Wärtsilä Corporation FINANCIAL STATEMENTS RELEASE 28 January 2010 at 8.30 local
time
ALL TIME HIGH NET SALES AND OPERATING PROFIT, STRONG CASH FLOW
FOURTH QUARTER HIGHLIGHTS
- Strong net sales EUR 1,519 million (1,530)
- All time high profitability 14.4 % of net sales (12.9). Operating result
(before nonrecurring items) grew to EUR 219 million (197). EUR 40 million of
nonrecurring expenses related to restructuring measures recognised
- Earnings per share excluding nonrecurring items amounted to 1.48 (1.46)
- Order intake at last year's level, EUR 823 million (823). Recovery in Power
Plants orders and signs of recovery in offshore. Services continued strong.
- Adjustment of production capacity to lower order intake was accelerated
- Cash flow from operating activities EUR 207 million (23)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-DECEMBER 2009
- Strong year, net sales grew 14%, to EUR 5,260 million (4,612),
- Profitability at record level, 12.1% of net sales (11.4). Operating result
before nonrecurring restructuring items grew to EUR 638 million (525). Including
the restructuring items, the operating result totalled EUR 592 million, 11.2% of
net sales.
- Earnings per share excluding nonrecurring items amounted to 4.30 euros (3.88)
- Strong cash flow from operating activities EUR 349 million (278)
- Order intake EUR 3,291 million (5,573), a decrease of 41%
- Order book total EUR 4,491 million (6,883), a decrease of 35%
- Materialised order cancellations totalled EUR 410 million
- Dividend proposal 1.75 euros/share
OLE JOHANSSON, PRESIDENT AND CEO:
"The year 2009 was very successful for Wärtsilä in many ways. Group net sales
grew by 14%, coupled with an all time high operating profit. The demand for
power plants continued on a healthy level and the Services business maintained
its volumes in spite of significant lay ups of vessels. The global recession of
the marine market was reflected as low ordering activity and cancellations in
the Ship Power business. While the standstill of new shipbuilding orders at
large is expected to continue for another two years, first signs of recovery can
be seen in some Offshore and Special vessel segments. Wärtsilä's activity in all
major segments of shipping is a valuable element of future competitiveness. The
concentration of shipbuilding activity to Asia, particularly to China is
expected to continue. This is the basis for the capacity adjustments within
Wärtsilä Ship Power and Industrial operations that were initiated during 2009
and early 2010. With power plant demand continuing at a healthy level,
opportunities in Services, operations and manufacturing adjusted to the changing
global markets and with continued focus on innovation, Wärtsilä is well
positioned for the year 2010 and beyond".
WÄRTSILÄ'S PROSPECTS FOR 2010
Due to the weakness of the shipbuilding sector we expect net sales to decline by
10-20 percent in 2010. As a result of a stable service business, good demand for
power plants and proper adaptation of capacity, our operational profitability
(EBIT% before nonrecurring items) should be between 9-10 %, well within the
upper end of our long-term target range.
ANALYST AND PRESS CONFERENCE
An analyst and press conference will be held on Thursday 28 January 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://194.100.179.139/wip/directlink.do?newbrowser=1&pid=3161110
To participate in the teleconference please call: +44 (0)20 7162 0125 and enter
the Conference ID: 854586. If you want to ask questions during the
teleconference, press the number 1 on your phone to register for a question and
the # -key to withdraw a question. The event title for the call is: Annual
Results. Please be ready to state your details and the name of the conference to
the operator. If problems occur, please press the *-key followed by the 0-key.
We would recommend that you would register to the conference in advance at the
following address:
https://eventreg2.conferencing.com/webportal3/reg.html?Acc=158744&Conf=200493
An on-demand version of the webcast will be available on the company website
later the same day.
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.
FINANCIAL STATEMENTS BULLETIN JANUARY-DECEMBER 2009
The annual figures in this financial statements bulletin are audited.
FOURTH QUARTER 10-12/2009 IN BRIEF
MEUR 10-12/2009 10-12/2008 Change
Order intake 823 823 0%
Net sales 1 519 1 530 -1%
Operating result (EBIT) before nonrecurring
restructuring items 219 197 11%
% of net sales 14.4% 12.9%
Nonrecurring items 40
Operating result 179
% of net sales 11.8%
Profit before taxes 170 183
Earnings/share, EUR 1.48 1) 1.46
Cash flow from operating activities 207 23
1) Earnings/share excluding nonrecurring items (EPS including nonrecurring items
total EUR 1.17)
REVIEW PERIOD JANUARY-DECEMBER 2009 IN BRIEF
MEUR 1-12/2009 1-12/2008 Change
Order intake 3 291 5 573 -41%
Order book at the end of the period 4 491 1) 6 883 -35%
Net sales 5 260 4 612 14%
Operating result (EBIT) before nonrecurring
restructuring items 638 525 21%
% of net sales 12.1% 11.4%
Nonrecurring items 46
Operating result 592
% of net sales 11.2%
Profit before taxes 558 516 8%
Earnings/share, EUR 4.30 2) 3.88
Cash flow from operating activities 349 278
Interest-bearing net debt
at the end of the period 414 455
Gross capital expenditure 152 366
1) Cancellations amounting to EUR 410 million have been eliminated form the
order book during the review period January-December 2009.
2) Earnings/share excluding nonrecurring items (EPS including nonrecurring items
total EUR 3.94)
MARKET DEVELOPMENT
CONTINUED WEAKNESS IN THE SHIP POWER MARKET
In 2009, only 400 new ships were ordered, which is less than 10% of average new
orders during the all time high years. The first half of the year was
particularly difficult, an environment of oversupply within the major vessel
segments prevailed throughout the year. In the latter part of the year market
activity picked up somewhat and a slight recovery was seen. Project financing
still seems to remain the most important factor in many new investments, and
this can be seen for example in offshore projects where there has not yet been a
recovery, despite a surge in the price of oil. The strong and on-going recession
in the shipping and shipbuilding industry has left its marks on the market, with
both freight rates and new build prices at very low levels. Cancellations and
rearrangements of existing orders will continue.
Ship Power geographical markets
In 2009, China secured approximately 50% (39) of global new building orders in
terms of number of vessels, followed by Korea with approximately 30% (29) of the
orders. China's gain of market share continues to be at the expense of Japan 2%
(16) and Europe 9% (10). In terms of Dead Weight Tons (DWT), China and Korea
each secured around 45% of the global contracted volume. Once the broader
recovery commences, the Asian shipbuilding market is expected to emerge even
stronger than earlier. The dominance will grow in all areas, including the more
specialised vessel segments.
Ship Power market shares
Wärtsilä's market share in medium speed main engines increased from 31% at the
end of the previous quarter to 36%. The company's market share in low speed main
engines remained stable at 12% (13). In auxiliary engines the market shares
decreased to 2% (4). Market shares have become more sensitive to individual
orders since the total contracting volume is low.
POWER PLANTS MARKETS RECOVERED SLIGHTLY BY THE END OF THE YEAR
In 2009, demand for power plants was at a good level and offering activity
remained high. Ordering activity was hampered by difficulties in arranging
financing and customer decision-making processes were slow. Ordering activity
improved in the fourth quarter, due mainly to the improved situation in the
financial markets.
Power Plants market shares
According to statistics compiled by Diesel and Gas Turbine magazine, the global
market for oil and gas power plants in Wärtsilä's power range declined to
11,570 MW (20,980) between June 2008 and May 2009. The market for gas power
plants, including both reciprocating engines and gas turbines, declined to
7,090 MW (15,630), Wärtsilä's share of the market being 13% (8). The market for
heavy fuel oil plants decreased to 3,430 MW (4,050), Wärtsilä's share being 46%
(49). In light fuel oil plants the market decreased to 1.050 MW (1,300) and
Wärtsilä's market share was 3% (20). For Wärtsilä the relevant markets for light
fuel oil power plants are those running on liquid bio-fuels where hardly any new
plants were ordered.
SERVICES BUSINESS STABLE DESPITE CHALLENGING MARINE MARKET
The economic crisis has affected customers' businesses, cash flow and investment
levels. Marine customers have been especially hit and this has also impacted
the maintenance of their installations, especially in the Merchant vessel
segment. However, although approximately 10% of the total vessel fleet is
laid-up and the active engine base is underutilised, the medium-speed engine
base has largely maintained its planned maintenance schedules. In some market
segments, fuel conversions, retrofits or other larger investments have been
postponed while customers focus on essential repairs and maintenance. Power
plant installations continue to run at high levels with a stable demand for
maintenance.
Wärtsilä's installed engine base in the Ship Power and Power Plant markets
totals over 160,000 MW and consists of thousands of installations distributed
throughout the world. Both end markets consist of several customer segments for
Services, and Wärtsilä's portfolio is the broadest in the market. These factors
limit the impacts of fluctuations in any individual market or customer segment.
ORDER INTAKE
The Group order intake for the fourth quarter was at the same level as in the
corresponding period last year, and totalled EUR 823 million (823).
The order intake for Ship Power totalled EUR 54 million (152), 64% below the
corresponding period last year. The fourth quarter order intake was 21% lower
than in the third quarter of 2009 (EUR 68 million in the third quarter of
2009). The order intake for Power Plants in the fourth quarter totalled EUR 300
million (263), which was 14% higher than for the corresponding period last year.
The order intake was 77% higher than in the previous quarter. This was mainly
due to the improved situation in the financial markets. During the quarter the
largest oil-fired power plant orders were those received from Greece and Kenya.
During the fourth quarter Wärtsilä was contracted to supply a 170 MW gas-fired
power plant to Texas, USA. The power plant is to be located close to significant
wind farm generation, and will serve to stabilise the grid when the output from
the wind farms change unexpectedly because of weather changes. Wärtsilä also
received several orders for gas-fired power plants to Turkey during the quarter.
Order intake for the Services business totalled EUR 470 million (410) in the
fourth quarter, a growth of 15% compared to the corresponding period 2008.
Compared to the third quarter order intake decreased by 3% (EUR 483 million in
the third quarter of 2009). During the quarter an operation & maintenance
agreement was signed for a 160 MW coal plant located in India supplied by a
third party. In December, a major 5-year agreement with Maersk LNG for five LNG
vessels equipped with Wärtsilä 50DF dual-fuel engines.
Wärtsilä's order intake for the review period January-December 2009 totalled EUR
3,291 million (5,573), a decrease of 41%. Wärtsilä Ship Power's order intake
for the review period was EUR 317 million (1,826), a decrease of 83% from the
corresponding period last year. The main part of the year reflected the very
difficult circumstances in the market. The Merchant customer segment represented
36%, Offshore 17%, Navy 16% and Cruise & Ferry 15% of total orders received in
Ship Power during the review period.
For the review period January-December 2009, the Power Plants order intake
totalled EUR 1,048 million (1,883), a 44% decrease compared to last year.
Ordering activity was low during the first three quarters of the review period
due to the financial crisis but improved during the fourth quarter. Wärtsilä
Power Plants' order intake for the review period is the third highest order
intake in the business' history, which is notable considering the challenging
market environment.
Services' order intake for the review period January-December totalled EUR
1,917 million (1,858). During the review period Wärtsilä Services signed several
operations and maintenance contracts in Brazil, Pakistan and the Philippines
among others.
ORDER BOOK
At the end of the review period Wärtsilä's total order book stood at EUR 4,491
million (6,883), a decrease of 35%.
The Ship Power order book stood at EUR 2,553 million (4,486), -43%. During the
review period January-December 2009, cancellations of EUR 410 million
materialised and were deducted from the order book. The cancellations were
mainly within the Merchant and Offshore segments. Wärtsilä sees a cancellation
risk in the year-end order book of approximately EUR 500 million (EUR 800
million at the end of 2008).
At the end of the review period the Power Plants order book amounted to EUR
1,362 million (1,949), which is 30% lower than at the same date last year.
The Services order book totalled EUR 576 million (445) at the end of the review
period, an increase of 29%.
Fourth quarter order intake by business
MEUR 10-12/2009 10-12/2008 Change
Ship Power 54 152 -64%
Power Plants 300 263 14%
Services 470 410 15%
Order intake, total 823 823 0%
Order intake Power Plants
MW 10-12/2009 10-12/2008 Change
Oil 293 290 1%
Gas 332 207 60%
Renewable fuels 0 0 0%
Order intake for the review period by business
MEUR 1-12/2009 1-12/2008 Change
Ship Power 317 1 826 -83%
Power Plants 1 048 1 883 -44%
Services 1 917 1 858 3%
Order intake, total 3 291 5 573 -41%
Order intake Power Plants
MW 1-12/2009 1-12/2008 Change
Oil 1 172 2 029 -42%
Gas 800 1 240 -35%
Renewable fuels 35 80 -56%
Order book by business
MEUR 31 Dec. 2009 31 Dec. 2008 Change
Ship Power 2 553 4 486 -43%
Power Plants 1 362 1 949 -30%
Services 576 445 29%
Order book, total 4 491*) 6 883 -35%
*) Cancellations amounting to EUR 410 million have been eliminated form the
order book during the review period January-December 2009.
STRONG SALES GROWTH
During the fourth quarter, Wärtsilä's net sales totalled EUR 1,519 million
(1,530). Net sales for Ship Power totalled EUR 538 million (579), a decrease of
7%. Power Plants' net sales for the fourth quarter totalled 476 million (464),
+3%. In Services the fourth quarter of 2009 represented an all time high quarter
and amounted to EUR 504 million (495), +2%.
Wärtsilä's net sales for January-December 2009 grew by 14% and totalled EUR
5,260 million (4,612). Ship Power's net sales grew 15% to EUR 1,767 million
(1,531). Net Sales for Power Plants totalled EUR 1,645 million (1,261), a growth
of 30%. Net sales from the Services business remained stable and on a good level
amounting to EUR 1,830 million (1,830). Net sales were evenly distributed
between the businesses during the review period, Ship Power accounted for 34%,
Power Plants for 31% and Services for 35% of the total net sales.
Fourth quarter net sales by business
MEUR 10-12/2009 10-12/2008 Change
Ship Power 538 579 -7%
Power Plants 476 464 3%
Services 504 495 2%
Net sales, total 1 519 1 530 -1%
Net sales for the review period by business
MEUR 1-12/2009 1-12/2008 Change
Ship Power 1 767 1 531 15%
Power Plants 1 645 1 261 30%
Services 1 830 1 830 0%
Net sales, total 5 260 4 612 14%
PROFITABILITY IMPROVED CONSIDERABLY
The fourth quarter operating result before nonrecurring expenses was EUR 219
million (197), 14.4% of net sales (12.9). For the review period January-December
2009, the operating result before nonrecurring expenses rose to an all time high
EUR 638 million (525), 12.1% of net sales (11.4). Including the nonrecurring
expenses, the operating result was EUR 592 million or 11.2% of net sales.
Wärtsilä recognised EUR 46 million of nonrecurring expenses related to the
restructuring measures during the year.
Financial items amounted to EUR -34 million (-9). Net interest totalled EUR -17
million (-19). Dividends received totalled EUR 6 million (7). Other financial
items include impairment write-offs of non-operating receivables of EUR 10
million and the interest rate differences on derivatives amounted to EUR 1
million (10). Profit before taxes amounted to EUR 558 million (516). Taxes in
the reporting period amounted to EUR 161 million (127). The profit for the
financial period amounted to EUR 396 million (389). Earnings per share were EUR
3.94 (3.88). Return on Investment (ROI) was 29.9% (32). Return on equity (ROE)
was 29.2% (31).
BALANCE SHEET, FINANCING AND CASH FLOW
Wärtsilä's fourth quarter cash flow from operating activities was strong and
totalled EUR 207 million (23). For January-December 2009 the cash flow from
operating activities was EUR 349 million (278). Working capital in the cash flow
decreased by EUR 25 million during the fourth quarter. Net working capital at
the end of the period totalled EUR 482 million (267). Advances received at the
end of the period totalled EUR 879 million (1,243). Net working capital has been
exceptionally low during the past years due to the high amount of advances
received. Cash and cash equivalents at the end of the period amounted to EUR
244 million (197).
Net interest-bearing loan capital totalled EUR 414 million (455). Wärtsilä had
interest bearing loans totalling EUR 664 million (664) at the end
of December 2009. The existing funding programmes include long-term loans of
EUR 591 million, unutilised Committed Revolving Credit Facilities totalling
EUR 555 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 73 million.
The solvency ratio was 40.0% (34.3) and gearing was 0.28 (0.39).
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 98 million.
CAPITAL EXPENDITURE
Gross capital expenditure in the review period totalled EUR 152 million (366),
which comprised EUR 16 million (198) in acquisitions and investments in
securities, and EUR 136 million (168) in production and information technology
investments. Depreciation and amortisations for the review period amounted to
EUR 165 million (99), of which EUR 40 million is related to the restructuring
measures announced at the beginning of 2010.
Maintenance capital expenditure for 2010 will be in line with or below
depreciation. 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 ACQUISITIONS, JOINT VENTURES AND EXPANSION OF THE NETWORK
Wärtsilä continued pursuing its strategy of expanding its network with new
service facilities in many countries, including Ukraine, Cameroon, Hungary,
Chile, Dubai, Russia and Sweden. These facilities provide a good base for future
service growth, and expansion the network will continue to be one of Wärtsilä's
strategic focus areas in the future.
In May, Wärtsilä acquired 60% of the shares of Wärtsilä Navim Diesel of Italy,
thus increasing its ownership of the company to 100%. Wärtsilä Navim Diesel,
which specialises in marine sales and service, has a strong market position,
particularly in the Cruise & Ferry segment. The transaction resulted in EUR 8
million of new goodwill.
MANUFACTURING
In April, Wärtsilä, China Shipbuilding Industry Corporation (CSIC) and
Mitsubishi Heavy Industries (MHI) inaugurated a jointly owned, low-speed marine
engine factory in Qingdao, Shandong Province, China. The joint venture company
Qingdao Qiyao Wartsila MHI Linshan Marine Diesel Co. Ltd. (QMD) is owned by CSIC
(50%), Wärtsilä Corporation (27%), and MHI (23%).
In May, Wärtsilä and 3. Maj Shipbuilding Industry Ltd. of Croatia signed a
ten-year renewal of the existing licence agreement for the marketing, sale,
manufacturing and servicing of Wärtsilä low-speed marine diesel engines.
During the second quarter, an important milestone was reached for the Wärtsilä
32 engine with the 6000th engine produced Vaasa, Finland factory.
The newest expansion investment in the Wärtsilä CME Zhenjiang Propeller Co. Ltd
joint venture in Zhenjiang, China was concluded and inaugurated in the second
quarter according to plan.
The concentration of shipbuilding activity to Asia, particularly to China is
expected to continue. This is the basis for the adjustments of capacity within
Wärtsilä Industrial operations that were initiated during 2009. At the beginning
of the year 2010 a plan was announced to move the main part of the propeller and
W20 generating set production to China.
RESEARCH & DEVELOPMENT
During 2009 several R&D milestones were passed. The Hercules-Beta research
project proposal was approved by the European Commission in March. Hercules-Beta
represents a major international co-operative effort to maximise fuel efficiency
while producing ultra-low emissions, and to develop future generations of
optimally efficient and clean marine diesel engines.
After performing successfully in a series of tests, the Wärtsilä sulphur oxides
(SOx) scrubber was awarded the Sulphur Emission Control Area (SECA) Compliance
Certificate during the third quarter, by the classification societies Det Norske
Veritas and Germanischer Lloyd.
In the fourth quarter, Wärtsilä extended its dual-fuel technology to the lower
power range with the launch of the new environmentally advanced Wärtsilä 20DF
engine. The new Wärtsilä 20DF engine is a testimony to Wärtsilä's ability to
successfully utilise gas as a main fuel for marine operations.
The joint development project between Wärtsilä and Mitsubishi Heavy Industries
Ltd. to design and develop new small, low-speed marine diesel engines of less
than 450 mm cylinder bore, proceeded according to plan. This agreement is an
extension of the strategic alliance created by Wärtsilä and Mitsubishi in 2005.
Wärtsilä is one of the three leading companies driving a major national
three-year combustion engine research programme in Finland. The initiative has
been set up by a wide and cross-functional consortium of Finnish technology
companies and leading research institutes. The principle aim of the Future
Combustion Engine Power Plant (FCEP) programme is to develop reciprocating
engine and related power plant technologies. The aim is to maintain a leading
position in global markets while meeting the requirements of tightening
environmental legislation.
In 2009, Wärtsilä's research and development expenses totalled EUR 141 million
(121), or 2.7% of net sales.
PERSONNEL
In May 2009, Wärtsilä Ship Power announced that it had initiated the formal
process to reduce 400-450 jobs. The negotiations were initiated to adjust to the
substantially weakened global marine market situation. The annual savings from
these measures will be approximately EUR30 million. The effect of the savings
started to materialise gradually from the second half of 2009, and will take
full effect by the end of 2010. In the second quarter Wärtsilä recognised EUR 6
million of nonrecurring expenses in its operating result related to the
adjustment measures taken in the Ship Power business. Altogether, Wärtsilä Ship
Power employs sales, project management, engineering services and ship design
personnel in 30 countries.
As the order book started to diminish also the Industrial Operations commenced
personnel reductions in the form of temporary lay-offs and by reducing temporary
employment contracts. In January 2010 Wärtsilä announced its plans to adjust to
the fundamental changes in the market by reducing its manufacturing capacity.
Wärtsilä also plans to move the majority of its propeller production and
W20-generating set production to China, close to the main marine markets. In the
course of 2010 Wärtsilä plans to reduce approximately 1,400 jobs globally within
the Group.
During the review period Wärtsilä's personnel on average was 18,830 (17,623). At
the end of December Wärtsilä had 18,541 (18,812) employees. As the biggest
single business, Services had 11,219 employees (11,011) globally.
SUSTAINABLE DEVELOPMENT
At the beginning of 2009, Wärtsilä was for the first time included in the list
of the 100 most sustainable companies in the world. The list was published at
the World Economic Forum in Davos, Switzerland.
To illustrate its strong commitment to sustainability, Wärtsilä signed the
United Nations Global Compact in 2009.
Wärtsilä's Sustainability Report, which is part of the annual report, is
prepared in accordance with the GRI G3 guidelines. It represents a balanced and
reasonable view of Wärtsilä's economic, environmental and social performance.
The Sustainability Report is assured.
CHANGES IN MANAGEMENT
The following appointments were made to Wärtsilä Corporation's Board of
Management, with effect from 1 August 2009:
Christoph Vitzthum (40) MSc (Econ.) was appointed Group Vice President,
Services.
Vesa Riihimäki (43) MSc (Eng.) was appointed Group Vice President, Power Plants
and a member of the Board of Management.
Tage Blomberg, Group Vice President, Services, retired during 2009 in line with
his employment contract.
SHARES AND SHAREHOLDERS
SHARES ON HELSINKI EXCHANGES
31 December 2009 Number of Number of Number of shares
Shares votes traded 1-12/2009
--------------------------------------------------------------------------------
WRT1V 98 620 565 98 620 565 137 102 273
--------------------------------------------------------------------------------
1. Jan - 31 Dec. 2009 High Low Average 1) Close
--------------------------------------------------------------------------------
Share price 30.91 15.81 23.46 28.07
--------------------------------------------------------------------------------
1) Trade-weighted average price
31 Dec. 2009 31 Dec. 2008
-------------------------------------------------------------------------
Market capitalisation, EUR 2 768 2 072
million
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Foreign shareholders 45.4% 45.8%
-------------------------------------------------------------------------
DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING
Wärtsilä's Annual General Meeting held on 11 March 2009 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 2008. The
Meeting approved the Board of Directors' proposal to pay a dividend of EUR 1.50
per share totalling EUR 148 million. Dividends were paid on 23 March 2009.
The Annual General Meeting decided that the Board of Directors shall have six
members. The following were elected to the Board: Ms Maarit Aarni-Sirviö, Mr
Kaj-Gustaf Bergh, Mr Kari Kauniskangas, Mr Antti Lagerroos, Mr Bertel
Langenskiöld and Mr Matti Vuoria.
The firm of authorised public accountants KPMG Oy Ab, was appointed as the
company's auditors.
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:
Antti Lagerroos, chairman
Maarit Aarni-Sirviö
Bertel Langenskiöld
Nomination Committee:
Antti Lagerroos, chairman
Matti Vuoria
Kaj-Gustaf Bergh
Compensation Committee:
Antti Lagerroos, chairman
Matti Vuoria
Bertel Langenskiöld
EVENTS AFTER THE REPORTING PERIOD
On January 19th 2010, Wärtsilä announced its plans to adjust to the fundamental
changes in the market by reducing its manufacturing capacity. Wärtsilä also
plans to move the majority of its propeller production and W20 generating set
production to China, close to the main marine markets. The current propeller
manufacturing in Drunen, and the component manufacturing DTS in Zwolle, both in
The Netherlands, are planned to be closed. The Wärtsilä 20 generating set
production in Vaasa Finland is planned to be closed and moved to China in order
to stay competitive in this market.
In the course of 2010 Wärtsilä plans to reduce approximately 1,400 jobs globally
within the Group. Of these reductions 570 are planned to be in the Netherlands,
where Wärtsilä employs 1,561 people. The remaining reduction will impact various
divisions, functions and countries and will be clarified during the first half
of this year.
The nonrecurring costs related to the restructuring will be approximately EUR
140 million. This includes non-cash write-offs of approximately EUR 50 million
of which EUR 40 million is recognised in 2009. Wärtsilä is looking for an annual
cost savings of approximately EUR 80-90 million. The effect of the savings will
start to materialise gradually during 2010, and will take full effect in the
first half of 2011.
BOARD OF DIRECTOR'S DIVIDEND PROPOSAL
The Board of Directors proposes that a dividend of 1.75 euros per share be paid
for the financial year 2009. Wärtsilä's distributable funds at the end of the
period totalled EUR 585,892,877.82. The Annual Report 2009, including the
financial review and the review by the Board of Directors, will be available on
the company website www.wartsila.com <http://www.wartsila.com/> on during week
6.
RISKS AND BUSINESS UNCERTAINTIES
Due to the uncertainties within the shipping industry, the main risk in Ship
Power remains the slippage of ship yard delivery schedules and it seems probable
that some orders will be rescheduled or cancelled. As a result of this
development, Wärtsilä sees a cancellation risk of approximately EUR 500 million.
In the Power Plant business, the impact from the financial crisis can mainly be
seen in the timing of larger projects.
In Services, the biggest risks still relate to the further deterioration of the
shipping industry leading to a larger scale lay-up of ships, which could reduce
demand for maintenance and services within this segment.
The current market situation has impacted the entire supply chain during 2009
and Wärtsilä is continuously monitoring its supplier base. The risk level has
not significantly changed during the year.
The annual report for 2009 contains a thorough description of Wärtsilä's risks
and risk management.
MARKET OUTLOOK
At the end of the year, signs of easing in the financing of new projects have
spurred project development, especially in the Offshore segment. The gradual
normalisation of the financial markets is also expected to result in
revitalisation in investments for various special vessels. These vessel
categories have not faced any significant over supply issues during recent
years. Some recovery in new ordering of Offshore and Special vessels is expected
in the first two quarters of 2010. In the Merchant segment, demand for the
biggest vessel categories is expected to remain low for another two years. The
market is still burdened by overcapacity and finance related issues. It is
expected that more cancellations, swaps and splits of old orders will be seen,
all of which will hamper new ordering activity.
Even though markets seem to have bottomed out, it is clear that current
overcapacity and prevailing conditions will lead to more intense competition and
price pressure among shipbuilding suppliers. Wärtsilä Ship Power estimates
order intake in 2010 to be moderately better than in 2009.
In 2010, the power generation market is expected to recover gradually, along
with the improvements in the financial sector. The recovery is expected to
happen at varying pace in different regions and countries, while emerging
markets are expected to be in the forefront of the recovery. The flexible
baseload and grid stability & peaking customer segments are expected to recover
first. Wärtsilä Power Plants estimates order intake to improve in 2010.
Uncertainty will continue in 2010 with regards to larger service projects, as
many customers are still adapting to the economic crisis. 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 in these areas. Customers are increasingly looking for
remote management and optimisation of their assets, as this allows them to
reduce both their costs and environmental footprint at the same time. Wärtsilä
also sees an increased interest in maintenance partnerships, which reduce the
fixed costs for our marine, offshore and power plant customers.
In 2010, Services will continue its stable development.
WÄRTSILÄ'S PROSPECTS FOR 2010
Due to the weakness of the shipbuilding sector we expect net sales to decline by
10-20 percent in 2010. As a result of a stable service business, good demand for
power plants and proper adaptation of capacity, our operational profitability
(EBIT% before nonrecurring items) should be between 9-10 %, well within the
upper end of our long-term target range.
WÄRTSILÄ FINANCIAL STATEMENTS BULLETIN 2009
This financial statement bulletin 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 2008. 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.
IFRS amendments
Of the amended International Financial Reporting Standards (IFRS) and
interpretations mandatory as of 1 January 2009 the following are applicable to
the Group reporting:
* IFRS 8 Operating Segments
* IAS 23 Borrowing Cost
* IAS 1 Presentation of financial Statement
* IFRIC 16 Hedges of Net Investment in a foreign Operation
The adaption of the revised standards and interpretations does not have any
material effect on the interim report.
The annual figures in this financial statements bulletin are audited.
Consolidated Income Statement
--------------------------------------------------------------------------------
MEUR 2009 2008
--------------------------------------------------------------------------------
Net sales 5 260 4 612
Change in inventories of
finished goods & work in progress 98 304
Work performed by the Group and capitalized 1 7
Other income 50 26
Material and services -3 183 -2 999
Employee benefit expenses -910 -854
Depreciation and amortizations -165 -99
Other expenses -564 -474
Share of profit of associates and joint ventures 6
Operating result 592 525
Income from financial assets 6 7
Interest income 4 9
Other financial income 12 22
Interest expenses -21 -27
Other financial expenses -35 -20
Profit before taxes 558 516
Income taxes -161 -127
--------------------------------------------------------------------------------
Profit for the financial period 396 389
--------------------------------------------------------------------------------
Attributable to:
Owners of the parent 389 380
Non-controlling interest 8 9
--------------------------------------------------------------------------------
Total 396 389
--------------------------------------------------------------------------------
Earnings per share attributable to equity holders of
the parent company:
--------------------------------------------------------------------------------
Earnings per share, EUR (basic and diluted) 3.94 3.88
STATEMENT OF COMPREHENSIVE INCOME
Profit for the financial period 396 389
Other comprehensive income after tax:
Exchange differences on translating foreign
operations 18 -27
Investments available for sale 34 -37
Cash flow hedges 20 -44
Share of other comprehensive income of associates
and joint ventures 1 -1
Other income/expenses 6
--------------------------------------------------------------------------------
Other comprehensive income for the period 73 -103
--------------------------------------------------------------------------------
Total comprehensive income for the period 469 286
--------------------------------------------------------------------------------
Total comprehensive income attributable to:
Owners of the parent 460 277
Non-controlling interest 9 9
--------------------------------------------------------------------------------
469 286
Consolidated Balance Sheet, Assets
MEUR 31 Dec. 2009 31 Dec. 2008
--------------------------------------------------------------------------------
Non-current assets
Goodwill 558 549
Intangible assets 222 244
Property, plant and equipment 449 435
Investment properties 9 11
Equity in associates and joint ventures 56 41
Investments available for sale 151 106
Interest-bearing investments 2 11
Deferred tax receivables 88 85
Trade receivables 2 3
Other receivables 12 12
--------------------------------------------------------------------------------
1 548 1 498
Current assets
Inventories 1 577 1 656
Interest-bearing receivables 4 1
Trade receivables 1 028 891
Income tax receivables 10 14
Other receivables 244 486
Cash and cash equivalents 244 197
--------------------------------------------------------------------------------
3 108 3 245
Assets 4 655 4 743
Consolidated Balance Sheet, Shareholders' equity and
liabilities
MEUR 31 Dec. 2009 31 Dec. 2008
--------------------------------------------------------------------------------
Shareholders' equity
Share capital 336 336
Share premium reserve 61 61
Translation differences -6 -27
Fair value reserve 99 50
Retained earnings 1 006 764
--------------------------------------------------------------------------------
Total equity attributable to equity holders of the
parent 1 496 1 184
Minority interest 16 15
--------------------------------------------------------------------------------
Total shareholders' equity 1 512 1 199
Liabilities
Non-current liabilities
Interest-bearing debt 591 448
Deferred tax liabilities 93 86
Pension obligations 46 40
Provisions 24 24
Advances received 187 329
Other liabilities 1 1
--------------------------------------------------------------------------------
941 927
Current liabilities
Interest-bearing debt 73 216
Provisions 181 165
Advances received 691 915
Trade payables 299 444
Income tax liabilities 75 58
Other liabilities 883 819
--------------------------------------------------------------------------------
2 202 2 616
--------------------------------------------------------------------------------
Total liabilities 3 143 3 544
Shareholders' equity and liabilities 4 655 4 743
Consolidated Cash Flow Statement
MEUR 2009 2008
--------------------------------------------------------------------------------
Cash flows from operating activities:
Profit before taxes 558 516
Adjustments:
Depreciation and amortizations 165 99
Financial income and expenses 34 9
Selling profit and loss of fixed assets and other
changes -7 2
Share of profit of associates and joint ventures -6
--------------------------------------------------------------------------------
Cash flow before changes in working capital 743 626
Changes in working capital:
Current assets, non-interest-bearing, increase (-) /
decrease (+) 114 -278
Inventories, increase (-) / decrease (+) 66 -561
Current liabilities, non-interest-bearing, increase
(+) / decrease (-) -358 589
--------------------------------------------------------------------------------
Changes in working capital -179 -250
Cash flow from operating activities before financial
items and taxes 564 377
Financial items and taxes:
Interest and other financial expenses -72 -45
Interest and other financial income 15 50
Income taxes -158 -104
--------------------------------------------------------------------------------
Financial items and taxes -215 -99
--------------------------------------------------------------------------------
Cash flow from operating activities 349 278
--------------------------------------------------------------------------------
Cash flow from investing activities:
Investments in shares and acquisitions -16 -198
Investments in tangible and intangible assets -136 -168
Proceeds from sale of shares 3 21
Proceeds from sale of tangible and intangible assets -21 9
Loan receivables, increase (-) / decrease (+) and
other changes -1 1
Dividends received from investments 8 7
--------------------------------------------------------------------------------
Cash flow from investing activities -163 -329
--------------------------------------------------------------------------------
Cash flow after investing activities 187 -51
Cash flow from financing activities:
New long-term loans 263 260
Amortization and other changes in long-term loans -109 -4
Loan receivables, increase (-) / decrease (+) 3
Current loans, increase (+) / decrease (-) -141 129
Dividends paid -156 -412
--------------------------------------------------------------------------------
Cash flow from financing activities -140 -26
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and cash equivalents, increase (+) /
decrease (-) 47 -76
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 197 296
Joint ventures' cash and cash equivalents at
beginning of period -18
Fair value adjustments, investments 1
Exchange rate changes -6
Cash and cash equivalents at end of period 244 197
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Total equity attributable to equity
MEUR holders of the parent Minority Total
interest equity
--------------------------------------------------------------------------------
Trans- Fair
Share lation value
Share issue differ- and other Retained
capital premium ences reserves Earnings
--------------------------------------------------------------------------------
Shareholders'
equity on 1 January
2009 336 61 -27 50 764 15 1 199
Translation
differences 21 21
Other changes 1 1
Available-for-sale
investments
gain/loss from
fair valuation, net
of taxes 34 34
Cash flow hedges
gain/loss from
fair valuation, net
of taxes 3 3
transferred to
income statement,
net of taxes 12 2 14
--------------------------------------------------------------------------------
Comprehensive
income 21 49 1 1 73
Profit for the
financial period 389 8 396
--------------------------------------------------------------------------------
Total comprehensive
income for the
period 21 49 390 9 469
Dividends paid -148 -8 -156
--------------------------------------------------------------------------------
Shareholders'
equity on 31 Dec.
2009 336 61 -6 99 1 006 16 1 512
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders'
equity on 1 January
2008 336 61 3 127 788 10 1 325
Translation
differences -23 -23
Other changes 4 4
Available-for-sale
investments
gain/loss from
fair valuation, net
of taxes -37 -37
Cash flow hedges
gain/loss from
fair valuation, net
of taxes -18 -18
transferred to
income statement,
net of taxes -22 -22
--------------------------------------------------------------------------------
Comprehensive
income -23 -77 4 -96
Profit for the
financial period -7 380 9 382
--------------------------------------------------------------------------------
Total comprehensive
income for the
period -30 -77 384 9 286
Dividends paid -408 -4 -412
--------------------------------------------------------------------------------
Shareholders'
equity on 31 Dec.
2008 336 61 -27 50 764 15 1 199
--------------------------------------------------------------------------------
Geographical areas Europe Asia Americas Other Group
MEUR
------------------------------------------------------
Net sales 2009 1 654 1 937 1 176 493 5 260
Net sales 2008 1 695 1 792 689 436 4 612
------------------------------------------------------
INTANGIBLE ASSETS AND PROPERTY, PLANT &
EQUIPMENT
MEUR 2009 2008
----------------------------------------------------
Intangible assets
Book value at 1 January 793 646
Changes in exchange rates 26 -30
Acquisitions 12 191
Additions 24 29
Depreciation and amortizations -62 -42
Disposals and intra-balance sheet
transfer -14 -1
----------------------------------------------------
Book value at end of period 779 793
----------------------------------------------------
Property, plant and equipment
Book value at 1 January 446 377
Changes in exchange rates 3 -3
Acquisitions 1 9
Additions 112 139
Depreciation and amortizations -103 -57
Joint ventures' opening balances -6
Disposals and intra-balance sheet
transfer -2 -13
----------------------------------------------------
Book value at end of period 457 446
----------------------------------------------------
GROSS CAPITAL EXPENDITURE
MEUR 2009 2008
----------------------------------------------------
Investments in securities and
acquisitions 16 198
Intangible assets and property, plant
and equipment 136 168
----------------------------------------------------
Group 152 366
----------------------------------------------------
Wärtsilä centralises warehousing and log stic of pare parts by investing in
a new distribution centre in the Netherl nds. The nvestments to the new
distribution centre amounted to EUR 22 m llio dur ng the review period and
commitments related to the investment we e EU 41 illion at the end of the
review period.
IMPACT OF ACQUISITIONS ON THE CONSOLIDATED
BALANCE SHEET
During the review period Wärtsilä has acqu r d the remaining 60 per cent of
the shares of Wärtsilä Navim Diesel of Ita y company specialised in marine
sales and service. Wärtsilä has also aquir d S rbian Vik-Sandvik Albatross
d.o.o. and Russian CJSC Vik-Sandvik Russla d d ring the review period. These
companies specialise in ship design.
MEUR 2009
-------------------------------------------------------
Acquisition costs 13
Acquired assets to fair value -5
-------------------------------------------------------
Goodwill 8
Specification of acquired assets:
Intangible assets 4
Property, plant and equipment 1
Inventories 1
Receivables 10
Liabilities -10
Deferred tax liabilities -1
-------------------------------------------------------
Total 5
-------------------------------------------------------
INTEREST-BEARING LOAN CAPITAL
MEUR 31 Dec. 2009 31 Dec. 2008
-----------------------------------------------------------------------
Long-term liabilities 591 448
Current liabilities 73 216
Loan receivables -6 -12
Cash and bank balances -244 -197
-----------------------------------------------------------------------
Net 414 455
-----------------------------------------------------------------------
FINANCIAL RATIOS 2009 2008
-----------------------------------------------------------------------
Earnings per share, EUR 3,94 3,88
Diluted earnings per share, EUR 3,94 3,88
Equity per share, EUR 15,17 12,01
Solvency ratio, % 40,0 34,3
Gearing 0,28 0,39
-----------------------------------------------------------------------
PERSONNEL
2009 2008
-----------------------------------------------------------------------
On average 18 830 17 623
At end of period 18 541 18 812
-----------------------------------------------------------------------
CONTINGENT LIABILITIES
MEUR 31 Dec. 2009 31 Dec. 2008
-----------------------------------------------------------------------
Mortgages 56 61
Chattel mortgages 10 10
-----------------------------------------------------------------------
Total 66 71
-----------------------------------------------------------------------
Guarantees and contingent liabilities
on behalf of Group companies 678 664
on behalf of associated companies 8
Nominal amount of rents according
to leasing contracts 77 87
-----------------------------------------------------------------------
Total 763 751
-----------------------------------------------------------------------
NOMINAL VALUES OF DERIVATIVE INSTRUMENTS
MEUR Total amount of which closed
-----------------------------------------------------------------------
Interest rate swaps 90
Foreign exchange forward contracts 1 381 433
Currency options, purchased 72
Currency options, written 5
-----------------------------------------------------------------------
CONDENSED INCOME
STATEMENT, QUARTERLY
10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
MEUR 2009 2009 2009 2009 2008 2008 2008 2008
--------------------------------------------------------------------------------
Net sales 1 519 1 167 1 333 1 241 1 530 1 140 1 092 850
Other income 11 20 13 5 10 6 5 5
Expenses -1 280 -1 026 -1 167 -1 087 -1 313 -996 -953 -753
Depreciation and
amortizations -73 -31 -30 -30 -31 -26 -21 -21
Share of profit of
associates and joint
ventures 1 3 1 1 1 -1 1 0
Operating result 179 133 149 130 197 123 124 81
Financial income and
expenses -9 -9 -9 -7 -14 5 7 -7
Profit before taxes 170 125 141 123 183 127 131 75
Income taxes -51 -38 -39 -34 -36 -30 -36 -25
--------------------------------------------------------------------------------
Profit for the
financial period 119 87 102 89 147 97 96 49
--------------------------------------------------------------------------------
Attributable to:
Owners of the parent 115 86 100 87 144 95 94 47
Non-controlling
interest 4 1 2 1 3 3 2 2
--------------------------------------------------------------------------------
Total 119 87 102 89 147 97 96 49
--------------------------------------------------------------------------------
Earnings per share attributable to
equity holders of the parent company:
--------------------------------------------------------------------------------
Earnings per share,
EUR 1.17 0.87 1.01 0.89 1.46 0.97 0.96 0.49
--------------------------------------------------------------------------------
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
27 January 2010
Wärtsilä Corporation
Board of Directors
Wärtsilä Corporation ENCLOSURE TO THE FINANCIAL STATEMENTS BULLETIN 28.1.2010
Proposal of the Board
The parent company's distributable funds total 585,892,877.82 euros, which
includes 319,816,166.25 euros in net profit for the year. There are 98,620,565
shares with dividend rights.
The Board of Directors proposes to the Annual General Meeting that the company's
distributable earnings be disposed of in the following way:
+--------------------------------------------------------+---------------------+
|EUR | |
+--------------------------------------------------------+---------------------+
|A dividend of 1.75 euros per share be paid, making a | |
|total of | 172,585,988.75 euros|
+--------------------------------------------------------+---------------------+
|That the following sum be retained in shareholders' | |
|equity | 413,306,889.07 euros|
+--------------------------------------------------------+---------------------+
|Totalling | 585,892,877.82 euros|
+--------------------------------------------------------+---------------------+
No significant changes have taken place in the company's financial position
since the end of the financial year. The company's liquidity is good and in the
opinion of the Board of Directors the proposed dividend will not put the
company's solvency at risk.
[HUG#1378031]
