Key messages and Q&A on Interim report January-September 2023

Wärtsilä published its Interim report January–September 2023 on Tuesday 31 October 2023 at 8:30 am EET. Here are the key messages and Q&A on the report.

General/market environment

The market sentiment remained fairly positive for our businesses during the third quarter of 2023 and we further improved our performance in many areas. Growth in services continued to support our profitability improvement.

In the energy market, the energy and climate policies around the world continue to evolve towards decarbonisation targets, and the mid-term energy transition outlook remains strong. Due to the higher interest rates and gas price volatility, uncertainty remains in the overall investment environment, delaying decision-making especially in the engine power plants business. On the other hand, constraints in global and energy-related supply chains have eased considerably, which has had a positive effect especially in battery energy storage. The energy service business continued to develop well.

In the marine market, the sentiment remained positive for Wärtsilä’s key segments. The growing pressure to decarbonise operations continued to drive demand for both newbuild and service. However, capacity limitations at shipyards and increased prices in newbuild continued to dampen the investment appetite in some segments and move the delivery dates of ships further. Good development continued in Marine Power service agreements. 

Order intake

In the third quarter, order intake grew organically at 18%, supported by good development both in equipment and services. In Energy segment, equipment order intake decreased with lower volumes in both thermal power plants and energy storage. In the power plants business, some orders have been moving forward.

Net sales, operating result and cash flow

Net sales of the Group grew organically at 7% with solid growth in services and a decline in equipment. The comparable operating result increased by 53% to EUR 125 million with a comparable operating margin of 8.6%, supported by improving margins among many of our businesses. Cash flow from our operating activities also significantly improved.



Wärtsilä expects the demand environment for the next 12 months (Q4/2023-Q3/2024) to be similar to that of the comparison period.


Wärtsilä expects the demand environment for the next 12 months (Q4/2023-Q3/2024) to be better to that of the comparison period.


You expect the demand environment to be “similar” for the next 12 months (Q4/2023–Q3/2024) for Marine– what kind of a development in order intake in % would that translate into, and what are the drivers behind it?

In Marine, the demand for service and decarbonization solutions is expected to remain good. The limited yard capacity in certain segments, increasing cost of new ships, and longer lead times may postpone customers’ decision-making. We are not commenting on exact growth percentage expectations.

In your Q3 report, you’ve upgraded your outlook for Energy business to “better”. What was the driver for this? What kind of a development in order intake in % does this translate to? 

In Energy, both storage and engine power plants continue to have a good pipeline. Energy and climate policies around the world continue to evolve towards decarbonisation targets, and the mid-term energy transition outlook remains strong. We are not commenting on exact growth percentage expectations, and the nature of energy business is lumpy, i.e., the impact of single orders can be large.

In the Engine Power Plants business, higher interest rates and gas price volatility continue to provide uncertainty in the investment environment and potentially delay decision-making. The outlook for services is good, with the present situation in the energy markets driving a stable utilisation of our installed base. Our services business performance typically correlates with the running hours of the installed base. The outlook for Energy Storage is good, driven by the IRA and REPowerEU as well as the increasing amount of renewable energy in the grid. Constraints in global and energy-related supply chains have eased, which has had a positive effect.

What are the biggest opportunities and headwinds in terms of EBIT for Q4/2023 and 2024?

We are not providing guidance for the margins, but if we look at positive and negative drivers, we can say the following:

EBIT should be supported by good service performance, continued decarbonization push in both the energy and marine markets, profitability improvements in Energy Storage and (the former) Voyage business, and continued footprint and cost optimization.

Orders taken before the acceleration of cost inflation in the beginning of 2022 are now delivered which will have a positive impact on delivery margins going forward.

We have solid order book for deliveries in Q4/2023 and 2024.

You mentioned that you have had orders worth EUR 1.2 bn in your orderbook for this year which were priced before inflation accelerated and that these should be recognized by Q3. Is there still anything left?

We have now delivered these projects out of our orderbook.

Your cash flow continued to improve in Q3. Can we expect similar development to continue in Q4/2023 or 2024?

Cash flow outlook remains positive for the remainder of the year.

In 2022 cash flow was weak mainly due to negative working capital situation in the start of the year, driven by large customer payments received December 2021. In addition, working capital in 2022 was burdened by increased inventories due to the ramp up of the spare part business and to secure the timely availability of parts, as well as to support a smooth ramp up of STH and related footprint changes.

We do not foresee as big impact of items affecting comparability (Russia, factory transfer activities) to our cash flow in 2023 as we have seen in 2022.

We have high focus on cash flow and we continue to work on optimizing our working capital related processes (inventories, collection, sourcing). With these measures and solid business outlook we expect good cash flow development in 2024 as well. 

Marine Power order intake increased. What was driving that? Was there a single significant order?

Order intake increased by 33% (52% increase in equipment and 20% increase in services). On the equipment side, the order intake growth was supported by good activity in the merchant and cruise segments. On the service side, the order intake growth was supported by an increase in offshore and cruise segment.

How was the progress in Voyage in Q3? Is the integration done and cost savings achieved? How have the customers reacted?

With the shifts that we have made, Voyage integration is now progressing according to plan. Voyage Services business unit, focusing on end-to-end optimization of port and fleet operations and capturing synergies with Performance Services, is part of Marine Power. ANCS (Automation, Navigation and Control Systems) was moved to Portfolio Business. Implementation of organisational changes has been completed by the end of Q2/2023 and cost savings have started to materialize. Customers are seeing a clear logic in this strategic move.

How are you progressing with methanol engine sales?

We have had good order intake for engines capable of running on methanol. These have been sold to several segments: Container vessels, Special Vessels and Cruise & Ferry.

What could trigger better demand in engine power plants?

A number of auctions & tenders are planned in several countries and expected to materialise in 2024. The demand is driven by the need for flexible short- and longer-term solutions as renewable deployment is increasing in combination with coal switch off.

Your comparable operating profit from Energy improved in Q3, will this trend continue during Q4/2023 and 2024?

We do not give guidance on profit going forward, but the trend has been positive in 2023, with good Services performance and improving Storage profitability. Factory capacity utilisation remains a risk going forward.

Energy order intake decreased in Q3/2023 (y-o-y). Why?

Order intake decreased by 16%. Service order intake increased by 11%, supported by a good level of upgrade projects. Equipment order intake decreased by 29%, with lower order volumes in both thermal power plants and energy storage. Timing of orders is the main reason for the decline in equipment orders. The pipeline development is good.

With the current view on orders in the pipeline and their probability of realization, we still believe that equipment orders of engine power plants in H2 will exceed equipment orders in H1.

You’ve now succeeded in your turnaround in Energy storage and made it to black numbers. Is it sustainable? What will be the main drivers for further profitability improvement in Q4/2023 and 2024? Do you expect it to develop linearly?

Long term volume increase is one of the key drivers for improved profitability through for example better cost leverage and improved purchasing power towards the supply chain. In addition, we continue with our selective approach in taking orders, securing that we have the right risk/reward balance. Also supply chain diversification and R&D development further contribute to improved profitability.