Wärtsilä Corporation Interim Report q3 2014

Market outlook

Power generation markets closely follow global macro-economic development. Based on the difficult market situation seen during the three first quarters of the year and the revised GDP forecasts for 2014, the overall market for liquid and gas fuelled power generation is expected to continue to be challenging. Ordering remains active in emerging markets, which continue to invest in new power generation capacity. Furthermore, the current market situation is creating pent-up demand in certain emerging countries where investment decisions have been delayed. In the OECD countries demand is mainly driven by CO2 neutral generation and the ramp down of older, largely coal-based generation.

Overcapacity continues to affect the demand for traditional merchant vessels. Vessels are being scrapped at a younger age, which along with a more balanced fleet growth supports a gradual recovery in the freight market. In the offshore segment, the contracting of drilling units and certain support vessels is expected to continue to be at a lower level. The outlook for gas carriers remains positive, although the recent strong ordering volumes may affect activity in the short term. The importance of fuel efficiency and environmental regulations are clearly visible. The regulatory environment is also driving interest in gas as a marine fuel in the wider marine markets, a trend further strengthened in the US by favourable pricing.

The overall service market outlook remains stable, with positive developments in selected regions. An increase in the installed base offsets the slower service demand for older installations and the continued emphasis of merchant marine customers on reducing operating expenses. The outlook for services to offshore and gas fuelled vessels remains favourable. Demand for services in the power plant segment continues to be good. The interest in service agreements is strong in both of Wärtsilä’s end markets. From a regional perspective, the outlook for the Middle East and Asia is positive, and is supported by interest in power plant related services. The outlook is also good in the Americas and in Africa.

Wärtsilä's prospects for 2014 revised

Wärtsilä estimates its profitability for 2014 (EBIT% before non-recurring items) to be 11.5-12.0%. Previously profitability was expected to be around 11.5%. Wärtsilä reiterates its expectation that net sales will grow by around 5%.

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