Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

Okay, we have already more than 45 participants. I think there will still be quite many joining but I think it's good time to start now. So welcome to this [indiscernible] call. My name is Hanna-Maria Heikkine, I'm in charge of investor relations and soon our CFO Arjen Berends will go through a couple of slides we have prepared. And he will start with the key messages and then after Arjen's key messages, we will go for the Q&A. [Operator Instructions]. Arjen, time to start please.

All right. Let's say a few, let's say, general comments and then we go deeper into the business. I would say, in general, let's say, cost inflation is still burdening our new equipment business, in particular, related to the -- what we have also talked about earlier several times, EUR 1.2 billion order book that we had at the end of last year March. Wage inflation is still an issue. I think it's a global issue. We are facing the same. Of course, we have been trying to mitigate it as much as possible by price increases. But it's different in different countries. So it's not so easy to, let's say, cover it all just like that because also the changes are time-wise coming in at different paces. Voyage integration in Marine Power is going well. I think we are progressing quite well. And also, let's say, in Q2, we will do further modifications, as already mentioned, moving parts of Voyage to portfolio business as well as marine electrical systems. Looking at the energy market. pipelines are good, let's say, both for storage and thermal business. It's, of course, always, let's say, fluctuating by quarter that, okay, what comes in and what comes not in out of -- I mean, what comes out of the pipeline and what does not come out of the pipeline yet. Our installed base, I would say, is pretty stable. Let's say the utilization is good. And we don't see and also not foresee on the shorter term, say, a strong decline there either. We expect utilization to be quite good throughout the year, at least with what we know today. Also, the demand outlook for energy, we anticipate -- actually I can confirm, let's say, our guidance of, let's say, a quarter ago, but it will be better than last year. Storage pipeline goods. IRA, there is still a lot of details to, let's say, fall in place on that one. But what we can clearly see happening in the market is that more and more, in particular, battery suppliers are thinking about, let's say, local production in the U.S. to benefit maximum from those rules. Looking at the marine market, I think it's good to look at this slide that is now on the screen. It's the -- you could say, our first reflections on this week updated Clarkson forecast. In the container market, let's say, the freight rates have come down. But having said that, I think the business in the container sector is still quite good. Good cash levels are coming in, and that's also what we hear from our customers. We don't see a decline yet in shipping nor let's say, shipping transport, at least, let's say, from the ships that we are, let's say, very active in. So that's good for us. Business is still going quite well. The banking sector problems -- okay, that's, of course, something to be monitored very closely. But at least so far, we have not gotten any implications out of that. At least not, let's say, through our projects that we are discussing with customers. So that's good. But of course, it's close monitoring that we are implementing here as well. Newbuild prices on the rise, still not so much from cost. On the cost side, let's say, we see raw material prices coming down, but at the same time, we see salary costs going up. The yards are, let's say, limited in slots. There is some increase, but it's [ slown ]. So the price increase, if you want to buy a new ship is more driven by, let's say, lack of capacity, meaning that there is more demand than the yards can supply than the cost structure underneath. Fleet aging is continuing, which in a way, is a surprise. I think it's also a lot to do with the fact that there is a lot of thinking, I would say, on customer side on what shall I do with my next ship, in particular to environmental regulation and what is wise for me to decide upon right now, what kind of solutions should I implement. So I have the maximum flexibility in my asset going forward. But of course, with aging fleet, let's say, the renewal requirement driven by regulation is just increasing. At some point of time, replacement has to start. CII has been implemented, as you know, let's say, beginning of this year. First ratings will be done towards the end of the year. I think that will also drive, let's say, renewal retrofits, et cetera. Slow steaming is, of course, one solution that is definitely, let's say, to be explored in the first part of the CII. I think with slow steaming, you can cover the beginning years of CII pretty well. And you might have seen the recent announcement that we did earlier this week on fit for power, basically, which is a slow steaming solution for 2 stroke to optimize the efficiency of 2 stroke engines to facilitate slow steaming. Methanol, 2 fuels are being heavily discussed in the marine industry, methanol and ammonia. I would say methanol also here what Clarkson indicates, and we hear it the same methanol is gaining more traction actually than ammonia right now. And it's also anticipated to increase as stated here, to 20% of contracting a number of ships by the end of the decade. So that's quite significant. Newbuild volumes in the current Clarkson forecast slightly downwards adjusted compared to the last one, which was September last year, but the anticipation is that the pickup will happen already again in 2024. And I mentioned the last point already, yard output is expected steady, let's say, there is shortage of capacity, which drives the price up, but also shipyards are slowly increasing capacity also by improving the utilization in the throughput times. So that gives a little bit more capacity in the coming years. If we move to the next slide. This is more an update on the -- profitability drivers. You have seen this slide from us before, not so much changes, I would say. What we took out is more the uncertainty bullet that we had earlier on the COVID situation in China and whether that would be an impact. That has been taken out. And the other change is around, let's say, the energy engine production volumes for the second half of this year. Will we get it all in? Because the time to, let's say, book the orders. There are orders that should support it in the pipeline, but will they come out in time to facilitate that production. So that might deviate a bit in the second half of the year depending on how the order intake goes. Otherwise, I would say that it's pretty much the same positives and negatives. I mentioned on the negative side, the wage inflation already. Cost of energy at the moment is not so bad, so that's pretty okay. But of course, this can change quite quickly. That's why we kept it on the list. If you go to the supporting drivers, service business is still going strong. That's also, let's say, what we've seen in Q1. The decarbonization push is just increasing. It's more and more, and that's good for us. We have a lot of solutions that we can offer to customers, so that's good. Profitability improvements in energy storage and voyage well moving forward. The trend in storage that we have also commented last year at the end of the year, an improving trend we see that continuous -- or continuing sorry. And voyage integration is also clearly going according to plan, as I mentioned earlier. Cost optimization, okay, one big item here is that, of course, the Trieste factory closure. There are, as you know, and for sure have read and we have also commented earlier, let's say, some time delays. At the end of the day, we are confident we will pursue it to the end, but we need to take the steps in the right order in very close cooperation with local authorities, even domestic authorities as well as, let's say, unions. Order book is good, both on equipment and service side, so that's helping us. And as I mentioned in the start, let's say, the EUR 1.2 billion of order book at the end of March last year. That was hit by, let's say, cost inflation, is a lot smaller than, let's say, what we had last year. So clearly, let's say, supports profitability increase for 2022 -- 2023, sorry. If we take one more slide and then I leave the floor to Q&A. There has been lots of questions in recent meetings about cash flow and rightfully so. We closed last year with a negative operating cash flow, which was, of course, not good. I don't like it either. It's of course, 2 elements in it. It's the profitability element and then it's the working capital element, but this is just to reflect that, let's say, what has happened to working capital and also, let's say, cash conversion cycle over the past years basically, and you can see a significant effort that we have done especially, I would say, throughout the COVID times on reducing working capital. And I would say at the moment, working capital is at a very good level. Having said that, I think there's always more opportunities. So we are definitely not, let's say, satisfied with this level. We will continue to push for further improvements going forward. That's it from my side as an opening comment and I leave the floor to questions.

Thank you, Arjen, for a clear summary. Now we will continue with the questions. So the first question comes from Daniela Costa. Please go ahead Daniela.

Can you hear me?

Yes, we can.

We don't have the video functionality yet. I have 2 questions. One, I think is rather quick. The other one is sort of just more medium term, but I'll do one at a time. First, I think you -- we put out an announcement saying that you completed the 200-megawatt energy storage in the U.S. recently. And I was wondering if you could provide any color on whether that's been an order like when originally did you sign it, if you can remind us? And was that a preprice lithium price rise? Like is this one of the dilutive orders that you mentioned has still something that you need to work through? Or how basically shall we think about the sounds like a relatively large order for the near term? How should we think about this in terms of -- yes, margin and bridge?

Of course, we are not commenting on margin. To be honest, I don't know exactly when this order was booked, but it must be before the escalation time, I would think, but that we could probably check quite quickly. So it's a bit difficult now for me to answer that question, Daniela. Sorry for that, but we can come back to that later on.

No worries. Maybe but -- is it right to assume that 200 megawatts is a sizable storage order?

Yes.

It is? yes. And then the second question I think last time we had this call based on the U.S. IRA, you mentioned the batteries had to come from the U.S., which is obviously not yet possible. But on European IRA equivalent, where we've, I guess, the main change we've heard is fastening of permitting. I just wanted to understand, in storage in your business or in your business in general, how much permitting had been a bottleneck? Is that sort of been a big thing? Do you think -- how quickly can stuff materialize? And can we start to see more storage orders in Europe within the next sort of few quarters on the back of that? Or what's your view on the European side of IRAs.

Of course, there are lots of, let's say, to be concluded items in that European side of IRA. I would say permitting for storage as such, let's say, purely for storage, I don't think that's a big issue. I think it's more the permitting on the renewable energy. So the windmills, the solar panels, et cetera, because, let's say, the storage [indiscernible] comes with more renewables because then you need backup power. But I have not heard any, let's say, issues, frankly speaking, with the storage side per se being -- or having a permitting item. It's more the renewables that the storage should support. And -- so there, of course, it's to be seen, let's say, what comes now from EU and how they are trying to, let's say, make that easier. I think it's still a lot of question marks around also for us, but how will they give that hand and feet, so to say. But I guess that will be coming more clear. Okay, it's difficult to put a time to it, but I would expect something to happen or be more clear, at least in the coming quarters. And by the way, on your earlier question, I think the order was from -- what was it, February 21 -- so that was before the cost escalation.

Thank you, Daniela. Next question comes from Johan Eliason.

I was just wondering your comment here about slow steaming on the back of these changes here. You got it to sound like a bit of a business opportunity for you with the low steaming package. But I remember, after financial crisis, slow steaming was a big topic and that eventually led to your service business being sort of flat for many years because ships were running slower and that drove less spare parts and things like that. How do you see the risk now on that front?

I would say it's different today. I think this retrofit package, I think, is something that we have particular also developed looking forward to, let's say, more environmental-friendly solution because to comply with -- in particular, for vessels, as you could read also from the release, it's in particular, suitable for vessels that are typically 10, 15 years older. So then let's say, you can extend their lifetime basically and comply to, let's say, tighter regulation by doing this retrofit package, for example. And that gives you basically, as a customer, it gives you time to think about, okay, if I now order a new vessel what should I do? Because that's what we see with many customers that what is my solution when I buy a new ship? You see [indiscernible] going to the say methanol as now, let's say, basically, you could say, all-in on methanol. But are others following the same? Or will it be another fuel? Will it be ammonia for some? So there are many solutions being developed, but you could still comply to CII or other regulations by slow steaming and doing, for example, this [ refit ] package. At the same time, if you do slow steaming and the number of goods to be transported stays the same, you need more ships in operations. So on one hand, you lose something, on the other hand, you win something, right?

Okay. Just on this methanol thing. I guess you're not the engine supplier anymore to the container ship sector to any big degree. But -- I mean these are methanol ready ship sort of -- are you selling some sort of equipment today and then when they will start using methanol, you will sell an upgrade? Or can you sort of give us an example in those cases.

Let's say, for the container vessels to use that as an example, yes, we are supplying, let's say, auxiliary engines to -- also the ones that are no methanol. We have clearly, let's say, methanol solutions. We have already sold tens of methanol engines already.

But are these like dual fuels. I mean, you sold dual fuel LNG and heavy fuel oil for a decade, basically, but everybody was using heavy fuel oil. Is it the same now with methanol?

You could say it's more multi-fuel nowadays. But if you go in the future, for example, if you go to ammonia, that is not so simple yet, okay. First of all, the ammonia concept that we have in development still needs to, let's say, be finalized. And of course, ammonia has -- yes, the corrosiveness of it, of course, requires quite more adjustments than, for example, methanol. Methanol is easier to [indiscernible] engine or in the existing engine, you could say, than ammonia. But the future will be definitely multi-fuel engines.

Next question comes from Max Yates.

I just -- my first question was I just wanted to ask about the lower margin revenues in the backlog. So when we think about, obviously, you're delivering less this year than you were last year. So I just wanted to confirm, when we think about the first quarter, is there any reason that 1Q shouldn't be lower year-over-year than last year? Or are these revenues for whatever reason, kind of weighted towards 1Q deliveries? I'm just trying to understand that, that still should be fundamentally a tailwind year-over-year for the first quarter? Or is that not the case because of the phasing?

I would say it's more opposite actually. Let's say, last year Q1 was not so much impacted by the cost inflation because what you delivered in Q1 last year -- yes, you bought it already earlier, right? And then the escalation started, you would say, March onwards. So I would say this year [indiscernible] much more impacted by cost inflation in Q1 than, let's say, last year Q1.

Okay. And then it starts to become a tailwind as we go through the rest of year.

We anticipate -- and of course, it depends very much if there are any change in schedule, but we anticipate that by the end of Q3 the majority should be out of this EUR 1.2 million (sic) [EUR 1.2 billion] impacted order book.

Okay. That makes sense. Just the second question would be around what is happening in Trieste. I was wondering if I know there's been kind of a lot of negotiations ongoing. So would you just be able to give us an update there as what is happening and what negotiations have thrown up.

No, we are, of course, let's say, in discussions with several parties to take over a part of the business. I won't comment on the names that have been floating in the news. [indiscernible] . These are openly out there, but -- and I think that's public news. We are discussing with several parties to take over full production or part of production or at least the factory, not -- of course not making engines, but let's say, the factory and the resources. But that's all I can say. I cannot say more.

Okay. And I guess just the final one, just thinking through your energy equipment -- your thermal equipment business. Obviously, one of the things that people -- one of the things that people obviously care about at the moment is credit availability. And I just wanted to kind of understand, when you look at your customer base, when you look at your customer base across energy and particularly thermal, how much of an issue is financing? I mean when you look at your customer, what is the split between government, people that maybe require financing from yourselves or others? How should we think about that?

We have very little customers that require financing from us, very, very minimal, I would say. It's mainly, let's say, own financing or, let's say, through banks. And of course, in power plants, you have also, let's say, development banks, et cetera, that support it in case. So far, let's say, I have not, let's say, on a very regular basis hearing any difficulties by, for example, the interest rate increase that we have seen over the past quarters.

And what about sort of government versus private? Any sense of kind of how much of your thermal energy orders in a normal year would come from government?

I think that's very difficult to say because if you look at the typical power plant, if you look at financing structures of a power plant, it's -- okay, how, let's say, the consolidated summary of all those 3 together because we are not just delivering 1 power plant but multiple. It's very difficult to say how much is government, but for sure some tens of percentage government related in the average, but it's very difficult to say exactly. Then you need to really do a deep dive analysis and look at all the parties that are involved in all of the power plants that we deliver and see okay, where is government behind?

Next question comes from Panu Laitinmaki.

I have a couple of questions. Firstly, on the margin theme and the communication about the EUR 2.2 billion last year and EUR 1.2 billion this year. Just to confirm, did EUR 2.2 billion last year include storage as well? Or was it only about nonstorage?

Both.

Both. And then how should we think about the margin in the EUR 1.2 billion this year compared to EUR 2.2 billion last year. So is it like same as low? Or is it better versus just to think of how the model is.

Yes, I think that -- okay. I would say it's slightly better but of course, everything depends on how raw materials develop. -- let's say, we saw last year, let's say, a steep increase in raw materials and that, of course, let's say, hit us quite hard. Now it takes steel -- for example, steel prices have come down. Of course, then the hit is less hard. But it's still a hit, if it is, let's say, not lower than, let's say, what we had assumed when we calculated the project when we sold it, for example, in 2021. So it depends very much on how it works. I would say, in general, it's somewhat less today than previous year.

Okay. Then on the outlook, I mean, just curious, you gave a 12-month outlook for demand now instead of 1 quarter. So does this indicate like better visibility or confidence or why the change?

Yes. And so we have been, I think, since, now how long 2020 -- beginning of 2020, I think we have been doing quarters because of, let's say, all the turmoil first of all, with COVID and then, let's say, with the Russia and Ukraine and all the cost escalations, et cetera, and what impact that has on the market. So it has been very difficult, but we have decided at the end of last year or the beginning of this year that this might be the new normal, then it's the choice. Do you want to continue with just quarter guidance? Or do you go back to, let's say, what we have been also doing earlier, full year guidance? We do the full year guidance still within, let's say, you could say, a volatile environment. But it's the best to our knowledge at that point of time. So our plan is to continue for now, let's say, with an annual guidance.

Okay. And then just finally, on the outlook. In terms of Marine, I mean you mentioned new Clarkson forecast, but what is it in practice? And are you still happy with the guidance that Marine demand is at the same level last year or is it more negative now?

I would say we are still, let's say, on the same thinking with Marine despite Clarkson is forecasting a little bit lower. There is always a delay in it as well because, let's say, this is contracting and let's say, before contracting becomes, let's say, to us, then let's say, there is always a delay. So ship contracting versus, let's say, when we get the order for engines, okay, they can be even up to 18 months delay or sometimes even 2 years, depends a bit on how long the series of ships is that they order.

And one other change in Clarkson estimate it was quite limited. Sorry it was down by 84 vessels as I calculate here. It's not very significant. Next question comes from Tomi Railo.

It's Tomi here. Just a question, actually, a little bit coming back to the engine side. You raised a little bit of a red flag in terms of production for the second half. To what extent is this related to, let's say, customer decision-making deal, is possibly due to the financing or tougher financing situation?

Let's say we don't -- difficult to say, Tomi, but we don't have any indication that it is related to the financing. So that's all I can say. At least I'm not aware of any financing being the reason. But of course, with energy power plant projects, it's always -- let's say, it's volatile. It's not as stable, let's say, every quarter, similar thing. It's just 1 quarter you have a lot, and the next quarter you might have very little. And yes, that depends now in particular, I think if we want to -- we have of course, production volume for the second half of the year. But if we want to fill it completely for the energy side, we need to book the orders, I would say, end of May latest.

And is it then that you have seen delays that you maybe expected more or earlier than you have now seen?

Yes, of course, that's how production volume is based on, let's say, what you anticipate -- okay, not particularly at the beginning of the year, but let's say, even earlier because you also need to facilitate your supply chain accordingly. And of course, you take assumption that, okay, this order is likely to come out now, February, March, April, May, whatever. And yes, that's always a guesstimate or best estimate, you could say of what you believe -- with what you know at that point of time. Will it then happen eventually? I can say in most of the cases, our estimation of the month of booking is wrong. Is it then 2 months wrong or 1 month wrong or sometimes even 6 months wrong? We have all the variations. So -- but yes, you go with what you know based on the discussions that you've had and then you make your best estimate -- then yes, that's just how it is.

A second question, if I may, to earlier question. On the full year outlook, but why is it then that -- I mean, assumably the visibility for full year is lower than for 1 quarter. Why is it that you were not able to -- or you are not able to say that directionally first quarter orders up or down or flat?

No, we are not going to do end quarter guidance and full year guidance. We only do our full year guidance. That's what we have concluded.

Next question comes from Sven Weier.

Questions most regarding carbon rules and your positioning. First of all, CCS, getting a bit more traction. You have, I think, a pilot running on CCS. Can you just talk us through a bit of the -- I think it's been a while that you announced this. I think this was last year already. Can you share a little bit of the experience on CCS so far?

Let's say, it's a carbon capture scrubbers we have sold that, I think I also mentioned was it September or October, I think, in the call. This, of course, let's say, being installed and so far, let's say, on carbon capture -- if you think about carbon capture scrubbers that, of course, let's say, in particular, when you do a retrofit, but also newbuilds you make sure that, let's say, the surrounding -- around the scrubber is sufficient or let's say, carbon capture unit to be installed in addition or integrated with the right piping connections, et cetera, et cetera. So that's the main thing. We are installing it. We are also, let's say, having a real test lab for carbon capture in Norway. The tests are very good, I would say, from a test result point of view. So yes, I would say that's probably all I can say at this point of time. Tests are ongoing. The milestones that we have in mind to reach each, but of course, it's a trajectory you need to go through.

Do you see other clients also becoming more interested in this theme with inquiries or?

We see a lot of, let's say, interest for carbon capture, actually. I would say we would have a solution already today. I think the line would be quite long for customers being interested. But of course, this is a solution in development. And we need to do the proper R&D, let's say, verifications and tests before we say, okay, now it's full release and we sell.

Okay. The other question I had, was on the capacity you have, for example, on the propeller side because when we think about the CII rules toughening in the coming years, I know this year, maybe next people are going to slow steam to deal with it, but that's not the mid- and long-term solution, right? So I guess people are going to think about installing new propellers, air lubrication and so forth. How flexible are you in terms of ramping capacity, for example, on the propeller side?

I would say we're pretty good actually to ramp it up. But of course, let's say, we have closed last year a joint venture in China, which was related to propeller manufacturing, very largely related to the fixed pitch propellers, which is just a monoblock, let's say, casting. That is -- there in that market, you're typically competing with yards, in particular, China, Korea. They often have their own foundry. So it's very difficult to maintain it. That was also one of the reasons why we closed it, by the way. We have moved, for example, the CPP, both roster, et cetera, production from Shenyang joint venture to Wuxi area, where we have a, you could say, a dedicated factory for propulsion equipment. And there is always room to, let's say, extend through. We have quite a number of, let's say, large service workshops, which can also quite easily pick up on propulsion production assembly, if so required. So I would say pretty flexible. I don't see any problems there.

And what do you expect -- I mean, in July, we have MPC 80 and the discussion around net zero. If that was going to go through, would you expect different client behavior or no impact?

Yes, I would say typically, reactions are slow, right? Let's say if you think about this year, I would say it's probably not happening too much. But of course, let's say that in the beginning, the discussions and it's not only for marine, it's also for energy, the same. It's all about climate and fuel solutions and environmental solutions, et cetera, that is high on the agenda. So the more regulation, you could say, the more push, stimulus, pressure, whatever word you want to use, is on our customers. Typically, let's say, customers are a little bit first a bit wait and see. Nonetheless, regulations really kicking in. There are many regulations that are also only kicking in '25. I think fuel EU, for example, is only '25 when it kicks in. So yes, until that, I think we will do a little wait and see.

It's just when you think about how sold out the yards are until '24, '25 probably also that you have to react at some point, I guess, no?

Yes. And let's say, the combination with aging fleet. Let's say all the combinations are wrong in a way, you could say, which is really building up like a cork on a champagne bottle, at least I feel, but when it jumps out of the bottle, that's -- yes, difficult to really say, okay, when. But the pressure is on, and it's building.

Next question comes from Anders Idborg.

Just a few things on storage. If you could help us perhaps just with the timing of the backlog, you had such a big jump in deliveries in Q4. And I think we're not yet familiar about how the seasonality works here. Should we -- I mean, even to the point where deliveries almost caught up with orders here in Q4. So what's the backlog support? And how does the timing look throughout the year there?

I would say it depends very much, let's say, in energy, it's always volatile. It's not like, let's say, steady line. One quarter, you have a lot, another quarter, you have less. Let's say, you remember we booked a lot of, what is it, engine orders, I think, in Q4 '21. Okay. Then the first question comes, okay, is it percentage of completion or not? And then that will determine very much -- very strongly related is it EPC or EEQ. So let's say that the translation to sales volumes, there are many factors that play a role. Completion being one of them, and that plays both in thermal side as well as in the storage side.

Okay. But it's fair to assume that there's a seasonal tilt towards the end of the year also in...

I would not conclude that. I don't think there is really seasonality. Let's say this whole ramp-up of storage is driven by, let's say, the need for, let's say, alternatives for renewable energy, which is intermittent and when do they need it, it's not that they all need it in Q4. I think it depends very much on how these projects, let's say when some are installed, commissioned, then you need backup -- 3 months later, 6 months later. It's -- I wouldn't call it seasonality.

Okay. That's clear. And just maybe a follow-up. What are you doing internally now in storage in terms of ramping up your footprint? Should we still expect sort of your cost base to keep increasing at a similar rate in '23, as it did in '22?

No, of course not, let's say, definitely not on the -- you could say, call it, more overhead kind of functions that, of course, let's say, it's one actually of our ways to get to a more probable business by having a better cost leverage. So yes, for sure, let's say, with the ramp-up as we have seen, we need to increase costs, but the cost leverage should definitely work in our favor going forward.

Then we have a couple of questions regarding Trieste. Part of these have been already discussed. But how much extra cost does Wärtsilä budget for Trieste. Then how much of this is [ retrofit ] in provisions so far.

Let's say, the cost -of the Trieste closure, as we communicated, was EUR 130 million, which we booked, let's say, EUR 90 million as items affecting comparability last year. I think it was EUR 89 million to be precise. And we still, with what we know today, believe that EUR 130 million is enough. So probably the rest of it, of course, depends a bit on, let's say, how fast we can make progress will come this year as high in terms of affecting comparability. We don't foresee at the moment that we will overrun EUR 130 million.

The next question comes from Erkki Vesola.

Regarding the cruise sector, it looks very strong for the remainder of '23. Can you confirm that service orders do you receive our following suit, i.e., do you still see growth increase in ferry service orders or did we see the upswing already last year?

I would say service -- sorry, cruise business service is a very steady, you could say, increasing business as well. Of course, it depends very much on the installed base and let's say, is it running. But as you rightfully refer to, let's say, many of the ships are running. And, of course having many of them also, let's say, life cycle agreements that gives us opportunity to do upselling. So I would say it's a good trend, a positive trend.

Okay. And then secondly, the Bloomberg NEF, they were very optimistic about offshore wind farm build up already this year and going forward. Do you see any early signs of the installation business support vessel demand or at least the respective service market picking up as this sector is one of your strongholds?

Yes. We -- at least on the newbuild side, we see an increasing interest, let's say, RFQs coming our way for installations or, let's say, for equipment for wind farm installation vessels. So clearly, that's happening. And of course, if they are utilized, let's say, as I said also before, our service business correlates with running hours. So when they run, we see service.

But going up, obviously.

Let's say, it's good business. Of course, let's say, with our installations, let's say, there's always -- let's say, there are sweet spots in the installed base as well. Let's say, in the first 2 years when you're under warranty, typically, let's say, there is not too much service work. But let's say, after that, it starts to come, and typically, it grows over time.

Next question comes from Max Yates.

So just my final question, could we just talk a little bit about the storage outlook and the IRA into next year? And I guess -- what I wanted to ask is, how do you think about your competitive advantage? I mean, we've obviously got companies like Fluence expecting an acceleration as we go into sort of 2024. Obviously, they are a U.S. -- more U.S. space company. So I guess I'd love to understand kind of what holds you back being a European company in terms of taking advantage of that region. Is there any reason that you would undergrow peers like Fluence in the U.S. specifically because of the IRA and because of your footprint where you buy batteries, et cetera. That would be great to hear a little bit about that.

No, I would say not really. Let's say, the majority of our storage organization is actually also in the U.S. So that's not any different from Fluence. Of course, the IRA is very much linked also to, let's say, local production. So you need to make sure that you're more and more of our supply chain because we are not producing anything ourselves moves to the U.S. in order to benefit. And I think in that sense, we are not different from the Fluences of this world. I think everybody is looking into the same because that's the way to benefit best. And I don't see any reason why we would be any different than they are. I know that, let's say, Fluence is very vocal about growth. I think we also believe in very strong growth in that area. Then it's perhaps more a matter of, let's say, how conservative/realistic do you want to be, not saying that, let's say, they are overoptimistic. But it's very difficult to say, okay, how quick this ramp-up will go. I think they know it equally good as we do. We are perhaps a little bit more conservative than they are because it's also a matter of, let's say, is there capacity available. You can say, okay, the volume will grow X, but we all know that battery capacity is very limited. And at the same time, also car industry is requiring a lot of batteries for conversion. So yes, I think...

I mean, you know what my next question will be. How much capacity do you have? And what are you sort of setting out your capacity to try and grow out without giving guidance? But I mean, how do you think about your own business ramping up?

I will not comment on that. Let's say, I will not tell, let's say, what kind of capacity we have reserved with battery suppliers because that's the main bottleneck factor, right? I don't want to make our competitors any smarter. Sorry for that.

Next question comes from Mikael Doepel.

Just a quick question on the marine side of things. I'm just wondering about the Clarkson data. I'm not sure if it was in your slide or not, but what was the baseline in terms of vessels contracting in 2022 for the total market, which you referred to? That would be the first question. And the second question is on cruise and ferry and special vessels in more detail because, I guess, those are pretty important for you. I think the previous forecast was actually for a quite decent pickup there this year. Just wondering what the outlook is there for those specific segments?

I think the Clarkson -- let's say, if you look at September last year, Clarkson expectation was 14,000 -- sorry, 1,460 vessels -- sorry no, that's now the current forecast 1,460 vessels and September last year was 1,544. So 85-ish vessels down. Now, I don't have exactly in my head because this is now very new Clarkson data that was actually from what was a day before yesterday, but it was now exactly for cruise and ferry. I think it was actually -- I think it was flattish. But let us come back to that in a moment. I think. ..

Yes. Unfortunately, we do not have now the comparison data here. So let's -- yes we need to get back to this Mikael. And then it's also so that we cannot share all of the details regarding Clarkson data because, you need to unfortunately pay for the report if you want to get all of the details. There are certain limitations.

I don't think there was a big change in the ferry side.

No. And if I remember correctly, the expectation was for a quite clear pickup back...

That relates to the aging because the ferry fleet is actually one of the most aging fleets. At the same time, ferries are typically moving in areas close to, let's say, domestic waters, which is then also driven by decarbonization, much stronger domestically. So I think it's -- as I said earlier, there is a cork on a champagne bottle and it's a question of when.

Next question comes from Johan Eliason.

Again, just a short question. We have started to see rates in the container industry dropping and then we have a very big backlog of container ships to be delivered. And I just saw the other day some news about some container orders being converted into tankers instead. We don't know if this will be a trend, but we saw a big trend of the financial crisis. Once again, when containers at that time was converted into bulk ships, maybe this time it's tankers. But would that have any impact for you? I mean you said you might sell your auxiliary engine to a container? Would the tanker be better for you in that sense?

Okay, we also do auxiliary engines for tankers. But I think it depends a bit on, let's say, what kind of tanker it is. Is the auxiliary power more on a container vessel or not? If you have a lot of, let's say, containers with cooling facility, of course, you need more auxiliary power. So I wouldn't say it's better or worse. At least, I cannot really comment on it.

And you don't do the main engines anymore really to tankers...

Tanker is also 2-stroke.

So coming back to the question regarding Clarkson estimates and cruise vessels. So basically, there is no major change on that estimate?

No [indiscernible]

[indiscernible] Okay. Then next question comes from Panu Laitinmaki.

I just have 2 follow-ups. Firstly, on the voyage turnaround. I mean, you commented it's going as planned, but can you give any kind of color what kind of -- how soon and what kind of improvement could we expect from that?

I added that -- last year, we made a comparable operating profit of close to minus [ EUR 40 million ]. And for sure, let's say, that will be significantly improved this year by, let's say, restructuring it quite significantly. A piece of it will move to the portfolio business, which we will -- which we intend to sell. Then a piece will be deeply integrated into Marine Power, in particular, very strongly linked to, let's say, also agreement business. As I explained also in earlier calls, we can now, from Marine Power combine engine efficiency, fuel efficiency and voyage efficiency because the future is that it's all about efficiency. Because everybody in the industry, marine industry, knows that the future fuels will be more expensive than the fuels of today. And every customer that is now negotiating new ships or retrofit solutions, et cetera, is after fuel efficiency. And now we have a quite unique offering by having the possibility to combine engine efficiency, propulsion efficiency/hydrodynamics and voyage efficiency. That's going according to plan. Of course, this is now recently kicked off. So there is lots of people being moved around in the organization. I would say people getting also new positions, facilitating the integration in a fast pace way. And that's what I commented. That's going according to plan. And I'm confident that it will result in a much better result than what we had last year on voyage in total.

And then just on the Trieste factory. If it goes as you now plan, when would -- do you expect to see the savings from that? And can you remind what is the annual saving?

Let's say, we had about, what is it, EUR 25 million, EUR 30 million savings in a mature situation. Of course, that plan has been delayed based on the - when we kicked it off basically in what is July last year. [ It was almost ] on the same day the Italian government fell, let's say, so our case became political, still is political unfortunately, but it delays quite a bit. So I would say that these savings compared to our original plan is probably delayed with 3 quarters to 4 quarters.

Next question comes from Georg von Wyss.

I think this is probably a stupid question, but the cost of materials and services went up by about 600 basis points or 6 percentage points versus, I don't know, 3 years ago, is that a good estimate of the impact that inflation had on your cost to manufacture?

I will not comment on that -- sorry for that.

Okay. Why did it go up 600 basis points?

I will not comment on that.

Next question comes from Sven Weier.

I had a follow-up question on the LNG [ Greligfaction ] order you had for the 8 LNG carriers. I was just wondering, obviously, we had over 160 LNG carriers ordered last year. But first of all, the lead time between the yard getting an order and passing it on to you. And what market share you typically have? I think you say in the press release that these systems are becoming a standard on all sizes of LNG carriers. And so obviously, that would be a market share below 10% so far. So maybe some additional color on this.

Time between, let's say, ship order and us receiving the order it varies a lot, but I would say 6 to 12 months-ish typically. Depends also, let's say, how quick, let's say, the yard can deliver. And I think that's, I would say, the main parameter for that time difference because if yards are now full and let's say the ship will be delivered, let's say '26, they will wait with the order until '25-ish because typically, they want the latest technology included when they place the order to us. So I think if the yards would have, let's say, unlimited capacity, I would say, 6 to 12 months. If the yards are full and the delivery is very long, it's actually the same for any vessel type. The cruise vessels is the same. So if the delivery is far out, they are not going to order tomorrow. They will wait until the latest moment. So they have the latest technology included when they order

Those vessels you announced were ones that were ordered some years ago, basically.

I don't remember now exactly let's -- when that was, but we can for sure check, but that I don't have in my head now.

But can you talk about market share on those products that you have?

No, I don't think we give that publicly away either.

Because I remember these are typically relatively sizable orders. I mean you didn't announce the size of the order, but it's not small.

No. These [indiscernible] plans are quite expensive plans here. It's not a couple of million. It's more than that.

Now I do not see any raised hands -- does somebody has additional questions? So if so, please raise your hand function. Seems like that I do not have any questions by e-mail either. It seems like that there are no further questions. So first of all, we will publish these slides on our IR website soon, then our Q1 report will be published on April 25. For your information, we are developing the structure of the report. It will be a little bit shorter and condensed. So it will be -- it will take less time for you to read it. We will also give some additional -- most likely give some more color regarding the currency impact and the EBITDA impact. So we will report the organic growth for both orders and net sales for group and for each of the businesses. That's the plan at the moment. So small steps to improve the disclosure. It seems like that there are now some questions so Erkki Vesola you raised your hand. Please go ahead.

Not directly linked to the business, but do you have a Capital Markets Day on your plans this year?

Yes, we have Capital Markets Day on our plan. So it's actually already on our IR calendar on our website. So it will be on November 9. That's the plan at the moment. Then we already sent the invitation to our service call, which will take place in the beginning of June. Then we are also planning to host a service-related [indiscernible] visit in Netherlands on the following day. And then we will also host a site visit in Vaasa, where we opened our new site last year. That will be on September 19. So lots of activity coming up.

You're all invited.

Of course, these are open for everybody. Just -- I think I saw Daniela Costa raising her hand, I cannot see here now, but Daniela if you have a question, please go ahead. It seems like that there are no questions so then thank you for active discussion and active participation, and have a great weekend.

Thank you very much.

Thank you. Bye.

Bye-bye.