“The market environment remained stable for Wärtsilä’s businesses during the second quarter of 2024. The headwinds for the global economy continued, but economic activity has proven to be relatively resilient.

In the energy market, the quarter was characterised by an increase in protectionist policies, with trade risks elevated by developments such as the recently imposed import tariffs by the US and EU. The market for engine power plants was stable, with good activity especially in the US. The rapid growth of artificial intelligence (AI) is having a sizable impact on the global electricity demand. According to the IEA, data centres consume approximately 1-2% of global electricity at present, potentially doubling in share by 2026. In May, we signed a cooperation agreement with AVK, the largest and fastestgrowing supplier of power solutions for data centres in Europe, to deliver on-site power generation for European data centres. The combination of AVK’s track record in power system design for data centres and Wärtsilä’s leading expertise in designing and manufacturing high-efficiency medium-speed engines has interesting potential moving forward.

Flexible power generation solutions play a vital role in balancing intermittent renewable energy sources. It is crucial for our customers that the solutions we sell are future-proof, and in the case of engine power plants, ready to run on sustainable fuels when these fuels become readily available. In June, Wärtsilä reached a significant milestone by launching the world’s first large-scale 100% hydrogen-ready engine power plant concept. This solution can use natural gas today to provide flexibility and balancing, and can be converted to run on hydrogen, thereby future-proofing the journey to net zero.

In the marine market, trade flows continued to be heavily impacted by the sanctions on Russia, and attacks on ships in the Red Sea. Global trade is facing challenges from longer average shipping distances, higher transportation costs, and delays to global supply chains, which have ultimately increased the demand for ship capacity. Investments in new ships during the first half of the year were clearly higher than in the comparison period, and the uptake of alternative fuels remained at a healthy level. Despite a continued increase in shipyard capacity and output, especially in China and South Korea, newbuild ship prices continued to be high, indicating a shortage of yard capacity. Market sentiment continued to develop favourably for Wärtsilä, with momentum building in our key segments, and with decarbonisation-related retrofits and longer trade routes supporting services. For instance, in May, we announced that we will supply the electrical systems needed to convert two Scandlines ferries to a plug-in hybrid solution, the world’s largest conversion project of its kind. Ship hybridisation is one of the solutions for decarbonisation, and with this project, we can help Scandlines towards their target of achieving emission-free operations on the route by 2030.

Wärtsilä’s order intake in the second quarter increased organically by 12%. Service order intake increased, supported by good activity in Marine. Equipment order intake increased, supported by higher equipment order intake in Marine, Engine Power Plants, and Portfolio Business. Equipment order intake in Energy Storage & Optimisation decreased, resulting from lower battery material prices.

Net sales in the second quarter increased organically by 9%, with growth in both service and equipment. In Energy, the equipment business is lumpy by nature, which means that order intake, as well as revenue recognition, can vary significantly from one quarter to another. We expect that the equipment deliveries in the second half of 2024 will grow faster than the service deliveries. This is driven by equipment deliveries in Energy, both for Engine Power Plants and Energy Storage & Optimisation, being tilted towards the second half of 2024. In Marine, the lead times from equipment order intake to net sales are slightly longer, due to the remaining constraints in shipyard capacity. The comparable operating result increased by 63% to EUR 176 million with a comparable operating margin of 11.3%.

The comparable operating result increased in both Marine and Energy, and also in our businesses to be divested, reported under Portfolio Business. During recent years, Wärtsilä’s comparable operating margin percentage has typically reached its high in the fourth quarter of each year. In 2024, we do not expect to see that normal seasonality, given the mix impact from increasing equipment deliveries in the second half of the year.

Cash flow from operating activities significantly improved to EUR 216 million during the second quarter. The improvement in cash flow was driven by a better operating result, but also by our good working capital development. Over the past twelve months, Wärtsilä has generated over a billion euros of cash flow from its operating activities.

In October 2023, we announced a strategic review of Energy Storage & Optimisation to accelerate its profitable growth in a way that benefits customers, employees, and value creation for Wärtsilä shareholders. This review is still ongoing.

We expect the demand environment for the coming 12 months to be better than for the comparison period in both Marine and Energy. Innovation in sustainable technology remains at the heart of Wärtsilä as we continue our focus on helping our customers to continuously improve their environmental and economic performance. We are focused on executing our strategy and remain very well positioned for the transformation towards carbon-neutral shipping and a 100% renewable energy future."