Good morning, everyone, welcome to Wärtsilä Corporation Results Presentation 2019. Here this morning in Wärtsilä campus here in Helsinki, I have the whole board of management. I have Natalia Valtasaari and Emilia Rantala from Investor Relations. I will have a short presentation with the slides, then we have the possibility to ask questions. I start with a note that 2019 was a year marked by difficult market conditions and project-related challenges. When you look at the markets, first, 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 scrubber retrofits.
When you look at the Energy, everybody knows that energy landscape is evolving rapidly as the technological development, the political agenda, and public opinion. This is and has been making investment environment complex and is creating uncertainty among our customers. The 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 good prospects in our pipeline, which, if they finally materialize, will of course support the recovery in order intake from the very low levels of 2019. When you look at the key figures from 2019, order intake fell 16%. We saw some recovery on the fourth quarter compared to the third one, which was very low. Order book is 5% down. Net sales was stable compared to 2018. Book-to-bill a bit over one still.
The comparable operating result quite close to what was also earlier announced. I will come back to the numbers a bit later on the presentation. Earnings per share, EUR 1.37 and cash flow finally over EUR 200 million. The dividend proposal for the AGM is EUR 0.48, the same what we had last year. As said, the sequential improvement in Q4 did entail finally when you look at the whole year. Fourth quarter development very good in Marine and a recovery in Energy, that's a good sign that at least there is some good activity in the market. The net sales growth in Marine was helping us. Our Services, of course, has been growing quite well during the year. Unfortunately, because of the lower order intake in Energy, it has affected our net sales.
Marine is now on, if you look at the fourth quarter, 61% and Energy 39. If you look at the Services and equipment, we had a good development of Services on the fourth quarter. Book-to-bill, as I said, a bit over one. When you look at the order book distribution, you can see that the order book at the moment for this year is a bit lower than at the same moment last year. 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. Here the numbers where we finally ended were a bit lower than originally thought, and there were a couple of impacting factors. First, the volumes were a bit lower.
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 differences also coming from the effect of the strike which happened in December. Cash flow less than previous years, the cash flow was really affected also because of working capital development. When you look at now building the inventories, we finally have to go out, and of course, we expect this year the cash flow to be better than during the last year. Because of that, the gearing today at this moment is 0.3. As said, earnings a bit lower than previous year, but the dividend proposal is EUR 0.48. When you look at the two different businesses now, and we also saw some development on vessel contracting specifically in December.
I have to say that the whole market sentiment is still cautious. I mean, the same sectors are thriving and there we see positive developments, the whole merchant fleet is still quite cautious and our customers at the same time, there hasn't been any major positive developments in offshore. Order intake in Marine stayed for fourth quarter on the equipment side, very good. You can see it also from the pie chart that it heavily has been geared to cruise and ferry. Of course, special vessels is represented quite well also in our order intake figures. When we talk about the long-term service agreement, this was also touched quite well and discussed three months ago, we have seen there a small dip, this is now when you look at the megawatts.
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 two-stroke engines are not under the long-term agreement, but we service our customers on a transactional basis. If you would turn this slide to be in EUR, I wouldn't see there so big difference. Net sales development also in Marine developed well, both in equipment and services on the fourth quarter. That has, of course, helped the whole Wärtsilä net sales development during the year. One major achievement during the last quarter has really been our relationship and the solution we can offer to one of our customers, which is Anglo-Eastern. We are rolling out a Wärtsilä Fleet Operations Solution for all their 600 vessels.
I think it is one of the biggest software transaction ever done in the maritime sector. The solution is integrating the different individual processes to optimize the voyage planning, weather routing, fuel consumption, speed of vessels. 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 the same time our market share has improved a bit, and here it's good to know that this is always three months lag here on these numbers. When you look at overall the order intake, it has been going down, but then we had a quite nice pick up on the fourth quarter.
It 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 second one. Here you see the installed base covered by long-term agreements in Energy side. Very good development, great work 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 DR. It's approximately 400 MW, a Wärtsilä deal. Specifically predict the spare parts and maintenance cost and help them to run the power plants more efficiently.
Net sales development, a good development also in the fourth quarter, and similar kind of setup where equipment today is 61% of the fourth quarter sales development. We have been able to develop a so-called modular setup in our energy business. We call it Modular Block, and it can be sold as a fast-track approach to our customers. This example is for a customer in Mali. It's really an off-grid gold mine. Good example of those cases where Wärtsilä can provide savings and facilitate the integration of renewables, and all the other ones to the mine's energy system. These blocks are basically, you can then multiply and easily build and provide the decentralized solution to our customers. Finally, the prospects, first of all, the demand for Wärtsilä services and solutions in 2020 is expected to be somehow below 2019.
I would highlight here that the whole services development, taking out of looking at Wärtsilä's this year, I would say the services is stable. When you look at the business areas, the demand are at the moment as I highlighted at the beginning, are soft. With this slide, I will end my presentation and we can move on to questions and answers. As previously, I hope you can ask and you speak to the way which is fair to everybody that you ask one question and then the follow-up, and then you go back to the line. 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 Erkki Vesola from Inderes. Clarksons still remains very positive in their 2020 contracting estimates in the segments that are important for you, gas carriers, special vessels, even container vessels. Even when considering the lead lag in your orders, why are you still so cautious providing the new note?
Thank you, Erkki. I will start, and I will ask Roger to join me here, but I'll start that Clarksons numbers are always a little bit a question mark. I hand over to Roger because Roger follows the market carefully. Please, Roger Holm, the head of marine.
Thank you, 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 that every year we start the year with Clarksons saying that next year will be slightly better, and every year we have been disappointed. Also, for last year. We clearly during the year downward estimates on vessel contracting. This year also starts with the fact that Clarksons says we will increase, but also Clarksons themselves has been a bit cautious to see now what will happen 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?
December was good, but I think it's too early to draw too long-term conclusions based on one month, and there are a lot of uncertainties in the world and the trade at the moment which impact our guidance. The other fact 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 still seen a huge uptake on activities, even if the sentiments are good. This is also more coming from the fact that installations for retrofit scrubbers takes much longer than anticipated. There is a shortage, especially for large vessels on yard capacity.
We are still in the second half of this year to get yard capacity for scrubber installations for the bigger vessels. Having said that, I believe we will see some more activities in scrubber 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. Now we can call or anybody else in the audience here now. You can have your follow-up question.
Okay. Thank you so much. Even this is on a different subject. Cost inflation drivers going forward on steels, hydraulics, electronics, wages, especially. How do you see that developing, and what's your capability to pass them on to your customers?
If you look at the history, we have been quite well doing that one, but we have highlighted that one earlier. The whole pricing and how the market is changing, that has affected and a real effect on numbers. The inflation is another one. That remains to be seen also how the market now develops.
Thanks.
We move on to the lines, please.
Our first question from the line is coming from Max Yates.
Thank you. Just my first question is on the power opportunities that you talked about. Could you give a little bit of regional color around where you're expecting or where you see the good pipeline? When I look at the megawatts orders, it looks like the Americas has come under pressure. Do you see some opportunities in the U.S. in the coming months? Maybe just the final part of this question is, do we still see opportunities in 100- 200 MW size power plants, or are what you're quoting on some of the smaller power plants in the zero to 100 range? Thank you.
Thank you, Max. I will let Marco Wirén, the head of energy to answer those questions. Please, Marco.
Thank you, Max. If you look at different markets, we definitely see 100 megawatt sizes that you mentioned is pretty normal size. Specifically, if you take Americas, we have in the pipeline, 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. The other market that is very active is still Asia, we have also there a good pipeline that we're working with.
Okay. Just my second question was around the services business. I want to check effectively, have we seen any pricing pressures start to spread to the Energy services business? Obviously, you talked about pricing pressure in the Energy OE business, but how's pricing in services? Then the sort of extension of that question on marine services is, could you just give a brief comment on whether there is any impact on the engines from using low sulfur fuel and whether that puts any greater wear and tear or pressure on the engines in vessels and potentially provides further servicing opportunities?
I can start with the energy side. The pricing pressure that we have mentioned is on the equipment side, the new build side. When it comes to services, as you saw, actually, our service order intake was plus 13% last year. If you look, we have signed the largest order ever in our history in the energy side in last year as well. If you look at agreements, we have all-time high increase in our agreements order intake. It was actually plus 60% last year, which makes that all-time high on agreement order intake. This is something that we deliberately focused on in the beginning of the year, said when we have a new organization, let's focus on the energy services, because before we had one service organization, and we basically divide customers based on if they are energy or marine.
With this new organization, we definitely have done very specific actions and focus on marine versus the energy side. We haven't seen any price pressure. Reliability is extremely important in energy side, and to secure that output is there when it's needed. I think this is giving a very good flavor and affecting our order intake as well. What comes to the marine side, I would ask Roger to take this one.
Thank you.
Thank you. If I first comment on the price pressure, same as Marco said, the heavy pressure is on the new build side. Of course, the overall sentiment impacts the total picture, but the heavy pressure is really on the new build side. As such, I don't see a major impact on our service business due to the low sulfur fuel as such. That's normal business for us.
I just wanted to understand whether the actual using low sulfur fuel in engine cause more wear and tear on the customer's engine and actually potentially creates a greater service opportunity because they're using a range of fuels in their engine. Is this the case or does that not right?
No, the short answer to that one is no significant impact.
Okay. Thank you.
Thank you.
The next question is from the line of Manu Rimpelä . Thank you. Please ask your question.
Good morning. 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. 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 that service opportunity in the future compared to traditional combustion engines?
Thank you, Manu.
Yeah. Thank you, Manu. Of course, what comes to the engine-based power plant 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 course, service content is high. If it's only a backup power and usually backup power could be 25%, then of course, the service revenues will be lower as well. When it comes to storage, usually per megawatt sold, the service content is much lower than in engine side. The reason is that there's less moving parts, and it's more on the software side that we ensure that the software is working properly, we have the updates, and we can continuously have an understanding of if there's a replacement need of any cells, and then we do that.
Are you in any way able to help us to kind of understand, are we talking about 50% less service content in a storage solution compared to an engine running at full speed, for instance?
Yeah. It is less than 50% typically.
My second question would be on the services growth in the fourth quarter. I mean, I think that was at least on a retail basis, it turned out to be quite low and the same was the case in the third quarter. Are you seeing that, is it just a reflection of the overall market uncertainty, or are there any kind of increased competition or insourcing of services given the big size of the market?
I think services and energy, are you talking about energy now?
No, group as a whole.
This energy side, actually, I think it's more marine side. Service has been developing extremely well during 2019 and on both marine and energy side. 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 and volatility. That's why it's important that when you need that electricity, that you can count on that it's working. Also, many of the customers have seen that when they have a reliable, very good service provider, actually their returns are higher and this is something that we've been able to illustrate during 2019, and we've been able to increase our agreement sales by 50%. As marine, you want to comment here ?
Yeah, same comment. I think the marine service has developed well and here a recommendation, please look at the sales, which grew 5% in the quarter-over-quarter. Order intake is a bit different here on the service side because this is impacted by the IFRS rules as well and how you impact, say, in order intake on, especially on performance-based agreements. If you have lower costs, you see that as impacting also the order intake figure. Please look at the sales figure.
If I may just quickly follow up. If I look at the group service growth, it was 1% in Q4 and it was probably 1% in Q3 as well. What am I missing? That's not really a good growth rate.
Yeah. It's services.
Yeah. On the sales side, in fourth quarter specifically on the energy side, we actually didn't have growth on the sales side. Reason is that last year, fourth quarter, we had one big sales on the service side. That's why its comparison is a tough comparison. It goes up and down. If you look at the order intake and agreement sales that we've done, that gives extremely good understanding how the services is developing.
Thank you.
Thank you.
Next question is from the lines, Sven Weier. Thank you, please ask your question.
Good morning from my side. Two questions, please. The first one is on the energy backlog. If I do an energy backlog order bridge for the fourth quarter, I would have normally ended up EUR 250 million higher. Can you confirm that you've taken out orders off the backlog and maybe can give us a reason why and how likely they are to come back into the backlog later?
First of all, we have taken out of our order book some of the orders, older orders, and we have a more strict rule than we used to have when we look at the orders and old orders, how they have been coming into the books, and that's why the backlog is, specifically in the energy side, is lower. They feel, I mean, and there have been also a couple of small cancellations, so I don't expect them to come back. We need to get more deals with our existing books.
The 250 roundabout makes sense, yeah?
Yes.
Is it fair that those orders didn't probably carry a high margin anyhow?
I don't start commenting on the margins.
Okay.
They are now out of the books and probably good that they are. You never know about those customers.
Okay. Thank you. The second question is just when we think about 2020, obviously, you didn't give an EBIT guidance for this year. When I think about the different building blocks here, is it fair to assume that you're not seeing any further cost overruns, so that seems to be under control? That's maybe the first part of that question.
It's important to remember now a couple of facts. First of all, we shouldn't have any overruns and those issues. We have totally controlled the order book and how we now take also new transactions in. They are carefully analyzed as much as possible. The risk management is better. You need to remember that some of those projects which were on the list of this EUR 150, which is now EUR 152 million, they will be still delivered out this year. When they go out, they go with zero margin.
Yes, this will be the second part of the question, because I think I am confident that impact that EUR 20 million-EUR 30 million on EBIT, if I remember correctly. I was just wondering, what do you see as a total headwind to EBIT if you combine the zero margin and the price pressure? Are we talking about EUR 50? Are we talking EUR hundreds? Is there any kind of guide you can give us?
I can give you an approximate number, and that's EUR 100 million saves around, where probably half of that will be already in Q1.
That's on the zero-margin contracts, right?
Yes.
How should we look at the pricing pressure impact on EBIT? Is that like 1% of your background?
Let's not go too deeply in trying to analyze the EBIT effect. We have the pricing pressure and so on, but that's as far as we can go.
Okay. Thanks, Jaakko.
Thank you.
Next question is from the line of Andreas Willi. Thank you. Please ask your question.
Yeah. Good morning. Thanks for your time.
Morning.
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, you just look at the normal day-to-day transactional service business and your installed base, what's your view on terms of the utilization of your engines? Is that changing as we move from more base to more peak use? How 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?
Thank you. Marco.
Thank you.
Marco.
Great question. Yeah. Definitely when we see that more and more of our 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. It's not immediate impact, but we would definitely going forward this coming 5-10 years, we will see a decline on running hours.
A follow-up question maybe on what Sven asked earlier about the energy backlog, the EUR 250 million roughly that left the backlog. Did you book that in Q4 against the order number, or was that just removed from the backlog? Basically, would the order have been EUR 250 million higher in the quarter if you've not removed EUR 250 million?
No. These orders are actually, they were not taken recently 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, then we take those in again. There were no plan to have deliver on those orders in quarter four.
The order intake that we see, the EUR amount for Q4, that'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-
Yeah.
The fear understanding.
Yeah.
Exactly. Order intake is order intake that we had in Q4.
Okay.
It's not impacted.
Thank you.
Thank you.
Thank you, Andreas.
Next question is from the line of Antti Kansanen. Thank you. Please ask your question.
Hi. Thank you, Antti. Thanks 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. Still, could you give even some guidance on how we should expect the margin developing year-over-year if you look at what you have in your backlog for 2020? How has the pricing pressure evolved throughout, let's say, last 12-18 months? It's kind of the worst still ahead in terms of what you're delivering order or how much worse?
As you remember last year, we started talking about the pricing pressure specifically you saw it when the energy market also has been going down at the same time. If you have less contracting, all the players are eager to get at least some of the transactions. I cannot quantify the number, but it has been there at least the last two, three quarters. Is it going to go further down? We cannot predict the market so well.
If you think about the pricing right now that you are taking orders to be delivered in 2021, should we be worried about kind of impacts on 2021 compared to 2020 when you are delivering these orders?
As I said, I don't start guiding now the margins, at least not the 2021.
Okay. The second question would be on scrubbers. Could you comment a little bit, how much did you deliver on Q4 and how much do you have left for this year? How did the scrubber deliveries impacted your margins or mix during Q4?
Thanks, Antti. Roger will have quite exact numbers.
Yeah.
Economical as well.
Yeah. If you look at the sales figures, we had around EUR 370 million plus of sales for scrubbers last year and EUR 129 in Q4. From a sales point of view, we expect we might be slightly higher this year. Depends of course, on still orders to come and also how the deliveries and the yard times and the installation times are impacted. This is where we are.
You expect to be slightly higher if you see a comeback in order intake or is it based on the backlog that you have right now?
We still need orders to come, especially for the second half of the year to get to the figures I just mentioned. For the first half of the year, it's based on the backlog and then for the second half we still need orders.
Great. How about the mix impact or the profitability impact compared to other marine OE business in Q4?
I will not comment on product profitability, but I can comment that we have been satisfied with the profitability of the scrubbers.
It's good to remember that in scrubbers there is not too much services.
Exactly. You need to look at this from a mix point of view as well, new build versus life cycle. On the scrubber side, this needs to come through the new build phase.
All right. That's all for me.
Thank you.
Next question is from the line of Antti Suttelin. Thank you. Please ask your questions.
Thank you. 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 not in 2019. What could change this? What should we see in order for your orders to really take off?
Thank you, Antti. Marco.
Thank you, Antti. Good question. This is pretty much according to Bloomberg and the International Energy Agency's predictions as well, that it will take some time before systems come to a point that they actually need balancing power and that flexibility that we are offering. Australia is a great example. They started deploying a lot of renewables, and then when they have done that, they said, "Okay, let's take down the coal power plant." What happened was that they didn't calculate properly that what would happen if wind is not blowing continuously and sun is not shining, so they got blackouts. Immediately when that happened, they realized that they need backup power and flexibility. They ordered both engine-based and storage-based solutions. 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 thermal inflexible solutions they have, then they come to a point that they need to order the flexible backup power and balancing power.
Okay. Do you expect this take out of coal to happen in 10 years or two years? What is the time frame that you are thinking of?
Different countries have different schedule for that. If you see actually the country that has taken down most coal in the past two, three years is United States. That's why we've seen also in the past year that United States has been ordering balancing power from us. Australia is the second one now we see it is happening. Each country will do their plans individually, and it's usually a political decision because it's both government and private companies that have to come to a conclusion there. Germany is a very good example.
We have to do.
Yeah, we just announced the deal in Germany in quarter four as well, it goes of preparing themselves to the fact that they will take down the coal. I know that schedule is now by 2038, 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 2038. When I talk to utility heads which are owning these coal assets, they are saying that we will take down those actually much earlier than 2038. 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. Usually, the lifetime of coal plant is we talk about 50 years.
Yes. Thank you. Then finally, is the battery a competitive solution these days compared to your engine? How do you assess now today the competitive balance between battery storage and an engine?
That's a very good point as well. I would say that these two different technologies are complementing each other extremely well. Storage is perfect for frequency balancing but also daily shifting. When the sun is shining, particularly in countries or regions where you have PVs, on the wind side, it's a little bit more difficult to utilize storage on the battery side. When we have PVs, you know the sun is shining in the daytime, the most of the electricity needs are in the evening times. That's a very simple way to shift that energy to the evenings. Of course, just like you've seen in Australia, you have days when the sun is not shining every day that capacity factor is needed, you need something else as well. That's why these two technologies are complementing.
Okay. That's all from me. Thank you very much.
Okay. Thank you.
Thank you.
For those participants on the phone who would like to ask questions, press the star one . Our next question is from the line of Alexander Vega please ask your questions .
Thanks very much. Morning, gentlemen. I guess just a couple of quick framing 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 am just trying to understand where you think the infra outlook is going to come from. Can we see sufficient demand? Obviously, equipment's weak if services are stable. Can we see sufficient growth in that infra outlook to see revenue flat in 2020? 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 appreciate you don't want to give guidance specifically, but you've 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've obviously got some cost savings coming through as well. 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 savings and now when, first of all, the demands, we say that net demand is expected to be somewhat below. That's now, of course, based partly on what is our order book at the moment. That, of course, then still needs to develop this year. 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 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. We also have a portfolio today we call portfolio businesses.
We have highlighted that we have businesses which we are basically selling out of Wärtsilä, and depending on now when those actually happen, will finally affect also to the final sales number. That's why today it's very difficult to say around what would be the final numbers. 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. 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 and projects where spare parts are also included.
Last year, we saw very good development the first part of the year, and then Marine also continued during the whole year extremely well. Energy got orders, agreements in. Let's see how this year develops. The visibility is not there. We need to work with our customer, get them to understand what is the value, and then we can 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, Wärtsilä is a company where most of the sales and profit, which are coming on the fourth quarter, so this year is not going to be different than earlier years. When you are analyzing us, remember the first quarter is as it has always been.
We have a slow start, and then we make the year. That's as much as we can talk about this year.
Okay. Thank you.
Thank you.
Our next question is from the line of Japo Bryant. Thank you. Please ask your question.
Hi. Good morning everyone. Just want to come back to this cost overruns point and just to check that I understand correctly. You had EUR 152 million of above the line charges in 2019. In 2020, you're expecting maybe some EUR 100 million of sales to be delivered at a zero margin, so maybe some tens of millions impact. Specifically on the cost overruns, if we think about the 2020 EBIT bridge, could we assume that the year-on-year headwinds, you can pack some of that back in 2020, and that is clearly before we then consider things like pricing pressure and infra outlooks. Am I looking at that the right way?
First of all, you should always look at where the sales and what is the sales number, how much of the sales is services, then you start looking at the EBIT. Then, of course, you have the deliveries of the equipment, can affect some of the equipment are carrying a zero margin. That will affect to that one. 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. Unfortunately, this is the only way how we can try to open the bridge for the development.
I suppose thinking about it a bit different way, do you feel comfortable that we won't see other cost overruns? I suppose this came as a bit of a surprise to us with the 3Q, 4Q profit warning. Do you now feel that you've sort of taken appropriate provisions?
Yeah. Profit warning is always a surprise, but we have done huge amounts of work, of course, to understand what happened and that we know. We have done huge amounts of work and changes within the organization on how we analyze the projects, how we look at the risks, how we elevate all those discussions within the organization. Of course you might have mistakes here and there, but at least we have learned our lesson now, and these kind of mistakes shouldn't happen anymore.
Thank you. Just one final question on the Marine business. It sounds like scrubbers will potentially be up year-on-year for order intake. I just want to ask about cruise and LNG, which is roughly 50% of your Marine order intake typically. Do you expect-
Yeah, that's-
Cruise and LNG to be up in 2020 year-on-year?
That's a good question. Roger, please.
If we look at the activity in the segment and starting from vessel contracting, we don't see any trend changes as such on both cruise and LNG or gas carriers. We expect that those two segments will continue to play a strong role out in general as well as for us.
Okay. Thank you very much.
Thank you.
Next question is from the line of Tommy Wile. Thank you. Please ask your question.
Hello, this is Tommy from DNB. Just to clarify, how much were the scrubber orders in 2019?
The full year order intake for scrubbers, EUR 154 million for full year.
Thank you. In terms of the energy order 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 canceled, or how much was your own decisions due to delaying down payments and so on?
Mainly our own decisions, couple of cancellations. That's a minor number. It's more our own decisions.
Thank you. 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 the Marine equipment orders could be down in 2020 compared to last year?
Let's not make too much conclusions on. The demand is a little bit below, and that the demand in the business areas is soft. I cannot make a conclusion which one is bigger or smaller.
Okay. Finally, how do you see the capacity situation at the moment? Are you happy with the ordering level in energy, what you got in fourth quarter and then the pipeline outlook for 2020? 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 happened the whole year. Market is pretty much challenging. Capacity situation at the moment is okay, but as I said earlier, we need orders this year to be happy also going forward.
Okay. Thank you very much.
Thank you, Tommy.
Next question is from the line is Tom Skogman. Please ask your question.
Yes. Hi, 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 backup power to the Western world are you working on at the moment? What's the safe ton of that? That's very important for sentiment.
Thank you, Tom. Marco will answer this one.
Yeah. Actually, if you look at our pipeline, we definitely see both a mix of backup power plants, but also flexible base load plants. It's a mixed basket of both kind of customers. Then, of course, we have the intermediate customers as well, which will run perhaps 4,000 hours per year. It is the whole palette.
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 totally empty, the backlog for these markets in backup power?
We are continuously working on both in these countries that you mentioned, but also many other countries. It's never totally empty. Just like we now signed 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 these sort of permits could take longer time than the customer has anticipated, or it could be something else that could cause that they have to delay the decision-making. Especially in the U.S., usually when it's the city that is ordering, the rules are that city council, they usually have a year and a half time to actually ask the people if there's any opponents on the decision they're making. Even they might award a power plant to us or somebody else, but before it's effective, it takes perhaps a year.
That's why it's very difficult to predict exactly when that power plant is coming. That, of course, makes the communication towards you as well a little bit tricky from our part.
To make it simple, are you more optimistic for this year compared to one year ago on this backup orders? Is the market showing any signs of picking up and taking off?
Yeah, I would say that, as you saw, market went down 44%. Just like our order intake as well in 2019. It was extremely heavy drop in orders in 2019. I would say that we shouldn't see that kind of drop during 2020. If you look at the pipeline, there's a lot of activity, so there's potential in the market. As I said, it's very difficult to predict right now how the year will end and how much orders we will get during 2020.
Okay. Over to another subject. At least in my EBS, which I have cost savings of EUR 50 million for 2020. Please confirm that that is still an accurate number. You said at the Capital Markets Day that pricing pressure will hit you by some tens of million EUR. My understanding is tens of millions equals this EUR 50, so it's kind of on balance it's there. Is that still the situation?
Well, I will ask Arjen Berends , our CFO, to open up that one. He can also answer a question. Please, Arjen.
Thanks for the question. Yes, we have run a restructuring program. No, it's not.
No, it's.
Now you can hear me better. Yes, we have run a restructuring program during 2019, basically, the restructuring program is going pretty well according to plan. Savings are coming through. I said also earlier in communication, not all the savings are straight bottom line. Many of the savings and cost reduction are also related to volume adjustments. Big impact, for example, is the joint venture in Korea. Because we're taking quite significant costs that is not really showing up on the bottom line, it's more avoiding absorption losses in the future. To your question about, let's say margin, will it offset? For sure, savings will partly offset. We are not guiding on the margin, so I have not the exact numbers, but yes, there is a part of offsetting there.
Okay. Finally, as you are on the line, can you confirm that this power plant order where you had not got the down payment, that it was booked in Q4? It's hard when you have so large inventories now at the end of the year. Is this order still expected to come, or was it booked in Q4?
Which one are you referring to? Can you clarify once more?
The one you have mentioned in group analyst meetings that you said that you have already made the engines for a power plant order where you have not got the down payment. That is what you informed us at the group analyst meetings. I wonder, was it booked in the fourth quarter or not?
Yes, partly. Okay, now I get your question. Yes, we said earlier in also, I think, in Q3 and also in CMD, that 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 did not come through. The timing was a bit off, but let's say generally, we got some other orders as well instead.
Okay. Thank you.
All right. Thank you. Now we are two minutes over 11, we need to stop here. Thank you for your questions. Thank you for being here in Helsinki at Wärtsilä Campus, see you in April. Thank you. Bye-bye.