Wartsila Corp Unsp/Adr

Good morning, everybody, and welcome to this news conference regarding Wärtsilä's Q3 result. My name is Hanna-Maria Heikkinen, and I'm in charge of investor relations. Today, our CEO, Håkan Agneval, will start with the group highlights, market environment, and business area-specific progress. Then our CFO, Arjen Behrens, will continue with the key financials. After the presentation, there is a possibility to ask questions. Time to start. Please, Håkan.

Thank you, Hanna-Maria, and welcome everybody. It's time for a quarterly report from Wärtsilä again, and I would say we are doing good. Order intake is up, net sales is up, and profitability is up. So I think we had a Q3 that has been looking really exciting. Order intake increased by 21%, growth in all businesses. You could say that same time last year was a low but we are moving in the right direction and we are growing uh also highlighting services i think our our path there continues in the right direction order intake increased by by 14 percent the net sales went up with with 20 percent profitability improved 43 percent so so significant step in the right direction um and still covid uh continues to impact us quite a lot, both on the marine and on the energy side. On the marine side, cruise is still not cruising. 50% operating of the world's vessel cruising fleet. There is still potential. On the energy side, we do see COVID impacting still, unfortunately, many of our core markets, vaccination programs taking time. But in spite of COVID really having an impact, I think we are moving in the right direction. And I want to take the opportunity to thank the whole Wärtsilä team, all the people that are out there with our customers, supporting, helping, often in many challenging times. So in the field, in the factories, still running, in the offices, and at home. And as we are returning in parts of the world, COVID is still a very harsh reality in other parts of the world. So thanks a lot for the employees, really. The numbers, if we quickly go through them. Order intake, as I said, up 21% from 981 million euro to 1186. And you can see the services growth there of 14%. Net sales up 11% from the 995 to the 1103. And you see the The strong growth on the services side, also on the sales. Book to bill, above one, 1.07. So it's going in the right direction. And comparable operating result, 43% up at 87 million euro. That's 7.9% of net sales moving in the right direction. Of course, we are not satisfied with 7.9, but we are going in the right direction. The highlights is really the net sales at 11.3 million with a 20% increase on the services side. The comparable operating result at 87 million with 43% growth. It's driven by increased sales. a favorable mix between equipment and services, and also, I would say, good cost control. And you can see the comparable operating result, Q and Q comparisons since 2019. It's going in the right direction. If we spend some time on the markets, and we start with the marine markets, it's mixed activity levels on the marine side. We see a significant increase in vessel contracting, mainly driven still by containers. And the number of vessels orders in this quarter, 1,400 plus, compared to 500 corresponding period last year. So it's a significant uptick. But it's major driven by container ships, where cruise and ferry is still very, very low on the new contracting side. 297 orders for alternative fuels, where LNG still is the major alternative fuel. Increasing. But the positive news is that cruise is slowly recuperating. 20% cruising end of June. Now, end of September, 50%. When I talk to our cruising customers, I would say consensus 65%, 70%, 75% by the end of this year. On the energy side, pandemic still impacts negatively. However, on the positive side, there is a strong demand on the energy storage side. COVID-19 significant impact on many of our core markets. The recovery will most likely take time well into 2022 for the markets. So the energy storage, it continues as a trailblazer in some of the key markets, North America, Australia, et cetera. But the slow of our core thermal markets makes us decrease our market share on the thermal side to 6%. I see this more as a COVID impact than anything else. At the same time, we keep up our battery storage position as one of the three top players in the world in this space. Order intake increased by 21%, and it increased all over the businesses and all business disciplines. And especially on the equipment side, it was up 29% supported by a strong growth in energy storage. And service continues a good trend, up 14%. and you see it's still good makes between service and equipment and i think there is growth potential further and the services if we look at the the uh... order backlog we are building the order backlog slightly uh... despite some of the divestments that we have done book to be in about one uh... and and so they're all the backlog is is uh... buildings of this net sales increased by 11%. Equipment net sales increased by two, whereas the service really kicked off in this quarter. And also a strong contributor to our profitability, growing by 20%. And you can also see that we start to get back to pre-COVID levels on the service side. And you see also that you could say 55-45% split between services and equipment. Technology, a very important part of Vatsala's DNA and also certainly part of our future, how we can evolve cutting edge technology on enabling decarbonization of energy and marine. So what are some of the major things that we have done in Q3? First of all, we have upgraded a classic, the Wärtsilä 20DF dual fuel engines. It's one of our big sellers through the years. And we have now taken that to the next step when it comes to power output. reducing methane slip with 40%, lower fuel consumption, and also accepting a wider gas quality span. So really taking that to the next step. On the new fuels, we are developing a concept together with Samsung on ammonia-fueled vessels. Ammonia is not only about the driveline itself. It's a whole vessel design with tanks, et cetera. And we are working very closely with Samsung to develop this concept for the future. And we are also working on the battery side with zero emissions and electric vessels. The first vessels fitted by the battery containers, that's a concept, that's a product that we offer. And this has now started to commence operations in the Netherlands, transporting beer for Heineken. And also on the carbon capture side, we are moving with speed. And here we have two initiatives in the LINX project. We are working to bring a maritime carbon capture solution. And we also have our first pilot project for full-scale retrofit with Solvang in Norway, which we The target is to have operational in the beginning of 2024. Now, today we are also very proud to announce our decarbonization goals, and we have set them for 2030. And this goes hand in hand with our strategy, which is very much about shaping decarbonization of energy in marine. And then when we have set the targets, ambitious targets for the future, and for 2030, we look at this from two perspectives. One thing is to become carbon neutral in our own operations, so by 2030. And so this is how we run our facilities, how we travel, how we operate in Wärtsilä, so to say. And then the other perspective is, how can we help our customers in their decarbonization journey with our products? And there, our goal is to provide a product portfolio which will be ready for zero carbon fuels before 2030. So these are forward leaning stakes in the ground for us. And this we are now fully committed at working on. And you also remember the communication we had about our product portfolio to have ammonia concept ready for 2023, and a hydrogen concept ready for 2025. And we take it from there, and then to have a product portfolio before 2030. Milestone event in Wärtsilä. Now, let's shift and look a little bit at how the different businesses are doing. And if we start with marine power, order intake and comparable operating result increased. And service order intake increased by 29%. Overall order intake up about 8%. And net sales, rather flat. But still you can see a significant improvement in profit. And I think the drivers here is the gradual return on crews to business. And it's also the mix between equipment and services. On the challenging side, the factory load situation is not optimal. We are running at fairly low load. And we also have a cost inflation pressure. But in spite of this, we managed to counteract the headwind and increase our profitability. And if you look on our services side, the net sales from the installation under agreements have stabilized after the COVID-19 related decline. So we see a stabilization in a positive way. And an exciting example of how we are working with our service agreements is with Aurora Botnia, the new ferry running between Vasa and Umeå, which is the world's most environmentally friendly ferry with the latest technology from Wärtsilä and in cooperation with the ecosystem in Vasa and Umeå. And we have now signed a 10-year agreement optimized maintenance agreement covering the new ferry. The agreement includes the latest digital solutions based on AI machine learnings. And it's all about providing predictive maintenance and uptime reliability and then fuel efficiency and therefore also emission efficiency. And to really work on driving down and have the lowest possible carbon footprint. If we go to marine systems, the marine systems order intake increased. Net sales and comparable operating results decreased. And you can see order intake up 10%. Major driver is gas solution, and the LNG tankers is driving demand for our gas solutions. Net sales is down 16%. The scrubber business is going slow right now, especially the retrofit, I should say, because operators are out there. with container vessels, shipping, and they don't have time to bring them to port and do the retrofits. On the tender activity on the scrubbers, though, for new builds, we see a fairly high level of activity. But the retrofit is slow. And you can see that our profit is coming down. And on the positive side, gas solutions It's contributing in a positive way, but it cannot offset the declining Scrabble volumes. We also have had an insolvency case among one of our customers, and also here we feel a cost inflation pressure. Voyage. Order intake and net sales increased. Service order intake increased by 75%, significant uptick, mostly driven by crews. Overall order intake up 20%, net sales up 24%. And the sales volumes is major driven by services in crews. The profitability is going in the right direction, slowly but steadily. And we are still spending a lot of R&D to evolving our digital offering and FOSS and the other platforms that we have. And also, we have been in voyage affected by the COVID situation where it's hard to transfer from different countries to do the services, so to say. And this is an important figure that we track and communicate and follow up. And this is how we grow our cloud solutions, the volumes in our cloud solutions. And as you can see, it's a rapid growth, 61% if you look on numbers of vessels connected to our cloud solutions. So it's a steep growth journey. Exciting journey, I would say, in Voyage is the cloud simulation solutions. I mean, the team has developed simulations solutions for COVID that you can run training through the cloud. And they are now available on Ocean Technology Group's Ocean Learning Platform. And the learning platform aims to provide the broadest and most comprehensive range of maritime-specific digital learning solutions. And it includes instructor-led interactive simulation training, automated assessment solutions and growing library of self-directed simulation exercises. It's all about being able to do it digitally. And it's quite an extensive customer pool with 3,000 shipping companies and plus a million seafarers. So the cooperation with Ocean Technologies gives the platform a very broad exposure. Energy. So order intake, net sales, and comparable operating results all increased. This was a really good quarter for energy. Service order decreased a bit, but it was still in a good level, I would say. You can say order increased. 52%, a lot driven by battery storage, energy storage. Net sales also went up, and battery storage also being a major driver. And if you look at the profitability, it's a major shift. And do note that sales volumes really contribute. I would say on the services side, it's the strongest growth driver, but also that we have a robust execution of our energy projects in Q3, which is very positive. And we certainly managed to counterbalance the negatives, which is a low factory load situation, and we also face a cost inflation. Here's an exciting example from our battery storage business. It's our latest order with AGL. In Australia, we recently signed a frame agreement. So this is the first call-off. 100 million euro plus order. And it's their first installation. 250 megawatt, 250 megawatt hour system to be installed on Torrance Islands in South Australia. And when installed, this system will support a broad portfolio of generating assets, so both thermal, renewable, and help Australia to decarbonize and on the journey to 100% renewable future. And this is one of that Celes strength going forward, is our capability to integrate different generating assets together with our GEMS platform and really optimize energy cost. If you look at the service agreements, the installed base covered by long-term service agreements is increasing in a good way. It's a good trend. We have one example here from Nigeria. I think it's a good one with Lafarge and their cement plant in Nigeria. We provide a dedicated supply of electricity for the cement manufacturing, and the scope of the agreement includes the operating crew, the performance guarantees, plant availability, and spare parts. So we have real skin in the game, and it's about uptime reliability of the power. Ariane, please join me here for some key financials, further key financials.

Thank you very much, Hakan. Yes, let's move to the key financials. First of all, cash flow. We had a good cash flow in quarter three, 49 million euro, also considering the fact that we had to increase our inventory somewhat to make sure that also the deliveries in Q4, which are expected to be higher than, let's say, historically in this year, can go out and can be going out on time as well. So working capital, some increase compared to, let's say, what you saw at the end of Q2. Good cash flow also enabled us to, let's say, reduce our debt levels further in Q3. We repaid about €145 million of debt. Gearing, good development, fairly flattish if you compare it to Q2. 0.12 we had at Q2, now it's 0.14. And solvency clearly also better than last year and also better than let's say Q2, which was 37.8, now 39.3. Basic earnings per share, really good improvement as you can see here from the numbers both in the quarter as well as for the year-to-date numbers. Looking at cash flow, and if you look at the left side graph, I would say it's going really well. Let's say our really focus on cash flow is really paying off. If you look at the curve, okay, it's a little bit down, but still if you look at the level and comparing it to the profitability levels that we have, I think above 600 is really a good level to be. If we go to the right side of the page here, profitability, 50 million. Of course, you add back the depreciation and amortization, let's say 41 million, which is not cash. And then let's say we have all the changes in the working capital. And basically, the main thing of change I would like to highlight here is what I mentioned earlier as well, the increase in inventories to facilitate, let's say, the deliveries for the later part of this year, as well as, let's say, partly into Q1. But with these words, Håkan, I... Give the floor back to you.