Welcome to Wärtsilä Q3 Pre- salent call and greetings from sunny Helsinki. My name is Hanna-Maria Heikkinen and I'm in charge of Investor Relations. Today, our CFO, Arjen Berends, will start with key messages. We will also show a few slides, which are already available on our IR website, and my colleague Noora will share a link to the chat. After the key messages, we have time for Q&A. When you have a question, please use raise your hand functionality. If you cannot use raise your hand functionality, you can also email the question for me. Let's first start with one question per person, and after the first round, we can continue with the follow-up questions. Arjen, please, time to start.
All right, let's start with these slides, if you can put them on the screen. Yeah, let's start with these. It's a bit of a reminder, if you could say, as well. We had good progress in our divestment of the portfolio businesses. As we already earlier announced, ANCS is now no longer part of the Q3 numbers, as we did the closing earlier in the year. That one is out, and please consider that also in your numbers. It will likely have a positive impact of about EUR 30 million, but there are still some post-closing adjustments that need to be tuned, so let's see what the final outcome is. I don't expect it majorly different. Whatever happens there will land in items affecting comparability. ANCS was the most profitable unit in portfolio business. It was about 80% of the portfolio business operating result, just for our reference.
We have also corrected the order book, so Wärtsilä order book will be adjusted also for the remainder part of ANCS to be delivered in the future, which now, of course, goes to the new owner, and that is about EUR 250 million-EUR 260 million. We also announced earlier the divestment of Marine Electrical Systems to Vinci, and we anticipate that to close within the last quarter of 2025. After that, that will also be no longer part of our business anymore in our numbers. We have two businesses left in portfolio business, which is Gas Solutions and Water and Waste. It's difficult to say exact timing, but hopefully sooner rather than later, we will also be able to divest them. If we move to the next slide, it's a bit about the volume outlook now for the second half of this year.
In marine, we have a good order book, I would say, to reach our own internal target of the full year, and especially for equipment business. It's quite a lot of equipment that needs to go out in the second half of the year. For energy, it's the same. We have also a good order book for the remainder of the year, but we clearly expect a peak in energy to happen in the fourth quarter. That will clearly be, from a sales perspective, the heavier quarter of the two. Good to know that in energy, we focus more and more on equipment deliveries, EEQ, as we use as an abbreviation. Where earlier, we had actually more EPC deliveries, but that has completely shifted in a couple of years. Now the far majority of our deliveries is EEQ, which is also a different revenue recognition method.
It's based on deliveries, completed contract method, where EPC is typically POC. That's a change also in the way we recognize sales. One general comment, and that goes both for marine and energy, the longer in time the order book gets, also the longer it takes to convert from order intake to sales. Good to keep in mind as well. Energy storage, similar market conditions are still there, as we also saw at the end of Q2. The U.S. market is more or less on a standstill situation, which makes that all competitors are moving to the active markets, which, of course, makes that market extremely competitive. It remains a bit of a challenge to operate in this market. Hopefully, let's say, things will stabilize, as soon as possible, if possible.
Of course, with, let's say, tariff discussions in the U.S., and I think you can all see how quick things change, it's not so easy to predict. Challenging market, and clearly, let's say, it is all our focus as well. If we move to the next slide, which is basically the most recent Clarkson forecast that came a couple of days ago, basically. In general, not so much change in the picture. This is basically the same picture as you could see from our Q2 interim report, where we see the total, let's say, ship contracting in the top, and let's say what is happening in our key segments. Basically, there are not any major changes. I would say, if you look at Clarkson total forecast, 2025 adjusted a little bit up, 2.6%, 48 vessels, where 2026 was adjusted a little bit down, 1.6%, 31 vessels.
In the total of, let's say, close to 1,900 to 2,000 vessels, that is very minor. You could say 2% - 3% adjustments either up or down, which in my view is basically ignorable. The trend is what counts, and that has actually not changed. If you look at our key segments, I would say good activity in cruise, ferries, very good potential, aging fleet, and the pressure is building up for owners to renew, basically. LNG, not so much activities today, but with, let's say, investment decisions on LNG export projects coming more and more online, we anticipate this will improve over time. Offshore, not so much activity on the new build side, but on the service side, we see very good activities. Specifically focused on marine, decarbonization continues, first of all. That is not only for marine, that also goes for energy.
In marine, of course, the key, you could say, event on the horizon is, of course, the decision on the global carbon fee, which is due to be decided upon in October, I think in the week of the 13th of October. Let's see what happens there. Despite the decision, I believe that decarbonization will also drive our business. Yes, certain items like carbon capture might delay a bit because that's very unclear under this decision context of the IMO, how that will fit into this whole carbon fee. That might delay a bit, but otherwise, anything that improves fuel efficiency is hot in the market, and fuel efficiency at the same time reduces carbon output because it correlates. Despite the decision, I'm still very positive about the way forward, and decarbonization will not stop. Good opportunities also in marine on moving up the service value ladder.
We see good traction in agreements and also in projects, also better than what we saw earlier. I'm quite happy with the development there as well. In energy, renewable energy still remains the cheapest form of generating electricity. They are intermittent, so you need balancing power, and that's a key market where we are strong with our solution. I think we have a perfect solution for basically anybody. On top of that, you have the whole data center opportunity, which is a very fresh and new one, but clearly ticking on quite well, and as also Håkan reflected earlier in his meeting on the strategy, we are working on several opportunities. Globally, I would say, it's not only U.S., even though that's the biggest market, but we are working with many opportunities in different places.
Good to see also that the utilization rate of our installed base in energy is holding up quite nicely, around 4,000 hours per installation. On tariffs, so far, we anticipate limited impact. Also, our evaluation of the latest aluminium and steel tariffs, we don't foresee any major implications to Wärtsilä. Of course, with tariff, things can change very fast. What's the situation today and tomorrow can differ quite a bit. We are currently expanding our R&D facilities in Vaasa, creating a potential for future growth, not just in, say, our R&D capability, but also in our manufacturing capacity and volumes in the Sustainable Technology Hub in Vaasa, and that is proceeding quite well according to plans. I would leave it there and give the floor for questions.
Thank you, Arjen. Now we continue with the Q&A. If you have a question, please use the raise your hand functionality, or you can also send in a question for me by email. Please, let's start with one question per analyst first, and then kindly leave the follow-up questions to the second round. The first question is coming from Akash Gupta. Please go ahead.
Yes, thank you, Hanna, and thank you, Arjen, for your time. My question is on data center orders and regarding your announcement policy, because last quarter you announced after we had a consensus poll, and as we have seen after the announcement, that share price was quite sensitive due to that press release. Just a question on your announcement policy on data center orders, because I think over the last couple of months, we have seen a very active market in the U.S., and there is a possibility that you might have landed something. I just wanted to ask on your communication guidelines, and just because you haven't announced something, does it mean that there is something in there, or just like there may be another scope of backdated order when it comes to your communication policy? Thank you.
No, we don't have a specific communication policy for data centers. Let's say we want to publish basically all the orders that we can publish. Of course, this is always, let's say, yeah, two parties need to agree that there is some kind of publication. Some customers don't want it. We are depending on them. Let's say we make an announcement. Sometimes they don't want to have any news on it. Sometimes they say, okay, that is fine, even with a name. It varies case by case. Of course, really significant orders, if you think, let's say, I think it's 400 million+ .
Yeah, 500.
Or 500 million+ , for sure it will go out. Those we have not booked, that I can tell already.
Those are very significant. Those are announced as stock exchange release, not as a press release, based on the regulation.
Yeah.
Press release half a billion, or 500 million.
Yes.
That will be released then. Thank you, Akash. The next question comes from Max Yates.
Hi, good afternoon. My question would just be around your marine services business. I guess one of the things that sort of maybe the only thing that was going less well in your business last quarter was your service orders. They were negative in marine. I think they were down 4%. I know we sort of talked about at length the kind of tough comps that you had in retrofits and upgrades, but I guess to what extent would we expect that to then kind of rebound and turn positive again? Maybe just if you could talk about the kind of broader environment for servicing, have you seen any pull forward? Has there been any change in kind of shipping routes and ton miles that may affect the service growth?
Can we be comfortable just looking back and saying, you know, that was a one-off and we see that business kind of resuming back in growth territory?
I mentioned before the retrofit business. We look at the book-to-build ratio on a rolling and a 12-month basis, and at the end of the last quarter, you look Q3 to Q2. The majority of the retrofit order intake, coincidentally or not, is always depending on timing of orders. In 2024, 37% of the marine order intake for retrofits fell in Q2, and 43% in energy. That's why the line dropped below one.
Can I just talk because it also dropped because it went from 70 to 75 down to 41, quarter on quarter. It did drop quite significantly sequentially. When you look at the absolute numbers of what your retrofits were, it was not enough just to, I guess my question still stands. Sorry, I interrupted, but just trying to understand, is there, do we see that kind of going back to 70 and that was just a one-off basically?
I would not compare service numbers quarter on quarter. It's useless. In particular for retrofits and agreements, timing of orders makes such a difference. Also, the delivery, actually, if you book now a lot, if you book in Q2 a lot, it might be that they are all delivered in the same quarter the year after. It is much better to look at the rolling 12-month trend. I'm not, at least I'm not getting nervous on a quarter-to-quarter comparison that there is a drop. No, I'm more looking at the trend. I think that's more relevant.
The trend is still in terms of services. Nothing's really changed, and it's still a growth business from here.
Yes, we anticipate still, I'd say, moving forward on the value ladder, which also includes retrofits.
Thank you, Max. Next question comes from Antti Kansanen. Please go ahead, Antti.
Yeah, hi guys. Just the one question from me regarding the delivery times and manufacturing capacity, especially on the energy division side. I mean, I guess you have a pretty good visibility on the marine side on your core segments regarding kind of a yard contracting vessels who have not yet ordered engines, but you have kind of good reasons to expect you will get those orders. What about then when you kind of look at your slots for energy next, let's say, a couple of years? What's the power plant delivery times right now? You mentioned increasing a little bit of capacity also on the manufacturing side in Vaasa. How should we think about that going forward? I mean, if we continue to see really strong orders, at what point will it just lengthen your delivery times and not add additional revenue growth anymore?
That's a difficult question to answer because it depends very much on, let's say, if all data centers orders would come to us, we would be sold out tomorrow. That's not happening. You need to make always an evaluation of, let's say, what do you have in the pipeline? How serious are the discussions? At what time do you think it will, let's say, land basically in our books, and also considering what kind of delivery time relates to it? Let's say also, our capacity is not fully utilized yet. If you want a 200 MW power plant, I think you can still get, let's say, engines for Q4 next year. Not all engine types because, let's say, we are clearly, let's say, limited in what configurations you can do and cannot do.
That depends also on, let's say, the mix between, okay, how much marine, how much energy, how much is it with the generator, how much not. There are lots of, let's say, variations. Typically, the bottleneck in the factory is the testing capacity. We are trying to optimize that. It's like a big puzzle, basically. It's like loading a container vessel, which one goes in first and which one goes out first in the next port. It's not so easy to manage, but I think we can still handle more. We have also a possibility to overflow volume. If we see the needs, let's say, marine engines can also still be moved to the joint venture. I think we are flexible in the near term.
Of course, if sustainably, let's say, the capacity requirement is going up and up, we will for sure take investment decisions at some point of time then as well.
I mean.
We don't want to run ahead of the troops, you know.
No, I get it. I mean, previously, you kind of published the megawatts that you were delivering per year, but I guess that figure is not available for last year. Is there something you would like to say regarding any ballpark what we should think about your Vaasa capacity in terms of that versus what the historical reported numbers that you have had on deliveries? Back then you had Trieste as well.
No, I will not make any competitor any smarter.
Okay, fair enough. Thank you.
Thank you, Antti. The next question comes from Vivek Midha. Please go ahead.
Thanks very much, Hanna. Good afternoon. Hope you can hear me well. My question is quite similar to the last one, but it's just around the energy guidance and how to think about that in the context of the demand you're seeing, particularly around data centers. You're guiding for relatively similar demand over the next 12 months. I just want to understand more. Clearly, you've had an excellent 12 months of order intake. Should we think of your guidance as maybe a more conservative view based on the uncertainties around the lumpiness with these large orders, how these potentially could land? Is it, say, a balanced assessment because, for example, as you say, you've got certain constraints on how quickly you can get things out the door? It's based on an assessment of when these things are going to land. Thank you.
No, I think you got it right, actually. We try to be realistic in our guidance. Big orders in or out make a big difference. I said it many times, the timing is not so easy to say. Will it happen this quarter, the next quarter, or the quarter after? Sometimes you think, okay, you will book it in this quarter, but then it shifts three quarters out for whatever reason. We try to be as realistic as possible and rather over-deliver than over-promise.
Understood. Thank you.
Thank you, Vivek. Next question comes from Daniela Costa. Please go ahead.
Hi, good afternoon. Thank you for taking my question. I just wanted to ask a little bit more into marine and in terms of the tendering and the things that are on the pipeline right now. If you can comment a bit by subsegment across all the subsegments, but especially like naval and LNG, wondering if you're seeing any signs of a pickup in activity there right now.
Naval, yes, I think there is more activity, clearly, but I think it's really about quoting activities. If now, of course, with the geopolitical uncertainty, a lot of countries are investing in defense and maritime and navies, I mean, then here. From an increase of budget decision to a contract for equipment from Wärtsilä, for example, that can take several years. Because what are you going to invest in as a country? Is it a new frigate program or is it something else, submarines, you name it? There are many different navy vessels. It takes a long time to convert increased spending decision by a government to final contract from a yard to us. There are also all kinds of tests and requirements and paperwork in between, it's quite cumbersome in navy in general. I would not be surprised four or five years from now.
Some go faster, some go slower, but it's not just like that. On your question on LNG, I think at the moment, it's, like I said in the beginning, a bit slowish. I think that's also what Clarkson basically announces in their updated forecast. There is more export capacity coming online, so the outlook is more positive. The expectation, at least that we see or we have, is that 2026 will definitely be a better year than 2025, but 2025 was very low. You could almost say it cannot get worse than that.
Thank you.
Thank you, Daniela. Next question comes from Johan Eliason. Please go ahead, Johan.
Yeah, hello, Hanna. Hello, Arjen. I was wondering about your net working capital development. You've been highlighting a little bit that it should normalize over time. Looking at your guidance, you have better in marine and stable in energy and better in storage, sort of a little bit of a mixed picture. Is there any sort of immediate conclusions one should draw about how to look at the working capital going forward?
I would say, you know, we have been, let's say, breaking negative records quarter on quarter. I've always said that, okay, I expect it to normalize. There are clearly elements in the market today that are making it, let's say, normal is perhaps the wrong word, but there are extraordinary items in the market today. As an example, if you have customers, which we see quite regular, and I would say even a little bit increasing, they don't want to give payment security in the form of LCs or bank guarantees or whatever. I'm perfectly fine with that. Then it's cash up front. We have, in the past years, gotten quite a few of those. We see, I would not say it's a trend, but we've seen it more than before. If I look at my history as a CFO, that's one element. Is that sustainable over time?
I don't know. Is this something of today? I cannot say. It is what it is. Will that change? That's one element where I say, okay, will that last? If it doesn't last, it will, of course, have an impact to the cash flow, basically, in the project. Another one, which is also in this respect worth mentioning, is the yard order book. Yard order book, the latest I heard, is 3.9 years out. The longer it gets into the future, and if yards, and that is also a tendency, want to lock their cost as well, they can lock the cost of Wärtsilä, then you need to put a purchase order to us and pay a down payment. You get the money earlier and actually the cash out because the delivery is further and further into the future. That has a positive impact to cash flow today.
Will those things last? If yard order books, because yard capacity is expanding, if the yard order books get shorter again, this will disappear most likely. What horizon? Difficult to say. Those are two examples of areas where I think, okay, this might be a temporary thing. Let's see how long. At least if I look, let's say, short to mid-term, I think we will keep, let's say, pretty well negative working capital. Earlier, I was thinking, okay, it could probably be slightly positive or close to zero, but I think we will have negative working capital still for quite some time forward. I will not put a timeline on it, but it looks.
You haven't changed your risk profile in the contracts you are taking. If it's a guarantee or if it's a cash down payment for you, it doesn't change your portfolio.
We want to have payment security in all our contracts. That's one must-have. Like I said, fine for me if somebody doesn't want to open an LC, cash up front.
Yeah,
okay, that's positive.
Yeah.
For now. I'm happy about it. Thank you.
The next question comes from Vlad Sergievskii. Please go ahead, Vlad.
Yeah, good afternoon. Thank you so much for taking the time. Thank you very much for providing details on the divestment you had outside of the portfolio business. Have you shared or disclosed what would be the cash proceeds for Wärtsilä from this divestment?
No.
Any indication on the multiple? Because obviously the earnings contribution from those assets you are referring to are quite material, right? EUR 20+ million in the first half, EUR 40+ million annualized, any reasonable multiple would suggest there are many hundreds of millions of euros of contribution up there.
We are not opening that up, definitely not on the parts to be sold.
Understood. If I can try to squeeze a quick one instead of this one. The fact that you are not expecting a material impact from this new section 232 tariff, is it down to the fact that the amount that is due on this tariff is actually quite small, or it's down to the fact that your customers are kind enough to take those costs?
First of all, we are not paying for tariffs. Whatever tariff happens, we are not the one to pay. That's passed on to the customers. Your first evaluation is, of course, true. We are continuously looking at, because it's also always changing, what custom codes are in and what custom codes are out. We keep a close eye on it. With the knowledge of today, the impact is limited.
Excellent. Thank you so much.
Thank you, Vlad. Next question comes from Sven Weier. Please go ahead.
Thank you, Hanna. Thanks for taking my question and hi, Arjen. My question is on storage. Obviously, Håkan spoke about it a couple of weeks ago that the situation is not good. I think you sounded a bit even more cautious. For us, I guess it's really hard to get our arms around this, right, in terms of how bad it is. Is there any helping hand you can give us in terms of framing the problem, quantifying the problem, or?
No, not really. Like I said, the market is super, super complicated at the moment. If you take the U.S. market, I think the latest tariffs on batteries from China, which is still the biggest supplier, and of course there are discussions ongoing, let's say, is it batteries from China or is it batteries by a Chinese producer outside China? Lots of, let's say, variation, but the latest tariff is around, I think, 40% - 41%, I think, if I remember it right. It's uncertainty. Nobody takes a decision in uncertainty. We have good opportunities, I would say, outside the U.S. Let's say our active project pipeline, as we also said in, I think it was April and even at the end of Q2, we have good projects, let's say, active projects outside.
The fact is that, let's say, while the U.S. market is on a standstill, all the competitors, they are moving to the active markets because they all have a, let's say, capacity cost to cover, including ourselves. That's also why we need orders. Difficult to open up. Let's say there are lots of uncertainty. I think I'm still hopeful that we will get some orders in. Let's say also this year. Yeah, we need to, let's say, manage this. This is a challenge, let's say, that we are facing. Yeah, we will for sure take action, the required actions if so needed. That's all I can say. It's a difficult circumstance. It's only from April. It started with Liberation Day, basically. In a way, it's also a little bit too early to make, let's say, firm conclusions.
The thing I'm also wondering about is obviously the profitability situation, right? We remember the days when it was heavily loss-making. Should we expect that to return at least temporarily, or is it not going to be that bad? That's what I'm wondering about.
So far we have a good order book. The deliveries, let's say, they keep us going. Clearly we need orders for, in particular, next year still.
Understood. Thank you, Arjen.
Thank you, Sven. The next question comes from Anders Idborg. Please go ahead.
Thank you so much. I just wanted, Arjen, if you could clarify the comments you gave there initially about the shift from EPC to EEQ and what it does to revenue and earnings recognition. What does it do? How does it affect basically this queue towards Q4 compared to how it used to work when EPC was like 50%?
Yeah. Let's say when you do EPC, you do percentage of completion contracting. It goes by progress, if I put it very simple, and that's much more, let's say, linear revenue recognition. Of course, also, let's say, equivalent margin. When you go to, let's say, equipment delivery, yeah, basically you recognize on the moment that you deliver, so it's much more momentum-like. It's very relevant that, okay, when is that momentum to the majority of the order book? Not in the past, let's say the order book for energy, you could say it was much more, let's say, linear delivered through because the majority was EPC, percentage of completion. Now it's very much pung, pung, pung, pung, depending on, let's say, when do we deliver to the customer, what have we agreed when we book the order.
That gives a little bit more, let's say, fluctuations in revenue recognition per quarter.
Yeah, that makes sense. The same for earnings, I suppose, even though it seems like, okay.
Yeah, you do revenue recognition for sales and margin, and that, of course, goes hand in hand.
Okay, I just want to clarify that. Okay.
Proportionally, yeah.
Thank you so much.
Thank you, Anders. We continue also with the follow-up questions. The next question comes from Antti Kansanen. Please go ahead.
Thank you. It was basically a very similar question than what Sven already asked for. I wanted to maybe, if you could talk a little bit about the cost base on the energy storage side, how much is it isolated to the U.S. market in a sense that if that market continues to be on a very low level, because you don't have a lot of like fixed assets on there. It's more like a consultancy or design type of a type of a business. What is kind of the fixed level of cost base that you are running? How flexible are you into this kind of a new level of reality where the demand is much lower in one particular, even a very important region?
I would not bound it to, let's say, what is U.S. bound. Of course, the U.S., and it's a global market. Like I said earlier, basically the majority of our opportunities, even before the tariff started, were outside the U.S. We had good opportunities that we're working on. The fact is that, because of the U.S. standstill, all the competition moves to the active markets, and that makes the whole thing complicated. I would say it's very much, of course, it's related to the U.S., but not just like that. Of course, if the U.S. market would open up and all these tariffs are gone and the whole Liberation Day is canceled, for sure, I think it would help not only us, I would think it would help the whole energy storage market because everybody has the same challenge.
It is more about just kind of a gross margin pressure on whatever orders that you might get elsewhere?
Let's say with increased, when there is a lot of supply and you know also that the EV market is not taking all the batteries, there are cheap solutions in the market all over the place. We are working with customers that value, we will not be the cheapest. We have never been and we will most likely never be. There are clearly customers that value our proposition, which is execution capability, performance, guarantees, no thermal incidents, etc. I think that has a value to customers and they're willing to pay for it. Now that everybody is going to the active markets, there are others that can also do something similar or very close to what we can do. It makes the whole equation quite difficult. It's getting more price pressure, and that's clear.
Okay. My second follow-up question was on the energy side, on the power plant side. There's always a bit of quarterly volatility on the equipment order intake. Is there anything you would want to highlight regarding kind of client decision making? Some companies are seeing that the tariff environment is creating a little bit of hesitancy and slowness. You are not as exposed according to your comments. Is there anything that you want to say about client decision making on the power plant side?
No, activities are still continuing. If, of course, we are in this 15% tariff category with our engine solution, I would not say that we see stoppages of projects in the U.S. because of that. I think people are still making decisions. For example, recently, the data center order in the U.S. is a good example, but also the order for Kentucky was another good example. Things are moving forward. They are not stopping, at least not yet or with this level of tariff, I would say.
Okay, thank you.
Thank you, Antti. Next question comes from Sven Weier.
Yeah, thank you, Hanna. One follow-up question, please, from my side is regarding the IMO meeting in October. Obviously, you have a marine backlog in place. You have a guidance for the next 12 months. Do you think there's anything either in the backlog or in the pipeline tied to the carbon fee decision, or is it just a co-pilot? If it happens, it happens. If it doesn't happen, it won't really influence the decision making.
No, I think it's the latter. Let's say all customers are very keen on fuel efficiency improvements. Of course, if you make steps into fuel efficiency improvements, you help your economics, first of all. It correlates also with, let's say, CO2 output as an example or exhaust in general. That will help you no matter what the decision is on your carbon footprint, being it CII, or let's not forget that there is already a carbon fee in the maritime industry in Europe, or the global one if that happens. Customers see that the fuels of the future will be more expensive than the fuels of today. It will happen in the lifetime of a vessel. If the carbon fee is not decided now, it might be decided in five years from now. It will likely come in the lifetime of the vessel.
Whatever we can do to work with fuel efficiency clearly helps us.
It's more basically for those who are intending to adopt late and not adopting at the moment anyhow. It's probably more important for them.
Roger Holm, heading our marine business, has said many times that this decarbonization journey is a complicated one. If you're going too fast, that's not good for you. If you're going too slow, it's not good for you either. You need to strike the right balance with retrofits and getting the right rating. Because also a carbon fee, if it would be decided for a global carbon fee, it will not be implemented just like that. It will for sure be gradual. What's the speed to adjust? We are doing a lot of consultancy work, actually, on this with customers.
Makes sense. Thank you, Arjen.
Thank you.
Thank you, Sven. Next question comes from Johan Eliasson. Please go ahead.
Hi again. Just to follow up on this EEQ EPC discussion, obviously you are now guiding for energy to have a peak delivery in Q4. Does that imply that we are sort of back to this normal seasonality pattern, at least for the energy division then, that this is the best margin of the year? I thought that was more related to services historically, the pattern you had there.
Yeah, let's say it's of course what you agree with. These orders that we now deliver in the second half of this year have probably been booked one year ago or perhaps even longer ago. I don't know them all now by heart, which go out now in this or next quarter. You follow the delivery requirement of the customer. I think now, I'm talking out of my head now, I think it has been rather stable on the equipment sales for energy recently, despite the fact that we moved to EEQ. I think it depends very much on how are the delivery schedules per quarter.
Yes, I was thinking now.
I would not say that, let's say, a normal Q4 seasonality is back again. I don't think so. At least it's too early for me to conclude that.
What was the main reason for this seasonality to sort of disappear after the pandemic, if you remind us?
Again, let's say, okay, there's one element which is very difficult to exactly say what the impact of it is because you need to talk to all our customers, basically. I could imagine, now I'm just speculating, that let's say customers take yards, for example, they are building a ship. Most likely they will do revenue recognition based on percentage of completion because the ship typically builds over a long period of time. If they close their financial year, they would like to have the delivery from us, let's say, before the year ends because then they can revenue recognize in that financial year. I'm not sure if that's a reason, but that has historically been, at least in a few occasions I know of myself, actually, when I was a marine controller many years ago, was the case. How much that plays today, I cannot say.
You need to ask really our customers. Let's say we deliver according to agreed delivery schedules with customers. This is, yeah, just how it is.
Okay, thank you.
Next question comes from Panu Laitinmäki. Please go ahead.
Yes, thanks for taking my question. I just wanted to ask about the data center potential or the new orders that you are negotiating about. What is the size of those potential orders? Would that compare to the one that you have announced in terms of megawatts?
I think we are working with several orders, I would say. Like Håkan said, more than a handful, clearly. I would say anything between 50 and, I would say, 300 MW, 400 MW.
Okay, those are within that range that the potential was.
Yes, yes.
Okay, thank you.
Thank you, Panu. Now I do not see any hands up. If you have a question, please use the raise your hand functionality. Let me check if I have any. Yes, there's one question by email. What are you seeing on feed momentum in energy in the U.S.? Any trends you can draw out post the rate cut and the U.S. tax bill or outcome on renewable subsidies?
I'm not sure if I get the question.
I didn't get it, unfortunately, either. Maybe any trends you can draw out post the rate cut and the U.S. tax bill outcome on the renewable subsidies? I mean, I think maybe regarding the changes in renewable subsidies.
I don't know. Let's say, at least for us, I don't see a lot of impact, frankly speaking. Like I said, the projects in the U.S., they continue. There is a need for balancing power. Let's say renewable energy is still the most affordable way to generate electricity. If you look at the last year, the main additions, I think, also came from renewable. That supports our case. We don't see any postponements or cancellations in that sense, at least not immediately say by the customer, okay, it's linked to that. No.
There is another question regarding the energy storage. Given the current state of storage markets, what markets or regions do you see as strategic in the next three to five years?
What is currently active is mainly Australia and Europe. Then you have incidents in other places of the world. I would say those are the most active today. Having said that, of course, in the U.S., I think if there would not be this uncertainty about tariff, it would be a very active market. Will that change in three years from now? I hope so. I think the U.S. is not doing themselves a favor continuing with this uncertainty in tariffs. Will it happen? I cannot say.
I do not see any additional questions by email. Still got 15 minutes. If somebody has a question here, please use the raise your hand functionality.
It's all clear, I think.
Yes. Thank you, Arjen. The Q3 report will be published on October 28. I hope you can enjoy the autumn before that. Thank you, everybody.
Thank you very much. See you later. Thank you.