STABLE VOLUME DEVELOPMENT IN A CHALLENGING MARKET
This release is a summary of Wärtsilä’s Interim Report January-June 2016. The complete report is attached to this release as a pdf-file (Interim report Q2 2016). It is also available at http://www.wartsilareports.com/en-US/2016/q2/frontpage/ and on the company website at www.wartsila.com.
SECOND QUARTER HIGHLIGHTS
- Order intake increased 3% to EUR 1,194 million (1,159)
- Net sales decreased 3% to EUR 1,196 million (1,230)
- Book-to-bill 1.00 (0.94)
- Comparable operating result EUR 122 million, or 10.2% of net sales (EUR 137 million or 11.1%)
- Earnings per share 0.19 euro (0.54)
- Cash flow from operating activities EUR 202 million (47)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-JUNE 2016
- Order intake increased 1% to EUR 2,465 million (2,443)
- Net sales decreased 2% to EUR 2,163 million (2,218)
- Book-to-bill 1.14 (1.10)
- Comparable operating result EUR 206 million, or 9.5% of net sales (EUR 237 million or 10.7%)
- Earnings per share 0.49 euro (0.97)
- Cash flow from operating activities EUR 189 million (84)
- Order book at the end of the period decreased 5% to EUR 5,083 million (5,325)
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
“The development of the first half of 2016 was satisfactory, given the prevailing challenges in our operating environment. Net sales remained broadly in line with the previous year, while the lower level of power plant deliveries and tight competition in the energy markets burdened our operating result. Going forward, we expect equipment deliveries to be concentrated towards the end of the year. Order intake development was solid, largely thanks to the somewhat improved sentiment in the power generation industry, which supported growth in Energy Solutions’ ordering activity. Marine Solutions’ orders have also held up fairly well considering the low level of vessel contracting, benefitting from announced fleet renewal activity in the cruise and ferry markets. Services' net sales have grown at a slower pace; however, we expect improved activity levels to support a pick-up in volumes in the coming quarters. Based on the current trends in our end markets and the increased uncertainty in the global economy, our outlook for demand development remains cautious.
Pursuing growth through innovative solutions is one of the key cornerstones of Wärtsilä’s strategy, which is why I am pleased to highlight the acquisition of Eniram, a company specialised in energy management and data analytics solutions. Eniram complements our existing digital offering and enhances our expertise in data analytics, modelling, and performance optimisation. It is an important investment for our digital future. During the second quarter, we also announced the acquisition of American Hydro. This investment is aimed at strengthening our presence and competences in the industrial and hydro power service markets.”
Order book at the end of the period
% of net sales
Comparable operating result
% of net sales
Comparable adjusted EBITA
% of net sales
Profit before taxes2
Cash flow from operating activities
Net interest-bearing debt at the end of the period
Gross capital expenditure
1Items affecting comparability included restructuring costs of EUR 26 million in the second quarter of 2016, of which EUR 17 million were non-cash write-downs. During the review period January-June 2016 restructuring costs amounted to EUR 27 million.
2Write-downs of approx. EUR 42 million related to the divestment of the Winterthur Gas & Diesel joint venture, realised exchange rate losses from Brazilian projects, and other receivables were recognised in the results for the second quarter of 2016.
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 North America where the market situation is more positive for gas-fired power plants. The megatrend towards renewable energy sources 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 promote 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 impact investments in offshore exploration and development. In the gas carrier markets, the demand for both LNG and LPG carriers is under pressure due to low oil and gas prices and supply-demand imbalances. The outlook for the cruise and ferry segment remains positive. The demand for cruise vessels is supported by increasing passenger volumes, particularly in Asia, while the contracting of ferries is supported by fleet renewals in Europe, the potential implementation of new emission regulations, and favourable newbuilding prices.
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 specific 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 contracts, as evidenced by the growth in the installed engine base covered by agreements.
ANALYST AND PRESS CONFERENCE
An analyst and press conference will be held today 20 July 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=1214185&s=1&k=58BDF371EA04A78F20587BB4922A9510. To participate in the teleconference please register at the following address: http://emea.directeventreg.com/registration/37473381. 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 10 709 5637
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.