Earnings Call: Q1 2018

Apr 24, 2018

Good morning, everyone, and welcome to Wartsila Interim Report January March 20 18 presentation. This morning, I have here almost all Board of Management to help me with questions and answers. And Natalia Walthasarri, Head of our Investor and Media Relations. I have a short presentation and then we can go after that one to questions and answers. First of all, a couple of words about the quarter and what's happening in the market. I would characterize the development of the start in 2018 has a favorable operating environment for our equipment businesses. Energy Solutions today is developing well and the market divided to the developing world development and the developed world development is going well. Wartsila is emphasizing a lot to help the story of renewable energies, at the same time, helping the developing world for their infrastructure story. Marine Solutions, Finally, the world looks a bit better. And of course, our solutions are well fitted to some of the segments like cruise and ferry and gas carriers, which are developing favorably. Economic outlook looks good. But at the same time, we see some geopolitical uncertainty making changes in our customers' decision behavior. You can see this in this quarter also how the services has developed And compared to services to our equipment businesses, the sales mix has actually burdened our profitability. It's good to remember that The world is developing well what comes to new digital solutions, and Wartsila is spending a lot of resources and money in our future. You have seen our latest idea to make a new acquisition. But at the same time, we have developed our own digital platform. A couple of numbers. Order intake grew 7%, very good development. Net saves, 6%. Book to bill is very high, 1 point 41. Result developed a bit, but as I said, a bit burdened by the mix. Earnings per share of $1,000,000 Now you need to remember that there are much more shares in the market. So that's to remember when looking at that number. Cash flow, negative, and I will come back to that one also in my presentation a bit later. Order book at the healthy level, dollars 300,000,000 over $300,000,000 more and previously. So equipment business development in order intake. Marine, 31%. It's a good development. Certain segments were going to the right direction. Energy was high last year, now a bit better. And services, last year was a high number. And So if we have a steady development, that's also good. Net sales, As I said, services mix, a bit affecting to the numbers. Marine, 13% up and Energy, 12% up. If you compare the group numbers, now you can see how the mix has affected. Services is 50% of net sales, Marine and Energy, 2025, both. Book to bill at a good level. Order book distribution. Delivery current year is up, which is, of course, good when you look at the year end and also up also when you look at the next year or later deliveries. Operating result. As I said, a bit better than last year, but it has been affected by the mix of services being lower last year compared to the equipment business days. At the same time, you will see that the parts development within the services is a bit lower. At the same time, as I mentioned earlier, we have spent €3,000,000 more in digital development. And in seasonal reasons, our R and D is up $8,000,000 higher than it was last year. If I move on to the divisions, Stable development in services. And here, you can see the distribution different between different product areas. Spare parts, 49%. Last year, it was 54%. Agreement's high. It's higher than last year, and that's, of course, good. Segments by segments, no big difference. Cruise on ferries is growing and that should be the case when you look at cruise orders and our success in the cruise market, that should be growing also going forward. Installed base, no big changes. It's a stable development. And of course, that's an area we should grow when you look at the agreements growth going forward. Highlight here in Q1, We acquired a couple of years ago a company, or was it last year, American Hydro, which is serving the different kind of hydropower plants. Now we have got a big contract in this is in U. S. And as I said, it's an enhancement of our capabilities to modernize these plants and really get better into the industry. Energy Solutions, activities is at the high level. And if you look at our orders in the Q1, it's a healthy order development. Much more on utilities. Gas, a bit higher. And if you look at the certain Geographical areas, Asia is strong. We got a big order in Australia. And then you have a much stronger Africa and Middle East. America is higher. So good division also globally. One highlight was a deal in South Australia. 2 11 Megawatt Power Plant for an Australian customer, which is exactly supporting the story of Wartsila helping the renewable energy going forward. The more you add renewables, the more you'll need to add flexible power alongside. Market increase market share increase, the market itself has decreased a bit. Wartsila's market share today is 19%. Moving on, Marine. Vessel contracting, a bit lower in Q1 compared to last year. In March, there were significant orders in cruise and ferries. I think it was even 24 ships. You had significant orders in LNG vessels and which is, of course, those two segments are very much helping also Wartsila's future. We had a good development in our order intake. Here, you see cruise now higher than last year. Traditional merchant is very much higher. There you have some of the shuttle tanker orders we have got during the Q1, which is, of course, when you look at the Korean markets developing well, where Wartsila plays an important role. Highlight of the quarter is our acquisition or a plan to acquire Transas, which is a global market leader in marine navigation 10, and the training and simulation services, at the same time also providing the ship traffic control systems. The value of the transaction was $210,000,000 and we expect to close it now during the second quarter. Fits well just spot on to the Marine strategy, where we are looking at the smart marine ecosystems developing globally. Marine Solutions market share. Now we have a new slide here. We used to show you the market share of medium speed, main engines and the auxiliary engines. But as you know, Arcela is today, much more than engines. And it's much more valuable to tell you where we work in different segments, what can we provide to the systems to the segments and whether we are the top player or challenger or one of the mid players. Here, you have the segments. Gas carriers and crews and ferry, we are definitely the top player. Different kind of systems, as you see there. Main engine is quite often one of the items. But for example, gas systems, it could be a vessel which doesn't have any engines. So then you only talk about gas systems and auxiliary engines or the ship is not moving. Then you have the traditional merchants, which included, of course, bulkers and tankers and container vessels. You have offshore and then some special vessels like dredgers and talks and the Navy's. So, this is a new way to show where we are. And let's see how we can develop this one going forward even further. But this definitely tells you more about where Wartsila works with different solutions. Financials. Gas flow low, purely affected by working capital and mainly in Marine Solutions, where we are, of course, preparing us for the future deliveries and certain taxis we paid in advance. And here, you can see the working capital development also in the group. Gearing, 0.21. And to finalize the presentations, the prospects for this year, unchanged. The demand in business areas in Services is good, in Energy Solutions is good and still solid in Marine Solutions. So, this was the presentation. And now we can open the lines and, of course, are ready here for questions and answers. And I would like to point out that there definitely are a lot of people also on the lines that if you could limit your questions to one question and then one follow-up question so we could get everybody on the lines to have the possibility to ask questions. But first of all, anybody here? Here, we have one question in the audience. It's Erkki from Endres. If the outlook still is solid in Marine Solutions, even though your order intake was grew more than 30%, What should we expect in terms of order intake in Marine Solutions going forward? Because it was a slight disappointment that you didn't improve the outlook. Yes, it's a very good question. And actually, if you look at the market there, some of the segments are not developing they are developing differently. Steel Merchant is a little bit slow, offshore, no developments. And then you see some of the crews and ferries and the gas carriers developing well. So We still keep the solid in Marine Solutions because the environment is, in our opinion, challenging. Let's see how the world or the year goes ahead and whether we need to look at it differently. May I please have a follow-up? It's not actually a follow-up. But the new slide you showed that are you going to define the challenger mid and top players in terms of ranking or market share, etcetera? Let's see how it I mean, top player means that we are number 1 or 2. The mid player is number 3 and something 4, 5, depending on how many players you have there. So And let's see. If the market needs to understand it even better, we can come back to define it even better. Thank you. Anybody else here in the audience? Then we can go to the lines. Thank you. And. And we have quite a few questions on the line. The first question comes from Max Yates from Credit Suisse. Your line is open. Thank you. Just my first question would be around the EBITA and the investments that you talked about, the €8,000,000 increase in R and D And the €3,000,000 in digital, could you give us just any kind of idea of how one offs these were in the quarter or whether we should expect that Perhaps your R and D could be up CHF 20,000,000 this year, your digital investments could be up CHF 10,000,000 Just to give us a kind of contextualize these on what your expectation is Yes. If I start with R and D, that was more seasonal. This was more for the quarter 1. And I don't expect our R and D expenses to be towards the year higher than they were last year. So that's more a seasonality. Digital Development, CHF 3,000,000 more. We are actually going to spend quite a lot of money in digital. The number, I don't have it at the moment because also the market is developing towards all kinds of different solutions. But it's going to be higher. If you need to multiply that €3,000,000 by €4,000,000 you can do that one, but I don't have a number for you at the moment. Okay. Could just the second question would be around the outlook comments and where you talked about sort of customer decision making Being affected, was that in a specific division? Or was that a sort of broad comment across all three divisions? Just trying to sort of target exactly what you were talking about there and what is being impacted? Yes. Thanks, Max. Overall, of course, everybody is concerned today about trade wars. And you need to be careful, but it hasn't made any changes in our decision making in the equipment side. So no effect there. But on those elements are affecting some of our segments in our services behavior that they are more looking at the spending. And it's more like being cautious that how the spending, transactional spending in merchant and offshore is going to develop. So, it's more to say that let's see what's going to happen. Trade wars can, of course, create all kinds of difficulties, but that's, of course, now globally, the economic outlook is good, but you need to be concerned. And And I presume nothing in the 1st sort of month or so that we've had of Q2 has really changed given this I mean, this is going on right now. So I presume But I would rather say that the more you delay one stage, you'll anyway need to do the services. So this might be seasonal effect. And so let's see. Okay. Thank you very much. Thank you. The next question comes from the line from Manuimpeller from Nordea Markets. Your line is open. Good morning. My first question would be on the services sales split. Can you just help us to understand that why the spare parts fall to 49% of service sales from 54% a year ago. Nineteen. Thanks, Manu. May I ask Pierre Paolo to open it up a bit? Yes. First of all, I would say that and As you have seen, our order intake this quarter has been extremely high. Last year, same quarter was a record. This year is even bigger record. But this year, we didn't have any capital. So we had a Very interesting project in the order intake and it changed our profile. As you know, our order book 4. 2 thirds is related to long term agreement. In the sales of every month, 2 thirds are related to transactional business. So in the transactional business, we have assisted to we have seen for especially for merchant to and purchasing behavior on essential components and essential activities and works. And this is the reason for this transactional flat development. And specifically, if I look at the spare parts, so that sales declined year on year, whereas the whole service sales was flat. So Anything specific behind that? Anything specific, but we have also to remember that on the agreements, and the agreements is not pure field service transactional. In the agreements, there are also parts. So let's say, parts is part of your transactional. On the agreement, we have a certain portion of parts as well. So that's also one explanation. Okay. I guess that's very much it. Thank you. The next Question comes from the line from Alexander Virgo from Bank of America. Your line is open. Thanks very much. Just a couple of questions. Actually picking up on that last one. If Customer behavior is changing as a result of geopolitical uncertainty and affecting the transactional business. Does that raise a question With respect to the requirement for revenue that you need in the balance of the year, I think if you look at the backlog for delivery this year, it would imply somewhere north of 10% to 15% also of growth year on year in transactional business. Any comment you can provide on the color around that would be helpful. First of all, We are not changing our prospects for the year end. So, I mean, let's see, this was the Q1 and there is a concern in the market. No need to start wondering that whether they start or they stopped buying or so. But it's good to remember that these might affect the decision making. And of course, when looking at the different quarters within Wartsila, they are different. So still, we stick to what we have said earlier towards the year end. This is not affecting the year end yet. Okay. And then just Would be if the can you talk a little bit about how that affects Your mix given the EBIT in the Q1 was probably a bit disappointing because of the mix effect. Sorry, Alain Sandler, we lost some of your questions. Could you repeat it? Yes, of course. Apologies. It was just that if your service business was flat and slightly disappointing, I suppose, in the quarter because of these concerns, Can you talk a little bit about how that would affect your profitability through the balance of the year given it has affected the profitability in the Q1? As I said, no effect to whatsoever the year end looks like. Now there was a certain behavior, let's see how it develops towards the next quarters and so on. And if the mix is as it has been in earlier Atsila numbers, there is, of course, no change. Here in quarter 1, it's good to remember that FX was also affecting negatively to our services numbers, which was actually minus €41,000,000 So that dropped a bit this is net sales. Okay. That's helpful to know. Thank you very much. Thank you. And your next question comes from the line from Sven Weier from UBS. Your line is open. Yes. Good morning, Jaakko. I was just actually exactly wanting to touch on that point of currency, because I think if I do the adjustment, Your service revenues were up 7%, 8%, so not so bad. And shouldn't you also see a positive impact during the rest of the year on service, Both from a bigger merchant fleet, bigger active merchant fleets that we now have and more activity on scrubber retrofits? That would be my first question. Exactly, Sven. You are right. Of course, the FX was affecting. And as I said earlier, we are not changing anything towards the year end. And there will be more merchant vessels. The behavior in merchant and offshore is not always understandable. So that might always affect the different quarters. But that's developing to the right direction. And scrubber orders, both in marine and services is going to help us. And the Q1 was very positive. We got a lot of scrubber orders in Marine Solutions itself, but also scrubber orders from which we will be delivering through our service organization. Good. And my follow-up question would be on Energy Power Plant Solutions. Maybe I don't know if Javier is on the call, but maybe just a brief comment on the pipeline? Yes, Javier is here, and I'm sure he is willing to comment on I'm here, definitively, and thank you for the question. I mean, we have A strong pipeline, and I have to say that it's getting stronger in both, as Jacob was mentioning, both the developing world To provide flexible base load power. But in the developed countries like U. S, we see constantly Strengthening our position. We have seen the Australian, our biggest order ever in that country. We see in Europe also our position is strengthening. So we remain seeing the full transformation of energy into renewables is making our position strengthened day by day. So basically pipeline getting more active and therefore good outlook for the remainder of the year? Yes, absolutely, it is reported. Okay. Thank you, Bose. Thank you, Sven. Thank you. The next question comes from the line from Johan Eliason from Kepler Cheuvreux. Your line is open. Yes. Hi, this is Johan. Just coming back to the services, you blame lower service share, that's mix So revenues and then lower spare parts in that mix as well as one of the reasons for the weak margin in Q1 Or at least versus our expectations. Now isn't it so that you have been quite successful on this maintenance agreement? Shouldn't we expect that the mix towards more agreement type of revenues and those Implicitly lower share of spare part revenue should change going forward towards potentially a weaker margin picture for and For the services as such? Or how does the maintenance agreements impact the margins inside the service business? Thank you, Johan. As Pierre Paolo already said earlier that the maintenance the agreement side, if that increase, it increases the spare parts at same time. So, most of the agreements have actually spare parts included in the agreement. So, that's why we when we say that the agreements are growing, is actually helping our business and our profitability because we, 1st of all, have a long term relationship with the customer. We don't need to fight for the transactional spare parts every year and every quarter and every month and every day, but it's actually included in the agreement. And that will help going forward. If the agreements now are or have been increasing, It's good still to remember that they are long term agreements. And if agreements grows €100,000,000 it doesn't grow our net sales immediately next month SEK 100,000,000, but it's divided for 4 years. But it gives the certainty that we can continue. And Pierre, Paolo wanted to comment a bit more. I wanted to highlight also the operational profile of installation counts. For example, you have seen in the graph is flat In terms of megawatt installed, the graph. But in terms of installation, we have from the end of last year, we have 10 more installations. So it means that there's more installation, but we are growing in that field. And then when I said the and operational profile means that we have an agreement, but then we perform according to certain schedule. If you have an installation that is peak a big plant. Of course, the maintenance is scheduled differently compared to a load plant. Okay. Thank you very much. Maybe just a clarification on the scrubber side, so I remember it correctly. So new Bills, scrubbers, they all go into the Marine division. But retrofits, does it only imply that both the equipment and the service This goes into the services or is it sort of split between the Marine division and service? So, if it's a new one, it goes to Marine and if it's a retrofit, it goes to services buys the Marine or the scrubber from Marine, but it's in the scope of the installation commissioning and so. Okay. Thank you. Thank you. The next question comes from Antti from Switzerland. Your line is Yes. It's me here. Both questions on service. Why are you Getting so good orders from service, but you have problems turning the orders into sales. Last year, your book to bill in services was 1.14, so really good book to bill, but sluggish revenues now. Antti, first, The answer is that the order intake in services, what it's based on the long term agreements. And they might be Cardenval was last year. It's 12 years. And we only recognized 2 years of that failure in our order intake. And at the same time, the development when the sales starts, I mean, it doesn't immediately come into the picture. So but going forward, I mean, step by step, it increases the net sales also. Okay. And then what Drove service order intake now in Q1. You had flat even if last year you had €150,000,000 of Carnival. So what compensated for the, let's say, loss of Carnival compared to this year versus last year? Good questions, Antti. Piappa, you could actually? This is the difference with last year. Last year, in the Q1, we had an order intake linked to agreements. This quarter, that was this huge Order intake is related to projects, the Bear Swamp and other projects that we had, including the scrubbers, significant amount of scrubbers and so on. That that is the difference. How many scrubbers did you book now in Q1? Order of magnitude is around 40 for the order of magnitude. Okay. How much is 1 scrubber in terms of order intake? Well, we can it's different according to the size of the scrubber. And that was Antti, that was the services order intake scrubbers. Marine had 34 scrubbers. And we have always said that the scrubber order is from even from 1,000,000 to even to 5,000,000 in big cruise ships. But then when Pierpaolo talks about orders. That includes installation and installation. No average size. Okay. But all in all, you had 70 4 scrubbers, 40 in service and 34 in Marine. Is that understood? Approximately. All right. Thank you. You're welcome. Thank you. The next question comes from Glen Liddy from JPMorgan, your line is open. Good morning. Could you give us an idea what's happening in terms of pricing for each of the 3 areas of the business? Thanks, Glenn. It's challenging, but we haven't seen any negative changes. Of course, I would always highlight the marine. I mean, it has always been a little bit down and difficult market. And of course, there is a lot of players. There is a lot of overcapacity. So it's a challenging market to get the orders. But we have during the years, we have been able to protect our margins when we sell bigger solutions to our customers. And then, of course, if it includes services going forward, you can safeguard the margins in a bit. Energy, you know the story that we used to have a low margin business and that's getting healthier quarter by quarter and year by year. So it's services, it will probably be the same, no changes. Okay. On the service business, your installed base or your percentage of your installed base, I think you've been winning orders in the marine industry with people other than Carnival and over the last 12 months. Yet your percentage of your installed base is covered by contracts is now stable relative to last year. Is that just because you haven't booked any major service contracts so far this year? Glenn, Pierre Pappas, I want to answer that specific question. No, that'd be because let's say, in terms of installed base megawatt, right, we are stable. And in terms of installation, number of installation, we have been growing 10 installation from the end of last year. So let's say, it is related to the type of installation, how many megawatts are installed in that specific installation? So we have been growing in number of installation. We have been growing these 3 months in number of installation. The number the kilowatt installed are the same, approximately the same. Is that the same for the power business because that's stable for a few years as well? So what's more important to Profitability, the number of installations or the number of megawatts? The important factor is that the installations are running And they are not stopped. And they are not peak plants or they are if they are load plants, they consume more and they require more activities and then we sell more. Okay. Thank you. Thank you. Thank you. Your next question comes From the line from Sean McLoughlin from HSBC. Thank you. Good morning. Just a question on your cash and. Outflow in Q1, I see working capital continues to trend up as a percentage of sales. I mean, how much is structural? How much is seasonal. Any clarity here would be useful. Thank you. Thanks, Sona. Marco Viren, our CFO, wanted to answer to this question. Yes. Thank you. I would say that in Q1 or usually actually in the 1st part of year, we always build up inventory. But also in this Q1, you can see that the percentage completion is increasing a lot, Which means that we are doing a lot of work, but we haven't invoiced our customers yet. And because, especially In the equipment side, it is quite visible. We had a lot of deliveries throughout the year, and especially in Energy Solutions. And that's why we are building inventory now to be able to deliver those equipment in the latter part of the year. So the build is mainly For Energy Solutions and that's the increase. Therefore, as you deliver through the year, we'd expect that number to come down? Actually, it's both on Marine and Energy. But in Energy, you can see that inventory is increasing more than in Marine because The power plant is only engines, so it's a big inventory chunk. While in Marine, we've seen that There's a lot of percentage completion that we've been doing in Q1 because there are smaller installations and that's why we've seen that. But in both actually the inventory is increasing a little bit more in energy. Yes. Thank you. Thank you. Thank you. Your next question comes from the line from Julius Raffelli from SEB. Your line is open. Good morning. It's Tomi Ryvo from SEB. Coming back to the currency issue, could you be just a bit more specific on the impact of the currency changes in the orders, sales and profits? The currency Negative effect to services sales was minus €41,000,000 No other effect to other divisions or major. Order intake, minus 41 in services, 45, 45, and no effect to our profit, I mean, no major in profit at all. And do you expect negative currency impact for the full year? It depends on USD. Yes. USD could be a concern. But it's difficult to start expecting or forecasting currencies. USD is a question mark. Then on the Marine order intake, I can see actually that the growth was coming from Almost tripling in the Merchant segment and the cruise was double compared to last year, But gas carrier was actually very weak in the quarter. Do you see gas carrier orders picking up and maybe from Timing perspective to be more in the pipeline, I would say. Thank you for the question. Roger Holm, Head of Marine Solutions, he could open a little bit what's happening in the market. Thank you for the question. If I start with the big share of merchants, There were actually 2 big orders that increased the share of merchants. One was the Teekay deal where we booked part of it already in Q4 and And the other part came in Q1. We had in total 4 shuttle tankers for TK built at Samsung. And the other one was 2 tankers also for American Eagle Tankers that were booked in quarter 1. So these two orders itself had a large impact for our merchant order. Then back to your comment about gas carriers. I would say gas carriers is normal fluctuations depending on when the orders are booked. We don't see any major changes on gas carriers. If you look at vessel contracting, actually in Q1, we had the equal amount of LNG carriers or that as we had for the whole last year. So the LNG carrier segment is very active at the moment. We had no FSRU orders in Q1, while we had, I think 6 in total last year. So gas carriers are more seasonality from an ordering point of view. So if I mean, I understand that it fluctuates, but if it was roughly 20,000,000 Gas carrier orders in the Q1 and around SEK 100,000,000 in the Q1 2017, obviously, triggered by some larger activity. But is activity closer to the SEK 100,000,000 or the SEK 20,000,000? I think what you need to take into consideration here is that last year, we had quite good orders on FSRUs where you can see one deal is between €20,000,000 €30,000,000 for just 3 gas modules. But that has a big impact that if there are no FSRU activities, you see it immediately on that part. LNG carriers also last year was Fairly low. And the activities that we have seen now in new gas carriers orders in Q1 for LNG carriers are not yet reflected in our order intake. But the development and the sentiment in the gas carrier markets in general is improving. And then on the storage systems side for energy, you, I believe, announced 2 orders. Can you tell us anything about the megawatt size or and current. Euro value size? Yes, Javier can answer that one. And by the way, we agree to have one question and one follow-up. But Javier will still answer to that one. Very good indeed. And I will answer, try to be short. I mean, we have a lot of activity in the energy storage field. There is a lot of interest from the market. Since the acquisition of Gruner Smiths in 1 year ago, We are in the top global leaders in energy storage. Said that the deals and the projects are all very small, Small in size, mainly focused on complete turnkey solutions that include a software platform that is the Grainsmith platform managing the assets into the grid. So in terms of megawatts, they are not comparable to traditional power generation because we talk about megawatt hour of storage, not about generating power. So you cannot compare them. It's a market that is in the incumbents really getting born now, and we are Taking the leadership and taking the first steps into it and making sure we get as many deals globally as we are doing. Thank you. Your next question comes from the line from Edward Maravanyika from Citi Research. Your line is open. Hello. Good morning, Jacob. Thank you for taking my question. Just had a question to clarify the scrubber numbers. So if we look at the 77 scrubber systems sold last year, how does that number compare to the numbers you've given For Scrubs this morning, is that number just for Marine or is that number comparable to the services Plus Marine. Yes. This quarter, that's over 70 is both Marine and Services. East. Last year, probably, we didn't have any services, but only marine. And that's a new build. I mean, you need to remember that we have newbuild marine and then services makes the retrofits. Okay. And if we were to add the services number To the Marine number for last year, what would we get? We didn't get any service retrofits last year. It's actually started this quarter. Okay. Okay. Understood. And have you got any just as a follow-up, do you have any sort of insight with regards to scrapping rates. If the vessel owners, if you think you're If you are seeing scrapping rates going up, because I would imagine if scrubber retrofits are going up, it means Vessel owners are starting to take the Jan 2020 deadline quite seriously. Good question, Edward. I don't think we have seen scrapping rates going up and then not at all because of the 2020 because now you need to remember 2020, people might go for LNG, they might go for scrubbers, they might switch the fuel or they don't comply. So many of the players are waiting just to see the fines and so on. So they don't make decision to scrub or increase the rate of scrubbing yet. Okay. Okay. Thank you very much. You're welcome. Thank you. We have a few follow-up questions. And the first one comes from Manu Wimpela from Nordea Markets. Your line is open. Nineteen. Okay. My follow-up would be on the quotation activity that you show for Energy Solutions. So we have a slight dip in Q on 2018 compared to the Last couple of quarters, and I think Javier mentioned that the pipeline activity is improving and looking stronger. So could you just Explain why we saw a dip in quotations and is that something we should be worried about? Thank you, Manu. Thank you, Manu. No need to be worried at all. So some peace of mind is the number of quotations is based on number of projects, so not size, complexity. So we are as you know, we are enlarging our solutions, widen our portfolio. We are doing in really turnkey, Life cycle support, energy storage, gas solutions. So it's not comparable one period to another. So in that sense, We see the pipeline getting bigger in value and bigger in activities too. So but we will continue following up the Number of quotations because it gives benchmark to the past. But small fluctuations like this one is no need for any worry. Okay. And then maybe a follow-up on that. Can you comment just a bit more detail in terms of how do you nineteen. A lot more of the quotation activity being linked towards renewable energy today because traditionally you've been still very much exposed in the kind of emerging markets and more like traditional power generation. So can you give us some figures to understand how the kind of renewable share has developed? I mean, definitively, we I want to highlight that we keep our very strong fit and foundation in the developing world As flexible solution for new electricity in places where they didn't have access to electricity before, as you can see in our order intake. But at the same time, our growth in the developed world supporting wind and solar to happen with the smart power generation, with energy storage solutions, that Part is getting bigger and stronger every month that we can see. And you can see also from our orders booked in the last, you would say, 1 year already. And. The next Follow-up question comes from the line from Johan Eliason from Kepler Cheuvreux. Your line is open. Yes. Going back to the Scrubbers, is it still mainly cruise ships that are taking these scrubbers? Or are you seeing some activity in other segments as well? And is there a difference between the newbuilds and the retrofits that you are starting to see here in terms of which segment of the industry is buying those? There is definitely a change now that it used to be more cruise ships and ferries and only new building. Now you see new building also for container vessels merchant vessels And the retrofits are all basically almost merchant, different kind of merchant vessels. The type of scrubber is also changing. I mean, you used to have closed loop and now you have more open loop or mixers and so on. So now finally, because of the 2020, other segments are also looking at the different ways to comply. Excellent. And then have you had the opportunity to look closer at the Marine business? Rolls Royce wants to divest? Johan, thank you for the question. I was waiting for that one. And Yes, we have said many times that we will look every acquisition possibility if it supports our strategies, the smart marine and smart energy strategy. And so let's see. But have they started opening the books for you yet? Or how does it look? You should ask their opinion whether they want to tell with whom they talk and what they talk, so. Okay. Thank you very much. Thank you, Johan. Thank you. And the next question comes from the line from Alexander Vogel from the Bank of America. Your line is open. Thanks very much and apologies for the background noise if there is any. I just wondered, Jaakko, if you could talk us a little bit through the operating profit For each year on year because I'm just struggling a little bit, I guess, with the operational leverage given, I guess, if you adjust for the FX, your organic growth and 10% or so at the group level in terms of sales. Shouldn't you be getting better operational leverage on that and in the quarter, I appreciate it's only a quarter. And if you could give us any color on that, it would be great. Alexander, thank you for the question. And as I said, And we have been speaking about the years to come and how we are developing, how operational leverage is affecting how much we are doing actually for the profitability. And but at the same time, it's good to remember that our quarters are I mean, they go up and up and down, and then there are seasonal reasons. And now, I mean, the unfavorable mix of the sales that should actually change going forward in different directions. And but I'm not ready to start guiding the numerics of or the figures of the year end. You see that the markets are developing well in all the divisions, and that's supporting also then the net sales growth, supported by, of course, that we need the services also to perform every quarter and at the year end and next year and so on. But that's also supported when you get more equipment, more solutions into the market, they will attach our services going forward and that will support the profitability. Thank you. And the last question in this line comes from Sven Weier from UBS. Your line is open. Yes. Thank you for taking the follow ups. Just on the chart you gave on Page 25, your market positioning, I think it's quite Timely charge given what you've just said on Rolls Royce. And I was just wondering if we were including this business into the picture, I mean, which business would you not be a top player then anymore? I guess, it's especially strengthens your offshore, right, and So maybe in merchant, but hardly any business left where you would not be a top player anymore, right? So Rolls Royce is very much in offshore segment or has historically been. And their propulsion systems are very much complementary to our propulsion. It's and they work in certain same segments. The cranes, the deck machinery and so on, that has also been more in offshore. Then you have automation and you have their new Digital Development, it might be supporting some other segments. So overall, And I don't know how to answer your final question point at what would be there and what wouldn't be there. But you know Kroglsthorst and you know till end. Does it make sense? If then you need to start studying it even more. Nineteen. And then speaking about offshore, I mean, Alfa Laval yesterday, they announced numbers and obviously there's quite a bit of offshore orders in the quarter. Is it really that you're seeing absolutely 0 activity still or is there any cautious signs of some comeback here? I would still say that the numbers are small. I mean, what would be the right Verd. And in our case, we have not seen the only area where we see offshore activity is in services. And I mean, that's not the normal. If there is an activity, they start taking existing ships or lay up ships in operation, and then we would start seeing it even more in services. But starting to order something Marine Solutions, and we were 2 weeks ago, some weeks ago with Roger Holm in Korea, and they said that, okay, 0, still 0. So I don't know if there might be then some Norwegian offshore moving on, but very, very small. Okay. Thank you again. Thank you, Sven. Thank you. We have no further questions at this time. Thank you. And any further ones here from the audience? No? All right. Thank you, everyone. Good set of questions. And let's see you then in July. Bye bye. That does conclude the conference for today. Thank you all for participating. You may now disconnect.