Wärtsilä Corporation Interim Report Q2 2015

Strategic projects, acquisitions, joint ventures and expansion of the network

Construction of the CSSC Wärtsilä Engine (Shanghai) Co. Ltd factory in Lingang, Shanghai is proceeding according to plan. The business licence is expected to be received in the third quarter of 2015 and the first engines are expected to be ready for delivery in 2016.

In May, Wärtsilä signed a manufacturing license agreement with COSCO (Weihai) Shipbuilding Marine Technology Company Limited based in Weihai, China. The two-way agreement provides COSCO with access to technology and the rights to manufacture the Wärtsilä Aquarius Electro Chlorination (EC) Ballast Water Management System (BWMS) for applications in their global marine market. In return, Wärtsilä gains access to an additional manufacturing facility, which will assist with the supply of ballast water management systems directly to Wärtsilä customers.

Also in May, Wärtsilä and Carnival Corporation & plc announced an agreement to pilot technologies and systems to optimise engine room operations aboard Carnival’s fleet.

During the second quarter, Wärtsilä established a subsidiary to trade spare parts for classic 4-stroke Wärtsilä engines. QuantiParts B.V., fully owned by Wärtsilä, operates from the Netherlands and serves customers in the marine, locomotive and power plant industries worldwide.

Acquisition of L-3 Marine Systems International

The acquisition of L-3 Marine Systems International (MSI) from NYSE-listed L-3 Communications Holdings Inc. has been finalised and control of the company was transferred to Wärtsilä with effect from 1 June 2015. The integration of MSI with Wärtsilä’s existing Electrical & Automation business within Marine Solutions has begun. Wärtsilä foresees that the new unit will capture new market opportunities and improve the operational efficiency of its customers. In addition to sales synergies, Wärtsilä expects MSI to reach current group profitability within five years.

The enterprise value was EUR 285 million and the purchase price, after estimated adjustments of cash, working capital, and pension liabilities, was EUR 298 million. Purchase price allocation amortisation is expected to be EUR 7 million in 2015. According to preliminary calculations, the goodwill value of the transaction is estimated at EUR 161 million.

MSI’s order intake for the review period January-June 2015 totalled EUR 161 million and the order book at the end of the period stood at EUR 519 million. Net sales for the review period amounted to EUR 197 million. MSI has been consolidated as of June 2015. MSI contributed EUR 41 million to order intake and EUR 30 million to net sales during the second quarter of 2015. The impact on operating result was not significant.

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