WÄRTSILÄ’S FINANCIAL STATEMENTS BULLETIN JANUARY-DECEMBER 2018
GROWTH IN ORDER INTAKE AND NET SALES
This release is a summary of Wärtsilä’s financial statements bulletin 2018. The complete report is attached to this release as a pdf-file. It is also available at http://www.wartsilareports.com/en-US/2018/q4/frontpage/ and on the company website at www.wartsila.com.
FOURTH QUARTER HIGHLIGHTS
- Order intake increased 24% to EUR 1,874 million (1,514)
- Net sales increased 6% to EUR 1,532 million (1,441)
- Book-to-bill reached 1.22 (1.05)
- Comparable operating result decreased to EUR 226 million (241), which represents 14.7% of net sales (16.7).
The comparable operating result includes a provision amounting to approximately EUR 70 million to cover cost overruns and project delays in two nuclear power plant back-up genset projects, as well as a capital gain of EUR 27 million from the divestment of the pumps business and the release of an EUR 21 million provision related to ongoing long-term incentive schemes.
- Earnings per share amounted to 0.25 euro (0.28)
- Cash flow from operating activities increased to EUR 349 million (276)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-DECEMBER 2018
- Order intake increased 12% to EUR 6,307 million (5,644)
- Order book at the end of the period increased 21% to EUR 6,166 million (5,100)
- Net sales increased 5% to EUR 5,174 million (4,911)
- Book-to-bill reached 1.22 (1.15)
- Comparable operating result was stable at EUR 577 million (576), which represents 11.2% of net sales (11.7)
- Earnings per share increased to 0.65 euro (0.63)
- Cash flow from operating activities increased to EUR 470 million (430)
- Dividend proposal 0.48 euro per share (0.46)
The demand for Wärtsilä’s services and solutions in 2019 is expected to be in line with the previous year. Demand by business area is anticipated to be as follows:
- Solid in Wärtsilä Energy Business. The global shift towards renewable energy sources and increasing electricity demand in the emerging markets create a need for distributed and flexible power capacity.
- Solid in Wärtsilä Marine Business. Wärtsilä’s demand outlook is supported by its extensive product and service offering and broad segment exposure, which compensates for the slow pace of recovery in vessel contracting.
Wärtsilä’s current order book for 2019 deliveries is EUR 3,696 million (3,207). Deliveries are expected to be concentrated to the latter part of the year.
JAAKKO ESKOLA, PRESIDENT AND CEO
“2018 was marked by positive order intake development resulting from improved demand in the marine newbuild and service markets. Environmental considerations emerged as a key theme in the marine markets, as customers sought to prepare themselves for compliance with the IMO 2020 global sulphur cap. For Wärtsilä, this trend was reflected in a significant growth in demand for exhaust gas cleaning systems. Another contributor to the increase in order intake was the high level of activity in the cruise and ferry markets, as well as our customers’ interest in long-term service agreements. Energy Solutions' order intake was, on the other hand, lower than for the previous year, mainly due to slower decision-making among our customers. However, the long-term trends of growth in the emerging markets, and the shift towards flexible capacity to accommodate renewables, remain supportive of demand going forward.
Net sales for the year developed well, thanks to higher volumes in both Marine and Energy Solutions. Despite the pick-up in Services’ net sales toward the end of the year, the group sales mix favoured equipment deliveries, which, together with increased costs related to research, development and digitalisation, burdened profitability. To stay competitive in the current market environment, we must initiate actions to increase customer value and secure profitable growth. This includes increasing the focus on targeted sales activities, developing the agreements-based business, reviewing our cost structure, as well as optimising the business portfolio.
The marine and energy industries are being transformed through increasing connectivity, new business models, and the shift to a sustainable, low emissions economy. We are committed to supporting our customers by taking a leading role in this transition. Among the key milestones for the year was the introduction of new solutions for the integration of renewables and energy storage, as well as the successful testing of our automated dock-to-dock concept, and a project to develop an autonomously navigated harbour tug. The acquisition of Transas further strengthened our offering of smart solutions for the marine industry, and was important in this development work. Furthermore, our investment to build a Smart Technology Hub in Vaasa will speed up the time to market of new customer solutions.
We enter the year with a new organisation formed around two business areas that incorporate both newbuild activities and services. With this structure our primary focus is to better meet customer needs throughout the full lifecycle, and thus enhance the value we deliver. In so doing, we are supporting the progression towards our long-term target of profitable growth. In 2019, we expect market conditions to remain similar to those seen in the previous year. The pace of recovery in the marine markets is anticipated to remain slow, while the need for flexible power capacity supports the demand outlook in the energy markets. The competitive environment and geopolitical tension remain a concern. Our order book for this year’s deliveries is healthy, with deliveries again expected to be concentrated to the latter part of the year. The successful implementation of planned actions to ensure sustainable savings and increased customer value will be central to the development of our profitability in 2019.”
|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 taxes
|Cash flow from operating activities
|Net interest-bearing debt at the end of the period
|Gross capital expenditure
¹Items affecting comparability in the fourth quarter of 2018 included costs related to restructuring programmes and acquisitions of EUR 20 million (19). During the review period January-December 2018 restructuring and acquisition related costs amounted to EUR 35 million (37).
As of 1 January 2018, Wärtsilä has adopted the IFRS 15 Revenue from Contracts with Customers standard by using the full retrospective method. This Financial Statements Bulletin is published according to the new standard and comparison periods for 2017, including the opening balance sheet, have been restated accordingly. Wärtsilä has also restated the 2017 figures for Marine Solutions and Services, due to an internal transfer of certain service activities. This transfer has no impact on Group totals.
The share issue without payment approved by Wärtsilä’s Annual General Meeting on 8 March 2018 increased the total number of Wärtsilä shares to 591,723,390. The share related figures in the comparison periods have been adjusted to reflect the increased number of shares.
EVENTS AFTER THE REVIEW PERIOD
On 30 January 2019, Wärtsilä announced plans to realign its operations and resources to secure future profitability and competitiveness. The Group-wide programme emphasises sustainable savings and actions that increase customer value. The planned actions include an increased focus on targeted sales activities, developing the agreements-based and “as-a-service” business, reviewing the cost structure, as well as optimising the business portfolio and organisation. The program is expected to lead to a reduction of approximately 1,200 employees globally. The reductions will impact all businesses and support functions. With these actions Wärtsilä seeks annual savings of EUR 100 million. Savings are expected to materialise gradually during the second half of 2019, with full effect by the end of 2020. The costs related to the restructuring measures are expected to be EUR 75 million.
BOARD OF DIRECTORS’ DIVIDEND PROPOSAL
The Board of Directors proposes that a dividend of 0.48 euro per share be paid for the financial year 2018. The parent company’s distributable funds total 1,037,972,039.58 euro, which includes 308,072,530.42 euro in net profit for the year. There are 591,723,390 shares with dividend rights. The dividend will be paid in two instalments.
The first instalment of 0.24 euro per share will be paid to shareholders who are registered in the list of shareholders maintained by Euroclear Finland Ltd on the record date 11 March 2019. The payment date proposed by the Board for this instalment is 18 March 2019.
The second instalment of 0.24 euro per share will be paid to shareholders who are registered in the list of shareholders maintained by Euroclear Finland Ltd on the dividend record date, which, together with the payment date, shall be decided by the Board of Directors in its meeting scheduled for 18 September 2019. The dividend record date for the second instalment as per the current rules of the Finnish book-entry system would be 20 September 2019 and the dividend payment date 27 September 2019.
The Annual Report 2018, including the financial review and the review by the Board of Directors, will be available on the company website www.wartsila.com and at www.wartsilareports.com during week 7.
ANALYST AND PRESS CONFERENCE
An analyst and press conference will be held today, Wednesday 30 January 2019, at 10.00 a.m. Finnish time (8.00 a.m. UK time), at Wärtsilä Helsinki Campus, located at Hiililaiturinkuja 2, Helsinki, Finland. The combined web- and teleconference will be held in English and can be viewed at the following address: https://globalmeet.webcasts.com/starthere.jsp?ei=1228592&tp_key=fe9a6a3b32. Instructions and dial-in numbers for the teleconference can be found here. Please join the event conference 5-10 minutes prior to the start time. You will be asked to provide the confirmation code and the title of your conference:
Event Conference Title: Wärtsilä Corporation - Financial Statements Bulletin 2018
Confirmation Code: 7139357
A recording 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 5444
Director, Investor 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 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 2018, 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.
Financial Statements Bulletin 2018