Greetings from Wärtsilä's headquarters in Helsinki. Wärtsilä published their half-year financial report today, and I'm here with the company's CEO, Håkan Agnevall. Hello, Håkan. Nice to be here again. Good to have you. So, looking at the past quarter, what makes you proud, and where do you see room for improvement?

So, what makes me proud? I mean, we have a very strong order intake, basically up 33% compared to Q2 last year, and we also have a number of all-time highs. So we have an all-time high on our order intake overall, but also both for Energy and Marine, and in orders actually this is the second consecutive quarter with an all-time high. We have an all-time high order backlog, close to nine billion euro, so order intake is very strong, and we do continue to see a strong demand situation. We gave our outlook demand guidance, and we guided for a similar level on both Energy and Marine, but that is actually very positive because we are on a very high level. Also, with the investments that we are doing and that were announced during the second quarter, the additional investment that we're doing in Energy, it really underlines our positive long-term outlook of the demand situation. So that is something to be very, very happy about, and the other thing is that we also managed to translate the existing order backlog to improved profitability. So we now have an adjusted operating margin of 14%, and we are, step by step, improving, which is good. Now, what we are not so happy with, well, we can always do more and take additional steps. But I do think we are on this journey that we talk a lot about, a journey of continuous improvement. I think this is very important, both when it comes to the financials, but also how we operate. Then in addition, what is big in Q2,

I would say that we have made now the last two divestments in our portfolio business, and that means that over a six-year period, we have divested 11 business units. That's quite a lot, but now we divested the last two, and now we can close that initiative or program, or whatever we want to call it. So that means that we also, considering that we formed the JV with RCT Solutions on battery storage, it means that we are creating a much more focused Wärtsilä with better profitability, but also considering the two markets we're serving, with some great growth opportunities going forward.

Right, now you can focus on the core business going forward. After all the divestments. You reported that the gross margin on the Energy equipment order book has increased by over 500 basis points since the beginning of 2020. What factors have given the strengthening of the margin level?

First of all, it's a very buoyant market, very strong demand, so there are opportunities for price realization, but it is also that, of course, we work with our direct costs, so it's a combination of price realization clearly, and also continued efficiency and leveraging scale.

Then if we look at the data center segment, the demand was strong. How sustainable do you believe the rapid data center-driven growth is, and what specific competitive advantages does Wärtsilä have to maintain its leading position in this market when the competition is growing and there are evolving technologies?

So basically, before going into the data center specifically, I would say we need to be aware that there is a lot of focus on data centers, but if you look at the growth in Energy, it's actually driven by growth in several different segments. First of all, we have the genelectrification. You know, the International Energy Agency is predicting that the demand for electricity will grow two times by 2050, and we are trying to make industries more efficient by electrifying. We have road transport gradually going electric, but we also have cooling, air conditioning, which is a big topic in some regions. I think this summer in the south parts of Europe, it's a big topic, and I actually predict that cooling could be a big growth driver. Then we have the data centers, then we have aging infrastructure in the US, and then we have the balancing power narrative. As we see the share of renewables increasing, we need balancing power to keep the system stable, and our power plants really provide solutions for that. So it's actually a broad palette of growth drivers that kind of builds up to this positive outlook for the future. But if we zoom in on the data centers, to come back to your question, two years ago,

we were not in that discussion at Wärtsilä. Two years ago, the data centers were small, and you know, let's say they needed 20, 30, 40 megawatts of power. They sign power purchase agreements with utilities, and they bought some high-speed engines from Cummins or Caterpillar as backup power if the grid failed. That worked out in the past, but now as the data centers are growing in size, because you're talking about hundreds of megawatts, sometimes even a gigawatt of power, and then the data center developers in the US, they cannot get grid access from the utility. They say, yes, that's a great opportunity. You want 500 megawatts of offtake, we are open to that, but that means we need to build a new transmission line or we need to build a new power plant, and we have a process, and the average duration of such a process in the US is about eight years. So they're basically saying, well, come back in eight years, and that obviously doesn't work. Therefore, the whole concept of grid power generation is developing, and now people are looking for off-grid power generation in hundreds of megawatts. That's right in the Wärtsilä power plant sweet spot. So that's why, during the last year, we have gone basically from zero data centers to now, this quarter, 1.2 gigawatts of order intake. So it is one new clear Finnish nuclear power plant basically, in one quarter. So it is a significant growth opportunity. Then, is it hype or is it long term? There are many people and think tanks that make estimates, and the span of those estimates is huge. So I would say nobody knows, we don't know. I think what we do know, in a sense, is that there will be a long-term demand growth. Why? When we talk to our customers, they say that we invest in AI not for ChatGPT, not for you and me writing poems or whatever. We are past that. They invest for corporate AI. What they mean with that is companies, industrial technology companies, banks, all companies, are starting to use AI to drive efficiency and on the other side to develop the customer offering, and I think at least, as we are in that journey, we are very early stage. We can see our consumption of tokens is going up. It's going to grow, and we are not unique. This is what people are investing in. That's why people have a long-term view in this, and right now we are booking data centers all of 2029. I'm sure that within this year we start talking 2030, so for us, it is a long-term growth trend, but as I started with, it is not the only growth driver for Wärtsilä.

You already touched on the joint venture with RCT Solutions, but given the expected minus 50 million euro impact on this year's EBIT and the segment having historically lower margins, what was the strategic rationale behind the joint venture rather than just divesting it or then continuing alone in that business?

So, to make the long story short, we acquired Greensmith, Harry, in 2017. Since then we grew the business to a billion. We managed to turn it around. In Q1 it actually had its highest profit margin ever, which was 5% EBIT, so we grew it. We did the strategic review. For quite some time we looked at different ownership alternatives, but we concluded through the review that the best way to create shareholder value is to keep the business. Now, two things happened after the conclusion of the strategic review. First, the Liberation Day tariffs in the US, which were a kind of wet blanket over the US market. The second thing is that EV sales of electric vehicles have not developed as people had anticipated. So that has meant that people that have invested in battery cell manufacturing for automotive have now moved into energy, and when they move, they do not only produce batteries, they actually start to compete with us as an integrator. So those two things that happened after the conclusion of the strategy review have actually increased the competition and made it an even more challenging industry. So now, in this sense, the team has delivered on the order backlog in a very good way, but if you look at this year and Q1, Q2, our new-build order backlog, or order intake, is basically zero. So it's a very challenging market and we need to work with our cost. We need to work on how to increase the competitiveness.

So why did we formulate the JV with RCT Solutions? They bring technical competence and knowledge and experience of the battery cell supply chain, because they have actually supported their customers in building battery factories. So RCT brings really good insight there. They are also involved in initiatives in the US to set up cell manufacturing in the US, and that is needed in some segments in the US because you require US manufacturing. So this is the value that RCT brings in. We don't have those competences as strong as we have them together with RCT. Then we have also been very open with that we are looking for other potential equity owners to step in. Gradually we will decrease our ownership. This is a business that is extremely competitive. Now we have Wärtsilä with a 14% EBIT margin, and we want to focus on that.

In May, you announced the further 90 million euro investment in the Vaasa Sustainable Technology Hub. This brings the total planned capacity expansion to 65% from the 2025 level. What gives you the confidence to scale production that aggressively, and how flexible is the capacity if the demand for equipment softens?

So just to get the numbers right there, because basically what we have communicated, we have communicated several steps. Sometimes that creates some confusion, but if we look at now, after all the steps that we have communicated, we will basically more than double, 2.2 times actually, our industrial capability compared to the capability we utilized in 2025. So it's more than doubling, just to get the number right, but it is a significant expansion. It's of course an expansion of the factory and the supply chain. Because we do our engineering, but we buy a lot of the stuff that we put in our engine from the outside, and we do final assembly and testing. We do some internal machining, but we are highly dependent on and working closely with our supply chain, so scaling up is both scaling up your manufacturing and testing, but also scaling up the supply chain. Now what is critical here in terms of creating resilience and flexibility, so far we have really focused on expanding Vaasa. You could say, why don't you set up a new factory somewhere in the world, because then you would diversify geographical risk, et cetera, et cetera. But there you come to the flexibility. If you set up a factory, you have a lot of fixed costs and that makes you less flexible. So actually, scaling in Vaasa is a relatively capital-efficient way to scale, and it also creates a relatively high level of flexibility, as you prove. We closed down manufacturing in Italy a couple of years back, and I get a lot of questions, was that the wise decision or not? In the short term, it would have been fantastic to have that manufacturing capacity, but long term our view is still it was the right decision because we bring down the fixed cost level and we create a higher level of flexibility, and we think that long term is the best for Wärtsilä competitiveness.

You recently conducted a world-first test of a large-scale 100% hydrogen-fueled engine in Spain. With this technical milestone, what is the realistic roadmap for commercial delivery, and how does the lack of green hydrogen infrastructure currently impact the customer interest?

So I think you need to see this in a couple of steps, and right now it's about proving the technology, and if you look on the customer side, there are customers that are looking to have power plants that are hydrogen-enabled. They don't have the hydrogen. The economy of green hydrogen is not there, the availability is not there, but they think that you have an asset that will last for 30, 40 years. Hydrogen can come in, so for that, now we have an offering that we can provide, but the hydrogen journey, it's gonna take a long time. I think the question is still there, how do you do this transition with hydrogen in an energy-efficient and affordable way? But it is one possible avenue, and for Wärtsilä we are serving market demand in the sense that people are looking for equipment that is hydrogen-enabled.

And then.

What I would like to say.

Also, just to take the chance, because that's probably not we are investigating different, we are investing in fossil fuels to bring up the fuel efficiency, fuel flexibility. We are investing in the carbon-neutral, zero-carbon fuels similarly, then we also start to deliver the first ammonia-fueled engines for Marine. So these are commercial. This is clearly driven by a decarb agenda from the customers.

You had a recent survey of 225 shipping executives that suggested that 70% of respondents find it difficult to prioritize investments due to regulatory and technological uncertainty. How are you proactively helping Marine customers overcome this wait-and-see attitude to drive more order activity?

So I think the key thing is fuel flexibility and fuel efficiency, because you need to invest in creating your vessels, because the fleet is aging in general, so waiting for too long is not an option for anybody. So then you want to create optionality because nobody knows. There's not gonna be one future fuel. I mean, most likely there will be a number of different fuels. Fossil will be with us for decades. We have carbon-neutral and some zero-carbon, and it will go with different speed in different parts of the world. We will face more and more fragmentation. IMO struggles to get this together on having a global common pricing mechanism. That is gonna be a patchwork of regional regulation. At the latest now in China, which announced goals to develop carbon intensity with 15% by 2030, so now we have a Chinese framework, you have a European framework, and there likely is a US framework to come. But the common denominator in how we help our customers is to provide solutions that are flexible in terms of what fuel they can use, and that are fuel efficient because the fuels will be more expensive as we go forward. So this journey continues, and we have always been very clear. We have this saying in Wärtsilä that green is not black and white. There's not gonna be one single simple solution, and it's gonna be a transition, a journey over decades. It's of course in our interest to accelerate it, but we have also been very clear, we need to be realistic, because it is huge investments that have been made and that need to be made in infrastructure.

In the final question on the outlook or guidance, like you mentioned, it is that a similar demand environment remains for the next 12 months, but you did highlight the record order intake and the decision to further expand capacity. Could you provide a more granular view of what similar implies in terms of expected growth rates for Marine and Energy over the next year?

Similar, similar. I mean, if you look at the aggregated order intake, and the analysts, they will do their work. It's gonna be similar. You arrive at what the same exact future of 12 months is gonna be about the same. But then, that's the coming 12 months. But then we also say in the guidance statement that we have a very positive outlook on the long-term market demand, which is further underpinned by our investments continuing to even further expand capacity, but those will only come in starting in 2029.

Thank you, Håkan, and good luck with Q2. Thank you.

Thank you very much.