Wärtsilä aims at profitable growth by providing advanced technologies and lifecycle solutions to its marine and energy market customers.
Increasing environmental awareness and changing energy needs are affecting the way that our customers operate. With our integrated products and services, we are well positioned today to respond to the need for energy efficient and flexible solutions. We will meet the increasing demand for gas based technologies with our industry leading multiple fuel products and LNG solutions. We will leverage our project management and engineering competences to achieve growth by offering our customers new and innovative solutions. Our growth ambitions are supported by our superior global service network.
With our production and supply chain management, we constantly seek ways to provide high quality and maintain cost efficiency – often in co-operation with leading industrial partners in our key growth markets. Our market driven investments in R&D and our focus on digitalisation create a strong foundation for securing and strengthening our position at the forefront of technological innovation. This innovative culture, together with our constant emphasis on safety, diversity, and high ethical standards, attract skilled and committed people and lead to a high performing organisation. Our entrepreneurial drive, customer focus, and passion for doing right not only create new opportunities and environmentally sustainable solutions, but also bring value to all our stakeholders.
Strategy implementation in 2015
The importance of fuel efficiency is increasing in both the marine and energy markets. Wärtsilä’s launch of the new generation Wärtsilä 31 engine was a milestone achievement in product efficiency improvement. The Wärtsilä 31 has been recognised by Guinness World Records as being the world’s most efficient 4-stroke diesel engine; its diesel fuel consumption being as low as 165 g/kWh. Within the Services business, customer emphasis on optimising efficiency drove the demand for propulsion system upgrades, as well as for long-term service agreements.
The transition to natural gas fuelled applications in the power generation market is evident, with gas and multi-fuel applications accounting for 71% of Energy Solutions' quotation activity and 46% of its order intake. Gas based contracts included several orders for peaking and renewable support power plants from the USA. Furthermore, Wärtsilä Services received orders to convert power plants to operate on natural gas, among the more significant of these being the Maltese Delimara Power Station. Gas is of interest also in the marine markets. Gas carriers continued to be the largest segment in terms of Marine Solutions’ order intake, partly due to the increasing use of Wärtsilä 34DF engines for auxiliary applications in the LNG carrier segment. Wärtsilä maintained its position as a leading supplier of gas handling systems to the marine markets, and received orders to deliver similar equipment to land-based installations as well.
The development of Wärtsilä’s digital presence was a key theme during 2015. A new digital service portfolio, Wärtsilä Genius services, was launched, and Wärtsilä’s digitalisation competences were further strengthened by the acquisition of L-3 Marine Systems International.
Wärtsilä continued to invest in technology development in order to maintain the competitiveness of its product portfolio, and to secure a leading position in sustainable innovation. The R&D related expenditure totalled EUR 132 million or 2.6% of net sales, with the areas of emphasis being efficiency improvement, fuel flexibility, and the reduction of environmental impact.
To promote a high performance culture, Wärtsilä arranged leadership development programmes, as well as learning solutions for core competence areas in sales, project management, and technology. Wärtsilä employees attended a total of 55,620 training days, which represents on average 3.0 training days per employee. Diversity continued to be a focus area during 2015, the emphasis being on local diversity action planning and implementation. Additionally, Wärtsilä participated in the Dialogi 2015 programme with the aim of developing and promoting female leadership and careers in business. Wärtsilä was also one of the main sponsors of the bi-annual Women in Tech event. Personnel safety is a priority for Wärtsilä and during the year the company moved steadily closer to its on-going target of zero lost-time injuries. Wärtsilä also introduced a WeCare mobile application with the aim of increasing near miss and hazard reporting.
Financial targets and guidance realisation
Wärtsilä’s long-term financial target is to grow faster than global GDP and to maintain its operating profit margin between 14% at the peak of the cycle and 10% at the trough. Furthermore, the target is to maintain gearing below 0.50, and to pay a dividend of at least 50% of earnings per share over the cycle.
Wärtsilä’s performance in 2015 was in line with the Company’s long-term targets and with the guidance set for the year. On 29 January 2015, Wärtsilä estimated its net sales for 2015 to grow by 0-10% and operational profitability to be 12.0-12.5%. The expectations were revised on 17 July to include the impact of the L-3 Marine Systems International (MSI) acquisition, whereby net sales were expected to grow by 5-10% and profitability was estimated to be around 12.0-12.5%. MSI was expected to contribute approximately EUR 250 million to sales and EUR 9 million to the operating result during 2015. Excluding purchase price allocation amortisation, MSI’s operating result was estimated to reach EUR 16 million.
Net sales for 2015 increased by 5%, while the IMF estimates global real GDP to have increased by 3.1%. Profitability improved to 12.2%. Gearing was 0.17 and the Board of Directors' proposed dividend of EUR 1.20 per share represents 53% of operational earnings.