Wartsila Oyj Abp Q2 2021 Earnings Presentation Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Yuxin Lin - JPMorgan Chase & Co, Research Division - Analyst : Can you hear me?

Question: Yuxin Lin - JPMorgan Chase & Co, Research Division - Analyst : My question is around a regulation proposed by EU regarding the decarbonization of marine industry last week. Can you please elaborate on what this means for WSrtsilS in general and how the proposal compares to what you have hoped before? There seems to be some general disappointment about the slow phasing in emission limits. Specifically, what does it mean for the current 4-stroke [dual-fuel] engine technology given focus of reducing total (inaudible) emissions, which could put your current 4-stroke engines above the limit due to the methane slip?

Question: Antti Kansanen - SEB, Research Division - Analyst : Yes. This is Antti from SEB. And it is a bit of a follow-up on the previous one, on the M&A side and capital allocation. And Hskan, you've been with WSrtsilS for a number of months now, so what do you think about the technology portfolio and especially regarding the decarbonization, the battery storage side? Is the offering complete enough to kind of maintain the competitive edge, for example, on the storage market? Is there something that you should add via M&A or partnering regarding renewables or things like that? What are your first views on that matter?

Question: Antti Kansanen - SEB, Research Division - Analyst : All right. And then a follow-up on the storage side. And you mentioned that the lifetime profitability may be lower than what -- on the thermal side, but could you comment a little bit about the earnings pool on this project? How much is the GEMS system and kind of the license payments and regarding -- sorry, recurring revenues and things like that of the total earnings pool that you are looking at on these projects versus kind of the initial CapEx?

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Can you hear me?

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Okay, perfect. Yes, on the Marine Systems and LNG side, the orders that you see currently, the order increase in Marine Systems, is this already kind of related to the boom in the container vessel business? Or is this still kind of the old, let's say, inherited business from the last years? And when do you think the container vessel boom will kick in? The next question, maybe because it's related: How much more business do you think you can make on a new container vessel that runs on dual fuel and needs more, let's say, environmental equipment? Is there a big jump in content per ship? That will be my first questions.

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : I mean all the LNG or the dual-fuel container ships. So (inaudible) mainly dual fuel, and so they probably need much more equipment. And...

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Okay. So just to be clear: The order increase you saw in Marine Systems is not related to the boom we saw in container vessels in the first 6 months (inaudible). REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 20, 2021 / 7:00AM, WRT1V.HE - Q2 2021 Wartsila Oyj Abp Earnings Presentation

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Yes, yes, yes. I know that. And scrubbers for the new vessels is also not included yet in the orders, I guess, for -- the big boom in containers, yes.

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Understood, understood. Perfect, understood. And then for energy storage, could you just again explain? I might have missed it, but what exactly is your value add for energy storage? And who is your battery supplier for energy storage? That would be all.

Question: Sebastian Kuenne - RBC Capital Markets, Research Division - Analyst : Okay. That would be all.

Question: Erkki Vesola - Inderes Oy - Analyst : Can you hear me?

Question: Erkki Vesola - Inderes Oy - Analyst : Okay, very good. On the marine engines, in your presentation [you talk about it's] 170% alternative fuel-capable units being ordered in the first half. Is it the number of engines? And if so, how many vessels does this transfer to? And I've got a couple of follow-ups on that.

Question: Erkki Vesola - Inderes Oy - Analyst : Number of vessels, okay, okay.

Question: Erkki Vesola - Inderes Oy - Analyst : What were these fuels actually? What is considered as alternative fuel?

Question: Erkki Vesola - Inderes Oy - Analyst : Okay. And finally, where does WSrtsilS stand in this regard, regarding these numbers?

Question: Antti Kansanen - SEB, Research Division - Analyst : This is more detailed regarding the near-term profitability outlook and kind of the P&L impacts of the cost inflation. So I mean you have a lot of positives going for you. Book-to-bill is above 1. You are seeing a positive mix from service recovery, but how cautious should we be that we'll see kind of a de-acceleration when the bigger impact of the raw material cost inflation, logistic cost inflation hits, let's say, Q3 and seasonally important Q4? You have a lot of fixed-price contracts, so Arjen, could you give us a little bit of a bridge about the positives and negatives going into the, let's say, second half of this year?

Question: Antti Kansanen - SEB, Research Division - Analyst : And then specifically on the services side, I guess, where the lead times are maybe a little bit shorter, what type of inflationary pressures are there? And how quickly can you adapt with, let's say, price increases?

Question: Antti Kansanen - SEB, Research Division - Analyst : [Then you're going to be -- going to] recover it, yes. Sorry.

Question: Antti Kansanen - SEB, Research Division - Analyst : But then how about the pricing in the, let's say, more transactional service business that would be more dynamic than...

Question: Antti Kansanen - SEB, Research Division - Analyst : Okay. And then lastly, can you say anything about kind of the seasonality on Q3 versus Q4? Because last year, there was not a typical quarter-on-quarter margin expansion. Now given what you see on the environment and on your outlook, how should we think about this year?