Wartsila Corp Unsp/Adr

Good morning, everybody, and welcome to this news conference for Wärtsilä Q3 results. My name is Hanna-Maria Heikkinen, and I'm in charge of investor relations. Today, our CEO, Håkan Agneval, will go through our recent performance, and after that, our CFO, Arjen Berends, will summarize our key financials. After the presentation, there is a possibility to ask questions. Time to start. Please, Håkan.

Thank you, Hanna-Marie. Thank you for the introduction. So, looking at Q3, on the positive side, a good order intake. And we do see an increase of 36%. On the challenging side, we have the cost inflation and business mix burdening our profitability. But net sales will also continue to grow up 30%. The service business is also in a good progress. Service order intake increased by 27% and service net sales increased by 13%. Comparable operating result, though, decreased with 6%. If we look at the overall global market situation, we do see intensifying cost inflation, prevailing disturbances in supply chains, tightening monetary policies and a challenging macro environment that are creating turbulence within the global business environment. Then, on a recent event in Wärtsilä, we last week announced that we are taking the next step to further strengthen our marine end-to-end lifecycle offering by integrating the voyage business into Marine Power as a business unit. So if we look at some of the key figures, we can see our order intake is up 36% to 1.6 billion. We can see the services is growing with 27%. If we look at net sales, we are up 30% to 1.4 billion. And we see that we are growing service sales with 13%. And you can also see the relation between service sales to total sales, where service sales is 46% this quarter. And if you compare Q3 last year, it was around 53%. So to the point that 2022 is a new build year. Book-to-bill continues above 1 at 1.13. And this is actually the seventh consecutive quarter where we have a book-to-bill above 1. Looking at the comparable operating result, it is down from 7.9% to 5.7%. If you look year-to-date, though, the absolute comparable operating result is up 17%. Looking at net sales and comparable operating results, now in the graph format, we do see net sales at 1.4 billion, and we see the 13% increase in services. Comparable operating results at 82 million euro, it is a 6% decline. Looking at the marine markets, the sentiments continue to improve despite the growing macroeconomic concerns. Demand for new ships has moderated as many shipyards are operating at close to full capacity. And looking at the number of vessels that were ordered in the review period in Q3, it decreased to 1,095 from 1,400. Vessels contracting was largely driven still by container ships and also record high orders for LNG carriers. Driven by, of course, the turbulence and the strong demand for gas in Europe. Where we need to move from pipeline gas to gas carried by vessels. The transition to cleaner fuels continued with 326 orders placed globally for alternative fuels. And that represents about 30% of all the new build contracting in the review period. If we look at cruise, the focus of the cruise sector has now shifted towards improving onboard occupancy levels in a profitable way and mitigating the impact of rising operating costs. And if you look at the active cruise fleet, it has been well over 90% on average during the quarter. Looking at the energy side, energy markets are affected by global cost inflation and price volatility. And we do see a good continued demand for balancing solutions. The investment environment witnessed higher quotation prices, slower customer decision making and considerable uncertainty. Supply chains are in turmoil as inflation, exchange rate fluctuations and trade restrictions shadow the global business. The decreased pipeline gas flow from Russia to Europe plays new constraints on the demands and also on the gas trade. The Inflation Reduction Act in the U.S. will allocate substantial incentives for renewables, battery energy storage and other clean energy technologies. And we do see continued growth in demand for energy storage solutions. Service growth also continued for us, and customers are showing an increasing interest in long-term agreements. If you look at our market share in the gas and liquid fuel power plants market, we declined from 9% to 7%. And looking at the overall order intake, as we talked about, it increased by 36%. Their equipment orders continues a strong journey. It increased with 45%. And services also solid increase in order intake by 27%. That leads to also a strong order book. And if we look at the rolling 12 month, we see the book to bill continues well above 1, 1.16. On the sales side, net sales increased by 30%. And we see that equipment net sales increased by 49%. And service net sales increased by 13%. Now, technology and partnership highlights, and we are on our de-carbonization journey, shaping de-carbonization for marine and energy. One really important step and a milestone for Wärtsilä is the launch of our new Wärtsilä 25 engine. It is a leader in its range in both efficiency and emissions, and it's also very fuel flexible. So the modularity offers ship owners and operators maximized flexibility while ensuring efficiency and fuel economy second to none. It's already capable to operating on diesel and LNG, either on gas, liquid or the carbon neutral biofuels. And it is easily upgradable to operate with the future carbon free fuels. So it is prepared for fuel conversion for fuels like ammonia and for methanol. If we look at the different technology sector now in Voyage, we have a really important order for our spec system. It's the smart panoramic edge camera systems, where DFDS will deploy this technology on Aurora, Zealandia seaways. And Silania operates in a busy and challenging route, and it has now been retrofitted with this small technology to provide 360 situation awareness. It eliminates the blind spots by providing a 360 vessel view, enhancing safety and enabling the crew to make better operational decisions based on real-time data. Now, let's move on to the different businesses and see how we are doing. This is the Wärtsilä 25. It's the beauty newcomer to the family. Marine power, basically all key figures improved. Service order intake increased by 21%. You can see order intake is up 33%, net sales 21. If you look at the comparable operating results on the positive side, the strong service sales continues. On the challenging side, we do see cost inflation, especially affecting material, component, transport, and also test fuels for developing our new technologies. Component availability continues to be a challenge, and also the high energy prices is affecting us in our testing. We consume a lot of fuel in our testing. If we look at the marine power service growth and the service agreement, we can see that net sales from installation under agreements is strongly increasing. One example among other is a recent agreement that we struck with the CBO group in Rio de Janeiro. And we have signed an agreement on modeling decarbonization. The objective is to support and accelerate CBO's journey towards decarbonized operation for its fleet of offshore support vessels. And they are among the largest in its segments in Brazil. So what are we doing? We are doing a detailed analysis of both short and long term solutions, including digitalization, energy efficiency, and energy saving devices. Also including hybridization and future alternative marine fuels. And since we are in Brazil, there is a specific focus on the viability of ethanol fuel. Marine systems, a great team in Japan. Marine systems, net sales and comparable operating results increased. Order intake decreased. So you see the order intake decreased by 34%, whereas net sales is up 30%. If we look at the comparable operating results on the positive side, clearly the higher sales volume is contributing to profitability. And on the challenging side, we do see an unfavorable sales mix between equipment and services. Turning to Voyage, and here you have an example of a spec system, one of the cameras for a spec system. And the order intake increased. However, the Russia exit impacted both sales and profitability negatively. Order intake up 58%, net sales down 10. And the real challenge here on the comparable operating result is the closure of the profitable Russian turnkey business and also the acceleration of the cost inflation. Our journey on the cloud solutions continues. So we continue to increase our installed base. We increased it 20%, quarter on quarter, with connected vessels. Another example of the digital journey in Voyage is our ports operation and support for ports operation, where we also made the port link acquisitions some time back. So here, a very important order with the associate British ports and to help them to digitalize their marine operation. So we have signed a contract for five year framework agreement with ABP to digitalize the operations in 21 ports. The project aims to accelerate the digital transformation of port calls and operation, making them as efficient, sustainable, and safe as possible. And the program includes just-in-time solutions, machine learning and AI to optimize port calls and drive sustainability. Energy. Order intake and net sales increased. However, the comparable operating result declined. You can see order intake up 66%, net sales is up 43%. So looking at the comparable operating results, so what is happening there? Well, on the positive side, if you look at the mix within services, it's a favorable mix driving up the profitability. But we do have some headweights on the profitability. We have a less favorable sales mix between equipment and services, so more equipment than services, relatively speaking. We have higher storage volumes, and we know storage has a negative EBIT, continuous. And then we have a general impact of cost inflation. This is a great example and I would say a proof point of our balancing strategy. So we will support the integration of renewables in Japan's power mix by providing balancing power gas engines. And this new plant in Japan will operate 10 Wärtsilä 34 SGs. It will replace an existing combined cycle gas turbine plant, 100 megawatt, that was located at the same site before. Now, the fast-charging engines will provide the grid balancing and the peaking capabilities needed as Japan increases its share of energy from renewable sources. And the main purpose of the utility-scale power plant is hedging market price fluctuations. And it will enable participation in the recently launched cross-regional balancing market. And to set the scene, Japan is committed to addressing climate change and has set the target to have a share of renewable energy increasing to up to 38% until 2030. Looking at the service side of energy, it's also growing in a very inspiring way. I mean, the installed base covered by long-term service agreements is clearly increasing, as you can see. An example within the services side is automation upgrade and long-term agreement that we have made for a power plant in Cameroon. And so we will provide an upgrading project of the electrical and automation system to ensure the optimal reliability of the Creeby power station in the Republic of Cameroon. So it's a 260 megawatt plant that has been operating for nearly 10 years, and it's operating 1350 DF dual fuel engines. running primarily on natural gas. And now, we will support the customer's operational and maintenance performance with a 10-year long-term service contract. Now, other key financials. Arjen, please.

All right, if we look at the other key financials, I think the highlight on this slide is the positive operating cash flow of 100 million euro in quarter three. After two quarters of negative cash flow, negative 122 million in the first quarter and negative 90 in the second quarter, it's very good to see a positive cash flow now in Q3. Positive cash flow was generated basically 50-50, you could say, between profit and the change in working capital. And by reducing working capital, improving our cash flow, we were able to reduce our net debt compared to Q2 with about 55 million euro and also gearing from 0.21 to 0.18. Solvency went slightly down, let's say, from last quarter to this quarter, mainly coming from, let's say, increased, let's say, cash and inventory balances, and then that was financed by payables, basically meaning suppliers, and deferred income, basically meaning customers. Basic earnings per share was zero, very much impacted also, of course, by the write-downs that we did related to Trieste. If we look at the graphs, let's say the 100 million I mentioned already, let's say about 50-50 generated through profit and change in working capital. As we said also earlier, we have been building up working capital in the beginning of the year to facilitate the higher delivery volumes in the second half of the year. We saw a positive impact of that by the change in working capital already in Q3. We also anticipate that the deliveries of Q4 will generate positive cash flow for us going forward. With these words, I hand over to you. I'll come back on the prospects.