Wartsila Corp (WRTBF) reported an 18% increase in net sales, indicating strong business performance.
The company achieved a 41% increase in comparable operating results, showcasing improved profitability.
Service order intake rose by 4%, and service net sales increased by 6%, reflecting growth in the service segment.
Wartsila Corp (WRTBF) maintained a strong book-to-bill ratio above 1 for the 14th consecutive quarter, indicating robust demand.
The company reported strong cash flow from operating activities, close to EUR 300 million, enhancing financial stability.
Negative Points
Equipment order intake decreased by 2%, primarily due to timing issues with energy storage orders.
The marine segment experienced a 100 basis point decline in margins quarter-on-quarter, raising concerns about profitability.
Rising protectionism and geopolitical uncertainties are impacting market conditions and decision-making speed.
The storage business faced a low order intake in Q3, although improvements are expected in Q4.
Local content requirements and import tariffs in the US pose challenges for the energy storage business.
Q & A Highlights
Q: Can you provide more details on the storage business, particularly regarding the order intake and backlog? A: Hakan Agnevall, CEO, explained that the low order intake for Q3 is due to the nature of the project business, where contracts can slide from one quarter to another. However, they are confident about Q4 due to a strong pipeline and underlying demand. The storage business is developing positively, with improved profitability due to a focused strategy on key markets like the US, Australia, and the UK.
Q: Has there been any underlying pressure on storage pricing due to competition, aside from the impact of lithium prices? A: Hakan Agnevall noted that while lithium prices have significantly decreased, this does not affect their margins as they have locked in prices for their backlog. The competition is increasing, but Wartsila's focused strategy on specific customer segments that value their core propositions, such as execution skills and thermal stability, helps maintain their competitive edge.
Q: What is the outlook for Marine margins, given the recent sequential decline? A: Arjen Berends, CFO, explained that the decline is due to a mix of projects within equipment and service segments, not just between equipment and services. They anticipate a similar trend in Q4, with margins not reaching the all-time highs typically seen in Q4. The focus remains on reaching financial targets.
Q: How is the local content regulation in the US affecting your strategy for the North American market, especially for storage and data centers? A: Hakan Agnevall stated that while local content requirements will increase, they are working on a diversified supply chain, including US suppliers. This does not currently impact their order intake. For data centers, there is no immediate impact from localization requirements, and they see strong interest as data centers evolve into a baseload industry.
Q: Can you comment on the strategic review of the storage business and the sustainability of high single-digit margins? A: Hakan Agnevall mentioned that the strategic review is ongoing, focusing on creating value for customers and shareholders. They see significant growth opportunities and a journey towards improved profit margins. The current high single-digit margins are seen as sustainable, driven by disciplined order intake and solid project execution.
Q: What are the lead times for Marine engines, and how does shipyard capacity affect delivery schedules? A: Arjen Berends explained that while production capacity is not a bottleneck, shipyard capacity is limited, affecting delivery schedules. Engine orders are typically contracted 12 to 18 months in advance, aligning with the overall vessel build schedule.
Q: How are you addressing the impact of local content requirements and import duties on the storage business in the US? A: Hakan Agnevall noted that they are working on a diversified supply chain to address these requirements, which will increase in 2026. This is an ongoing process and does not currently impact their order intake.
Q: What is the future outlook for scrubbers, particularly in relation to carbon capture? A: Hakan Agnevall highlighted that they are focusing on scrubber 2.0, which includes carbon capture capabilities. They are investing in this technology and expect a commercial launch next year. The ecosystem for carbon capture is still evolving, and they are positioning themselves to be part of this development.