Earnings Call: Q4 2019

Jan 30, 2020

Good morning, everyone, and welcome to the ERSO Corporation Results Presentation 2019. Here this morning in Wartsila Campus here in Helsinki, I have the whole Board of Management. Then I have Natalia Waughsparian and Henriette Ramkova from Investor Relations. I may have a short presentation with the slides, and then we have the possibility to ask questions. And I start with a note that 2019 It was a year marked by difficult market conditions and project related challenges. And when you look at the markets, 1st, Marine. I have to say that despite some pickup we saw in the vessel contracting towards the end of 2019, market sentiment remains cautious. That's due to the continued concerns over global economic and geopolitical developments. At the same time, the fuel price development in the next months as well as yard capacity to install retrofits will determine the level of demand for those quarter retrofits. And then when you look at the energy, everybody knows that the energy landscape is evolving rapidly as the technological development, the political action and public opinion. This is and has been making investment environment complex and is creating uncertainty among our customers. And macro environment is further slowing decision making, particularly in emerging markets. Although market conditions are expected to remain challenging in the short term, We do have several prospects in our pipeline, which, If clearly, finally materialize, we will, of course, support the recovery in order intake from the very low levels of 2019. The new strategic figures from 2019 order intake fell 16%. We saw some recovery on the 4th quarter compared to the 3rd one, which is very low. Quarter book is 5% down. Net sales was stable compared to 20 and 'eighteen, booked to kilobit over 1 still. And the comparable operating result quite close what was also earlier announced. I will come back to the numbers number a bit later on the presentation. Earnings per share, €1.37 and cash flow, Finally, over €200,000,000 The dividend proposal for the AGM is $0.48 That's the same what we had last year. As said, The sequential improvement in Q4 didn't help finally when you look at the whole whole year. 4th quarter development, very good in marine and a recovery in energy. So that's a good sign that at least there is some productivity in the market. And the net sales Growth in marine was helping us. And our services, of course, has been growing quite well during the year. But unfortunately, because of the lower order intake in Energy, it has affected 1% and net C, 30 39%. And then if you look at the services and equipment, we had development of services on the Q4. Bill, as I said, a bit over 1. And when you look at the order book distribution, you can see that the order book at the moment for this year It's a bit lower than at the same moment last year. So we still need orders, both in marine and energy, for this year for the development of our net sales. The comparable operating result has been discussed quite thoroughly during the last months. And here, the numbers where we finally ended were a bit lower than Original report and we have a couple of impacting factors. First, the volumes were a bit lower. Finally, some of the deliveries in the marine were moved for this year and the energy order book and order intake didn't develop exactly as expected. Almost half of those the slight difference is also coming from the effect of the strike which happened in December. Gas flow, less than previous years and the cash flow was really affected also how the because of the working capital development. But it's when you look at now building the inventories, they finally have to go out. And Of course, we expect this year to be the cash flow to be better than previous during the last year. So because of that, on the theory today at this moment is 0.3%. Asset earnings a bit lower than previous year, but the dividend proposal is 0.48%. And when you look at the different Different frequencies now. And we all saw some development on vessel contracting, specifically in December. But I have to say that the whole market, 'twenty-'twenty is still cautious. The same sectors are driving and are and there we see positive developments, but the whole merchant, the steel field, quite cautious and our customers. At the same time, there hasn't been any major positive developments in offshore. Order intake in Marine Steel for Q4 on the equipment side, very good. And you can see it also from the pie chart that it's heavily has been geared to cruise and ferry. And of course, special vessels is represented quite well also in our order intake figures. When we talk about the long term service agreement, and this was also touched quite well and discussed 3 months ago, we have seen there a small dip, and this is now when you look at the megawatts. And in marine, you always need to remember that the megawatts are coming from the engines and the bigger the engine, The bigger the megawatts and here you have some customers on the merchant side where big cruise tokens are not under the long term agreement, but we service our customers on a transactional basis. So If you would turn this slide to be in euros, I wouldn't see there, so big difference. Net sales development also on marine development, both in equipment and services on the 4th quarter. And that has, of course, helped the whole legacy as necessary development during the year. One major Achievement during the last quarter has really been our relationship and the solution we can offer to 1 of our customers, which is Anglo Eastern. We have we are rolling out a I think this is one of the biggest software transaction ever done in the maritime sector. So this solution is integrating the different individual processes to optimize the voyage planning, weather routing, fuel consumption, speed of vessels, so really the efficiency of the ships. Of course, this is quite important when you look at our latest acquisitions regarding the navigation and operations competencies we have done. Moving on to energy. The market I mean, you can see very well here, the market is really going down. At the same time, our market share has improved a bit. And here, it's Good to know that this is always 3 months' slack here on these numbers. And when you look at overall the order intake, Going down, then we had a quite nice pickup on the 4th quarter. Has also helped when you look at our services order intake development. We have been very successful on long term agreements, which you will see later on. If you look at the world, Asia is today the biggest for us and Americas, the second one. And here, you see the install base covered by long term treatments in energy side. So very good development, great curve from our people and being able to show the value to our customers. There was one significant transaction in Dominican Republic, where we have an existing customer who now basically signed all the power plants they own and operate in the NIMDR. So over or it's approximately 400 megawatt, that's still a deal. Specifically, credit the spare parts and maintenance costs and have them run the couplings more efficiently. Net sales development, a good development also in the 4th quarter And similar kind of setup where equipment today is 61% of the 4th quarter sales development. We have been able to develop a so called modular setup in our energy business. We call it modular prop, and it can be solved in a as a fast track project to our customers. And this example is for a customer in Mali. It's really an off grid Gold mine, for example, of course, Teysys, Queretaro can provide savings and facilitate the integration of renewables and all the other ones to the mine's energy system. So these blocks are basically you can then multiply and easily build and provide a decentralized solution to our customers. And finally, The prospects, 1st of all, demand for that to our services and solutions in 2020 is expected be somehow below 2019. I would highlight here that the whole services development, I mean, taking power of the profile, looking at Platinus this year, I would say the services is stable. And then you look at the business areas, the demand are at the moment, as I highlighted that at the beginning are solved. With this slide, I will End my presentation, and we can move on to questions and answers. And as previously, I hope you can And you speak to the way which is fair to everybody that you That's one question and then a follow-up and then you go back to the line. But I would like to start here in Helsinki. There is at least one question here. I don't know, do we have a microphone? Yes, please. Hi, good morning. It's Jeff Kresno from Ingers. Clarkson still remains at the current prospect in the 2020 contracting estimates in the segments that are important for you, Yes, obvious. I show this in container business. And even when considering the lead lag in your orders, why are you still so cautious regarding marine outlook? Thank you, Edkian. I mean I will start and I will ask Oker to join me here, but I'll start at Clarkson. Larger numbers are always a little bit the question mark. And then I hand over to Roger because Roger follows the market carefully. Please, Edgar Horne, Head of Marine. Thank you, and thank you for the question. There are several aspects to this one. We have seen now over Quite many years, we have had the same trend. Every year, we start the year with Clarkson saying that next year will be slightly better. And every year, we have been disappointed. Also for last year, so we clearly during the year to comment on estimates on vessel contracting. This year also starts with the fact that Clarkson says we will increase, but also Clarkson themselves has been a bit cautious to see now what will happen And when new updates comes in March, I myself believe that we will see some downgrading on those estimates. How much is still to be seen? The center was good, but I think it's too early to draw Through long term conclusions based on 1 month, there are a lot of uncertainties in the world and afraid at the moment which impact Our guidance. The other part then looking at our guidance is that we need to carefully follow what happens on the scrubbers and order intake coming from the scrubbers. All sentiments are there. They are good. The fuel spread shows that this is a good business case. We haven't yet see still seeing a huge uptake on activities, even if the sentiments are good. But this is also more coming from the fact that installations for retrofit cabo stays much longer than And is it great? So there is a shortage, especially for large vessels on yard capacity. So we are still in the second half of this year to meet our capacity for scrubber installations for the bigger vessels. Having said that, I believe we will see some more It is in scrubbers order intake this year compared to 2019, but still to be seen. Okay. Thanks so much. Thank you, Roger. You answered almost every following question, probably at the same time. But now we can or anybody else in the audience here now. And we hope You can have your follow-up question. Thank you so much. And this is on a different subject. Cost inflation drivers going forward on steel, hydraulics, electronics, wages, especially, do you see that developing? And what's your probability to pass 10 months to your tariffs? If you look at history, we have been quite well doing that one, but we have highlighted that one earlier. I mean, of course, the whole pricing Yes, of and how the market is changing, that has affected and will affect our numbers. But of course, the inflation is another one. But that remains to be seen also how the market now develops. Then we move on to the lines, please. Our first question from the line is coming from Max Yates. Just my first question is on the The power opportunities that you talked about, could you give a little bit of regional color around where you're expecting, where you see the pipeline. And when I look at the sort of megawatts orders, it looks like the Americas has come under pressure. Do you see some opportunities in the U. S. In the coming months? And maybe just the final part of this question is, do we still see opportunities in 100 megawatts to 200 megawatts size power plants or what you're quoting on some of the smaller Power plants in the sort of 0 to 100 range? Thank you, Max. I will let Marco Virend, Head of Energy, Last of those questions, please, Mark. Thank you. Thank you, Max. If you look at the different markets, we definitely see 100 megawatt sizes that you mentioned is pretty normal size. And specifically, if you take Americas, we have In the pipeline, there are several projects that we're working with, and let's hope that we can have a good first half year and show that, that market is active as well. And then the other market that is very active is still Asia, And we have also we are in this pipeline that we are working with. Okay. And just my second question was around energy or around the services business. So I wanted to check effectively, have we seen any pricing pressures to spread For the Energy Services business, obviously, you talked about pricing pressure in the Energy OE business, but how is pricing in Services? And then the sort of expansion of that question on Marine Services. Could you just give a brief comment on whether there is any impact on the engines from using low sulfur fuel and whether that does that puts any greater wear and tear or pressure on the engines in vessels and potentially provide service servicing opportunities? Okay. I can start with the energy side. The pricing pressure that we have mentioned is on the equipment side, the vehicle side. But it comes to services. As you saw, actually, our service order intake was plus 13% last year. And if you look, We have signed the largest order ever in our history in the energy side in last year as well. And also, if you look at the agreements, we have all time high increase in our agreements quarter intake. It was actually plus 60% last year, which makes that all time high on infraiment order intake. And this is something that we deliberately focused on in the beginning of the year. So when we have a new organization, Let's focus on energy services because before, we had one service organization, and we basically Given to divide customers based on, if they are energy or marine, but with this new organization, we definitely have done very specific actions and focus on marine diversity to the energy side. And we haven't seen any price pressure. Reliability is extremely important in any side and secure that output is there when needed. So I think it's giving a very good flavor and affecting our order intake as well. When it comes to the marine side average, as we always think about. Thank you. Thank you. If I first comment on the price pressure, same as Markus said, the heavy pressure is on the newbuild side. Of course, the overall sentiment Impacts the total picture, but the heavy pressure is really on the newbuild side. As such, I don't see a major impact on our service business due to the low low sulfur fuel as such. So that's normal business for us. I just want to understand whether the actual using low sulfur fuel in engine cause more wear and tear up in this engine and actually potentially create a greater service opportunity Because they're using a range of fuels in their engine. Is this the case? Or is that not right? No. The short answer to that one is No significant impact. The next question is from the line of Nanno Rimpela. My first question would be on the services value content in these energy orders, which We are increasingly moving towards this kind of battery and different types of modular block solutions. And can you talk about How do you see that kind of service per megawatt euro value? Or how do you want to kind of quantify We have service also a few new units, if you recall, but traditional combustion engines. Thank you, Mano. Yes. Thank you, Mano. Of course, what comes to engine based power plants, it is actually how they're utilizing the engine or the power plant, which is determining how much services they will need. If it's running flat out of those service companies, It's high. If it's only effective power and usually if it's effective, it'd be 25%, then of course, service revenues will be lower as well. In terms of storage, Usually, per megawatt sold to service content is much lower than in the engine side. The reason is that there's less moving parts, and it's more on the software side, that the software is working properly. We have the updates, and we can continuously have an understanding of if there's a replacement of any cells. And when we do that, are you in any way able to help us kind of understand that you are talking about half 50 percent less service content in a storage solution compression engine running at full scale, for instance. Yes, it's less than 50%. Okay. Then my second question would be on The services growth in the 4th quarter. So I mean, I think that was on at least on a retail basis, it turned out to be quite low and the same was case in the Q3. So are you seeing is it just a reflection of the overall market uncertainty? Or Are there any kind of increased competition or insourcing of services given the exit of the market? Actually, services and energy, I think, but energy in our Now group as a whole. This energy side actually, I think, So in the marine side, service has been building extremely well during 2019 and on both marine and energy side. And As I mentioned earlier, especially on the energy side, the reliability is getting more and more important because when the energy is needed And what happens is when you have some kind of renewables content in your system, you have much higher variability productivity. And that's why it's important that when you need the electric electricity, that you can challenge that it's working. Also, many of our customers have seen that when they have a reliable, very good service provider, Actually, the returns are higher. And this is something that we've been able to illustrate during 2019, And we've been able to increase our treatment sales more than 50%. As Marine, do you want to comment there? Yes, same comment. I think the marine services developed well. And here, a recommendation, please Look at the sales, which grew 5% in the quarter versus quarter, order intake is a bit different here on the service side because if it's impacted by the IFRS rules as well and how you impact Take in order intake on especially on performance based agreements. So if you have lower costs, you see that as impacting also the order intake figure. So please look at the sales figure. I may just speak to Carla. If I look at the group service growth, it was 1% in Q4, and it was probably 1% in Q3 as well. So what am I missing because that's not really a good growth rate? Yes. It's services. Yes. On the sales side, in Q4 specifically, the energy side, We actually didn't have growth on sales, but the reason is that last year, Q4, we have 1 big sales on the service side. So that's why it's comparison is tough comparison. It goes up and down. So if you can't go into the agreement sales that we've done, that gives you extremely good understanding how the services is developing. Thank you. Thank you. Next question is from the line of Ben Wyer. Thank you. Please ask your question. Two questions, please. The first one is on the energy backlog. Because if I do an energy backlog order bridge for the Q4, I would have normally ended up €250,000,000 higher. So can you confirm that you've taken out all of the backlog? And maybe can give us a reason why and how likely they are to come back First of all, we have taken out of our order book some of the orders, colder orders. And you have a more strict rule than we used to have when we look at orders and old orders, how they have been coming into the auction. That's why the backlog is specifically in the energy side is lower. And they will I wouldn't I mean, there has been also a couple of plants, smaller cancellations. So I don't expect them to come back. We need to get more deals with our existing approach. And then for the $250,000,000 roundabout makes sense, yes? Yes. And is it fair that those orders didn't probably carry a high margin anyhow or I don't start commenting on the margin, But we are now out of the books and probably good that they are. You never know about those customers. Okay. And the second question is just when we think about 2020, obviously, you didn't give an EBIT guidance for this year. But when I think about the different building blocks here, right, is it fair to assume that you're not seeing any further cost overruns or that seems So we are under control. That's maybe the first part of that question. It's important to remember now a couple of facts. 1st of all, we shouldn't have any overruns and those issues. We have totally gone through the order book and how we now take also new transactions in. I mean, they are carefully analyzed as much as possible. The risk management is better. But you need to remember that some of those projects, which were on the list of this €150,000,000 which is now €152,000,000 They will be still delivered out this year. And when they go out, they go with 0 margin. And And this will be the second part of your question because I think I That's $20,000,000 to $30,000,000 On EBIT, if I remember correctly, I was just wondering what do you see as a total headwind to EBIT if you combine the 0 margin and the price pressure. Are we talking about 50? Are we talking 100? Is there any kind of guidance you can give us? I can give you an approximate number, and that's EUR 100,000,000 sales around, where probably half of that will be already in Q1. That's on the 0 margin contracts, right? Yes. But how should we look at the pricing pressure impact on units? Mean, is that like 1% of your backlog? I mean, is it just I mean, it's let's not go Deeply in trying to analyze the effect. We have the pricing pressure and so on, But that's as far as we can go. Next question is from the line of Andreas Willi. My question is on the Energy business on service activity. If you Take away the benefit of the service contracts where you're increasingly successful in getting and you just look at this, The normal day to day transactional service business and you're in small place, what's your view on of your engines? And is that changing as we move more base to more PQs? And do you monitor that? What's the rate of decline that is happening or we could see from the change in utilization rates on your installed base in the energy business. Definitely, when we see that more and more customers are buying balancing power for the renewables, That, of course, will impact our services sales. It doesn't mean that they start utilizing that as balancing power immediately. We have customers that buy flexible power from us because they believe that in the future, they will need the flexibility. So it's not needed impact, but we will definitely going forward, this coming 5 to 10 years, we will see And decline on running hours. And a follow-up question maybe on what Sven asked earlier about the Energy backlog, the €250,000,000 roughly that left backlog, did you book that in Q4 against the order number? Or was that just removed from the backlog? So basically, would the order have been €250,000,000 higher in the quarter if you've not removed €250,000,000 No. That's these orders are actually they were not taken We haven't either there's been delays on the down payments, and that's why we decided that let's take them out. And if customer will get back, can we take those in again? And there were no plans to have delivering those orders in Q4. But the order intake that we see, the euro amount for Q4, that's It's a fair representation of the market level that's not artificially reduced by your reassessment of the backlog. Okay. So it's the fear. Yes, the fear. I understand. Yes. You can see order intake is order intake that we had in Q4. It's not impacted. Thank you. Thank you. Thank you. Next question is from the line of Antti Ghanfanen. Antti, please ask your question. Thank you for taking the question. Coming back to the comment on pricing pressure and the gross margin on the backlog that you are delivering for 2020. Phil, could you give even some guidance on how we should expect the margin developing year over year if you look at what you have for 2020. So how has the pricing pressure evolved throughout, let's say, last Well, in months, is it kind of the worst still ahead in terms of what you're delivering out of there? Or how much worse? As you remember, last year, we started talking about the pricing pressure. And specifically, you saw it, and the energy market also has been going down. At the same time, there is I mean, if you have less better contracting, all the players are eager to get any lease some of the transactions. So I cannot quantify the number, but it has been there at least the last 2, 3 quarters. But if you see from a call further down, I mean, We cannot predict the market so well. But if you think about the pricing right now that you are taking orders to be delivered 2021, should we be worried about kind of impacts on 'twenty one compared to 'twenty when you are delivering this This order? As said, I don't start guiding now the margins, activities not for 2021. Okay. And the second question would be on scrubbers. Could you comment a little bit how much Did you deliver on Q4? And how much you have left for this year? And how did the scrubber deliveries impacted your margins or mix during Q4? Thanks, Santiago. Kroger will have Quite exact numbers. Yes. If you look at sales figures, we had around €370,000,000 plus of sales 1st quarters last year and 1 100 and 29,000,000 in Q4. We From a sales point of view, we expect we might be slightly higher this year. That depends, of course, on still orders to come And also how the deliveries and the yard times and installation times are impacted, but this is where they are. It's we still need orders to come, especially for the second half of the year to get to the figures I just mentioned. But it's For the first half of the year, it's based on the backlog and then for the second half, it's still new orders. Right. And how about the mix impact or the profitability impact compared to other marine oil business in Q4? I will not comment on product profitability, but I should comment that we have been satisfied with the profitability of the But it's good to remember that new scrubbers there is not too much services. Exactly. So you need to look at this from a Next point of view as well, newbuild versus life cycle and on the scrubber side, this needs to come through the newbuild phase. Next question is from the line of Andy Sujulin. This is a Big picture question on the energy side. Clearly, the world has been going your way in the sense that wind and solar are becoming bigger and bigger part of production. Despite this, the backup story hasn't really played out at least in 2019. What could change this? What should we see in order for your orders to really take off? Thank you, Hans. Markus? Thank you. Very good question. This is pretty much according to Bloomberg and the International Energy Agency's predictions as well, but it will take some time before systems come to a point that they actually need balancing power and that flexibility that we are offering. And Australia is a very good example. They started deploying a lot of renewables. And when they have done that, they said, okay, let's take down the coal power plant. What happened was that we didn't calculate probably that it would happen if wind is not blowing continuously and sun is shining, So they got back outs. And immediately, when that happened, they realized that they need power and flexibility. They ordered both engine based and storage based solutions. And this is pretty much what we see in other countries as well. It will take some time, and especially when they start taking down the terminal inflexible solutions they have, Then they come to a point that they need to order a flexible backup power and balancing power. Okay. And do you expect this takeout of coal to happen in 2 years Or 2 years? What is the time frame that you are thinking of? Different countries have different schedule for that. But if you see, actually, the country that has keeping down most coal in the past 2, 3 years with United States. And that's why we've seen also in the past year that the United States has been ordering balancing power from Mars. Australia is the second one. Now we see it is happening. If country will view their plans individually. And it's usually a political position because it's both government and private companies that have to come to a conclusion in Germany. Germany is a very good example. We have to deal. Yes. We just announced a deal in Germany in quarter 4 as well. And it goes off comparing themselves to the fact that they will take down the coal. I know that Skate Chile found batches in 38. But remember, if you look at the assets that they have in Germany, Quite a lot of those coal assets they have, the lifetime is not until 2048. And when I talk to utility heads who are owning these coal assets, they are saying that we will take down those actually much earlier than 38. So it depends where you are and what assets you have and when you take it down. Because it's not profitable to invest in an asset when you know that you're going to have to take it down anyway. And usually, lifetime of coal power plant is about €50 Yes. And then finally, is the factory A competitive solution these days compared to your engine, how do you assess now today the competitive environment for factory storage engine? That's a very good point as well. I would say that these 2 different technologies are complementing each other stream of well. Storage is perfect for frequency balancing but also daily shifting. So when the sun is shining, because in the countries or regions where you have TVs, on the wind side, it's more difficult to utilize storage on a battery side. But when you have TVs, you know that sun is shining in the daytime, and then the most of the electricity we need or in the evening times. So that's very simple way to shift that energy to the evenings. But then of course, just like you've seen in Australia, you have days when sun is not shining every day. It's that capital structure is needed, so you need something else as well. So that's why these 2 technologies are complementing. Okay. That's all for me. Thank you very much. Okay. Thank you, Ron. Thank you. Our Our next question is from the line of Alexander Virgo. So I guess just a couple of quick payment questions really. The first one would be, if we think about how you describe demand for 2020 and then the support for 2020 from the current backlog being a little bit lower year on year. I'm just trying to understand where you think the in for out is going to come from? And can we see sufficient margin service equipment is weak if services are stable? And can we see sufficient growth for in that in for out to see revenue flat in 2020? And then second question, which I suppose is a follow-up because ultimately that will drive your operating profit bridge. Just trying to think about the margin progression In 2020, I agree that you don't want to give guidance specifically, but you talked before about feeling that The progress year on year is going to be quite difficult because of the dilutive effect of all that equipment being delivered. I'm just trying to think a little bit more about the moving parts. You obviously got some cost savings coming through as well. So I guess how confident can we be that margins should expand in 2020? Thank you. Thank you. Quite a question. First of all, when you look at the sales and now when first of all, The demands, we say that demand is expected to be somewhat below. That's now, of course, based on Partly on what is our order book at the moment. That, of course, then still needs to develop this year. So we need orders both in marine and energy. The markets are, as we say, soft, which means that there is uncertainty in the market, and let's see how that develops. At the same time, it's good to remember that I mean, you can still develop quite a lot, for example, our service activities. And then margin is pretty much also determined how you sell spare parts compared to anything else. But we also have a portfolio today, we call portfolio of businesses. So we have Highlighted that we have businesses which we are basically selling out of Obergina. And Depending on now when those actually happen, it will finally affect also the final sales number. So that's why Today, it's very difficult to say, I mean, what around what would be the final numbers. And then on margin side, it's also pretty much then dependent on all the other facts we have discussed today, but also how the services is developing. So what is going to be the mix between the new equipment and the service sales And then again, how within services we are able to develop spare parts or agreements projects where spare parts are also included. So last year, we saw very good development the first year, Q1 of the year and then, I mean, Marine also continued during the whole year. Extremely well, and as you got orders pre emptying. So I mean, let's see how this year develops. And but The visibility is not up there. So we need to work with our customer, get them to understand what is the value And then finally, when we move on, we can see how the year develops. I think it's also always good to remember, And I want to highlight, again, Wartsila is a company where most of the sales and profit Profits are coming on the Q4. So this year is not going to be different than earlier years. So when you are Analyzing us, remember the Q1 is as it has always been. We have a slow start and then we make the year, and that's as much as we can talk about this year. Our next question is from the line of Jacob Ryan. Just want to come back to this cost overruns point just to check if I understand correctly. So you had €152,000,000 of above the line charges in 2019. In 2020, you're expecting maybe some €100,000,000 of sales to be delivered at a zero maybe some €100,000,000 of sales delivered at a 0 margin, so maybe some €100,000,000 impact. But specifically on the cost overruns, we think about the 2020 EBIT bridge, could we assume that the year on year headwinds will impact some of that back in 2020? And that is clearly before we've been considering pricing pressure and in throughout. But am I looking at that the right way? I mean, first of all, you should always look at where the sales end, where what is the sales number, how much of sales, services, and you start looking at the EBIT. And then, of course, you have the deliveries of the equipments And as such, some of the equipments are carrying a zero margin. So that's in effect to that one. And then we will, As I said many times, we need orders this year and then it depends on what will be the margin of those orders. So Unfortunately, this is the only way how we can try to open the streets for the development. And I suppose, if you're out in a different way, do you feel comfortable that we won't See kind of cost overruns because I suppose this came as a bit of a surprise with the 3Q, 4Q profit warning. Do you now feel that take appropriate provisions? Yes, profit warning is always a surprise. And we have done huge amount of work, Of course, you understand what happened and that we know. We have done huge amount of work and changes within the organization and how we analyze the projects, how we look at the risks and how we elevate all those discussions within the organization. So Of course, you might have mistakes here and there, but at least we have learned our lesson now. And these kind of these days shouldn't happen anymore. And just one final question on the Marine business. It sounds like Scrubbers will potentially be up year on year for order intake. But I just want to ask about crews and LNG, which is roughly 50% of your marine order intake for the fleet. Do you expect that cruise in LNG to be up in 2020 year on year? That's a good question. Oker, please. If we look at the activity in the segment and starting from XL contract, we don't see any trend changes as such from both Cruise and Landio Gas Care. So we expect that those two segments will continue to play a strong role, Next question is from the line of Tommy Ryals. This is Pero from GMV. Just to clarify, how much were the scrubber orders in 2019? The full year order intake for Straub is €154,000,000 for the full year. Thank you. And then in terms of the energy or the backlog calculations or how do you want to call them? Can you just give an understanding or split or comment that how much were Really captured or how much was your own decisions due to the rising down payment center and so on? Mainly our own decisions, couple of cancellations. That's a minor number. So it's more our own decisions. And then still on the overall outlook, if you say that the demand is expected to somewhat below, You are also commenting that energy orders should see some recovery. Are you saying that marine Equipment orders could be down in 2020 compared to last year? Let's not make Too much conclusions. I mean soft can be also I mean the demand is a little bit low, And but the demand in the business areas is soft. And then I cannot make a conclusion which one is a bit bigger or Smaller. Okay. And finally, how do you see the capacity situation at the moment? Are you Happy with the order intake level in energy, what you got in, in Q4 and then The pipeline outlook for 2020? Or do you see a need for further capacity adjustments in 2020? I'm happy that we got an increase in the energy orders. I'm not happy what's happened the whole year. Of course, market is Pretty much challenging. Capacity situation at the moment is okay. But as I said earlier, we need orders this year. So we'd be happy also going forward. Next question is from the line of Thomas Kostner. This is Tom from Carnegie. You mentioned you have order prospects for power plants in Central America and Asia. I wonder how many kind of projects on Thank you, Tom. Marco, I'll answer. Yes. Actually, with the Pipeline, we definitely see both a mix of backup power plants but also flexible baseload plants. So it's a mixed basket of both customers. And then, of course, we have the intermediate customers as well, which will run perhaps 4,000 hours per year. So it is the whole pallet. But Do you have order prospects in these kind of big Western countries like Germany and the U. S. Now for this year? Or is it So we are continuously working on both Indian countries that you mentioned, There are also a minimum increase. So it's never like fully empty. It's always just like we now find one big order in Germany. The pipeline is there, and we are working with several different projects. And The timing is very difficult to say because it is all that permit to take longer time than customer If the customer has penetrated or is it something else that could cause that they have to delay Decision making. And usually in the United States, usually when it's a city that is ordering, The rules of the city council, they usually have a year and a half time to actually ask the people It is just any opponents on the decision they're making. So even they might award a 12 months or just or somebody else, but before it's effective, it takes perhaps a year. And that's why it's very difficult to predict exactly when that power plant is coming. That, of course, makes Communication towards you as well is tricky from our part. To make it simple, are you More optimistic for this year compared to 1 year ago, is there nothing on this backup orders? Is the market showing any signs of Hey, picking up and picking up. Yes. I would say that as you saw, market went down 4% And just like our order intake as well in the equipment side, it was a fairly heavy drop in quarters in 2019. And I would say that We shouldn't see that kind of drop here in 2020. So if you look at the pipeline, there's a lot of activity. So there's potential in the market. But as I said, afraid to be afraid right now how the year will end and how much All right. We will get to 2020. Okay. Then over to another subject. At least in my EBIT, which I have cost savings of €600,000,000 for 2020. Please confirm that, that's still an accurate number. And then you said at Capgemont, you say that price increase will hit you by some €10,000,000. But my understanding is So it's kind of on balance, it's fair. Is that still the situation? Well, I will ask Arjen There is our CFO to open up that one. So if you also answer your question, please, Arjen. Thanks for the question. Yes, we have done a restructuring program. Yes, we have run our restructuring program during 2019. And basically, the restructuring program is going pretty well according to plan. Savings are coming through. But I said also earlier in communication, not all the savings are straight bottom line. Many of the savings and cost reduction that drove out also related to volume adjustments. Big impact, for example, is the joint venture in the Covina because we'll be taking quite significant costs, but it's not really showing up on the bottom line. It's more avoiding absorption losses in the future. And to your question about, let's say, margin, will it offset? For sure, savings will partly offset. I'm not guiding on the margin, so I don't know if I said numbers, but yesterday is a part of offsetting there. Okay. And then finally, as you're on the line, can you confirm the Karl Klans order where you had not got the down payment that was booked in Q4, it's hard when you have still large inventories now at the end of the year. Is Is this order still expected to come? Or was it booked in Q4? Which one are you referring to? Please clarify once more. The one you have mentioned in group analyst meetings that you said that you have are waiting for have already made the engines for a power plant or we have not got the down payment. That's what you informed us at the group analyst. So I'm wondering Was it booked in the Q4 or not? Yes, partly, and now I get your question. Yes, we said earlier in also I think in Q3 and also in CMD I think we would still need orders in the energy side to support, let's say, the sales and the margin in 2019, partly that came through, partly that came through. So the timing was a bit off, but let's say in general, We've got some other orders as well instead. All right. Thank you. And now we are 2 minutes over 11, so we need to stop here. Thank you for being here in Helsinki, Latvia, Campus and see you in April. Thank you. Bye bye.