Wärtsilä Corporation Interim Report Q2 2015

“I am especially pleased with the development of the Services business; the second quarter saw growth in both order intake and sales, and the market outlook remains positive.“

Björn Rosengren,
President and CEO

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Net sales increased in challenging market conditions

“Environmental awareness and changing energy needs are increasingly steering investments in the markets in which we operate. The industry dynamics are changing, and we have fine-tuned our strategy accordingly. We seek growth by offering innovative and energy efficient lifecycle solutions, as well as by leveraging our leading position in gas based technology. As we enter new market segments, such as Oil & Gas and LNG terminals, and acquire companies that bring new products to our portfolio, the scope of our offering becomes more than simply powering ships or building power plants. Therefore, we have decided to rename our Ship Power and Power Plants businesses Marine Solutions and Energy Solutions.

Supported by growth in service volumes and increased power plant deliveries, Wärtsilä’s second quarter net sales grew by 10% to EUR 1,230 million. I am especially pleased with the development of the Services business; the second quarter saw growth in both order intake and sales, and the market outlook remains positive. Profitability was 11.1% for the second quarter and 10.7% for the first half. In Energy Solutions, delayed decision-making in certain projects affected our order intake. However, our solid project pipeline gives me confidence in improved activity during the second half of the year. The marine markets continue to suffer from weak vessel demand caused primarily by overcapacity, depressed freight rates, and low oil prices. Marine Solutions’ order intake was on a good level despite the challenging market conditions. Still, we must ensure our future competitiveness in a low demand environment. Consequently, we have today announced plans to realign our Marine Solutions organisation.

Our guidance has been updated to reflect the acquisition of L-3 Marine Systems International, which was finalised at the end of May. We now expect net sales growth of 5-10% and profitability to be 12.0-12.5%.”

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Björn Rosengren, President and CEO

Wärtsilä's prospects for 2015 revised

Wärtsilä expects its net sales for 2015 to grow by 5-10% and its operational profitability (EBIT% before non-recurring items) to be 12.0-12.5%. The guidance includes the impact of the L-3 Marine Systems International (MSI) acquisition. MSI is expected to contribute approximately EUR 250 million to net sales and EUR 9 million to the operating result during 2015. Excluding purchase price allocation amortisation, MSI’s operating result is estimated to reach EUR 16 million.

Previously Wärtsilä expected its net sales to grow by 0-10% and its operational profitability (EBIT% before non-recurring items) to be 12.0-12.5%, excluding the impact of the MSI acquisition.

Second quarter highlights

  • Order intake increased 2% to EUR 1,159 million (1,138)

  • Net sales increased 10% to EUR 1,230 million (1,116)

  • Book-to-bill 0.94 (1.02)

  • EBITA EUR 144 million, or 11.7% of net sales (EUR 138 million or 12.3%)

  • Operating result before non-recurring items EUR 137 million, or 11.1% of net sales (EUR 132 million or 11.8%)

  • Earnings per share 0.54 euro (0.42)

  • Cash flow from operating activities EUR 47 million (61)

  • Acquisition of L-3 Marine Systems International finalised

 

Events after the reporting period

  • Plans to realign the Ship Power business, today renamed Marine Solutions, announced on 17 July 2015

Highlights of the review period January-June 2015

  • Order intake increased 8% to EUR 2,443 million (2,253)

  • Net sales increased 5% to EUR 2,218 million (2,113)

  • Book-to-bill 1.10 (1.07)

  • EBITA EUR 250 million, or 11.3% of net sales (EUR 243 million or 11.5%)

  • Operating result before non-recurring items EUR 237 million, or 10.7% of net sales (EUR 230 million or 10.9%)

  • Earnings per share 0.97 euro (0.73)

  • Cash flow from operating activities EUR 84 million (172)

  • Order book at the end of the period increased 20% to EUR 5,325 million (4,420)

 Key figures

MEUR 4-6/2015 4-6/2014 Change 1-6/2015 1-6/2014 Change 2014
Order intake 1 159 1 138 2% 2 443 2 253 8% 5 084
Order book at the end of the period 5 325 4 420 20% 4 530
Net sales 1 230 1 116 10% 2 218 2 113 5% 4 779
Operating result (EBITA)1 144 138 4% 250 243 3% 594
% of net sales 11.7 12.4 11.3 11.5 12.4
Operating result (EBIT)2 137 132 4% 237 230 3% 569
% of net sales 11.1 11.8 10.7 10.9 11.9
Profit before taxes 140 119 18% 222 208 6% 494
Earnings/share, EUR 0.54 0.42 0.97 0.73 1.76
Cash flow from operating activities 47 61 84 172 452
Net interest-bearing debt at the end of the period 495 350 94
Gross capital expenditure 297 42 94
Gearing 0.25 0.19 0.05
1 EBITA is shown excluding non-recurring items and purchase price allocation amortisation. Purchase price allocation amortisation totalled EUR 7 million (6) in the second quarter of 2015 and EUR 13 million (13) in the review period January-June. In 2014, Wärtsilä recognised non-recurring items related to restructuring measures amounting to EUR 9 million in the second quarter and EUR 15 million during the January-June review period.
2 EBIT is shown excluding non-recurring items.
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