Wärtsilä Corporation Interim Report q1 2014

Risks and business uncertainties

In the Power Plants business, uncertainty in the financial markets and significant currency fluctuations may impact financing availability and the timing of bigger projects. Lack of demand for commodities, e.g. minerals, can affect industrial customers’ investment decisions.

The business environment for the shipping and shipbuilding industry continues to be challenging, and there is still some uncertainty in the outlook for the global economy. In the offshore segment, exploration and production investments are highly sensitive to changes in oil prices. Furthermore, increased production costs, in combination with fairly stable oil & gas prices, may increase the hesitancy of some operators to make further investments. Overcapacity in the traditional merchant markets remains a concern, as the vessels from the large order book accumulated during the shipbuilding boom have been delivered. The trend of slow steaming contributes towards absorbing this overcapacity.

Continued risks in the global economy and political instability in certain areas may have a negative impact on Services’ order intake. The challenging conditions in several marine market segments are also seen as a potential risk.

The Group is a defendant in a number of legal cases which have arisen out of, or are incidental to, the ordinary course of its business. These lawsuits mainly concern issues such as contractual and other liability, labour relations, property damage, and regulatory matters. The Group receives from time to time claims of different amounts and with varying degrees of substantiation. It is the Group’s policy to provide for amounts related to the claims, as well as for the litigation and arbitration matters, when an unfavourable outcome is probable and the amount of the loss can be reasonably estimated.

The annual report 2013 contains a more specific description of Wärtsilä’s risks and risk management.

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