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The year 2017

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Market environment

Steady development in the service markets

Service market activity was solid during 2017. In the marine industry, low freight rates affected merchant customers’ appetite for service investments. The offshore service markets remained challenging throughout 2017, although increased oil prices led to some recovery in sentiment towards the end of the year. The cruise segment developed positively, largely due to increased demand for long-term agreements especially in the first part of the year. The demand for power plant related services was steady, supported by the growth in long-term service agreements in Asia.

Power generation markets shifting towards smart and flexible technologies

The demand for Wärtsilä’s energy solutions was strong in 2017. The continued decline in renewable energy prices have made solar and wind power especially competitive in many markets and utilities globally are assessing how to integrate such energy sources into their asset base. The first steps are already being taken in the USA, Australia and the Middle East, where market conditions are the most favourable. This, in turn, is increasing the need for flexible power capacity. Demand was also strong in the emerging markets, where countries are investing in new power generation capacity to support economic growth and alleviate power shortages.

Energy Solutions’ market share

For the twelve months ending in September, global orders for natural gas and liquid fuel power plants of up to 500 MW amounted to 25.2 GW (24.8 GW at the end of June). Wärtsilä's market share was 15% (14). Global orders include all gas turbine and Wärtsilä orders with prime movers over 5 MW in size.

Vessel contracting supported by improved sentiment

During 2017, 1,037 contracts for new vessels were registered (916, including late contracting). Conditions in the merchant and gas carrier markets improved towards the end of the year along with economic growth. However, large order books and scheduled newbuilding deliveries continue to limit utilisation levels and rates in the gas carrier segment. FSRU contracting was healthy, supported by growing LNG demand from the emerging markets and long-term fundamentals. Contracting activity was on a good level also in the cruise, ferry and Ro-Ro segments due to higher earnings, ageing fleets, planned regulatory developments, and attractive newbuilding prices. Despite some recovery in oil and gas prices towards the end of the year, overcapacity continued to limit newbuild investments in the offshore industry.

In terms of compensated gross tonnage, China and South Korea remain the largest shipbuilding nations with 40% and 27% of all confirmed contracts respectively. Japan and Italy accounted for 8% and 5% of the global total respectively.

Marine Solutions market shares

Wärtsilä is well positioned in key product and solution areas, such as electrical & automation and gas systems. In the medium-speed main engine market, Wärtsilä’s share was 47% (43% at the end of the previous quarter). The market share in auxiliary engines was 10% (13% at the end of the previous quarter).

Order intake

Wärtsilä’s order intake for the financial period January-December 2017 increased by 15% to EUR 5,644 million (4,927). The book-to-bill ratio was 1.15 (1.03).

Services’ order intake increased by 13% to EUR 2,481 million (2,194), thanks to higher demand for long-term service agreements in both the marine and energy markets. The highlight of the year was the strategic performance-based partnership with Carnival Corporation. According to the agreement, Wärtsilä will handle all engine maintenance and monitoring work for 79 Carnival vessels. A strategically interesting order was the contract with Belize Electric Company Limited (BECOL) for a plant upgrade with high quality hydroelectric solutions and technical support, which expands the business of American Hydro, a Wärtsilä company, to Central America.   

Energy Solutions’ order intake was EUR 1,685 million (1,448), which represents an increase of 16% from the previous year. Asia was the most active region in terms of ordering activity. Demand was particularly good in growing economies, such as Indonesia, and in Bangladesh, where the government is making a strong effort to increase the number of households having access to electricity. In the developed markets, Wärtsilä received orders for two 50 MW power plants from the UK and contracts exceeding 500 MW to support the expansion of renewable energy in the USA. Other noteworthy orders included the first solar PV plant contracts from Burkina Faso and Jordan. In addition to power generation solutions, Wärtsilä received orders for energy storage and software projects in the USA, Singapore, and Portugal, and a turnkey liquefied natural gas (LNG) receiving terminal to be built in Hamina.

Marine Solutions’ order intake increased by 15% to EUR 1,478 million (1,285). Expectations for growth in cruise tourism supported demand in the cruise and ferry segment, which represented 31% of Marine Solutions’ order intake. Significant orders included a contract to supply the main engines and exhaust gas cleaning systems to Norwegian Cruise Line’s four new generation cruise ships being built by Fincantieri. The gas carriers’ share of the order intake was 25%, largely due to improved demand for FSRUs. Orders received within this segment included a contract to equip two new vessels being built for Höegh LNG at the Samsung Heavy Industries and Hyundai Heavy Industries shipyards in Korea, with dual-fuel main engines and regasification technology. In the conventional merchant segment, which represented 23% of order intake, Wärtsilä received a sizeable order for four shuttle tankers from TEEKAY, of which two were included in the order intake for 2017. The vessels will feature a wide range of Wärtsilä’s latest technology innovations, which enables them to reach a new level of economic and ecological performance. With regards to the remaining segments, special vessels represented 8% of order intake, navy 7%, and offshore 3%. Other orders accounted for 4%.

Order intake in joint ventures

Order intake in the Wärtsilä Hyundai Engine Company Ltd joint venture in South Korea, and in the Wärtsilä Qiyao Diesel Company Ltd and CSSC Wärtsilä Engine Company Ltd. joint ventures in China totalled EUR 70 million (62) during the financial period January-December 2017. The results of these companies are reported as a share of the result of associates and joint ventures.

Order book

The total order book at the end of the financial period amounted to EUR 5,064 million (4,696), an increase of 8%. The Services order book totalled EUR 1,171 million (999), which is 17% higher than at the same time last year thanks to the increased demand for long-term service agreements. The Energy Solutions order book increased by 11%, totalling EUR 1,871 million (1,680), while the Marine Solutions order book was stable at EUR 2,023 million (2,017).

Net sales

Wärtsilä’s net sales for January-December 2017 amounted to EUR 4,923 million (4,801), an increase of 3% over the corresponding period last year. Net sales from the Services business was solid at EUR 2,215 million (2,190). Increased revenues from long-term service agreements offset low volumes from service projects. Net sales for Energy Solutions totalled EUR 1,401 million (943), an increase of 48%. Marine Solutions’ net sales decreased by 22% to EUR 1,307 million (1,667). Of the total net sales, Services accounted for 45%, Energy Solutions for 28%, and Marine Solutions for 27%.

Of Wärtsilä’s net sales for January-December 2017, approximately 69% was EUR denominated, 18% USD denominated, with the remainder being split between several currencies.

Group net sales development.svg
Megawatts delivered
2017 2016 Change %
Energy Solutions engines 3 119 2 189 42%
Marine Solutions engines 1 203 1 649 -27%
Wärtsilä total 4 322 3 838 13%
By joint ventures 601 657 -9%
Engine deliveries total 4 923 4 495 10%

Operating result and profitability

The operating result for the financial period January-December 2017 was EUR 552 million (532), which represents 11.2% of net sales (11.1). The comparable operating result was EUR 590 million (583), or 12.0% of net sales (12.1). Items affecting comparability amounted to EUR 37 million (51), of which EUR 36 million (48) was related to restructuring programmes and EUR 2 million (3) to acquisitions and other costs. The comparable adjusted EBITA was EUR 626 million (618), or 12.7% of net sales (12.9). Purchase price allocation amortisation amounted to EUR 36 million (35).

Wärtsilä’s operating result was affected by a provision of EUR 40 million (5) related to long-term incentive schemes. The provision covers all three ongoing programmes. Wärtsilä’s three-year long-term incentive schemes are tied to the development of the company's share price, and they apply to approximately 100 company executives.

Financial items amounted to EUR -47 million (-53). Financial items include exchange rate losses related to terminated hedges. Net interest totalled EUR -8 million (-11). Profit before taxes amounted to EUR 506 million (479). Taxes amounted to EUR 122 million (123), implying an effective tax rate of 24.2% (25.6). The profit for the financial period amounted to EUR 383 million (357). Earnings per share were 1.95 euro (1.79) and the equity per share was 12.02 euro (11.60). The return on investments (ROI) was 18.9% (17.1), while return on equity (ROE) was 16.3% (15.6).

Measures of profit and items affecting comparability
MEUR 2017 2016
Comparable adjusted EBITA 626 618
Purchase price allocation amortisation -36 -35
Comparable operating result 590 583
Items affecting comparability:
Social plan costs -10 -22
Impairment and write-downs -18 -22
Transfer costs -3
Other restructuring costs -7 -7
Items affecting comparability, total -37 -51
Operating result 552 532
Result.svg

Balance sheet, financing and cash flow

Wärtsilä’s operating cash flow totalled EUR 430 million (613) in the financial period January-December 2017. Cash flow was negatively impacted by the increase in receivables. At the end of the period, working capital totalled EUR 591 million (490), a decrease of EUR 66 million from the end of September. Advances received at the end of the period totalled EUR 522 million (516). At the end of September, advances totalled EUR 495 million. Cash and cash equivalents at the end of the period amounted to EUR 379 million (472). Unutilised Committed Credit Facilities totalled EUR 765 million (640), which includes a signed EUR 125 million long-term loan available for disbursement as of 31 December 2017.

Wärtsilä had interest-bearing debt totalling EUR 619 million (629) at the end of December 2017. The total amount of short-term debt maturing within the next 12 months was EUR 102 million. Long-term loans amounted to EUR 517 million. Net interest-bearing debt totalled EUR 234 million (150) and gearing was 0.10 (0.07).

Liquidity preparedness
MEUR 31.12.2017 31.12.2016
Cash and cash equivalents 379 472
Unutilised committed credit facilities 7651 640
Liquidity preparedness 1 144 1 112
% of net sales (rolling 12 months) 23 23
Less Commercial Papers - -
Liquidity preparedness excluding Commercial Papers 1 144 1 112
% of net sales (rolling 12 months) 23 23
On 31 December 2017, the average maturity of the total loan portfolio was 43 months and the average maturity of the long-term debt was 44 months.
1 Includes a EUR 125 million EIB loan that remains undrawn.
Loans.svg
Maturity profiles of long-term loans.svg
Committed revolving credit facilities (end of period).svg
Gearing.svg

Capital expenditure

Capital expenditure related to intangible assets and property, plant, and equipment amounted to EUR 64 million (55) during the financial period January-December 2017. Capital expenditure related to acquisitions and investments in joint ventures totalled EUR 191 million (91). The figure for 2017 includes the acquisitions of Guidance Marine Limited, Puregas Solutions, and Greensmith Energy Management Systems Inc. Depreciation, amortisation, and impairment for the financial period amounted to EUR 134 million (138).

In 2018, capital expenditure related to intangible assets and property, plant, and equipment is expected to be below depreciation and amortisation.

Gross capital expenditure.svg

Strategic projects, acquisitions, and joint ventures

In July, Wärtsilä completed the acquisition of Greensmith Energy Management Systems Inc., a market leader in grid-scale energy storage software and integrated solutions. The acquisition will enable Wärtsilä to rapidly expand its footprint in the global energy storage market, and position itself as a premier energy systems integrator. In 2016, Greensmith’s revenues were USD 32 million with over 40 employees. The integration of Greensmith is proceeding according to plan.

In August, Wärtsilä and ABB signed an agreement to expand their co-operation in lifecycle service offerings. ABB granted Wärtsilä Authorized Service Provider status for the standard maintenance of ABB turbochargers installed with Wärtsilä 4-stroke engines.

In September, Wärtsilä added wave power technology to its capabilities as an energy systems integrator through its partnership with AW-Energy. The co-operation is based on AW-Energy’s patented and certified wave energy technology and Wärtsilä’s global project execution, services, and integration capabilities.

In October, Wärtsilä announced the acquisitions of Puregas Solutions and Guidance Marine. Puregas Solutions is a Sweden based leader in turnkey biogas upgrading solutions. The acquisition complements Wärtsilä’s existing position in the biogas liquefaction market. In 2016, Puregas Solutions had approximately 40 employees and a turnover of SEK 200 million. Guidance Marine Limited, a UK based privately owned company, is a technology leader in the marine industry for sensor solutions relating to dynamic positioning and other vessel control systems. The acquisition enhances Wärtsilä’s capabilities in the areas of situational awareness and near-field measurement, both essential for more intelligent vessel navigation. In 2016, Guidance Marine employed more than 50 people worldwide and had a turnover of GBP 6 million.

In December, Wärtsilä and GTT, the designer of cryogenic membrane containment solutions for liquefied gases, finalised a co-operation agreement to explore potential business opportunities in the marine sector in relation to LNG storage, fuel gas supply systems, and associated services that will benefit both shipyards and vessel owners. Wärtsilä also signed a 10-year service partnership agreement with Winterthur Gas & Diesel Ltd. (WinGD). According to the agreement, Wärtsilä will continue to provide extensive customer support and services to the end users of WinGD’s products, to WinGD, as well as to licensed engine builders. The agreement includes service work conducted for any 2-stroke engines delivered under the Wärtsilä, Sulzer, and WinGD brands.

Towards the end of the year, Wärtsilä announced the opening of the CSSC Wartsila Electrical & Automation Co Ltd (CWE&A) joint venture between Wärtsilä and China State Shipbuilding Corporation (CSSC), and the acquisition of Trident B.V., a Netherlands based company specialised in underwater ship maintenance, inspection, and repair services. The acquisition of Trident enables Wärtsilä to become a leading global operator in the underwater services market.

Research and development, product launches

Wärtsilä continued to invest in product and solution innovation during 2017. The R&D related expenditure totalled EUR 141 million (131), which represents 2.9% of net sales (2.7). The key focus areas included digitalisation, efficiency improvement, fuel flexibility, and the reduction of environmental impact.

In March, Wärtsilä launched SmartPredict, a system designed to provide safer and more efficient operations for all vessel types with the help of advanced motion prediction.

In May, Wärtsilä introduced the Wärtsilä HY, a fully integrated hybrid power module combining engines, an energy storage system, and power electronics optimised to work together through a newly developed energy management system. Wärtsilä also announced its decision to invest in expanding its capability to service turbochargers at more than 20 service workshops globally. With this investment, Wärtsilä is able to offer customers global turbocharger services coupled with engine know-how in flexible co-operation with other Wärtsilä service centres. Eniram, a Wärtsilä company, launched an update to the SkyLight performance monitoring system, adding nautical maps, weather layers, and route importation to make predictive analysis and proactive planning more available.

In August, Wärtsilä successfully tested its automatic wireless induction charging system on a hybrid powered coastal ferry, owned by Norled, one of Norway’s largest ferry operators. Wärtsilä also took a further step in developing its Smart Marine capabilities by successfully testing the remote control of ship operations in collaboration with the U.S. based operator Gulfmark Offshore. The testing involved driving a vessel through a sequence of manoeuvres using a combination of dynamic positioning and manual joystick control via standard bandwidth onboard satellite communication.

Product launches in November included EnergoFlow, a solution for reducing the power losses that occur in a ship’s propeller slipstream by providing an optimised inflow, thereby bringing cost savings in the form of fuel efficiency. A gas-fuelled version of the successful Wärtsilä 31 engine was also launched. The defining feature of the Wärtsilä 31SG is its ability to achieve simple-cycle efficiency levels in excess of 50%, which enables reduced emissions and offers the potential for considerable cost savings to power producers. Another benefit is the provision of increased flexibility, which enables a rapid response to continuously changing load patterns, especially in systems with a notable share of solar and wind energy.

In December, Wärtsilä introduced its Voyage Emissions Reduction system, which reduces environmental impact and increases oil tanker revenues by effectively eliminating the problem of volatile organic compound emissions during voyages, as well as Linesafe, a new simplified bearing design that enhances flexibility and lowers lifecycle costs for customers.

At the end of the year, the European Investment Bank (EIB) and Wärtsilä signed a EUR 125 million loan agreement to support the research and development of more environmentally friendly and efficient ship engines and power plants. This fifth loan to support Wärtsilä’s Research, Development and Innovation (RDI) will further solidify the successful co-operation with the EIB, which has resulted in tangible improvements in European engine technology since the first loan was signed in 2003.

 

Research and development expenditure.svg

Restructuring programmes

Wärtsilä’s aim is to continuously pursue more cost-efficient ways of operating and align its operations to market conditions. The incremental savings from local actions within Marine Solutions and restructuring measures initiated in previous years amounted to approximately EUR 55 million in 2017, while the related costs totalled EUR 36 million. The remaining savings of EUR 15-20 million are expected to materialise in 2018.

Personnel

Wärtsilä had 18,065 (18,011) employees at the end of December 2017. On average, the number of personnel for January-December 2017 totalled 17,866 (18,332). Services employed 10,624 (10,567) people, Energy Solutions 1,038 (903), and Marine Solutions 5,845 (6,074).

Of Wärtsilä’s total number of employees, 20% (19) were located in Finland and 38% (39) elsewhere in Europe. Personnel employed in Asia represented 27% (28) of the total, personnel in the Americas 11% (11), and personnel in other countries 4% (4).

Personnel.svg

Non-financial report

Increasing environmental awareness is resulting in fundamental changes in both the marine and energy industries. Thanks to its various technologies and specialised services, Wärtsilä is well positioned to reduce exhaust emissions and the use of natural resources, and to support its customers in preparing for new regulatory requirements. R&D efforts continue to focus on the development of advanced environmental technologies and solutions. Wärtsilä emphasises responsible business conduct, and is committed to supporting the UN Global Compact and its principles with respect to human rights, labour, the environment and anti-corruption.

Responsible business conduct

The Wärtsilä Code of Conduct defines common rules for all employees, and provides guidance on Wärtsilä’s approach to responsible business practices. The Code of Conduct is complemented by group-wide policies, including the Quality, Environmental, Health and Safety Policy, the corporate policy on equal opportunities and fair employment practices, as well as policies related to anti-corruption, compliance reporting, and sourcing and purchasing.

Wärtsilä takes an active approach to the application of the Code of Conduct and promotes its implementation through the effective communication of its contents to its employees. Wärtsilä monitors the application of the Code internally to ensure understanding and commitment throughout the organisation. At the end of 2017, 16,137 employees, covering 89% of the total number of employees, had participated in the Code of Conduct training programme.

Suppliers and business partners are an integral part of the total value chain of the products and services of Wärtsilä. They are expected to conduct their businesses in compliance with the same high legal and ethical standards and business practices as Wärtsilä. Information on Wärtsilä’s requirements is included in supplier agreement templates. 

Environmental performance

Wärtsilä’s main contribution to improved environmental performance lies in providing its customers with reliable and safe technologies and services, which, in addition to enabling environmental compliance, support the sustainable development of the marine and energy industries. Wärtsilä’s products and solutions are designed to operate for up to 30 years. Therefore, focusing R&D efforts on improving the product or system level performance is crucial, as is adopting a lifecycle approach to performance optimisation. In addition to improving the environmental performance of its product and solutions, Wärtsilä also continuously monitors the impact caused by its own activities and targets reduced energy consumption in its facilities.

Wärtsilä's Quality, Environmental, Health and Safety Policy sets principles for managing the environmental impacts of Wärtsilä’s products and services. The potential risks related to environmental matters and climate change are in the areas of regulatory emission restrictions and changes in customer attitudes to using combustion engines and fossil fuels. Risks are managed by focusing on product efficiency improvement and emission reduction in R&D activities, as well as by developing a wide product offering, including technologies related to waste reduction, noise abatement, and effluent and ballast water treatment. During 2017, R&D investments totalled EUR 141 million, which represents 2.9% of net sales. The majority of these investments targeted improved environmental performance. Significant achievements related to sustainable innovation included the introduction of Wärtsilä 31SG, a gas fuelled version of the highly efficient Wärtsilä 31 engine for the energy industry, and the introduction of the Wärtsilä HY, the marine sector’s first integrated hybrid power module.

Social and employee matters

Wärtsilä is a responsible employer, offering employees a workplace where openness, respect, trust, equal opportunities, and scope for personal development prevail. Wärtsilä is a signatory of the UN Global Compact initiative and supports the work-related rights defined by the International Labour Organization (ILO). Wärtsilä's corporate policy on equal opportunities and fair employment practices creates a common framework for employee practices in all Wärtsilä companies. People management processes, tools, and ways of working are developed to ensure consistency across national and organisational boundaries. Wärtsilä has a global job grading system and rewarding principles to ensure transparency and fairness for all employees, which are followed by all the entities in Wärtsilä globally.

The objective of Wärtsilä’s people management strategy is to ensure that the businesses have the required resources, and skilled and motivated people at their disposal. In order to develop their competences, employees are offered a wide variety of internal training courses, including topics like technology, health and safety, language and culture, project management, environment, security, and leadership. The average number of learning days was 2.2 per employee in 2017.

Wärtsilä aims at offering employees and contractors a hazard-free working environment, and at minimising the health and safety risks associated with the use of its products and services. The company’s occupational health and safety principles are defined in the Code of Conduct, the quality, environmental, health and safety (QEHS) policy, and in the directive on environment, health, and safety (EHS). Wärtsilä's units are required to have a management system in place that conforms to the QEHS Policy and the EHS directive. In addition to the management system, Wärtsilä companies apply occupational health and safety programmes as required by local legislation. Wärtsilä’s aim is to reach a long-term goal of zero injuries. In 2017, the corporate lost-time injury frequency rate was 2.48 (2.59). To further emphasise the importance of safety within the organisation, Wärtsilä started the ZeroMindset leaders’ occupational health and safety programme during the year.

Respect for human rights

Wärtsilä supports and respects basic human values as outlined in the UN's Universal Declaration of Human Rights. Wärtsilä is also a signatory of the UN Global Compact and is thereby committed to its principles with respect to human rights, labour, the environment and anti-corruption. No employee is allowed to take any action that violates these human rights principles, either directly or indirectly. Wärtsilä does not accept the use of forced labour or child labour in any form. Human and Labour rights are a part of the Code of Conduct training material, and are included in Wärtsilä’s policy on equal opportunities and fair employment practices as well as in the company’s supplier handbook.

Anti-corruption and bribery matters

Wärtsilä's Code of Conduct, Anti-Corruption Policy, and Broker Directive expressly prohibit the company and its employees from offering or accepting any kind of benefit considered a bribe and from taking actions that could give rise to a conflict of interest or breach of loyalty. The instructions make it compulsory to comply with anti-corruption laws of all the countries in which Wärtsilä does or intends to do business and urge the reporting of any cases of corruption and bribery.

Wärtsilä is aware of the risk of being subject to fraud by external business parties, and that the risk of corruption and fraud is heightened in many markets where the company operates. Therefore, full compliance with a stringent anti-corruption regime is required of all employees. An extensive training programme is in place for personnel on anti-corruption principles and applicable legislation as well as the relevant company policies and procedures. By the end of 2017, 92% of Wärtsilä’s employees have participated in anti-corruption trainings. Employees are encouraged to provide feedback and communicate suspected misconduct to line management or directly to the Compliance, Legal Affairs or Internal Audit function. Wärtsilä also has a dedicated tool, which was taken into use during 2017, through which employees can report infringements.

Shares and shareholders

During January-December 2017, the volume of trades on Nasdaq Helsinki was 89,407,327 shares, equivalent to a turnover of EUR 4,800 million. Wärtsilä's shares are also traded on alternative exchanges, such as Turquoise, BATS CXE, and BATS BXE. The total trading volume on these alternative exchanges was 60,463,921 shares.

Shares on Nasdaq Helsinki
31.12.2017 Number of shares and votes Number of shares traded 1-12/2017
WRT1V 197 241 130 89 407 327
1.1. - 31.12.2017 High Low Average1 Close
Share price 62.30 41.90 53.70 52.60
¹ Trade-weighted average price
Market capitalisation 31.12.2017 31.12.2016
MEUR 10 375 8 418
Foreign shareholders 31.12.2017 31.12.2016
% 55.9 55.0
Flagging notifications

During the financial period January-December 2017, BlackRock Inc. informed Wärtsilä of the changes in ownership summarised in the table below. The total number of shares held by BlackRock, Inc. remained above 5% of Wärtsilä’s share capital and total votes throughout the period.

Release date Transaction date Shareholder Threshold Direct holding, % Total holding, %
23.11.2017 22.11.2017 BlackRock Investment Management (UK) Limited Above 5% 4.63 5.05
30.11.2017 29.11.2017 BlackRock Investment Management (UK) Limited Above 5% 5.10 5.47

Decisions taken by the Annual General Meeting

Wärtsilä’s Annual General Meeting held on 2 March 2017 approved the financial statements and discharged the members of the Board of Directors and the company’s President & CEO from liability for the financial year 2016.

The Annual General Meeting decided that the Board of Directors shall have eight members. The following were elected to the Board: Maarit Aarni-Sirviö, Kaj-Gustaf Bergh, Karin Falk, Johan Forssell, Tom Johnstone, Mikael Lilius, Risto Murto and Markus Rauramo.

The audit firm PricewaterhouseCoopers Oy was elected as the auditor of the Company for the year 2017.

Dividend distribution

The Annual General Meeting approved the Board of Directors’ proposal to pay a dividend of EUR 1.30 per share in two instalments. The first instalment of EUR 0.65 per share was paid on 13 March 2017, and the second instalment of EUR 0.65 per share was paid on 21 September 2017.

Authorisation to repurchase and distribute the Company’s own shares

The Board of Directors was authorised to resolve to repurchase a maximum of 19,000,000 of the Company’s own shares. The authorisation to repurchase the Company’s own shares shall be valid until the close of the next Annual General Meeting, however no longer than for 18 months from the authorisation of the shareholders’ meeting.

The Board of Directors was authorised to resolve to distribute a maximum of 19,000,000 of the Company’s own shares. The authorisation for the Board of Directors to distribute the Company’s own shares shall be valid for three years from the authorisation of the shareholders’ meeting and it cancels the authorisation given by the General Meeting on 3 March 2016. The Board of Directors was authorised to resolve to whom and in which order the Company’s own shares will be distributed. The Board of Directors was authorised to decide on the distribution of the Company’s own shares otherwise than in proportion to the existing pre-emptive right of the shareholders to purchase the Company’s own shares.

Organisation of the Board of Directors

The Board of Directors of Wärtsilä Corporation elected Mikael Lilius as its chairman and Tom Johnstone as the deputy chairman. The Board decided to establish an Audit Committee, a Nomination Committee and a Remuneration Committee. The Board appointed from among its members the following members to the Committees:

Audit Committee: Chairman Markus Rauramo, Maarit Aarni-Sirviö, Risto Murto

Nomination Committee: Chairman Mikael Lilius, Kaj-Gustaf Bergh, Johan Forssell, Risto Murto

Remuneration Committee: Chairman Mikael Lilius, Maarit Aarni-Sirviö, Tom Johnstone

Risks and business uncertainties

In the Services business, slow economic growth and political instability in specific regions are the main risks for demand development. The challenging conditions in the offshore and conventional merchant segments are also seen as a potential risk.

In the power generation markets, fragile economic growth and slow decision-making continue to be the primary risks for demand development. Geopolitical tensions and significant currency fluctuations can result in investment decisions being postponed in certain countries. Low oil prices have a similar impact in the oil and gas producing countries. Price pressure resulting from the prevailing competitive environment remains a risk.

Economic and political uncertainty, as well as new emerging technologies and innovations, will challenge current business models and trade patterns in the marine industry. Reduced capital expenditure from oil companies continues to limit offshore investments, and offshore production is facing increasing competition from low cost onshore and shale production. In addition, increasing energy efficiency and the substitution of other energy sources, will challenge crude oil demand growth. The enforcement of environmental regulations and potential new regulations remain as a source of uncertainty. Climate change continues to create pressure for reducing greenhouse gas emissions within the shipping industry.

Wärtsilä places great emphasis on the integration of cyber and physical systems to ensure a holistic security solution is in place for its internal operations and customer offerings. The Wärtsilä cyber security team conducts operations, governance and compliance activities in line with IEC62443 and ISO 27k. Activities include cyber assurance, risk management, detection, securing the software development lifecycle, training, endpoint protection, network security, and cyber advisory services.

The Group is a defendant in a number of legal cases that have arisen out of, or are incidental to, the ordinary course of its business. These lawsuits mainly concern issues such as contractual and other liability, labour relations, property damage, and regulatory matters. The Group receives from time to time claims of different amounts and with varying degrees of substantiation. There is currently one unusually sizeable claim. It is the Group’s policy to provide for amounts related to the claims, as well as for litigation and arbitration matters, when an unfavourable outcome is probable, and the amount of the loss can be reasonably estimated.

The Risks and risk management section of this Annual Report contains a more detailed description of Wärtsilä’s risks and business uncertainties.

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