Good morning, everyone, welcome to Wärtsilä Corporation Result Presentation 2018. Everyone here in Helsinki, welcome also to Wärtsilä's new campus here in Helsinki. This place is actually called Experience Center. 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, then we have the possibility for questions- and- answers. 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. If I go shortly first through about the 2018 and the markets. 2018 was really marked by positive order intake development. That really happened 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, that, of course, was helped by our solutions. 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 slowed down compared to previous year. Here we have, during the year, quite many times commented that the decision-making among our customers is slower than it used to be. There are reasons for that one, we will come back to that one during the presentations. Net sales developed well, that's mainly coming from the new building markets. 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 three actually here, this hub or this campus here in Helsinki and the smart technology hub in Vaasa. Investments which are really promoting collaboration and cooperation within our customers, suppliers and academia. 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 grew 12%, as I said, mainly coming from the Marine and Services. Order book, all-time high, over EUR 2 billion.
Here it's always good to remember that we book orders in Services order intake only for the first two years. If you take the whole order book in Services into account, you could easily add over EUR 1 billion to that number. Net sales last year, 5% increase, pretty much where we expected it to develop. Book-to-bill, very strong. The result was not as we expected. Here in the result number, you should remember that we made a very high provision regarding our providing solutions to the nuclear industry, where we start deciding to end that business, that provision, EUR 70 million, was taken during the fourth quarter. Earnings per share, EUR 0.65, a bit higher than last year. Cash flow developed well during the fourth quarter, according to the plans.
Dividend proposal for the AGM is EUR 0.48 per share. Look at the ordering date development, which I already highlighted a couple of times, and really how it is developing in different divisions. Highest in marine scrubbers, also cruise and ferry, and the LNG carrier segment is developing quite well. Of course, Wärtsilä's very wide portfolio of solutions is helping our operations in the marine sector. Energy fourth quarter development was good. The whole year did not develop as previous year. We finally, during the fourth quarter, also got the famous El Salvador power deal, also seen quite good development when it comes to our solutions to the renewable energy story. Services contracts, very good development during the fourth quarter. Net sales, 5% during the year and 6% during the fourth quarter. Both services and marine developing quite well, energy, a bit slower.
Here, it is as we quite often have communicated, it is good to remember that sometimes the deals might flip from one quarter to another quarter. No drama if energy was only 1% in last quarter. Those deals, with what we have in our order book, will be also delivered later on. The mix is unfortunately also today affecting our and probably one of the biggest reason affecting our profitability. Services share, 47%, within services, the share between spare parts and projects and contracts is affecting our profitability. Book-to-bill, very high. It is good to look positively to the future when it comes to development of our sales. 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 decline in profitability during the last four years.
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, this is now the final and last time when we show services as a separate division. As said, fourth quarter development in service sales was positive, only 1% during the whole year. Not really reached the 5% expectations, that is an area where we need to also focus going forward. 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 is now 20% of the services sales, that is good that that is developing quite well. Here you can see the installed base covered by service agreements.
Overall, it has now stayed at the same level, not so much change during last year. As 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 am confident that this long-term agreements part 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 Wärtsilä engines. Mexico is actually quite interesting part going forward. Mexico has a plan to develop the energy industry, Wärtsilä, with our history and with the commitment we can show to our customers, we are very well-placed. Moving on to energy quotation activity, the same levels. There are, as we have said before, there are good pipeline going forward.
Decision-making is slower than it used to be, the decisions have not disappeared. We have not lost any deal anywhere but what we have been negotiating, but it takes more time. Gas, the importance of gas is getting more and more important. Here you can see also when you compare the year, the fourth quarter was good. Let's hope we can develop the order intake in a way that customers can make the decisions faster. At the same time, we have highlighted that the world economy is getting more uncertain. Globalization is affecting the uncertain globalization, the trade wars has to be remembered that there are a lot of uncertainty. The latest coming from yesterday evening, Brexit. Who knows what's going to happen there.
Looking at the different areas, Asia has been very strong when it comes to our orders. At the same time, when we finally got the deal in El Salvador, that's a highlight in America's 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 Wärtsilä 31, which is the most efficient engine in the world. We'll be operating on natural gas. This is really one of the types of transactions we have been highlighting, promoting and supporting the way and the story moving more and more to renewable. These are the typical deals you will be seeing also going forward. Market share dropped a bit here. This is one quarter behind the analysis always. As you remember, the third quarter order intake in energy was lower.
Probably we can't make any too many conclusions from these numbers. 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. I would rather look at the 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 Clarksons numbers. Clarksons was a bit more optimistic. Looking this year, the estimates are again a bit higher. Here, when you look at the different segments, again, supporting Wärtsilä story, cruise and ferries, LNG carriers and special vessels. People are sometimes asking that how long will this cruise ordering continue?
I think it's good to remember that if you look at people, how many people are traveling and spending holidays and so on, is it 1% or 2% of that population only cruises. 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. Ordering 2018 was very high in marine solutions. 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, these orders are quite for many years. A picture of our campus here in Helsinki, then 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. Finally, you see also the proposal which is going to go to the AGM. 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 Wärtsilä. These are different kind of actions, increasing the focus really on sales activities, how we sell, developing agreements and as-a-service business within Wärtsilä. We also definitely need to look at our cost structure. Finally, also optimizing the business portfolio and the organization we have. Unfortunately, this will lead to reduction of employees, and this is a global approach.
Wärtsilä 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 EUR 100 million. A final slide here, the prospects for this year, 2019. We expect 2019 to be in line with the previous year. If you look at the two businesses now, the demand in businesses, we regard them as solid. There is 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 for you to remember. 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, then give the line 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. 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.
Katja Boxberg, Talouselämä Lehti. Is this in English?
I think we do it in English because.
Yeah, well, whatever. You mentioned China and the trade war. Can you open up a little bit, what kind of effect are you looking at?
During the whole last year, we have highlighted many times that these concerns regarding the trade wars, whether it's trade war possibilities or challenges between U.S. and China or U.S. and Europe, China and Europe, and so on. You need to include into the trade wars different kind of tariff mechanisms and also sanctions which are affecting the businesses. Nothing bigger hasn't happened to Wärtsilä yet. We need to be agile, and we need to look at where the world is moving. Of course, the uncertainty is really affecting our customers' decision-making. If 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.
Do you see an impact already in the numbers you just showed?
We have seen the impact on the slowness of making decisions. The world is getting slower. The growth, what we have seen, is getting slower. Any further questions here? We can move on to the lines. Please.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. Pause for just a moment to allow everyone an opportunity to signal for questions. We'll now take our first question from Johan Eliasson from Kepler Cheuvreux. Please go ahead, sir.
Yes. Hello. Can you hear me?
Yes, we can.
Yep. I was wondering about your outlook statements. If you look at Marine, you say it's solid. 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 the prospects as I said. I have Roger Holm here, the head of our marine business. This is a golden opportunity for Roger to open up a bit how the market is developing.
Yeah. Thank you, and thank you for the question. I think if we start, as Jaakko 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. Please remember now when we look at the scrubbers and the environmental part, the order intake last year was really on a good level. 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. 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.
The general comment is that we are still looking at good demand and good levels as we have seen last year.
Last year, order intake was high, and if we say solid, it means that we expect it to be high.
Correct.
Okay. Just a question on the cost-cutting program then. I can understand why you implement it, obviously, having seen your margin development over the last few years. Now, will this cost-cutting 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. 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 comments around profitability for 2019. You talk about the cost savings being central to profitability in 2019. 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%. We do a lot of different actions. We have a new organization which is dealing in a different way with our customers. We need to do these alignment programs. If we reach the 14%, we need to gradually get there. I'm not going to start opening the profitability levels this year or margin levels this year.
Right.
We have a target where we are confident we will reach.
Okay. The follow-up question would be, if we looked at 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. 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, 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. I don't start opening up which product or solution gives a better margins. We have said that today we have a very strong marketplace 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. We have a good place in the market. We are today selling scrubbers with quite good margins. How the deliveries during the 2019 will finally hit and will be realized, I cannot start opening that one.
I can ask Roger, of course, to say about the scrubber market itself.
Well, maybe.
Max.
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. Are you planning to keep your capacity flat at the current 500 scrubbers level? Just to give us a sense of how you're thinking about orders for 2019.
Roger will open it up.
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. 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. There might be a few slots still left for delivery this year, but we can say that's full. We have a good order book for 2020 already, that's the part we are filling up. From a demand point of view, we still see good demand 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? 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. There are also customers that are installing scrubbers on fairly old vessels due to the fast payback. I would say at the moment, the development continue as we have seen so far.
Okay. Thank you very much.
Thank you, Max.
The next question will come from Sven Weier of UBS. Please go ahead, sir.
Yeah, 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 EUR 100 million, and how you would see the phasing of the cost saving between 2019 and 2020? That would be the first question, please. Thank you.
Okay. First of all, the whole program, as already probably discussed here, is going to 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 before we know all the numbers and effects to different parts in the world. 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, EUR 75 million, follows that development. I think that's the ballpark where we are.
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 halves of years, you have four, six months going forward during the next two years, and it actually starts during the latter part of the year. One could say one third, but I'm now guessing only. It starts later. Before we know the real effect to the whole company, it still takes time. We initiated the program this morning, this is something what we need to come back during the next months.
On the retention, I guess you mentioned that there's also some pricing pressure. I guess you're not assuming you keep 100% of the EUR 100 million. What's been 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. To clarify the figures later on when we know more.
Okay
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.
Then maybe the second question to Roger again, and sorry for keeping asking about scrubbers. I was just wondering, you rightly said that 2018 was really extraordinary in terms of ordering of scrubbers. I was just wondering, when you say good, does it relate to 2018 good 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 seen. Wouldn't that mean that 2019 could be, at the end of the day, a bit below the 2018 level, to say the least?
I start by commenting first on the open loop scrubbers, we haven't seen any impact among our customers so far due to bans in some port areas coming in. 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. The impact on the business case for our customers is minimal. If you want to find an upside on that one, we also have hybrid scrubbers that we can offer, and there are many competitors that only have open loop scrubbers. 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. So far, we haven't seen any indication on that one.
All indications we have on the business case and the fuel spread is that that will continue. 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 so quickly for them. Good development last year from an order intake point of view, and we see good development continuing this year as well.
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. At the same time, please keep in mind that there are long delivery times today. It might be that larger fleet deals might change then to a bigger amount of smaller deals. This is what we are following closely now.
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 smaller impact. Also the competition in ballast water is you see more players and it's a heavy price game. For us, ballast water is clearly a smaller impact and has not generated.
Yet
Yet in the big picture, significant volumes. We see.
Okay. Thank you
we see increased interest in it, if we state it like that.
Thank you, Roger, and thank you, Sven. If you remember, some years back, we acquired Hamworthy.
Hi, just thinking maybe a little bit longer-term, as I think about the savings you've talked about over the last few years. I think in my model, I've got over EUR 100 million of savings over the last three or four years, margins have still been under a bit of pressure. When you look historically, what has been the key driver of that? Has that been the mix or has it been pricing? I suppose if it has been pricing or mix, do you see any of those things getting better over the next two years? Thank you.
I missed really the first lines of the question. You are now asking the mix in relation to Could you repeat your question, please?
Yeah, sorry. I might have broken up. I'm just saying, when I think about the savings that you've had 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 million over the past three or four years, but obviously margins have still been under pressure. Has that been really been driven by pricing or mix? 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?
Yeah. Thank you. When you look at our alignment programs we have had during the last, let's say, since Lehman. They have, first of all, been very much focused on the marine sector. 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. 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. It's still there and you need to take actions, but it's also how you actually communicate and deal with customers. Marine industry is a complicated industry. When you sell to the shipyard and then you serve the ship owner later on, and that's why trying to figure it out, what would be the best way.
Really one reason for all these alignments have been the competition, the overcapacity. Pricing, very heavy pricing pressure. There were also a lot of cancellations after the Lehman crisis, if you remember. We were hit by those cancellations, but we actually succeeded quite well after all. 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. The way how we have reshaped the energy today, what you have heard also, we are getting better deals. 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 lifecycle solution. You need these alignment programs. This is not only 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. That's really an important part of the program.
Thank you very much. Very helpful. Maybe just one follow-up, just on R&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 million or so, something like that. Should we think about R&D flat into 2019, or do you think you need to step it up again to deal with kind of digitalization or those longer-term themes?
Yeah. You are spot on. We spend more on R&D. If the absolute numbers you see from the report, EUR 165 million, of course, going through the P&L is a bit different.
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 new innovation because of the digital development. We have a very good organization looking at the transformation and looking at 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&D. We will spend money in Vaasa building the new technology hub, and that's part of the new development going forward.
Great. Thank you very much. Very helpful.
Thank you.
As a reminder, please limit your question to one main question and one follow-up to allow everyone an opportunity to ask questions. Our next question will come from Manu Rimpelä 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 quotations activity that you passed in the report foundations, I would like to see some decline in that activity, although it was sequentially slightly up in the fourth quarter. Then you talked about these German orders. Can you talk about how comfortable do you feel about the outlook you have for 2019, given that 2018 ended up being weaker than you expected, at the same time, emerging market currencies, and there is uncertainty around those markets as well. How comfortable do you feel with the outlook you have for the energy business orders?
Thank you, Manu. Marco Wirén, the head of energy, has been waiting for that question, and he's 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 big auctions in certain regions or countries. 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. Instead of buying the traditional thermal power plants, they are actually now considering that they have to invest more in renewables, and of course, planning takes some time. If you look at the different regions, we see definitely that both in North America and Latin America, there's a lot of opportunities.
We also see in Middle East Asia, that region is very active, both when it comes to renewables deployment, but also just flexible base load 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. I would say that pipeline is pretty positive. Of course, this is a business that you have to always look in a longer-term than just one quarter.
Thank you, Marko.
Thank you.
A follow-up would be, can you comment on how much of the order intake in 2018 was related to renewables? If you just look at the geographical split, it seems very much emerging market-weighted. 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, not backup power, but kind of just power generation in emerging markets, the backlog and outlook and pipeline at least for?
I would say that we see a lot of customers, not only in the Western countries, buying balancing 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. We definitely believe that that will come as well.
The renewables story, is it one-third today?
Yeah. We say that about one-third is backup power for renewables today. Thank you.
Thank you.
Thank you, Manu.
The next question will come from Antti Hollo, Danske Bank. Please go ahead.
Thank you. This is Antti. I would also like to ask about the energy business, because when I calculate backwards, as you know, I am able to do from your numbers, it seems like the gas market as a whole has fallen this year in the nine-month period year-over-year, and also the Wärtsilä market share is down. At the same time, if I look into what is going on with the wind turbine makers, for example, I do not see a slowdown. Why is there such a discrepancy between the gas market as a whole and the wind turbine makers, and why is Wärtsilä's market share down this year?
Thank you. Very good question as well. 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%, above perhaps approaching 20% renewables, then they need balancing power. They might invest a lot of wind power or PVs, but still they have a lot of old traditional generation left in the system with 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 still coal and nuclear, and that's why they have overcapacity.
That's why we have to look into each of the markets, where they are and what are the plans to take down the traditional thermal power as well. The U.S. is a very good example. That's why we have been winning a lot of orders in the U.S., because they actually closed down coal power plants. Two reasons, basically. One, they came to the end of their life cycle, but also economic reasons. Because today it is more economically feasible to deploy renewables and balancing power than invest or keep actually the old coal plants running.
Okay. 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 oil-fueled power plants or-
No, oil-fired power plants.
Oil-fired. I would say that depends 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. 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. It's very dependent on each country.
I guess what I'm trying to ask is that, you are positive on the gas side long-term, and in 2008, your oil-fired power plants halved in order intake, and this must be because of the emerging currency weakness. Despite that big down going trend in 2018, I'm surprised that you are not guiding more positively for 2019.
I would say that the emerging market currency is not the fact that we have less or more 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-fired part or 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, Jaakko. My question was just really around the energy business. Obviously, you had a very sort of 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 of what's really changed between 3Q and 4Q, in terms of your customers. I know you sort of highlighted EM currency volatility around 3Q as that was sort of causing it to be particularly weak. Are you actually seeing any sort of underlying change in behavior? How much of that sort of, I guess, order acceleration do you expect to kind of catch up into 2019? Just how you're thinking about the sales development, particularly in the energy business next year. Thanks.
Thank you, Robert.
Thank you. Very good point as well. Definitely we saw a slowdown in Q3. That's why I always say that don't look at this business on a quarterly basis because decision-making is very lumpy, and that's why we have to look at rolling 12 basis. One quarter could be quiet, the next quarter we get much more orders.
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. I would say overall, we see that on a 12 months basis, the activity is good.
Okay, that's clear. 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 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, or what will change in 2019 versus 2018?
Definitely the way how we operate with our customers. The whole reason to have a new organization is to deal with the customer from the start, bringing value for life cycle solutions. In marine, it's easy to say that we sell something to shipyard, and we wait for the service deal. Now customers are asking something more. From customers' point of view, they have been asking for this change. They would like to deal with Wärtsilä so that they know what would be the life cycle costs and the possibilities. 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, Jaakko.
Thank you, Robert.
The next question will come from Erkki Vesola of Inderes Ltd. Please go ahead.
Thank you. Still coming back to the savings program. How sales mix agnostic are these expected EUR 100 million savings? I mean, if energy sales volumes drop meaningfully while marine grows, would the impact still be the same?
Was a bit difficult to hear the question. At least I didn't, but 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-
Yes.
How sales mix agnostic are these expected EUR 100 billion savings?
Agnostic.
If energy sales volumes drop meaningfully while marine grows, would the impact still be the same?
Okay. Yeah. Today it's totally impossible to answer. I mean, we kicked off the program, the whole process this morning, We need to come back to that one closer 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. I mean, our CFO, Arjen Berends, is agreeing with me that we cannot open Or we don't even know it, I mean, to be honest, at the moment.
No. Okay, sure.
The next question will come from Glen 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? At the moment you've got strong order backlog for equipment deliveries. Can you get to your margin target without a big lift in the proportion of service revenue?
Thank you, Glenn. Very good question. 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. 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. 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, you said that about a third of the revenue or orders are now coming from renewables. Are batteries playing a significant part in the development of the business, as in people want batteries as well as engines? Is that still something that's too early to decide?
Thanks, Glen. Marco will open it up.
Yeah. Thank you. I would say that so far it's quite small amount of batteries that are being sold, but definitely they will come. It's a very good complement to the whole system. 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. Now it's 11 o'clock here in Helsinki. We need to stop here, and thank you for all participating. See you in April.
Thank you. Bye-bye.