Wärtsilä Corporation INTERIM REPORT 21 April 2016 at 8.30 a.m. local time
WÄRTSILÄ INTERIM REPORT JANUARY-MARCH 2016
STABLE ORDERS AND SALES IN CHALLENGING MARKETS
This release is a summary of Wärtsilä's Interim Report January-March 2016. The complete report is attached to this release as a pdf-file. It is also available at http://www.wartsilareports.com/en-US/2016/q1/frontpage/ and on the company website at www.wartsila.com .
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-MARCH 2016
- Order intake decreased 1% to EUR 1,271 million (1,285)
- Net sales decreased 2% to EUR 967 million (988)
- Book-to-bill 1.31 (1.30)
- Comparable operating result EUR 84 million, or 8.7% of net sales (EUR 100 million or 10.1%)
- Earnings per share 0.30 euro (0.43)
- Cash flow from operating activities EUR -13 million (37)
- Order book at the end of the period increased 3% to EUR 5,103 million (4,931)
EVENTS AFTER THE REPORTING PERIOD
- Plans to realign the Marine Solutions and Energy Solutions businesses announced on 21 April 2016
Wärtsilä has revised the terminology used for alternative performance measures due to new guidelines by the European Securities and Market Authority. 'Operating result before non-recurring items' has been replaced with 'comparable operating result', and 'operating result before non-recurring items and purchase price allocation amortisation' has been replaced with 'comparable adjusted EBITA'. Definitions of these performance measures and of items affecting comparability can be found in the tables of the interim report on page 22. Wärtsilä presents alternative performance measures to show the underlying business performance and to enhance comparability between reporting periods.
WÄRTSILÄ'S PROSPECTS FOR 2016 UNCHANGED
Wärtsilä expects its net sales for 2016 to grow by 0-5% and its profitability (comparable operating result as a percent of net sales) to be 12.5-13.0%.
JAAKKO ESKOLA, PRESIDENT AND CEO
"In terms of Wärtsilä's operations, 2016 has started in line with our expectations. We continued to advance steadily in our maintenance markets, as reflected by an increase of 3% in Services' net sales during the first quarter. I am satisfied with this development given the strong volumes in the corresponding period last year. Order intake was on a good level in Marine Solutions, largely due to healthy demand for electrical & automation systems and positive activity in the cruise and ferry segment. Ordering activity was solid also in the Energy Solutions business, but the reduction in power plant deliveries and price pressure in the power generation markets affected Wärtsilä's overall financial performance. Group net sales declined slightly to EUR 967 million in the first quarter and profitability ended up at 8.7%. Nevertheless, we remain committed to our guidance of modest growth in sales based upon our broad customer offering, our current order book and the demand outlook in the Services business. Furthermore, we expect our continuous focus on cost control and increased efficiency to support an improvement in profitability this year.
We have seen market conditions weakening in our equipment businesses. Despite the somewhat improved sentiment in the power generation markets, the competitive environment remains tough. Furthermore, the combined effect of overcapacity of merchant ships, and a continued lack of demand in the offshore segment, caused vessel contracting to decline in the first quarter. We continue to strive for success despite the prevailing market challenges. Consequently, we have today announced plans to realign our Marine Solutions and Energy Solutions businesses. These adjustments, although unfortunate, are necessary for securing our future competitiveness and performance. In addition, we plan to concentrate more of the engine related R&D activities to Finland with the aim of reducing development cycles."
|Order intake||1 271||1 285||-1%||4 932|
|Order book at the end of the period||5 103||4 931||3%||4 882|
|Net sales||967||988||-2%||5 029|
|% of net sales||8.6||10.1||11.7|
|Comparable operating result 1||84||100||-16%||612|
|% of net sales||8.7||10.1||12.2|
|Comparable adjusted EBITA 1||93||106||-12%||643|
|% of net sales||9.6||10.7||12.8|
|Profit before taxes||80||82||553|
|Cash flow from operating activities||-13||37||255|
|Net interest-bearing debt at the end of the period||639||251||372|
|Gross capital expenditure||11||18||346|
|1 Items affecting comparability in the first quarter of 2016 included costs of EUR 1 million related to the ongoing restructuring measures in the Marine Solutions business.|
The market for liquid and gas fuelled power generation is expected to remain challenging as economic uncertainty continues. Despite slower economic growth in the emerging markets, growth in electricity demand and the availability of international funding for infrastructure projects will continue to support power plant investments. In the industrialised countries, the low economic growth continues to limit demand for new power plants, except for in North America where the market situation is more positive for gas-fired power plants. The megatrend towards renewables is evident, with investments expected to favour utility scale solar PV installations. Furthermore, distributed, flexible, gas-fired power generation continues to gain ground globally. Electricity markets are being developed to reward the necessary flexibility, thereby enabling new profitable investments. Wärtsilä's systematic market development work in these markets will continue to bring forward the benefits of Smart Power Generation.
The outlook for the shipping and shipbuilding markets remains challenging. Overcapacity continues to limit demand for new vessels in the merchant segment, while low oil prices are impacting investments in offshore exploration and development. In the gas carrier markets, the demand for LNG carriers is under pressure due to supply-demand imbalances and low gas prices. The high number of scheduled deliveries is also creating pressure for LPG carrier contracting, despite the strong growth in LPG demand in Asia. Fleet renewal, potential implementation of new emission regulations, and favourable newbuilding prices are expected to support contracting for passenger ferries. The outlook for cruise vessels remains positive due to an anticipated increase in Asian passenger traffic. The importance of fuel efficiency and environmental regulations are clearly visible, driving interest in environmental solutions, gas as a marine fuel, as well as electric/hybrid solutions.
The service market outlook is positive with growth opportunities in selected regions and segments. An increase in the installed base of medium-speed engines and propulsion equipment, as well as the shift to gas based technology, offsets the slower service demand for older installations and the uncertainty regarding short-term demand development in the merchant marine segment. In the offshore segment, the growth in the installed base during recent years is expected to partially compensate for the challenging outlook in certain regions. The service outlook for gas fuelled vessels remains favourable. Service demand in the power plant segment continues to be good with an especially positive outlook in the Middle East and Africa. Customers in both the marine and power plant markets continue to show healthy interest in long-term service agreements.
EVENTS AFTER THE REPORTING PERIOD
On 21 April 2016, Wärtsilä announced plans to adjust its Marine Solutions and Energy Solutions businesses to the weakened newbuild market situation and the tough competitive environment. In addition, Wärtsilä plans to concentrate more of the engine related R&D activities to Finland with the aim of reducing development cycles. The realignment will mean the reduction of approximately 550 jobs, of which some 270 will be in Finland. In taking these measures, Wärtsilä seeks annual savings in the region of EUR 50 million. The effect of the savings will materialise gradually beginning from the second quarter of 2016, and will take full effect by the end of 2017. The costs related to the restructuring measures will be approximately EUR 50 million.
ANALYST AND PRESS CONFERENCE AT 10.00 A.M. LOCAL TIME
An analyst and press conference will be held today, Thursday 21 April 2016, 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=1163080&s=1&k=5FC92DDC5B26941DAC1FC8AD5E3E0B89 . To participate in the teleconference please register at the following address: http://emea.directeventreg.com/registration/79260235 . 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:
Executive Vice President & CFO
Tel: +358 10 709 5640
Director, Investor & Media Relations
Tel: +358 40 187 7809
For press information, please contact:
Executive Vice President, Communications & Branding
Tel: +358 10 709 5599
Wärtsilä in brief
Wärtsilä is a global leader in advanced technologies and complete lifecycle solutions for the marine and energy markets. By emphasising sustainable innovation and total efficiency, Wärtsilä maximises the environmental and economic performance of the vessels and power plants of its customers.
In 2015, Wärtsilä's net sales totalled EUR 5 billion with approximately 18,800 employees. The company has operations in over 200 locations in more than 70 countries around the world. Wärtsilä is listed on Nasdaq Helsinki.