Wärtsilä’s Q1 net sales in its energy storage and optimisation (ES&O) business division fell 75% year-on-year, with revenues to be recognised as projects move toward completion later in the year.
The Finnish marine and energy technology company reported its interim financial results for January-March 2024 last week. The group’s leadership said that despite the big drop in net sales and a smaller decline in order intake for the first quarter, it expects the ES&O unit’s profitability to improve mid-to-long-term.
It reported an order intake of €236 million (US$251.84 million) for the quarter, down from €257 million in Q1 2023, although this was considerably higher than 2022’s Q1 order intake of just €72 million. Meanwhile, net sales were at €62 million, versus €252 million in the first quarter of 2023 and €134 million in Q1 2022.
Wärtsilä said the 75% decrease in net sales was largely attributable to the company applying periodisation to its accounting, with revenues from various projects in its portfolio set to be recognised later in the year based on certain delivery and completion milestones.
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CEO Håkan Agnevall said that with some individual energy storage projects representing large orders in themselves, any movement of milestones into future quarters “can have quite a big impact” on sales. It did not indicate any significant challenges on supply chain or the ability of the company to execute energy storage projects, he said.
CEO Agnevall said that the low sales figure of €62 million is “not the new normal” of expectations in energy storage sales and said that much higher figures will likely be reported later this year, in response to a question from a Deutsche Bank analyst on a call to explain results.
‘No updates’ on strategic review
The company is conducting a strategic review of ES&O, and has previously said it is considering all options, including retaining ownership, seeking outside investment, or divesting the business unit completely.
Energy storage, while a profitable business line for the company, has a much lower margin than its activities in marine and balancing engine power plants. Analysts and industry experts have discussed the possibility that Wärtsilä shareholders may not want to see the group’s margins diluted.
That strategic review was initiated in October 2023, and one analyst asked how this was progressing and why it was “taking so long.”
Wärtsilä’s CEO and CFO said there were no updates on the schedule, with the review still ongoing and “all potential alternatives” still being considered.
Agnevall pointed out that the company is continuing to invest in energy storage, with the recent launch of its latest modular grid-scale battery energy storage system (BESS) product, Quantum 2, one of the highlights of the quarter. Quantum 2 is a high energy density solution aimed at larger projects than Wartsila’s other modular BESS solutions, Quantum and Quantum High Energy (Quantum HE).
