Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

Happy new year, everyone. I hope the year has started well. Welcome to Wärtsilä Q4 Pre-Silent Call and Greetings from Helsinki. We have a nice and cold winter here. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CFO, Arjen Berends, will start with key messages. We will also show some slides, which are already available on our IR website, and my colleague, Nora will share a link on the chat. After the key messages, we have time for Q&A. [Operator Instructions] Okay, Arjen, time to start.

Thank you, Hanna-Maria. And also from my side, let's say, happy new year to you all. I hope this will be a successful year also in 2026. Let's start with the slides. A few points on portfolio business. A lot of things have happened in the year 2025. And let's say, to highlight, let's say, the most important ones, the divestment of Marine Electrical Systems that was now completed on the 31st of October, so we closed it there. Just to give you a size of revenue, it's about EUR 100 million. We also will adjust the group order book accordingly, which means about, let's say, EUR 600 million to be taken out for that particular business. Automation, Navigation and Control Systems, also known as ANCS was sold to Solix and that was already completed earlier in the year, first of July. Also here, let's say, we have corrected the order book about EUR 260 million in quarter 3. And annual revenue size-wise, was EUR 230 million in 2024. Then recently, let's say, we signed in December the divestment of Gas Solutions, selling the business to Mutares. And we expect to complete this whole transaction basically by the second quarter of 2026. And for indication purposes annual revenue of this business was about EUR 300 million in 2024. And basically, after, let's say, Gas Solutions is out, we only have, let's say, water and waste left in portfolio business with an approximate sales of about EUR 15 million per year. If we go to the next slide, and this is to support basically all of you in the future also in, let's say, order book and [ role ]. Sorry, there's no noise on the line here, can you please mute. So basically to support you all in also showing, let's say, when for each business that we have and that we report each segment basically how the order book is developing. And what we can clearly see over time is that order books get longer and longer. And definitely, you can see it here in the call it, light blue bar on the right side of each graph bar or, let's say, the length is more and more up the further you go to the right. And that also is a good sign because that means that we can preplan a lot of things. We can also -- with respect to supply management, let's say, get benefits if you know upfront that you will have orders in a certain period of time. And also, it helps you, hopefully, in the future also to estimate, let's say, what the sales revenues could be in a certain year. What else to highlight? Operating environment, I would say Marine, we see good activity also continuing in Q4 in our key segments, let's say, cruise and ferry, they, are remaining very active, but also let's say around key segments have a good traction, so to say. Decarbonization remains a topic in Marine, but also in energy. Decarbonization, we believe, will not stop, let's say despite -- say, postponement of the decision on the global pricing mechanism for carbon, we believe that -- and we also see it actually in discussions with customers, the decarbonization will not stop. There is still a lot of regulation out there is an ETS system also for Europe and other countries are thinking regions as well, thinking of similar and that also pushes our customers to continuously work with decarbonization. Decarbonization correlates with fuel efficiencies, the more fuel efficient you are, the better you are in your carbon footprint. So fuel efficiency and decarbonization needing regulations remain the key discussion topic in discussions with customers. On energy side, let's say we have basically, you could say, three key segments, if I want to call it like that, first of all, it's, let's say, baseload power plants. I would say that's a pretty stable market, let's say, size-wise, it's pretty constant. It's projects here and there. They are also globally distributed, but fairly stable over time. Then we have, of course, balancing power, that's where we anticipate a lot of growth. And then we see that also happening also in the pipeline. And then, let's say, most recently, I would say, since the beginning of 2025, we see a lot more new opportunities also coming in data centers. That's, of course, a very interesting opportunity for us because typically, data centers is baseload power, so that also provides good, you could say, volume and business opportunities for our service revenue streams in the future. Energy storage, that's still a challenging one. Let's say, we said also at the end of Q3 that we certainly need more orders, and we were more positive about, let's say, Q4, I can have confirmed that I'm still more positive about Q4. So let's say, going in a better direction. Still, we need orders more also to fill and compensate for the capacity cost of energy storage in 2026. But of course, let's say, we keep a close eye on that and let's say, we will take cost improvement measures, if so required. I would probably leave it there and open up for questions.

Thank you, Arjen. [Operator Instructions] We will start with Sven Weier. Please go ahead, Sven.

Happy New Year. And the first two initial ones. First one is on cruise. I mean, we've all seen the big activity, especially in December. I was just wondering, are we getting back to a situation like we had it before COVID where there was also a boom and then it took years until you receive the contracts? Or are we still relatively aligned with the ordering at the yards? That's the first one.

I would say it's the later one. I think we are still relatively aligned. Of course, it's very difficult to really look, let's say, far ahead into the future. But cruise operators keep, let's say, reporting, let's say, quite good, let's say, level of bookings for cruises. And with that, let's say, continuously to improving and also breaking records, actually, at points depends a bit by cruise company as well. But we anticipate, let's say, this to at least a -- let's say, on a good level for some time to come, yes.

Would you say you kept the market share in this cycle so far?

I don't know exactly now by hard the latest, let's say, market share, but I would say we are definitely taking a big piece of the pie if I put it like that.

Second question I had was just on the disposals you had, whether you can talk a little bit about the proceeds that you're expecting the cash in you're expecting? And how you think about the capital allocation? I mean, if we assume -- I mean, let's say, Everllence wouldn't happen. What you have in mind was doing with the cash?

I will not open up on the proceeds, but let's say, on the capital allocation, I would say we stay with what we have said so far. For sure, let's say, we will pay 50% of dividend out -- or let's say, 50% of EPS out as dividend. Clearly, let's say, we will keep, let's say, our level of R&D spend on the higher side, let's say, not a historical 3%, but more than 4%. And of course, 4% of the higher sales volume is also in absolute terms quite much bigger amount. CapEx, I would say that's -- okay, it varies by year, but let's say any year between EUR 100 million and EUR 200 million, replacing machinery workshop materials, whatever. I think that's also pretty, let's say, stable. I don't see big fluctuations in that range either. And then, of course, you can wonder about, okay, should we do anything more. I would not say, give anything here at this point of time. I'm sure this will be a Board discussion topic in the very near term.

I mean, do you also see other M&A opportunities beyond Everllence?

The M&A Yes, there might be M&A opportunities as well. But I would not say any big major ticket items I'm missing to make our strategy come through. So I think what we -- we have what it takes to make, let's say, decarbonization and moving on to service value let the strategy come through. Yes, bolt-ons can happen, but let's say, no major thing. So I think the Everllence is clearly, let's say, the bigger ticket item on the horizon.

And you also don't see any bigger CapEx needs for expanding the footprint for the engines.

I would say not immediately. Let's say, we have still capacity. So let's say we can expand. But of course, let's say, over time, if, let's say, it gets more stable and when we feel the right time is there, let's say, we will also definitely invest in capacity. But it's not just, let's say, your own capacity, let's say, capacity of your own facilities is one thing. The more important or even equally important element is the capacity of your supply chain. That needs to be able to follow whatever you have in mind. And that's why we have, let's say, constant dialogue with, let's say, our suppliers, in particular, the critical suppliers to make sure that they can anticipate and also follow, let's say, what we have in mind for the future. But it goes hand and hand.

The next question comes from Daniela Costa.

I have two questions. One is regarding just getting your thoughts on like seasonality. Historically, we used to have these Q4, which were very high. And then I think you've changed it for the mix from EPC to EPQ a bit more. But should we think the seasonality in either of the business has materially changed that is slightly higher Q4 pattern no longer is relevant. Because, I guess, when looking at consensus for energy, for example, people have reverse seasonality versus what has always happened. Just wondering if you can help us think through how we should think about seasonality given all the changes that the portfolio has gone through?

It's a good question, Daniela. And seasonality, okay, if I go in my own history of Wärtsilä, I think we have seen much more seasonality than what we see today. I think seasonality will always stay there to a certain extent. In particular, let's say, at the year-end, even though I believe it's less and less over time. And one reason for me saying that is that if you think about, let's say, our customers, they build a power plant or the customers build, let's say, a cruise ship. This is not something you do, let's say, in a very short time. Typically, it takes multiple years, let's say, to do that. And let's say, yards, as an example, they work with percentage of completion on these projects. So if they can get, let's say, our engines delivered in the last month of the year, percentage of completion wise it would help their numbers in that financial year, right? So there might be somewhere behind that. Let's say, for other customers, maybe it could be one, let's say, the governmental, let's say, customers. Yes, there might be an end of the budget of the current year. And you want to empty it before you, let's say, go into the new year. Otherwise, our budget get cuts or whatever, those are clearly, let's say, elements that are there. I do so believe that it is less and less, but I cannot say it's comp. I think it will always be to a certain extent. Also for us, let's say, percentage of completion is less and less than most percentage of completion that we have currently is basically on the agreement side, and of course, on the very few, let's say, EPC projects that we have in energy. But otherwise, it's less and less. So also in that respect, I think it is much more, let's say, on time. And that's also why we earlier said that, okay, for energy, the second half of the year will be bigger than the first half of the year when it comes to sales volumes. And we can say that because of the order book at that point of time. That's also why we open up now, let's say, in the statistics that I showed about order book development. We will also, let's say, make that now -- let's say, going forward every quarter as well. So hopefully, it supports you in your analysis as well.

Got it. And my second question is just regarding -- can you recap where the lead times for supplying to data centers is for you now? I remember -- I believe in the last call, it had moved to 18 months. from I think it was 12 earlier. But I wanted to tally that comment with the fact that you still have capacity. So why -- if it still true that the lead times have increased why have they increased or maybe the figure is different now?

No, let's say at the end of Q3, we said still that okay, if you need 200 megawatts for delivery '26, we could probably deliver it. I think that moment is gone. Let's say, now basically, we are filling mostly, let's say, '27, also the order that we recently booked on data centers in Q4 is 2027 delivery. So that's range what we are talking about today.

But you still have capacity, I mean you have capacity flexibility to invest more [indiscernible].

Yes. We also have capacity still for this year. But it's scaling up, of course, not for all engine types either. So it depends a bit on what you want at which point of time you want -- at what magnitude you want it. So that's was always a different one.

The next question comes from John-B Kim.

I wanted to see if we could speak a little bit about the velocity in retrofits and upgrades. Just wondering if you could give us a bit of color between the two divisions, which geographies are leading the way. And what you're most hopeful for in the next 3-year views in terms of incremental business?

Geography wise, it's very difficult to say. Let's say, ship is a more globally moving asset, so it depends on where we are with the ship. Retrofits, they have seen a dip in the book-to-bill ratio. I think one thing which is good to perhaps highlight is that, let's say, book-to-bill ratio is the order intake on a certain service revenue stream versus the sales. One thing to, let's say, look at in addition, if I can give you a recommendation is also to look at the magnitude in euros of each individual line. And you will see that, let's say, a retrofit in that sense, compared to, let's say, spare parts and field services is a smaller one. Yes, we have seen both in Energy and Marine. Let's say, the trend recently coming down. I'm fairly positive that, let's say, within half year around, so to say, can be a bit plus or minus, but we will be back again on, let's say, positive -- I mean, above 1 numbers on that one. But of course, let's say nothing is, let's say, fixed, let's say, it all depends on order intake, but the pipeline is good, and I'm confident that we will, let's say, recover on that line as well. But I think also it's important to highlight that look at the absolute money line as well for that particular stream. One thing to add, that's on the marine side, we have earlier said that okay, we anticipate good retrofit potential from carbon capture. I would say that part, I would say, on the marine business, in particular, I would say that's delayed because, let's say, carbon capture in relation to, let's say, IMO regulations, but also, let's say, carbon pricing mechanisms is still a bit unclear. Let's say, what does it mean? If there would be a carbon pricing mechanism implemented how does carbon capture fit in? Do you get less carbon fees if you have carbon capture or not? And how does that work from a money calculation point of view, that's unclear. IMO to my recent knowledge have said that, okay, in 2028, we will provide clarity on that one. So This, we believe, will, let's say, push out for the longer term. But let's say, other retrofits like, let's say, hybrid installations for marine, let's say, all kind of say, efficiency improvements on our derating on 2-stroke, et cetera, those will all continue because the benefit of those retrofits is also providing more fuel efficiency and fuel efficiency immediately supports the economics of any customer. At the same time, whatever you do on fuel efficiency also helps you forward on the decarbonization, no matter what regulation will come in the future. If you will anyhow make steps in that direction -- in a good direction, I mean.

Great. And just shifting gears, just a one-off question on what sort of wage inflation you're experiencing?

We will not open up on that one. It's very diverse. Let's say, we have a global footprint, we'd say, global people. That's what I will say.

Thank you. The next question comes from Johan Eliason.

Happy New Year to you as well from my side. I was just wondering, data centers. We saw some comments from NVIDIA about future chips and the potential impact on cooling, et cetera. Has there been any sort of new discoveries that might impact your sort of potential in the data center offering electricity or is the outlook still positive on that front.

I've not heard of any impact of that to our, let's say, opportunity pipeline now.

And have you seen anything from competition sort of delivery times? I think we already discussed your delivery time a bit, but it seems to be an opportunity for you to deliver in a faster way than competition. Any sort of news on that front for you?

I say like I said, we are now filling, let's say, still on 2027. Of course, again, it depends on size and how many engines do you want at the same time and cylinder configurations, and power need a lot of other technical requirements as well. But we are still having capacity to fill for, let's say, 2026 even in 2027. So yes, we can deliver fairly fast. Of course, if all data center opportunities would tomorrow come to Wärtsilä, we are sold out very quickly. Let's say, how long is this benefit there. Let's say, the turbines, we know they have delivery times 29-plus yes, depends a bit on, let's say, what do customers feature, let's say, most important delivery time is, of course, an important factor, many want power, and they want it, let's say, as soon as possible. But I think there are also other factors in play. So when we get into discussions with customers and explain also our other technical features like operating in human condition operating in high altitudes, hot conditions, water consumption, et cetera. I think there are also other benefits that come.

Excellent. Then on the marine side, just a question, just a coincidence, I was trying to book a ferry ticket and it seems like the ferry order you got years ago for some new ferries between Poland and Sweden has been sort of pushed out a little bit in time, but the first one is now delivered. And I was looking at the shipyard of this Polish yard. And it seems they're all talking about mine sweepers and all sort of different naval ships rather than the ferries. Is there a trend that you see that your sort of core segment like ferry maybe not cruise, but ferries at least have sort of been pushed out in favor of naval projects right now. And if that is a trend, would that have any sort of impact for you? Is it more or less with the ferry than whatever naval ship there are out there?

Okay. For sure, there is more activity in Navy. But let's say Navy typically takes a very long time to conclude and decide. If you let's say, now in many countries in Europe, let's say, government spending on military goes up or defense goes up. Then, of course, the question, first of all, is, okay, how much goes to Navy, land-based, and air. Then let's say, when you decide on this amount goes to Navy, then you get, okay, what do we need? Is it frigate, is it something else, mine sweepers or what have you? Then you need to get the whole specification together, then you need to get to the short list. So before you get, let's say, from an increased government spending to, let's say, a really new opportunity orders for, let's say, suppliers like vessel, you are easily 4 years down the line. So what happens now with discussions on this particular yard that you're referring to, I don't know which one it is, but I would guess this is already something that is ongoing for a longer time. Because if they are concrete already in, okay, this is what we are going to build. And I would not say that, that is pushing out, let's say, the ferries. I think the ferries is just in addition as well, I think they have been planning like that. At least we don't -- at least I'm not aware of any, let's say, Navy orders pushing out commercial orders.

Good. And then just finally, on storage. You obviously mentioned it seems like Q4 has been a bit better for you. But looking at the chart you show backlog, it's not very impressive, especially in light of your growth targets you have for the business. How is the delivery opportunity here, the lead times. And basically, where are you selling today when -- and the U.S. is probably not an active market.

It's a good question. It's clearly, it remains a challenging market. Yes, we are selling. And I would say we are selling globally. I will not open up, let's say, specific markets, but let's say, the -- it's a traditional market. Even in the U.S., we see activity coming back, but U.S. is a very complicated market because there are still a lot of, let's say, tariffs and high tariffs. I think the latest tariff now on battery cells, I think it's 40 point-something percent. Then you have the FEOC, let's say, Foreign Entities of Concern, let's say, regulation. So is not an easy market. But I would not say it's totally standing still either. And Will it revive at what time it will revive to, let's say, levels before Liberation day, I find it very, very difficult to say. But it's not totally dead, but let's say it's not super active either even not normal active, I would say. But Australia, example is a good market with a lot of activity. U.K. is a good market with a lot of activity. Also Central Europe, we have, let's say, activity. So there are clearly also active markets, but the active markets, of course, are very much focused by all suppliers, which makes competition extremely hard. But the good thing is Q4, we booked new orders again. So is moving in the right direction, but we need more.

And how fast can you sort of deliver if you get an Australian or U.K. order?

We can deliver fairly fast. I cannot say now exactly, let's say, how quick it depends, I think, probably also on size. But let's say, at the same time, energy storage projects typically are always percentage of completion. So even with partial deliveries, you generate revenue.

The next question comes from Anders Idborg.

Just had on -- it looks like very big delivery quarter coming up from energy, and we discussed after Q3, how to think about the mix there. I would just -- can you help us a bit with the moving parts here, equipment service project? How should we think about that?

I will not open up on mix. I think for that, you need to wait until, let's say, we publish the final numbers. We try to help you a little bit with, let's say, providing the order book because the order book statistics that I showed earlier is the end state by end of Q3. Of course, you need to, let's say, take an assumption on, let's say, what's the in-for-out part on the services because that's short cycle. But I will not give you in advance of the final report, let's say, any idea about, let's say, mix. I think that you need to do your own estimation.

Okay. Fair enough. I'll just try one more margin question just in terms of storage. I mean you in Q3, we're well above the range that you flagged for. So how should we think about that? And what drove that and how sustainably starts?

I think our delivery capability is excellent. And let's say also when you book orders in storage, typically, you do a risk assessment based on the risk assessment, you also take consideration of certain contingencies. Once you execute and deliver, you make an evaluation, okay, should I maintain this level? Or there might be something still pending? Those are considerations we make every quarter or basically every month actually. And let's say, in Q3, we had, let's say, a lot of projects delivered where we concluded it, okay. The risk is less or gone. We can release these contingencies that we had in the beginning, and that drove up the margin. Will we have that again in Q4, let's see.

The next question comes from Antti Kansanen.

Two questions for me, and let's start with cash flow and working capital in '26. And I mean, Arjen, you mentioned that you are still fairly aligned on the yard schedules on taking orders. And on the power plant side, quite easily, it's the case that the delivery times are prolonging. So in that case, is there any reason why the advanced payments wouldn't continue to grow and your working capital to sales then should remain or even improve at the very kind of favorable levels as it has been? What would be kind of the negative moving part going into '26 and '27 if demand continues to grow for the equity?

Yes, that's the point I was just about to mention. As long as we keep our equipment order intake, book-to-bill ratio, about 1. I don't see any major issue. Of course, there are -- and I said it before, there are clearly, let's say, outlayers in the cash flow, let's say, certain customers don't want to, let's say, provide payment security guarantees. LC bank guarantees, what have you. That's perfectly fine then it's cash up front. And the more of those we have, and of course, the better it is for cash flow because then you get bigger down payments bigger intermediate milestone payments, et cetera. But you're right. Let's say, as long as, let's say, order intake, book-to-bill ratio on equipment is above 1. I don't see any major risk to a continuous positive development here. No.

Sure. And I guess, are there any -- I mean, I guess, on the yard side on the Marine side, the customers have been more than willing to pay these upfront payments even if the delivery times and the yard schedules are getting longer and longer. Is there kind of a mix in the energy clients that you would want to comment on, which one do you and which one don't?

No, I don't want to comment on that. Let's say, it's of course very, let's say, customer by customer. There is no real fixed pattern in it either. So it's even difficult to comment.

Okay. And then the second was on the data center opportunity and demand. I mean the 500-megawatt order that you announced during the quarter, it's a fairly sizable. It's a very big one for you and for the engine technology. Does that matter in terms of generating kind of more demand? I mean you've been talking about that you're in a way, still building your presence in the U.S. versus the turbines kind of that these are also options for the data center baseload. Does a big order like that help? Or do you see it as an increased interest when you can lag a sizable one like that?

There is certainly a factor of, let's say, we get more and more known in the U.S., let's say, even with balancing power before the whole data center was there, let's say, with balancing power, we really need to -- we have to fight our way in, basically, if I put it bluntly, because when in the U.S., they think power generation, they think GE and turbine. That's the first thing that pops up in their mind. That's probably how engineers are also educated at universities. And that's what we have been fighting against. So once we get into the door and can explain our technical solutions, the benefits of flexibility, water consumption, modularity in data centers, et cetera, many come back and say, hey, this is actually a very good solution that I was not even aware of. So the more, let's say, data center operators are pushed to other alternatives than turbines. And the more we get known through that I think the better it is. And not just for, let's say, the data center operators, I think we get also known then by the electricity, let's say, providers, IPPs and what have you? So clearly, this, let's say, call it pressure on turbine delivery times clearly helps us to get more known and also explain our technical features, and that is often coming back with positive feedback.

So is the -- you've been talking about a handful of projects is that starting to become a couple of handfuls already after Q4? Or to comment?

It's definitely more than a handful.

Next question comes from Akash Gupta.

I got two as well. The first one is in the sale increase in commodity prices. Maybe you can walk us through hedging policy and what sort of price protection do you have in long-duration contracts to protect yourself against increase in metal prices. So that's the cost and then I have a follow-up.

Okay. It's very simple. Let's say, life cycle agreement, you commit very long term, it can be up to 15 years. So basically, these contracts are full of indexes. Being it material-related or salary related or what have you. So -- and it's not just one index. It's a lot of indexes. And it depends also on, let's say, what is -- what is the life cycle agreement about? Is it a guaranteed asset performance agreement? Or is it a simple technical maintenance agreement or operation and maintenance agreement, there are many variations and then that depends also, let's say, what kind of indexes and what level of indexes do you include? I would say we are very well protected like that. But I don't know of any life cycle agreement that went into, let's say, bad numbers because of that. No, we are covered.

Maybe just a follow-up to that question. If you look at your marine business where you have some long duration orders can you knock in supply chain at the price when you got the order or like what sort of protection do you have there? Like if you're getting order for cruise ships, which may be delivered in 4, 5 years' time, how you're going to protect yourself on such contracts that was.

We, of course, also work with long-term supplier contracts, definitely for the critical suppliers. When you talk about, let's say, simple materials like bolts and nuts that's not needed because there is a multitude of suppliers available. But typically for critical components, let's say, we have long-term agreements with our suppliers. And that links also back to the earlier question about, let's say, if we, at some point of time, think of, let's say, expanding our capacity, and we need to make sure that the suppliers are along with us. And they will not be along with us if they are not, let's say, having long-term relationship with us. So yes, we typically also have long-term relationships and that also goes to, let's say, long-term idea about, let's say, pricing and how it should develop.

And my second question is on data center customer base. And I think Hakan previously said on the conference call that you were not talking directly to hyperscalers as some other companies. And I wanted to ask, has there been any change in the previous quarters and given you are winning getting a little bit more success than before. So now as you gone through the door with hyperscalers directly or is it still the same customers that you.

No. To my knowledge, we are not talking to hyperscalers directly. It's still the same.

The next question comes from Tom Skogman.

Good afternoon, and in Happy New Year. A couple of questions around data centers. Have you discussed including batteries in any orders or as an add-on or so, as you have that acknowledge in the competence as well.

Simple answer so far, no, no. There is a bit more, let's say, attention and questions about it, but nothing concrete. No.

Okay. And then I mean, we build a lot of data centers in the Nordics, and you are a well-known brand here. Of course, we have excellent grid -- electricity grids here, but back up is always needed. Do you have an opportunity to sell a backup generation to European data centers and especially, of course, in your home country where a lot of data centers are built.

Yes, I think we can certainly provide backup power. That's our core business. So yes, let's see what happens.

I don't -- have not seen any order announcement, but have you booked any orders like that, that you have not announced.

No. Let's say, what we have not announced, I cannot talk about because, let's say, whenever we do an announcement, we need to make sure that the customer is aligned with our announcement. And if we can, we will always announce an order. But yes, sometimes you don't get okay from the customer to make that verbal, let's say, externally.

And would you like to highlight some hot countries in Europe for your offering? I mean you have these orders in 2024, but nothing in '25 in Europe, so?

No, not any specific. I think data center opportunities are coming up more and more in different countries. So I would not say it's just one country. I think all European countries are more and more, let's say, thinking about it as well, but they are certainly behind on, let's say, what happens in the U.S. I think I would say Europe is reactive if I put it like that, when it comes to that. And I think the U.S. is more proactive. And that equally so goes for the rest of the world. Let's say, if you take Japan and Australia, data center is also more -- and then also probably has to do with, let's say, the big tech companies, mainly coming from the U.S.

And then when we look at your capacity and the supply network, is it so general that the larger the component it is, the fewer suppliers, you have and the more critical it is to have them on board? Or are there also challenges in, let's say, electronics and stuff like that. It's to scale or is it really hard just to scale up in engine blocks and crank shaft et cetera.

Of course, let's say, the for engine blocks, let's say, for engine block, crank shafts, turbochargers, there are not so many suppliers in the world. So you need to make sure that, let's say, a good agreements with your suppliers that you partner with them and develop together basically. But there are certainly also, let's say, smaller components. Let's say, in the times of COVID when it was very difficult to get semiconductors. Then semiconductors was a problem because if you have an engine without a control system that is complete. Yes. So yes, you need to work with all the suppliers. But let's say, I would say the suppliers of, let's say, big and critical components are the most important ones.

So everything looks very, very good. What are like the key very items at the moment.

I would say I'm not so worried about many things. I'm a positive person by nature. I would say we should still -- and then that's what I highlighted in the beginning, we still need more orders for energy storage. That's clear. That's the most challenging business at the moment. For Marine and Energy, I don't have any major concerns. I think that's going well forward. I think the opportunities are clearly there. Good thing is in energy storage, things are better now in Q4. Let's see how we develop this going forward. But it depends very much on a lot of external factors as well.

And do you use the same kind of pricing method. I mean, it's always about market prices and cost plus, et cetera. But have you adjusted in any way you know how you think about pricing just when markets are so strong.

No, let's say, our pricing has not changed. We are not doing cost-plus at call, frankly speaking. So let's say, our pricing is case-by-case and it's value-based selling. Every case is just independently, let's say, what is our competitive position. And of course, we try always to get the maximum out of any deal. So there is more, let's say, demand than supply, and you have an opportunity.

Next question comes from Uma Samlin.

Happy New Year. Sorry, I apologize my camera is not working today. I just have one follow-up on the pricing side. Especially when it comes to data center engine price. So if you track the turbine prices, they have raised significantly in the past 2 years. And you just mentioned that you do value-based pricing, I guess the value for your customers should be quite high given you're one of the very few that can deliver in such a short time scale. So how should we think about your pricing for the data center project?

Like I said, let's say, if there is more demand than supply, you have an opportunity, and we are maximizing on that opportunity. That's all I will tell. I wouldn't tell know you how much we have increased prices or anything in that direction.

The next question comes from Sven Weier.

Yes. I just have one follow-up question regarding the margin targets, right? 14% for combined Energy Marine, Energy has already gapped away above 14%. I mean two questions in that. First of all, I guess, I mean, as we just heard, the DC pricing benefit is still to come. So I guess you're probably positive to raise the energy margins further. And the second part would be to ask you. I mean, is there -- would you see any structural challenge for Marine to close the gap long term? Or anything that keeps it away from going where energy is now?

No. First of all, let's say, the margin target of 14% is for Marine and Energy combined. It's not that both should be reaching that. Let's say, it's a combined. And there is one clear underlying reason because there is many, many things that are combined between Energy & Marine factory. First of all, let's say, the whole R&D, then the whole Global Logistics Center. All of those are owned by marine and they provide service to energy. Of course, you try to split it as good as possible, but it's never perfect. So that's also why we have this marine and energy combined targets. I would say it's largely perfect, but not totally. I think if you look at the historical trends, let's say, quarter-on-quarter, let's say, the trend is clearly positive. I think we were with Marine and Energy combined 13.2%, I think, at the end of Q3. Every quarter, we make a step in the right direction. But yes, I think I'm confident we will hit the 14%. Let's say, if we then change it and do something differently. Let's see. First, we reach it, and then we consider it.

Ryan, what is the reason why Marine is 2 percentage points below energy? Is it product mix? What's causing it?

Yes, I think there are probably, let's say, many different factors, let's say, first of all, I'd say it's a much more challenging call it, contracting environment. Let's say if you do energy, a power plant, you deliver new equipment and you can offer a life cycle contract to the same customer, which you can much better combine, let's say, the value offering. Let's say, in marine, let's say, the value of your solution, let's say, fuel efficiency and what have you of your solution that you offer on the equipment side comes to the operator or the owner, which is not the same party that, let's say, is contracting on the new equipment side. The yard is very cost driven. So you need to get the owner to convince the yard I want [indiscernible] equipment, and that is a much more challenging way to negotiate. And yes, in that sense, I would say it's much easier to get better margins, actually, I think, in energy.

That's why there should still be a gap then also in the future between the two, I guess.

Okay. Let's see, of course, let's say, in Marine, it's also, let's say, certain segments give you better margins than other segments. Certain customers give you also a better margin than so it depends a bit on the mix as well. I would say, let's say, in my memory, I think historically, Marine has always been a little bit lower. I don't see it immediately change the other way out.

Next question comes from Antti Kansanen.

Yes. Thanks. Just a very kind of a technical modeling question. Thanks for providing the split of the order book for the different segments. So I just wanted you to remind me how do you include the service businesses in the order book, especially the agreement-based driven service business? Do you kind of have a 2-year rolling orders on the order book? Okay.

Order intake, let's say, when we book an order for life cycle agreements, we take all the sales in that we anticipate of the coming 24 months. And then month-on-month, we roll it.

Okay. So kind of 2-year order agreement basis.

No, I do not see any hands up. So we still have some time left. So if you have a question, please use raise your hand functionality. For me, it looks like that there are no further questions. So thank you for great discussion. Thank you, Arjen. Thank you. And our financial statements bulletin will be published on February I hope you can enjoy winter a little bit before that, but let's talk then more. Thank you.

Thank you. See you in a few weeks.