Wartsila Corp Unsp/Adr

Good morning everybody and welcome to this news conference for Wärtsilä Q1 2024 results. 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 and he will also go through the business performance. After that our CFO Arjen Behrens will continue with the key financials. After the presentation there is a possibility to ask questions. Please Håkan.

Thank you, Hanna-Maria, and a warm welcome. First, I'm going to go and get my clicker. I'll be back. Sorry, I forgot that one. So welcome to a really good quarter, summing up a really good quarter. We have made progress and we continue to make progress in a very good way, evolving in the decarbonization transformation of our two industries, positioning ourselves and also improving our financial results. So if we look at Q1, we came out with double digit comparable operating margin and continued strong order intake. So, order intake is up 11%. Organically, it's actually up 17%. And it's especially supported by good development in the marine order intake, up 23%. leaves us with a order book at at all-time high at 7.3 billion euro and i think one of the highlights is that the comparable operating results increased by 50 so we are now at 10 comparable operating margin and and and and the continuous journey of improvement is evolving, so to say. Good progress in services also continued. As you know, it's a very important part of the Wärtsilä business. Service order intake increased by 7% and the net sales increased by 13%. Cash flow also very strong, which is a very strong signal considering that Q4 also was exceptionally strong. So strong cash flow from operating activities to 158 million euro. And as a group, we are becoming a more focused and more profitable company. And we have now consolidated into two reporting segments, marine and energy. So if we look at a little bit closer to the numbers, looking at the order intake, so 1.9 billion euro up 11%. And if you look on the service side, 949 million up 7%. And the equipment, which equipment order intake continues to grow in a very good way in both of our businesses. So 975 million euro up 15%. And that leaves us with an all-time high order backlog of €7.3 billion. Net sales is down 10%, so €1.3 billion. And you can see net sales continue to grow on the services side, so €833 million. It's really the equipment that is coming down. And I think the major message there, it's a periodization effect between quarters. So it's not a trend shift. We have a positive outlook, but there is a bit of periodization, especially in our project related business between the quarters. Book-to-bill at 1.46, 12 consecutive quarter with book-to-bill higher than one. Operating result up 38% and the comparable operating results up 50% to 132 million euro and 10% of net sales. So outlook on our two markets, the marine market, the sentiments turned positive for Wärtsilä's key segments. In the first quarter, the appetite for new ships increased in general. The number of vessels ordered in Q1, 411 compared to 255, same period last year. Uptake on alternative fuels remained on a healthy level, 118 orders. 29% of all the vessels, 45% of capacity. And I think here, as of 1st of Jan, a major step in the decarbonization journey for the marine industry, certainly in Europe, where The marine industry is now included in the EU's emission trading system, which is adding cost and incentives for shipping companies that operate in the EU or that do port calls in the EU to really focus on reducing CO2 emissions. either by modernizing existing fleets and upgrading existing fleets, but also looking at strategies for new built vessels going forward. Cruise segment increasingly very positive. A lot of cruising activities. And we also see that the high demand for cruise is now filtering through to the first new build orders for large cruise ships, so to say. And all the big players, they are indicating orders to come. And so it's a distinct shift from, I would say, a four year period of low rates. Clarkson also optimistic in their most recent update of the forecast, basically taking the overall level of orders for 2024 up 7%. Looking at energy, we continue to see solid mid- to long-term market opportunities. In the first quarter, though, uncertain market environment continued despite some relief. The increase of share of renewables is the primary driver behind the Wärtsilä's balancing and energy storage solution demand. And we do see a lot of activities and interest. Global natural gas prices continue to decline towards the pre-2021 levels. It's made possible by increased renewable generation, warm winter season and also muted demand growth. On the commodity pricing side, it has stabilized, although the uncertain geopolitical environment presents price and availability risks. The positive thing is that we do see several signs that the energy transition continues to advance. It's another year of record high investments in deployment of clean technology last year. Looking at our numbers more in detail so organic order increase by order intake increased by 17% order intake grew 11% out of that equipment order intake increased by 15% service order intake increased by 7%. All time high on the order book as a result. And one important thing to highlight and note here is that the 2024 deliveries are tilted towards the second half of the year, especially on the energy side. The rolling book to bill continues to trend up. Organic net sales decreased by 6%. So net sales decreased by 10%. And equipment was the big driver. So equipment net sales decreased by 33%. Whereas service sales continues the positive journey, increasing by 13%. And as I mentioned before, the equipment net sales decrease is mostly driven by prioritization between quarters in project business. Profitability continues to improve. We are on a journey of continued improved financial performance. So net sales decreased, but the comparable operating results increased by 50%. I mean, clearly this is supported by a more favorable mix between services and new build. We have about 63% of our sales in Q1 was service related. So that gives a positive impact on our profitability for Q1. The lower sales give lower operational leverage. So that goes the other way. But in general, I think we are on a solid path to reach our financial targets. Technology and partnerships, this is really what we are excited about in Wärtsilä. And it's all focused around our strategy for decarbonisation. So a couple of examples from Q1. First of all, we are very happy and proud that we are part and we are actually leading a 200 million euro collaboration in an ecosystem to develop autonomous power plants and also autonomous zero emission power plants for balancing solutions going forward. So this is a five year collaboration program. It involves more than 200 Finnish companies, industrial organizations, research institutes and universities. We call it WISE and it's really to develop innovative clean energy concepts and autonomous zero emission balancing solution by using data analytics and artificial intelligence. And our goal as an outcome is to offer flexible autonomous power plants concepts by 2028. On the storage side, we continue to invest and continue to launch new products. We have introduced a Quantum 2 to optimize the deployment of large-scale energy storage facilities. It's a fully integrated, high-capacity battery energy storage system optimized for global large-scale deployment. And it enables our customers, project developers, to meet capacity requirements with improved transportation and deployment speed and unparalleled safety. As you know, we have the industry leading safety, thermal safety track record. It's flexible to include modules from various manufacturers, allowing optimized configuration for each project and for different partners in the supply chain. If we then zoom in on our two businesses, starting with Marine. good performance continue order intake net sales comparable operating results all increased order intake up 23 percent net sales up six percent and if we look at the comparable operating result we see good performances and services supporting the result and And and but we do have an increase in R&D costs and higher depreciation and amortization. As we talked about, we are investing in new technologies on the marine side, new fuels, hybrid solution, carbon capture, etc. And we want to position ourselves as a technology leader in the industry. And I think we have a very strong position. And if we look on the services side, we have good development in marine service agreements, marine net sales to agreement installation continues to increase. And we took one example here with many of these, but this is really what the service business is about. So it's a lifecycle agreement to support optimized low emission operations for two P&O ferries. So we signed the agreement with P&O, five-year agreement, two vessels, Pioneer and Liberté, designed to optimize and ensure minimal impact on operation. So the scope includes parts, maintenance services, maintenance planning, operational support, and also expert insight for predictive maintenance services. And this order was booked in the first quarter. Now, looking at energy, comparable operating results increased. Equipment net sales decreased due to the periodization of deliveries between quarters, as we talked about before. So ordering take up 4%, net sales down 30% quarter on quarter. If we look at the operating result, it was supported by the good performances in services and also improved profitability in our EPP business. So decreased sales, of course, we have lower operational leverage with the sales coming down. And also on the energy side, we are investing for the future, being positioning ourselves as a technology leader. This, I think, is a great example of balancing and of the global trend that we are seeing in balancing, which is very strong, particularly in the US. So one of our, you could say, repeat customers has placed another order. The Lower Colorado River Authority, LCRA, they provide wholesale power to the Texas power grid. And LCRA actually gave us an order in 2022 for 190 megawatts. And now they are returning, which we are very happy, to place an order for another 10 engines, the 50 SG engines. So it will basically double their output. And I think the statement here by senior leadership in LCRA, I think it's spot on with what we are doing in Wärtsilä on the balancing side and actually the message that we have been giving. So quoting here, we really appreciate Wärtsilä's track record in supplying efficient and reliable engines. The flexibility of the Wärtsilä engine is particularly important in providing the rapid ramp up of power needed for a new Pico plant, which will be called upon to quickly come online when other generation is not available to meet the power demand of a growing state. So this is balancing power spot on. And this order was booked in the first quarter. If we look at energy storage, the comparable operating results continue to be positive. We had low net sales due also here due to periodization of project deliveries between the quarters. And the strategic review continues. Energy services is at the good level. I mean, good agreement coverage. 29% of the installed base is under agreement. I mean, you see a slight reduction of megawatts under agreement in Q1, but that is also affected by periodization. It's not a general trend. We do see a positive development of our agreement business also in energy. And for us, one of the major metrics continues to be the customer's renewal rate on the agreements, and they are 90%. So a strong testimonial that we are creating value for our customers. To sum it up, looking at how the comparable operating results have improved, the bridge from Q1 last year, and you can see the contributors here, marine energy portfolio business. And I think it's worth to note that marine and energy both are now above 11% EBIT. And the comparable operating results increased by 50%. Iron, other key financials.

Thank you. Give me the clicker. All right, other key financials. If we look at all these, let's say, other key financial parameters or KPIs, however we want to call them, actually we can clearly see that it is on all lines improving compared to the same quarter last year. Actually, it's also improving compared to Q4 last year. except for solvency and basic earnings per share. Solvency typically goes down in the first quarter as the AGM decision about dividend is accounted for in equity. And if we look at the basic earnings per share, it's actually only two cents down from Q4, which is actually for Q1 a very good level. Our operating cash flow, €258 million. Actually, it's an all-time high Q1 record for Wetzel. We have never had such a high cash flow in Q1. Clearly supported by customer payments. Down payments, very much, I would say. Related to the good order intake that Håkan was reflecting upon earlier. Actually, our order intake in Q1 was higher than Q4, which is really a good trend. But also other milestone payments from customers. What also clearly happens to the or supports the cash flow is our continuous improvement on transactional services. Because the transition let's say from order to cash on transactional services is a lot shorter and that can have quite significant impact even on single quarters. Looking at this graph, or this slide actually, the left-hand graph, let's say cash flow from operating activities actually going really strong. Actually, it generates that we are in a net cash position today, very much supported by improved profitability, but also a continuous negative working capital. I would still say that negative working capital is exceptional and it relates very much to, let's say, project execution milestones in our order backlog. And that can vary a lot, let's say, quarter on quarter. But Q1, extremely good, and the trend is clearly positive. Back to you, Håkon, on the prospects.