Wärtsilä Oyj Abp (WRT1V) Earnings Call Transcript & Summary

Okay. Hello, everyone, and welcome to Wärtsilä's Q2 pre-pilot Call. My name is Maija Hongas, and I'm from Wärtsilä's Investor Relations team, and I'll be hosting you today as Hanna-Maria is today on a well-deserved holiday. And today, our CFO, Arjen Berends, will start with some key messages, and we will also show you 2 slides, which are available on our IR website as well. And after the key messages, we have reserved time for Q&A. [Operator Instructions if you can send your question to me [email protected]@wartsila.com. [Operator Instructions] And I think it's time to start. Please go ahead, Arjen.

Thank you, Maija, and hello to everybody. A few highlights to cover. Of course, first of all, order intake. I'm pretty happy with, let's say, order intake and how it develops both on Energy and Marine side, let's say, we have good traction. Data center orders announced earlier, and I think you have seen also in the press releases. So not more to comment there. Pipeline is strong. Pipeline also continues to be on a good level, both actually for Energy and Marine. So looking good, let's say, at least the last couple of -- or it's actually 1 week to go in this quarter. Then I think also good to highlight and remember once again or remind once again, let's say, the divestment that we have done and completed basically, first of all, what we have done last year. You can see it on this slide, A&CS, Automation navigation Control Systems last year July and Marine Electrical System last year in October. And it had a quite significant, let's say, correction in the order book, EUR 900 million about. And annual revenue in 2025 was about EUR 225 million. So quite good to keep in mind also for your own analytics. Then also now in '26, we have 2 more. Actually, the last one out of portfolio business, Gas Solutions that was completed on 1st of June as well as Water and Waste also completed on 1st of June. Annual revenue for both of them, let's say, 2025 Gas Solutions, EUR 390 million and Water & Waste about [ EUR 50 million ]. And order book expected to be adjusted with about EUR 650 million now in Q2 reporting. So as I said, with the final, let's say, 2 Gas Solutions and Water & Waste going out, basically, portfolio business have no remaining activities anymore after Q2. If we move to the next slide, which is actually the other, let's say, highlight I want to make is, of course, the announcement that we did, let's say, not so long ago, 15th of June to start a joint venture with RCT Solutions from Germany for our energy storage business. It will be a 50-50 joint ventures. Over time, let's say, we anticipate new investors to come in, and that would reduce ownership of the initial shareholders, both RCT as well as Wärtsilä. [ Peter Fath ], which is the CEO of RCT Solutions will become the CEO of the joint venture after closing. So then he's really, let's say, committed to this financial impact at closing, no material profit and loss impact at closing. And we transfer basically assets to the joint venture, which is less -- net assets actually, which is less than 5% of Wärtsilä total net assets, so it's not significant in that scale. And we expect the joint venture after, let's say, all kind of transformation-related activities to be executed, but we expect, let's say, the joint venture to generate positive results towards the end of 2027. While in '26, we anticipate the loss for Wärtsilä -- on Wärtsilä result and basically total to be in the range of EUR 40 million to EUR 50 million coming from this area. With respect to reporting and timing, we will not have any separate segment reporting anymore in Q2 financials. We will also stop, let's say, the financial targets for this business and also not provide any demand guidance as I would believe it's also quite obvious that, that will disappear. We expect the closing to happen in Q3, depending on regulatory and other customary conditions and approvals as well as arranging, let's say, financing package. And until that, it will be reported as discontinued operations and asset held for sale. From closing onwards, the joint venture will, as any other joint venture that we have, be reported under other business activities and as share of results in associated companies. Not all of our joint ventures are other business activities, this one will be, but all joint ventures are reported as share of results in associated companies. So one single line consolidation, which is part of, let's say, operating result. This year still next year due to IFRS 18 joint venture results will move out of operating result and we will move to results from investing activities. Just on the size, energy storage business has been a smaller segment in Wärtsilä, about 480 employees globally. Net sales of about EUR 700 million in 2025 and an operating result of EUR 23 million in 2025, 2.8% of Wärtsilä äsila total. So very small contributor, small positive contributor. These were my short introduction words, and I would open up for questions.

Thank you very much, Arjen. And, let's start with the Q&A. And the first question comes from John Kim.

I'm wondering if we could start off with Marine. Can you give us a bit of compare and contrast on how disruptions both on equipment yards and perhaps service looks like in Q2 versus Q1? What I'm trying to unpack is kind of time in place impact from Middle East conflict removes versus perhaps ongoing constraints in various parts of the supply chain, if there are any?

So far, we have not had any, let's say, immediate impact or direct impact. We have been already for some time, let's say, stocking a little bit extra also because we saw that factory utilization and capacity clearly goes up. So I don't know have any immediate urgent case that some parts are stuck industry to Hormuz, not at all. It's in a way, also a bit of a dead-end street. So it's more for, let's say, transport of oil and stuff then from home supply chain. Our supply chain is typically not in that region. Most of our supply chain critical, at least comes from Europe and some parts from Asia, but they don't typically go through the Strait of Hormuz. Then from a service perspective, of course, there are ships in the Strait of Hormuz sailing that we can service. Good to remind that it's mainly merchant fleet, where the main engine is a 2-stroke engine, which is not so much, let's say, impacting us because, okay, also on the main -- on the 2-stroke engine, let's say, the main market share is even basically to stroke. And we are servicing more a, let's say, call it, the [indiscernible] brand. So also there, let's say, I would not say the Strait of Hormuz has a significant impact either. So altogether, no major impact, I would say, not a material change compared to Q1. Having said that, I think with unrest in the world, of course, and the longer it takes our people or businesses and ship owners and operators are also getting a little bit, let's say, nervous. Let's say, how long will it take? What does it mean to fuel prices, et cetera. So there are probably new considerations coming. Should we, let's say, go for a more fuel-efficient solution in the future. do a retrofit or not stuff like that. So -- but let's say, no concrete big scale impact. I would say, more discussions than anything else at this point of time. Of course, this can change. But at this point of time, I don't see Q2 being very different than Q1.

Next question comes from Sven Weier.

My first question is on orders. I was just wondering you didn't have any announced orders since the 800-megawatt data center order. I mean, should we assume that you will stop reporting every data center order now, now that it has become a bit more normal part of the business? Or how should we think about unannounced orders in general, should they be at a normal level, average level in Q2

No, let's say that's -- our policy is to basically report as many orders as we possibly can. But of course, you need the permission of the customer to announce an order, then sometimes and it depends a bit on the scale, let's say, for big orders, it's more relevant than for, let's say, smaller orders. Yes, we try then to report even anonymously. Then we -- as you have also seen earlier from us that, let's say, we don't mention the customer name. Sometimes even not the location, but still saying that, okay, there is a big order coming. But our policy is not really a policy. We try to report as much as possible the orders that we get preferably with the name, but if not allowed, and at least for the bigger ones, we want to go on this.

Is there any reason to assume that unannounced orders should be at a completely different level as in the quarters before or...

Yes. Now I cannot remember by heart, let's say, how much the unannounced part was first for all the quarters before I would say it's a normal business, business as usual.

And next question comes from Sebastian Kuenne.

I have a question on deals related to AI or energy security in Europe. I mean Europe wants to become independent ideally from U.S. AI systems and one would expect also primary power issues here. But we haven't seen much from Wattle in the sense that you get allocated deals for data center power here in Europe. Could you give us maybe a little update here. And also on the country-wide energy tenders that you are involved and I think one was in Brazil a couple of weeks ago, maybe another update there where there are big tenders that we should be aware of?

Good question. Let's say, data centers in Europe, I think Europe is late to the game. I think it will be a challenge for them. At least I'm not aware of, let's say, huge data center orders in Europe of the scale of, let's say, size and scale, I would say, in a number of orders, I mean, as we see in the U.S., for sure, there is a pipeline. Also we have pipeline in Europe, but nothing peak has been so far, let's say, materializing. I would expect still something to happen this year. But timing with these orders is always very difficult. What is a fact, and I think that is more and more also aware in the world among our customers is you need to be fast in decision-making because if you're not, you're without power because the capacity, not only our capacity, but also the capacity of our competitors is being sold very, very, very fast. So decision-making is key. But it's also very difficult. And I think in Europe, it's even more difficult than in U.S., for example, to get permits. And get, let's say, all your -- and then if you buy an engine without permits, should you do that or not. So it's more complicated, I think, to push orders forward in Europe than it is in the U.S. Then on your question on the Brazil, yes, the tender took place, let's say, the award was done, what is it now 1.5 or so months ago. I think the ones that offered with [indiscernible] equipment there were quite a few. We also announced, let's say, at least 2 of them. We are negotiating with a few more, but I think time starts to run out. Let's say, if they are not concluding within weeks, I would say, the slots are gone, at least the stocks are gone for the time that they require it. So then they need to find alternatives.

And other countries are the bigger...

Okay, not like Brazil, but let's say we have quite good activities ongoing in Malaysia, Indonesia Australia, also in Europe, a few locations and of course, also in the U.S. but also South America. Actually, it's quite active all over the place. I think also more and more customers realize that if we are not making decisions, we will need to wait, let's say, a couple of years before there is any capacity available, not only from us but also from others. So I think the awareness starts to grow, which also means that pipeline and activity starts to go up or is up actually.

And next question comes from Vivek Midha.

My question is actually also on Brazil. I saw from your release that you described it as an equipment supply contract. Now historically, you've obviously -- you indicated your strategy to move away from EPC towards the EQ. Brazil historically has been quite an EPC market. I'm just curious, long term, as you think about your more emerging market focused your emerging market focused customers. How are you approaching those kinds of negotiations? And should we expect that, for example, if you do book Brazil orders in Q3, for example, that they will also be very equipment focused as well?

I would say it's a good question. Let's say, our first focus when we sell new equipment in energy is equipment delivery. And that's where we start with typically. It's typically, let's say, we go to the customer with an equipment delivery and a life cycle offer, often in combination because that's how we believe we can generate more value for customers. If the customer wants EPC, we are not ruling out EPC. We have always said that, okay, we are not ruling out EPC, but we take on extra risk with EPC. So that also means that we need to get premium price and get paid for the extra risk that we take on. If the customer is not willing to do that, then there will not be an EPC contract, then it's just equipment. But that's the approach. So let's say, we are not ruling out EPC, but we need to get extra pay because we take extra risk.

Next question comes from Johan Eliason.

Just on the equipment deliveries, can you sort of give us any guidance over the year, how that looks like now when you only have the energy and the marine business to worry about? How does that look like?

Let's say, the fact that we are increasing capacity, it says a lot of how it looks like. In particular, I would say, energy is really, let's say, booming business and majority of the capacity expansion will go to energy by far. Having said that, we also see good opportunities in marine. Let's say the ship age has been as all as it's ever been. Yards capacity is ramping up much faster than what we thought even 1 year ago. So I think also something big is coming in marine. And we see also, let's say, good outlook for that. It's, of course, always segment-based. So let's say, not all ship segments move in the same pace. And depends on age as well. Let's say, for example, Hakan mentioned many times, I think fares are very old. So there needs to be a newbuild cycle at some point of time. It's amazing how long it takes actually before it kicks off, but we see more and more activity. So yes, I'm very positive about energy. I'm also actually very positive about Marine. But if you put it in perspective, more positive about energy.

Yes. But that was sort of more thinking of your backlog delivery pace over this year, while we have higher equipment deliveries every quarter now and then until you have the capacity.

That's difficult to say, Johan, because let's say timing, let's say, now the equipment delivery is you take revenues and delivery. And let's say if it slips in, let's say, in the last week of a month to the next quarter, it's certainly a totally different picture in the next quarter. But I would say, over the coming time, with a faster ramp-up of capacity, and I would say, in particular, 2028 onwards when the new capacity becomes available, I think then we will see more shift towards, let's say, higher on the equipment side prorata. But I mean you mentioned we also believe in growth of services, but can you keep the same pace, that's a bit questionable. Depends very much on, in particular, I would say, retrofit projects, how is the retrofit cycle.

But you mentioned that you had 75% capacity utilization in the main [indiscernible] plant last year. And I guess you must be filling that up now this year already, I suppose.

Yes, that has an impact already. But I would say the more significant impact is later in '27 towards '28.

And the next question comes from a [indiscernible].

Yes. [Technical Difficulty].

The line is very bad. We can't hear you. [Technical Difficulty] I think we will take a next question and then come back to [indiscernible], and let's try again at a bit later if the connection would be better. But please, Antti, go ahead.

But my question was on the capacity announcement that you made in May. So my question is that why did you not announced of the full capacity expansion in February when you made the original kind of 28 expansion. Why did you step approach? Why do you separate announcements? And what are you actually doing in the second phase of the capacity expansion, your own factory versus your suppliers, please?

It's actually -- the main reason is the supply chain, let's say. I think in the first capacity expansion, I would say the majority dependency, I would say, was very much on our own facilities. Of course, also the supply chain, we need to make sure that, let's say, the supply chain can follow what we have in mind, let's say, to do, let's say, locally [indiscernible]. I would say we could not say more, let's say, because at that point of time, in February, we have not secured, let's say, the, call it, the next capacity expansion phase from a supply chain point of view. So that's the main reason. And let's say, what's different. I would say that in the second one, I think you have more investments related to supply chain, machining capacity, either in or, let's say, at supplier sites or in our own facility and let's say, extra machining efforts, but also, let's say, happening investments supporting, let's say, the supply chain itself. So with a certain volume commitment or what have you. So there is lots of work to be done. We are not in totally safe waters. But I would say we are comfortable, let's say, that we can make this capacity come to life by the time that we have estimated it. Q1 '28 and Q1 '29. Main driver is, Antti, that we could, in February, not have the full commitment of the supply chain.

Okay. Clear enough. And maybe referring to the comment that you earlier said about the Brazilian clients that you are kind of running out of production slots for them. What is kind of time frame that they are asking for your deliveries?

I think the majority is, let's say, '28, '29.

Okay. But you should have ample capacity for '29, if I understand correctly, the expansion plans?

Yes. Let's say, it depends a bit on the customers. And of course, what they are have promised, let's say, from a capacity point of view, I would say that there are big customers and there are smaller customers. But 28% is pretty much, let's say, locked and committed, and I would say, or let's say, either booked are locked through, let's say, valid, let's say, customer quotes, '29 starts to be also, let's say, more and more committed through customer quotes. But there we have space. But again, let's say, it's not only Brazilian customers that are looking for capacity. I think there's a lot of other customers in different places, like I mentioned, Australia, Indonesia, Malaysia, et cetera, that also, let's say, on the log slot. So yes, first time first serve, that's more or less what it is today.

For me, it seems that [indiscernible] picture is still frozen. So let's try to have another one. So next question comes from Daniela Costa.

Sorry my line has been on and also apologies if this has already been asked, but I wanted to ask sort of a 2-part question regarding how should we think about modeling advances from here. So from one side, has your orders get bigger and bigger in the megawatts? Does the rule of tone like 20% to 25% of advances still applies? Or does it change with size? And then from another side, I guess, you've added capacity, several peers are adding capacity for those outer years that are being bid now. is the customer acceptance of these type of levels of advanced? Has that stayed put or do we think sort of the customers negotiating maybe that more actively?

No, let's say, our aim is always to be, let's say, cash positive throughout the project. That's -- and I must say, we have very successful in that overall. Of course, you have here and there, you have exceptions. But overall, I would say we are very successful in that. Then, okay, is it, let's say, 10% down or 20% down or sometimes even more percent down? Depending by order. Let's say, you might have, let's say, 10% down in, let's say, 30% mid delivery, you might also have, let's say, 20% down and 10% med delivery. At the end of the day, what is for me most important is that the down payment is at least more than 10% and that we have a cash positive, let's say, flow throughout the project. And preferably, the majority of the cash in the house at delivery. So -- and your question, is it changing, no, I would not say it's changing.

Next question comes from Sven Weier.

The first one is on -- you obviously have a few data center orders now and we're hearing a lot about potential construction delays and aided, I mean, are you -- can you track the progress on these projects, whether they start in time, whether there are delays, whether they are permitting issues? Is that possible for you? Or is it difficult for you?

No, Okay. It varies by case. Some are more transparent than others. In general, I think we are pretty much on top of, let's say, if there is a delay, basically, often they come to us and say, okay, we cannot have the engines right now because, let's say, if you ship, let's say, 10, 20 engines to a site, it takes a lot of space. And if they are delayed with the building construction, they cannot have it. So often, we get pretty much early warnings if that happens. So far, I have not heard of any, let's say, major delays on, for example, the data centers, as you mentioned. So far, not.

And when you pitch for the projects, I mean, compared to the one you won in July last year, the first one. Are you running into more engine competitors or fuel cell competitors now when you pitch for the projects? Or is it unchanged?

At least I've not heard of any major changes, no, I would say it's the same.

And are you thinking about developing an even bigger engine because of the megawatts increase of the projects? Or are you at a physical limit where you are?

Let's say, developing a new engine takes a lot of time and effort. And by the time you have it probably mature, the market is probably totally different or not, difficult to say. We used to have a long time ago, I still remember it, and I think we have a few of them still operational, a vessel of 64. But that is 20 years ago, I think, about. But yes, I don't think it makes a lot of sense to pull those drawings out of the cupboard and start using it. No. I don't see it realistic. It's too much work and testing and what have you to get it up and running quickly. Because you also need to make sure that the whole stocking supply chain, everything is geared up again. And I don't think that will happen on short notice.

That wouldn't change the project decision if you had a bigger engine, even that...

No. Let's say, it's even up today, let's say, for some projects, probably the large board engine was a better fit, but simply because it was not available, they went from medium bore Yes. that's how desperate let's say, that the market is at the moment. I need power, and I need it quick.

Next question comes from Tomas Skogman.

You talk about expansion in percentages, but I think it would make a lot of sense for you then to tell what is the share of engine in marine equipment because otherwise, we might end up putting 2 large growth estimates for you.

No. I think we stick what we have said earlier, the majority of the capacity expansion goes to energy. And I think that's but you need to use in your simulations.

But when you say you will have basically 30% and 35% more capacity than it's on engines. It's -- and then in marine equipment, you have a lot of other products. So it's -- you cannot just add that capacity basically to that. So I mean, that's why I'm thinking this would be quite crucial just to -- it's not business sensitive in any way, just to avoid that estimates are wrong in the market, basically.

True and perhaps we will do that in the future. But so far, we have not, let's say, decided to do so.

Yes. Then future reporting. So is it so that you will have 2 divisions? Or are you considering to report in some different way when you no longer have the portfolio and the storage businesses?

No, it will be, let's say, 2 segments. We have a dual segment reporting, Marine and Energy and the rest is other business activities.

Yes. And this storage loss event is that booked on the discontinued line? Or is it day 1 on the associated line? So it's on the discontinued line, we should have the loss in the third quarter.

Until, let's say, closing, it's on the discontinued line, and then after it will be share of results in associated companies.

But this big one-off loss related to the write-down?

That will be likely on share of results in associated companies when the joint venture is established.

Okay. And then finally, I would just like to -- I get so much different information about energy vision and so on. So is your view that mid-speed engines are always more fuel-efficient than high-speed engines independent of size. And why is that there?

Oh, now, you asked me a very technical question, Tom.

But you have highlighted that the fee I think 2 percentage points better in [indiscernible].

The answer is yes. But let's say, what's the main driver, I think it's probably, let's say, power per megawatt deal. I would assume, let's say, I don't know the exact technical reason why an high-speed engine is less efficient than a medium-speed engine, but it has to do with power per fuel density basically fuel consumption versus power output.

Is your view then that this order boom for high-speed engines to data centers, that's because they have a supply chain that is just more easy to ramp up as they might use, let's say, components from the truck industry or so?

I think it's, let's say, it's the desperation for, let's say, power if you need one, let's say, 500-megawatt power plant and you put it with high-speed engines, you're desperate because you need power, first of all, let's say, engines, let's say high-speed engines, they lost much less long a medium-speed engine, media speed engine can take 30 years. We have engines running in the field for 40 years, even higher than that. typically high-speed engines, I think it's 15, 20 years max, and they are on out, you need to, let's say, replace them. And also from a space point of view, it's by far not the most optimal solution. So 400, 500 megawatt, I definitely would never go with high-speed engine and unless you are really desperate because there are so much disadvantages with it.

Next question comes from Sebastian Kuenne.

My first is relating your investor developments in carbon capture, hydrogen engines, ammonia engines. Now we have this delay with the IMO with U.S. blocking further enforcement certain rules. And the question is then, should we prepare for some capitalized R&D having to be written down? Is there any smaller business where you have put like 30, 50, 100 people that develop certain engines and that you cannot now commercialize? So is there any shift or any risk that certain units are underutilized because we have delays in this in our transition?

No, I don't think so. Let's say I don't see any reason. Let's say if you take carbonate as an example, it's not a debt mark. Let's say, there are activities happening. We are still selling also scrubbers, let's say, that are carbon capture enabled. And I'm pretty sure it will come. But it will take a little bit longer time than we originally anticipated. No, I don't see any, let's say, accelerated write-downs on that area, not at all.

Very good. And then my last question is the [indiscernible] failed by Volkswagen. The latest news I have is there are 3 interested parties. None of them is not [indiscernible]. I was wondering if you are in talks with Volkswagen or with any of the buyers or if you heard that [ Evolent ] is being broken up into pieces where you could get some of it? I mean, what can you share with us on that topic?

Actually, let's say, there is not so much known to us, let's say, but I think the case starts to be less and less appealing. Let's say, first of all, let's say, Volkswagen wants to maintain a quite big ownership, at least to our understanding, but is it 45 or something plus just minority basically. Then I would say at least the price that they have in mind, at least what we have heard is quite high. There is lots of complication with, let's say, splitting 4 stroke and 2 stroke. To be honest, I don't think it will end in our favor.

Is there other options you see in the market to complement your current portfolio? Not , but just if there would be someone?

No, let's say, 2 stroke would be an excellent add-on especially when you can acquire basically a market leader in that space, which is Evolent clearly on the stroke side. But let's say, there is no, let's say, second strong player except for WinGD and Mitsubishi, but those are, let's say, market share-wise so small, it wouldn't make sense in my view.

Our next question comes from Mikael Doepel.

So just one question on the data center-related pipeline. Maybe you could talk a bit about that. I mean, you previously said that you have a sweet spot there, 50 to 400 megawatt, we are seeing quite big deals recently. So just wondering if you could talk a bit about that, what you see out there in the market and how you are positioned on that front?

No, it has not really changed. Let's say the pipeline is still, let's say, strong and good. size-wise, I think our sweet spot is the for 50 to 400. I think then if you compare all the parameters, let's say, water consumption, fuel efficiency, what have you, I think we typically come our best. I think in most of the cases. If you go beyond yes, we can still come our best, let's say, if you need 1 gigawatt or 800-megawatt whatever, let's say, power plant but you're in an area where water consumption is a big issue or water is scarce. Probably it's not so good to go with the turbine because that needs a lot more water than, let's say, what the engine is. So there are different parameters that make or break, let's say, a decision upon equipment for a customer in different locations. So yes, I would still say the sweet spot is what it is, 50 to 400. But certainly, let's say, we have also clear options or let's say, good opportunities, I would say, on the bigger scale.

Okay. No, that's clear. And just as a follow-up there, I mean, how would you describe the where in the negotiations are you currently -- are you close to finalizing some deals? Or should -- I mean, just thinking about managing the expectations here in the market, everybody can see the boom out there. I was just wondering if you could say anything about that.

No, we have, let's say, in the whole pipeline, you have orders that are let's say, in final stages of negotiation, you have orders that just are opportunities that just come in. So -- and that's a bit of a constant flow. And sometimes, let's say, One that is very close to conclusion just disappears for whatever reason, they didn't get a permit or some other reason. But let's say, immediately, some other customer jumps into the slot. And basically, sometimes we have even cases that within, let's say, 4 to 6 weeks, you conclude something, which is also possible. So it's a very volatile pipeline, as we have also said before, it can change very quickly. But yes, different projects in different stages. And we have always projects in, I would say, any stage of the opportunity pipeline.

And the next question comes from Johan Eliason.

I was just wondering, you have announced the details of the CapEx for this expansion. How should we think about the total CapEx over this period until 2028. Is this sort of our normal 2% to 3% of sales and then this comes on top? Or how should we model it?

I would say it's a good question. I would say this is largely on top, you could say -- because you have always, let's say, the normal, let's say, CapEx flow of replacement of workshop equipment and what have you. I would say the majority of this, I would calculate on top.

Good. And just thinking about your balance sheet while we were at the topic, you decided to go for this extra dividend, but versus your gearing target, you're still very far away. Is it Obviously, you have to have a strong balance sheet now when you are doing these investments, but still priority going forward, M&A or continuous shareholder returns? Have you communicated anything about that going?

No, we have not, let's say, communicated, let's say, the shareholder returns, that's typically, let's say, more decision at the end of the year when we talk about that. So far, no conclusion. Let's say, last year, we did an extraordinary dividend, eventually paying 100% of EPS out in dividends, partly a regular party extraordinary. Will that happen again? No, there are no guarantees for that. It's a case-by-case decision. It depends on the situation at that point of time. From other priorities, yes, clearly, let's say, we need to spend more money on the CapEx. R&D spend will stay on a higher level, let's say, not to 3% historically, but let's say, 4 plus, clearly. And then of course, with growing sales 4% plus of sales, there's also an increasing absolute amount. M&A, yes, we are looking out, let's say, I don't think, like I just said, [indiscernible] is going to happen. Will there be something else, at least no big tickets that I can see. It will be more, let's say, small bolt-ons. And otherwise, I think it's also not a bad situation to have in a time when there is lots of things happening also geopolitically to have a solid balance sheet. So better be safe, than sorry.

Yes, absolutely. And then finally, just detail about this JV with the storage business. You talked about this EUR 40 million to EUR 50 million charge. But you mentioned it will be taken when it's part of the JV. So it's EUR 40 million to EUR 50 million, half of this charge as you own half of the [ idea ].

Let's say our share is 50%. Of course, not all that result is from that time. Let's say, we have said that if we are not booking orders, let's say, in last quarter, we said if we are not booking orders, we will be loss-making. So okay. We start to be at the tipping point, you could say that as the orders have not yet really come in, we start to generate losses probably between now and closing. And then on top you have, let's say, the result of the joint venture later on when it is a joint venture. And as 50%. That's 50%, correct.

The next question comes from Sven Weier.

Yes. A few follow-ups left, please. First one is come back on M&A and fuel cells. I know we discussed this last time a few years ago, maybe that I think you guys ruled out to get involved. But when we're seeing these guys making good progress on the data center side, for example, could be also on shipping, you still rule that out to kind of organically inorganically get involved in fuel cells?

Let's say, in the past, we used to have to a fuel cell business. Remember from what is it, 15 10, 15 years ago? It was too small to survive. I think it was also pretty early in the time of fuel cells. I think the fuel cell technology has evolved quite well. I will not rule it out completely. I think it's definitely an area we should keep an eye on. And let's see.

Good. The other question I had was just, I mean, as you know, in the last couple of quarters, there was a great focus on this euro per megawatt number in energy. And I think you've explained it a few times that there is a big influence from scope, right? I mean when you look at the orders that you had in Q2, is there any reason to assume a much different scope in Q2 from Q1, so that we are prepared for another fluctuation here or?

Okay, let's say, difficult to say because I'm not 100% having in mind clear, let's say, what's the scope of every order that we take I would say, in general, the mix is pretty equal. But it makes a big difference, let's say, how much axillary equipment is freight included or not included. If you need a 300-megawatt power plant whether we sell it with, let's say, large bore engines or medium bore engines, that's already, let's say, what is it 10%, 15% price difference. So there is lots of, let's say, different elements that play at all in Europe. But I would say, is it radically changing because of one factor? No, I don't think so.

But it can still be volatile, I assume, right?

I think it will remain volatile, that I'm pretty sure.

But you're not going to change the definition of it just to look at maybe the core per megawatt, so that we have really a like-for-like number in the future?

No, that's not what we aim now.

Would be too detailed, I guess, now?

Yes, also very difficult to do.

The next question comes from Panu Laitinmäki.

Yes. I just wanted to clarify on the reporting of the NC storage business. So will it be in discontinued operations in the Q2 report already?

Most likely, yes.

And then next question comes from Tom Skogman.

Yes. I just noticed that Hakan, you said you get repeat orders in data centers. So I mean, its views that customers are happy, of course, but I just wonder about customer concentration. I mean, could you open up a bit about this as you have very large single orders. And if some of them go to the same customers, it would be relevant to know about that kind of a risk, I guess.

No, I will not open that up, sorry.

But it's not in any way. I mean is it -- you have summarized it 2 or 3 orders from the same customer?

I will not tell.

Okay. And then the deliveries in the second quarter. I mean, do you want to say anything? I mean, you have a great order backlog, but we know that deliveries sales is booked at deliveries, but you still had a very big jump in the Energy Equipment sales in the first quarter, of course. But is there anything we should take into account modeling the second quarter sales estimates?

No, I think, let's say, looking at the volumes -- sales volumes in particular, I think the majority of our sales volumes are actually in the second half of the year. I think Q2 is a good quarter. I would say it's a bad quarter, but I think the majority of sales will happen in the second half of the year when you think about, let's say, energy equipment.

Next question comes from Johan Eliason.

Just coming back to your comment about R&D. I can't remember how it is in your case. Do you capitalize R&D or you just expense it directly?

No, hardly capitalized yes. If we do a new engine platform development and also the expanding it to the different cylinder configurations, that's typically capitalized R&D.

And the next question comes from Antti Kansanen.

I wanted to come back to the potential Brazilian orders and what you mentioned that they should be placing them very shortly if they want to keep kind of the delivery time. So how does this work? I would assume that when they are quoting kind of for the auction, they already have some type of a pricing agreement with you in order to kind of calculate how much the cost is and some type of a financing agreement as well to be included in the auction. So what is then driving this kind of a potential delays in orders?

It's a bit different than that. Let's say, we have even, let's say, parties that have offered with vessel equipment that we were not even aware that they offered with vital equipment. So yes, it varies a lot by customer. And yes, we have typically made courts. And we have also with some -- we have even made commitments, if you make a decision up to, let's say, this moment. But there are also clearly customers quoting with metal equipment that they have not even contact with us. So very little contact with us. So it's a mixed bag of things. But again, let's say, as I said earlier, if you have a commitment from Wärtsilä, okay, you can have these slots, but you need to decide by this time. We will honor that. if you don't decide by that time, the slot is gone. And for many, this lot has gone.

And kind of the remaining opportunities are these largely parties that you have interacted with or largely parties that?

Yes. It's, of course, always better to, let's say, sit down with me and discuss and be open about, let's say, what you need, when you need it and what you want. That, of course, gives you the best possibility to get engines. But again, let's say, it's with a fixed time. So if you don't decide, we will not keep your slots available for you forever.

Okay. Fair enough. Then I had a kind of a detailed follow-up on the R&D write-down related to the storage JV. And I mean, I would assume that that's quite a sizable portion of the 40 to 50 [indiscernible] that you're guiding for the full year wouldn't 100% of that be for [indiscernible]. I mean is it Wärtsilä, who is doing that write-down, R&D capitalization write-down rather than the JV? So could you maybe walk us through how would that kind of play in your reporting?

No, we will likely do that in the joint venture. Why would we do it Wärtsilä.

Okay. So you will move kind of the balance sheet into the joint venture? The joint venture will do it? Okay.

We transfer the net asset value to the joint venture, and then they will take the necessary actions. These actions, okay, they are largely worked out, but let's say, all the details on need to be tuned. And so that's also why we give a range.

And in no cases, this will be visible on your adjusted EBIT that you report, it will be either discontinued or discontinued or?

Yes. Discontinued or share of results in associated companies, correct.

Okay. And is there anything you want to kind of give more clarity on the cash impacts of the JV? I mean you will move net asset assets into it, which will have some advanced payments. Is there any money moving to the other direction?

Which is, which is absolutely correct. And let's say that's the cash outflow that we will have. And I think in considering, let's say, the size of advantage that we have received in this business is more cash going out and coming in. because, let's say, when we say, okay, the P&L impact at closing is more or less 0. So you get compensated for the net asset value that you transfer, but the net added value includes, let's say, the cash from advances. And that's a quite sizable amount, actually.

So the impact on group net cash position will be minor negative?

Altogether, it will be negative, yes.

And the next question comes from John Kim.

Arjen, was wondering if you could help us think through factory loads as you expand capacity. I'm trying to square the circle here. You have a number of customers who are quite eager to get delivery as soon as possible. there's probably an optimal level of load in the factory itself, but there's also, I think, conceptually the option of paying over time to deliver potentially at a rate above that optimal level? Just trying to think how you and the management team are thinking through this and how that might kind of sequence over the next 2 or 3 years. Is there a period where you're going to have extraordinarily high load because of what appears to be a fairly super normal demand? Or are you looking to load balance that and provide more of a consistent cadence on load and profit?

I think at the moment, and I think that will still stay for quite some time. We are running the factory at maximum capacity. Utilization is -- you can basically say 100%. Of course, there is a little bit of fluctuation. It's never flat, let's say, 100%. But in general, I would say it's 100%. And as long as, I would say, that given the fact that, okay, we have extra capacity coming available in 2028. Most of 2028 slots have already been either sold or committed we are pretty confident that, let's say, at least until the end of '28, and if not longer, I think it will even be longer. We are on the factory at 100% capacity. It will not.

Understood. And how could we think about need to hire in the back of this? So we talked about nameplate capacity, but can you help us?

Hiring new people for this extra capacity. I don't think we need a lot, actually, to be honest. It's a we have a factory that is capable of running 100%. So we don't need a lot of, let's say, new resources where we do need the resources in the future is, of course, when all these installations get installed and you need to do operational maintenance, you run the power plant on behalf of customers. So many places where we have sold, let's say, power plants, we are hiring people to make sure that we can run the power plant once it's commissioned. Thank you.

And it seems that we don't have any more questions, and I haven't received any questions to e-mail. So I think it's time to wrap up. Our half year financial report will be published on July 21. So hopefully, we will meet in connection with that. Many thanks, Arjen, and thanks for all the participants for a very lively discussion.

Thank you.