Wartsila Corp B Shs

Hi all and welcome to this news conference for Wärtsilä Q4 25 results. My name is Hanna-Maria Heikkinen and I'm in charge of investor relations. Today our CEO Håkon Agneval will start with the group highlights. He will continue with the business performance and after that our CFO Arjen Behrens will continue with key financials. After that we will discuss the dividend proposal and also the outlook. After the presentation there is a good opportunity to ask questions. Time to start, Håkan.

Thank you, Hanna-Maria. And before you leave, congratulations. You were voted to the most popular investor relations professional in Finland.

Thank you, Håkan. And thank you, first of all, to Håkan, Arjen and all of the Wärtsilä management, but also all of the analysts and investors who have been engaging in our dialogue and providing very inspiring questions. Thank you.

Thank you. Thank you. So, Q4. And 2025, I think this has been a great year. And we are on a great journey, I would say. If I sum it up in one word, great. But you also need to look a little bit beyond, and I will come back to that. So if we start with Q4, all-time high operating profit and cash flow. And look at the order intake. And if we focus on energy and marine, it's developing quite positively. So marine order intake increased by 8%. while the organic growth, which when we exclude FX impact and impact of acquisition, was actually 11%, double digit. On the energy side, the energy order intake increased by 4%, while the organic was 13%, so also there double digit. Total order intake, and this is where it gets a little bit complex. The total order intake for the group was down 11% to 2.2 billion euro due to two drivers. Basically, a strong comparison period in energy storage. Energy storage had decent order intake in Q4 2025, but it was very strong in the year before. In general, we continue to have a challenge on order intake in energy storage. And then the second driver for the down 11% is the divestment in portfolio business, which is actually, we are on a good trajectory divesting the business units, but as we take them out, it has an impact, of course, on our overall order intake for the group. But key messages, marine and energy, double-digit organic growth. Now, we also continue to have a strong order book around €8.2 billion, and that is after the elimination of about €900 million related to the divestments. Net sales increased by 8% to about 2 billion euros. Then we continued the journey of improving our operating profit. Comparable operating results increased by 23% to 256 million euros. That is 12.8% of net sales. Operating results increased by 10% to 251 million euros, and that is 12.5% of net sales. And then on services, a lot of attention on services. The 12-month rolling book to build continues to be above 1. On the energy side, it was 1.1, and on the marine side, it's 1.01. And cash flow, and Arjan will talk more about that, strong cash flow from operating activities of 652 million euro. So strong Q4 and If we look at the full year, we have all-time highs in four key metrics. So, in order intake, in net sales, in operating results, and in cash flow. So, very strong year. Now, I will talk through these numbers, and I will do it rather quickly, because of these effects on portfolio and storage, we actually make an additional slide this time, where we drill a little bit deeper. But if we start with the group levels, order intake, you can clearly see it's down 11%, 2.2 billion euro. Net sales is still up with 8% to 2 billion euros. Book-to-bill also on group level, 1.11, clearly above 1. Comparable operating results up 23% to 12.8%. Operating result up 10% to 12.5% of net sales. Then looking at the full year before we move on, order intake rather flat on group level, net sales up 7% to 6.9 billion euro, book to bill for the full year 1.17, comparable operating results up 20% to 829 million euro, which is 12% of net sales, And finally, the operating result up 16% to 833 million euro at 12.1% net sales. And that's a milestone, the 12.1. You remember our old financial targets for the whole group. We achieved them and now we move on. Now, this is a little bit breaking down into details because this is the underlying message. So let's look first, these are full year numbers. Let's look at marine and energy combined and then energy storage. So here you see a little bit different picture. So order intake was actually up on full year 17% to 6.9 billion euro. Even if you look at organic growth, it's even higher, it's 20%. If we look at service and equipment, it's flat on service, but we do have an FX effect here of about 4%. Equipment is up 43% to 3.3 billion euro. Order book up 18% to 6.7 billion euro. Net sales up 12 to 5.5 billion euro. And organically, it's even up 15%. You look at the services, services actually up 6%. It's up 10% if you look organically. Equipment up 22%. And book to bill moving to 1.24%. And comparable operating results up 21% to 758 million euro, and that is 13.7% of net sales. We are on a good path, solid path to reach our targets of 14% for marine and energy combined. Now, that's all good, developing really well. We do have and continue to have a challenge of storage. I mean, you can clearly see it here. Order intake has been a real challenge during 2025. So order intake is down 60% to 455 million euro. If you look at the order book, it's also down 36% to 719 million euros. Net sales down 13% to 694 million euros. And book-to-bill clearly below 1 at 0.66. And comparable operating results also deteriorated to 24 million euro, 3.4% of net sales. So still within the 3 to 5% EBIT span that we've been talking about, the team is doing a good work in executing projects and delivering and doing that in a profitable way. But of course, order intake is a major challenge. Now, looking at our two industries, some comments on the general industry development, starting with marine. The sentiment for our key segments remain on a good level. Of course, overall contracting in 2025 decreased from the extraordinary activity levels we saw in 2024. So the number of vessels ordered in the review period decreased to about 2,000 from 2,400. Now, one driving factor, the regulatory uncertainty, but also high new build prices and softer market conditions affected negatively the new build investment in some segments. Ordering has been rather uneven across vessel segments. The appetite in our core segments, in vessel-less core segments, cruise, container ships, and LNG bunkering vessels, has been rather good. And contracting in our key segments are expected by Clarkson and by ourselves to remain clearly above the 10-year average level. Shipyard order books are at the highest level since 2009, and ship building capacity expansion is primarily in China. In January to December, 366 orders for new alternative fuel capable ships were reported. That's about 37% of the total, so to say, which is down from 50% in the comparison period. And that is mainly mixed-driven, because during the last time, there's been a bigger share of tankers and conventional bulk carriers, so to say. But the key thing here, when we see the graphs here, is still the same message. If you look on the overall demand, the forecast from Clarkson is still above the 10-year average. Focusing on Wärtsilä core segments, it's clearly above the 10-year average. Energy market. Increased demand drives the energy transition and investments in the energy transition, and the transition continues to move forward. Two key themes stood out in the energy-related macroeconomic development in 2025. One was load growth and the other was tariff-related uncertainty. The investment environment for energy technologies has improved along with global microeconomic conditions. In engine power plants, the market demand for equipment and services has been strong. Demand for baseload engine power plants is expected to remain stable with further growth opportunities in data centers. The driver for engine balancing power plants continue to develop favorably. In the battery energy storage, the demand is closely linked to the increasing share of intermittent renewables in the energy system, which continues to progress strongly. The US market is still facing regulatory headwinds, though several drivers remain solid, with data centers also for storage as a potential new opportunity going forward. And after significant growth driven by solar up to the mid-20s, renewable capacity addition are expecting to decrease slightly in 2026. Growth prospects towards the end of the decade, though, remain solid. So there is still definitely a positive trend. So going through the numbers, looking at the graphs, and now we are back to group level. So organic order intake decreased by 4%. Order intake decreased by 11%. But as we talked about, marine order intake increased by 8%. Energy order intake increased by 4%. Energy storage, though, order intake decreased by 40%. If we look at equipment overall, equipment order intake decreased by 15%, primarily driven by storage, and service order intake decreased by 5%. We have a strong order book and rolling book to bill continues above one, I think now for the 19th consecutive quarter. But as we talked about, the order book decreased due to the elimination of about 900 million euros related to divestments in portfolio business. Now, this is a new slide that we have added and our intention is to keep this as a standard slide in our reporting going forward. And we are really trying to describe how our order book will translate into sales going forward. Because the existing order book will generate sales that is distributed further into the future. So here you can see the distribution in time of the deliveries of the existing order backlogs for 2024, 2025 and 2026. And you clearly see how it is stretching out. We have also given the numbers and the size of the order backlog to help the analysis. And you can say there are two driving factors here that you really need to look very carefully on. First of all, we are selling capacity further and further out in time. And that is, of course, a function of a hot market, so to say. And the other major driving factor, as you know, in energy, we are very much about equipment deliveries and much less on EPC deliveries these days. And there are two different revenue recognition models. I mean, basically, the EEQ you could say the major revenue recognition, it's rather lumpy because it's actually when you deliver the engines. And that is different from the EPC way, because the EPC way, you could say you gradually continuously over the project recognize sales. So these two factors really affects how we think about translating the timing, how we translate the order backlog into sales. Very important going forward. Organic net sales increased by 16%, net sales increased by 8%, marine net sales increased by 10%, and energy net sales increased by 29%. Energy storage net sales decreased by 20%. Overall equipment net sales increased by 15%, and service net sales remained stable. Profitability continued to improve. Net sales, we talked about that, increased by eight. Comparable operating result increased by 23%. And the comparable operating margin 12 months rolling to 12% from previous 10.8%. Now, technology and partnership highlights. And there is a lot of exciting things happening. As you know, it's all about innovation and technology and services. And there we are really making progress. First of all, data center orders. We continue to break into the U.S. and a global also data center market. We talked about it that... off-grid data centers really growing in its market, so to say. And the power need in many installations is right in our sweet spot. So this is the example from the end of last year, where we got an order for 507 megawatt power plant supplying data center in the US. We continue to grow and we will deliver 27 engines to provide continuous primary power for a new data center in construction in the US. The on-site power facility will operate with these 24 Wärtsilä 50 SG engines with a power of 507 MW. They will run on natural gas that can later be converted to run on sustainable fuels in the future. The order was booked in our order intake in Q4 2025. The equipment will be delivered in 2027. Then moving to marine, we had our second order for an ammonia engine on the marine side, and to a Norwegian customer, Skarv shipping cargo vessel. So we will provide our advanced Wärtsilä 25 ammonia solution to power a new cargo vessel for Skarv. And this vessel will be built at the Huanghai shipyard in China, and it will be the first new build to benefit from the solution. And this order was also booked in our order intake in the fourth quarter of 2025. You have also seen the other press release that we have made this morning, and it's about setting us up for continued growth, further investments in our capacity. We will expand our production capacity in Vasa in Finland. We will expand the technical capacity with 35% to meet the global increase in demand in energy and marine. We will invest about 140 million euro to further expand our production capacity with 35% in our STH technology center and also in the associated global supply chain. The vast majority of the investment is in STH. This expansion will increase our industrial capacity and strengthen the capacity of the associated global supply chain. And the new capacity will be installed within the SDH expansion that we announced in April 2025, and it's expected to be commissioned in the first quarter of 2028. So a major step for SDH in Vasa. I think overall now, the last few years, we have invested about 400 million euros in Vasa facility. But it's not only about Vasa. We also continue to invest in our service business in a very concrete way in our global spare part distribution center in Kampen in the Netherlands. And that investment is also to continue to support the growth. So we will expand our main spare part distribution center in Kampen by 40% and consolidate nearby leased storage facility into Kampen. This is a smaller investment, but a very important one. We will invest about 14 million euros in expanding the facility and we expect to have it commissioned by 2027. Then expanding capacity is a lot about the supply chain, as we all know. And I really wanted to highlight this partnership agreement that we have signed with one of our key suppliers, Simpelkamp Foundry. We have formed a strategic partnership to secure the supply chain to support our continued growth. And we strengthen the supply chain by this strategic partnership with Simpelkamp in the supply and their supply to us of large cast components for our engines. And as a result, we can in our turn support the growing demand from our customers and the markets in sustainable technologies for the marine and energy sectors. We are also continuing our work on streamlining Wärtsilä, becoming a more focused and profitable company. So we have made progress in our portfolio business divestments. This is nothing new, but we wanted to sum up some of the of the metrics here to help you with the analysis of Wärtsilä. So as you remember, we divested ANCS, Automation Navigation and Control System, to SOLIX. The divestment was completed in the 1st of July last year. Now, the annual revenue of this business was 127 million euro in 2025 and close to 230 million euro in 2024. And ANCS has also clearly been the most profitable unit of our portfolio business, representing about 80% of the operating result during the first half of 2025. So that was ANCS. Then we had MES, the divestment of marine electrical system to Vinci energies that was completed on 31st of October last year. Here the annual revenue of the business was about 92 million euro in 2025 and 100 million euro in 2024. And the group order book has now been adjusted with in this case 620 million euro. So it's one big part of the 900 million euro that I was talking about before. And finally, the divestment of gas solution to Motares is expected to be completed. We have signed and we expect to complete the transaction in the second quarter this year. The annual revenue of the business was 394 million euro in 2025, about 300 million euro in 2024. And after these divestments, we have one business unit left, and that is water and waste. And that is a business unit with annual sales of about 50 million euro. And of course, our ambition is to move ahead and also sign and close during this year. Work is ongoing. Now looking a little bit on our businesses, how have they developed? So on the marine side, growing order intake and net sales, as well as improving our comparable operating results. So order intake up 8%, we talked about that. Net sales up 10%. And if we look at the development, continuous improvement of the profitability, on the positive side, we have higher service and equipment volumes providing better operating leverage. We also have improved new build margins in what we have delivered, positively contributing. And on the investment side or the cost side, we do run increased R&D, investing into our future. Service continues with a book to bill above one. We see 9% CAGR on the net sales and you see the different disciplines here. And then you notice if you see agreements, it looks like it's going down. It's the blue line there. That is more periodization because agreements, it's a little bit like project business and you can have It could be a bit lumpy based on periodization. And you also see the retrofit business that is really below one now, but also there it's project business. And we have a positive outlook going forward. So we will continue to grow in marine services. Going over to energy. So, growing order intake, as well as significantly improved net sales and comparable operating results. Order intake up 4%. You might think that was not so impressive growth, but look at the new build side there and look at the orders we announced here just in the beginning of the year, where the other week we announced an additional 550 megawatt plus. It's about periodization of order intake of big orders, so to say. there is a strong underlying demand, and we will come back to that when we give the demand guidance. Net sales up 29%. Here, if we look at the development of the comparable operating result, continue to improve our profitability. Also here, the higher equipment volumes provides better operating leverage. And we have a better service margin mix. I can also say that we are building the margins in our order backlog, but that will be delivered later, so to say. On the same side as Marine, we continue to increase in R&D. Also on the energy side, we continue with a service book to build above one. We have had 4% CAGR. Here you see, if we look to the right, on the energy side, on the blue dotted line, we had good service agreement order intake at the very last weeks so periodization here we were a little bit lucky but the overall trend is positive similar to marine you see retrofit here it's periodization we see underlying growth going forward storage So in storage, on the positive note, we had a revived order intake development after three slow quarters. However, it was clearly below the exceptionally high comparison period in the fourth quarter of 2024. And this is why you see the order intake is down with 40%. Now, we do have a challenge overall through the 2025 on order intake. Let's be very frank about that. Net sales was down as a consequence of that with 20%. If we look on profitability, which has decreased on the positive side, as I talked about, very solid execution of the projects in the backlog by a strong team. But the lower volumes and also R&D, we continue to invest in R&D, is affecting the profitability negatively. Here's the bridge, Q4, Q on Q, so to say, and how the different businesses are developing. So from the group, we go from 11.3% to 12.8% comparable operating results. Marine is up from 11.8% to 13%. Energy is also up from 15.1% to 16%. And storage down then from 6.9% to 4.3%. Portfolio is actually executing well, improving 3.7% to 7.4%. And overall, the comparable operating results increased by 23%. Now, Arjan, over to you.

Thank you, Håkan. Very happy to talk about other key financials as they look all very, very good. Very happy with that. If we start with operating cash flow, €652 million for the quarter and €1.6 million for the full year. Both on the quarter as well as the full year, it's an all-time high, as Håkan also mentioned earlier. The previous all-time high was actually also on the slide. It's €1.2 billion in 2024. Great support from the profitability to the cash flow. Let's say you can see it on the EBITDA line, which is clearly getting higher, and that, of course, over time will convert into operating cash, as well as, let's say, the working capital. Working capital, in fact, is actually at an all-time low as well. Big element in the working capital is, of course, the advances. It's about 1.3 and a little bit more. If you exclude the advances from the working capital, still I would say it's a very good working capital level. It's about 80 million euro positive compared to, let's say, two years ago at the start of, let's say, 2024, it was 600 million euro. So working capital excluding advances being 600 million at that time, now about 80. So it's not just the advances that help us, but it's also all the good work that we are doing in other areas of working capital. Clear highlight on this slide is the ROSE, clearly going up. It's close to double, I would say, from previous year. And of course, that is really driven by also good profitability development and in particular also a very good working capital development. Solvency, I'm also very happy with. Let's say, I think it's a couple of years ago that we had a number above 40. Now we have 40.5, up from 37.4 last year. And earnings per share, also here an all-time high at 1.06. So I can only say that I'm super happy with these numbers. If we look at the trend, let's say all trends go in the right direction. cash flow, clearly let's say the orange trend is up and the working capital trend is down. Also good to remark here that let's say the five year average working capital to net sales line, the dotted line on the right side graph, is now for the first time in a negative number, minus 0.6. Just for reference, at the end of Q2, I think we had 2.4, if I remember right. So really, let's say, going well on a long-term basis as well. If we then move to dividend, the board will propose to the AGM, or has proposed to the AGM, basically a base dividend of 54 cents, euro cents, to be paid in two installments, and then an extraordinary dividend of 52 cents, all together making up for 100% of EPS at 1 euro and 6 cents. Final slide from my side, solid progress towards the financial targets. If we start at the marine and energy combined graph in the top left corner, first of all, very good growth, organically 15%. New build was 25% and service was 9%, so really in both areas, really good growth. Also the orange line, 13.8% on the operating margin. really improving significantly I would say in Q4 on a rolling 12 month basis Q3 was 13.2 percent and one year ago at the end of 2024 we had 12.8 percent so it's one full percent up year on year percent point I mean. On energy storage, as Håkan also explained already, we have been suffering from, let's say, lower intake. That translates then, of course, also in lower sales, and that has a consequence to, let's say, absolute profitability as well. Still, having said that, let's say the performance was on an acceptable level, 3.3%, which is within the range of the financial targets for energy storage, 3% to 5% operating margin. Gearing, it further goes down. I don't need to comment too much about that. And I think the dividend distribution I just mentioned. With these words, back to you, Håkan, on the outlook. Yes.

So let's look on the guidance. So on the marine side, we expect the demand environment in the coming 12 months to be similar to that of the comparison period. But please note that the last 12 months have been very, very strong. So we continue to The demands continue on a very good level, driven by our core segments. On the energy side, we expect the demand environment for the next 12 months to be better than the comparison period, and driven not only by data centers, but by balancing power, other baseload, so better demand environment. On energy storage, we expect the demand environment next 12 months to be better also, of course, coming from a very low level. But particularly in the energy storage, we note that the current geopolitical uncertainty particularly impacts this business and may affect the growth. Then we make the general comment that we underline that the current high external uncertainties make forward-looking statements challenging. due to high geopolitical uncertainty, the changing landscape of global trade and the lack of clarity related to tariffs. There are risks of postponement in investment decisions and of global economic activity slowing down. Okay. That was the presentation.

Thank you, Håkan, and thank you, Arjen. Now we will continue with the Q&A. And I kindly ask all of the analysts to start with one question, and then we can continue with the follow-up questions after everybody has had the possibility to ask one question first. Handing over to the operator, please.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi, good morning. Thank you for taking my question and then the follow-up. But I wanted to start on getting a little bit more color on the 35% capacity increase. I guess a couple of items related to that. But how much of that is already things that you have, let's say, on 1Q28 you will open up? How much of that is already covered by things that you have on the backlog? And then would we have sort of any margin impacts before 1Q28 because you're hiring people and how should we think about sort of like any financial implications before you open? But starting with that and then I'll ask a follow-up.

So I think now what we can say, well, we are starting to open up our backlog. I'm referring to the slide that we presented here. I say it's a new standard slide going forward. But I don't think it has reached 2028 yet. So I think it's a little bit early to open up there.

I mean, I can say that... Of course, we have orders for 28 already.

We have orders for 28. And for certain parts of our... you know, offering. I mean, engine types, as you know, we have different engine types. If you want to order a new engine of that particular type, the delivery time is definitely in 2028. Then we have other engine types where we can deliver at the end of this year. So it's a mixed situation. I think that is as precise as we will go. On the cost side, I think that that will not affect our profitability in a major way going forward, so to say.

Got it. Thank you. And then just as a follow up, can you talk a little bit about like how prices per megawatt have evolved 25 versus 24 in the general trend you're seeing given the demand has been so strong, particularly both for engines and turbines and everyone in this supply chain. So to have an idea of how the mix is also maybe improving going forward.

No, as I briefly mentioned before, I think the margins in our order backlog are going up. I mean, it is, of course, a very vibrant demand side. And so that leads to, you know, some pricing realization. But I don't want to go into the details. But it's developing. The margins are increasing.

Positive. Thank you. The next question comes from Akash Gupta from JP Morgan. Please go ahead.

Yeah, hi, good morning. My question is on your announcement on increasing capacity by 35%. So again, I mean, when we look at the other power equipment makers, the decision is not surprising. But I think what is different is on other guys, we have a lot of visibility from for motors backlog and some slot reservations, while at Watsila, based on what you have reported, we don't yet see that. So I wanted to ask, like, you know, what has changed in the last few months that led to this announcement of 35% increase in capacity? Is this more bottleneck on these 50 SG engines that has been commonly used by data centers based on your order announcement? or anything that is in pipeline, but any clarity that you can provide behind this capacity expansion, that would be.

So, I mean, first of all, please note that we communicate, you know, around our technical capacity. And right now, and you see that in our Q&A document, which we also posted, 2025, we have been operating around 75% of our technical capacity. So 75% of the technical capacity. Now, the expansion is to expand the technical capacity with 35%. So then you understand we are coming from one level and going to another level over a few years. So that's one important element to look into. Now, why do we do this? I mean, you could also say already in April last year, we took one step. We announced the 50 million euro and where we started to expand. And now we continue. And the drivers, they are... There are several. On the energy side, yes, data center is clearly a driver, and it's certainly there. We have several opportunities in various stages of maturity. You also saw we started the year in a very strong way. But it's not only about data centers. On the balancing power, the narrative is playing out still in the U.S., still in some other countries as well. And then on the, you could say, the traditional base load, we have strong demand in Southeast Asia, in Latin America. So it's a strong underlying demand situation overall in energy. And on the marine side, you know, we continue to operate, as we talked about, even though we guide similar, this is on a very high level for us and in a good level. And we continue to see strength in cruise. We continue to see strength in offshore and special vessels, to a certain extent to containers as well. So it's more than data centers. And the expansion, just also to clarify, it's not only for W50. W50 is the standard energy engine, so you're right from that perspective. But this expansion is not for W50 only, clearly.

SDH is very flexible, so you can swap slots quite easily.

Thank you for clarifying. SDH is very flexible, so you can run different engine models.

Correct, yeah.

And this 75% of technical capacity, that is on total engines, I mean, including marine and energy both together, or is it just only energy?

Total, total, total. Thank you. Both marine and energy.

The next question comes from Uma Samlin from Bank of America. Please go ahead.

Hi, good morning, everyone. Thank you very much for taking my question. I just have one on the service opportunities for your data center orders. So far, it seems like most of the orders you've booked are more on the OE side and how should we think about the service opportunities there? I presume that a lot of the data center developers are not keen to do the service themselves. How should we think about that? Like the timing of those opportunities and the pricing power you have there? Thank you.

So I think that there will be a strong service business, first of all, because these plants will operate 24-7 with high requirements and uptime reliability. And that is a strong base for a good service business. Within the data center customers, some want to go to full O&M where we do the operation and maintenance. Some want to do a little bit more themselves. There is not one solution fits all. We will adapt. if you sum it all up it's it's very strong potential for for for service business there now and and that has not uh started to to to to accumulate in order intake yet it's a base load opportunity so base load is good the more running hours the more service so when can we expect to see that coming into your autism In the coming, I mean, as we said, I'll say a little bit similar like on the new build side, that we are in negotiation with customers on service agreements. These negotiations are in various stages of maturity, and some of this will materialize this year.

Thank you very much. I appreciate it.

The next question comes from Vlad Sergievski from Barclays. Please go ahead.

Yes, good morning and thank you very much for taking my question. Could I ask about the marine service business? The order intake growth rate slowed a bit from obviously very impressive levels historically. What's your outlook there? What's driving the slowdown? And perhaps what would be a potential impact from the reopening of the Red Sea on the service opportunity that you have? Thank you very much.

So if you look, and you're right, Vlad, if you look here on Q, we are down. And I think there are a couple of drivers. One is that in Q4 2024, we had a big order from Royal. And so that creates this effect. Then there is also some periodization. I mentioned that earlier on the agreement side, things moving from one quarter to the other. Similarly, also on the retrofit side, a bit of periodization from one quarter to the other. There is also a little bit of FX. Clearly, you know, it's mainly U.S. dollar exposure. So those are combined. But our underlying message, and I'm reiterating it, you know, we are above one, and we have a positive outlook on the growth of the service business also in marine.

So very helpful. And anything you can comment on potential impact of Red City opening? Is it meaningful for your business? Is it not at all?

So I mean, what will happen and what I hear now that there are, you know, some of the major liners, they are kind of testing Of course, everybody is very much focused on the safety side. I mean, it's pretty obvious that right now, you know, people have been running longer hauls south of Africa. And if you go back to the Red Sea, that will, you know, reduce the route that you travel. First of all, the whole Red Sea has not been a major driver for service growth. There has been some addition, but it's not a major driver. And there are some other elements, because some people are also saying that the operators will go slower. to try to compensate. So they will try to keep some of the fleet... I mean, they will not just scrap out vessels. So let's see how the dynamic... I think the dynamic is a little bit hard to predict what will happen. It will have some impact on our service base, but not the major impact.

Not majorly. And also good to remind here that the majority of the vessels that sail through the Suez Canal is two-stroke main engine, and that's the main engine running. We have, of course, a lot of auxiliary engines on merchant fleet, But typically, let's say, they don't run less or more, typically, on a journey.

And there is not a lot of cruise vessels going through Sweden?

No, no, definitely not now.

That's very helpful context. Thanks, gentlemen.

The next question comes from John Kim from Deutsche Bank. Please go ahead.

Hi, good morning. Congrats on the results. Thanks for the opportunity. If we could go back to slide five where we talk about where you're indexed in the contracting trends, it looks like you're addressing about 25% of the overall market, just kind of correlating the two graphs, the one on top and one on bottom. On that kind of Better indexation over the next three years. Is it fair to assume that there's production slots on these vessel classes already, i.e., within the contracting numbers, the mix is skewing to your favor over the next three years? Or am I reading too much into this?

So... Okay, if I understand your question right, let's say it's on these upper lines on the 26, 27, 28. Do we have already contracts to be part of that? I would say the answer is yes. Because let's say our order books, as you could also see from the other slide, are getting longer and longer, also in marine. So clearly, let's say we have orders for 27, 28. So they're part of those lines.

Sorry, Arden. Sorry, Arjun, my question was actually more on the production slots in the yards. The yard capacity is still an issue.

But then can you repeat the question? Because then I misunderstood it most likely.

Sure. So within those orders or that pipeline, do you have visibility on production slots? Are the yard constraints still valid or are these already planned in the yards for the next three years?

I would say it's a mix. It depends what type of vessel you're ordering. I mean, if you take on cruise, for instance, I think the slots are, you know, pulling out longer and longer in time. Whereas, you know, on certain bulkers or tankers, there are shorter lead times. But to Arjen's point, when we talk about Wärtsilä, you know, supporting or delivering to the shipyards, if you look at 26, 27, we clearly have in our order backlog, you know, deliveries for yard slots in 26, 27. And 28 as well. Okay. Okay. Thank you.

The next question comes from Sven Weyer from UBS. Please go ahead.

Yes, good morning. Thanks for taking my questions. The first one is just following up on the announced capacity expansion. I was just wondering, I mean, if you say we raise capacity, technical capacity by 35%, should we assume that this is also raising the revenue potential by at least 35%, given where the prices per megawatt are heading. And I was also wondering, why is the expansion only completed in Q1 2028? Because I think it's probably a bit more of a brownfield. Why is this taking like two years? That's the first one. Thank you. Yeah.

So, of course, you know, over time, if you expand a certain capacity, it will translate to revenues. So from that perspective, but then, and I know you know this, Sven, but there is also, you know, we have our production schedule. which is the factory related. And then we have our project schedule, which relates to when we deliver to customers in the projects. And there is sometimes there is not a perfect correlation, you know, year by year. But I mean, the fundamentals, you're right. I mean, as we expand capacity, revenues will go up as well. Then, of course, with the twist, which is positive, maybe from a revenue perspective, if we have EPC, then it's engine plus. Now, I mean, we are not changing our strategy. Our focus is still having a majority of EEQ and less EPC, but we will still have EPC. So that will, of course, then you get, you know, a leverage on the engine capacity that you have. Sorry, your second question.

It was on the capacity. Why only in early 28?

Yeah, that's what I'm asking my team as well. Let's go faster. But on a more serious note, I think there is lead time for equipment that we need in our, for instance, in our testing facilities. These are big power equipment. There are certain lead time. The concrete needs to dry before you put certain things in. And also, it's... Since we are now, the team is doing a great job in trying to do a lot of things and squeeze it in. But there is a limit what you can do in one space, so to say. But believe me, we have really tried to accelerate.

And to add, let's say the supply chain needs to follow, right?

So I think it's a... I think the supply chain, as we all know, is critical. But however, I would say, I mean, the partnership that we announced with SimpleCamp, and we wanted to make that point to show to the... There's one example of... that we are working very actively with our supply chain. That's just one example. We have very good dialogue with our core suppliers and we have long-term relationship. So it's a major work. We should not diminish the importance, but we are step by step. We are in a good role here to be able to go live in the beginning of 2028.

If you have a nice factory with capacity, but you miss some parts, then you can still not make engines. So we need to make sure that the supply chain can follow.

That makes sense. Just maybe on the energy margin itself, I mean, obviously impressive outcome here, but when you look at GEV and Siemens Energy, they've obviously given new long-term margin outlooks for the divisions that obviously looked quite nice. I was just wondering, I mean, are you planning kind of a capital markets day for this year where you also intend to give us revised new longer-term margin targets, at least for the energy business?

I think this is a very relevant question. We fully understand it. We will have to come back and answer it. I don't have the answer today, but clearly we understand the logic for the question. Okay, thank you.

The next question comes from Max Yates from Morgan Stanley. Please go ahead.

Hi, good morning. Just sorry to come back on this capacity extension. You talked about the fact that this was in addition to the announcement that you announced last year. So I guess if we just look at the base in terms of what you're delivering today, it looks like 1.2 gigawatts in terms of deliveries when I back it out of your revenues. Just thinking about what is the total technical capacity increase when we include this latest round, but also what went before. And I guess I'm trying to tie it back to You know, this year in terms of sort of megawatts, it looks like your orders are roughly around 2.3 billion. You know, is that the kind of end technical capacity that we should be thinking for in terms of what you can deliver when we look out to 2028?

I understand the question. Here we will not be so explicit. I mean, for instance, we will not give out the megawatts. I know some of the competition is doing that. We are very happy because we make a lot of analysis of those data. We don't want to give out those data. So that's why we are talking about where we are moving in relationship to our technical capacity. So, as I said, 2025, full year, 0.75% of technical. And then beginning of 2028, once we have commissioned this, we will have a technical capacity that is 1.35, so to say. So you see where we are going from and where we are going.

It's about 80% up then from the operating level. Correct.

Okay, but we shouldn't assume that you had a given capacity, you increased it last year, and then this 35% comes on top. 35% is the total all-in.

That can be very clear. I mean, the April announcement, 50 million euro, you could say that is also coming online in connection with this additional 140. So it's not on top. You could say, you know, we are going from 0.75 2025,

to to to 1.35 in beginning of 2028 and that is including all the investments that we have announced okay and sorry maybe one quick clarification you know when when we look at your data when we look at your orders this quarter in energy in new equipment you know you did 520 megawatts i mean it looks like it was almost entirely that data center order that you booked and yet the value per megawatt on the orders is only about 0.7 million per megawatt. So I guess I'm just trying to square the fact that we're talking about pricing on these data center orders being very good. We're seeing huge numbers in terms of dollars per kilowatt coming out of the gas turbines, guys. Yet when I very simply look at your Q4 number, which I know is mostly the data centers, I don't see that kind of uplift. So maybe if you can help us understand, it doesn't look like you're getting a huge price uplift to these data center customers based on what you booked this quarter?

Well, I can say, and I restate it, we have definitely, you know, improving our order backlog and we are on a good journey there. I would rather say it shows that we are very competitive.

What does that mean?

Sorry, that means you're pricing aggressively versus... No, that we can improve our profitability and be very competitive with the gas turbine competition. And also with other engine manufacturers.

Okay, understood. Thank you very much.

And just for clarity, I mean, I understand your analysis, but I should also say it so we are fully clear. There was more than data center orders, but the data center was a major chunk of the ordering. So from that perspective, you're right.

The next question comes from Panu Leighton-Mackie from Dansky Bank. Please go ahead.

Thanks for taking my question. I actually wanted to ask about the same topic. So it seems that in Q4, majority of the energy equipment orders were the single data center order. Just a bit surprised, like why didn't you get more of the other orders? Was it just timing or was it tariff-related delays or did you increase pricing so much that there were delays or what caused this?

So, first of all, this is a project. Energy is a project business. Power plants, whether they go for data centres or balancing power, you negotiate, and sometimes you don't close the deal at the end of December or the 20th of December, you close it on the 15th of January instead. And that's why I underlined, look at how we started the year with 550 megawatt. One is clearly the biggest one there is for utility that the demand is driven by data center. The smaller one, I would say it's one of our traditional, you can say it's a balancing borderline base load. I think that's the answer to your question. It's about periodization.

Okay, thanks. Let's just ask a follow-up. If you look at what... Sorry?

No, go ahead.

Yeah. So if I can ask about a follow-up, what does your pipeline in energy equipment orders look like? So if you would directionally comment, like, if things go as you planned in first half or full year this year, will it be like half of orders coming from data centers, half balancing, or any comments, how does it look like?

No, we don't go into those details. The only thing I can point to is the guidance. It's going to be better.

It looks good. Otherwise, we would not extend capacity either.

I think that's really it. Look at how we expand capacity. Look at how we communicate. We increase the guidance. We give an extra dividend. We are on the road. Okay, thanks.

We are running out of time. We still have one additional slide. It's regarding our data center theme call, which is taking place next week. So it's an excellent opportunity to continue the discussion, what are Wärtsilä's opportunities in growing data center market. Besides Håkan and Arjen, I'm very happy that also Anders Lindberg, president of our energy business, will join the call. So hopefully you can also be there. And our Q1 report will be published on April 28th. Thank you.

Thank you for today and warm welcome to our data center call. Looking forward to that. Thank you.