Wartsila Corp Unsp/Adr

A warm welcome to Wärtsilä's Q3 results presentation. My name is Natalia Valdesari, and I'm head of investor relations here at Wärtsilä. Before I let Jaakko take over the show and go through the presentation itself, I thought I'd say a few words around the practicalities surrounding the Q&A session, given that this is a bit of a new setup for us. So first of all, good to note that only the people who have registered via the GoToWebinar link can actually participate in the Q&A session. So please do so now if you haven't yet. When you do want to enter the questions and answers queue, please raise your hand. Use the raise your hand function. And when the moderator announces your name, please remember to unmute your microphone. And then lower your hand once the question has been answered. In order to give as many as possible time to answer questions or to ask questions, please try to stick to one question and one follow-up and then re-enter the questions queue later on. And that was about it. If you do experience audio issues, which I hope you don't, there is a chat function, so questions can be sent in via there, and I will try to ask them here online. If we don't have time for that, then I will get back to you later on. With that, I'll let Jaakko take over.

Thank you, Natalia, and good afternoon, everybody, and welcome to the interim report presentation. I'll start with a short story about the market and the situation where we are today. First of all, the conditions in the marine and energy markets remain difficult. with escalating COVID-19 infection rates, and concerns over the pandemic's long-term economic implications delaying decision-making. You have definitely seen that also in our order intake development. Customers are adjusting their CAPEX and OPEX plans to the prevailing market conditions. This is visible in low vessel contracting, postponements of new power plant capacity investments, as well as reduced spare parts consumption and maintenance activities. The low level of orders received in the third quarter reflected the uncertainty in our market environment. You have seen definitely the demand decline in cruise segment. That has been continued to represent the main challenge, what we have in power, marine power and voyage. affecting both equipment and service orders. Marine services, marine systems, water intake developed quite well, thanks to good progress in our gas solutions business line, which was offset by the continued lack of scrubber orders. And in energy, we experience delays in finalizing negotiations for certain orders, while services order intake declined due to the postponement, maintenances, overhauls and agreement renewals. On a more positive note, orders for storage projects developed well thanks to an increased need for short-term flexibility. I state at this moment, probably it will be said many times during the call, that we did not experience any major cancellations beyond normal patterns. One of the highlights was cash flow development on the third quarter, and this is mainly thanks to inventory management and our efforts to decrease credit risk by intensifying receivables collection. A couple of key figures. Here you see order intake, no change actually from last year. But what is definitely seen here is also the services order intake, which is lower than last year. Order book at this moment fell percent down from last year. Net sales 11% less than the comparable number. And again, services minus 14%. Book-to-build getting closer to one, which is always a good situation. And then comparable operating results. 61, it's 55% compared to last year. And last year, we all remember we had some difficulties with the project. So this is probably also one reason why the percentage is so high. and again highlights the cash flow from operating activities, plus 174 million. If you look at the markets a bit through a couple of slides, first of all, vessel contracting. September vessel contracts a bit less than 30 vessels. So this year we are a bit over 500, which is a very low number. If you look at it in tonnages, it's extremely low compared to the previous year. And then for us in Wärtsilä, specialized tonnage, I mean, very, very low numbers. After September 2029 or 28 or so, vessels, quite many of those were also tankers. And so not so much supporting the special tonnage, which always has been very important for Wärtsilä. Energy markets saw some decline. Now, it's good to remember that this figure here is one quarter behind. Wärtsilä's market share a bit higher, but also the energy markets have seen some decline. And order intake, as already discussed, flat development, but then again, more equipment and less services. Going forward, of course, we always try to aim to get more services than equipment. Order book, first of all on the left side, book to build. Now the trend is a bit to the right direction. Delivery schedule on the right hand side. You can here see delivery at this moment for current year around 1.2 billion. Next year is the same level as we were last year, and then delivery after next year, it has been dropping now down. Net sales, small decrease. Again, if you look at, very importantly, one of the pie charts here, services, again, less than the development than in the equipment side. and comparable operating result. Now when you start comparing one quarter to another, you need to remember also the distress projects we have been having in our operations. Overall, if you take the rolling number, now the trend is a bit more positive. Gas flow is very good compared to the comparable number, and has been developing extremely well this year. Moving on to the businesses. First, marine power. Order intake decreased, ailing cruise vessels and customers adjusting capital and operating expenditures. Net sales decreased by 11%, and the comparable operating result amounted to 30%. 8.3%, so a bit less than last year. COVID-19 heavily affecting to the numbers. At the same time, weaker absorption of fixed costs. This slide, first of all, talks about the net sales from installations under agreement, when quite major customers not having ships which are not moving, definitely affects to the net sales level. At the same time, a good example of Wärtsilä providing a five-year maintenance agreement to the world's largest NGO hospital ship. These kind of ships are important. also for our services operations. Marine systems, oil intake increased by 16%, good development in gas solutions. The reduced fuel spread, which hasn't been developing so much, is lessening the demand for scrubber investments. And this is one area where the visibility is also quite bad. I mean, it totally depends on the fuel spread. Net sales decreased. Last year we had much more scrubber deliveries than this year. And the result, very good development. But then again, last year we had some of the cost overruns in certain gas solution projects. Voyage is also very much hit by COVID and the situation with the cruise and ferry segments and really quite a drop on the order intake. Net sales didn't decrease so much. There has been COVID-19 related postponements and at the same time lower transactional service business. Comparable result amounted a bit better than the comparable number and there the reason is mainly coming from cost savings. We have been talking about the voids and the future, and one important element here is how we can get vessels connected, and here is a good example of the number of vessels connected, and a good example of a profit-sharing contract with Brittany Ferries, where we basically help the customer to reduce the exhaust emissions. And this is an important number to look and follow, so that we get these connected vessels into Wärtsilä's portfolio. Energy order intake increased, still affected by postponed decision making and traveling, site access is not so easy. Net sales also increased 6% and operating profit amounted to 14 million. Again, you have to compare last year where we had certain cost overrun in our equipment projects. And then one chart about energy installed base, which is now flat. Of course, there are good examples of great deals. We have signed a five year maintenance agreement in Cambodia for a 200 megawatt power plant, which supports, of course, the whole energy going forward. Today, we also reinstated our prospects for 2020. When I started my presentation, it's now following the same story. Near-term demand is expected to improve from current levels. However, visibility remains limited, and the prevailing market conditions make the outlook uncertain. If you look at the order book I showed you earlier, based on that one, net sales for 2020 is expected to decline around by approximately 10%. Last year it was 5.17 billion euros. profitability is expected to continue to be burdened by the effects of COVID-19. And while service demand is anticipated to improve, the seasonal pickup is unlikely to be as strong as in previous years. So we normally have quite a hockey stick in Q4. Now this says that it's not going to be as strong as earlier. I will stop here and let everybody to start asking questions. And as Natalia said, two questions in a row, and then you get the next one. And once again, I have the whole board of management here, so we can get also the important elements of the markets from the business leaders. Please.

The first question on the line, Andreas Willi, please open your microphone and ask your question.