Wärtsilä Corporation INTERIM REPORT 18 July 2014 at 8.30 a.m. local time
WÄRTSILÄ INTERIM REPORT JANUARY-JUNE 2014
GOOD DEVELOPMENT IN PROFITABILITY
This release is a summary of Wärtsilä's Interim Report January-June 2014. The
complete report is attached to this release as a pdf-file. It is also available
at http://www.wartsilareports.com/en-US/2014/q2/frontpage/ and on the company
website at www.wartsila.com.
SECOND QUARTER HIGHLIGHTS
- Order intake increased 9% to EUR 1,163 million (1,071)
- Net sales decreased 2% to EUR 1,132 million (1,152)
- Book-to-bill 1.03 (0.93)
- Operating result before non-recurring items EUR 122 million, or 10.8% of net
sales (EUR 111 million or 9.6%)
- Earnings per share EUR 0.42 (0.39)
- Cash flow from operating activities EUR 61 million (38)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-JUNE 2014
- Order intake decreased 5% to EUR 2,305 million (2,424)
- Net sales increased 5% to EUR 2,144 million (2,034)
- Book-to-bill 1.07 (1.19)
- Operating result before non-recurring items EUR 212 million, or 9.9% of net
sales (EUR 181 million or 8.9%)
- Earnings per share EUR 0.73 (0.76)
- Cash flow from operating activities EUR 172 million (122)
- Order book at the end of the period decreased 4% to EUR 4,554 million (4,763)
EVENTS AFTER THE REPORTING PERIOD
- Wärtsilä and China State Shipbuilding Corporation announced the establishment
of a joint venture, which will take over Wärtsilä's two-stroke engine business.
Going forward, the two-stroke engine business will be reported as discontinued
operations.
- Wärtsilä and China State Shipbuilding Corporation announced the establishment
of a joint venture for manufacturing medium and large bore medium-speed diesel
and dual-fuel engines.
WÄRTSILÄ'S PROSPECTS FOR 2014 REVISED
Wärtsilä estimates its profitability for 2014 (EBIT% before non-recurring items)
to be around 11.5%, due to the two-stroke business transaction. Net sales are
expected to grow by around 5%.
Previously Wärtsilä expected its net sales to grow by 0-10% and its operational
profitability (EBIT% before non-recurring items) to be around 11%.
BJÖRN ROSENGREN, PRESIDENT AND CEO
"The first half of 2014 has developed well. I am pleased to note that the
ongoing restructuring measures have already made a positive contribution to our
operating result. The savings we have achieved through these measures, together
with the improved Ship Power and Services performance, have compensated for the
low volumes in the Power Plants business and resulted in profitability
increasing to 9.9%.
Contracting in the marine markets was active and Ship Power's second quarter
order intake developed favourably, especially in the offshore and gas carrier
segments. The challenges in the overall power generation markets, however,
continued to affect our Power Plants business. Orders remained fairly low,
although improving from the weak levels seen in the first quarter. I am
confident that activity will improve in the second half. The Services business
had an active quarter in terms of signing long-term service contracts with
marine customers. The interest for agreements continues to be strongest in the
more specialised vessel segments.
In July, Wärtsilä and China State Shipbuilding Corporation announced the
establishment of a joint venture company, which will assume total responsibility
for Wärtsilä's two-stroke engine business. Our ownership in the joint venture
will be 30%. The responsibility for servicing Wärtsilä's two-stroke engines will
remain with our Services business. The partnership will enhance the position of
Wärtsilä's two-stroke technology in the marine engine market, and will provide a
strong base for future investments in leading two-stroke technology and customer
support. The transaction will have a positive impact on our continuing
operations and consequently our estimate for 2014 profitability has been
increased to around 11.5%. We have also narrowed down our net sales guidance to
around 5% growth."
KEY FIGURES
MEUR 4-6/2014 4-6/2013 Change 1-6/2014 1-6/2013 Change 2013
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Order intake 1 163 1 071 9% 2 305 2 424 -5% 4 872
Order book at the
end of the period 4 554 4 763 -4% 4 426
Net sales 1 132 1 152 -2% 2 144 2 034 5% 4 654
Operating result
(EBIT)(1) 122 111 10% 212 181 17% 520
% of net sales 10.8 9.6 9.9 8.9 11.2
Profit before taxes
(2) 109 104 190 200 507
Earnings/share, EUR
(2) 0.42 0.39 0.73 0.76 1.98
Cash flow from
operating
activities 61 38 172 122 578
Net interest-
bearing debt at the
end of the period 350 658 276
Gross capital
expenditure 47 49 134
Gearing 0.19 0.40 0.15
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(1) EBIT is shown excluding non-recurring items. Wärtsilä recognised non-
recurring items related to restructuring measures amounting to EUR 10 million
(1) in the second quarter and EUR 16 million (2) during the review period
January-June 2014.
(2) Earnings/share and profit before taxes for January-June 2013 and the full
year 2013 include the sale of Wärtsilä's shares in Sato Oyj.
EVENTS AFTER THE REPORTING PERIOD
Wärtsilä and China State Shipbuilding Corporation (CSSC) announced an agreement
to establish a joint venture, which will take over Wärtsilä's two-stroke engine
business. CSSC will own 70% of the business and Wärtsilä's ownership will be
30%. Responsibility for servicing Wärtsilä's two-stroke engines will remain with
Wärtsilä Services. The partnership will boost the position of Wärtsilä's two-
stroke technology in the marine engine market and provide a strong base for
future investments in leading two-stroke technology and customer support. The
value of the transaction is approximately EUR 46 million. The financial impact
of the deal will be dependent on the timing of the closing and certain related
mechanisms. The deal will have a positive effect on Wärtsilä's continuing
operations. The closing of the transaction is subject to the required regulatory
approvals, which are expected in the first quarter of 2015. Going forward, the
two-stroke engine business will be reported as discontinued operations.
Wärtsilä and China State Shipbuilding Corporation (CSSC) announced an agreement
to establish a joint venture company, for manufacturing medium and large bore
medium-speed diesel and dual-fuel engines. The CSSC Wärtsilä Engine (Shanghai)
Co. Ltd factory will be located in Lingang, Shanghai and is expected to have its
first engine ready for delivery by the end of 2015. The Wärtsilä share of the
joint venture is 49 per cent and the size of Wärtsilä's equity investment is
approximately EUR 27 million.
MARKET OUTLOOK
Power generation markets closely follow the global macro-economic situation.
Based on the market challenges seen during the first half year and the revised
GDP forecasts for 2014, the overall market for liquid and gas fuelled power
generation is expected to continue to be challenging. Ordering activity remains
focused on the emerging markets, especially those with oil and gas production
based economies, which continue to invest in new power generation capacity.
Furthermore, the current market situation is creating pent-up demand in emerging
countries where investment decisions have been delayed. In the OECD countries,
demand is mainly driven by CO2 neutral generation and the ramp down of older,
largely coal-based generation.
The main drivers supporting activity in the shipping and offshore sectors are in
place, yet growth has nevertheless been slow. Despite improving seaborne trade,
overcapacity is still affecting demand in the traditional merchant markets.
Increased scrapping and a more balanced fleet growth support gradual freight
market recovery. In the offshore segment, current oil price levels support
investments in projects with controlled exploration and development costs. The
importance of fuel efficiency and the introduction of environmental regulations
are clearly visible. The regulatory environment is also increasing interest in
gas as a marine fuel, which is further strengthened in the US by favourable
pricing. Offshore activity is anticipated to continue; however a decline in the
contracting of drilling units and certain support vessels may be seen. The
shipping markets are expected to remain active, especially within the gas
carrier segment, although the contracting of traditional merchant vessels is
likely to decline.
The overall service market outlook remains stable, with positive developments in
selected regions. An increase in the installed base offsets the slower service
demand for older installations and the continued emphasis of merchant marine
customers on reducing operating expenses. The outlook for services to offshore
and gas fuelled vessels remains favourable. The interest for service agreements
is strong in both of Wärtsilä's end markets. Demand for services in the power
plant segment continues to be good. From a regional perspective, the outlook for
the Middle East and Asia is positive, and is supported by interest in power
plant related services. The outlook is also good in the Americas and in Africa.
ANALYST AND PRESS CONFERENCE AT 10.00 A.M. LOCAL TIME
An analyst and press conference will be held on Friday 18 July 2014 at 10.00
a.m. Finnish time (8.00 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 at the following address:
http://wcc.webeventservices.com/r.htm?e=798106&s=1&k=6415F8D0193EE508B3A23434515
F2566.
To participate in the teleconference please register at the following address:
http://emea.directeventreg.com/registration/58115145. You will receive dial-in
details by e-mail once you have registered. If problems occur, please press *0
for operator assistance. Please use *6 to mute your phone during the
teleconference and the same code to unmute.
An on-demand version of the webcast will be available on the company website
later the same day.
For further information, please contact:
Marco Wirén
Executive Vice President & CFO
Tel: +358 10 709 5640
marco.wiren@wartsila.com
Natalia Valtasaari
Director, Investor Relations
Tel: +358 40 187 7809
natalia.valtasaari@wartsila.com
For press information, please contact:
Atte Palomäki
Executive Vice President, Communications & Branding
Tel: +358 10 709 5599
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 maximizes the environmental and economic performance of the
vessels and power plants of its customers. In 2013, Wärtsilä's net sales
totalled EUR 4.7 billion with approximately 18,700 employees. The company has
operations in more than 200 locations in nearly 70 countries around the world.
Wärtsilä is listed on the NASDAQ OMX Helsinki, Finland. www.wartsila.com
[HUG#1830253]
