Vestas Wind Systems A/S (VWS.CO) Q3 2026 Earnings Call Transcript

Henrik Andersen: Good morning, everyone, and welcome to this Q3 2026 investor presentation from Vestas. First, let me extend here a big thank you to our customers, partners, and also colleagues for a very committed and high support in another strong and also very busy quarter of Vestas. And at the same time, also contained and recovered from the blade incident on the 22nd of July. So big thank you. With that, let me go to the key highlights. So the key highlights for Q3 is revenue of EUR 5.7 billion. That's an increase of 6% year-on-year, driven by growth in Offshore and Service. The EBIT margin ended at 8.5% for the quarter. That's improvement driven by both profitability in Power Solutions and on the operating leverage. EPS of EUR 1.14 per share. Earnings per share grew 21% and reached an all-time high in Vestas. Really proud of that and also something we'll talk more about in the coming slides and sure over the coming days. The order intake ended at 3.4 gigawatts, driven by commercial traction in EMEA and Asia Pacific at higher average selling price, more to come. And then we are returning cash to shareholders. Just an update, the share buyback of EUR 400 million we initiated in August continues until mid-December, and you can follow that in our weekly updates of that program. And then last but not least, the outlook for 2026. Guidance narrowed, reflecting solid performance in the quarter and also improved visibility with only now 50 days to go for the remainder part of the year. So let's look at the current environment we are operating in. I think here, I will start to the right of this slide with the energy trilemma. It's never been more relevant and it's never been more current than it is currently. When we look at both the energy security, the energy affordability, and also the energy sustainability, it is on top of the discussions you will have with local governments and our partners and customers around in the world. You might have picked up, we initiated our National Air Force video. And of course, that is also to just make people maybe stop, think, and reflect over how we actually both get our energy, use our energy, and not least, also when we look towards the next generation to come, how we spend our energy for the future. When we look at our global environment, not really any changes from Q2. We still see some inflation, some raw materials, and transport costs that are deviating and varying, but otherwise remain pretty stable. We got tariffs and blockages that will increase cost over time, and we've seen that, but we've also seen that we've been able to mitigate a number of those. When we look at the ongoing geopolitical trade volatility and energy crisis, that does still lead to regionalization. It's not a surprise. We've been down that alley for a number of years. So the geopolitical fragmentation happening, of course, is potentially only accelerating that part. When we look at the macro market environment, I will say some positives, some negatives. Overall, I think there is a very increased focus on energy security and affordability, which, of course, strengthens the Vestas' underlying business. We see the investment in grid prioritized in many markets, but also in some markets, just from an attention point, probably is late in increasing the grid's capability and capacity in many countries. And last but not least, permitting improving in some markets, but overall permitting auctions and market design is still challenging. And I will say here, as always, right now, mentioned Germany representing an enormous positive in the onshore, but also have faced some challenges to address in the offshore, but so far, well done on the onshore. When we look at project level, then I will say, just like we had in Q2, very well executed to all the teams across. And again, here also a big thank you and a shout out to the cooperation we have had on especially the offshore project in He Dreiht, and I'll come back to that under Power Solutions. So in Power Solutions in the quarter, continued good onshore activity. So the order intake of 3.4 gigawatts in the quarter was driven by solid onshore order intake, especially in EMEA and Asia Pacific, predominantly driven by Germany and Australia. There were no offshore orders in Q3. ASP on new orders was high at EUR 1.22 million per megawatt for the quarter. The ASP reflects beneficial scope with 1 gigawatt of order intake in EPC contracts in Australia. The overall pricing environment remains stable and therefore, also favorable to the continued progress of Vestas in the Power Solutions. We continue also to see progress in our offshore ramp-up with increased operating costs related to one European offshore project, which everyone, of course, have now sensed it's He Dreiht, together with our partner, EnBW. The progress overall reflects reduced takt times across offshore, better efficiency in manufacturing, and good installation cadence. So overall, with the progress in the quarter, really pleased with offshore with the exception of, of course, an incident like that happened on the 22nd of July has taken not only attention, it has also taken significant operating cost, which, of course, we book in the operating cost line there. So again, a really big thank you to our customer, EnBW, and especially Peter Heydecker. We know each other much better today than we did a few months ago, and also our colleagues across both partner EnBW and Vestas for tirelessly working through this incident and therefore, also containing it to be an incident and not a stop and a go for our offshore activities, which, of course, could have been the risk. So here, really pleased with Power Solutions and really also pleased to see that we ended with an EBIT from that business at the level despite of the incident in the North Sea. You'll be able to see here on the right, first of all, where the order comes from. And of course, here, also a big recognition of Australia. It is lumpy, but when it comes through and also relates to the auction design in Australia, then they come at a larger scale. So EUR 1.22 million in the high end. That leads to an order backlog collectively in Power Solutions of just shy of EUR 36 billion end of this quarter, which leaves combined with service, which we'll come to now. So on the service side, Q3 '26 recovery plan on track. The service order backlog increased to a historical high of EUR 42 billion, an increase of EUR 6 billion compared to a year ago, including, of course, EUR 1.1 billion uplift from indexation and EUR 0.4 billion tailwind from foreign exchange rate movements. I think here, it's worth noticing that gives us a combined backlog of EUR 78 billion, which, by the way, is also the highest we've ever had in Vestas' history and more than double up of what we experienced from the end of the previous decade in 2019. Service reached 169 gigawatts under active service, an increase of 3 gigawatts compared to last quarter, as strong contract renewals and also new additions more than offset expiries and customer deselection in the service recovery. The service recovery plan is progressing well. We have achieved further operational improvements, including reduced cost to serve per megawatt, while the commercial reset is improving the backlog health. We're really pleased with where the service turnaround is progressing and how far we have reached. Now we are also into the next part of that journey. That also means we start planning of how we continue the operational discipline, key in operations on site, the cost, and also the commercial Ts and Cs, which will, of course, from 1st of January be a natural part of what goes on in the service business. With that, I will go to sustainability in Q3. So turbines produced and shipped in the last 12 months are expected to avoid a record high of 557 million tonnes of greenhouse gas emissions over the course of their lifetime. You will see that to the right, a 21% increase compared to the LTM Q3 last year. When we look at the carbon emission from our own operations, it increased by 13% compared to last year, mainly due to higher vessel emissions in the offshore. And clearly, when we have had the incident containment, we also talked about that has also pushed to the carbon usage in the quarter. So carbon use is up 13%. I don't think it takes long to compare 13% up versus 21%. It is absolutely worth doing and keep expanding the capacity of the wind industry. Then to the number of recordable injuries per million working hours, TRIR, decreased to 2.7 compared to 2.9 last year. The improvement was driven by service and construction activities, and safety remains one of our top priorities for us, and we are committed to improve that every day and on every site we operate. With that, I would like to pass to Jakob for the financials and, of course, probably a bit more words on the historical high EPS.

Jakob Wegge-Larsen: Thank you, Henrik. Indeed, the quarter with a record high earnings per share. Our revenue increased 6% year-on-year, driven by growth in both Power Solutions as well as the Service segment. Our EBIT margin before special items reached 8.5% in the third quarter, which is up 0.7 percentage points year-on-year, driven by both better profitability within the Power Solutions segment as well as also the operating leverage. As you can see on the right, we incurred EUR 30 million of special items in the quarter, and this is mainly related to the Operating Model Reset program. And then diving into the financials per segment. First, the Power Solutions segment, where we see growth both driven by volume as well as pricing. Power Solutions revenue increased 5% year-on-year, driven by higher megawatt delivered in offshore, supported by higher average selling prices on megawatt delivered in both onshore as well as offshore. The EBIT margin reached 8.8% in Q3. It was a solid result, up almost 1 percentage point compared to last year. We see benefits in the segment from both the operating leverage as well as continued improved profitability in both the onshore and offshore subsegments. The quarter was, however, as mentioned by Henrik, negatively impacted by increased operating costs related to the European offshore project. And it is, as always, important when we look at this slide on the right that we note that the onshore revenue is expected to follow a back-end loaded profile during the year, while offshore, as you can also see, revenue is more evenly spread across the quarters. And on the right, yes, you see also the EBIT margin progression throughout the years and quarters. Moving to our Service segment, where we see a quarter in line with expectations with strong cost out as the foundation. Service revenue increased by 13% year-on-year, driven by strong transactional sales that grew 83% in the quarter with high activity, especially in Americas and the EMEA regions. Revenue also benefited from a 1% currency tailwind. Service generated one of the highest quarterly results in some time, an EBIT of EUR 168 million in the quarter, equivalent to an EBIT margin of 16.5%, in line with the outlook, underlying that the recovery plan is working. And then I've spoken a few times about operating leverage, and there's no better slide than this slide to show it in numbers. Our SG&A cost amounted to 6.8% of revenue on the last 12 months basis, which is an improvement of 0.8 percentage points compared to just a year ago, mainly driven by higher revenue, but as you can also see, a slight decrease in cost levels. We continue to work with and improve our SG&A cost through the Operating Model Reset program, aiming to strengthen customer focus, simplify processes and drive commercial as well as operational efficiency. In terms of our net working capital, we see a slight increase in Q3 to negative EUR 2.1 billion, mainly driven by an increase in net contract assets in Power Solutions, partly offset by the higher trade payables. As a percentage of last 12 months revenue, net working capital in the third quarter amounted to negative 10.1% and this is quite normal and is an increase ahead of a busy Q4. And on the cash flow statement, despite of the higher working capital, we see positive free cash flow. Our operating cash flow before working capital increased to EUR 650 million in the quarter as profitability improved compared to Q3 last year. Total investments amounted to EUR 252 million in Q3, slightly down compared to EUR 274 million last year. And the EUR 252 million is mainly investments in transport equipment and tools related to our offshore 15-megawatt V236 ramp-up. Adjusted free cash flow in the quarter amounted to EUR 99 million positive, down from last year, as working capital, as just explained, increased, and that's primarily driven by the growing offshore business. We ended the quarter with a net cash position of EUR 14 million. And here, it's worth to remember that we have, over the last 12 months, paid out more than EUR 658 million in form of dividend and share buybacks. Our provisions and LPF, the so-called Lost Production Factor, which is the quality metric, it was on the same level as the prior quarter. Warranty costs amounted to EUR 181 million in the quarter, corresponding to 3.2% of revenue. Warranty consumption, which you can also see in the graph in the lower right corner, was EUR 234 million, reflecting that we are repairing old identified warranty cases and making upgrades across the fleet. On our capital structure and shareholder distribution slide, as mentioned by Henrik, we continue our share buyback. Net debt-to-EBITDA was 0x, which is in the middle of our targeted range of minus 1x to plus 1x. You can see that in the lower right corner. We maintain a solid investment-grade rating from Moody's with a stable outlook. In early November, we also extended our EUR 2 billion revolving credit line and established a new committed guarantee facility. For our other guarantee facilities, we signed a common terms agreement, which will support our customers even better. This refinancing provides the financial frame to execute and continue our growth strategy in the years ahead. And from my side, a shout out to the finance team that headed this and delivered on this and, of course, also our financing partners. We are very pleased with this. And then ending on the share buyback, as you mentioned, Henrik, we launched it in August. We continue into December 16, and this will help us and are helping us to return well above 40% of the net profits to shareholders. Dividend for the year and potential further share buybacks will be communicated with the full year result in February 2027. And then ending on our long-term shareholder value creation where, of course, the highlight for us is the EPS at an all-time high of EUR 1.14, and you can also see the rest of the KPIs moving in a direction that we appreciate. 10% EBIT is getting closer and the 20% ROCE is also getting closer. So with that, over to you, Henrik, to take us through the last page.

Henrik Andersen: Thank you so much, Jakob. And I can hear and see on your number of slides that there are a number of them that have become more and more favorite to you. So keep up the good work. And now to the outlook and the guidance for 2026. And given, of course, we are now 50 days away from 31st of December, we have narrowed our guidance on the revenue for EUR 20.5 billion to EUR 21.5 billion previously from EUR 20 billion to EUR 22 billion. On the EBIT side, narrowing to 7.5% to 8.5% from the previous 7% to 9%. And I just want to highlight here also we could have said previous when we started in February, because on the EBIT side, that means 7.5%, 8.5% is just around the originally top of that range that was 6% to 8%, a good indication of we feel quite ahead of what we actually said we wanted to get out of 2026. So that's a positive 7.5%, 8.5%. And on the service side, we now say approximately 16.5%. You can see where we are year-to-date. And therefore, we also see service performing just around the 16.5% mark. And on total investment, approximately EUR 1.0 billion, slightly down from the EUR 1.2 billion when we started the year. So that's our new guidance for the remaining part of this year. So with that, thank you so much for listening in, and I'm sure we will have a number of Q&A. So with that, I will go to the Q&A and the operator. Thank you.

Operator: [Operator Instructions] The first question comes from the line of John Kim from Deutsche Bank.

John-B Kim: Two questions, if I may. First one, if we think about the drivers or the blocks to your long-term margin ambition, how do you think about the rank order now versus what you've delivered or have on a run rate basis for onshore, service, and offshore? What are the bigger levers here?

Henrik Andersen: Okay. Let me answer that. First of all, you can see, we are getting closer and closer, and therefore, that's basis points by basis point. Our ranking, John, hasn't changed. If I look at it, with a quarter we're coming out of, probably only the opportunity to recover more and add to the 10% has probably even gone bigger in a quarterly review on the offshore because, of course, some of our containment and incident containment costs on the right sits specifically in the offshore cost in the quarter. So offshore still, by far, right now, the largest contributor towards the 10%. And then when we look at it, I will say, wouldn't exclude that, of course, where we are now on service, service we're coming out, we're saying around 16.5% end of the year. But we can also see that the transparency and the journey ahead of us on service bodes well for that being the second largest quality, sure, but it's in there. And then the third one is onshore. Onshore is as much both volume and it's the mix of markets and onshore can still contribute in that. So the 4 levers more than enough to get us to a 10% EBIT margin.

John-B Kim: Okay. And second question, if we focus down on service and the business model reset here, how far along are we on repricing and agreeing more, I guess, appropriate terms and conditions in the contract base? Should we think of this as -- I know it's an ongoing process, but is this something that you will largely complete in the next 3 years? Or is tenor too long for that?

Henrik Andersen: First of all, I think when I go 6, 8 quarters back now, I think we all sat here and said, with our revised commercial focus on Ts and Cs, I think there was, at a point in time, expectations of that renewal rates will be close to 0, and we will see our service on the -- in gigawatt on the service will probably in some quarters drop. That hasn't happened. So I think we probably, in some cases, grossly underestimated how valuable we were for making the wind parks perform well. And therefore, we are a long way into that. I will also say when we pass into 2027, some of that will be business as usual, because don't forget that when we have an average length of the contract, we see ratios up to around 10% every year on normal renewable parts. And of course, there, the new terms and conditions will be. But of course, in part of our conversations here, we've also had things where we either repriced early, renewed, or even terminated, because it wasn't for us to make any value out of. So that we are well progressed. And I think for me, the most positive is that we now can see that both the cost-out program and the commercial reset program are moving the graphs in the right direction. So we get a higher and more healthier backlog. And of course, we get a much better operational efficiency on a day-to-day basis on the cost per megawatt. So really pleased with it. And as I said here, I can definitely see the end to the recovery and the turnaround phase. Now it's also keeping that focus as a modus operandi of the service business will be key from also 1st of January '27.

Operator: We now have a question from the line of Akash Gupta from JPMorgan.

Akash Gupta: I have a couple of questions as well. My first one is on Power Solutions Onshore. Revenues were down 8% year-on-year. And when I look at your deliveries, it's down 4% year-to-date. I know revenues in onshore is a bit lumpy as you recognize revenues at deliveries. But I'm curious for any incremental color you can provide given we hear concern in the German market from transportation bottlenecks that could potentially delay installation, and for you might -- if that happens, then might move revenues from this year to next year.

Henrik Andersen: Thank you, Akash. Yes, of course, when you compare on a like-for-like, there will always be changes. Also because in some parts of the world, for instance, Brazil last year, we had a lot to do in Brazil last year, we have less to do this year. When it then comes back to whether it's in the U.S. or it's in Germany and others, clearly, when there is things that moves out of a quarter, you will also see on the order intake come on, on the second of workday in the quarter, fourth quarter, we received orders from the U.S. Of course, if that had ended 30th of September, everyone would have said, oh, that means it's above 4 gigawatts. So therefore, a, we are a going concern. Everything we do is improving and the pointers we're having both from the onshore and the offshore is pointing upwards. So we are really pleased with it. Therefore, any sort of deviations on a quarterly on an onshore don't read more into it. We see some of the same things and issues, parts of it. But I will say, honestly, we are mitigating most of it. And that has not -- I mean, you could also see it, we narrowed the guidance spot in the middle of where we intended to end in the year. So we are actually feeling pretty comfortable. If something has moved from Q3 to Q4, we have a little bit more to do in Q4. And that also means that it's a busy Q4 we are executing on in onshore.

Akash Gupta: And my second question is on the U.S. market. We saw election results last week with Democrats regaining control of Congress. And the U.S. still has the highest electricity growth rates among all major countries and a lot of land to develop wind. So keen to know your thoughts on how do you see these election results might change growth prospects in the next 2, 3, 4 years for you?

Henrik Andersen: Well, that could be one that as everyone has already expressed their opinion on. From a personal point of view and what we experienced where it works best for the energy capacity and energy situation, any bipartisan solution will always strengthen building new capacity. And here, I'm talking about all energy classes. I hope 2026 is the year where we end within the energy industry of talking badly about each other. We need more of all of the above right now. And I think the current Secretary of Energy, Chris Wright, in the U.S. have introduced a permitting bill, which I think the whole industry should welcome, because it also sets and outlines bipartisan support, hopefully, for actually how to progress and make permitting on energy assets quicker for the future. So from a midterm point of view, clearly, there will be a period of change right now until beginning of '27. But we really, really encourage, also in the U.S., to think bipartisan-wide compromises for getting legislation going, because the energy is well asked for. The demand is going up, and therefore, time-to-energy is important. Time-to-energy of the individual energy classes is important and of course, the cost. And I think wind is well positioned on the onshore side in the U.S., both with the current and I will say also future administration.

Operator: The next question comes from the line of Kristian Tornøe from SEB.

Kristian Tornøe Johansen: So my question relates to the He Dreiht incident. So I know there are many of us who would like to know exactly how much the cost is in Q3, because then we can calculate the underlying earnings. But I also appreciate the reasons why you probably are not willing to share that exact figure with us. So instead, can we talk to the underlying performance? So in onshore, are your margins continuing to improve year-on-year? And is there an element of the strength we saw in Q2 also here in Q3 for onshore? And for offshore, is earnings also improving despite this incident year-on-year? And do you remain comfortable in having offshore profitable by next year?

Henrik Andersen: Yes. Thank you, Kristian. And you're absolutely right. I'm not going to release on the call here with the number of audience what we spent in He Dreiht. It's a partnership focus to get the incident recovered as quickly as we could, and we contained any of the negative effect that would have been of having this debris being either in the water or up on the beaches. Exceptionally well done, exceptionally well-coordinated with the partner. And I can only thank for the patience the partner also showed in us now in beginning of November, now have a full turbine restored with new blades and a new nacelle. So we are really pleased with that. Kristian, that's not for free. That has quite a large operating cost that we have taken just in ordinary cost. Is it a one-off? Yes. I am not expecting that we have incidents like this with broken blades offshore. So therefore, that is in the performance this quarter. So therefore, when you read that number, then somebody has judged that, well, underperformance of Vestas in Power Solutions. I can only say here, you're wrong. Onshore and offshore progressed immensely in the quarter, also continuing the positive from Q1 and Q2. So without that, we would have been sitting here and probably smiling all of us around it. So coming back to your point around offshore being in black in 2027, the answer is yes. You can see it. We say it directly here. Takt time is better, installation time is better, and we are very pleased. We now have more than 200 V236s out there. So by the incident of 22nd of July, there's nothing that didn't work at or better than planned in Q3. So then you can make your assumptions, your math. I will allow that completely to you. I stick with my good partner, EnBW, and that's between them and us to fix a case like this.

Kristian Tornøe Johansen: That's very clear, Henrik. And then just my second question on the same topic. So first of all, can you just confirm that we shouldn't expect any costs related to this He Dreiht incident in 2027? And also, I would assume the root cause analysis has been completed by now. So are there any findings from that you can share with us, especially whether this is a design error or isolated incident?

Henrik Andersen: Yes. First of all, I can say there will be some -- as you know probably, I hinted already that in my previous answer, when we restore the turbine in beginning of Q4, there will be some carryover cost into fourth quarter of '26, but we don't expect to see any negative costs carried over into '27. We got to every hands on deck now to complete it and also get the electricity generation to our partner, EnBW, from He Dreiht. EnBW even inaugurated He Dreiht earlier in Q3. So therefore, we are fully with our partner to get things and technology up and running. In terms of the root cause analysis, yes, it's completed. No, it has no design effects. So therefore, it's not any effect on the design or the serial manufacturing of the blade. We feel strongly for that RCA we have addressed. Internally, we addressed it diligently with the certifying bodies and also with our partners. So we all agreed on the final root cause analysis, the RCA, and has been issued, and we have also informed our other offshore customers about the same just recently.

Operator: The next question comes from the line of Claus Almer from Nordea.

Claus Almer: I also have a few questions. The first one is coming back to the U.S. situation. And a few weeks ago, we had this Section 232 announcement. And I know it's not all precise, but was the wording enough to start unlocking projects that has been awaiting for clarification? That would be the first question.

Henrik Andersen: I think if anyone was taken away from the 232 announcement, it was that there is definitely an opportunity within a 6-month period to get things through. And I think also here, we have seen that also the DoW or DoD, Department of Defense, is also combining that with the Energy Administration, that now they are coming with the permitting bill. You've also seen some of the negative approvals or permittings given from the Department of Defense also start flowing. So Claus, I think most people under the Section 232 see that as a positive. Well, you can't see it as a negative. The negative in there is probably, as always, when you read the text, I think wind get blamed for nearly every possible things that goes wrong in the world, which we can also just say that's not factual, correct?

Claus Almer: But do you actually see these projects in permitting phase starting to flow? I know there was a few ones starting to get going, but then there were some other obstacles that the government introduced. But underlying, you actually start seeing projects coming through. Is that how to understand your reply?

Henrik Andersen: I've had my regional CEO here for 48 hours and he smiles. So the answer is short, yes, but that doesn't then allow you for the follow-up question to ask for the order intake in Q4. You will see the orders when they come through. But generally, whenever somebody gets a permitting and a project fully permitted right now, the offtake is guaranteed and the offtake guarantee price is typically also really healthy. So therefore, Claus, nothing will be held back from when people are ready to go. And financing of the project is not a problem either.

Claus Almer: Of course, I wouldn't spend my second question on that question, Henrik. So my second question is totally different. Looking at consensus and the Q3 results, as you also said, I think it was Jakob who said, the miss came from the onshore part. And I guess it's fair to assume this is all about timing. So it didn't come in Q3, then will come in Q4, maybe in Q1 next year. And when I try to calculate the impact on profitability due to this lower revenue than expected, the EBIT level in the quarter actually looked pretty as expected, maybe even it was an underlying small beat. Do you agree on that one?

Henrik Andersen: As I haven't seen your calculation, then of course, I can't comment on your calculation. I can just sort of say, we performed and we executed on the portfolio better in Q3 than we did and also probably to our own expectation. So Claus, we are really pleased with the onshore performance and the execution. Whether that then drops from one quarter to another, hey, we have 50 days to go. So we sit here and we say there's still EUR 1 billion in between lower and upper part. That's the usual thing. But related to Q3, we come out of Q3 with solid confidence of that we are going to hit into the guidance of the full year with confidence.

Claus Almer: I just did a very simple math saying the lower revenue have a 15% incremental margin, which is probably on the low side. And if you do that adjustment, the EBIT in Q3 looked at least as expected by consensus.

Henrik Andersen: I won't comment on because you missed the consensus and the actual so much in Q2. So I'm not going to discuss here on a call on 2 or 3 things because the deviating factors of one-off nature in Q3 is much bigger than the consensus miss we are sitting and discussing, which I think I can't say it much more direct than I think the reaction out there is wrong. And therefore, we just see it as an opportunity to complete more of our share buyback program.

Operator: We now have a question from the line of Casper Blom from Danske Bank.

Casper Blom: I also have a couple of questions, but no one to He Dreiht this time. First question goes to your level of investments. You're guiding the expected investments in '26 down by EUR 200 million. Should we see this merely as a matter of investments moving from '26 into '27? And maybe also if you can give a little bit of commentary on your general investment levels, especially for offshore if you're sort of done with the big things and that we from now on need to look more into what you may call maintenance CapEx? That's the first question. The second question goes to your depreciations here in the quarter, which came in at EUR 323 million and thus some EUR 25 million above the roughly EUR 300 million level that at least both I and the consensus expected. Is there specific reasons for this jump? Is this a new level that we should expect going forward? And has there been any internal surprises in your financial planning for depreciations?

Jakob Wegge-Larsen: This is Jakob here, Casper. Let's start with the CapEx. You have seen indeed that we take this down. This is something that we spend quite a lot of time and look at every single dollar that we spend on CapEx. So you should see this as also an attempt to simply just be prudent and look at only spending the money that we wanted to. And we have successfully been able to reduce a number of areas. And I'll not start guiding on next year. We'll guide on that in 3 months' time. But this is a good level, and we are actually very happy with this. On depreciations, a couple of things. Of course, you have seen that we have had quite higher CapEx than we have this year in the previous years, and we start basically just depreciating that. So that's a natural consequence. But then, of course, also in the depreciation line, you also have the impact of leases. And of course, as we do more and more offshore, that also hits that line. So simply the vessels that we have as part of that line. And of course, having an incident like we have here in Q3 is including also additional capacity with offshore vessels. So that have also driven it up. And then again, we're not guiding on depreciation. So I'm not going to start answering the last part of your question. But overall, this is something we're very happy about how we can keep CapEx under control. And then, yes, depreciation is a consequence of the operations that we have now and also the CapEx we have done in previous years.

Operator: We have now a question from the line of Sean McLoughlin from HSBC.

Sean McLoughlin: I wanted to just gauge your level of confidence on the rebound in offshore. The industry is looking at an installation gap in '28, '29, already seeing financial stress points in the supply chain, particularly around foundations. And what do you need to see to give you confidence that order intake picks up again over the next 6 to 12 months for you?

Henrik Andersen: Thanks, Sean. I think on the offshore there, first of all, right now, in a quarter like this, all hands on deck in getting the supply chain and not least the manufacturing to support what we have gone through here. So therefore, coming out of this, and as I said in the introduction, to avoid any major or material stop and go in an activity like this is really positive. And I can only thank the supply chain and our partners for doing that. So I'm not so nervous for not being able to mitigate. We are mitigating on a quarterly basis whatever challenges that are thrown at us. So that one, not so nervous. Then your second part of the question was a bit more about what happens on the demand side. And I think in most of at least the European markets or Europe across, there is an increase in demand. There is a discussion on is there some of those things from an auction point of view, you can accelerate? We are coming out of a quarter where we have had elevated energy prices across the whole of Europe. Most governments right now are spending disproportionate time, probably 80% of their time discussing how they can increase subsidies or somehow lower the energy prices rather than spending real quality time on adding capacity with short notice. So of course, we come from the latter. And I don't question. There can be years, there can be a '29, there can be a '30. But when we are into the next decade, offshore will be one of the fastest, best, easiest major energy sources in Europe that you can build yourself and you can elevate. So therefore, not a problem.

Sean McLoughlin: And staying on offshore, just to understand in a little bit more detail the steps to profitability in '27. I mean you're already at a EUR 1 billion plus quarterly revenue run rate. Just what then is driving improvements over the next quarters in takt time and in installation time?

Henrik Andersen: I think here, I think you asked me 4 quarters ago, I was not as sure in the voice of answering because, of course, we still had major takt time improvements, and we still had major cost out. And in reality, Sean, we were not yet feeling home safe on learning and picking up the installation pace. Today, we can say that's different. We are able to mitigate. We're also able to find through vessels and capacity and the partners we have there where we can either accelerate. I think right now, the whole offshore industry in Europe is scaling up. And of course, there, we are subject to some of those bottlenecks. But outside that, we're really pleased. I don't think today, it's the EUR 1 billion you see a quarter or if it's a bit more or a bit less. That's not the variable that gets us closer to 10%. It is that we keep that constant improvement. And of course, in a quarter like this, material contribution can be found out of a quarter like this to a 10% margin target.

Operator: The next question comes from the line of Martin Wilkie from Citibank.

Martin Wilkie: Just a couple of questions from me. The first one, just to hopefully sort of finalize on the He Dreiht questions. When you say there's no impact to '27, does that mean that from a sort of revenue perspective and sort of project execution perspective, that project is completed in the fourth quarter, and that's the reason that you're confident that there's no impact in 2027?

Henrik Andersen: Yes, Martin. So what's sort of in a bit more sequence is when you have finished your root cause analysis and you know there's not a wider effect on the other 63 turbines. So all turbines are now up, all turbines are now installed, and that means it's now commissioning and it is the work that goes on getting every turbine with some of the smaller component issues and other stuff on the grid, and that is scheduled to happen before year-end '26.

Martin Wilkie: That's really helpful. And then the other question, just coming back to the U.S. market. So there's obviously a couple of things going on. One is the permitting bill that you mentioned, but also then on the Section 232, we've got this 180-day window where the U.S. government is looking into imports effectively. What's your impression as to what customers want to do at the moment? Are they looking for finalization on the permitting bill? Or do we have to wait for that 180-day period on the tariffs to complete as well? Just to get some sort of sense as to how you think customers are looking at potentially either booking orders early in 2027? Or do we have to wait for all this uncertainty to pass?

Henrik Andersen: I think actually, if I look at it on the 232, and I think most of you also concluded that, I think there were much different scenarios for the Section 232 than a 180-day delay window, and then at the same time, not particularly otherwise hinting other things. And I think also that goes for the onshore industry in the U.S. There is a clear also acknowledge of that most of the onshore equipment and turbine is coming directly from factories in the U.S. So therefore, this about tariff is, of course, a discussion point, but you are able to mitigate quite substantially part of that. So therefore, it's positive that there is a period of time where you can do things. That also means if you can accelerate some of the things you have planned for end of this year and into '27, you do whatever you can with those. And then at the same time, I think it gives a bit more visibility of that probably the demand side overrides trying to find new legislation that hinders capacity being built. I think that's the way I should phrase it, because everyone wants to try to build capacity faster, Martin, because the electrons and the electricity is extremely high demand, extremely high demand. And that goes for all customer groups, whether it's utilities or it's the infrastructure funds. And I think we are looking into a decade or probably decades of infrastructure build-outs that require substantially more energy generation in the U.S.

Operator: The next question comes from the line of Ajay Patel from Goldman Sachs.

Ajay Patel: Look, it's more of a clarification, if you don't mind. If I look at last year's Q4 margin, it's like 9.3%. And if I look at the midpoint of your guidance for '26, it would imply 9.4%. And so given revenue goes up in Q4, is the flat margin just more a consequence of the He Dreiht or the offshore side of the business? Or are there any other variables that I need to think to for Q4 to just get a better grip on where it should come out? And then the second question, just on offshore as a whole. Can you just confirm, you're still expecting to be breakeven in Q4 on offshore and the objective is to be profitable in '27?

Henrik Andersen: Yes. Thanks, Ajay. I think here on the Q4 breakdown and leading into '27, we expect offshore to be in black numbers. I probably just finished a Q3 where I didn't expect to have the number I ended Q3 with. So therefore, we also have to just appreciate offshore will pose sometimes a bump or a challenge, but the schedule is that we are coming in black numbers in '27, and therefore also being black numbered when we get into part of the finishing of this year for sure. When it then comes to exactly hitting comparable the same or better than Q4 2025, you will also see the whole year of '25 was balanced differently in EBIT over the year. And we are much further advanced this year probably comes from part of the backlog we're executing on. But at the same time, we're not trying to hit the lower part of a guidance range, but we also know and duly appreciate that we are in the latter part of the year where it is extremely busy, and we are weather dependent. So take that as the best guidance. So it's the typical risk, but there is no other things we see, Ajay, on that part. And onshore still performs well, but it is also important that everyone wants to have access to the grid right now with energy and electricity generating assets, because electricity prices are high.

Operator: The next question comes from the line of Lucas Ferhani from Jefferies.

Lucas Ferhani: I just had one additional on offshore. As we're still in the EUR 1 billion roughly kind of quarterly run rate, so EUR 4 billion, just wondering into the coming years and before talking about any potential additional capacity, I know there are plans in the U.K., is that roughly what the business should continue to deliver? Are you at kind of max capacity when you look at your factories and also on productivity? Or can you grow from that base into coming years again before additional capacity potentially coming through?

Henrik Andersen: Yes. Thanks, Lucas. If you are asking on behalf of the EU Commission or the government in Europe, I can definitely confirm that it's not a problem to increase capacity in Europe. It's more to have the stability in between the years that you don't overload certain years with high auction volumes and then have literally no auction volumes in other years. You've seen that when we have our takt time improving, then we sometimes have to adjust our shifts in some of our factories negatively. That's a positive for an analyst, but it's a negative for a CEO in the sense of that means I could, in reality, have kept some of the capacity now if I had more auctions coming through from some of the European countries. But you know what, not a problem. So therefore, when we look at the quarterly split on offshore, that will run that way. Whether then we will have quarters or years where it becomes a little less or a little higher, we will take it as it comes from that angle. We will just encourage people to think planning. And there is a capacity that can be accelerated. So if government wants to build more offshore earlier, then I think on behalf of the industry, I think we can build it earlier if governments can get us grid access earlier. And that, by the way, goes for most parts of Asia Pacific as well, where I just returned from a little bit more than a week ago. Exactly the same interest. And at least 3 countries I was in are having energy imports north of 80%. So they are having more homegrown energy from also offshore is one of the key priorities that I don't understand why we don't do faster.

Lucas Ferhani: Perfect. And then the second one is on Germany. I guess, any updated thoughts around kind of the changes to the regulation we discussed before. Obviously, it's still ongoing. There's still potentially some changes to happen. But any updated thoughts on going into '27, and the new rules, what happened in Germany?

Henrik Andersen: I think we still have to give the German government time. I think they invited for a consultative process, which I actually welcome. I think when you want to do adjustments or taking advantage of what Germany has built, especially in the onshore, it's right to invite market participants to contribute with interest and also good insights to how to potentially even improve it. And if you want to increase the current German from shy around 10 gigawatts a year to potentially 15 gigawatts a year, we definitely need also from both grid and permitting some longer-term planning and thinking. So I welcome that. There isn't any news. Could it be that the news could be around the corner any day or any week? Probably. But on the other hand, we've also seen a German government that is right now also addressing part of the vacuum that they have had from some of the previous offshore auctions. So I think there's a couple of things going on with the German government. But I know they're working hard on it. So therefore, we have given our input. And of course, I think it was a positive consultative process because they want to keep the volume coming.

Operator: The next question comes from the line of William Mackie from Kepler Cheuvreux.

William Mackie: Two questions that are perhaps more mid-term orientated, to step back a little. Good progress throughout 2026, and thank you for all the detail on the quarterly numbers and the levers for turnaround. But can you frame 2 things, please? Firstly, within offshore, back in the black next year if things move on target. But when you look at your mid-term objective, when would you expect that business to be hitting the medium-term objectives for profitability? And probably the same question is for service. The reset efforts end this year. It's clear that you see good momentum going into 2027. But what sort of expectations can you set for the point when you can get back to the historic levels of 20% plus profitability across service?

Henrik Andersen: Thanks, William. I think here, again, we will touch on the '27 numbers in February, and you will appreciate that I'll be borderline if I start giving you actual years of where it is. I think the service journey is twofold. We need to get it back. So it starts with the 2 that we are working hard on. And I will say, compared to where we have been just 4 quarters ago, I'm fairly more confident of that we have the building blocks of doing that, but it also shows that we have an underlying business that was underestimated in its own value together with our partners. And that I think we have had a much stronger handshake on. So both the 20% and the 25% mark is in the making of what we are looking for, for service. Putting years on it, not so interested because I will say mid-term, for sure, we will get back towards the 20%. The 25%, don't know a year, because we need to see that it's continuing progressing and improving what we have already initiated. But we are really pleased with where we are today. And if you ask me 7, 8 quarters ago, I wouldn't have said we will be here on the backlog health and the cost out, and we are. So that also showed we had an untapped opportunity here. On the offshore, we will be back in black. No one knows how much that back in black will be on your side. We know it on our side, and it's a black number that is not just a black number. So therefore, we will have that journey over the coming years before. And then, of course, I think in the meantime, we can also see that the onshore has moved. So for offshore to catch up with onshore margin, that has become more difficult in the last couple of years. So that's also another observation that in reality, the blended mix of Power Solutions has made it a little more steep for offshore to catch up with them. But we see a blended mix there that it's margin accretive, both of them to the Vestas margin. Which is also why the size of the improvement and the lever and the size of the lever to 10% sits very well with the largest impact from offshore.

Operator: We now have a question from the line of Alex Jones from Bank of America.

Alexander Jones: Just one question from my side on the service reset. You talked about repricing efforts earlier. Are you able to give any more color on what share of the gigawatts under service you have repriced over the past 2 years? And are we already seeing the benefit of that repricing in the service margins that you're reporting this year or some of those agreements take time to take effect, and therefore, we should think about more that progression showing in the margin in 2027 and beyond?

Jakob Wegge-Larsen: Jakob here. I would say on service, yes, we have been successful with a number of reset of contracts. First and foremost, this is improving our backlog health. And as Henrik is saying, that will, over time, also go into higher margins. I think what the 2 points that I want to bring out here is that our renewal rates continue to be at a very high level, which means that there is a high appetite also to continue doing business with us here in service. And you also see that in the very strong backlog of the EUR 42 billion that we end with in this quarter. That's EUR 6 billion up year-on-year. And that combined with our Power Solutions backlog now almost hitting EUR 80 billion together, that's something that bodes well for the future.

Operator: We now have a question from the line of Klaus Kehl from Nykredit.

Klaus Kehl: Just one question from my side. Your transactional sales in service was fairly high in this quarter. Did that have anything to do with the high electricity prices in the U.S. right now? And also, could you just give us any comment on the transactional sales here in the beginning of Q4? And what I'm wondering about is whether it's a new trend or just pure luck in Q3?

Henrik Andersen: Klaus, I always like -- first of all, it's the last question. And of course, just sneaking in pure luck is always easy for me to answer. Nothing here is pure luck. But as I said here, there is clearly, around the world right now, energy crisis, of course, triggers also, anything that has a component or has a vacant thing, whatever. Then, of course, you need to get the transactional sales going. And of course, that goes for our own transactional sales, and it also goes for customers' transactional sales as part. So that was elevated, and it is more or less solely increased from pretty transactional sales. So there's not a repower influence in the Q3. Can we continue doing that, Klaus? We will try. But I don't think anything in Q3 for Vestas came out of pure luck. So there was a really commitment to it and really pleased to see it. I think there is a link between the transactional sales and the elevated energy prices. I think that's the underlying.

Klaus Kehl: Okay. But do you have any comments to the trends here in the beginning of Q4?

Henrik Andersen: Now you're asking me of guidance on transactional sales for Q4, which I'll tell you about how that went in February. But if you took my link between energy prices and transactional sales, then you can make your own connection. With that, thank you so much for the Q3 call. Look forward to see many of you over the coming days. And again, here, especially also to the ones that are really out there on site and doing it, keep up the good work. You've done really well in Q3. Thank you.