Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

So welcome to this Wärtsilä Pre-silent call Q1 '25. My name is Hanna-Maria Heikkinen. I'm in charge of Investor Relations, and I'm here with my IR colleagues and with our CFO, Arjen Berends. And today, Arjen will start with a couple of key messages and highlights, and then we will continue with the Q&A. Please.

All right. Thank you, Hanna-Maria, and welcome to this pre-silent call from my side as well. If I start with a few, let's say, key messages. First of all, in marine, we expect the positive trends that we see in our key segments to continue. And actually, that was, in a way, confirmed, you could say, by Clarkson this morning when they published their new outlook, where we can clearly see for 2025 that the decline is in the segments, let's say, tankers, bulkers and other cargo, while in containers, cruise and ferry, LNG and offshore, actually the expectation is up. So our key segments, and that's also the feedback we got internally from our sales organization is in the right direction. In general, I would say that the good momentum in the marine market remains. Let's say, the average age of the fleet is all-time high. The forward load at yards is all-time long, which indicates that there is more demand than supply. The tightening regulations, they are not disappearing. Let's say, the European carbon taxes continues to move forward. And okay, let's see now what IMO in April will decide in their next meeting, but they are also discussing similar solutions. Outcome to be seen, of course. Also good to know that the utilization of the fleet is good. And that, of course, gives good opportunities for our service business as well, as well as, let's say, our strategy of moving up the service value ladder. It's not all positive. Let's say there are also clearly headwinds or to a higher or lower degrees. I would say there's still more positive than negative. The lack of yard capacity, we have been talking about that earlier as well, still an issue, but the situation is improving, although, let's say, improving, let's say, yard capacity is not something that happens overnight and takes a bit of time. The implication of this is clearly that we can also see that the time from order to delivery gets longer. And that you can see also in our order book. It's a longer order book, but we can also actually see it in our cash flow because we earlier get also now down payments because if they contract earlier, also the down payments come earlier. With respect to tariffs in the U.S., there is, of course, a lot of uncertainty about that. And let's say, from a marine perspective, we don't expect them to have significant impact as more shipbuilding in marine is actually outside the U.S. and also, let's say, spare part deliveries, et cetera, we believe we can manage those also outside the U.S. even for U.S. vessels. So no major issues expected there on the horizon. Of course, let's say, tariffs in general is bad news for global trade and of course, global trade links to shipping, but I think it's too early to say if that will have an impact short term, long term or midterm. If we look at energy, order intake is lumpy. I think we have seen that over the past quarters many times. Tariff uncertainty is impacting customer decision-making. It slows it down actually. Let's say, we have no cancellations, but let's say, it's clearly a slowdown in decision-making, in particular for energy storage. Good is, of course, that the electrification of the world continues. As mentioned earlier, power demand is expected to triple actually towards 2050. We have a good pipeline for both engine power plants as well as energy storage and the utilization of the energy installed base is actually very stable. So also giving good opportunities to our service business there. We see long-term demand keeping up actually, driven by, of course, the gradual change shift towards renewable energy production, the replacement of coal and of course, also in general, let's say, growing demand for electricity. Challenge in the energy market is clearly grid connections. It gets increasingly difficult in many places of the world, if you want to have a grid connection, especially for big power demands, let's say, it's 5 years plus. And that, of course, let's say, at the same time, gives opportunities for us, in particular, for microgrids where we can clearly, let's say, support. And in a way, you could say data centers is also in a way, a microgrid. Impact of tariffs in the U.S. on energy is a difficult thing to predict, let's say, what will actually happen. We, of course, continuously monitor the situation. As mentioned earlier, the impact on the existing order book, we don't see as major. And we have not seen any cancellations either of projects in order book or actually projects under negotiation, so to say. But let's say, these uncertainties, of course, put, let's say, or slow things down, in particular, in energy storage. Negotiation with customers, we can clearly see it takes more time as customers upfront want to understand how the pain is shared in case tariffs will be implemented on new contracts or if they will be raised along the way. And that's, of course, a discussion that you should not take lightly. So let's say, we want to take the time for that and also customers want to have clarity before they sign. When it comes to decarbonization trends in the U.S., we are not so concerned. Let's say, renewable energy is still the cheapest form of generating electricity. There have been -- or the expectation is that there will be record installations of solar and wind in 2024 and 2025 as well according to Bloomberg and IEA. So let's say, affordability is a key, key element here. Good to know that lumpiness, I mentioned it earlier as well, will remain. Let's say, the size, in particular for storage of deals is going up quite substantially. And whether you have one or two big orders in 1 quarter or not can make a big difference per quarter. Data centers, final comment from my side, creating clearly, let's say, interesting opportunities. Lead times, let's say, from our competitors are pretty long. So that gives also good opportunities for us. And we are working on many opportunities here, still, let's say, the big flow or the anticipated big flow, hopefully, is still to come. We have booked orders in Europe, but not yet in the U.S. That's it from my side.

Thank you, Arjen. Then we will continue with the Q&A.

[Operator Instructions] We will start with Sebastian Kuenne.

Arjen, there was a discussion a couple of weeks ago that in marine, you have this new hybrid system where you want to bring back the 4-stroke engines into LNG carriers. When I look at the order book at Clarksons for LNG carriers, I don't see any bookings for these 4-stroke solutions. Can you confirm that? And what type of LNG carrier are you aiming for? And is there a much larger market to be developed here?

It's a good question. And yes, I think we have a very advantageous solution for, let's say, LNG carriers with 4-stroke engine and hybrid electric basically, giving extra cargo space, doing fuel savings, of course, improving the footprint. So there are many advantages. First order still to be sold, and that has to do with the fact that, let's say, the order book at yards are already pretty full with respect to LNG carriers. And let's say, you need to get into, let's say, the next one basically. And for many -- or not for -- I don't know exactly, but I think there are several LNG carriers in yard order book where equipment orders still need to be placed. Of course, this change means a radical change in the design. So it depends very much, let's say, in what stage you enter the negotiation. We are clearly working with end customers on this solution. And I'm very hopeful that, let's say, we will get our space back into this market. Timing is a little bit difficult to say. But looking at, let's say, Clarksons now, also they lifted up actually the LNG contracting expectations. So yes, let's see. I'm very positive about this. It gives so much benefits that -- it's almost logical that you would go for a solution, I would say. But that's, of course, from my perspective, easy to say.

Yes. Understood. Second question, similar subject, methanol engines. When we had the call with Hakan, he mentioned that the pendulum is currently swinging back to LNG from methanol. There was a big hype that Wärtsilä came out with the first 100% methanol engine. Is this really -- is methanol really a viable solution, a commercial solution going forward? Or is it more realistic that LNG is the solution of choice and methanol is a nice to have or methanol-ready engine is a nice to have, but it's not really viable economically. What's your view there?

I don't think so. I think, let's say, all the new fuels will have a place in the journey towards 2050 when, let's say, the whole maritime industry expect to be carbon neutral basically. There will not be one fuel that I think there will be many fuels. I think the pendulum now swinging back a little bit has to do with the fact that, okay, you need to also have the fuel available on the routes that ship sails. At the same time, I was just this morning in a contract discussion about, let's say, new methanol engines again. So yes, I don't think methanol will disappear. But momentum-wise, let's say, it might be now on a lower point. Perhaps in 1 year, it's on a high point again. I think a lot depends on the ecosystem development as well at the same time. But you need, let's say, all these new fuels to decarbonize marine.

Next question comes from Sven Weier.

Thanks for the call. The first one is just on your energy statements. I mean I'm just curious, I mean, do you explicitly repeat the guidance today that you exceed better demand in the next 12 months? Or would you say that the environment has worsened quite a bit since you gave the outlook beginning of February because tariff uncertainties are not that new, I would argue, but just wondering how consistent what you said is what you said in February?

I'm not, let's say, guiding differently than what we have said before. And certainly, I'm not running ahead of the guidance that we will give in April because it's not so far away. But let's say, we have good opportunities. And let's say, that's -- let's say, whenever we make guidance, we always base it on, let's say, the market outlook, the expectations that we see, the projects that we are working on. Then, of course, due to the lumpiness, it can vary a lot between quarters. So that makes it a bit difficult. But in general, I think the trend is positive.

Good. That's good to hear. Second question, I was just wondering if you could comment specifically on the cruise segment. I mean, obviously, U.S. uncertainties, we could also see that in quite a decline of the cruise shipping share prices and the concerns around the U.S. consumer. I mean, are you seeing any different behavior from cruise customers? Or is this...

No. We don't see that at all, actually. So no, not yet. Let's say, it might come over time. But let's say, as you know, let's say, the bookings of cruise is record high in order to facilitate that, let's say, people need more ships. And in particular, they need new ships because typically, customers want to go on the newer ships with the biggest entertainment that they can make photos of and show to their families when they're back home. So no, we don't see that.

And final question just on -- because I -- your comment around U.S. spare parts also caught my interest because we're currently obviously hearing U.S. is introducing penalties for Chinese flagships, Chinese-made ships. I mean, are you preparing yourself for a greater reallocation of how you service those ships that are landing in the U.S. or maybe no longer landing there?

No, there is a discussion about -- and I think the decision would be somewhere this week or there would be more clarity. But let's say, some weeks ago came, let's say, a proposal initiated by Trump administration that for vessels that are either, let's say, Chinese-owned or Chinese operated, they would have a port fee of USD 1 million to USD 1.5 million per time. Yes, will it happen or will it not happen? These things are bad for global trade, so that's not good. But at the same time, I can -- let's say, the majority of the vessels are built by Chinese, and they will not swallow it themselves. So I think what this will do is make the consumer prices in the U.S. more expensive. Let's see over time how this plays out. But of course, all these tariffs and port fees and whatever the Trump administration is now initiating is bad for global trade. And global trade is the underlying driver for, let's say, shipping. Having said that, let's say, this will not change overnight. I think this will be a decade if he wants to change it because the production is still largely in Asia and the consumers are largely somewhere else. So yes, it's another uncertainty on the horizon. But at this point, I would -- I'm not too concerned about that.

The next question comes from Max Yates.

We cannot hear you, Max, if you're saying something.

Yes, Max, we cannot hear you. It looks like that you are unmuted, but we cannot hear you. Okay. Then Tom Skogman, please go ahead.

A couple of questions. So first of all, if tariffs are introduced on power plants, and I guess you don't want to carry the cost burden, but how protected are you if customers want to cancel the order?

I think we are -- let's say, I do not expect, let's say, cancellations of contracts, seriously not. And let's say, from an existing order book point of view, let's say, we are well covered and well protected. And typically, let's say, our project payment milestones run ahead of the cost. So in that sense, I'm not so concerned about that one.

Well, I have followed Wärtsilä many years, and it was the same situation in the financial crisis, but that time on the marine side. And then things just disappeared from the order backlog without getting the money. So what's the difference?

No. Actually, I remember that very, very well. I was the marine controller at that time, and we made a hell of a lot of money on advanced payments actually because we kept the payment and we did not deliver the engine.

So its down payments are secure, is it so no matter what happens basically?

Typically, that is, let's say. And of course, let's say, it's always a matter of, let's say, how the contract is put together. And of course, typically, there is some cost to be settled. But I think we are on the safe side here.

Yes. And then on the marine side, where you start to have an exceptionally long kind of delivery time in many things. It's very hard to predict the cost level 3, 4 years down the road. How are you protected here?

Yes. That's, of course, let's say, how we have also -- because, let's say, we are not, let's say, having short-term contracts with suppliers either. Let's say, we make, of course, if you think engines, let's say, it's a lot of components that together make an engine. And we, of course, also make with our suppliers, let's say, long-term contracts. So we have a pretty good -- and I cannot recall the time that we have been super seriously off, okay, the cost inflation that happened when Russia invaded Ukraine, then I think we were off. But otherwise, I'm not so concerned about this either. I think we have a very good picture of where costs are going, at least the coming few years.

But you have not like booked these components and paid advanced payments yourself. So you have an open position? Or how should we understand?

Yes, yes. Okay. With some suppliers, you need to lock slots and in particular, some critical suppliers that are not, let's say, that many in the world. Otherwise, they give the slots away to somebody else. So there, you pay sometimes, let's say, an advanced payment to them to lock the slot. But in general, we are not doing that. But we have, of course, a constant dialogue every -- I would say, every quarter, there is an alignment with the whole supply chain, in particular, critical suppliers about expected volumes going forward.

And then my final question is about this IMO meeting in April. Can you give some more insights into what type of -- kind of what is the range in terms of fines that are being discussed at the moment? I guess you have some information.

No, I don't have that. So sorry, I cannot help you. I wish I knew.

Me too.

The next question comes from Mikael Doepel.

Can you hear me?

Yes.

Good. Yes. Sorry, if I ask you to repeat something here because I got on a bit late, so apologies for that. But I did hear you talking about the marine business in the beginning when you talked about the service utilization being good. But what did you say about the equipment side of the business? I mean, how do you see ship contracting for your core segments currently going into this year?

I was referring to actually Clarkson that made an outlook update this morning. And basically, for all the, let's say, key segments, if you just look at 2025, being it containers, cruise and ferry, LNG and offshore, they have all been, let's say, upward corrected, while, for example, bulkers, tankers and other cargo vessels, which are typically, let's say, 2-stroke main engine and not so much of our core markets, they have actually been adjusted down. So I would say for our segments, it still looks very good.

Okay. No, that's very helpful. And in terms of your outlook, I mean, I think Sven asked previously about the energy side of the business. You still see a better market despite that you have some uncertainty there among the clients. But I assume the same goes for the marine business. You haven't seen anything that would kind of derail your outlook for this year, which is for a better -- for basically continued growth in the overall orders in this business.

No, at this point, I don't see that, no.

Okay. That's fair. And then just a final question. In terms of the margins outlook for this year, I know you don't give a guidance on margins, so I understand that. But maybe you could just talk around it a bit. So I mean, you're probably going to see some sort of revenue growth for the year and then there might be a bit of a mix shift, I guess, perhaps happening this year. Just wondering if you could talk a bit about what are the kind of the pros and cons in terms of further margin progression into 2025 compared to 2024. Are you going to see a shift in the mix between new equipment and services that might go against you in a way? On the other hand, is there a mix within the mix that could support it and I guess some other factors as well. But if you could talk a bit about tailwinds and headwinds, if you want to call it, in terms of margins into this year?

That's a good question. But let's say, mix is always a difficult one to predict. Let's say, if you look at service, we have four revenue streams. And as you might remember from our book-to-bill ratios, which we publish every quarter, let's say, in particular, projects and agreements can fluctuate a lot, and that's a different margin than, for example, the highest margin in the service is clearly the spare parts. So yes, how this equation plays out determines a lot on the margin percentage. Having said, let's say, if you purely look at let's say, margin improvement, let's say, with growth, you have better leverage. That goes for service business, that goes also for the new build business. And we clearly anticipate, let's say, growing volumes in our factories. So yes, that, of course, helps. Let's say, the fact that we last year concluded also the Trieste closure clearly helps. We have in the whole of Wärtsilä, but this is something that is always there, I would almost say. Continuous improvement projects, smaller or bigger, let's say, which are very focused. It's a whole program actually that we have been rolling out now for 1.5 years about. It's very much focused on flow optimization. And of course, let's say, you want to take waste away. You want to have faster responsiveness to your customers, which hopefully results in, let's say, better, let's say, NPS scores and better customer loyalty. So there's lots and lots of things ongoing to improve the margin. But the mix is always a factor. Let's say, also on new build projects, let's say, it's never the same margin. If you take an Wärtsilä 31 engine, one marine customer versus, let's say, 10 others, it's all different margins. There is no one margin for this. It depends on the circumstances. Do you negotiate a series of vessels or not, and you might be willing to, let's say, give a little bit more in to keep the competition out in your installed base up. Is there a life cycle agreement afterwards that we know that will come, makes also a different consideration. So there is not one margin. And yes, that makes it difficult to predict. But like I said, when Tom asked the questions about cost, yes, we have a good picture of, let's say, how costs develop. I think we also have a good position when it comes to differentiating ourselves in the market. I think we are clearly recognized as the frontrunner for many marine solutions basically being in hybrids or whatever. And of course, let's say, more volume gives better leverage. I would say those are the key factors besides mix because mix is just -- it comes as it comes, it's very difficult to forecast.

The next question comes from Sean McLoughlin.

Can you hear me?

Yes, we can hear you.

Super. I just wanted to build on that previous question, if I may. If I look at the -- your order book delivery schedule from going back to the Q4 presentation, there's a big jump over EUR 5 billion for delivery in 2025. Just again, thinking in terms of mix, I mean, is there any -- assuming a lot of that is equipment simply because you have much better visibility on equipment. So is there -- is it fair to think that you should be more equipment heavy this year versus last year? And I suppose the second part of the question and just thinking through the year, should we expect a similar profile very back-end loaded Q1 to Q4 in like '24? Or would it be something maybe flatter like '23? What visibility do you have on that right now?

Let's say, if you look at the order book, typically, let's say, the order book consists in particular, the long-term order book now I'm talking about, its equipment orders, yes, you're right. And its agreements and its service projects basically because they have to be scheduled well in advance because you need a repair yard or some, let's say, preparatory work. So the order book in general consists of these three things: new build equipment, agreements, both energy and marine and, let's say, service projects. There is also an element of, you could say, transactional in your order book. The transactional part, okay, it varies a little bit, but I would say, in general, is maxed 3 months forward. And even in 1 month, you can have a lot of spare parts in for out. You get in the beginning of the -- or second week of the month, a spare part order of a couple of million, still possible to deliver that out, subject to availability, of course. But that's how you should read the order book, let's say. So transactional spare parts, field service, 3 months, ballpark, the rest is equipment projects and agreements.

Okay. And in terms of the shape of the deliveries through the year?

I will not guide you on that one because that is also, let's say, a changing curve. Let's say, if, let's say, an overall, let's say, suddenly the repair yard is not there or the shipyard is delayed in their work, let's say, things shift. So I will not comment on that. It's too much changes all the time.

Okay. And just one last, if I may. Just on the energy storage, the deferred decision-making, is this exclusively in the U.S.? Or is this more broadly?

Mainly U.S.

The next question comes from Johan Eliason.

Just a question on the -- a bit longer-term picture, maybe the fuel transition. I mean you've announced some ammonia deals last year is Eidesvik Offshore, for example. Now I noticed that Alfa Laval a week or 2 weeks ago announced that they have supplied a fuel system to an ammonia LPG carrier, but obviously functioning with ammonia. I don't know who the engine supplier is in this case, but would you say that the competition is picking up now on the ammonia track?

I cannot say because I am not aware of any engine maker, 4-stroke engine maker that also has 100% ammonia engine available right now. So I cannot comment.

I think this was some sort of LPG ammonia carrier. So I guess it was sort of a dual fuel type of solutions would be my guess.

At least it doesn't ring a bell with me. I can check, of course, with our marine guys if they know about this vessel, but at least I'm not aware, no.

Okay. They were supposed to deliver end of this year. So when you deliver the engine, will it always be you who sort of also supplies the fuel system? Or will it sort of work with alternative suppliers?

Mostly, we supply the fuel system as well, yes.

Okay. Good. Then a completely different storage divestment. Anything you can mention? I guess it's very difficult to get anyone to take a decision right now on this.

No.

Nothing.

Maybe we can just remind Johan, you know this very well, but it's not a divestment plan. It's a strategic review.

Yes.

But no outcome there. So I cannot add anything new than, let's say, what I've said earlier. But as also said earlier, hopefully, sooner rather than later, we conclude on this one.

Next question comes from Antti Kansanen.

A couple of follow-ups from me. And first is on the tariff impact on the existing order book, and you mentioned that you are not exposed. So I just wanted to make sure that this means that if there is any tariff between now and whatever delivery obligation you have, it would be the client who pays the tariff and not Wärtsilä, am I correct?

Yes.

And this goes...

Most of the time...

The entire...

Most of the time, there are a few cases where we share, but then our share is very small actually. Not significant on the total of Wärtsilä...

Okay. That's clear. And then the second one was on kind of when you talked about a little bit of the same question on the uncertainty and slower decision-making and lumpiness. Was that a question only on storage and only on U.S.? Or was it also the power plant business and also rest of the world? Has this kind of created some kind of...

I was mainly referring to storage and the U.S.

Okay. Okay. So what about the power plant business?

In EPP, we don't see that. Of course, let's say, decision-making is always lumpy. As mentioned many times, we -- let's say, from first contract discussions to, let's say, final contract signing can be a 3 years journey. So will it come this quarter or next quarter is always a question mark. But let's say, this slowness due to tariffs, that's mainly storage and mainly U.S.

Okay. So what about the power plant business, let's say, kind of emerging markets, the auctions that you've been talking about, all of these? Has there been any progress, any slowness? Anything you would like to comment?

No, actually, that's quite well moving along the lines that we expected to see. So no, no major changes from earlier statements, no.

Okay. And then the last one was regarding kind of the mix and the margin outlook for this year. And I guess you mentioned that if we look at your order book and look at how much you expect to deliver this year and look at what the year-over-year growth is. So basically, spare parts is the business that is underrepresented on that...

In the order book.

Order book. Yes. So if the growth...

Sorry, to add and field service as well, so the transactional business.

But the transactional business, especially parts is clearly of the highest margin for you guys.

That's clear. Yes.

If I would assume that the growth that you have on the order book side is higher than what I expect the demand on the parts side or the transactional part to be this year, then there would be a negative mix impact. Am I right? That's the biggest difference. The parts versus everything else is the biggest difference, right?

Yes. And then, of course, it's also good to remember that, let's say, we can still book new build orders as well with delivery this year. I would say that goes up to the -- it varies a little bit by product, but up to the summertime, you can still book with delivery this year and even you can book it after the summer. But then if it's, for example, percentage of completion contract, and you're pretty far in production by the year-end, then, of course, you take a big piece as well. But I would say, on an average basis, let's say, June, July, we should have it more or less covered.

And what is the year-over-year improvement from Trieste now in '25? Because you didn't have a lot of costs last year. Is it just a better setup, more efficient setup? What's the benefit now in '25?

Yes, it's, of course, let's say, all the overheads that you had from a manufacturing unit in Trieste are definitely, let's say, gone. And then, let's say, the more load you have in the factory in STH, typically when you run production, the more load you have in the factory, the more efficient it gets. And that, of course, helps. So both elements actually.

But is there a certain kind of a cost euro number that you would say that there's less overheads this?

No. I will not comment on that.

Then Anders Idborg.

I think somebody else [indiscernible]

Yes. Just one follow-up on the working capital, if you could just update again, like EUR 800 million negative now. You've been talking about normalized maybe more around 0 or even slightly positive. But the timing of that, I know it's difficult, but anything new to say there?

No, I think I mentioned earlier as well that, okay, this -- let's say, the level we concluded last year with, what was it, EUR 777 million out of my head, working capital negative, that's an extraordinary level. And I also mentioned that I don't expect that to hold during this year. I do expect, though, that this year, we will not go to positive working capital. So I think the working capital level stay negative, but I don't think they will stay as negative as they ended last year. That's all I want to say about, let's say, working capital.

Okay. That's fair. And just maybe to -- this has been -- we talked about this, but just in terms of the drop-through rate for equipment, I mean, I imagine in some factory, I mean, you are running pretty full, pretty long lead times, et cetera. So have we come to the point where the incremental drop-through is actually a bit lower just because you need to add extra shifts, et cetera? Or should we think about a normal drop-through for engines essentially?

Well, that's a difficult question because, let's say, I've mentioned before, we are running ballpark at, let's say, 75% of technical capacity, if I take STH in Vaasa factory there as an example. The unfortunate thing is that, let's say, factory load never comes linear. You always have, let's say, ups and downs depending on, let's say, when do you need to deliver which engine to which customer. And often, let's say, the bottleneck in the factory is the testing capacity. So it depends very much on, let's say, what kind of engines do you need. And of course, let's say, the more different fuels you have in the mix of production, so to say, the more the test bed becomes a bottleneck because not all test beds have all the fuels because certain fuels are in ramp-up and not all the test beds are facilitated fully for that. So yes, there are many factors. So that means that also, let's say, from a workload point of view, let's say, some months, you might work in, let's say, multiple shifts where, let's say, other months, you do just two shifts. And yes, that varies. And typically, the shifts are mostly fluctuating, I would say, in the testing facility and the test bits because that's the bottleneck typically. But the drop-through is difficult to answer your question. I would say we are still on a reasonably normal level, I would say.

Then Sebastian Kuenne, your follow-up questions.

I have another question on the LNG uptake or, let's say, alternative fuel uptake. If I look at the fleet currently, there's literally no like alternative fuel vessels out there. And then in the backlog, it's now -- we're not talking 1/3 of the backlog is alternative fuel or multi-fuel engines. Now I wonder what holds or what makes the customer switch to Wärtsilä if the main engine comes from a 2-stroke or 2-stroke MAN engine and the auxiliary engines would also be offered by MAN. So what makes the customer switch over to Wärtsilä? Are your engines more efficient? Would not MAN say, okay, I make you a nice deal. If you take out 2-strokes, I give you 3 of the auxiliary engines, 4-stroke engines. What makes a customer switch? And the second question is on data centers, so energy side. You seem to be in discussions for providing 4-stroke engines as power plants for data centers in the U.S. Could you give us an update what the current discussions are and how far progressed you are in the discussions there?

On your first question, I think it's good to remind that, let's say, MAN, the 2-stroke main engine is a license business. So it's the yard that, let's say, builds basically the engine because it's too big to lift. You cannot build it in a factory and then lift it into the ship. The biggest engines, they are, what is it, 11 meters high and 20 meters long. So it's just too heavy to lift. So the yard basically, let's say, builds the engine in the vessel as part of the vessel construction and pays a license fee to MAN. The 4-stroke part of MAN -- and sorry, just to add to that, MAN 2-stroke is located in Denmark and the 4-stroke part of MAN is located in Germany. And the 4-stroke part is in general, some exceptions, I will come back to that. But in general, it's a traded business like we do. Let's say, we sell engines from our factory and MAN does the same 4-stroke engines from the factory to the yard basically. There are some exceptions because MAN has also 4 stroke licenses in, I think, China and Korea, but they are very old engine types. So they are not meeting, let's say, regulatory requirements as, let's say, today is required in many places of the world, and they get more stringent. So the license engines, I would anyhow rule out as auxiliary engines and definitely for, let's say, international sailing ships, perhaps for, let's say, coastal ships in China, that might be fine, but not for international going vessels. And then it's more a matter of, okay, how differentiating can we be in our auxiliary engines versus MAN. And what we do more and more, and you can see that in our agreement coverage as well is that we negotiate already at the start of new build projects also with the potential future owner, even though that's 1 year out because the vessel still needs to be built that can we go for a life cycle agreement. And through that, we -- our intent is, of course, to prove to the operator owner that the best total cost of ownership for that operator or owner is going with Wärtsilä engines. So making the owner say to the yard, yes, I want your ship, but I want Wärtsilä engines because that's the best total cost of ownership or it has, let's say, a differentiating technology that, let's say, suits me better than the MAN version. But that's typically how we work in contracting. Now I forgot your energy question.

It was about data centers.

Sorry, yes, data centers. Let's say, like I said in the introduction, we are working on opportunities and the opportunity list is growing. We have contracts in Europe that we have said already earlier. We are still pending the first contract in the U.S. Data center market is typically the hot thing in Europe and the U.S. But for the U.S., we are still waiting for the first order. Hopefully, we get it soon. But yes, as I said, this is a lumpy business. It can shift from one quarter to another and sometimes even 2 quarters, but let's see. I'm very positive about us getting an order, but timing is always difficult.

Then I have received a couple of questions by e-mail. Can you comment on price versus cost increases in marine equipment given how tight yard capacities are?

No, I cannot say anything about that.

Specific thing.

Let's say yards are not stupid. Of course, let's say, if there is more demand than supply, and that goes basically for any smart company, the prices go up. That's how it works. So as long as the yard capacity is short, prices for ships will be higher.

Then what are you seeing in the tanker segment?

Paul, now you're asking me something that I don't have, let's say, a good picture of. Let's say, tanker segment per se is not, let's say, okay, tanker and tanker, there are many tankers, LNG carriers, I'm sure this is probably not what they are referring to, but oil tankers is not typically a market for us. Let's say, very little in there. It's basically, let's say, 2-stroke engines. These are big vessels, go slower across the oceans. Auxiliary engines don't run a lot. So it's not a core market for us. But like I said, Clarksons expects decline there.

That's correct. Then those were the questions by e-mail. I think the cruise outlook we have already discussed. Any further questions from the live audience here? We have still 14 minutes time left. It seems like that there are no further questions. So thank you, Arjen.

Thank you, Hanna-Maria.

Thank you for all the good questions.

Thank you.

And tomorrow, we are hosting a site visit in Kampen in Netherlands in our logistics center. There will be a couple of slides we will show there. So my colleague, [ Nora ] will publish the slides tomorrow. I think it's 2:00 Finnish time.

On Thursday.

Yes, on Thursday, sorry, sorry. And then..

We are traveling tomorrow.

Traveling tomorrow. Busy days. And then the Q1 report will be published on April 25.

Thank you.

Thank you. Bye.

Bye. Thank you.