Earnings Call: Q4 2018

Jan 30, 2019

Good morning, everyone, and welcome to Wartsila Corporation Result Presentation 2018. And everyone here in Helsinki, welcome also to Wartsila's new campus here in Helsinki. This place is actually called Experience Center. So let's see what kind of an experience we will see during the next 60 minutes. I will have a short presentation about the numbers, highlights, And then we have the possibility for questions and answers. And this morning, I have here, as usual, the whole Board of Management, some of them with me here in front and the other ones also helping me to get through the presentation here in the audience. But if I go shortly first through about the 2018 and the markets. And 2018 was really marked by positive order intake Development. And that really happened in very strongly in Marine and services markets. Here, it's good to remember that we got a lot of Products and orders, what comes to the environmental regulation going on in the maritime sector. And that's, of course, was helped by our solutions. And one of those products We have been delivering to our customers. The exhaust gas cleaning systems have helped both the marine and Services order intake. Energy, a bit slowdown compared to previous year. And here we have during the year quite many times commented that the decision making among our customers Is lower than it used to be. There are reasons for that one, and we will come back to that one during the presentations. Net sales developed well, and that's mainly coming from the newbuilding markets. And that's again a fact we want to comment on when we talk about our profitability. When you look at our purpose and our strategies Within the marine and energy, we are quite confident that these areas are developing well also Going forward and in the future, we are in the right markets, providing sustainable solutions to the societies. Two highlights regarding our operations or 3 actually here. This hub or this campus here in Helsinki and the Smart Technology Hub in Vaasa Investments, which is investments which are really promoting collaboration and cooperation within our customers and suppliers and academia. And we also entered this year, 2019, with a new organization where marine and energy are now working together with Services providing value added solutions to our customers. Key financials. Order intake 2018 Crew, 12%, as I said, mainly coming from the marine and services. Order book, all time high, over €2,000,000,000 And Here, it's always good to remember that we book orders in services order intake only for the 1st 2 years. And if you take the whole order book in services into account, you could easily add over €1,000,000,000 to that number. Net sales last year, 5% increase, pretty much where we expected it to develop. Book to bill, very strong, but then the result was not as we expected. Here in the result number, you should remember that we made a very high provision regarding our Nuclear providing solutions to the nuclear industry where we started decided to end that business. And that provision, SEK 70,000,000 was taken during the Q4. Earnings per share, SEK0.65 higher a bit higher than last year. And cash flow Developed well during the Q4 according to the plans. Dividend proposal for the AGM is €0.48 per share. If you look at the Order intake development, which I already highlighted a couple of times and really how it's developing in different divisions. Highest in marine, scrubbers, but also cruise and ferry And the LNG carrier segment is developing quite well. And of course, Wartsila's very wide Portfolio of Solutions is helping our operations in the marine sector. Energy, 4th quarter development was good. The whole year didn't develop as previous year. But we finally, during the Q4, also got the famous El Salvador power deal and also seen Quite good development when it comes to our solutions to the renewable energy story. Services contracts, very good development during the Q4. Net sales, 5% during the year and 6% in during to Q4. And both services and marine developing quite well, energy a bit slower. Here, it's as we quite often have communicated, it's good to remember that, I mean, sometimes the deals might flip from 1 quarter to another quarter. So no drama if energy It was only 1% in last quarter. Those deals will with what we have in our order book will be also delivered later on. The mix is unfortunately also today affecting to our and probably one of the biggest reason affecting our profitability. Services share, 47% And within services, the share between spare parts and projects and contracts is affecting to the profitability. Book to bill, very high. It's good to look positively to the future what comes to development of our sales. And here, you can see also how We expect the deliveries going this year. This slide shows very well why we initiated a program this morning, a declining profitability during the last to 4 years. So we need to look at our operations and how we can serve our customers, how we can be competitive also going forward. I will come back to the program later on. Moving on to the divisions, and this is now the final and last time when we show Services as a separate division. But as said, 4th quarter Development and Service sales was positive, only 1% during the whole year, so not really Reached the 5% expectations and but that's an area where we need to also focus going forward. And again, spare parts services sale a bit lower. The mix here in services is very important. What is positive is, again, at the agreement side. That's now 20% of the sales services sales, and that's good that that's developing quite well. And here you can see the installed base covered by Service agreements. Overall, it has now stayed at the same level, so not so much Changed during last year, but as I said earlier many times, now when we have the divisional Structure where we look our customers and deal with our customers from the start with a life cycle solution. I'm confident that this long term agreement's parties is going to be More focused and also increase going forward. One highlight during the year, we got A deal in Mexico where we will operate Wartsila engines, and Mexico is actually quite interesting part going forward. Mexico has a plan to develop the energy industry and Wartsila. With our history and with the commitment we can show to our customers, we are very well placed. Then moving on to energy quotation activity, the same levels. So there are As we have said before, there are good pipeline going forward. Decision making is lower than it used to be, But the decisions have not disappeared. We have not lost any deal anywhere what we are have been negotiating, but it takes more time. Gas, the importance of gas is getting more and more important. And here you can see also how I mean, when you compare the year, the Q4 was good. Let's hope we can develop the order intake in a way that customers can make the decisions faster. But At the same time, we have highlighted that the world economy is getting more uncertain. Globalization is affecting the uncertain globalization and the trade wars It has to be remembered that there are a lot of uncertainty, the latest coming from yesterday evening, Brexit. I mean, who knows what's going to happen there. In Looking at the different areas, Asia has been very strong what comes to our orders. And at the same time when we finally got the deal in El Salvador. That's a highlight in Americas area. At the end of the year, we got a landmark deal, a very important reference again in Germany. It's a 90 Megawatt Combined Heat and Power Plant featuring our 31 engine, which is the most efficient engine in the world. We will be operating on natural gas. And this is really the transaction we have been highlight one of the types of transaction we have been Highlighting, promoting and supporting the way and the story moving more and more to renewables. So These are the typical deals you will be seeing also going forward. Market share dropped a bit Here, this is 1 quarter behind the analysis always. And as you remember, the Q3 order intake in Energy Was lower, so probably we can't make any too many conclusions from these numbers. And here, it's always also good to remember if some of the turbine manufacturers get Some kind of a bigger deal somewhere, this affects the numbers. But I would rather look at to development going forward where we end up with our market share. Moving to Marine Solutions. Last year, vessel contracting was a bit higher than 2017. We didn't hit the Clarkson numbers, so Clarkson was a bit more optimistic. Looking this year, the estimates are again a bit higher. And but here it's When you look at the different segments, again, supporting Wartsila's story, cruise and ferries, LNG Carriers and Special Vessels. People are sometimes asking that how long will this Cruise ordering continue. And I think it's good to remember that if you look at people, how many people our traveling and spending holidays and so on. And is it 1% or 2% of that population only cruises? So There is still possibilities to enhance that business. And there are oceans around the world where in different ways the cruise ships can sail. Here you can see also the split. Order in 2018 was very, very high in Marine Solutions. And I'm happy to see that A lot of our brand development supporting the connectivity and the new way of thinking in the marine industry has played very well. Order book, Today, we have a lot of cruise orders in the order book, which if you now remember, our These orders are quite for many years. A picture of our Campus here in Helsinki and then a couple of last slides. Cash flow, a bit better last year. We have been Building also our working capital because of the deliveries. We are delivering also during this year a lot of different solutions to our customers and gearing at the quite healthy level. And finally, you see also the proposal, which is going to go to the AGM. And one slide now regarding the alignment announcement this morning. We need to focus on our Sustainable savings and actions needed to increase our customer value and really look at the competitiveness of Wartsila. And this is these are different kind of actions increasing the focus on really on sales activities, how we sell developing agreements and as a service business within Wartsila. We also definitely need to look at our cost structure. And finally, also optimizing the portfolio, the business portfolio and the organization we have. Unfortunately, this will lead to reduction of employees. And this is a global project. Vertila has 19,300 employees in more than 80 countries, and the effect will be also global and everywhere. The savings for these actions, we are seeking for around €100,000,000 And a final slide here, the prospects for this year to 2019. We expect 2019 to be in line with the previous year. And if you look at the 2 businesses now, the demand in businesses, we regard them as solid. There is a all these uncertainties I was already discussing about. At the same time, the opportunities we have, we look at the demand really to be solid. With this last slide, I put back to the key financials just to for you to remember. But now we are ready for questions. And we have had a habit here, which I think is a good one. When you start asking, please ask one question and then one follow-up and then Keith, the line to or the opportunity to the next one, and you can come back later on. So we get a lot of people and a lot of different kind of questions. But first of all, here, anybody here in Helsinki Campus in the audience, any questions at this stage. No questions here. Oh, there is one question. Katibokzberg, Talos, Salamalletti. Is this in English? I think we've Yes, I'll do it in English. Whatever. You mentioned China and the trade war. Can you open up a little bit like what kind of effect are you looking at? Juri, the whole Last year, we have highlighted many times that these concerns regarding the trade wars, whether it's a trade war, Possibilities or challenges between U. S. And China or U. S. And Europe, China and Europe and so And you need to include into the trade wars different kind of tariff mechanisms and also sanctions, These are affecting the businesses. And nothing bigger hasn't happened to Wartsila yet, But we need to be agile, and we need to look at where the world is moving. And of course, The uncertainty is really affecting our customers' decision making. If people our customers, if they don't know where the world is moving, where the globalization, The traffic, what comes to moving goods or whether they should go for holiday or whether they should invest in electricity in developing world Is affecting to the slowness of the business. But do you see an impact already in the numbers you just showed? We have seen the impact on the slowness of making decisions. So the world is getting slower. The growth, what we have seen is getting slower. Any further questions here? Then we can move on to the lines, please. Thank We'll now take our first question from Johan Eliason from Kepler Cheuvreux. Please go ahead, sir. Yes, hello. I was wondering about the can you hear me? Yes, we can. Yes. I was wondering about your outlook statement. If you look at Marine, you say it's to all. But obviously, I would be guessing that the environmental business should still have a pretty visible Positive development in terms of orders in 2019. Are you seeing any weakness In the other marine related business, that would sort of make you end up at solid rather than good. Thank you. Thank you, Johan. I think the overall uncertainty is affecting to our decision to look at that the prospects, as I said. But I have Roger Holm here, the Head of our Marine Business. And This is a golden opportunity for Roger to open up a bit how the market is developing. Yes, thank you, and thank you for the question. I think if we start, as Jako mentioned already, if we look at vessel contracting, we are Still cautiously optimistic. It will grow slightly or be flat depending a bit on which segments we are looking at. And please remember now when we look at the scrubbers and the environmental part, the order intake last year was really on a good level. So we are comparing order intake levels also on environmental side that have started very well already last year. At the moment, we still foresee good demand for scrubber order intake. So even if most of the major suppliers have quite long order books already and short term Have a full capacity. We don't foresee any major changes in that demand. So the general comment is that we are still looking at good demand and good levels as we have seen last year. So last year, order intake was high. And if we say solid, I mean, it means that we expect it to be high. Correct. Okay. Then just a question on the Cost cutting program then. I kind of understand why you implemented, obviously, having seen your margin development over the last few years. Now will this podcasting program be enough to take you to your 14% margin target? Or what else do you need to see happening? Johan, we have a plan to deliver 14%. I'm not going to say when as we have discussed earlier, But this is really the way how we will finally get there. So all these actions should support us to reach our long term target. Okay. Thank you. That's my two questions. Thank you. We will now take our next question from Max Yates of Credit Suisse. Please go ahead, sir. Thank you. Just my first question would be on your sort of comments around profitability for 2019. And You talk about the cost savings being central to profitability in 2019. So do you think when you exclude Any action from cost savings that the underlying business, when you look at the backlog, will be able to increase margins Year on year in 2019, excluding any impact from cost savings. Max, quite clever way to try to ask what would be the margins in 2019. I rather answer that We have a target to reach the 14%, and we do a lot of different actions. We have a new organization, which is dealing in a different way with our customers. And we need to do these alignment programs. So if we reach the 14%, we need to gradually get there. But I'm not going to start opening The profitability levels this year or margin levels this year, we have a target where we are confident we will reach. Okay. If okay, the follow-up question would be, if we looked at your revenues, your incremental revenues for 2019, A lot of that is going to be coming from scrubbers. It was clearly a very big part of your order intake, and a lot of those deliveries will come next year. So When we look at deliveries of scrubbers, including the installation work that you do, will that be accretive or dilutive to your Current level of margin. And maybe if you could talk about how the phasing of the profitability on scrubbers is different in the first half versus the second half of 2019. First of all, when you look at the scrubbers, I of the Increase in revenues 2019, yes, there will be quite a lot of scrubber deliveries during the year. At the same time, we have a lot of other solutions we are delivering during the year, which is, of course, very important. And I don't start opening up which product or solution gives a better margins. We have said that today we have a very strong market place in the scrubbers, as everybody knows that. From the public sources, what you get, the market shares of the bigger players have been going down. But at the same time, The volumes have been increasing. So we have a good place in the market. We are today selling scrubbers with quite good margins. But how the deliveries during 2019 will Finally hit and will be realized. I cannot start opening that one. But I can ask Roger, of course, to say about the scrubber market itself, if you talk about Marc. Maybe what would be really helpful is how you're thinking about the scrubber demand environment because I guess if you're adding capacity from your current level of 500, then you would inherently be quite bullish about the outlook for 2019. Or are you planning to keep your capacity flat At the sort of current 500 scrubbers level, just to give us a sense of how you're thinking about orders for 2019? Roger We'll open another If I start from the demand side and what we see from our customers at the moment, we don't see signs at the moment that there would be a change. And our delivery times today is what we have said before, that if you order today, we will start looking at Slots about 12 months ahead. So there might be a few slots still left for delivery this year, but we can say that, that's full. We have a good order book for 2020 already, so that's the part we are filling up. So from a demand point of view, We still see good demand continuing, so continuing on same high level. What we need to follow closely is that how will the market Develop from bigger fleet deals to more looking at specific vessels as we get closer to the 2020 Deadline that will we see any change in customer behavior there? So far, we haven't, but that's something that we are closely following as well. What is good to mention as well is in the orders coming in, we also see parts That relates to fairly old vessels, which shows again that there is a good business case for scrubbers with these fuel prices. So There are also customers that are installing scrubbers on fairly old vessels due to the fast payback. So I would say at the moment, the development continues as we have seen so far. Okay. Thank you very much. Thank you, Max. The next question will come from Sven Wyrm of UBS. Please go ahead, sir. Yes, good morning from my side. First question is on the cost saving program you've announced. I was just wondering, as obviously not the first program you do, What kind of cost saving retention we should be expecting from the €100,000,000 and how you would see the phasing of the cost saving between 2019 and 2023. That would be the first question, please. Thank you. Okay. First of all, the whole program, as already probably discussed here, is Gonna be this year and next year finalizing I think we are at the end of the program, the end of next year, Gradually starting at the latter part of this year, it will definitely take time for we know all the numbers and effects to different parts in the world. And so that means that also the savings will be starting later on this year and more and more 2020. Also the expenses, what we have been highlighting here, euros 75,000,000 follows that development. And I think that's the ballpark where we are. So it's fair to say that you have less than half of the savings this year, given it starts only in the second half? Probably not half of the savings this year, if you think about half of the years, you have for 6 months going forward through the next 2 years, and it actually starts during the latter part of the year. So One could say 1 third, but I'm now guessing only. But it starts later. I mean, before we know the real effect to the whole company. It still takes time. We initiated the program this morning, and This is something what we need to come back during the next months. And on the retention, I guess, you mentioned that there's also some pricing pressure. So I guess you're not assuming you keep 100% of the SEK 100,000,000. So what's In the past evidence, is it you keep half of it? Or what's a realistic figure here? I need to get back to that one. I to clarify the figures later on when we know more. But as you are right, there are a lot of items what we need to focus, How we price, how we deal with our customers, what comes to agreements, how we operate in different parts of the world. And then maybe the second question to Roga again, I'm sorry for Keeping asking about scrubbers. But I was just wondering, I mean, you rightly said that 2018 was really extraordinary in terms of Ordering of scrubbers. And so I was just wondering when you say goods, is it does it relate to 2018 goods Being flat or because obviously, we now also have a little bit of uncertainty with regarding to the open loop scrubber bannings. We have Quite a bit of a decline in the fuel spread, Sien. So wouldn't that mean that 2019 could be, at the end of the day, a bit below the 2018 level, to say the least. If I start by commenting first on the open loop scrubbers, we haven't Seeing any impact in among our customers so far due to bans in some port areas coming in. And this is really due to the fact that if you look at the total operational profile, it's just a small part that would operate in these areas. So The impact on the business case for our customers is minimal. And if you want to find an Side on that one, we also have hybrid scrubbers that we can offer, and there are many competitors that only have open loop scrubbers. So Still for us, the majority that we sell is open loop scrubbers, but we have technology then to expand on the hybrids if that's needed. But so far, we haven't seen any indication on that one. All indications we have on a business case and the fuel spread That will continue. And as I said, I'd rather take it from a positive angle that we have customers also investing for fairly old vessels because the payback is going to come quickly for them. So good development last year from an order intake point of view, and we see good development continuing this year as well. But you see less fleet agreements than this year, right, as you said? That's more a comment that we are following closely. I cannot comment on that yet because this is more a question mark still from our side that How will it impact then how the customers are reacting when we get to 2020? But at the same time, please keep in mind that there is There are long delivery times today, so it might be that larger fleet deals might change then to a bigger amount of smaller deals, but this is what we are following closely now. And do you already see a more significant contribution from ballast water equipment already this year? Or is it still Not so significant for you. If you look at and start comparing to the scrubber impact, ballast water is much, much Smaller impact. And also the competition in ballast water is you see more players, and It's a heavy price game. So for us, ballast water is clearly a smaller impact and has not generated yet in the big picture Significant volumes. But we see increased interest in it, if we state it like that. Thank you, Roger, and thank you, Sven. So if you remember, some years back, we acquired Hamburg at the end and good morning. Hi, Ashby. Just thinking maybe a little bit longer term, if I think about the savings you've talked about over the last few years, I think in My model, I've got over €100,000,000 of savings over the last 3 or 4 years. And obviously, margins have still been under a bit of pressure. When you look historically, what has been the key driver of that? Has that been mix or has it been pricing? And I suppose if it has been Pricing or mix, do you see any of those things getting better over the next 2 years? Thank you. I missed the really the first lines of the questions. So you are now asking the mix in relation to could you Repeat your question, please. Yes. Sorry, sorry, I might have broken up. I'm just saying when I think about the savings that you Pat, over the past few years, it seems like you've had quite a lot of savings. Say, for example, in our model, I think we've got over EUR 100,000,000 over the past 3 or 4 years. But obviously, margins have still been under pressure. Has that been really been driven by pricing or mix? And I suppose When you think about those two things going forward, is the pricing or mix in your backlog now better than it has been over the past few years? Thank you. It's when you look at our alignment programs we have had during the last, let's say, 8 since Lehman. So they have, 1st of all, been very much focused on the marine sector. And I have been running the business and then Roger later on, and we have done several actions to realign the organization and the way how we work. And one reason is that the huge competition going on in the marine sector, The overall huge overcapacity you have seen in the market, it hasn't disappeared anywhere. So it's still there, and you need to take actions. But it's also how you actually communicate and deal with customers. Marine industry It's a complicated industry when you sell to the shipyard and then you serve the shipowner later on. And that's why trying to figure it out what would be the best way. But really one reason for all these alignments have been the competition, The overcapacity, so pricing very heavy pricing pressure. There were also a lot of cancellations after to the Lehman crisis, if you remember. So that we were hit by those cancellations, but we actually succeeded quite well after all. And then later on, we have seen some alignment programs also in our energy When the market was hitting us and we were also Booking quite low margin deals and the way how we have reshaped the energy today, I mean, what you have heard also, We are getting better deals. But really looking at the world today, when it's changing and you get Digitalization, you get all new ways of dealing with customers together with the life cycle solutions. So you need these to the alignment program. This is not only a this is not a you shouldn't call this one only as a cost cutting exercise. This is more to look at how we sell, how we price and bring value to our customers. And That's really an important part of the program. Thank you very much. Very helpful. And then maybe just one follow-up, just on R and D. I think going through the year, you talked about it being flat year over year, but I think it Was up year over year, I think maybe EUR 12,000,000 or so, something like that. Should we think about R and D flat into 2019? Or do you you think you need to step it up again to deal with kind of digitalization or those longer term themes? Yes. You are Spot on, we spend more on R and D. I mean, if the absolute numbers you see from the report, EUR 165,000,000, Of course, going through the P and L is a bit different, but it's an area where we need to spend money to be competitive. And it was higher last year. Partly, it was also higher some of these developments and a new innovation because of the digital development. We have a very good organization looking at the transformation and looking the ways how we can serve our customers. A bit difficult to comment what's going to be this year, but we will spend money also in R and D. We will spend money in Vasa building, the new technology hub. And that's part of the new development going forward. Great. Thank you very much. Very helpful. Thank you. Our next question We'll come from Manu Rimpela of Nordea. Please go ahead. Thank you. I would like to ask about the energy orders and the outlook especially for 2019. If we look at the quotation of activity that you Just in the report presentation, so you're right. We've seen some decline in that activity, although it was sequentially slightly up in the Q4. So can you and then you talked about this German order. So can you talk about how comfortable do you Feel about the outlook you have for 2019, given that the 2018 ended up being weaker than you expected, And we know that global demand is slowing down on a GDP basis, but at the same time, emerging market currencies, and there is uncertainty around Those markets as well. So how comfortable do you feel with the outlook for the Energy business orders? Thank you, Manu. And I mean, Marco Viren, the Head of Energy has been waiting for that question and he is definitely ready to answer. Thank you, Manu. Very good question as well. I would say that tendering activity goes up and down a little bit depending if we have a big Auctions in certain regions or countries, but I would say that if you look at the underlying demand, it's definitely there. The fundamentals when it comes to renewables increasing and needing backup power and balancing power, That's definitely there. Of course, we see also that some utilities in some regions, they are actually replanning and redoing their plans, And this is causing a little bit delay in their decision making as well because instead of buying to traditional thermal power plants. They are actually now considering that they have to invest more in renewables. And of course, planning takes some time. But if you look at different regions, we see definitely that Both in North America and Latin America, there's a lot of opportunities. We also see Middle East, Asia, and that region is very active, both when it comes to renewables deployment, but also just flexible baseload energy need. Africa, we've been talking about that we see more activity there. And I also believe that we see some potential deals to be signed this year. So I would say that pipeline is pretty positive. But of course, this is a Business that you have to always look in a longer term than just 1 quarter. Thank you, Marco. Thank you. Okay. Thank you. And the follow-up would be, can you comment on how much of the order intake in 2018 was related to renewables? And if you just look at the geographical space, it seems very much emerging market weighted. So have you really seen a bigger structural shift Towards the developed markets and renewable energy? Or is it just really the case that it is still very much dependent on this kind of older Backup well, not backup power, but kind of just power generation in the emerging market, the backlog and outlook and pipeline is for. I would say that we see a lot of customers, not only in the Western countries buying Balance and Power for Renewables, but more and more also in the emerging markets, the interest of renewables is there And they are deploying more and more renewables, and they need backup there as well. So we definitely believe that, that will come as well. But the renewable story is, is it 1 third today? Yes. About we say that about 1 third is backup power for renewables today. Thank you. Thank you. Thank you, Manu. The next question will come from Antti Polin, Danske Bank. Please go ahead. Thank you. This is Antti. I would also like to ask about to the Energy business because when I calculate backwards, as you know, I'm able to do from your numbers, it Seems like the gas market as a whole has fallen this year in the 9 month period year over year and also the Wartsila market share is down. At the same time, If I look into what's going on with wind turbine makers, for example, I don't see a slowdown. So why is there such a discrepancy between the gas market as a whole and the wind thermometer makers? And why is the largest market share down this year? Thank you. Very good question as well. And I would say that if you look when different countries are deploying renewables, when they come to certain Share of renewables in that market or that market mechanism they were acting, they start needing the balancing power. I would say that tipping point we usually say is somewhere when they are reaching above 10%, about perhaps Approaching 20% renewables and then they need ballast and power. So they might invest a lot of wind power or PVs, But still they have a lot of old traditional generation left in the system A lot of old capacity, Germany is a very good example of that. They have a lot of renewables, But they haven't been needing balancing power because of the fact that they have a lot of steel coal and nuclear And that's why they have overcapacity. So that's why we have to look into each of the markets, where they are and what are their plans to take down the traditional thermal power as well. United States is a very good example. That's why we have been winning a lot of orders in the United States They actually closed down coal power plants. 2 reasons basically. 1, they came to the end of their life cycle, But also economical reasons, because today it is more economically feasible to deploy Renewables and balancing power that invest or keep actually the old coal plants running. Okay. And then I would also like to ask about the oil related business or oil powered business. Despite the big decline this year, you are not anticipating a comeback in 2019. I read from the guidance here again. Are you talking about Oilfield power plants. No, no, no, no, oil fired power plants. Oil fired. I would say that that tells a lot which country is ordering. We see a lot of countries that don't have access to gas today and if they don't have any plans to Secure the import of gas, then they will continue to buy oil. We see more and more countries, just like Bangladesh has been a very big oil country for buying oil fueled or fired power plants. But they actually have plans to implement or invest in terminal now. And we see that the interest is shifting over to gas fired power plants in the future. So it's very dependent on each country. Yes. I guess what I'm trying to ask is You are positive on the gas side long term. And in 2008, your oil fired power plants halved In order intake, this must be because of the emerging currency weakness. Despite that midyear down going trend in 2018, I'm surprised that you are not guiding more positively for 2019. Regarding the I would say that the emerging market currencies is not the fact that we have less or more oil fired Orders, oil fired power plant orders, it is depending which country is ordering and Depending if they have gas or not, just like I said, when Bangladesh ordered a lot of orders, then the oil part for share increased in our order book. Okay. Thank you. Thank you. Thank you, Antti. We will now take the next question from Mr. Robert Davies of Morgan Stanley. Please go ahead. Hello? Can you hear me? Yes. Now we can. Yes. Thanks, Jacob. Yes, just my question was just really around the Energy business. Obviously, you had very strong Order growth on the quarter, sales are sort of somewhat behind consensus expectations. I guess I just wanted to get a sense from you what's really changed between 3Q and 4Q In terms of your customers, I know you sort of highlighted EM currency volatility around 3Qs. That was sort of causing it to be particularly weak. Are you actually seeing any sort of underlying change in behavior? And how much of that sort of, I guess, order acceleration do you expect to kind of catch up into 2019? So just how you're thinking about development, particularly in the Energy business next year. Thanks. Thank you, Robert. Thank you. Very good point as well. And definitely, we saw a slowdown in Q3. That's why I always say that don't click this business on a quarterly basis because decision making is very lumpy And that's why we have to look at rolling 12 basis. 1 quarter could be quiet, but the next quarter we could get quite small orders. And there's a I would say, every country, every customer, they have their own reasons. And Quite often there is political decisions behind as well. And if there's any delays or political discussions, That immediately delays the decision making. But I would say overall, we see that on a 12 months basis, The activity is good. Okay. That's clear. And then my follow-up was Just around the service business, you mentioned growth over the year was maybe not where you wanted it to be. What are you sort of changing From a sort of operational standpoint, particularly now you're obviously embedding the service business with the other two divisions. I just kind of wondered Structurally and operationally, what's actually changed in 2019 or what will change in 2019 versus 2018? Definitely the way how we to operate with our customers. I mean, as the whole reason to have a new organization is to deal with the customer from the start, bringing value for life cycle solutions. We In marine, it's easy to say that we sell something to CPR, then we wait for the service deal. Now customers are asking something more. And from customers' point of view, they have been asking for this change. They would like to deal with Wartsila so that they know what would be the life cycle costs and the possibilities. And Really, really, this goes down to the market and the area where the customer contact point is that we allow more accountability also for these people to deal with the customer in a totally different way. Okay. That's great. Thanks, Jager. Thank you, Robert. The next question will come from Erkki Nesola of Inderes Ltd. Please go ahead. Thank you. Still coming back to the savings program. How sales mix agnostic are these expected EUR 100,000,000 savings? I mean, if energy sales volumes drop meaningfully while marine grows, would the impact still be the same? It was a bit difficult to hear the question. At least I didn't, but I don't know if Could you sorry, could you repeat it? I can repeat. Can you hear me now? Yes. Let's hope we can understand the question, sorry. Yes. About the savings program, how sales mix agnostic are these expected EUR 100,000,000,000 savings Aknostics. If energy sales volumes drop meaningfully while marine grows, would the impact Still be the same. Okay. Yes. But that's today, it's totally impossible to answer. I mean, we Kicked off the program, the whole process this morning, and we need to come back to that one closure when we know more about how it's going to affect our markets in different places. We have the more than 19,000 people in more than 80 countries. So I mean, we cannot yes, our CFO, Arjen Berens, is agreeing with me that we cannot open or we don't even know it, I mean, to be honest, at the moment. Fair enough. Thank you. The next question will come from Glenn Liddy of JPMorgan. Please go ahead. Good morning. You seem more confident about Being able to achieve your long term margin target of 14%, in the past, when you've talked about your margin target, you've also said It's going to be very dependent on mix. Is that still the case? Or does this get you to your margin target with less need to grow the service business because at the moment, you've got strong order backlog for equipment deliveries. So can you get to your margin target without a big lift in the proportion of service revenue? Thank you, Glenn. Very good question. And it's now good to remember we are selling huge amount of solutions equipment to our customers Last year and now going on this year, which will, as much as we have seen the market developing, will end also for service contracts going forward. So I'm not expecting the services to start dropping, and we will follow it very carefully that we need the services to be there and play a role together with the different elements in services, spare parts, how to look at our spare parts moving on and the agreements. But we are very confident when we look at our order book and the new structure we have and dealings with our customers together with the alignment program that we are on the right track reaching the target level. Okay. Secondly, on the Energy business, and you said that About onethree of the revenue orders are now coming from renewables. Are batteries Playing a significant part in the development of the business, I think people want batteries as well as engines? Or is that still something that's too early to decide? Thanks, Gled. And then Marco will open it up. Yes, thank you. I would say that so far it's quite small amount of batteries that are being sold, but definitely they will come. And it's a very good complement to the whole system. So I would say that we will see more and more batteries coming as well when we see renewables and other long term balancing power to be deployed. Especially when it comes to frequency power stabilization, batteries are definitely the best. Thank you. Thank you. Thank you, Marco. And now we it's 11 o'clock here in Helsinki. We need to up here. And thank you for all participating. See you in April. Thank you. Bye bye.