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Wärtsilä Corporation

Wärtsilä Corporation#

Financial Statements Bulletin 2018

“2018 was marked by positive order intake development resulting from improved demand in the marine newbuild and service markets.”

Jaakko Eskola, President & CEO

Financial Statements Bulletin 2018 PDF

Growth in order intake and net sales

“2018 was marked by positive order intake development resulting from improved demand in the marine newbuild and service markets. Environmental considerations emerged as a key theme in the marine markets, as customers sought to prepare themselves for compliance with the IMO 2020 global sulphur cap. For Wärtsilä, this trend was reflected in a significant growth in demand for exhaust gas cleaning systems. Another contributor to the increase in order intake was the high level of activity in the cruise and ferry markets, as well as our customers’ interest in long-term service agreements. Energy Solutions' order intake was, on the other hand, lower than for the previous year, mainly due to slower decision-making among our customers. However, the long-term trends of growth in the emerging markets, and the shift towards flexible capacity to accommodate renewables, remain supportive of demand going forward.

Net sales for the year developed well, thanks to higher volumes in both Marine and Energy Solutions. Despite the pick-up in Services’ net sales toward the end of the year, the group sales mix favoured equipment deliveries, which, together with increased costs related to research, development and digitalisation, burdened profitability. To stay competitive in the current market environment, we must initiate actions to increase customer value and secure profitable growth. This includes increasing the focus on targeted sales activities, developing the agreements-based business, reviewing our cost structure, as well as optimising the business portfolio.

The marine and energy industries are being transformed through increasing connectivity, new business models, and the shift to a sustainable, low emissions economy. We are committed to supporting our customers by taking a leading role in this transition. Among the key milestones for the year was the introduction of new solutions for the integration of renewables and energy storage, as well as the successful testing of our automated dock-to-dock concept, and a project to develop an autonomously navigated harbour tug. The acquisition of Transas further strengthened our offering of smart solutions for the marine industry, and was important in this development work. Furthermore, our investment to build a Smart Technology Hub in Vaasa will speed up the time to market of new customer solutions.

We enter the year with a new organisation formed around two business areas that incorporate both newbuild activities and services. With this structure our primary focus is to better meet customer needs throughout the full lifecycle, and thus enhance the value we deliver. In so doing, we are supporting the progression towards our long-term target of profitable growth. In 2019, we expect market conditions to remain similar to those seen in the previous year. The pace of recovery in the marine markets is anticipated to remain slow, while the need for flexible power capacity supports the demand outlook in the energy markets. The competitive environment and geopolitical tension remain a concern. Our order book for this year’s deliveries is healthy, with deliveries again expected to be concentrated to the latter part of the year. The successful implementation of planned actions to ensure sustainable savings and increased customer value will be central to the development of our profitability in 2019.”
Signature

Jaakko Eskola

President & CEO

Wärtsilä’s prospects

The demand for Wärtsilä’s services and solutions in 2019 is expected to be in line with the previous year. Demand by business area is anticipated to be as follows:
  • Solid in Wärtsilä Energy Business. The global shift towards renewable energy sources and increasing electricity demand in the emerging markets create a need for distributed and flexible power capacity.
  • Solid in Wärtsilä Marine Business. Wärtsilä’s demand outlook is supported by its extensive product and service offering and broad segment exposure, which compensates for the slow pace of recovery in vessel contracting.
Wärtsilä’s current order book for 2019 deliveries is EUR 3,696 million (3,207). Deliveries are expected to be concentrated to the latter part of the year.

Fourth quarter highlights

  • Order intake increased 24% to EUR 1,874 million (1,514)
  • Net sales increased 6% to EUR 1,532 million (1,441)
  • Book-to-bill reached 1.22 (1.05)
  • Comparable operating result decreased to EUR 226 million (241), which represents 14.7% of net sales (16.7).
    The comparable operating result includes a provision amounting to approximately EUR 70 million to cover cost overruns and project delays in two nuclear power plant back-up genset projects, as well as a capital gain of EUR 27 million from the divestment of the pumps business and the release of an EUR 21 million provision related to ongoing long-term incentive schemes.
  • Earnings per share amounted to 0.25 euro (0.28)
  • Cash flow from operating activities increased to EUR 349 million (276)

Highlights of the review period January–December 2018

  • Order intake increased 12% to EUR 6,307 million (5,644)
  • Order book at the end of the period increased 21% to EUR 6,166 million (5,100)
  • Net sales increased 5% to EUR 5,174 million (4,911)
  • Book-to-bill reached 1.22 (1.15)
  • Comparable operating result was stable at EUR 577 million (576), which represents 11.2% of net sales (11.7)
  • Earnings per share increased to 0.65 euro (0.63)
  • Cash flow from operating activities increased to EUR 470 million (430)
  • Dividend proposal 0.48 euro per share (0.46)

As of 1 January 2018, Wärtsilä has adopted the IFRS 15 Revenue from Contracts with Customers standard by using the full retrospective method. This Financial Statements Bulletin is published according to the new standard and comparison periods for 2017, including the opening balance sheet, have been restated accordingly. Wärtsilä has also restated the 2017 figures for Marine Solutions and Services, due to an internal transfer of certain service activities. This transfer has no impact on Group totals.

The share issue without payment approved by Wärtsilä’s Annual General Meeting on 8 March 2018 increased the total number of Wärtsilä shares to 591,723,390. The share related figures in the comparison periods have been adjusted to reflect the increased number of shares.

Key figures
MEUR 10-12/2018 Restated
10-12/2017
Change 1-12/2018 Restated
1-12/2017
Change
Order intake 1 874 1 514 24% 6 307 5 644 12%
Order book at the end of the period 6 166 5 100 21%
Net sales 1 532 1 441 6% 5 174 4 911 5%
Operating result1 206 222 -7% 543 538 1%
% of net sales 13.4 15.4 10.5 11.0
Comparable operating result 226 241 -6% 577 576 0%
% of net sales 14.7 16.7 11.2 11.7
Comparable adjusted EBITA 237 250 -5% 621 612 1%
% of net sales 15.4 17.4 12.0 12.5
Profit before taxes 194 211 -8% 502 491 2%
Earnings/share, EUR 0.25 0.28 0.65 0.63
Cash flow from operating activities 349 276 470 430
Net interest-bearing debt at the end of the period 333 234
Gross capital expenditure 306 255
Gearing 0.14 0.10
¹Items affecting comparability in the fourth quarter of 2018 included costs related to restructuring programmes and acquisitions of EUR 20 million (19). During the review period January-December 2018 restructuring and acquisition related costs amounted to EUR 35 million (37).

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