A pre-silent call for the fourth quarter of 2025 was held on 13 January 2026 with our CFO Arjen Berends. In this blog post, we summarise the main messages and questions from the call.
The recording of the call is available here and the presentation materials here. You can change the language of the transcript in the Wistia recording page to Finnish or English.
Before the Q&A session, Arjen discussed the recent development of Wärtsilä’s businesses and the market trends. The operating environment has remained favourable for Wärtsilä in both Marine and Energy during the quarter.
Continued progress in Portfolio streamlining
Wärtsilä made significant progress in the execution of our portfolio strategy during 2025. Two divestments were completed over the course of the year and one divestment is expected to be completed during 2026.
The divestment of Marine Electrical Systems (MES) business to Vinci Energies was completed on 31 October 2025. The annual revenue of the business was approximately EUR 100 million in 2024. The group order book will be adjusted in fourth quarter of 2025, approximate impact being EUR 620 million. Earlier in the year, the divestment of Automation, Navigation and Control Systems (ANCS) to Solix was completed on 1 July. The group order book was already adjusted by approximately EUR 260 million in the third quarter, and the annual revenue of the business in 2024 was EUR 230 million. In December, Wärtsilä signed the agreement to divest Gas Solutions, with completion expected by the second quarter of 2026. The business had annual revenue of around EUR 300 million in 2024.
Once the Gas Solutions divestment is finalised, only Water & Waste will remain in the portfolio business, representing approximately EUR 50 million of annual sales.
Strong order books supporting both Marine and Energy
Wärtsilä’s order books have grown and lengthened. This development supports more accurate planning, improved supply chain coordination and better forecasting visibility. It also means that converting order intake into recognised sales takes increasingly longer, which is visible in both the Marine and Energy delivery cycles.
In the Marine business, order activity remained solid, driven by strong demand in the cruise and ferry segments and continued momentum across other key markets. In the Energy business, we serve three customer segments that offer long‑term business potential: baseload power, where the market is stable and globally diversified; balancing power, where demand is supported by the growth of renewable energy sources; and data centres, which represent our newest market segment. The data centre market provides us with attractive baseload opportunities in both equipment and service deliveries.
In Energy Storage, the market environment remains challenging. The slow US market has redirected competitors into other active markets, intensifying pricing pressure. However, the fourth quarter has been facing more positive momentum. The current situation is challenging, and we need orders for next year's deliveries.
Decarbonisation remains a central market driver
Decarbonisation continues to shape customer decision‑making across both Marine and Energy. Although the decision on a global carbon pricing mechanism for the marine industry has been postponed, regulatory frameworks such as the EU ETS and other regional systems continue to support the need for fuel efficiency and emission reductions. In customer discussions, efficiency and regulatory compliance consistently emerge as key factors influencing investment decisions.
In the Energy business, renewable energy remains the most cost‑competitive form of generation, which strengthens demand for balancing power solutions. Wärtsilä is well positioned to support this development.
Q&A
Will the cruise market return to a pre-COVID pattern, where a boom was followed by years without new contracts, or are we still aligned with shipyard ordering?
We remain relatively aligned with shipyard ordering. Although long-term forecasting is challenging, cruise operators continue to report strong booking levels, with some even achieving record highs. We expect this positive trend to persist for the foreseeable future.
Has seasonality in your business materially changed, given the order book shift from EPC to EEQ? Should we still expect a stronger Q4 pattern, or is that no longer relevant?
Seasonality has decreased compared to historical levels, but it has not disappeared entirely. Year-end effects remain due to factors such as customers seeking to complete projects or utilize budgets before year-end. For example, shipyards may accelerate engine deliveries to improve percentage-of-completion metrics, and governmental customers may finalize spending before new fiscal periods. While these elements persist, they are less pronounced than in the past. Additionally, our own reliance on percentage-of-completion accounting has diminished, except for service agreements and a few EPC projects. For energy, the second half of the year typically remains stronger than the first, as reflected in our order book disclosures.
What are the current lead times for supplying to data centres, and why have they increased despite available capacity?
At the end of Q3, we indicated that delivery of 200 MW for 2026 was feasible. That window has now closed. The recently booked data centre order was scheduled for 2027 delivery, and most of our capacity is now allocated to that timeframe. While we still have capacity for this year, it is filling up quickly and varies by engine type and project magnitude.
Could you provide insights on the velocity of retrofits and upgrades across divisions, the leading geographies, and your expectations for incremental business over the next three years?
Retrofits and upgrades have recently shown a decline in the book-to-bill ratio, which measures order intake versus sales for a specific service stream. It is important to also consider the absolute monetary value of each line item, as retrofits and upgrades represent a smaller share compared to spare parts and field services.
The pipeline for retrofits and upgrades remains strong in the long term.
On the marine side, the demand for carbon capture retrofits has been delayed due to regulatory uncertainty around IMO guidelines and carbon pricing mechanisms. IMO is expected to provide clarity by 2028. In contrast, other retrofits, such as hybrid installations and efficiency improvements like power derating, continue to progress. These upgrades deliver immediate fuel efficiency benefits, improving customer economics and supporting decarbonization regardless of future regulations.
Is there a trend of naval projects displacing ferry orders at shipyards, and could this impact your marine business?
There is increased activity in naval projects, driven by higher defence spending in several countries. However, naval projects typically involve long decision cycles, often four years or more from initial discussions to confirmed orders. We are not aware of naval orders pushing out commercial ferry projects. Current developments appear to be part of long-term planning rather than a shift away from ferries.
Energy Storage backlog appears modest compared to growth targets. How do you assess delivery opportunities and lead times, particularly in markets like Australia and the UK?
The energy storage market remains challenging, with the US constrained by tariffs and regulatory complexities. While activity in the US is limited, markets such as Australia, the UK, and parts of Europe are active, though highly competitive. We booked new orders in Q4, which is encouraging, but further growth is needed. We can deliver projects relatively quickly, subject to size and scope, and revenue is often recognised through percentage-of-completion accounting, even with partial deliveries.
How do you expect cash flow and working capital to develop in 2026, given prolonged delivery times and strong demand?
As long as our equipment order intake book-to-bill ratio remains above one, we do not anticipate major risks to positive cash flow development. Certain customers prefer upfront payments without security guarantees, which improves cash flow through larger down payments and milestone payments. While patterns vary by customer, overall conditions remain favorable.
How does your hedging policy protect against commodity price increases, and what safeguards exist in long-duration contracts?
Our long-term lifecycle agreements, which can extend up to 15 years, include multiple indexation mechanisms covering materials, labor, and other cost drivers. These agreements vary depending on the type, such as guaranteed asset performance, technical maintenance, or operation and maintenance, and incorporate several indices to ensure price protection. We have not experienced any adverse financial impact from commodity price fluctuations under these agreements.
In the marine business, where orders may span several years, how do you mitigate supply chain cost risks?
We maintain long-term agreements with critical suppliers to secure pricing and ensure capacity alignment. For standard components, such as bolts and nuts, this is unnecessary due to broad supplier availability. However, for critical components, such as engine blocks, crankshafts, and turbochargers, strategic partnerships and long-term contracts are essential to maintain stability and support future capacity expansion.
What are the key supply chain challenges when scaling up capacity?
Critical components such as engine blocks, crankshafts, and turbochargers have limited global suppliers, making strong partnerships essential. Smaller components, including electronics, can also pose challenges, as seen during the semiconductor shortages in the COVID-19 period. We work closely with suppliers across all tiers to mitigate these risks.
The combined margin target for Marine and Energy is 14%. Energy has already exceeded this level. Does this imply an upward revision for Energy margins, and are there structural challenges preventing Marine from closing the gap?
The 14% margin target applies to Marine and Energy combined, not individually. This is due to shared resources such as factories, R&D, and global logistics, which are primarily owned by Marine but serve both businesses. While allocations are made, they are not perfectly separable, making a combined target more appropriate.
The trend is positive, with the combined margin reaching 13.2% at the end of Q3, and we are confident in achieving 14% in the future. Any future adjustments will be considered after reaching the current target.
Marine margins are typically lower than Energy due to structural factors. In Energy, we can combine equipment sales with lifecycle agreements, creating a stronger value proposition. In Marine, contracting is more complex because shipyards, focused on cost, make equipment decisions, while the benefits of service activities, such as related to fuel efficiency accrue to operators. This dynamic makes margin improvement more challenging for Marine. Historically, Marine margins have been slightly lower, and we do not expect this to reverse in the near term.
