Wärtsilä’s Half Year Financial Report January–June 2020
The stock exchange release published at 8:30 was missing the pdf-report due to a technical error, the pdf has now been added to this release.
This release is a summary of Wärtsilä’s Half Year Report January–June 2020. The complete report is attached to this release as a pdf file. It is also available on the company website at www.wartsila.com.
HIGHLIGHTS OF APRIL–JUNE 2020
The markets in which Wärtsilä operates are being affected by the coronavirus (COVID-19) outbreak and the measures taken to contain the global pandemic. This will materially impact the demand for Wärtsilä’s solutions and services, as well as the company’s financial performance in 2020. The full financial impact cannot be quantified at this time, as it will depend on the duration and severity of the measures taken to contain the virus spread, and the pace of the eventual market recovery in different geographies. Consequently, Wärtsilä withdrew its market outlook for 2020 on 31 March 2020 pending an improvement in visibility.
JAAKKO ESKOLA, PRESIDENT AND CEO
“The adverse impact of COVID-19 on both our own operations and those of our customers increased during the second quarter. This was clearly visible in the decrease in orders received across all businesses. The decline in demand was especially strong in the cruise industry, as travel bans and other mitigation measures have kept most passenger vessels idle for the past few months. Customer interest in scrubber investments was another area of weakness, due to the turmoil in global oil markets. In the Energy business, customers remained hesitant to commit to new investments. With this is mind, the order to supply a 200 MW flexible baseload power plant to South America showed that progress can be made, even in exceptional circumstances. Service activity was negatively affected in our businesses by the lower utilisation of installations, as well as by virus containment measures.
Given this difficult back-drop, second quarter net sales held up reasonably well. This was mainly thanks to increased equipment deliveries, which offset the volume decline in services. The resulting sales mix weakened our profitability, as did COVID-19 driven cost inflation, lower than normal capacity utilisation in our European factories, and the ongoing limited mobility of field service personnel despite some recent easing of travel restrictions. While visibility remains low, it is clear that the effects of the pandemic on our financial performance this year will be material. The short-term cost saving initiatives announced in the first quarter to moderate these effects have progressed according to plan. In the second quarter, we realised the first savings, both from reduced discretionary spending and worktime reductions.
The highlight of the quarter was clearly the strong development in cash flow. I’m pleased to see that our efforts to decrease credit risk by intensifying receivables collection has paid off. Strengthening our liquidity reserves has also been a priority. During the second quarter, we extended and expanded our revolving credit facilities, and initiated arrangements for additional two-year term loans.
In addition to securing our financial position, we have taken extraordinary precautions to secure the health and safety of our people and focused on developing commercial solutions to support our customers in overcoming the COVID-19 related business disruption. One example of such a solution is Wärtsilä Energy Transition Lab, a platform that helps accelerate the energy transition by providing a better understanding of COVID-19 implications for electricity generation, demand, and pricing. Another example is the recently introduced Assured Operations remote support service, which enables technical experts to assess and resolve operational issues via a remote connection between vessels and Wärtsilä’s Expertise Centres.
Mitigating the COVID-19 related near-term business disruptions has naturally been high on our agenda. However, positioning ourselves for the eventual market recovery is of equal importance. Our new organisational structure, which became operational at the beginning of July, is central in this context. Our business areas are today in very different development phases and thus require different strategies for creating long-term value. Marine Power, Marine Systems, and Energy will continue to focus on driving performance by strengthening their lifecycle offerings. Voyage, on the other hand, still needs investments in R&D, sales, and marketing to scale the digital business and to create a basis for sustainable, profitable growth. Thanks to its unique offering, and with the maritime industry’s increasing interest in utilising data to optimise performance, I am confident that Voyage will eventually play a key role in Wärtsilä reaching its long-term financial targets.”
|of which services||486||623||-22%||1,120||1,277||-12%||2,683|
|Order book, end of period||5,401||6,157||-12%||5,878|
|of which services||510||613||-17%||1,103||1,186||-7%||2,505|
|% of net sales||4.0||7.9||4.2||7.9||7.0|
|Comparable operating result||55||113||-51%||111||215||-48%||457|
|% of net sales||4.5||9.3||4.7||9.1||8.8|
|Comparable adjusted EBITA*||63||123||-49%||128||236||-46%||498|
|% of net sales||5.2||10.1||5.4||10.0||9.6|
|Profit before taxes||36||83||-57%||79||162||-51%||315|
|Cash flow from operating activities||252||-37||293||-2||232|
|Net interest-bearing debt, end of period||643||746||726|
|Gross capital expenditure||54||54||122|
|Personnel, end of period||18,334||19,239||-5%||18,795|
*Comparable adjusted EBITA excludes items affecting comparability and purchase price allocation amortisation.
Wärtsilä’s financial information for the first quarter of 2020 and full year 2019 has been adjusted to reflect the group’s new reporting structure. As of the second quarter of 2020, Marine Power, Marine Systems, Voyage, and Energy constitute the reportable segments of the group, while Portfolio Business continues to be reported as other business activities. This restatement has no impact on the group’s total financial figures.
As published in the Interim report January-March 2020, order book figures for 2019 have been restated due to the stricter requirements for booking new orders, and personnel comparison figures for 2019 have been adjusted to correctly reflect the business line composition of the Portfolio Business and a change in allocation principles. The tables in the report reflect both changes.
Wärtsilä presents certain alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definitions of these alternative performance measures are presented in the Calculations of financial ratios section.
ANALYST AND PRESS CONFERENCE
A virtual analyst and press conference will be held today, Friday 17 July 2020, at 10:00 a.m. Finnish time (8:00 a.m. UK time). The combined web- and teleconference will be held in English and can be viewed by registering on: http://www.mediaserver.fi/live/wartsila.
To participate in the teleconference, please register at the following address: http://emea.directeventreg.com/registration/3341178. You will receive dial-in details by e-mail once you have registered. If problems occur, please press *0 for operator assistance. Please press *6 to mute your phone during the teleconference and to unmute.
A recording of the webcast will be available on the company website later during the day.
For further information, please contact:
Executive Vice President & CFO
Tel: +358 10 709 5444
Vice President, Investor Relations
Tel: +358 10 709 5637
For press information, please contact:
Executive Vice President, Communications, Branding & Marketing
Tel: +358 10 709 5599
Wärtsilä in brief
Wärtsilä is a global leader in smart technologies and complete lifecycle solutions for the marine and energy markets. By emphasising sustainable innovation, total efficiency and data analytics, Wärtsilä maximises the environmental and economic performance of the vessels and power plants of its customers. In 2019, Wärtsilä’s net sales totalled EUR 5.2 billion with approximately 19,000 employees. The company has operations in over 200 locations in more than 80 countries around the world. Wärtsilä is listed on Nasdaq Helsinki.