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Strategy

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Wärtsilä’s purpose is to enable sustainable societies with smart technology. The demand for clean and flexible energy and the need for efficient and safe transportation are increasingly affecting the way that customers operate. This forms the basis for Wärtsilä’s offering of smart solutions to the marine and energy markets. With an integrated portfolio of services, systems and products, the company is well positioned to respond to the demand for energy efficient and innovative solutions. The emphasis is placed on optimising installation performance throughout the lifecycle, using data analytics and artificial intelligence to support customers’ business decisions. Wärtsilä’s digital transformation will provide increased customer value through a new era of collaboration and knowledge sharing. A strong presence in key markets and a superior global service network support the company’s profitable growth ambitions.

With its flexible production and supply chain management, Wärtsilä constantly seeks new ways to maintain high quality and cost efficiency – often in co-operation with customers and leading industrial partners. The investments in R&D and the focus on digitalisation create a strong foundation for securing and strengthening a position at the forefront of market innovation. This innovative culture, together with a constant emphasis on safety, diversity, and high ethical standards, attracts skilled and committed people and creates the basis for a high performing organisation. The implementation of operational excellence ensures that Wärtsilä is easy to do business with, and drives increased productivity and efficiency throughout the lifecycle.

Strategy implementation in 2017

Wärtsilä introduced several new concepts and solutions during 2017, all of which support the realisation of its strategy. These include the launch of the marine hybrid power module Wärtsilä HY, the strengthening of capabilities for remote vessel operation, the introduction of performance-based service concepts, and the expansion into energy storage and related software solutions through the acquisition of Greensmith. The introduction of a gas fuelled version of the Wärtsilä 31 engine in response to the rapidly evolving need for greater flexibility and better efficiency in power generation was another key initiative.

The focus on digitalising Wärtsilä’s operations and customer offering continued throughout the year. To support this strategy, the first digital acceleration centre was launched with the aim of developing promising ideas and co-creating them into service concepts and products together with customers and partners. The acquisition of Guidance Marine represents another important step in Wärtsilä’s digital transformation. Being a technology leader in sensor solutions relating to dynamic positioning and other vessel control systems, such as collision avoidance and remote control operations, Guidance Marine enhances Wärtsilä’s frontrunner position in intelligent shipping technologies.

To promote a high performance culture, Wärtsilä has continued its leadership development programmes in many areas. During the year, more than 100 company managers attended the Operational Excellence Senior Leadership Academy, which was established in 2016 to ensure that continuous improvement becomes an integrated part of the company culture and way of working. The success of Wärtsilä’s first Growth Lab programme, which aims at developing future leaders through action-based learning, resulted in its continuation in 2017. To support the company’s objective of fostering an inclusive corporate culture, Wärtsilä’s local entities have taken a number of actions related to promoting diversity during the year.

The health and safety of personnel is a priority for Wärtsilä, and for a number of years the company has moved steadily closer to its on-going target of zero lost-time injuries. In 2017, the lost-time injury frequency was 2.48 (2.59), which represents a decrease of 4% compared to the previous year. During the year, Wärtsilä arranged its third global Safety Day under the theme ‘Stop and Care’, addressing the importance of intervening when unsafe acts are seen. Wärtsilä also launched a Zero Mindset training programme, with the aim of strengthening safety leadership within the company.

Financial targets

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 2017 was in line with its long-term targets. Net sales increased by 3%, bringing Wärtsilä’s 10-year compound annual growth rate to 2.7%. The global real GDP is estimated to have increased by 3.7% in 2017, giving a 10-year compound annual growth rate of 3.2%. The comparable operating result was 12.0% of net sales. Gearing was 0.10 and the Board of Directors' proposed dividend of EUR 1.38 per share represents 70.8% of operational earnings.

Long-term financial targets
Target Development in 2017 Development in 2016
Net sales growth faster than global GDP 3% increase 5% decline
Comparable operating result margin between 10% and 14% 12.0% 12.1%
Gearing below 0.50 0.10 0.07
Dividend payment at least 50% of earnings per share over the cycle 70.8%1 72.8%
1 Proposal of the Board of Directors.

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