Wärtsilä Corporation INTERIM REPORT 20 October 2010 at 8.30 local time
POSITIVE DEVELOPMENTS CONTINUED - STRONG QUARTER AT ALL LEVELS
THIRD QUARTER HIGHLIGHTS
- Order intake EUR 1,004 million (725), +38%
- Net sales EUR 1,039 million (1,167), -11%
- Operating result EUR 117 million (133), 11.2% of net sales (11.4)
- Earnings per share amounted to 0.83 euro (0.87)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-SEPTEMBER 2010
- Order intake EUR 3,002 million (2,468), +22%
- At the end of the period the order book totalled EUR 4,243 million (5,351),
-21%
- Net sales EUR 3,091 million (3,741), -17%
- Operating result EUR 328 million (419), 10.6% of net sales (11.2)
- Earnings per share amounted to 2.36 euro (2.82)
- All time high cash flow from operating activities EUR 491 million (142)
All numbers above are shown excluding nonrecurring items. Wärtsilä recognised
EUR 2 million of nonrecurring items related to restructuring measures during the
third quarter and a selling profit of EUR 32 million from the divestment of its
Sampo Group holding. Wärtsilä recognised EUR 59 million (6) of nonrecurring
restructuring items during the review period January-September 2010.
OLE JOHANSSON, PRESIDENT AND CEO:
"The third quarter was strong for Wärtsilä at all levels, as net sales developed
according to plan, profitability was strong, and cash flow from operating
activities was at an all time high level. As a result of this positive
development we now expect our profitability to exceed 10% for the year 2010. The
improvements in Wärtsilä's market environment that started in the second quarter
have continued, and we expect the order intake for the full year to clearly
exceed last year's levels. Despite this, structural changes in the market,
intense competition and price pressure support our restructuring and efficiency
improvement measures which will ensure our competitiveness also in the future."
WÄRTSILÄ'S PROSPECTS FOR 2010 IMPROVED
Based on the current order book and a stable service business we expect net
sales to decline by approximately 15 percent in 2010 and our operational
profitability (EBIT% before nonrecurring items) to be better than earlier
expected and to exceed 10%.
ANALYST AND PRESS CONFERENCE AT 10.45 AM FINNISH TIME
An analyst and press conference will be held today, Wednesday 20 October 2010,
at 10.45 a.m. Finnish time (8.45 a.m. UK time), at the Wärtsilä headquarters in
Helsinki, Finland. The combined web- and teleconference will be held in English
and can be viewed on the internet at the following address:
http://storm.zoomvisionmamato.com/player/wartsila/objects/69c5tpfv/
To participate in the teleconference please call: +44 (0)20 7162 0125 and enter
the Conference ID: 877660. If you want to ask questions during the
teleconference, press the *-button followed by the 1-button on your phone to
register for a question and the # -key to withdraw a question. The event title
for the call is: Quarter 3 Results. Please be ready to state your details and
the name of the conference to the operator. If problems occur, please press the
*-button followed by the 0-button. We would recommend that you register for the
conference in advance at the following address:
https://eventreg2.conferencing.com/webportal3/reg.html?Acc=158744&Conf=202787
An on-demand version of the webcast will be available on the company website
later the same day.
For further information, please contact:
Raimo Lind
Executive Vice President & CFO
Tel: +358 10 7095640
raimo.lind@wartsila.com
Joséphine Mickwitz
Director, Investor Relations
Tel: +358 400784889
josephine.mickwitz@wartsila.com
For press information, please contact:
Atte Palomäki
Group Vice President, Communications & Branding
Tel: +358 40 547 6390
atte.palomaki@wartsila.com
Wärtsilä in brief
Wärtsilä is a global leader in complete lifecycle power solutions for the marine
and energy markets. By emphasising technological innovation and total
efficiency, Wärtsilä maximises the environmental and economic performance of the
vessels and power plants of its customers. In 2009, Wärtsilä's net sales
totalled EUR 5.3 billion with more than 18,000 employees. The company has
operations in 160 locations in 70 countries around the world. Wärtsilä is listed
on the NASDAQ OMX Helsinki, Finland.
WÄRTSILÄ CORPORATION INTERIM REPORT JANUARY - SEPTEMBER 2010
THIRD QUARTER 7-9/2010 IN BRIEF
MEUR 7-9/2010 7-9/2009 Change
Order intake 1 004 725 38%
Net sales 1 039 1 167 -11%
Operating result 117 133 -13%
% of net sales 11.2% 11.4%
Profit before taxes 140 125
Earnings/share, EUR 0.83 0.87
REVIEW PERIOD JANUARY - SEPTEMBER 2010 IN BRIEF
MEUR 1-9/2010 1-9/2009 Change 2009
Order intake 3 002 2 468 22% 3 291
Order book at the end of the period 4 243 5 351 -21% 4 491
Net sales 3 091 3 741 -17% 5 260
Operating result 328 419 -22% 638
% of net sales 10.6% 11.2% 12.1%
Profit before taxes 298 388 558
Earnings/share, EUR 2.36 2.82 4.30
Cash flow from operating activities 491 142 349
Interest-bearing net debt
at the end of the period 91 575 414
Gross capital expenditure 54 98 152
Operating result and EPS in the above tables are shown excluding nonrecurring
items. Wärtsilä recognised EUR 2 million of nonrecurring items related to
restructuring measures during the third quarter and a selling profit of EUR 32
million from the divestment of its Sampo Group holding. Wärtsilä recognised EUR
59 million (6) of nonrecurring restructuring items during the review period
January-September 2010.
OPERATING ENVIRONMENT AND DEMAND DEVELOPMENT
SHIP POWER
Market recovery continues
During the third quarter, new vessel ordering activity continued to recover with
more than 100 vessels being ordered per month. By the end of the third quarter,
1,150 vessels have been ordered which is notably more than for the full year
2009. Contracting activity continued to be good in the bulk carrier segment,
supported mainly by Chinese ship owners. Backed by the recovery in trade volumes
and attractive new building prices a pick-up was seen in the container vessel
segment and this development is expected to continue. Some LNG vessel contracts
were signed during the quarter after a long silent period.
Activity in the offshore segment continued to be strong, and recovery in the
more specialised tonnage continues.
China continued to strengthen its position in the shipbuilding industry, and for
the first time this year China dominated the market both in terms of number of
vessels and tonnage (DWT). China's market share in number of vessels was 49%,
Korea's 30%, Japan's 7% and Europe's 5%. During the review period, emerging
shipbuilding regions, such as Brazil, Russia and the Philippines secured 9% of
all contracts.
Ship Power market shares
Wärtsilä's share of the medium speed main engine market decreased from 37% (at
the end of the previous quarter) to 32%. The market share in low speed engines
decreased to 12% (15). In the auxiliary engine market Wärtsilä's share increased
to 3% (1).
POWER PLANTS
Good activity in the Power Plants market continues
The Power Plants market activity continued to be at a good level during the
third quarter of 2010 and several large and medium size projects were closed.
Industrial output is increasing in most emerging markets, which is driving the
need for more power generation. The installed base of wind power generation has
also increased which is creating need for additional flexible power generation.
The financial crisis led to postponing of investments for power generation in
2009 and this is now creating demand for shorter delivery times in several
markets.
SERVICES
Services' customers continue to focus on savings
Although activity in the marine industry has started to recover and the number
of idle vessels has decreased there is still pressure to reduce maintenance
costs through postponing overhauls and focusing only on essential repairs. At
the same time, marine customers are increasingly looking for optimisation of
their assets to reduce both costs and their environmental footprint. Rising fuel
prices and overcapacity have spurred containership lines to operate more of
their ships at slow speeds.
The power plant service market is active, and there is an increased interest in
efficiency improvements and the outsourcing of plant operations and management.
ORDER INTAKE
Strong growth in order intake
Wärtsilä's order intake for the third quarter totalled EUR 1,004 million (725)
an increase of 38%. The book-to-bill ratio for the third quarter was 0.97
(0.62).
The recovery in Ship Power continued and the order intake for the third quarter
totalled EUR 176 million (68), 160% above the corresponding period last year.
During the quarter, Wärtsilä noted increased activity in the Offshore segment
and secured several offshore orders. Wärtsilä is traditionally well positioned
in this segment. Some of the orders featured Dual-Fuel engine technology that
enables vessels to run on clean LNG fuel, and in general the orders highlighted
the success of Wärtsilä's strategy to be a systems integrator, ship designer and
solution provider. The Offshore segment represented 43% of the total orders,
Merchant 33%, Special vessels 18%, and Cruise&Ferry and Ship Design represented
2% and 3% respectively. Compared to the second quarter 2010, order intake fell
by 17% (EUR 213 million during the second quarter of 2010).
The order intake for Power Plants in the third quarter totalled EUR 393 million
(170), which was 131% higher than for the corresponding period last year. During
the third quarter, the largest power plant orders were received from the
Caribbean, Russia and Bangladesh. Compared to the previous quarter, the Power
Plants business order intake decreased by 10% (EUR 437 million in the second
quarter of 2010).
Order intake for the Services business totalled EUR 433 million (483) in the
third quarter, a decrease of 10% from the corresponding period 2009. Compared to
the second quarter, order intake fell 7% (EUR 465 million in the second quarter
of 2010). As an example of the customers' increased focus on cost savings and
reducing their environmental footprint, Wärtsilä signed a turnkey contract with
Tarbit Shipping of Sweden to convert a product tanker to LNG propulsion. The
conversion of the 25,000 dwt product tanker 'Bit Viking' will enable the vessel
to qualify for lower emission taxes under the Norwegian government's fund
scheme. The project to convert the ship's main propulsion to LNG is the first of
its kind in the world.
In the third quarter, Wärtsilä also signed a landmark contract with the A.P.
Moller Maersk Group. The order covers the installation of Wärtsilä Slow Steaming
Upgrade Kits to 34 more of the company's large container vessels. The upgrade
kits will lead to fuel savings as well as reduced CO2 emissions.
Wärtsilä expects environmental upgrades and conversions to continue.
In the power plant service market Wärtsilä signed several important Operations &
Management contracts in Brazil during the quarter. Wärtsilä now has O&M
agreements for power plants with a combined output of 1,500 MW in the country.
Several contracts were also signed in Europe.
For the review period January-September 2010, Wärtsilä's total order intake
amounted to EUR 3,002 million (2,468), which represents an increase of 22%
compared to the corresponding period 2009. The book-to-bill ratio for the review
period was 0.97 (0.66). Ship Power's order intake was EUR 479 million (262), an
increase of 83% from the corresponding period last year. Power Plant's order
intake was EUR 1,097 million (748), which is 47% higher than in 2009. Services'
order intake for the review period totalled EUR 1,421 million (1,448), a
decrease of 2% over the corresponding period in 2009.
ORDER BOOK
At the end of the review period Wärtsilä's total order book stood at EUR 4,243
million (5,351), a decrease of 21%. The Ship Power order book stood at EUR
2,038 million (3,230), -37%. At the end of the review period, the Power Plants
order book amounted to EUR 1,517 million (1,549), which is 2% lower than at the
corresponding time last year. The Services order book totalled EUR 689 million
(571) at the end of the review period, an increase of 21%.
Third quarter order intake by business
MEUR 7-9/2010 7-9/2009 Change
Ship Power 176 68 160%
Power Plants 393 170 131%
Services 433 483 -10%
Order intake, total 1 004 725 38%
Order intake Power Plants
MW 7-9/2010 7-9/2009 Change
Oil 475 109 335%
Gas 393 174 126%
Renewable fuels 0 35
Order intake for the review period by business
MEUR 1-9/2010 1-9/2009 Change 1-12/2009
Ship Power 479 262 83% 317
Power Plants 1 097 748 47% 1 048
Services 1 421 1 448 -2% 1 917
Order intake, total 3 002 2 468 22% 3 291
Order intake Power Plants
MW 1-9/2010 1-9/2009 Change 1-12/2009
Oil 1 574 879 79% 1 172
Gas 767 468 64% 800
Renewable fuels 1 35 -97% 35
Order book by business
MEUR 30 Sept. 2010 30 Sept. 2009 Change 31 Dec. 2009
Ship Power 2 038 3 230 -37% 2 553
Power Plants 1 517 1 549 -2% 1 362
Services 689 571 21% 576
Order book, total 4 243 5 351 -21% 4 491
NET SALES
As expected, Wärtsilä's net sales for the third quarter decreased by 11% to EUR
1,039 million (1,167) compared to the corresponding period last year. Net sales
for Ship Power totalled EUR 277 million (378), a decrease of 27%. Power Plants'
net sales for the third quarter totalled 321 million (360), which is 11% lower
than in the corresponding quarter last year. The third quarter net sales for
Services amounted to EUR 435 million (424), an increase of 3%.
Wärtsilä's net sales for January-September 2010 fell by 17% and totalled EUR
3,091 million (3,741). Ship Power's net sales decreased by 32% and totalled EUR
831 million (1,230). Net sales for Power Plants totalled EUR 948 million
(1,169), a decrease of 19%. Net sales from the Services business decreased 1%
from last year's level and amounted to EUR 1,307 million (1,326). Ship Power
accounted for 27%, Power Plants for 31% and Services for 42% of the total net
sales.
Of Wärtsilä's net sales for January-September 2010 approximately 70% was EUR
denominated, 11% USD denominated, with the remainder being split between several
currencies.
Third quarter net sales by business
MEUR 7-9/2010 7-9/2009 Change
Ship Power 277 378 -27%
Power Plants 321 360 -11%
Services 435 424 3%
Net sales, total 1 039 1 167 -11%
Net sales for the review period by business
MEUR 1-9/2010 1-9/2009 Change 1-12/2009
Ship Power 831 1 230 -32% 1 767
Power Plants 948 1 169 -19% 1 645
Services 1 307 1 326 -1% 1 830
Net sales, total 3 091 3 741 -17% 5 260
FINANCIAL RESULTS
The third quarter operating result before nonrecurring expenses was EUR 117
million (133), or 11.2% of net sales (11.4). For the review period January-
September 2010, the operating result before nonrecurring expenses was EUR 328
million (419), which is 10.6% of net sales (11.2). Including nonrecurring
expenses, the operating result decreased to EUR 269 million or 8.7% of net
sales. Wärtsilä recognised EUR 59 million of nonrecurring expenses related to
the restructuring measures during the review period January-September 2010.
Financial items amounted to EUR -3 million (-25). Net interest totalled EUR -8
million (-14). Dividends received totalled EUR 6 million (5). The deviation in
other financial items is mainly due to gains from exchange rates, which were
negative during the corresponding period of 2009. Profit before taxes amounted
to EUR 298 million (388). Taxes in the reporting period amounted to EUR 80
million (111). Earnings per share were 2.13 euro (2.77) and equity per share was
15.77 euro (13.86).
BALANCE SHEET, FINANCING AND CASH FLOW
Wärtsilä's cash flow from operating activities was very strong amounting to EUR
491 million (142) in January-September 2010. Net working capital at the end of
the period totalled EUR 229 million (511). Advances received at the end of the
period totalled EUR 813 million (1,039). Liquid reserves at the end of the
period amounted to EUR 578 million (262).
Wärtsilä had interest bearing loans totalling EUR 688 million at the end
of September 2010. The existing funding programmes include long-term loans of
EUR 599 million, unutilised Committed Revolving Credit Facilities totalling
EUR 565 million, and Finnish Commercial Paper programmes totalling EUR 700
million. The total amount of short-term debt maturing within the next 12 months
is EUR 89 million.
The solvency ratio was 40.5% (35.4) and gearing was 0.07 (0.43).
HOLDINGS
Wärtsilä owns 7,270,350 B shares in Assa Abloy, or 2.0% of the total. This
holding has been booked in the balance sheet at its market value at the end of
the reporting period, EUR 135 million. During the third quarter Wärtsilä sold
its holding in Sampo Group for EUR 35 million.
CAPITAL EXPENDITURE
Gross capital expenditure in the review period totalled only EUR 54 million
(98), which comprised EUR 5 million (15) in acquisitions and investments in
securities, and EUR 49 million (82) in production and information technology
investments. Depreciation amounted to EUR 87 million (91).
Capital expenditure excluding acquisitions for 2010 will be approximately EUR
95 million, which is well below depreciation. Depreciation for 2010 is expected
to be approximately EUR 115 million. Wärtsilä continues to pursue its strategy
to expand the Services offering and network, and any acquisition opportunities
in this market may affect total capital expenditure for the year.
STRATEGIC STEPS, ACQUISITIONS AND EXPANSION OF NETWORK
In May, Wärtsilä signed a joint venture agreement with the Russian company
Transmashholding (TMH) to manufacture modern and multipurpose diesel engines in
Russia. The engines, including a new and technically advanced version of the
Wärtsilä 20-engine, will be used in shunter locomotives and for various marine
and power applications. The two companies will jointly engineer the railway
application. Wärtsilä and TMH will also evaluate broadening the activities of
the joint venture to include the development and manufacturing of other diesel
engine models in the future. The value of Wärtsilä's investment in the joint
venture is approximately EUR 30 million and production of the engines is planned
to start in 2012.
During the review period, Wärtsilä continued to expand its service network with
the inauguration of a new office and workshop facility in Panama.
RESTRUCTURING MEASURES
Following the global financial crisis, Wärtsilä began adjusting its capacity and
cost structure in May 2009 to reflect lower demand and intensified these efforts
in January 2010.
The first steps taken were to reduce the number of jobs in Ship Power, the
business that had been the most severely hit by the market downturn.
In January 2010, measures continued by starting to adapt manufacturing capacity
both to the structural changes in the market and to a lower demand environment.
Some of the manufacturing capacity has been moved to China and two factories in
the Netherlands will be closed. New and more efficient ways to operate have been
introduced, thus enabling the closure of smaller units and the consolidation of
operations to larger entities in various countries. Temporary lay-offs have
mainly been used in Finland and Norway. Lower capacity utilisation has also
triggered an evaluation of all Wärtsilä's global staff functions with the aim of
streamlining processes, decreasing overlaps, and improving the cost efficiency.
After the review period, Wärtsilä has initiated processes to reduce
approximately 400 jobs globally in its support functions.
Through all of these measures initiated in different phases, Wärtsilä is
reducing the number of personnel by approximately 1,800 employees.
When fully implemented, it is estimated that the reductions will decrease costs
by approximately EUR 110-120 million. Of these cost savings, Wärtsilä estimates
that about EUR 30 million will materialise by the end of 2010. The rest of the
savings will gradually materialise during 2011. The total nonrecurring costs
related to the restructuring will be approximately EUR 140 million, out of which
EUR 40 million non-cash write-offs were recognised in 2009. In January-September
Wärtsilä recorded EUR 59 million nonrecurring items related to restructuring
measures.
PERSONNEL
Wärtsilä had 17,704 (18,806) employees at the end of September 2010. On average,
the personnel for January-September 2010 totalled 18,116 (18,897). Ship Power
employed 974 (1,209) people. Power Plants employed 845 (848) people, Services
11,157 (11,318) and manufacturing and R&D (Wärtsilä Industrial Operations)
4,347 (4,988) people.
Of Wärtsilä's total number of employees, 19% (19) were located in Finland, 7%
(9) in the Netherlands and 31% (32) in the rest of Europe. Personnel employed in
Asia represented 31% (30), out of which 7% (7) were in China, in India 6% (6),
in Singapore 5% (5), and in the rest of the Asia 13% (12).
RESEARCH & DEVELOPMENT
During the quarter, Wärtsilä signed an exclusive agreement with Turboden of
Italy to jointly develop, market, and distribute the Wärtsilä Marine Engine
Combined Cycle (ECC) product. With the Marine ECC in operation, fuel consumption
and exhaust gas emissions will be significantly lowered. Turboden is a Pratt &
Whitney Power Systems company. The joint development work will initially focus
on applying the technology for ship applications, and is expected to enter the
market during 2011.
NEW PRODUCT LAUNCHES
During the third quarter, Wärtsilä launched its new Communication and Control
Centre, the first system to integrate the entire vessel's control into one
solution.
In September Wärtsilä launched the latest addition to its gas engine portfolio,
the Wärtsilä 18V50SG engine. The engine has an electrical output of 18,321 kW,
making it the largest gas powered generating set in the world.
During the quarter, Wärtsilä launched the Wärtsilä Ballast Water Treatment
solution which provides customers with a reliable means to respond to the
requirements set by the International Maritime Organization, and to additional
requirements by maritime authorities.
The new Propulsion Condition Monitoring Service, adapted from the remote
monitoring architecture Wärtsilä developed for its engine monitoring service, is
the first of its kind in the marine propulsion market
SUSTAINABLE DEVELOPMENT
Wärtsilä is well positioned to reduce emissions and the use of natural
resources, thanks to its various technologies and specialised services. Wärtsilä
continues to focus on the development of advanced environmental technologies.
During the review period Wärtsilä started a joint project, the aim of which is
to develop an innovative compact selective catalytic reduction (SCR) system
especially tailored to operations involving 2-stage turbocharging. Wärtsilä also
joined the World Bank-led Global Gas Flaring Reduction organisation, which
strives to reduce the flaring or burning of natural gas associated with oil
production, thereby reducing greenhouse gas emissions.
SHARES AND SHAREHOLDERS
SHARES ON HELSINKI EXCHANGES
30 Sept. 2010 Number of Number of Number of shares traded
shares votes 1-9/2010
--------------------------------------------------------------------------------
WRT1V 98 620 565 98 620 565 78 094 206
1 Jan. -30 Sept. 2010 High Low Average 1) Close
--------------------------------------------------------------------------------
Share price 48.50 28.19 36.86 47.87
1) Trade-weighted average price
30 Sept. 2010 30 Sept. 2009
-----------------------------------------------------------------------
Market capitalisation, EUR 4,721 2,905
million
Foreign shareholders 49.4% 49.5%
DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING
Wärtsilä's Annual General Meeting held on 4 March 2010 approved the financial
statements and discharged the members of the Board of Directors and the
company's President & CEO from liability for the financial year 2009. The
Meeting approved the Board of Directors' proposal to pay a dividend of 1.75 euro
per share. The dividend was paid on 16 March 2010.
The Annual General Meeting decided to change the eighth article of the Articles
of Association so that the publication of the notice for the general meeting
will be no later than three weeks, but at least nine (9) days before the record
date of the general meeting. The change is due to a change in the Finnish
Limited Liability Companies Act.
The Annual General Meeting decided to change the fourth article of the Articles
of Association so that the maximum number of members of the Board of Directors
was increased to ten, and that the Board of Directors consists of 5-10 members.
The Annual General Meeting decided that the Board of Directors shall have nine
members. The following were elected to the Board: Ms Maarit Aarni-Sirviö, Mr
Kaj-Gustaf Bergh, Mr Alexander Ehrnrooth, Mr Paul Ehrnrooth, Mr Ole Johansson,
Mr Antti Lagerroos, Mr Bertel Langenskiöld, Mr Mikael Lilius and Mr Matti
Vuoria.
The firm of public auditors KPMG Oy Ab was appointed as the company's auditors.
The Annual General Meeting authorised the Board to resolve on donations of EUR
1,500,000 at the maximum to be made to universities during 2010. The primary
recipient of the donations is Aalto University.
Organisation of the Board of Directors
The Board of Directors of Wärtsilä Corporation elected Antti Lagerroos as its
chairman and Matti Vuoria as the deputy chairman. The Board decided to establish
an Audit Committee, a Nomination Committee and a Compensation Committee. The
Board appointed from among its members the following members to the Committees:
Audit Committee:
Chairman Antti Lagerroos, Maarit Aarni-Sirviö, Alexander Ehrnrooth, Bertel
Langenskiöld
Nomination Committee:
Chairman Antti Lagerroos, Kaj-Gustaf Bergh, Paul Ehrnrooth, Matti Vuoria
Compensation Committee:
Chairman Antti Lagerroos, Bertel Langenskiöld, Mikael Lilius, Matti Vuoria
RISKS AND BUSINESS UNCERTAINTIES
No major changes occurred in Wärtsilä's business environment in the third
quarter and Wärtsilä expects that its business environment will continue to
improve.
Although the risks have decreased substantially, the main risks within Ship
Power remain the slippage of shipyard delivery schedules, as well as the risk of
cancellation of existing orders.
In the Power Plant business, the consequences from the financial crisis can
still be seen in the timing of closing bigger projects.
In Services, the biggest risk continues to be the uncertainty in the marine
markets.
The annual report for 2009 contains a thorough description of Wärtsilä's risks
and risk management.
MARKET OUTLOOK
In the marine industry, contracting activity is expected to improve slightly. A
shift in the mix of vessel types ordered is expected as contracting for bulk
carriers decreases from current levels and containership ordering continues to
increase. The outlook for offshore contracting activity is positive with strong
demand expected to materialise in new orders.
Even though markets have bottomed out, the prevailing conditions will result in
ordering volumes being maintained at lower levels than during the previous peak
years. Competition and price pressures among shipbuilding suppliers will remain
intense. Wärtsilä expects Ship Power's order intake in 2010 to clearly improve
over 2009.
The power generation market recovery is expected to continue. The recovery will
happen in varying pace in different regions and countries. The emerging markets
are anticipated to be in the forefront of the recovery and the Flexible baseload
and Grid stability & peaking segments are expected to pick-up first. A recovery
in Western Europe and in USA is not expected during 2010. Wärtsilä expects Power
Plants' order intake in 2010 to clearly improve over 2009.
Services development is expected to remain steady. Though the size of the active
fleet remains stable, the scrapping of older tonnage and its replacement with
new tonnage, which is still under warranty and has lower maintenance needs, may
impact Services. Power plant installations continue to be run at high operating
levels. Environmental compliance and economic considerations have been the main
drivers of this business, and will remain so in the foreseeable future. Wärtsilä
is continuously developing its portfolio accordingly. Customers are increasingly
looking for remote management and optimisation of their assets, as this allows
them to simultaneously reduce both their costs and environmental footprint.
Wärtsilä also sees an increased interest in maintenance partnerships, which
reduce the fixed costs for its marine, offshore and power plant customers.
WÄRTSILÄ'S PROSPECTS FOR 2010 IMPROVED
Based on the current order book and a stable service business we expect net
sales to decline by approximately 15 percent in 2010 and our operational
profitability (EBIT% before nonrecurring items) to be better than earlier
expected and to exceed 10%.
WÄRTSILÄ INTERIM REPORT JANUARY - SEPTEMBER 2010
This interim financial report is prepared in accordance with IAS 34 (Interim
Financial Reporting) using the same accounting policies and methods of
computation as in the annual financial statements for 2009. All figures in the
accounts have been rounded and consequently the sum of individual figures can
deviate from the presented sum figure.
Use of estimates
The preparation of the financial statements in accordance with IFRS requires
management to make estimates and assumptions that affect the valuation of the
reported assets and liabilities and other information, such as contingent
liabilities and the recognition of income and expenses in the income statement.
Although the estimates are based on the management's best knowledge of current
events and actions, actual results may differ from the estimates.
Of the amended International Financial Reporting Standards (IFRS) and
interpretations mandatory as of 1 January 2010 the following are applicable on
the Group reporting:
* Revised IFRS 3 Business Combinations
* Amendment to IAS 27 Consolidated and Separate Financial Statements
* Amendment to IAS 39 Financial Instruments: Recognition and Measurement:
Eligible Hedged Items
* IFRIC 18 Transfers of Assets from Customers
- Amendments to IFRIC 9 Reassessment of Embedded Derivatives and IAS 39
Financial Instruments: Recognition and Measurement - Embedded Derivatives
The adaption of the revised standards and interpretations does not have any
material effect on the interim report.
This interim report is unaudited.
CONDENSED INCOME STATEMENT
MEUR 1-9/2010 1-9/2009 2009
--------------------------------------------------------------------------------
Net sales 3 091 3 741 5 260
Other income 31 39 50
Expenses -2 769 -3 279 -4 559
Depreciation and impairment -87 -91 -165
Share of profit of associates and joint ventures 3 5 6
Operating result 269 413 592
Financial income and expenses -3 -25 -34
Net income from assets available for sale 32
Profit before taxes 298 388 558
Income taxes -80 -111 -161
--------------------------------------------------------------------------------
Profit for the financial period 218 277 396
--------------------------------------------------------------------------------
Attributable to:
Owners of the parent 210 273 389
Non-controlling interest 8 4 8
--------------------------------------------------------------------------------
Total 218 277 396
--------------------------------------------------------------------------------
Earnings per share attributable to equity holders of
the parent company:
--------------------------------------------------------------------------------
Earnings per share, EUR (basic and diluted) 2,13 2,77 3,94
--------------------------------------------------------------------------------
STATEMENT OF COMPREHENSIVE INCOME
Profit for the financial period 218 277 396
Other comprehensive income after tax:
Exchange differences on translating foreign
operations 12 13 18
Investments available for sale 7* 21 34
Cash flow hedges 4 24 20
Share of other comprehensive income of associates and
joint ventures 1
--------------------------------------------------------------------------------
Other comprehensive income for the period 23 58 73
--------------------------------------------------------------------------------
Total comprehensive income for the period 240 336 469
--------------------------------------------------------------------------------
Total comprehensive income attributable to:
Owners of the parent 232 331 460
Non-controlling interest 9 5 9
--------------------------------------------------------------------------------
240 336 469
*of which transferred to income statement EUR -21 million
CONDENSED BALANCE SHEET
MEUR 30 Sep. 2010 30 Sep. 2009 31 Dec. 2009
--------------------------------------------------------------------------------
Non-current assets
Intangible assets 773 791 779
Property, plant and equipment 449 465 457
Equity in associates and joint ventures 61 53 56
Investments available for sale 156 134 151
Deferred tax receivables 98 77 88
Other receivables 30 26 15
--------------------------------------------------------------------------------
1 568 1 545 1 548
Current assets
Inventories 1 473 1 843 1 577
Other receivables 1 092 1 285 1 287
Cash and cash equivalents 578 262 244
--------------------------------------------------------------------------------
3 143 3 390 3 108
--------------------------------------------------------------------------------
Assets 4 711 4 935 4 655
--------------------------------------------------------------------------------
Shareholders' equity
Share capital 336 336 336
Other shareholders' equity 1 220 1 031 1 160
--------------------------------------------------------------------------------
Total equity attributable to equity
holders of the parent 1 556 1 367 1 496
Minority interest 22 12 16
--------------------------------------------------------------------------------
Total shareholders' equity 1 578 1 379 1 512
Non-current liabilities
Interest-bearing debt 599 622 591
Deferred tax liabilities 93 89 93
Other liabilities 242 284 258
--------------------------------------------------------------------------------
934 994 941
Current liabilities
Interest-bearing debt 89 230 73
Other liabilities 2 110 2 331 2 129
--------------------------------------------------------------------------------
2 199 2 561 2 202
Total liabilities 3 133 3 556 3 143
--------------------------------------------------------------------------------
Shareholders' equity and liabilities 4 711 4 935 4 655
--------------------------------------------------------------------------------
CONDENSED CASH FLOW STATEMENT
MEUR 1-9/2010 1-9/2009 2009
--------------------------------------------------------------------------------
Cash flow from operating activities:
Profit before taxes 298 388 558
Depreciation and impairment 87 91 165
Financial income and expenses 3 25 34
Selling profit and loss of fixed assets and other
adjustments -31 -8 -7
Share of profit of associates and joint ventures -3 -5 -6
Changes in working capital 333 -204 -179
--------------------------------------------------------------------------------
Cash flow from operating activities before financial
items and taxes 687 289 564
Net financial items and income taxes -195 -147 -215
--------------------------------------------------------------------------------
Cash flow from operating activities 491 142 349
--------------------------------------------------------------------------------
Cash flow from investing activities:
Investments in shares and acquisitions -5 -15 -16
Net investments in tangible and intangible assets -44 -82 -133
Proceeds from sale of shares 36 -19 -21
Cash flow from other investing activities 9 4 7
--------------------------------------------------------------------------------
Cash flow from investing activities -3 -113 -163
--------------------------------------------------------------------------------
Cash flow from financing activities:
New long-term loans 37 229 263
Amortization and other changes in long-term loans -24 -67 -106
Changes in short term loans and other financing
activities 2 30 -141
Dividends paid -175 -156 -156
--------------------------------------------------------------------------------
Cash flow from financing activities -159 36 -140
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and cash equivalents, increase (+) /
decrease (-) 329 65 47
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 244 197 197
Exchange rate changes 5 -1
Cash and cash equivalents at end of period 578 262 244
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
Total equity attributable to equity
MEUR holders of the parent Minority Total
interest equity
--------------------------------------------------------------------------------
Fair
value
Share
Share issue Translation and other Retained
capital premium differences reserves earnings
--------------------------------------------------------------------------------
Shareholders'
equity on 1
January 2010 336 61 -6 99 1 006 16 1 512
Dividends -173 -2 -175
Total
comprehensive
income for the
period 11 10 210 9 240
--------------------------------------------------------------------------------
Shareholders'
equity on 30
Sep. 2010 336 61 5 110 1 044 22 1 578
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders'
equity on 1
January 2009 336 61 -27 50 764 15 1 199
Dividends -148 -8 -156
Total
comprehensive
income for the
period 16 41 274 5 336
--------------------------------------------------------------------------------
Shareholders'
equity on 30
Sep. 2009 336 61 -11 91 890 12 1 379
--------------------------------------------------------------------------------
Geographical distribution of net sales Europe Asia Americas Other Group
MEUR
------------------------------------------------------------------------
Net sales 1-9/2010 896 1 130 719 346 3 091
Net sales 1-9/2009 1 120 1 385 907 329 3 741
------------------------------------------------------------------------
INTANGIBLE ASSETS AND PROPERTY, PLANT & EQUIPMENT
MEUR 1-9/2010 1-9/2009 2009
--------------------------------------------------------------------------
Intangible assets
Book value at 1 January 779 793 793
Changes in exchange rates 16 16 26
Acquisitions 12 12
Additions 10 13 24
Depreciation and impairment -32 -43 -62
Disposals and intra-balance sheet transfer -14
--------------------------------------------------------------------------
Book value at end of period 773 791 779
--------------------------------------------------------------------------
Property, plant and equipment
Book value at 1 January 457 446 446
Changes in exchange rates 9 1 3
Acquisitions 1 1
Additions 40 69 112
Depreciation and impairment -54 -49 -103
Disposals and intra-balance sheet transfer -3 -4 -2
--------------------------------------------------------------------------
Book value at end of period 449 465 457
--------------------------------------------------------------------------
GROSS CAPITAL EXPENDITURE
MEUR 1-9/2010 1-9/2009 2009
--------------------------------------------------------------------------------
Investments in securities and
acquisitions 5 15 16
Intangible assets and property,
plant and equipment 49 82 136
--------------------------------------------------------------------------------
Group 54 98 152
--------------------------------------------------------------------------------
Wärtsilä centralises warehousin and logisti s of spare p rts by investing in a
new distribution centre in the etherlands. he investmen s to the new
distribution centre amounted to EUR 16 million during the review period and
commitments related to the investment were EUR 17 million at the end of the
review period.
INTEREST-BEARING LOAN CAPITAL
MEUR 30 Sep. 2010 30 Sep. 2009 31 Dec. 2009
--------------------------------------------------------------------------------
Long-term liabilities 599 622 591
Current liabilities 89 230 73
Loan receivables -19 -15 -6
Cash and bank balances -578 -262 -244
--------------------------------------------------------------------------------
Net 91 575 414
--------------------------------------------------------------------------------
FINANCIAL RATIOS 1-9/2010 1-9/2009 2009
---------------------------------------------------------------------
Earnings per share, EUR (basic and diluted) 2,13 2,77 3,94
Equity per share, EUR 15,77 13,86 15,17
Solvency ratio, % 40,5 35,4 40,0
Gearing 0,07 0,43 0,28
---------------------------------------------------------------------
PERSONNEL
1-9/2010 1-9/2009 2009
-------------------------------------------
On average 18 116 18 897 18 830
At end of period 17 704 18 806 18 541
-------------------------------------------
CONTINGENT LIABILITIES
MEUR 30 Sep. 2010 30 Sep. 2009 31 Dec. 2009
----------------------------------------------------------------------------
Mortgages 56 56 56
Chattel mortgages 18 9 10
----------------------------------------------------------------------------
Total 74 66 66
----------------------------------------------------------------------------
Guarantees and contingent liabilities
on behalf of Group companies 619 809 678
on behalf of associated companies 9 8 8
Nominal amount of rents according
to leasing contracts 75 81 77
----------------------------------------------------------------------------
Total 703 897 763
----------------------------------------------------------------------------
NOMINAL VALUES OF DERIVATIVE INSTRUMENTS
MEUR Total amount of which closed
---------------------------------------------------------------------
Interest rate swaps 20
Foreign exchange forward contracts 1 252 299
Currency options, purchased 27 7
Currency options, written 7 7
---------------------------------------------------------------------
CONDENSED INCOME
STATEMENT, QUARTERLY
MEUR 7-9/2010 4-6/2010 1-3/2010 10-12/2009 7-9/2009 4-6/2009 1-3/2009
--------------------------------------------------------------------------------
Net sales 1 039 1 131 922 1 519 1 167 1 333 1 241
Other income 13 11 7 11 20 13 5
Expenses -910 -1 007 -851 -1 280 -1 026 -1 167 -1 087
Depreciation
and impairment -29 -28 -30 -73 -31 -30 -30
Share of
profit of
associates and
joint ventures 2 2 1 3 1 1
Operating
result 114 105 49 179 133 149 130
Financial
income and
expenses -6 4 -9 -9 -9 -7
Net income
from assets
available for
sale 32
Profit before
taxes 140 109 49 170 125 141 123
Income taxes -35 -31 -14 -51 -38 -39 -34
--------------------------------------------------------------------------------
Profit for the
financial
period 104 79 35 119 87 102 89
--------------------------------------------------------------------------------
Attributable
to:
Owners of the
parent 101 76 32 115 86 100 87
Non-
controlling
interest 3 3 2 4 1 2 1
--------------------------------------------------------------------------------
Total 104 79 35 119 87 102 89
--------------------------------------------------------------------------------
Earnings per share attributable
to equity holders of the parent
company:
--------------------------------------------------------------------------------
Earnings per
share, EUR 1,03 0,77 0,33 1,17 0,87 1,01 0,89
--------------------------------------------------------------------------------
CALCULATION OF FINANCIAL RATIOS
Earnings per share (EPS)
Profit for the period attributable to equity holders of the parent company
---------------------------------------------------------------------------
Adjusted number of shares over the period
Equity per share
Equity attributable to equity holders of the parent company
---------------------------------------------------------------------------
Adjusted number of shares at the end of the period
Solvency ratio
Shareholders' equity
---------------------------------------------------------------------------x 100
Balance sheet total - advances received
Gearing
Interest-bearing liabilities - cash and bank balances
---------------------------------------------------------------------------
Shareholders' equity
19 October 2010
Wärtsilä Corporation
Board of Directors
[HUG#1453323]
