investors where they are. And this time, it's in New York, so really happy to be here. So in terms of the half one twenty twenty four highlights, just to briefly go through that.

Speaker 1

Financial performance is in line with our expectations. We have successfully delivered the 1st newbuild Winpeak on time and on budget. And as we also said in connection with that, we have delivered 5,000,000 man hours with 0 LTIs on this vessel. And as it was just announced this morning, we have 3,000,000 man hours on Wind PACE, the following vessel without LTIs and 1,000,000 man hours on Wind Ally, the 3rd vessel from COSCO in Chilung, also without 0 LTIs. So in grand total, 9,000,000 man hours without LTI, which I really think is something to celebrate.

Speaker 1

We have launched the Wink Maker and the Wink Pace. And the Wink Apex, the 3rd A Class, has been ordered with expected deliveries in the first half of twenty twenty seven. Only we're on track, which we deliver on or in advance off schedule project work, which is also a key target for us as an organization, really delivering on our CapEx projects on time, on budget. Signing of 3 BIA's vessel reservation agreement in Q2 has marked a very important milestone for the company because we have also signed the largest vessel reservation agreement in the historic pilgrimage company. It's between SEK400,000,000 and SEK700,000,000.

Speaker 1

And these vessel restoration agreements are not included in the backlog. We will more into that later how it's done, but our contract backlog now stands at a record SEK1.9 billion with further growth in the coming months ahead of us. We have continued progress on the post merger integration of Eneli, and we are realizing Syniti is actually above what we expected in when we did the combination of the 2 companies, especially on the financing side, where we have replaced the implant facility on much improved and more attractive terms. Q2, high end in terms of commercial. The wind Auker continues to execute the project on Moray West, where we currently install the world's largest ever installed serial produced offshore wind turbine, the 14.7 Megawatt from Siemens Gamesa.

Speaker 1

This is a project where we have started working with the new crane on Orkje, and I'm happy to say that we are executing as per expectation, both from ourselves and from the client. On Osprey, also with the new crane, we are executing on the German projects, Spolwindste and Bokundlichpondste and we are continuing to execute on as projected there as well. During the charter, we mutually agreed with us to release the vessel for 27 days to go and do some O and M work on some of the projects in the Dutch zone. This was really an opportunity to help a project that needed it while the project we are working on could do with a break, so to speak. And in connection with this, Verstel has called additional 74 days on the Golden Street project with catalog.

Speaker 1

On Wincilla, we completed a very comprehensive drive of work, which we did in France. And we believe that it was very important to really go to the bottom of the vessel here because the vessel was going to transit immediately after that to the U. S, where we are going to install first one project, which is the Revolution Wind and thereafter an unnamed project in this region. And I'm happy to say that we are now in the U. S.

Speaker 1

We have worked closely with the American authorities, and we have been extremely pleased with the collaboration we have met here in the U. S. And this is something we did definitely want to build on. And also happy to say that we are now starting to execute on the Revolution project. For the Vinceratam, we continue to execute for Siemens Gamesa on the Yunlin project in Taiwan, and we are still having quite some work there to complete, but I expect definitely completion within this year.

Speaker 1

In terms of backlog and how the backlog is built up and when we say that we have a record backlog, we have added this year the Instacate project, which is a project that I believe is worthwhile mentioning because it is a project where really we saw the benefit of having a client that needed the support of what we could deliver, but also having the right asset available for the client. And there we found what we believe is a good balance in terms of project economics, but also the ability to execute to the clients' expectations. And hence, I think we demonstrate what the market currently can deliver if things are really falling in place both with the supply and the demand of our services. Also on the A Class vessel for 2027, we have closed a project where we have added to the backlog, which would both be turbines or foundation work in 2027. And a focus for us has been 2027, no doubt about that, because with the delayed auction round 6 auction round 5, sorry, where there were no bidders, 2027 became a focus for us to ensure that we have strong utilization.

Speaker 1

I'm happy to say that we have very strong utilization with what we have in the backlog, but also in terms of vessel restoration agreements. And on the vessel restoration agreements, we have 3 vessel reservation agreements, as I mentioned earlier, that is not included in the backlog because they are subject to look to national auctions. And we are facing one big national auction ahead of us, which is the auction on 6, the U. K. And coming off a missed auction round 5.

Speaker 1

We saw improved pricing in the auction round 6, but also just before the submission of the bids from the developers to the auction round 6, we saw the U. K. Government increasing the budget in auction round 6 with around about 50%. So of course, it's about betting on different horses in that auction, but we do believe that we are in a good place on the auction round 6 and are looking forward to see the results of the auction expected sometime in December sorry, September. And on top of this, also together with Equinor and Poll Energy on Baltic 2 and 3, where we also have another 2027 project that is in process at the moment.

Speaker 1

So really, the project backlog today consists of several projects in Europe. Europe remains our strongest market, but also in Asia, where we are developing the pipeline and equally in the U. S. We do see U. S.

Speaker 1

As a market that is starting to get relaxed and where we can see that there's more and more activity. And with the work we're doing together with Ostrid at the moment here in the U. S, I do believe that we as a company has a firsthand experience on how it is to operate here. And our first experience here has been incredibly positive. And we're working together with our stakeholders in the market because as I've said for the last years, we believe that the way you positively build in a new market is that you create value for everybody involved and that is really what we try to do as a company.

Speaker 1

So in terms of the backlog, the backlog, as we have reported before, now stands at €1,925,000,000 including the options, and that's something that, of course, has been important for us to continue to build that backlog number, and it remains a focus as well. And we had a second column in this presentation, which is where we have added €94,000,000 on top of that number, and that's because one of the projects in one of the best investment agreements is fully contracted. So we have a fully completed contract that is signed by all parties, which is now only subject to the national auctions. And we are trying to give a spot transparency on the backlog and how we can do it, but we do not want to enter into any sort of backlog, any number that doesn't have a firm contract behind it. But of course, we are contracting on all these vessel reservation agreements, but also it's something that takes a long time, especially when it's around foundations.

Speaker 1

It's not only time consuming, but it's also incredibly resource consuming. So I think in terms of what we have added, strong utilization both in Europe, in the U. S. And also really a new normal in the industry, I would almost say, in terms of what we have seen with the Inskate. As I said, when things, they come into the optimum fit, both for us and for the client, then it is an opportunity to really make sure that we create true win wins both for the company, for our investors, but also for our clients.

Speaker 1

And then strong vessel restoration agreement, which we are looking forward to bring to fruition over the coming months. In terms of the progress on the new builds, this is of course something that is of great importance to our investors, we know that. And I'm very, very happy to report that the Wind Peak was delivered on time and on budget, something that I think it's not exactly normal in our industry, and we have worked incredibly hard to deliver this. And my thanks really goes to the teams that have been involved in this, especially the on-site team that has been working day in, day out to deliver this result. And we had a beautiful day in Chilung on the 15th August, where we named the vessel and really are now ready to leave the shipyard to start work with this vessel.

Speaker 1

On wind pace, we also continue the progress. I'm actually pleased to say that we probably will deliver slightly ahead of schedule on wind pace if everything continues as expected. And that is really now the learnings from the first newbuilding that is starting to come into the number of vessels we are delivering from Costco. On Windmaker, there is a little bit of a thing here, they count slightly different, the 2 yards. Windmaker is built at Hanwha and Windpays and Keegan is built at Costco.

Speaker 1

And they count slightly different in terms of how the construction completion is. But also there, we are confident also with discussions we have had with the top management of both Handwag Group, but also Handwag Hauschen in terms of that we will deliver in time for starting the project that we have signed Windmaker for. We continue to monitor it on a daily basis, and we have also not taken our last trip to Korea to ensure that the actuals also match the reports. So we are following this incredibly closely from every single point of the company, but we are still very much on target to deliver these vessels for the projects. Same on Windmover.

Speaker 1

We expect that we deliver at the end of Q4 'twenty five at the moment, and this could slip into Q1 'twenty six, which for us had no importance, whether it's the end of Q4 or the beginning of Q1 'twenty six. But this at the moment, we are trending towards Q4 'twenty five, and that's why we report that yet. On WinAlly, we are also seeing a very strong performance from the yard. And here, we think that we will you can actually see now here that we are planning the key laying for September 2024, which also means that we likely are delivering as much as 2 months ahead of schedule on the Win Ally. On WinAZE, everything is scheduled.

Speaker 1

And on Win Apex, we will start the steel cutting in Q3 2025. A few views from the delivery of the WindPeak. We have the vessel completing sea trials successfully doing overload testing of the crane of the jacking system, and you see some pictures here where we are jacked up to full jacking height. And also a fantastic day together with the godmother of the vessel, where we really made sure that it was probably celebrated this amazing milestone for the company. And also some sneak peeks from the following vessels.

Speaker 1

You can see the cranes the cranes have been installed on the windmaker, which is, of course, a very, very big milestone, but also really the launch of both wind pace and windmaker, while we also continue the strong progress on the block assembly for the following vessels, but really all in all, on track with all the vessels. And this chart here just confirms what we have said basically for the last quarters that we are still confident that we will deliver these vessels. And the first one delivered on time and on budget, which of course should give confidence on the remaining vessels from Cosmo. Then there has been a lot of lessons learned in this and the learning curve has been steep. But now we are also starting to benefit from that learning curve in the following vessels.

Speaker 1

In terms of the merger synergies, since the closing of the merger, we have materialized around 30% of our 2026 target, And these merger synergies come from SG and A savings, but also from financial savings where we have really managed to get much, much better terms on financial terms. And I'm happy to say that we are ahead of our own target in terms of the SG and A and financial synergies, where we earlier expected a slightly lower number, while we still have great confidence in both the operational and the commercial synergies that we are looking into in the years where we are fully delivering the fleet. So message from us is really that we are slightly ahead on the first milestone in terms of the synergies, but we have unchanged views on the commercial and operational synergies in the merger. And at this point, I'll hand over to Peter who will go through the financial highlights of 24.

Speaker 2

Yes. Thank you very much. Maybe the financials is very much a function of the merger of the Eveli as compared to last year. Now we have both companies having fully consolidated with 4 vessels instead of 2. And of course, it's also first half and Q2 partly also is impacted by the O class offering and the write off on the Siler vessel.

Speaker 2

Revenue was €63,000,000 as compared to this is Q2 number, so that is for 3 months ending 30th June. Revenue was €63,000,000 as compared to €400,000 last year. Equity ratio is still a very, very strong balance sheet that we have more on that later. The utilization was at 76% as compared to 100% last year. And that was a it's a tough comparison also because of the the full utilization of all risks in one quarter, which is we cannot expect in any quarter, but still impacted a little bit by the crane operation and write off.

Speaker 2

And market translation is now €2,100,000,000 EBITDA, euros 32,000,000 a little bit less than last year. Cash flow from operating activities is €4,200,000,000 Strong Care to €14,000,000 The backlog, as specified by middle, has increased to €500,000,000 This is again 3 months in the near 30th June, it's a Q2 numbers and you can see revenue is higher than last year because of the 4 vessels in our operations, whereas cost of sales goes up as a simple function of having more vessels on the water. The same with SG and A and other expenses is €14,000,000 as compared to €8,000,000 last year. That is, of course, because we have now merged with the head. We have the 2 organizations.

Speaker 2

And we are also building up for the future. So this is very much financials where we have to invest before we can meet the benefits from the contracts on the foundation, especially. So in order to be able to deliver in the future, we are building the of the overseas to be able to do that. Now maybe the EBITDA is in line with last year. There's a little bit of still we see that there is some integration costs.

Speaker 2

We're not very worried about, but we are not adjusting for that because then it comes a little bit in short time. So we just report a little bit of the 2.0. Half year, it's a same story, of course. You could see cost base doubled. The same goes for the SG and A expenses.

Speaker 2

And EBITDA of €22,000,000 as compared to €42,000,000 last year. Headcount in the average for first half of the 6 months is 222,000,000 and last year was 97,000,000. So this is a consequence of the ramp up that we are doing in capital to be able to deliver on the future. Balance sheet, equity ratio still it's a very solid balance sheet with 1 point €2,000,000,000 €1,200,000,000 in equity as compared to total assets of €1,600,000,000 If you look at the half year accounts, you can see that the goodwill from the in any merger is still €17,000,000 That means that we have not seen any negative surprises in the first half according to IFRS, it will be there were some surprises negative or positive, but then we need to adjust this goodwill in the first 12 months. But there has been no surprises in the first half so far.

Speaker 2

I would also like to stress that the in 'twenty three, we paid anything out and we If we know that the Enkels program, it is expected to be fully funded. And when we say that, then we have to bear in mind that some of it is already signed and committed. That is €1,100,000,000 that you can see to the left. That is the RCF and the P class facility, the M class facility and the HOKO facility where we have this is available test that we have there. And then there is A class facility that has not been permitted yet.

Speaker 2

So when we say that our CareVix program is fully funded, it is of course because we have funded the equity part of also the A Class business. But we need to cross the bridges as we meet them. So we need to finalize financing on the P class and refinancing of the M class and the HOKO facility. And now we are starting on financing the A class facility. And that is on a term sheet basis, and we expect to cover a copy paste from the P class.

Speaker 2

Nothing indicates that we will not be able to do this financing. So that is something we need to understand when it says in the half year report that we need to finance the A class. That is simply because of practicalities in being able to sell 4 facilities at the same time with the same bank. But I would really also like to thank for the huge support we see from the bank's PTC by the upsize of the Homegrown facility, which is an unsecured facility in the 3rd day. It was €50,000,000 with €50,000,000 accordion.

Speaker 2

And now we have our upsized into €125,000,000 in total and everything is committed in class facility. But also going in first half, this is was also a fantastic job, I think, done by the banks and where we aim to support in this way. It was signed until late in 'twenty three before the merger and now it has been refinanced with very capital terms and conditions. So we only have one set of terms and conditions I mean that same pricing, utilizing the bigger balance sheet and the bigger contract backlog. And that is what maybe also makes it that gives us the synergies on the financing side.

Speaker 2

So all in all, we have €1,800,000,000 in financing. And then we have cash as per 30th June €93,000,000 that is in total €1,900,000,000 And then you can see there is a small payment outstanding on the O class cranes, P class, we draw down at delivering symbols for the M class and the A classes. But again, you have the equity portion in the in place for also the 3rd A class versus that was the capital increase that we did in February this year. We have also recently, we have extended the RCF B facility that we had. There was a printing facility we had to ensure that we could go through the merger of the VINERI.

Speaker 2

We have that we originally had 10 year or 18 months and now it has been a long way of 12 months. And that's simply to be able to capture the possibility the opportunities in the market that we see and to ensure that we have sufficient liquidity to go through, strategy 5 where we are delivering 4 vessels. So that funding surplus is €259,000,000 and of course, we will also generate operational cash flow in this period. And hence, it is our firm view that we have the financing that we need and we are fully bonded with the current guidance. We have done hedging as we also are communicating in the past.

Speaker 2

We are not experts on how interest rates develop. So we have 10 year folks of it's 50% of the U. S. Dollars of FX and 50% of the interest exposure. And that is simply to present a little bit of the interest rate increase and also with the upside, if you see decreases.

Speaker 2

And that has worked very well for us so far, and that is also good obviously going forward. Financing overview of the section. The story again, we have the existing fleet on board, our O Class Ciner and the Sabertheim. We have committed financing of €450,000,000 neutralized is €262,000,000 €262,000,000 So we still have something on the RCF 80 and yes, not utilize anything on the RCF B. P class is committed and finance, N class committed and finance.

Speaker 2

Then it's a whole core facility, which is an unsecured facility of €125,000,000 and there we have moved to last €80,000,000 And then we are in the process of securing the financing on the A class. And that is, as I said, on a term sheet basis, and we expect to be able to close this before the end of 'twenty four. In addition, we also have increased the amount of performance guarantees that we perhaps available in the past. But actually, we will return to €100,000,000 It's a guarantee that we give to our clients in relation to our forms. That is now €200,000,000 to ensure that we have also that available for the contracts that we are signing.

Speaker 2

Full year outlook for 2024, the outlook remains unchanged. First half has pretty much been exactly as expected. So we maintain the full year outlook both on the revenue and EBITDA. The assumptions behind the 24 outlook was and is on time deliveries and execution on projects. We have executed on low class operators in the SCADA wider.

Speaker 2

And then it's a successful delivery of the peak and I assume some contracts on the peak in Q4, 'twenty four. The key facilities in SG and A, which we are very comfortable with. And then the last bullet that is really the only the outlook is of course impacted by the buildup of resources that we need to do, impacting the short term the SG and A, but it would be a better fit to the activity that we are looking into in the couple of years.

Speaker 1

Yes. And just a little bit on the commercial outlook for the company. We continue to look into a very, very strong growth in the industry and we can certainly see that in particular with the tendering activity that we currently are undergoing. We are, as we have said several quarters in a row now, a record high activity. But what especially is growing resources at the moment is tenders on foundation projects, where also the clients have a totally different expectation in terms of our deliveries to the projects and where we have to document much clearer our ability to deliver, which is, of course, very fair because we are a very, very important stone on the journey to build this wind farm.

Speaker 1

And hence, we do see a lot of expectations and documentation requirements on our ability to build out the organization to deliver on these projects, not only in the tendering phase, but also in the execution phase. And especially with these national tenders, where there's clear deadlines on our tendering activity, it requires a lot of resource commitment into these projects. And one really is to bet on the right forces here. What we also see is that we do see a continued growth in turbines. It has been discussed a lot whether the industry will cap at 1,000 feet or 15 megabit and so on and so forth.

Speaker 1

We think that the 15 megabat ish turbine size will have longer time in the industry, but we do believe still that, that becomes something that is bigger than that. And we can also already see that. And we are certainly working on projects at the moment where the turbine is bigger than 15 megabat. For Catler, this is good because we have vessels that can deliver on these projects, both in terms of the payloads required, the lifting heights, the lifting capacities, but also the water depths of these turbines. So all in all, I would say that Eversbree continues to develop as per our expectations with a slightly more positive outlook on the U.

Speaker 1

S. Market compared to what we have had in the past. In terms of the supply and demand balance, we have faced a slightly offuspidity data. And let's say, it is public available data. Our own personal view might be slightly less aggressive than what we see here.

Speaker 1

But we are showing it because I think that's an important point in the slide here, which is that it's continued growth, both in terms of the size of the foundations and the size of the turbines and also that there is certainly need for the services that we deliver. In particular, on the foundation side, we do see that some of the floaters that have been delivered have less capacity to install, in particular, mono pile foundations due to the dynamic lifting of these foundations and also the limitations of the motion compensated pile gripper. And hence, we do believe that our bet on jack ups and the ability of the jack ups, especially the A Class vessels when they come to the market, will prove itself as the correct choice when they are delivered because we believe that we can definitely match the filters in terms of both time and in particular on the monopile sizes that we can handle on the projects. And hence, we remain very, very positive on this market, especially in the period from 'twenty six and forward where we are starting to execute our first project, the Hornsea 3 and with what comes after that.

Speaker 1

We are in ongoing project work on several foundation projects. In terms of fleet build out, we are at 11 vessels now. So last time we presented, there was an LOI on the vessel, the 5th vessel from Costco that has now been contracted. We completed that in May. And we completed the contract within what we told the market that we would do.

Speaker 1

So also very positive on that. And I think that we can say that we have a very, very strong relationship with Costco. And there is a sense that we want to continue to work together, because we have been building a very strong relation. And as Cosmo said to us, when we delivered the WinPEAK with Kepler, one starts with having trust and then you can destroy it. With others, you have to build trust.

Speaker 1

And I think that, that has been one of the key lessons for us. It's really to give our partners trust from the beginning and then make sure that they deliver on it. And that has created a very good working environment. So I think with our FinTech, we are able to really benefit from supply and demand balances and also the fact that we have said before, our clients are looking for redundancy more and more. And clients are tending to book more time for the same projects compared to what we have seen in the past.

Speaker 1

And we do see that exercise of options is something that is more a norm now and it's happening earlier. And I think it's also been communicated by developers on their earnings calls that they will be executing options earlier. So I think that, that is really something that we also continue to see in our business. The global footprint of the company is becoming clearer, right, because we are working in all 3 major regions. We are looking at other regions as well.

Speaker 1

Not that we are going to be an early mover into any market, but we are looking to follow our clients when there is work as we have done for the other regions. We said no to the U. S. In the beginning, but we are here now when there's work to execute on a long term basis. And that is really the whole idea of what we want to do in catalog.

Speaker 1

When there is long term work that is not considered to be R and D or test projects and all of that, then we are here to support. Then I also think that the fleet diversity in the catalog is also something that the clients really like. And we do see that it's typically a combination of, let's say, a newbuild asset and a legacy asset that the clients are going for, because it adds a certain flexibility to the client as well and that really ensures fleet wide storm utilization. So in terms of we have showed this slide here before and this just continues to be true that we do see that the clients are move clients' projects are moving into deeper waters and they are moving further away from shore. And again, it really talks about the ability of the asset, especially the water depth capability.

Speaker 1

We do see projects where very few vessels can compete and the payload becomes a very, very important number because it's really around efficiency. And offshore wind, as I've said many times before, it is all about efficiency. So when you can deliver a more efficient solution, it almost self explanatory why that's the best solution. So we continue to monitor this, but it really continues to be the truth almost everywhere we look. In terms of empowering the green horizon, it's something that we will be communicating more and more about going forward.

Speaker 1

And one of the items is green fuels. And we believe that at the moment, alternative fuels are really one of the only levers that can take us all the way to net 0 and as we have as a target in 2035. And for that, the Gulf fuels are the only available option in the near term, although the vessels are prepared for the low blast point fuel types as well. And we have prepared operations and Canada will begin testing biofuels on board our vessels in Q4 'twenty four together with our clients and we are looking forward to further report on that and how that reduces our carbon footprint. Because as we have said before, we really want to have our own agreement in this space here, and we don't just want to piggyback off others building wind farms.

Speaker 1

So expect that Kedler will deliver on these targets as well. In terms of energy efficiency and digitalization, we are also using equipment to maximizing the energy efficiency on board, and we believe that, that offers a lot of opportunity for us. And we have signed an agreement to develop energy management dashboards on our vessels. And also, we have conducted energy survey on board our vessels to re identify the improvement opportunities, but also more where do we get more bankroll dollars invested, so to speak. And that is something that we will continue to report on.

Speaker 1

There's also some collaborations in the making at the moment with some larger corporations in Europe in terms of sharing knowledge on these various measures that will help us on this journey, which is, of course, very, very important. In terms of the organization, Peter delivered some words on it in his financial presentation, but I think that it's, of course, obvious that we are scaling up the team to delivering on the scope that we have are committing to the clients. We are still working with the same notion that we want to have a team that is mean and mean, so to speak. But also, we need to create a certain degree of organizational threat, especially for the ability to take in these extra foundation tenders. And this is something that we have worked hard on delivering on.

Speaker 1

And especially with the order of the 30 A Class vessel, this creates even more tightness in the whole tendering and it moves on to the project and then to the execution after that. And that is also why we are trying to demonstrate here that the growth of the team, of course, was impacted strongly by the merger where we took on a lot of people, a lot of good colleagues from the U. K. And from Asia and from the U. S.

Speaker 1

We're very happy to see them on board and also in terms of how it's been integrated. It's been an absolute joy to follow and everybody just delivers. But from here on onwards, it is a function of the increased foundation C and I tendering activity. It's an increased project activity. It's growth in the fleet and then it's in turn international expansion.

Speaker 1

And as we've said for many quarters also, we are a growth company and hence, we are showing it more as a funnel. But what we can say is that it's something that Peter and I will go through on a monthly basis where are we in terms of this to ensure also that it doesn't in any way go out of control. But we certainly believe that we are managing this very properly as well. In terms of continued growth, we have discussed this a lot in the past and the slide has changed a little bit since the last one, but really we are focusing on the transport and installation scopes within the industry and within the whole ecosystem of building an offshore wind farm, but also the operations and maintenance part because the things you can see on the bar chart on the left side here that there's a lot of value in the operations and maintenance. And Cattell will have a presence in the operations and maintenance space over time.

Speaker 1

For us, it's a matter of how do we do this at best and in the capital way, where we ensure that it creates value immediately from entrants into this space. And that is an ongoing strategy that's what we have with the board and also where we are looking at various opportunities. But again, open to both vertical and horizontal expansion, organic and non organic growth, but also regional expansion, I've already talked about that a little bit. We are now in the U. S.

Speaker 1

And in APAC, so really pressing the North Green Main Markets. But also, we are looking at the next frontier markets, and there are some markets out there that has lots and lots and lots of potential. But in terms of maturity, they're not there yet. So not something that we're going to invest in tomorrow or in the coming quarters at all. Strategic partnerships remain one of the foundations of the company, and we continue to really build strong relationships with our clients.

Speaker 1

We are supporting them a lot, and we can also see that from national auction to national auction, our involvement with the client becomes greater and greater. And that really also demonstrates the importance we have for the clients and the developers in these bids. And I'm pleased to say that that's the development we wanted to see and we are seeing it in real life as we are speaking. And then really around monitoring, applying new technologies and ensuring that we are ready to help our clients in all different parts of offshore wind, both in terms of being more efficient on current types of projects, but also maintenance of operations of wind farms and then, of course, floating wind, which is still somewhat out and has definitely been pushed out more than we expected just a few years ago. In terms of investment highlights on the company, largest and most capable, most versatile fleet in the industry.

Speaker 1

And I believe that a lot of complementarity that enables cost utilization, efficiency and derisking for the clients, and that something that we definitely see that the clients are also very much in agreement with us about. Very strong team, proven track record, critical know how and long standing and deep commercial relationships and contracts with the industry's leading developers. And I think that, that is really what one should look at, because there will always be different opinions about this industry and how it should be done. But I think that the trust on the biggest clients is something that one has to earn. It's not something that is easily given.

Speaker 1

We have a global growth platform, and we are now present in all major offshore wind markets, which is important for us and something we will build on. And there is an anticipated need for our both turbine and foundation vessels and we see that already today. And we continue to see that especially in the years after 2027 where it becomes even more apparent. I would say that with the new turbine types actually, today there is this forklift in the industry that the OEMs in many cases only have one set of tools for their new turbines. And hence, any maintenance on the turbines are pending on that you have this toolset almost on your vessel for installation.

Speaker 1

And this is, of course, something that the industry has to work its way out of, but that's almost like an inbuilt awkwardness at the moment for especially the newer turbines. And then really a strong track record, thanks to all our investors that we would like to send a big thank you to for the commitment and for the support, but really strong track record in the capital markets. We have delivered on the backlog and we will continue to deliver on the backlog. We still believe there's a lot of fire and power in the backlog, which provides the earnings visibility that our investors expect and not rightly so. And then we continue with a key focus on being a good custodian of Capsule.

Speaker 1

And that really concludes our presentation. And Leila, now please open the 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. As a reminder, we are allowing analysts one question and one related follow-up today. Written questions can also be submitted by any viewer using the ask a question tab at the top right of your screen. We will wait a moment to allow the queue to form. Our first question will come from Daniel Helgland, who will be joining us as a panelist in a moment.

Operator

All right. Daniel Hoglund, your line is open. Feel free to unmute.

Speaker 3

Yes. Good day, everyone. Hi, Mikael. Hi, Peter. My first question is on the A Class funding package.

Speaker 3

Maybe you could clarify that a syndicated debt funding package is still the go to solution here. And maybe also say something about how this is developing. I see you expect to sign it by year end. The reason I'm asking is that in the Q2 report, you're now explicitly right that you're exploring numerous options for funding needs towards Q4 2025. So maybe you can clarify a bit on that.

Speaker 3

Thank you.

Speaker 2

Yes. I also tried to address a little bit in the presentation, but what the rationale behind the A class financing and covering it from the the P classes, of course, price and the structure condition. We find those very attractive with this VCA backed loan with the Cygneshore and a group of banks are with 11 banks in the syndicated on the P class. So I think it's very, very efficient way to get financing is to go with the same syndicated again. And with the ECA path though because of again the pricing and in terms of reducing, we can't get that better in from other sources.

Speaker 2

And that's really, really supportive. And they would like to participate in GateMains and Commerce that will be discussed with them on an ongoing basis. And they're really interested to be in. And then I have available funding for all. The status is that we send out the term sheet, which is negotiating right now.

Speaker 2

And that is negotiated on the basis of the P class. So it is really easy and efficient. And then we will present out to the bank group. It is 11 banks. There's no indication that any of the banks will not participate.

Speaker 2

So we are quite confident of hitting this findings on the A class versus it would be the 2 first A class versus and then the 3rd in another facility because that would be delivered in 27, and then we have to pay commitment fees for a long period of time, and we don't want to do that. So we're really starting phases. But we are very, very confident that we will begin to do this and that we have enough available liquidity and support from the banks to be able to go through this without having to issue any new capital. Yes, so that is the answer.

Speaker 3

Okay. Thank you. So maybe my follow-up will then just be to be clear. So your plan does not include any more equity funding based on the current fleet on order. Is that correct?

Speaker 2

It's very, very clear and thank you for also the advice, but we can be very, very clear. We do not expect any further, consumable increases to foreign currency lines.

Operator

Our next question comes from Ben Nolan from Stifel.

Speaker 4

Hi, good morning, good afternoon. So I guess I've well, I'll start with my first question. I was curious about the ZERATAN, which I believe is operating in Asia. Any updated thoughts on obviously, that asset's a little bit smaller, but any updated thoughts on employment post its current contract and how you see that fitting in with the rest of the fleet going forward?

Speaker 1

I can say that we obviously update the market with new contracts as we sign them. So when we sign something for Saratan, we will update the market. But I think that as we have said before, we expect that Saratan gradually will slip into a more operations and maintenance related role in the industry, but also potentially a role around secondary steel on foundation projects, a scope that is in many times in our decision, so to speak, which kind of solution you use for that. And it sounds as a simple scope, but actually it forms a relatively big part of a project. And on HomeC3, we can definitely see how big a part it is just on a, let's say, slightly less than 200 foundation projects.

Speaker 1

So it is something that we are actively evaluating as well. We'll see over time potentially need an upgrade on the Lexus and stuff like that potentially, but that's not something that we see at the moment.

Speaker 4

Okay. That's helpful. I appreciate it. Thank you. And then as my follow-up question, just for modeling purposes, how should we think about taxes and the tax rate for the business going forward?

Speaker 2

Yes. On the short term, you should think that it is a 0 tax expense. We have a small tax expense that is related to sales and Taiwan. That is basically the only tax we are paying. So if you think you know it will not be higher than what we see in accounts now.

Speaker 2

So it is not depending on how much we earn because we are on the thermostats in Denmark, and we will we are also buying thermostats in the wind cave. So that is how we think about it. If you look longer term, we all know there's some of these pillar 2 and we don't know how that will be detailed carry out. But that will not be relevant for Canada before 'twenty eight. And there are some exemptions for shipping that we can neutralize.

Speaker 2

So and there will be some years here to come to be wiser, I think, for anybody. And there will probably also be some case number that we can learn from, but it will not be tax, which is a significant lumpover or something like a proper income tax times profit before tax. But we need to see how the Pillar 2 moves plays out. We will, of course, come under the Pillar 2 moves because of the earnings threshold. But we are not only concerned that it will have a firm impact and what is to be seen how we don't, but nobody knows now.

Speaker 4

Okay. All right. I appreciate. Thank you.

Operator

Our next question comes from Ola Iycongar from SEB. Please go ahead.

Speaker 5

Hi, Mikhail. Hi, Peter. Good to see you guys. Could you please help us understand why we are not seeing any more newbuild orders coming through? The market is evidently tight.

Speaker 5

Day rates are very attractive. So why are we not seeing any more newbuild orders? And has the newbuild order price moved in any direction over the past months? And what is the current lead time when ordering a new vessel? Thanks.

Speaker 1

I think in terms of why there's no other orders coming in, that's a small question for our competitors because I think we have ordered this year and have followed our plan, so to speak. We believe that we are where we should be. But while others are not ordering, this is really, really difficult to speculate around. What I can say is that it's not easy to order a new vessel. Several of the yards out there that was available to build these types of vessels in 2021, they are today rejecting to build this kind of vessel.

Speaker 1

And I would expect that, for example, if you go to Hanwha today to order a similar vessel of what we are building in China, it would be either be difficult or incredibly expensive. So your pricing question is also pretty difficult to answer because as we have seen prices coming up and we have been benefited from, let's say, capacity agreements we have made with the yard in China, we do expect that still that it's more expensive compared to what we are offering at the moment. But if you want to convert one of these yards that currently are saying no to saying yes, I think it will require a lot of capital. So the reason is probably that it's very expensive. It's very tough to get a slot and delivery times are a bit long.

Speaker 1

And I would expect if you order today, you are probably looking at late 'twenty eight, if not early 'twenty nine delivery. But that's a little bit of guess because I don't have the full view on the market, but it is a very, very difficult market at the moment with the yards. And I will go as far to say that one of the game changers with Cadillac has been our relationship with Cosmo and Chiron.

Speaker 5

Appreciate the color.

Speaker 1

Thank you, Ola.

Operator

Our next question comes from Roald Harvison from Clarkson. Please go ahead.

Speaker 6

Good morning, Mikael and Peter. Congratulations on another solid quarter. Just building upon Ola's questions on growth opportunities, I know cable installation vessels have previously been highlighted as a, let's call it, potential next step in terms of growth and vertical integration. Do you still see a potential path for acquiring or building such vessels? And if so, what will need to be in place for a move in that direction to be on the table and be realized?

Speaker 6

Thank you.

Speaker 1

Thank you very much, Oren. Good to see you again. I think, yes, very much so. It continues to be an area of interest for Kedla. So yes, we could do that.

Speaker 1

What it requires is utilization guarantee from the clients. We are not going to build a cable business based on one project. We've been very clear with the clients on this. If they want Cadillac to be playing a role in cables, they need to give us more utilization than just one project. So it has to be significant what we do with the first vessel.

Speaker 1

So we can build up in a measured way because one of the last sentences I said in the presentation is, we want to be good custodians of capital. Just because one has the opportunity to do something, one should not always do that. And for Cable Laying, so far, that has been our conclusion. But we are still open to doing it. And we think that clients are still interested in working with us, but it has to come with a lot of commitments.

Speaker 6

Thank you. That's it from my side today.

Speaker 1

Thank you.

Operator

Due to time constraints, that's all we have for today. This concludes

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Key Takeaways

  • H1 2024 financial performance was in line with expectations, with the first newbuild WindPeak vessel delivered on time and on budget.
  • Cumulative safety milestone of 9 million man-hours without Lost Time Incidents achieved across three newbuild vessels (WindPeak, WindPace and WindAlly).
  • Record contract backlog reached SEK 1.9 billion, supported by three vessel reservation agreements valued between SEK 400 million and SEK 700 million (not yet included in backlog).
  • About 30 percent of the 2026 merger synergy target has been realized early, driven by SG&A reductions and improved financing terms.
  • Balance sheet remains strong with €1.9 billion in financing (including €93 million cash) and an upcoming ECA-backed syndicated loan planned for funding the new A-Class vessels.
AI Generated. May Contain Errors.
Earnings Conference Call
Cadeler A/S H1 2024
00:00 / 00:00