With around 60% of net sales denominated in euro and a euro based cost structure, Wärtsilä is not highly exposed to foreign exchange risk. The impact of euro exchange rate compared to other currencies 2015 is the following.
- A change of +/- 10% would result in a -/+ 5.0% change in net sales
- The impact on EBIT% would be marginal
The direct effect of oil price changes on Wärtsilä's production is limited, with their impact being mainly demand related. Higher oil prices represent a risk for global economic growth and increase operating costs, especially in the shipping markets. However, they also stimulate investments in exploration and production for oil and gas, both on land and offshore. Furthermore, high oil prices increase investments in gas carriers, gas based power plants and, increasingly, also in gas fuelled vessels. Low oil prices can delay investment decisions in oil producing countries and regions and in the offshore industry. Wärtsilä is a global company involved in different shipping and power plant segments where oil price changes can have an opposing impact on demand drivers. This position is further diversified by the increasing importance of natural gas in Wärtsilä's business.
The components used in Wärtsilä’s manufacturing are highly value added, limiting the impact of changes in raw material prices. Furthermore, key components are sourced with long-term contracts, decreasing raw material price volatility.
Wärtsilä spreads its interest rate risk exposure by taking both fixed and floating rate loans. The share of floating rate loans as a proportion of the total debt can vary between 30–70%. At the end of 2015 the floating rate portion of total loans was 42% (32) after adjustment for interest rate derivatives. A one percentage point change in the interest level would cause a EUR 3 million (2) change in the following year’s interest expenses of the debt portfolio, including derivatives.
More information can be found on our Risk management pages.