THE BOARD PROPOSES TO AGM A TOTAL DIVIDEND OF EUR 1.75 PER SHARE.
- Net sales increased to MEUR 2,519 (2,359), up 16.5 percent on Q4/2002
- Demand for marine engines improved towards the year’s end. Integration of John Crane-Lips proceeded as planned
- Weak demand for power plants and low capacity load depressed profitability
- The result contains considerably less non-recurring items. Earnings per share was EUR 2.05 (5.53)
- The Board proposes a normal dividend of EUR 0.25 and an extra dividend of EUR 1.50 per share
Wärtsilä Group’s net sales rose to EUR 2,519.0 (2,358.7) million. Net sales of the Power Divisions was EUR 2,319.9 (2,174.3) million and Imatra Steel’s net sales totalled EUR 200.4 (186.4) million.
The Group recorded an operating profit of EUR 188.9 (523.9) million, which included a capital gain of EUR 111.1 million on the sale of Assa Abloy shares. The previous year’s operating profit included non-recurring gains of altogether EUR 550.4 million on the sale of Assa Abloy and Sanitec shares. Operational EBIT of the Power Divisions was EUR 74.6 (87.8) million, giving an operating margin of 3.2% (4.0). Imatra Steel’s profitability decreased as well.
The profit before extraordinary items was EUR 170.4 (508.7) million. Wärtsilä recorded a net profit of EUR 121.9 (305.7) million. Earnings per share (EPS) were EUR 2.05 (5.53), which included non-recurring items of EUR 1.33 (4.13) per share.
Financing and capital expenditure
Wärtsilä’s cash flow from operating activities and before acquisitions was clearly positive and the financial position was good.
Capital expenditure during the period amounted to EUR 423.3 (97.1) million, which comprised EUR 348.6 (29.6) million on investments in shares and EUR 74.7 (67.5) million on production investments. The most important investment was the acquisition of John Crane-Lips, the world’s leading marine propulsion systems supplier. The costs related to the acquisition were EUR 361.2 million. The Service division was strengthened with the acquisition of three service companies, renamed Ciserv, for altogether EUR 13.7 million.
Main R&D focus on the environment
Research and development expenditure in the Power Divisions totalled EUR 85.9 (79.8) million, which represented 3.7% (3.7) of consolidated net sales. Imatra Steel’s R&D expenditure was 1.7 (1.7) million.
The main thrust of Wärtsilä’s R&D activities during the year was on environmentally sound combustion and engine technology. A new area was the start of co-operation in fuel cell technology with Haldor Topsøe in Denmark.
Efficiency-enhancing measures continued
Restructuring continued in 2002. The closure of the factory in the Netherlands and the transfer of production and technology to Italy proceeded as planned. Negotiations related to restructuring measures are in progress that will reduce personnel in the Power Divisions by altogether 800 employees; of this figure, about 370 reductions took effect in 2002.
Position as marine propulsion systems supplier strengthened
Marine’s order intake has started to recover following market growth in autumn 2002. The fourth-quarter order intake was almost twice as high as in the last three months of 2001. The year-end orderbook stood at EUR 617.7 (769.6) million. Marine’s whole yearnet sales grew 28.3%.
Wärtsilä signed an agreement in January to acquire the world’s leading marine propulsion systems manufacturer, John Crane-Lips. This company became part of Wärtsilä in April, raising Marine’s annual net sales by approximately one quarter. The deal also made Wärtsilä a leading supplier in this sector.
Wärtsilä’s market share in medium-speed main engines is 34% (37) and in low-speed main engines 25% (26). The total market volume declined 34%.
Power orders down – Number of projects in progress
Global economic uncertainty throughout 2002, the problems experienced by energy companies, increases in fuel prices, and the growing threat of war in the Persian Gulf towards the year end all had a negative impact on power plant investments. The interest of financiers abated and decisions on new projects were postponed despite the fact that in many countries electricity production cannot meet regional needs or intermittent peak demand.
The volume of power plants delivered by Wärtsilä in 2002 was 1,387 (1,449) MW. This comprised oil-fuelled power plants totalling 1,167 (982) MW and gas power plants of 220 (467) MW.
The power plant order intake decreased during the final quarter to EUR 95.7 (226.5) million. The order intake for the whole of 2002 was EUR 427.9 (658.6) million.
Wärtsilä’s market share of the HFO power plant market was 46% (50). The market for small gas turbines decreased 66% to 5,915 MW. Wärtsilä’s share of this market segment during the same period was 315 (398) MW.
Wärtsilä expands its service network further
Net sales of the Service division continued to rise. Growth in the final quarter was 7.6%, and for the whole year 6.7%. Although growth did not reach the long-term target, it can still be considered relatively high in the prevailing market conditions.
Three new Ciserv companies were acquired during the year, each of which brings specialist expertise in marine engine service. The main goal of the Ciserv group is to provide total marine service with the widest possible range of customized repair and reconditioning services for 2-stroke engines and ship power systems.
Imatra Steel’s forging business raised its net sales
Demand for special engineering steels remained weak throughout 2002. Imatra Steel’s net sales totalled EUR 200.4 (186.4) million, up 7.5% on the previous year. This growth took place in the company’s forging operations where the acquisition of Scottish Stampings strengthened Imatra Kilsta’s position as a leading world manufacturer of forged components for the automotive industry. Delivery volumes at the Imatra Steel Works and the Billnäs Spring Works decreased, however. Imatra Steel’s operating profit was lower than in 2001, totalling EUR 3.2 (6.4) million.
Wärtsilä sold 10 million Assa Abloy shares at the end of May, recording a capital gain of EUR 111.1 million or EUR 1.33 per share after tax. Following this sale and Assa Abloy’s issue of 10 million new shares Wärtsilä’s holding in Assa Abloy is 7.6%. The market capitalization of this holding at the end of the year was 99.50 Swedish krona per share, or altogether EUR 302.4 million. Its book value in the consolidated balance sheet is EUR 67.4 million.
Prospects for 2003
The Power Divisions’ year-end orderbook is clearly lower than one year earlier. The Marine orderbook is satisfactory but the Power Plants orderbook is weak.
Net sales of the Power Divisions in 2003 is expected to grow slightly, with the strongest growth taking place in the Service business. Profitability will still not reach the 7-8% target set for the Power Divisions, because reaching this target will require recovery in the global economy and a consequent significant increase in demand. For this reason streamlining action will be further accelerated as required by market conditions. New restructuring measures have already been started, notably in the Power Plants division. The profitability of the Power Divisions is expected to show a slight improvement on 2002.
For Imatra Steel, 2003 has begun under the continuing shadow of uncertain market prospects. Truck and car production, and demand for special engineering steels likewise, are forecast to begin rising during the second half of the year. Imatra Steel is expected to report an increase in net sales, due mainly to expansion of the forging business, and improved profits in 2003 as a result of its restructuring measures.
The figures in this financial statements bulletin are not audited.
Board’s proposals to the AGM