Wartsila Corp Unsp/Adr

Good morning and welcome to this news conference for Wärtsilä Q4 24. My name is Hanna-Maria Heikkinen and I'm in charge of investor relations. Today our CEO Håkan Agneval will go through group highlights, business performance and then after that our CFO Arjen Behrens will continue with the financials. After the presentation, there is a possibility to ask questions. I kindly ask every analyst to ask first one question to make sure that everybody has a possibility to ask questions. Håkan, please, time to start.

Yes, thank you, Hanna-Maria, and a warm welcome to everybody joining us. which has been a great fourth quarter and a great year. If we start on the fourth quarter, we had a very strong order intake, net sales and profitability, all three dimensions. So all-time high order book at 8.3 billion euro. Order intake increased by 34%. Net sales increased by 13%. And that translated into comparable operating results that increased with 18%. And our good journey on services continues. So order intake up 15%, the net sales up with 12%. And I will smile later, the strong cash flow continues. I mean, very strong cash flow from operating activities, 437 million euros. So really great Q4. If we look then at the full year, it has been a year of all time highs. So order intake, absolute operating results and cash flow, all time highs. And we talked earlier about the order intake. You can see here, if we start on Q4, I will talk more on the full year, but if we start on Q4, Up 34% from 1.8 to 2.5 almost billion. And we continue to grow services up 15% from 900 to a billion. And then very strong order intake growth in equipment side, 51% up from a billion to almost 1.5 billion. The order book, as we talked about, it's all time high, 8.3 billion. Some very positive development. Net sales for the quarter up 13%. And we see it's up both in services and equipment. Services up 12%, equipment 13%. Book to bill, 1.3. It's the 15th consecutive quarter with a positive, I mean a positive, but a book to build above one. The comparable operating results up 18% to 209 million and we continued our or improvement of profitability. So up in the quarter to 11.3. And also the operating results now going from 7.8 to 12.4%. Looking then at the full year, on the order intake side, for the first time, we are passing the 8 billion mark, so order intake up on the full year for 14%. And still good growth, I would say, on services, up 8% on order intake. Equipment, we said it's going to be a stronger equipment year, up 20% on the full year basis. Net sales also we continue our growth 7% above our 5% annual growth target and we grow in services up 9% and we grow in equipment up 6%. And that then translates to continued improvement on the comparable operating results. So going up from 8.3 to 10.8 for the full year of 2024. Of course, also looking at the operating results going from 6.7 all the way to 11.1. So we are not at 12 yet, but we are on a solid path to reach also the 12% financial target. Then looking at marine and then energy, the market sentiment is positive for our core segments, and we see increase in demand for new ship. It basically continues. So the number of vessels ordered in Q4 came to 2,765, and that's up considerably from one, 1977. And the new-build contracting in 2024 was strong overall, driven by the supportive freight market, especially due to the red-site rerouting, but also to the underlying fleet renewal requirements. The global shipyard capacity, which was at its lowest point in 2020, where it reached 60% to the 2011 peak level, it's currently at 70%. But the trajectory is positive. Shipyard capacity is being added as we speak. And the forecast is that it could reach 80% to 85% of the 2011 baseline by 2030. the growth is primarily driven by expansion in China. Now, if we look at the 2024 contracted vessels, 653 are alternative fuel capable. And that is about 49% of the gross tonnage, and we do see the continued positive derivative here stepping up from 43 to 49%. So there is also an underlying trend for alternative fuel capable vessels. If we go to energy, we see solid long-term market opportunities, and the energy transition continued to advance in 2024. Wind and solar are expected to post record installations in 2024 and 2025. And the combined capacity additions from wind and solar are expected to be somewhere between 650 gigawatts and 800 gigawatts in 2025, according to EEA and BNEF. You could say it's going too slow, but there is a very solid trajectory in the continued growth of renewables. Energy-related macroeconomic development in 2024 was impacted by elevated risks in the geopolitical environment, creating uncertainty and also slowing down some decision making. In 2024, both thermal balancing and battery energy storage experienced highest level of market activity to date, driven by the increasing share of renewables. So that's the narrative of increasing share of renewables driving the need for balancing power. You can clearly see it playing out in 2024. Data centers, a lot of focus on that. It is a promising baseload opportunity due to the challenges for developers to get grid access and get power from the grid. And according to EA, additional 45 gigawatts of power capacity is expected to be added for data centers between 2024 and 2027. So there is a growth potential for Wärtsilä. Looking at the numbers also from a more visual side. So organic order intake increased by 35%. Overall order intake increased by 34%. It's not a typo that 35% is organic. The overall order increase is 34%. So they are very similar, but there is a percentage unit in difference. Equipment order intake increased by 51%. And services order intake increased by 15%. So continued strong growth. And all time high in our order book and the rolling book to build continues to be above one. As I said before, 15th consecutive quarter where it's above one. And we also see a good distribution of deliveries for this year and for next year. So looking good. Organic net sales increased by 13%. So net sales increased by 13%. Equipment net sales increased by 13% also. And services net sales increased by 12%. Profitability. We are on a journey of improving profitability. And also here, in the fourth quarter, we see it continues to improve. Net sales increased by 13%. And we see that comparable operating results increased by 18%. And if we look at the 12-month rolling comparable operating results, we landed at 10.8%, which is a step up compared to last year at 8.3%. Technology and partnership highlights. It's all about enabling sustainable societies through innovation in technology and services. So technology and partnerships right at the core of Wärtsilä, about enabling the industry decarbonization, which will take decades, but we are on the move. We recently contracted our first 46 TS installation in energy. This is for a 120 MW plant in Kazakhstan. It includes six 46 TS SGA-fueled large bore engines. and mechanical and electrical auxiliary equipment. And when the project will be completed, it will power oil and gas facilities in the region. Now, the interesting thing is that the power set up there, it's actually a blend of fossil and non-fossil power generation. So basically, the 46 tiers will be providing balancing power to secure reliable energy generation from renewable sources. And this order we booked in Q4. Then if we jump to the marine side, another first, that's delivering a propulsion package to power the world's largest methanol-ready cement carrier vessels. So we will supply the complete propulsion package consisting of engines and propulsion equipment for 38,000 deadweight ton methanol-ready cement carrier vessels for Nova Algoma, which is a joint venture And when it will be built, it will be the world's largest vessel of its type. And it will also be the first with a methanol-ready notation. And this order we also booked in Q4. Now, looking at our businesses and a little bit how they have been performing. On the marine side, we see a good overall performance continuing. Order intake and net sales increased, so order intake up 9%, net sales up 12%. And if we see on the development of the comparable operating results, on the positive side, the positive drivers is higher service volumes and better operating leverage. On the negative side, you could say it has been a less favorable project mix within equipment. Different type of equipments have different profitability. In this quarter, we had a mix that acted in a negative way, queue on queue. And then we see increased R&D. We continue to invest R&D. We are around 4% overall for the group, and we continue that. Now, on the marine services side, we also see continued good development, book-to-bill above one in all the service revenue streams. So you can see a quarter and quarter up 12%. And this is a graph that we intend to use going forward, the right one, when we will talk about the book-to-bill for the different service disciplines. So we have the field service, we have retrofits and upgrades, we have spare parts, and we have service agreements. And as you can all see here, all of these disciplines, they are above one, which continues to fuel the growth in the services. If we look at energy, the comparable operating results increased, and we do see a strong growth in order intake, both in engine power plants and in energy storage. So order intake up 54%. Net sales up 14%. And we do see a step up in the comparable operating results. Positive drivers also here, higher service volumes. Also the continued shift from EPC to EEQ, from the civilian installation complete responsibility to more of equipment responsibility. And we do see a very positive trend in project execution in energy storage and optimization. Great work being done. Now, if we zoom in on storage, the comparable operating result, 12 months rolling as we look here in storage, continued to improve. It's now at 4.2%. We also noticed the order intake. It was fantastic in Q4. It was not so fantastic in Q3. And we talked about that. There are big orders and there's a little bit of periodization between the quarters, but Q4 came in very strong. I think also this should be noted going forward, that this is a project business, so order intake can be a bit lumpy. But overall, a positive development and a very positive trend for continued journey of improved profitability. And also on energy services, we see continued good development. Also here we have a book to build above one in all the service revenue streams. Q and Q 11% growth and similar visualizations here of these four disciplines. And you also see all of them are above one. So good continued growth. Now, we continue also to work with the business units in our portfolio business, and we are continuing our journey of becoming a more focused company as we will be divesting our ANCS, our Automation Navigation and Control System business, to SOLIX, SOLIX Group AB, which is a Swedish private equity firm. ANCS is a global leader in innovative hardware and software technologies for marine navigation and automation. We acquired ANCS in 2015 as part of Marine Systems International. It was an overall acquisition we made then. And just to give the magnitude of the business as it is today, in 2024, the annual revenues of ANCS was close to 230 million euros. So subject to approvals and we expect to close this transaction in the second quarter of 2025. So here we have the bridge, the Q on Q bridge from 23 to 24. We go from 10.8 to 11.3. You can see marine is coming down a little bit. That is a new build mix. We see continuous improvement on energy side. And also on portfolio business, also encouraging to see that the profitability is developing. We talked about portfolio before. We are turning around the business units, and then we are divesting. So you see the concrete proof points here. Other key financials. Arjan, please.

Thank you, Håkan. Looking at the other key financials, basically all of them improved from Q3 to Q4, as well as, let's say, they improved from, let's say, year end 2023 to year end 2024. Our strong cash flow performance continued actually in the fourth quarter. Out of the full year operating cash flow, 36% was generated in Q4, and out of the full year net cash flow, actually 44% was generated in Q4. The good cash flow in Q4 supported basically to reach an all-time high cash flow of 1.208 billion that you can see on the slide, breaking the previous record, which is actually also on the slide, which is actually 2023, 822 million euro. The good cash flow was supported by both, let's say, improved profitability, as well as, let's say, the good activities that we have done over time to reduce further on our working capital performance. If we look at working capital to sales ratio on the right side graph here, up to the end of, let's say, 2023, you could say we had been running on positive working capital to sales ratios. And if you go longer back, it was even higher percentages in those years. But since 2023, end of the year, and going into 2024, let's say this working capital reduction continued. There are many, let's say, underlying actions that supported this development, actually. And just to name a few, for example, order intake in new-built agreements and service projects, retrofits, you could say, is clearly growing. And in those revenue streams, you typically have good down payments, and you have also Often also, let's say, midterm delivery payments. And that clearly supports working capital. Just to give a few numbers, let's say in the last two years, new order intake increased 1.2 billion euro. And service projects only in the last year increased 28% actually on order intake. Another good example is the one stock location that we have nowadays for manufacturing stock. Instead, earlier we had, let's say, Trieste and Vasa. Now everything is concentrated in Vasa. And that gives, of course, good opportunities to further, let's say, optimize stock levels, supporting working capital development in a positive way. Finally, I also want to mention the shift that we have seen over the past years from EPC, so turnkey projects basically, to equipment contracts, in particular in energy. Because EPC contracts typically tie working capital longer. And of course, if you shift more to EEQ, then you have a positive effect in the working capital. Just to give a few numbers here as well. In 2022, engine power plants, for example, 70% of the net sales was EPC. Last year it was only 20. Another point is the receivables, overdue receivables as a percentage of total trade receivables. We went five percentage points down in last year, from 28% to 23%. Clearly, again, contributing to working capital. And there are many more actions like this. While many of these actions are sustainable, I would not believe that this level of what we have currently is a long-term sustainable level. I do expect that the orange line that you see here on the right side graph will go up again at some point of time, because not all the parameters in the actions that I mentioned just a minute ago will always stay like this. For example, there might be a shift in the ratio between EPC and EQ, Supply chain finance, which also contributed with 100 million euro in last year, depends a bit on which suppliers you use. Are they part of supply chain finance? Yes or no. So not all the parameters will stay the same. Our anticipation is that, let's say, we will still, let's say, for the coming year, perhaps even a bit longer, stay on a negative working capital level, but the line will gradually go up. Final slide from my side, the board will propose to the AGM 44 cents of dividend, which is in line with our financial targets of paying 50% of EPS out as a dividend. In this case, it's 52%. Over to you, Arkan, on the prospects.