Exit from the Russian market

Wärtsilä continues to strongly condemn Russia’s invasion of Ukraine. Human rights, safety and prosperity are very important for Wärtsilä. We have been fully committed to complying with all trade sanctions applicable to our operations since the beginning of the war.

Wärtsilä has completed its orderly exit from the Russian market following the announcement of scaling down activities in April 2022. All adjustments and closures of Wärtsilä’s operations were completed in accordance with local regulations.

As a result of the decision to scale down activities in Russia, Wärtsilä made provisions of approximately EUR 200 million in the first quarter financial reporting. The provisions were included in items affecting comparability and therefore did not impact the comparable operating result.

In the second quarter financial reporting, Wärtsilä removed Russia related projects amounting to approximately EUR 240 million from the order book.

Please find below a brief Q&A on the situation.

What does an exit from the Russian market mean in practice?
We have ceased all business operations in Russia across all business units. The Wärtsilä Digital Technologies office in Saint Petersburg has been closed. We have built new R&D capabilities outside of Russia to secure the uninterrupted delivery of customer commitments. We also signed agreements to sell the Transas Navigator business and Wärtsilä Vostok LLC to the local management of the companies. Wärtsilä does not provide or deliver any services or parts to these companies.

What kind of business did Wärtsilä have in Russia?
Our main activities in Russia related to the Marine Businesses (newbuild and services). Our activities in Energy were limited (a small portion of service activities).

How did you conclude the EUR 200 million write-down? 
We considered different scenarios for our Russian related business and how the sanctions impact those. The EUR 200 million write-down included approximately EUR 75 million of impairment of Voyage related goodwill and intangible assets, approximately EUR 50 million of impairment related to assets in Russia, and approximately EUR 75 million of write-downs related to trade-sanctioned projects and receivables. The outcome represents our view of the most likely scenario.

Which businesses did the Russia related projects removed from the order book belong to?
The majority of orders removed from the order book was related to Marine Power.

How much of the EUR 240 million order book correction related to Russia was for delivery in 2022?
About 40% of the order book correction relates to 2022 delivery, the rest relates to delivery in 2023 or later.

Can you sell some of the projects suspended in Russia to other clients?
We are not opening up on individual projects or the re-usability of produced and/or procured equipment. Before any re-usability / re-sale can be considered, we need to first clear the contracts legally. This is a significant effort ongoing and is evolving in a continuous changing landscape. It’s also good to remember that the equipment in some of the suspended projects is highly customized.

What was the final financial impact of leaving Russia?
The financial impact of the exit from Russia is in line with the 200 MEUR write-down and provisions recognised in Q1. Negotiating and concluding on the trade-sanctioned projects and receivables will take a long time. Currently, we have no reason to change the estimate made in Q1.

What was Wärtsilä’s exposure to Ukraine and Russia before the war?
Russia related activities accounted for approximately 5% of Wärtsilä’s net sales in 2021, of which service net sales was approximately 40 MEUR. Sales to Ukraine was close to zero.

What kind of role does Russia have in your procurement chain?
Procurement from Russia is insignificant.

Do you have exposure to or operations in Belarus?
Belarus sales and supply are both insignificant.