WRTBY (WRTBY) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to this news conference Wärtsilä Q3 results. My name is Hanna-Maria Heikkinen, and I am in charge of investor relations. Today, our CEO, Håkan Agnevall, will go through the group highlights and then followed by the business performance. After that, our CFO, Arjen Berends, will continue with the key financials. After the presentation, there is a possibility to ask questions. You may have recognized that we also announced our new financial targets this morning, but we will kindly ask you to leave the questions regarding financial targets to our Capital Markets Day, which will take place next week. All of you are warmly welcome to our Capital Markets Day. But now, starting with results. Please, Håkan. Håkan Agnevall: Thank you, Hanna-Maria, and welcome, everybody. I think we have had a really strong Q3, both from an order intake perspective, but also on our journey to continued improved profitability. So, continued increasing profitability and continued strong order intake momentum. Order intake increased by 33% to EUR 2.4 billion. Actually, it is up 41% organically. Service order intake increased by 11% to EUR 950 million. And we are now at an all-time high order book of close to EUR 9.9 billion. Service continue the rolling book-to-bill above one, so now we are at 1.1. Net sales increased by 7% to EUR 1.5 billion. And we continue to improve our profitability. Comparable operating results increased by 19% to EUR 212 million, and that is 14.2% of net sales. Operating results increased by 4% to EUR 222 million, which corresponds to 14.9% of sales. Cash flow, we continue to have a strong cash flow from operating activities amounting to EUR 583 million. And on our ROCE journey, return on capital employed, we are now at 94%. So let us look a little bit deeper into the numbers. If we start with Q3, we see order intake is up 33% to EUR 2.4 billion. You can see that service order intake is up with 11% to EUR 950 million, and equipment up 53% to EUR 1.4 billion. The increasing order intake is primarily driven by energy. We now stand at an order book at EUR 9.9 billion. Net sales up 7% in the quarter from EUR 1.4 billion-EUR 1.5 billion. Services is a bit flat, EUR 850 million-EUR 802 million, so -2%, but I would say flat. Equipment up 19% from EUR 580 million to close to EUR 700 million. Book-to-bill continuously improving from 1.27-1.59. We are translating the sales to increased profitability. Comparable operating result up 19% from EUR 179 million-EUR 212 million, and that corresponds to 14.2% of net sales, improving from 12.8%. On the operating results, up also 4% to EUR 222 million, which is 14.9% on net sales. If we just quickly look at some of the key numbers for the full year, so to say, order intake is up 26% from EUR 5.6 billion-EUR 7.3 billion. Net sales is up 2%. Organically, it is actually up 9%, so from EUR 4.4 billion-EUR 4.5 billion. Then if we look at the comparable operating results, up 12% from EUR 558 million-EUR 623 million, 13.9%, also very close to the operating results, which lands at 13.8%. So good development, I would say, in all key figures. If we look quickly on marine and energy, the market. On the marine side, the market sentiment remains supportive of our key segments. Shipping has remained resilient despite the macroeconomic headwinds caused by the Middle East conflict. The number of vessels ordered increased to 2,500, up from 1,200 last year. The Middle East conflict has certainly lengthened the shipping routes, continues to do so, supporting demand and improving earnings. The market sentiment remains supportive and ordering appetite continue to be on a good level in Wärtsilä's key segments. Contracting in these segments is expecting to remain well above the 10-year average levels. The service market remained active, and overall vessel utilization stayed at a good level. Increased fuel prices reduced short-term service spending in some segments, while higher shipping rates led to postponements of some service activities. You will see that on our marine service order intake, it's impacting that. In January to September, 446 orders, well, for new alternative fuel-capable ships, which is about 30% of the capacity of the contracted vessel. That also reflects the mix of the vessels being ordered. On the energy side, clearly increased demand drives energy transition investments. We see a structural shift here in general electricity demand, and that translates into a very strong market for Wärtsilä. Electricity demand grows, and future projections have increased substantially, creating market opportunities for equipment providers. Two key themes have stood out in the recent macroeconomic development: load growth and increased tariff-related uncertainty. The diverse set of load growth drivers includes electrification of industry, transportation, cooling, and heating, as well as data center. We see it as a structural growth. It's not only data centers that are driving this growth. In engine power plants, market demand for equipment has been strong. The base load segment remains a consistent source of demand for thermal power, while the drivers for balancing demand are also expected to continue to develop favorably. Renewable energy investments continue to shape energy markets, with investments outside of China at record levels in the first half of the year of 2026. We, as Wärtsilä, we continue to see a strong demand from data centers globally with a dynamic pipeline of opportunities. The resulting growth in the installed base also support, as we talked about before, a significant lifecycle services business that will extend well beyond 2030. So looking at the numbers in graphs, the organic order intake increased by 41%, order intake increased by 33, marine order intake remained stable, whereas energy order intake increased by 121%. Very strong. Equipment order intake increased by 53%, and the organic equipment order intake was up 66%. Service order intake increased by 11%, and the organic service order intake growth was 13%. We have a strong order book development. Rolling book-to-bill continues to be well above one, and the order book is at an all-time high, driven a lot by energy, and it's the same theme as we talked about before. The order book is building further and further out in the future, and we have broken it down here on marine and energy, where the existing order book will generate sales that are distributed further and further in the future. You certainly see here to the right side for energy, later deliveries is really building up. This, we will come back to at the Capital Markets Day. You also see on marine, there is a buildup of later deliveries. Organic net sales increased by 16%. Net sales increased by 7%. Marine net sales increased by 5%. Energy net sales increased by 52%. Equipment was up with 19%. On the organic equipment, net sales growth was 39%. Service net sales remained stable. Also, the organic service net sale remained stable. On the profitability side, we continue our journey of improving our profitability. Net sales increased, as we talked about before, by 7%, comparable operating results increased by 19%, and comparable operating margin 12-month rolling are now at 13.8%, up from 12.2%. On technology and partnerships, some interesting orders and cooperations in the latest quarter. First of all, Australia. We will deliver Australia's largest-ever engine power plant to support the country's energy transition. As you might know, Australia is on a journey of reducing coal power and building up renewables. They have invested a lot in battery storage. We have been there with our battery storage business, but they have also realized that you need this mix that Wärtsilä has been talking about for many years. You need both batteries and reciprocating engines to provide the balancing power. We will see a market breakthrough in Australia here going forward for balancing power. Maybe also for data centers, but certainly for balancing power. We are talking about flexible and highly efficient 46TS engines that will be supplied to Australia's largest-ever reciprocating engine power plant. It's 300 MW that will provide critical grid balancing and system security in Australia. The fast-starting, flexible capacity provided by our engines will enable greater integration of renewables into the power system. It's really about balancing power, and we booked the order in the third quarter. Now, in different parts of the world, we received an order to integrate and optimize Aruba's generating assets for reliable and sustainable energy. This is, you could say, a microgrid application where we have signed an agreement with WEB Aruba, the Caribbean island's energy provider, to advance decarbonized operations through the integration, optimization, and control of Aruba's power-generating assets. This comprehensive solution includes engineering, procurement, and construction work, as well as service agreements. We booked this order in the third quarter. The final taking over is scheduled in the second quarter of 2028. Now, looking a little bit closer on Marine and then Energy and Development. On the Marine side, comparable operating results increased. Equipment order intake declined due to periodization of orders. You know there is lumpiness both in Energy and Marine, and we continue to see good growth opportunities, but order intake was rather flat due to the periodization of orders. While the service order intake remained stable. You see the order intake -2%, net sales continue to grow at 5%. We see the comparable operating results up to 13%. On the positive side, we certainly see better operating leverage, higher equipment sales, and better joint venture results also. Now, what is dragging us down, but I think for very good reasons, is we continue to increase our R&D efforts to continue to be the technology leader in the industry. If we look at the Marine service book-to-bill, it continues to be above one, and our Marine service order book increased by 10% compared to the third quarter in 2025. If we see the last three years, we have had 6% CAGR, and we will see continued growth going forward. You also see to the right, the graphs of the different disciplines in services. Here we can see the big swings. We see the curve that has been deep in the red, and that's the retrofits and upgrades. It really comes back now. We talked about it's lumpy. Many of these retrofit contracts are rather big, and when they come or not come, they have a big impact. On the agreements lately, we have been down a bit. On the Energy side, looking closer there, order intake, net sales, comparable operating results all increased, and the equipment order intake increased, supported by strong demand, both from data centers and balancing applications. Order intake up 121%, net sales up 52%, and you can also see the comparable operating result at 16%. Here we have same positive driver, better operating leverage, higher equipment sale. I would like to highlight this one, solid project execution. We have an Energy today that is really world-class in executing. Solid project execution means basically we deliver our projects at lower cost than we had budgeted for, and then we can improve our profitability. Really good teamwork by the Energy business. Overall, Energy service book-to-bill continues to be above one, and Energy service order book increased by 28% compared to the third quarter. That is, as you can see to the right, very much driven by retrofits and upgrades. Here we have had a couple of very big orders coming in the third quarter. You could say that those are type of one-timers. We also say it comes back making the point that the retrofit and upgrade business, it can swing quite a lot. If we look to the left on the journey over three years, we have had 4% CAGR in the Energy Service business. The bridge of the comparable operating result from Q3 last year to Q3 now, we see we are going from 12.8%-14.2%. We see Marine is down a little bit from 12.4%-12.1%. Energy, big step up from 15.9%-17.5% margins. Then we have a bit of still an impact of portfolio business, but that's the last year. We have now closed portfolio business, divested 11 business units. So comparable operating results increased by 19%. Arjen, over to you on the key financials.

Yes. Thank you, Håkan. Very happy to present the other key financials. If we start with operating cash flow, after a very strong, let's say Q2, very close to EUR 500 million. Now in the third quarter, we realized EUR 583 million. As far as we could trace it back, this is an all-time high Q3 for Wärtsilä. Good support from the profitability, but also very, let's say, good development in the working capital, as you can see also here on this slide. In the working capital, I would say the main two positive ones are, let's say, the payments from the customers, basically, so the advances as well as the receivables. On the negative side, let's say inventories went up, but that is logical. We are building, let's say, our deliveries for the future, so that takes money and investment and time to build. Looking at the return on capital employed, ROCE, very strong improvement. We had just over 70% at the end of last quarter. Now it is 94.1. Also solvency clearly improving, let us say from 38.2-39.4 now. As you can notice, we have two lines for earnings per share at the bottom here. One is, let us say the total, you could say, that is the first line, and the other one is the continued operation. The delta is basically the energy storage joint venture named Valo, that is now booked as discontinued operation, and that has a EUR 0.07 impact, as you can see on the earnings per share. If we look at the trends, let us say both cash flow as well as working capital trends move and continue to move basically in the right direction. Working capital at the end of, let us say, Q3 ended at around at EUR 1.6 billion negative. Advances received was about EUR 2 billion. So if you exclude that, you end up EUR +400 million-ish about on that level. So at working capital, excluding advances, a lot of good efforts are continuously being done. Over the past three years, that level has decreased. So working capital, excluding advances, has decreased EUR 300 million actually, while sales went up EUR 1.3 billion. So really good developments also in other areas than just the advances. Not wanting to make the comment that advances are bad, they are very good, and we should continue that. Looking at the, let us say, the five-year average working capital to net sales ratio, 5.2% right now. So clearly, let us say on a negative level, and we also anticipate working capital to stay negative for years to come. On the financial targets, and this is probably the last time we will show this, as you have noticed and also commented by Håkan, we have launched our new financial targets this morning as well. But looking at this graph then for the last time, first of all, on the left side, let us say organic growth, 14% year-on-year, for Marine and Energy combined, 6% is actually Marine and 28% is actually Energy. The profitability 14.2% now on a rolling 12-month basis, which is up, let us say, from 14.0% actually in Q2. Group gearing continues to be deep, low negative, so not much to add to that. Also for the dividend, I would say also nothing new to that as well because that is already for a long time above, let us say the financial target of 50% of EPS. With these words, I hand it back to you, Håkan, on the outlook. Håkan Agnevall: Thank you, Arjen. Cash is strong. If we look at the outlook, this will also be the last time we communicate outlook in this format because as you've also seen in our press release this morning, we are changing our guidance principle as we go into next year. For the last time, we are looking at the demand environment for the coming 12 months, and both in Marine and Energy, we regard them to be similar to that of their comparison period, basically 12 months before. We also highlight that following the high order intake orders, the outlook reflects a continued strong demand environment, especially on the Energy side. Okay, so that was a quick summary.

Thank you, Håkan, and thank you, Arjen, and now we are ready for the Q&A. As a gentle reminder, this is about Q3 results, and I kindly ask all of you to join our Capital Markets Day next week to discuss our new financial targets. Handing over to the operator, please.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Hi. Good morning. Thank you for taking my questions. I have two quick questions. The first one, just wondering on Marine services, on the slight delays that you've mentioned. If you just see the comeback of that kind of concentrated still into this year, if it's more spread to next year, how much can you help with any quantification on how much is being held up on that pattern? The second question, maybe I've missed this, sorry if that was the case, but I think last quarter you commented on the gross margin backlog, evolution in the backlog of the 500 basis points over the last 12 months. Just wondering how Q3 has contributed to that trend, if you could also help quantify there. Thank you.

Shall I answer first, or? Håkan Agnevall: Yeah.

On the service net sales, I would say that's not a real concern. The key thing is the book-to-bill ratio stays above one. If you look year to date on service net sales, both for Energy and Marine, actually we saw in the book-to-bill graphs that book-to-bill last year was very down on the retrofits or the service projects. Of course that translates into sales typically half a year to a year later, and that's what we are seeing now. The slowdown is really in the project services net sales. But as you could see from the graph in particular now for Energy, the big swing up. That will come to sales probably half a year to a year from now. That's the big swinging item. Other revenue streams are pretty okay, actually. Håkan Agnevall: On the 500 basis point on the new build order book for Energy, we will not come back and guide every time how it is going. But I can say we continue to have good price realization and you've seen the new financial targets. We can talk more about them in a week's time. I think that also indicates the direction we are going in.

Thank you.

The next question comes from Akash Gupta from JPMorgan. Please go ahead.

Yes. Hi, good morning. I got two as well. My first one is on Energy and particularly the outlook. I think you confirmed energy and demand environment to be similar to last 12 months, given the strong demand we have seen. But I'm wondering if you can talk about how shall we translate this demand environment into Wärtsilä orders, because when I look at your last four quarter orders, we have EUR 4.8 billion in orders. Let's say if that EUR 4.8 billion translate into revenue in few years down the line, we are at your medium-term target for the segment. My question is that we have seen big increase in lead time. Is it realistic for us to see this EUR 4.8 billion order intake in the next 12 months? Or maybe you could have some demand constraint, because of that, despite favorable environment, just because of your capacity constraint, might see lower order intake. Any thoughts on that one? That first one. Håkan Agnevall: Yeah. I think it is correctly spotted. We are building our order backlog that stretches further and further out in time, and we have sold forward now quite a lot during this year. Of course, there is always a balance how far you can sell out in the future. Then in parallel, we are ramping up our capacity, but we have basically sold out. If you are a new customer that comes to Wärtsilä today and asking for when we can deliver, we are into the 2030s. There is clearly a balance of how far we can stretch out the time and also the capacity that we have available.

Thank you. My second one is on your slide number eight on your energy backlog. When I look at energy backlog, I think at this point you have more than EUR 600 million higher backlog for 2027, what you had at this stage for 2026. Again, I think there is a bit of growth that we have in consensus for next year, and when we look at your production output, I think you are already at 100% in STH this year, and the next production growth will come in 2028. I am wondering if you can talk about what is helping this higher revenues, or higher deliveries in 2027. Is it just that some of the engines that are produced in 2026 might be recognized in revenues in 2027 when you deliver it or maybe something else? Any commentary on growth in backlog, despite production volumes will be likely flattish in 2027 versus 2026?

I think there are several reasons, not one reason, I would say. First of all, I want to mention scope. As we have been talking a lot about euro per kilowatt in the past, scope is a really big difference. It is not just engines that we do. Of course, we do engines, but if we deliver additional scope with the engines, that is also additional sales, and that is also in part of our order book. Secondly, there is on the EPC part, there is percentage of completion, so that will vary by year. It depends how the project progresses. Then it is always linked to delivery. On your latest comment, when we deliver the engines, that is when we take the sales. But let's say if other equipment comes later, then let's say if that goes into 2028 or actually it can also be the other way around, that certain equipment which is not engines is delivered in 2027 and the engines only come in January, for example. So this depends a bit, but it's those three reasons mainly.

Thank you. And maybe last, a housekeeping question. I know Hanna-Maria told us not to ask about mid-term, but maybe on this IFRS 18 headwind, can you quantify how big or small it can be? Because I think that has been one of the key differences on how people are interpreting this new medium-term target. Thank you.

It's of course, an estimate, but both for Energy and Marine, if you look the last 12 months, it's an estimate now of about 0.6, 0.7 percentage points. Håkan Agnevall: On EBIT.

On EBIT. Yeah. Håkan Agnevall: We will talk more about that in the CMD.

Correct. Restatement, sorry to add to that.

The next question comes from Uma Samlin from Bank of America. Please go ahead.

Hi. Good morning, everyone. Thank you very much for taking my question. First from me is a follow-up from the previous question. I guess you mentioned that the backlog is now stretching into the 2030s. Does that mean that your 2029 is now fully booked? Also, I guess given the very tight energy market, would you potentially consider further capacity expansion on your current footprint? Håkan Agnevall: When we have something in our order backlog, there are a number of prerequisites that needs to be fulfilled. We need to have a signed contract, there needs to be down payment, there needs to be notice to proceeds. What is in the backlog, those are firm orders. For 2029, we are in advanced stages of closing, but it's not recognized into our order backlog. That's why we like to talk about if a new customer comes and what's the best delivery date you can offer me, then it's in the 2030s.

Thank you very much. In terms of capacity expansion, is there any sort of indication for you on the market that you would consider further capacity expansion? Håkan Agnevall: We have taken several, I would say, major steps. We have a first step coming in beginning of 2028 and second step of beginning of 2029. But we will have this stepwise approach also going forward. We will continuously reassess the market situation, and we could expand even further. But we have to come back to that if and when we take those decisions.

Critical is the supply chain here. Håkan Agnevall: Absolutely. To ramp up now, it is of course our facility in Vaasa, and that is one element. But to ramp up a robust supply chain, that is also critical in this equation, so to say.

That is super helpful. Thank you very much. My second question is on the life cycle service opportunities. Would you be able to give us some updates on that, especially on the energy side? I remember you had previously mentioned that we could start seeing this by the end of the year. Is that still what you are expecting? When should we expect those service agreements to roll in terms of orders?

Yeah, let us say that is still the expectation. So the answer is a simple yes. Let us say we expect the first orders to be taken still within this year, but they are not in yet. Håkan Agnevall: No.

That is super clear. Thank you very much. That is all for me.

The next question comes from Antti Kansanen from SEB. Please go ahead. The next question comes from Vlad Sergievskiy from Barclays. Please go ahead.

Yes, good morning. Thank you very much for taking my two questions. First one, could I please ask a follow-up on energy orders? You booked 4.7 GW of energy orders over the past 12 months, predominantly driven by data center-related projects. Did I understand you correctly that you might not be able to book another 5 GW or so over the next 12 months due to the extended lead time? That is the first one. Håkan Agnevall: Yeah, I think that is clearly so.

Yeah Håkan Agnevall: There is a limitation on how far in the future that the market is transacting, so to say.

Yeah. Håkan Agnevall: There is a balance. We are, of course, ramping up our capacity, but there is a balance on how much new order intake that we can take in. Then I would say predominantly, we have a lot of balancing order intake as well. I just want to adjust that. It is a combination of both data centers and balancing power.

Yeah. Håkan Agnevall: This year's order intake.

It is all a matter of acceptance of the customer. Do they accept long delivery times or not? That is the key question.

Absolutely. Related to that question, please. In light of that, how competitive do you think your lead times right now are, given your comments that you are not able to deliver before 2030 for new customers? There are probably about 10 different power gen engine, smaller turbine suppliers who actually can deliver significantly earlier than that. If your lead time has become less competitive because of your success and bookings, what could you, and what do you plan to do about that? Håkan Agnevall: First of all, I would say that the current start is a proof point that we are very competitive because people are willing to wait. If you compare them, you're saying that somebody else can deliver earlier, and I'm sure there are some that can. But people are still contracting with us then furthering. Why do they do that? Because of energy efficiency, fuel, the flexibility of our assets, no water consumption, et cetera. That for me, is also my long-term reflection. We have a very competitive technology. When we talk about the sweet spot of these type of power plants, we are more fuel efficient than the high speeds, we are more fuel efficient than the industrial gas turbines and the aeroderivatives. We don't require any water. We don't derate at hot temperature. We don't derate at high altitude. You know this, Vlad. On top of that, in the medium speed segment, we have the best fuel consumption, we have the strongest service network, and we have a team that know how to deliver projects on time and with the right quality. Therefore, I am fairly confident also long-term when the market rebalance, because it's about being competitive.

Correct, and deliver on execution.

Thanks very much, and the duration of your backlog is a proof point to that.

The next question comes from Sven Weier from UBS. Please go ahead.

Yeah, good morning. Two questions from my side, please. First of all, on the Marine orders, you talked about phasing. I was just wondering in terms of where you are in terms of taking container vessel orders. Obviously, this year we've seen a boom in feeder container vessels, which I guess should be favorable for you. Have you already booked those orders or what kind of delay are you seeing there? That's the first question.

Now we clearly see, let's say that feeder container bookings. Yes, we have booked those, and we have also still some in the pipeline. So the answer is yes. Håkan Agnevall: What we should acknowledge on the container side, for us, it is mostly about auxiliary engines.

Correct. Håkan Agnevall: This we do through our JVs.

Is that also for the feeder vessels, the smaller ones, is also just auxiliaries? Håkan Agnevall: Yeah. Primarily, yes. There is also potential for hybrid electric in the future, but that is further. That is an innovation in the segment. So there is so far, not yet the commercial breakthrough. So for now it is primarily auxiliaries, yes.

But not all is going through the joint venture, so it is also through our books. Depends on the fuel type.

A second question I had is just a technical question on chart number seven, and sorry if you commented on this already, but I was just wondering, you say the order book is adjusted to exclude energy storage, but that does not hold true for the previous years, right? It is just for the-

No

-as of the end.

It has been consistently corrected. So also-

I do not know if my math is right. If I add up the Energy and Marine bars for the previous years, I get to a lower number than for the group.

Should not be.

But to me it seems storage is still in there, but maybe I am wrong.

Let us check that and I think Investor Relations can come back to you.

I can get back to you.

To my knowledge, it has been corrected.

Okay. Thank you.

The next question comes from Max Yates from Morgan Stanley. Please go ahead.

Hi. Could I ask a couple of questions? The first one is just around your data center customer base, and obviously the market is taking, I think, quite a different view to the availability of financing for hyperscalers versus neoclouds, versus co-location companies. I was wondering if you could give us a feel, simplistically, how much of your data center orders by percentage are going to hyperscaler customers versus some of the more kind of neoclouds like CoreWeave and Nebius. If you could give us a feel for that, please. That's my first question. Håkan Agnevall: I would say that as far as I know, everything is going to hyperscalers. I think if you look at our customer base, and sorry for not being able to talk publicly about it, because we talked about that before. There is a lot of secrecy in the industry and people don't want to know what the different players or competitors are doing in the industry. That's why I can't give you the names. But we have had the privilege to work with established players that have been in the data center industry for decades and this is clearly where we have been focusing.

Okay. Just the follow-up question is obviously seeing the 17.5% margins, very good year-over-year increase in Energy. To what extent should we view that as a kind of jumping off point into Q4 and in 2027, now that you will start delivering more of these data center orders, which you previously commented about are priced, or was there anything in that Energy margin we can't see that maybe flattered it, and we should think about more kind of the 16% year to date margin as the jumping off point? Any framing there would be helpful. Håkan Agnevall: I think the comment I can give, we are on a journey of continuously improving profitability.

Okay. Then just the final, very quick one is just obviously you announced the new targets today, but you didn't announce anything around buybacks. I think the market kind of honestly largely expects you to do a buyback. Should we assume that the fact that there isn't one means there isn't one coming? Or is this something that can still potentially come with the CMD or the full year results?

I would park that question to next week, if okay with you, Max.

Okay, well then if you didn't answer that, I'll try a different one. Your JV in Japan, well, sorry, not your JV, but your agreement that you've announced, trying to develop data centers in Asia. When would we expect that to start translating into new orders? The other part of that question is, does it give you an opportunity to also move into China? Because that probably outside of the U.S. is going to be the fastest growing data center market. To what extent do you see the opportunity to access China? Or is it primarily just to Japan for Japan opportunity and partnership? Håkan Agnevall: The partnership with Tokyo Gas, which I think you're referring to, is primarily to Japan. But it can also be to Europe and U.S., depending on Tokyo Gas. They have a fairly broad portfolio. I don't think it will take us into China. What's the timeframe? I will not go into those details because these are between the two parties, so to say.

Okay. Thank you very much.

The next question comes from Panu Laitinmäki from Danske Bank. Please go ahead. Panu Laitinmäki: Thank you. Actually, all my Q3 related questions were already asked, so I will try on the targets. Can you specify what is the timeframe for midterm in your new targets? Håkan Agnevall: Those are midterm targets, and we have loosely defined it as somewhere between three to five years. Panu Laitinmäki: Okay. That is clear. Thank you.

The next question comes from Vivek Midha from Citi. Please go ahead.

Thank you very much, everyone. Good morning. Hope you can hear me well. I have two follow-ups, if I may. The first question is around the exceptionally large retrofit orders in Energy you have highlighted for the quarter. Could you maybe give us some indication as to what was driving that? Do you see scope for similar such orders? I noticed you had the gas conversion project in Brazil. Was that the main one? Were there other ones and so on? Thank you.

I do not think we can be too specific. Let us say we have been working on these orders for a very long time, and coincidentally, actually, they came all, let us say, in this third quarter. I would say that is exceptional. Normally, they distribute more evenly, you would say. But now it came just coincidentally all in one quarter. There is nothing more to it.

Understood. That is clear. Thank you. My second follow-up, I am not sure if you will be able to help, but just to understand, you booked the process EPC order for two Brazilian contracts in the quarter, having previously booked the equipment scope. In order for us to be able to maybe compare order values and volumes on a like-to-like basis versus prior quarters, can you give us any directional rough indication as to the value of that EPC order? Thank you.

No, we cannot. No.

Understood. Thank you. Håkan Agnevall: But it is also another, sorry for coming back on this, which makes it challenging, of course, we talked about it before, the euro per kilowatt. It is very hard because, of course, and why we cannot disclose it is because we have agreements with the customer.

Correct. Håkan Agnevall: But so we book the equipment in Q2, and we are booking the EPC part in Q3. So it makes the whole. Yeah, we talked about it before.

And in the euro per kilowatt calculation, the megawatts is when we deliver the engines, huh? Håkan Agnevall: Yeah.

Yeah. So it goes off.

Thank you very much.

The next question comes from Tom Skogman from DNB Carnegie. Please go ahead.

Yes, hello. I would like to get some kind of a guidance just for discontinued operations the next quarter so we get it right in our models.

Let's say for the next quarter, since the joint venture is live 1st of October, let's say it will move from discontinued operation as it has been, let's say, from Q1 to Q3. It moves to share of result in associated companies and joint ventures. The estimate result impact of that period of time is, as I mentioned, actually in the pre-silent call, EUR 10 million-EUR 20 million negative.

Okay. I wonder about strategically, you have been dominating the Marine industry with, let's say, close to a 50% market share and in power plants even higher. We see that some competitors are investing very aggressively, even more than you have decided so far. I just wonder how important is it for Wärtsilä to kind of remain dominant in your industry, even if that means that you need to take a bit of risk with expanding or announcing further expansions? Håkan Agnevall: There is more capacity coming in, clearly. We saw HiMSEN's latest move, et cetera. I think it's coming back a little bit to my answer earlier. We are rather confident based on the strength of our technology in terms of fuel efficiency, in terms of a service network, et cetera, and the digital solutions we have. So we can take increased competition. Still, I would assume with good, or not only assume, still with good profitability. When it comes to further opportunities for capacity expansion, as I said, this is something that we are continuously evolving. We have taken two big steps now, 2028 and 2029. Can we take more steps? Yes, we can. But we will come back, if and when we have taken those decisions, so to say.

And market share-

And what-

For both energy-

Yeah, that's

Marine, absolutely. Yeah.

What is your increased R&D spending focusing on right now?

Fuel portfolio mainly. Yep. Expanding the fuel portfolio. Håkan Agnevall: Okay. Yeah. So, if you talk about the fuel portfolio, just reiterating, we have one bucket with the fossil fuels, we have another bucket with the carbon neutral fuels, and we have the third bucket with the zero carbon fuels. We are basically investing in all these three buckets. We are the market leader in methane slip. LNG is really focused on LNG in the marine side now as a big transition fuel, and we are the leader in methane slip, which brings real money to customers operating in Europe or to and through Europe. Because I think the industry is paying some fixed EUR 5 billion, EUR 6 billion under the

ETS Håkan Agnevall: ETS scheme, so to say. If you can bring down methane slip, you can bring down emissions. There is real value, real money for the customers to save. We are a leader in that development.

As an example, Tom, let's say Håkan Agnevall: I'm almost starting CMD now. You will have to come back again. [Helowitz], I'm sure. I hope you will come back in a week's time. We will talk more about that then.

Yeah. Let's park it there.

Thank you.

The next question comes from Nabil Najeeb from Deutsche Bank. Please go ahead.

Hi, good morning. Thanks for taking my question. I have just one, please. I noticed that you have added public opposition and tighter regulations as risks to data center power demand in your report this morning. Just wondering if these are actually affecting the pace of projects that are moving through your pipeline today, or are you just proactively flagging it as a risk, but that has not yet materially affected customer decisions? Just any color you can give on the broader demand picture for data center power would be helpful, please. Håkan Agnevall: Yeah. So if we talk about the order backlog and the orders that we are executing, so far, no delays or impact, clearly. Increasingly, we start to get positive feedback that we are one of the equipment suppliers that delivers on time and executes. We will talk more about that on CMD. Then for the projects and for the order intake, as I said before, we are very happy and grateful to work with established players. They have a positive view on the development going forward. They are operating in geographies and states where they feel confident, et cetera. So no major negative impact so far.

You don't see a softening of the pipeline? Håkan Agnevall: Clearly.

Not. No. Håkan Agnevall: Clearly not. The pipeline is very active.

Yes. Håkan Agnevall: It is very dynamic. Like before, we still have opportunities in various stages of development, but the demand is certainly there. As we talked about, the demand, we are starting to look in 2030 and beyond.

Got it. Thank you very much.

The next question comes from Mikael Doepel from Nordea. Please go ahead.

Thank you. A couple of quick questions. Looking at the orders in Q3 and Energy equipment in particular, it was very strong. Just wondering if there was anything unannounced, bigger orders that you booked in the quarter, either data center related or balancing related. My second question relates to the Marine outlook about the containerships. Could you also talk a bit about your other key segments? What are you seeing there and expectations for orders ahead, given the contract in the past, let us call it 6-12 months?

I think if you look at the Energy order intake, I would say the big two orders, I think, is what Håkan showed on the slide earlier. I would say the data center one and the Australia one. There are, of course, more orders than that. To the extent that we could announce them, they are in the press releases, but more than that, we cannot say. But there are for sure more orders than that, but those are the two big ones. Håkan Agnevall: On the demand side, on the Marine side, I think we still see strong demand from cruise. Cruise right now, of course, with increased fuel prices, they are really putting razor sharp focus on fuel efficiency and operational efficiency, which just actually makes our proposition even more attractive to them. There is still clearly a new build journey. Of course, shipyard capacity is also a bottleneck, so they are contracting also further and further out in the future. But I would say positive on the ferry side. They have been affected a bit by the high energy prices. We had some really strong ferry order intake last year.

Yep. Håkan Agnevall: This year it's a little bit more flat, I would say.

Correct. Håkan Agnevall: On offshore, I think that's really heating up, so to say. FPSOs, FLNGs, et cetera. So we see definitely opportunities there. Container side, I would say surprisingly resilient, I would say.

Yep.

Okay. Thank you.

The next question comes from Adrian Pehl from ODDO BHF. Please go ahead.

Yes. Hi, gentlemen. Actually, I have got two quick ones. Again, on the margin in Energy. Quite strong, actually. I was just wondering if we should take into account that your flexibility to outsource more of your content to your suppliers is a bit higher, or is it a bit of phasing of the ramp-up cost that will come a bit at the later stage? I was really also surprised to see that strong margin. Any kind of explanation would be good. The second one is on the Marine side. I think the question usually comes quite often, but I will phrase it again in terms of the conversion that you see from service orders into revenues going forward. How close are we to the point that vessel owners cannot further postpone the service? It must be nearing at some point. Any clarity on that would be helpful. Thank you. Håkan Agnevall: So if I take the first

Yeah, sure. Håkan Agnevall: Then you can take the second.

Yeah. Håkan Agnevall: When it comes to improving margins on the energy side, as we talked about, first, we talked about we have good price realizations. We have the operational leverage since we are delivering higher volumes than ever before. Then I really would like to underline the project execution excellence that I talked about, delivering the projects at a lower cost and serving the customers in a good way. There you have the profitability drivers, and I think also the targets that we have put, 18% for energy, is also showing where we are going. We will also recycle the language from earlier years. We have a clear path to reach our profitability targets.

I think on that note, also good to mention that, let's say a result in a quarter can vary a lot, and it depends on many different things. Let's say the project margins are always unique. We do not have a standard flat margin for a project. If you then on top of that, let's say, have certain projects in call it complicated areas where you can execute at lower cost, here you have an incidental upside. Yes, the journey is positive. I think we are growing the profitability all the time. It is project margin mix that has a big impact on a single quarter, and then on top the execution as well. Then on the question on how far can customers postpone services, are we reaching the point? It is very difficult to say because there is no generic answer for all the customers. Håkan Agnevall: It is about risk management.

Yeah, I would say so too. Let's say any customer has a different profile, and let's say some run it to the edge, and they might not be very safe if they continue their sailing routes, but in others, they are perfectly fine. You can postpone maintenance for some time, but at some day you need to go in and do the maintenance, otherwise you run your ship down. So difficult to answer the question, sorry for that. It depends on owner, running profiles, and segments as well, I would say. Because typically in the ship segments where there is currently high rates, they want to harvest as long as they can, as much as they can, so they sail on.

All right. Thank you.

Thank you. Then I will continue with couple of questions from the chat. Will you discontinue the outlook for demand environment as you start guiding for revenue?

Simple answer is yes.

Thank you. That was a very clear answer. Then Wärtsilä growth prospects, particularly in Energy business and in the meeting electricity needs of data centers appear strong. How much of this growth does management expect to translate into sustainable earnings and cash flow over 2027, 2030? What specific factors will determine whether the company can simultaneously improve its return on capital and create shareholder value?

I would say that-

Maybe a question to Capital Markets Day.

I would say so, yes. Håkan Agnevall: Yeah.

That is the place we go. Håkan Agnevall: The how-

Yeah Håkan Agnevall: -for the financial targets, that is really the focus at CMD.

Correct Håkan Agnevall: I hope you have the opportunity to join us then.

Yeah. Håkan Agnevall: We can spend quite some time on that.

Exactly. As a reminder, we will host our Capital Markets Day next Tuesday. You are warmly welcome to join. Registration for the online participation is still open. Looking forward to meet you there, and thank you for the discussion today.

Thank you. Håkan Agnevall: Thank you.

Thank you very much.