Wärtsilä Oyj Abp ($WRT1V)

Good morning, and welcome to this news conference for Wartsila Q1 2026 results. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will start with the group highlights. He will also go through business performance. And after that, our CFO, Arjen Berends, will continue with key financials. After the presentation, there is plenty of time for Q&A. Hakan, please, time to start.

Thank you, Hanna-Maria, and a warm welcome to our Q1 report. I'm joining you today from Shanghai. So it's a pleasure to be here in China. As you know, China accounts for more than half of the world's shipbuilding capacity. So it's a highly relevant place for us to be as Wartsila. But if we start with the first quarter, I would say we have a strong start of the year, both in Marine and Energy. So we start good in 2026. So if we look at the summary, double-digit growth in order intake, all-time high order book and continuously improved operating results. So the total order intake increased by 10% to EUR 2.1 billion. And this quarter, we will also talk a lot about organic growth because you have seen or you will see that our -- both order intake and sales has been heavily affected by FX, by exchange rate and also the fact that we have divested assets in portfolio business. So some of these numbers are good, but they look even greater when you look at the organic side, so to say. So order intake increased in Energy and Marine. Energy order intake increased by 56%. But if you exclude FX, organic growth is up 66%. Marine order intake increased by 9%. But once again, organic was even higher, 13% All-time high order book of EUR 8.9 billion and service, we know how important it is for Wartsila. So the order intake on organic side was up with 9%, strong number. Then, of course, we had FX impacts, and we also had impacts of our divestment, but organically up 9%. And that also leads to our -- that our service 12-month rolling book-to-bill continues to be above 1. Net sales remained stable at about EUR 1.6 billion, and we continue to improve our profitability comparable operating to EUR 199 million, and that corresponds to 12.8% of net sales. Operating results increased by 18% to EUR 194 million, which is 12.5% of net sales. Cash flow from operating activities amounted to EUR 7 million. It's a bit lower than we normally see, but that's because we are building up basically engines for deliveries. So we -- and Arjen will talk more about cash flow going forward, but we remain calm, composed and optimistic also on the cash flow side going forward. And we continue to have, I would say, a very attractive return on capital employed at 64%. So that's the highlight, strong performance, both on the Marine and Energy side. Let's dig a little bit further into the numbers. So order intake, up 10%, EUR 2.1 billion; of services, you see it's minus 1%. But once again, if you look on the organic growth, it's 9%. Equipment is up 23%, very strong on the energy side. And we have also seen that the start -- the first weeks of the second quarter has really started good for energy with 2 additional big data center orders in the U.S. Order book now is at a very good and solid level, EUR 8.9 billion. We continue to highlight the message that we are building up an order backlog for deliveries further and further into the future. And that is very important when you model the sales recognition. Net sales, flat EUR 1.5 billion the whole theme of FX and divestments we have done. Services, EUR 800 million, down 9%. Equipment up 11% to EUR 750 million. Book-to-bill continuously well above 1, at 1.35. Comparable operating results increasing 16% to EUR 199 million, 12.8% mentioned before, and operating results up 18% to EUR 194 million at 12.5% of net sales. We also continue to follow Marine and Energy combined and Energy Storage. And you can see that if you look at Marine and Energy combined, the order intake and the sales metrics is even stronger. I mean, order intake up 28%. Organically, it's 34% up. And you could also see that the order book is up 27% in Marine and Energy combined to EUR 7.5 billion. Net sales, the organic growth, 7% and services is down, but equipment is up 22% to EUR 504 million. Book-to-bill in Marine and Energy combined at 1.55 and comparable operating results also continue to improve clearly in Marine and Energy combined 7% up at EUR 175 million and at 13.6%. As you know, we have our financial targets for Marine and Energy combined at 14%. So we are not quite there yet, but we are on a solid path to reach our financial targets, I would say, as I have said many times before, and we have proven ourselves by step-by-step improving the financial results as well. On storage, we have a challenge. There is no doubt. And the challenge is order intake. I mean we basically had no new order intake on the equipment side in storage. So that's why you see the minus 53% down is basically services. The sales is down 14% at EUR 110 million. The good thing, though, on the storage side, you've seen the EBIT here, 5%. The team is delivering the existing order backlog with a solid execution at 5%, which is on the higher end of the span of our financial targets. But clearly, we have a challenge on the order intake side, and we've also been very clear that we need immediate order intake. Otherwise, we will have a loss-making second half of the year in energy storage. Okay. Then some industry perspective, starting with Marine. We do see in the first quarter, healthier demand and also earnings for our customers, supported by the market sentiment in the first quarter. The conflict in the Middle East has only had a minor impact on Wartsila in Q1. We have about 500 colleagues in the area there, safety, taking care about our people, so they can take care about our customers. And I think our team, our safety team working with our colleagues in the area has done a great work. So we continue to support customers in terms of revenues, et cetera, it has minor impact because -- as you know, our strengths, our focus is on 4 strokes. Many of the vessels, the majority are having 2 strokes. So the limited impact on Wartsila, short term so far on the financial side. The number of vessels ordered in the review period increased to 549, so compared to 235 previous year. So 2026 is clearly stronger than 2025, which was, as we all know, a rather weak year. The market sentiment in Q1 was supported by healthy demand and earnings. But obviously, the start of the conflict in the Middle East caused disruption and uncertainty in the shipping markets. But once again, we have not -- I mean, our core segments, we have not been impacted so far in a major way. Ordering appetite also continued to be on a good level in our key segments. As you know, when we look at the graph to right here, our core segments, even in Clarksons are trending clearly higher than the 10-year average, and we do see that also going forward. Also good to note is that the shipyards order book are at the highest level since 2009 with shipbuilding capacity expanding primarily in China. In January to March, 100 new orders for alternative fuel capable ships were reported. So that's about 26% of the capacity of the vessels. That's down from same period last year. And the major driver there for the decline is on the mix of vessels, tankers, more tankers means less alternative fuel. The underlying trend on decarb is clearly continuing, driven by the strategic approach by many of the shipowners and also by the fact these are long-time assets, 30 years, and you need to make sure that you have a fleet of vessels that you can be profitable with and operate in a relevant way the coming 30 years. And then you need the core proposition for Wartsila, fuel flexibility and fuel efficiency. So it's -- the narrative still holds. Then on the energy side, we do see a buoyant market. There is an increased demand driven by energy transition investments. Electricity demand growth is certainly there. Future projections have increased substantially. And clearly, there are very strong and good market opportunities for equipment providers. Two key themes have stood out in the macroeconomic development, low growth and increased tariff-related uncertainty. In energy power plants, market demand for equipment and services has been strong, very strong. The baseload segment remains a consistent source of demand for thermal power and clearly, with further growth opportunities in data centers. And we continue our, I would say, successful journey in the U.S. data center market, still with a very active pipeline and with 2 important and big captures just at the beginning of the second quarter. And also on the balancing side, we continue to see a very strong demand going forward. Before arriving here in Shanghai, I've spent a couple of days in Australia, clearly seeing the narrative playing out there. Australia over the years gradually moving from coal to renewables. And then you need the balancing power, battery storage, thermal generation and engines is a very -- is now getting in as one of the major technologies there. So it's happening in many places of the world, I would say. In battery storage, the demand is closely linked to the increased share of intermittent renewable energy systems, clearly, which continues to progress in a good way. The U.S. market is clearly facing headwinds from tariffs and regulatory changes. Though many of the drivers, especially in the midsection of the U.S. remain solid. I mean, affordable power is always attractive. And then on top of this, we are now also for our storage team have data centers as a potential new opportunity that we are looking at, so to say. We haven't stepped in fully yet, but we are looking at it. And if we look at renewables growth, I mean, after significant growth driven by solar in the mid-2020s, I think now the renewable capacity addition globally is expected to decrease a little bit in 2026. But I mean, we see long-term growth on the renewable side driving the need for balancing power. And there is more and more understanding and demand for balancing power because in many power systems, clearly, this narrative that we've been talking about for several years of needing more balancing power when the share of renewables is growing, it's definitely playing out. And here, you could see some of the International Energy Agency numbers, how they project the average -- I mean, the annual electricity demand growth in terawatt hours, and we can see the significant shift here. And there are plenty of drivers, electrification of industries, the need for cooling. I mean the world is getting warmer, certainly here in Asia. It's a big theme, data centers, but also aging energy infrastructure in the States and to a certain extent, also Europe. So there are several growth drivers, I would say, in the energy market. Now let's get back to the numbers and let's look at the visualization. So organic order intake increased 22%, quite considerable. That's the organic. If we look on the nonorganic, so to say, the order intake increased by 10%. And if we look at Marine, it's up with 9%. Energy is up with 56%. Energy storage, though, is down significantly with 53%. If we look at equipment versus service, so equipment order intake increased by 23%. Service order intake remained stable. If we look at the order book, strong order book development, rolling book-to-bill continues to be above 1. I think now it's consecutive 24 consecutive that we have remained with a book-to-bill -- larger than 1. And also well worth noting is that the order book is growing despite that we have eliminated close to EUR 900 million related to divestments. So it is a strong achievement. And -- but we also note, we really highlight this now as you could see, we have a very attractive order intake. We are taking orders for deliveries further into the future. And we have also talked about the fact that we do less of EPC, which has percentage of completion normally as revenue recognition to more equipment of EEQ, which means that the sales recognition also comes a little bit later when we deliver the engine basically. And we try to help you also by -- and I think we introduced this slide last quarter to get a little bit more concrete numbers on how the order backlog is developing over time. And it's clearly so that the order back -- order book will generate sales distributed further into the future. And you see particularly here in energy, how the order backlog is building up for sales and deliveries further ahead, I mean, beyond 2026. Organic net sales increased by 8%. Net sales, if we take the nonorganic, the complete, so to say, the whole, it was stable. Marine net sales remained stable. Energy net sales increased by 12%. Energy Storage net sales decreased by 14%. Equipment service or equipment net sales increased by 11% and service net sales decreased by 9%. Profitability continued to improve in a positive way step-by-step on our goal to -- on our path to reach our financial targets. So under the backdrop of a stable net sales, the comparable operating results increased by 16% and comparable operating margin on 12-month rolling is also up from 10.9% to 12.4%. Hanna, I need help. Arjen, can you flip to the next page because I can't see it.

Which page should we flip to? You cannot -- we are now looking at the Marine overall service book-to-bill above 1. Do you see the same, Hakan?

No, I don't see anything right now. If you see it, maybe you can continue, Arjen, where I left off.

All right. Which slide should we start then with?

The one that I left off, yes.

Yes. You don't see the slides now, Hakan, right?

No, I don't see the slide.

All right. I will take over. So order intake and comparable operating result in Marine. So order intake in Marine, let's say, had a good growth, 9%. Net sales was down, let's say, minus 1%. But as Hakan mentioned, let's say, organically, it was still up. Comparable operating results, better operating leverage, clearly, let's say, contributing positively. One could ask, okay, why with more or less equal sales. It's operating leverage better. We are running our STH facility at close to maximum technical capacity. And that, of course, generates, let's say, operating leverage in the absorption of hours, while the deliveries take place later on, turning it into sales. On the negative side, let's say, lower service volumes that we clearly could see comparing quarter-on-quarter and increased R&D cost. Comparable operating result continues to trend upwards. Overall, Marine service book-to-bill above 1. Good development. You can see also the lines on retrofits and upgrades as well as, let's say, service agreements turning to the upper direction again, which has been going down for some quarters. So that's good. All together, I would say, a good development ongoing here and also 7% CAGR year-on-year is a good number. If we look at Energy, Order intake, first of all, plus 56%. So really a strong step-up actually in sales also, I would say 12% is also a strong step-up in sales. If we look at the result, also here, better operating leverage, let's say, factory also contributes to energy. So it's the same equation here. And also on energy, we had lower service volumes and increased R&D cost as the, call it, the negative impact on the profitability. All together, let's say, it went up. Comparable operating result, slight dip down on a rolling 12-month basis, but we are confident on this going forward.

And if I continue on the services side, so a favorite topic of mine. The overall energy service book-to-bill continued above 1. So strong growth in service agreements and retrofits and upgrades. We see a 2% CAGR on the net sales. And you know that we like to talk about the different components of our service business. And here, you see a couple of things that are really interesting. You see the strong continued book-to-bill on agreements, and it's really, really good. You also see and you want to say field service is down, so it's less than 1.0. But I think that's development, it will go a little bit over time. I don't -- I'm not concerned about that as a trend. We see spare parts is down, but we should know that when agreements go up, there is, of course, spare parts under the agreement header as well. It's classified in the agreements business. So overall, I would say the strong growth of agreements is really, really good. And it's clearly in line with our strategy of moving up the service value ladder as we've been talking about many times. Then on the retrofit side, I think here, you see the -- clearly what we've been talking about in the past because it went down quite deep in the red, but now it's coming back, still not crossing the 1 again, but this is a project business. And therefore, it is -- can be very lumpy. And so we have had some good progress here in the first quarter. And I've said before that I think the retrofit business will certainly be there and will be interesting. I think on the Marine side, you could also see that the retrofit business is still down. And there, we have a little bit of a challenge because certain projects get postponed for the moment, so to say. But also on the Marine side, I think we will see a positive outlook on service growth in general going forward. Now on storage, I think that if we should start with the first thing. And today, we also announced that Tamara de Gruyter, who is leading storage, she will be leaving Wartsila after a long and very successful career, 30 years in the company. She has found a great new challenge outside of Wartsila and we congratulate her to that. We are very sad of seeing her leaving. She's done a great job with storage, which is, of course, in a very challenging situation as we've been talking about, but she will still be with us and lead the business to end of August, and we have started the recruitment for a successor. So thank you for Tamara for all your years in Wartsila. And you will still be with us for months here going forward. So we will have a planned transition. The challenge on storage is, of course, the order intake, which was very weak. So basically zero on the newbuild side. Order intake down minus 53%. Net sales also down. The positive side, if you see on the EBIT going into positive and a solid 5% EBIT margin with solid project execution and also we are taking -- have taken measures to reduce our cost to increase our competitiveness. But clearly, the lower equipment volumes is a challenge to the whole business. And we need -- we do need orders -- order intake in the near future. Otherwise, we will be loss-making for the second half of 2026 in storage. So here, you have the waterfall on the Q-on-Q development on the EBIT side. So we go from 11% to 12.8% in our continuous journey. And Marine is going up from 12% to 13%. Energy, a bit down from 15.2% to 14.7%. Energy storage, as I said, significant improvement. And portfolio also a significant improvement from 6.9% to 11.4%. So the comparable operating results increased with 16%. Now other key financials. Over to you, Arjen.

Thank you, Hakan. If we look at the other key financials, first of all, cash flow, it was mentioned already by Hakan, let's say, EUR 7 million in the quarter 1, which is fairly low compared to 1 year ago. But again, let's say, we are mainly -- the main underlying reason is working capital and the main underlying reason of that is the increased project execution activity. This is not something that is unexpected. This is something that we have foreseen. As said, STH runs at close to technical capacity. We need to produce engines now already for delivery in batches later on. So that's the consequence of that. At the same time, let's say, we have payables, of course, going down. Let's say, we buy components from suppliers. That's also clearly impacting and also receivables went up because we have invoiced customers for something that is not due yet, but still to be paid. At the same time, also in Q1, we saw a lower level of advances received than what we had in, for example, the previous quarter, that was a record high. Net interest-bearing debt, let's say, still very strong, nothing to comment on EBITDA, very good compared to previous year. Return on capital employed, ROCE, a very strong level, still going very strong, and that keeps going also for a while, I would definitely believe. And gearing also, let's say, nothing to comment on. We have a gearing target of positive, below minus 0.5%, and we are clearly in the negative. Solvency went a little bit, let's say, worse now in Q1, and that's happening every year in Q1. At the end of last year, we had 40.5%. Now we have 35%. Every year in Q1, you book the -- sorry, the dividend against equity, and that has an impact on the solvency ratio. Earnings per share, much better than previous year at the same quarter. If we look at the trend lines, cash flow and operating working capital, as you can see, and I don't want to repeat myself, but let's say, the working capital is the main driver for the reversal trend also in the cash flow. Reasons are known. This is not unexpected. So nothing to further comment on that. If we look at the financial targets, First of all, Marine and Energy combined, left top graph, organic growth, 13%. Marine was 12% actually on this horizon and Energy was 14%. We are also approaching closer and closer, let's say, our 14% target. Now we are at a rolling 12-month basis at 13.9%, which was a notch up basically from end of last year, and then it was 13.8%. If you look at Energy storage, of course, organic growth is a challenge. Let's say, Hakan has commented that also already. But profitability is very strong. We have a good margin in order book, and we have a good execution, very good execution actually. So on a rolling 12-month basis, this is now 4.8% on the upper range of the financial target versus 3.3% at the end of last year. Gearing, I mentioned already, not much to comment on deeply negative -- and also actually, the same goes for dividend distribution. It's very well in line with our policy of paying 50% out of EPS a dividend. Last year, it was 100% if you take the regular dividend and the extraordinary dividend together. With these words, I give it back to you, Hakan, on the guidance. Can you hear us, Hakan?

Thank you. So on the Marine side, we expect the demand environment for the next 12 months to be similar to that of the comparison period. And I would say we are still trending on a high level, but it's going to be similar. On the energy side, we expect the demand environment for the coming 12 months to be better than in the comparison period. In storage, we also expect the demand situation to be better than the coming 12 months. But we also underline specifically in storage that the current geopolitical uncertainty particularly impact this business and may certainly affect the growth. And in general, we have a geopolitical situation, which -- where we underline that the current high external uncertainties makes forward-looking statements challenging. Due to this high geopolitical uncertainty, the changing landscape for global trade and the lack of clarity related to tariffs, we have seen that they have very dynamic these days in the U.S. There are risks of postponements in investment decisions and also of global economic activity slowing down. So that's our presentation and summary of the first quarter, a strong quarter for Marine and Energy. We are moving forward towards our financial targets. And we have a challenge in order intake clearly in storage, but the team is executing in a very good way, but we need to address the challenge on the order intake. Overall, a good quarter. Thank you. So Hanna-Maria, let's go over to the Q&A.

Thank you, Hakan. Thank you, Arjen. Now continuing with the Q&A. So handing over to the operator.

[Operator Instructions] The next question comes from Daniela Costa.

I just wanted to ask 2 related questions regarding the energy. So I think this was debated a bit last quarter, but I think when we look at sort of equipment order intake per megawatt, we haven't sort of seen the increasing evolution like we see in some of the turbine players. Can you maybe comment on why that is the case? And now that you sort of pass the reporting period have got some really large data center orders, will we start to see that accretion coming through on order per megawatt and also sort of on margin from data center orders? And maybe just linking to that, you mentioned that you still have some capacity available from here to '29. How many large orders like the one you took last week, do you think you still have capacity to take?

So if I start with the latter part, how many orders, et cetera, we will not go into those details because that is highly, you could say, confidential information in the current market situation. So I won't go and disclose that. I mean, I would say that it's not a lot of capacity. It clearly depends on the type of energy and the size of the order, et cetera. So -- but I don't want to make more explicit statements because of the competitiveness in the market. Then coming back to your questions on this famous, I would say, oversimplistic metric of just dividing U.S. dollar per kilowatt. As we talked about before, it's the scope of our deliveries actually varies. And it varies with the engine is in the core, but it's also how much of auxiliaries, where do you transport in the world. U.S. is a pretty big country with different transport costs, et cetera, et cetera. So I've said it in the past, and I'm saying it before, we have good price realization on data centers. We will -- I mean, from a sales perspective, we will start to see that kicking in at the end of this -- I mean, during Q4 this year, and then it will gradually build up over the years to come. I don't know, Arjen, do you want to comment?

No, I think that's exactly what it is. Let's say, if you look at the order intake, energy for Q1, it's basically all EEQ, and it's very geographically spread as well. And there are different scopes, as you rightfully say, let's say, you have basic EEQ, you have extended EEQ. And if transport is part of your scope or not your scope because there are also differences, it makes a big difference in the euro per kilowatt. So I think it is a matrix, but I would not use it too much. We have good realization of margins. That's what we are focused on.

The next question comes from Vivek Midha from Citi.

My question is on working capital. Thank you for the color on the quarter. We've had very healthy order intake and book-to-bill in the quarter, but nonetheless, your working capital was a drag. And given your announcement, the second quarter is likely to be another good quarter on the order intake. But nonetheless, you mentioned that the fourth quarter level on working capital was exceptional. Would you be able to give us some color as to how you expect the working capital to evolve over the coming quarter and over the coming year?

We will not guide on cash flow and not on working capital either. I'm expecting, let's say, negative working capital to sustain. And yes, you will have fluctuations. Imagine if you have to deliver, let's say, 20 engines in one batch, let's say, 3, 4 months from now. You need to buy the components now. You need to do the assembly. You need to put them in front of the test beds, and they need to go one by one through the test beds. So it's obvious that you need to, let's say, pre-produce, make cost upfront before you can deliver the batch, which will generate the sales later on. Yes, then you have, of course, the new orders. They have typically advanced payments, always have advanced payments, I would say, down payments as well. Timing of that is always difficult to say. And okay, like I said, in Q1, it was on the lower end of, let's say, advances, but that can change certainly, let's say, in Q2. That timing is very difficult to predict. But I expect, let's say, negative working capital to sustain.

Okay. So just to be clear, so we shouldn't read your comments about the exceptional working capital mean that you see a return to that level from Q4 is unlikely in the coming quarters?

No, I would say that was a really extraordinary level in Q4, and that was also driven by really high advances received. So that I would not expect it to go back to that level. But it will stay, let's say, good negative, let's put it that way.

The next question comes from Sebastian Kuenne from RBC Capital Markets.

My first relates to energy storage. I'm wondering what needs to happen for [indiscernible] besides that you need a strategic decision for the energy storage business. So you mentioned you immediately need order intake now to prevent it from being loss-making. But at the same time, it's a low-margin business as is. Chinese competition is not decreasing going forward. So what needs to happen for you to make the decision there.

So as we all know, we did a strategic review, which was quite extensive, and we concluded that, yes, a little bit more than a year ago. And we made the conclusion before the liberation date tariffs and also before, I would say the -- you could say, the slowdown of the electric car industry really impacted the battery cell market. So you could say that there has been some macro shifts after we made our strategic review. I mean, we have also said also when we concluded the strategic review that we will continuously evaluate all business units in Wartsila based on how they contribute to the group. And from that perspective, I mean, we will evaluate storage like we evaluate other parts of our business. Right now, our focus is really to get orders in. I think there are some opportunities in some of our core markets and also to work with cost. That is our focus right here right now.

Understood. I have one question regarding capacity for your engine production as well. In your chart, you show that the end markets -- marine end markets that are relevant for Wartsila, you expect some 30%, 40%, 50% growth in contracting going forward. So really strong marine demand. At the same time, you indicate a good pipeline also for the data center baseload power business. So I'm wondering the plans that you have to increase your capacity, I think it was 35%. Do you already now look beyond that and think, okay, actually, if end markets evolve as we think they will in the next 2, 3 years, we need further expansion of capacity. Are you already now like planning or discussing further expansion? Or do you think this is still too early and it's more like, let's see how business evolves and then go from there?

So a highly relevant question. Just so we get the numbers right. We talked about that you're fully right, we said that by beginning of 2028, we have expanded our technical capacity with 35%. However, just to put it in contrast, in 2025, we were at 75% of our technical capacity. So if you look at the increase of our manufacturing capability, it's going from 75% to 135%. That's an expansion with 80%. Now we need to be cautious just to translate that to sales immediately because manufacturing engines does not translate to sales immediately. But -- so just to calibrate the magnitude of the increase that we are doing. Then coming back to your core question, can we expand further and we can certainly expand further. We need to grow in tandem with our supply chain. So it's not -- it's, of course, our own manufacturing and testing capability, but it's also our capability to ramp up our supply chain. There is a structure of work ongoing. In Q4 last year, we announced this -- just to give an example, we announced our strategic partner with Siempelkamp, who is a key supplier of big castings. So to your question, can we expand further? Yes, we can expand further, but let's take it step by step. We do see a very strong demand situation going forward.

The next question comes from Antti Kansanen from SEB.

I have 2 and I'll start with the kind of the capacity or situation on the power plant side. And when you talk with your clients, obviously, especially the U.S. data center ones, but generally as well, do you think that your ability to deliver is aligned with the overall kind of project time lines in the sense that there are other bottlenecks as well on building the power plants, the permitting stuff and the EPC components and so on. So do you think kind of the ability to, let's say, deliver '28, '29, 2030 commissioning is not actually a bottleneck in terms of your engines that the bottlenecks are elsewhere?

In my view, there are 2 major bottlenecks. One is data ships and the other one is power. So if we had the capability to deliver with shorter delivery times or with more capacity, we could sell more. So we are part of the -- it's not only one bottleneck, but we are certainly part of being a bottleneck.

And then the second question is a little bit about the phasing of capacity or free capacity and revenue recognition in a sense that now looking at Q2, 2 very sizable data center deals with kind of the deliveries '28, '29 or commissioning '28, '29. Over kind of how long time period does this spread in your production? I mean, the 40-plus engines, hundreds of megawatts in a sense, but how kind of a long time will that kind of burden your capacity? And how should we model that one?

Arjen, do you want to comment on that?

Yes. Of course, you need to, let's say, do this in, let's say, also within such a big order, you deliver typically in batches. So it's not that all the 40-plus engines go in one go, you typically deliver in batches. And of course, you need to, let's say, plan that well in advance. If you need to deliver a batch of, let's say, 10 or 15, like I said already with my example on cash flow, you need to pre-produce and that needs to be planned. So you need probably for these orders to be delivered in '28 fully, I would assume that we already end of this year need to at least make sure that the supply chain delivers certain critical components that we are not short of that, and then it goes on into 2027.

And sorry, Antti, if I may add, I really would take a very careful look on the prioritization of our order backlog because we are clearly signaling that sales recognition will be further out in the future. We have a great order intake and -- but sales recognition will clearly go further into the future.

No, I appreciate that. And actually, the follow-up was on what Arjen, you mentioned that you're delivering batches, but would the revenue recognition still be tilted towards the commissioning of the plant, the earnings contribution.

No. In these bigger orders, it's the batches basically that drives it.

The next question comes from Max Yates from Morgan Stanley.

Can I just ask firstly about Section 232. We've obviously had some changes with tariffs. I think there were some adjustments to anything with sort of percentage of metal over 15%. There were some specifics around, obviously, gas engines up to certain sizes. So quite a lot of moving parts. Could you just give us your take on how this will affect your business potentially in terms of ordering and cost and whether we should think about any impact going forward?

So I would say we have done a careful analysis. It's a complex framework and dynamic framework. When we make the assessment of the overall situation, different rates, different custom codes, et cetera, et cetera, I think net-net, it has a very limited impact on the type of tariffs that our customers will pay. It will be approximately on the same level as before the change. So from a customer perspective, it's about the same.

Okay. And maybe just a quick follow-up on the -- so if I look at your orders this quarter, you had roughly gigawatts of energy orders, round numbers, I think the data center one was like 429 megawatts. So you had a much better quarter in terms of kind of non-data center orders. Could you just talk a little bit around what regions those were coming from? What was driving it and maybe kind of how the pipeline for those non-data center orders? I guess what I'm trying to understand is we know from the second quarter, there's going to be a lot of data center orders. How do we think about that non-data center order piece going forward? And is some of your kind of more cautious commentary around geopolitical headwinds, uncertainty, is that targeted maybe at these non-data center customers? So a little bit of color there would be great.

So I would say there is some in North America, some in South America, some in Asia, so to say. So it's -- to your point, it's not only data center orders.

Okay. Given that was quick, can I just ask one very quick sort of, I guess, conceptual question. So we've basically seen this morning your energy margins have gone down year-over-year because your share of energy new equipment has gone up. So your share of new equipment this morning in Q1 is about 41% of your Energy division. If I look at what's going to happen over the next 3 years, your energy share or your new equipment share of revenues is going to go from about 40% to about 60% of your overall division. And I guess what I'm trying to understand is we've all been used to for Wartsila when equipment goes up, margins tend to go down. And I guess, is there a danger here that we all start looking at margins, I think many in the market would say your margins could go to 20% plus in energy. Is there a danger that actually as that mix increases, the revenues grow, the absolute EBIT grows, but actually the margin expansion stays relatively constant because of that mix. Just conceptually, how should we think about that so we don't get overexcited or so we don't get caught out as the energy share or the new equipment share of revenue grows over the next 2, 3 years?

So I think newbuild will grow, service will grow, but we are certainly in a time period where newbuild will grow faster. That's a high likelihood considering the buoyant market. I mean the profitability on newbuild is generally lower than services. However, I would say we talked about it, we have good price realization on the newbuild that we are taking in now. So -- and then -- and I know you're a long-term investor, there will be a fantastic service business generated by all that newbuild capacity that we are taking in now because the newbuild that we are taking in now, there is a lot we talked about that. It's a lot of 24/7 baseload operation.

The next question comes from Vladimir Sergievskii.

Could you talk about service order growth rates, including and excluding agreements? How much materially the difference is between the 2? Also, any particular reason for decline in service sales this quarter? And when realistically do you think we can expect service business for us to return to growth?

So I would argue, I mean, as I said, service is growing quite considerably on the organic side. So it's 9% for the whole group. But then we have had an FX impact that's primarily U.S. dollar to euro. And we also had an impact of the divestments. And I would say it's about 50-50 split on those 2 drivers. So we will see growth going forward. I'm not sure you need to help me here, but I'm not sure we are breaking down the growth percentages of each of the disciplines, so to say.

No, let's say, organic growth out of my head, I think for Marine was actually 9% and for service, 6%, if my memory serves me well here now. Q-on-Q. So let's say, yes, we are growing, and we are not breaking down, let's say, the growth ratio per revenue stream. Of course, let's say, it depends a bit on what type of agreement there is. There is a piece of parts in there as a piece of field service in there. So it's not just black and white parts versus agreements. There is also, let's say, mixes in particular on the agreement side.

Okay. And the question is on profitability as well. Your portfolio business was a clear highlight this quarter. Did you manage to improve the business by that much so that new owners will be getting a double-digit profitability business going forward from here? Or there were something specific coinciding in this quarter to support double-digit profitability in portfolio?

Sorry, I missed the first part of the question.

I heard it a little bit. Sorry, Vlad, can you repeat because we -- I think both me and I and we are sitting in different parts of the world, we didn't hear you quite.

No problem at all, if I can try to do it again. So your portfolio business has delivered an exceptionally strong margin in Q1. The question is, is that you've been able to improve this portfolio business so much that this double-digit margin will be maintained for the customers who are vital for this new owners of this business? Or there was something specific in this quarter that drove margin to that high level?

No, I can answer that. It's purely, let's say, commercially driven. So yes, let's say, you might remember, let's say, a long time ago when the current 2 business units that we still have there Gas Solutions and Water & Waste were put into this portfolio business unit, they were loss-making. And we have been able to convert that to a profit-making in order to be able to, let's say, also divest them in a better way. And this is purely, let's say, commercial work, commercially driven, let's put it that way. There is no special items in Q1.

And to add to that, and also Vlad, we continue to have the same message that like before that we are planning to close Gas Solutions in Q2 and Water and Waste latest in Q3.

The next question comes from Sven Weier from UBS.

First one is to follow up on the Texas order, which obviously is quite a bit above your sweet spot range that you mentioned before. I mean, if you consider also the capacity that you have left to be booked, I mean, is this order going to remain like an exception? Or do you see yourself even getting closer to the gigawatt range? And what was the kind of maybe the market feedback from you winning that order? Did it resonate very well with other projects that haven't made a decision yet?

Yes. So to give a little bit more color, we talk about that we have a pipeline, a data center pipeline. We talked about that it's buoyant and it's growing. If I look in that -- and we also talked about that it's very dynamic. We have clearly seen -- looking at the last -- now you could see the 5 orders that in the U.S. that they are getting bigger and bigger. I wouldn't say that each new order in data centers related to the U.S. will be of the same size. That will be smaller, but there will be big ones as well. I mean there are gigawatt potential orders in that very dynamic pipeline that comes and goes. So I mean, it's not completely off the wall of getting gigawatt even within our engines. But we will have a mix of big ones and smaller ones. But if you look on the average, I would say the trend is slowly increasing in the U.S.

And what is your expectation on the Brazil pipeline in terms of the power auction we had? I mean, should we see those orders in Q2 already or later?

So the auction has taken place. I think we -- and I cannot comment because we are sitting and having talks with customers as we speak, but there are clear opportunities, yes.

And then just finally, if I may, just coming back on the situation on marine retrofits and regulation. I was just wondering what your clients tell you on the methanol engine order book because we just recently saw Pacific Basin canceling a methanol order and converting it into conventional fuel, and they basically cited regulatory uncertainty, but also the like 15% cost saving on the overall vessel order. I mean that's probably on the 2-stroke side. I mean, are you seeing similar thoughts among your clients to make a change?

So far, we sold about 350. I mean, we have orders for about 350 methanol engines. We haven't had any cancellations that I'm aware of so far. I mean, also, of course, we have our dual fuel approach. So many -- I would say, clear vast majority there of those that we have delivered out of the 350, all the 350 has not been delivered yet. But of the ones that have been delivered, the vast majority is running on traditional fuels. And because the challenges that customers have faced is to find the methanol. It's not readily available. But because of this multi-fuel capability, we haven't had any cancellations so far.

The content per vessel you have on the methanol think it's bigger than if you just have kind of traditional dual fuel?

Well, I would say that methanol-enabled dual fuel engine is the technology diffusion curve. We have better price realization on new technology than our standard traditional technology. But I mean, the methanol -- so just clarify, the methanol engines that we have delivered, they are dual fuel. They are not single fuel engine.

The next question comes from Uma Samlin from Bank of America.

So my first one is a follow-up on the energy margin. So you talked about we will start to see the price realization of the newbuild and also the service potential to kick in to help your margin going forward. So just looking at your -- already the existing order, will we start to see that coming into the margins?

I think if you look at data center deliveries, they are starting to ramp up in Q4 and then well into 2027. So that's the time frame.

Yes. And for service?

Service, I would say, in general, it takes 4 to 5 years. So because you need to -- you install, you operate under warranty and you go in. So I mean, the good thing -- the great thing today, we sign service agreements very almost when we contract -- when we have the newbuild, we normally contract services as well, either at the same time or just a couple of months later. But then, of course, when the revenues kicks in and therefore starts to generate top line and EBIT, that's normally a 4- to 5-year time frame. So that's why I'm saying also commenting on Max, you will see the major impact on the service side with a 4- to 5-year time line.

Unless we agree an operational maintenance contract because then it starts at commissioning.

That's correct.

That's super helpful. So on the -- so just on that point, for the data center order you book, for example, the Texas order you booked, when will we expect to see the service contract kicking in? Is that like just in like a couple of months already?

So I can't go into that because we are in negotiation with customers. So I will have to come back on that.

And just last one for me. We have seen the order from Hyundai Heavy refill to supply data centers. Just wondering, is there any change in competitive landscape on the data center engine side? Also, do you see any pricing potential perhaps outside the data center space like spilling into the marine service, marine engine supply chain?

I haven't seen that so far. I think right now, it's a very buoyant market. And as I said, we have good price realization both in Energy and Marine. I mean we are an established supplier. We have years and years of references. We have the industry-leading service network, both on the energy and marine. In the U.S., we've been for decades. I think we have a very strong brand. And we have proven that we can execute and that our plants are running with very high uptime and reliability. So we have a strong market position. And I'd rather talk about that this is an opportunity for engine technology to actually, over time, expand its market share because there are some intrinsic benefits with the engine technology compared to the gas turbines. And especially when we talk about derivatives and industrial, better fuel efficiency, no water consumption. Water is a big topic in the U.S. and also for -- in the future for potential balancing better at handling fluctuating loads. So I see that much more of an important competitive dynamic than that we have new entrants coming in on the engine.

Thank you. Before closing this news conference, I would like to remind you that Capital Markets Day invitation has been published today. So the event will take place on November 3 in Helsinki or via live webcast. And on the following day on November 4, there's also a great opportunity to visit our sustainable technology hub in Vaasa. Before Capital Market Day, we will also host many smaller events, including CEO Strategy call on June 9; CFO pre-silent call on June 23, and then Q2 report will be published on July 21. Thank you.