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Wärtsilä Corporation

Wärtsilä Corporation

Financial Statements Bulletin 2019

“The year 2019 was characterised by a difficult demand environment and poor financial performance. While we remain cautious on the near-term demand outlook, we see longer-term opportunities related to the shift to low-carbon energy sources in both our end-markets.”

Jaakko Eskola, President & CEO

Financial Statements Bulletin 2019 PDF

2019 – A year marked by difficult market conditions and project related challenges

“The year 2019 was characterised by a difficult demand environment and poor financial performance. Although the increase in both marine equipment deliveries and service volumes resulted in stable net sales for the group, our operating result was well below the previous year. Performance was weakened in the second half of the year by cost overruns in a handful of complex marine and energy projects, which were caused by inaccurate assumptions in cost estimates, insufficient risk identification, and supplier related challenges. The decline in energy deliveries and the impact of the Industrial Union’s three-day strike in Finland during December further burdened our operating result.

Order intake for both marine and energy related equipment picked up in the fourth quarter, but was not sufficient to raise the order level to that of the previous year. In the marine markets, vessel contracting fell short of initial forecasts, largely due to concerns related to the implications of geopolitical developments on seaborne trade. Furthermore, the demand for scrubbers declined from exceptionally high levels in the previous year, as a result of uncertainty related to the price and availability of bunker fuels. In this context, we can be pleased with the level of equipment orders received in the Marine Business, which was supported by continued activity in specialised vessels, such as cruise ships and gas carriers. In the energy sector, the demand for new, gas and liquid fuelled power generation capacity declined significantly during the year, as macroeconomic uncertainty and the ongoing energy transition delayed investment decisions. While equipment orders in the Energy Business were well below that of the previous year, energy services orders developed well, thanks to a record high order intake for service agreements.

The business environment is expected to continue to be challenging during the upcoming year. For this reason, we remain cautious on the demand outlook. Our focus will be on improving operational efficiency and on optimising our portfolio, with the aim of mitigating the near-term headwinds related to pricing and mix to the extent possible. Delivery of the projects affected by cost overruns will also weigh on our performance. However, I am confident that the steps we have taken to tighten controls on risk analysis and technical assessments, as well as to strengthen our project management organisation, will prevent similar issues from occurring in future projects.

Looking further ahead, we see energy production and marine transport being greatly affected by the need to improve their environmental footprint. Wärtsilä, with its broad offering of flexible technologies and strong in-house capabilities, has the solutions needed to enable the shift to low-carbon energy sources in both our end-markets. Furthermore, we will continue to emphasise the strengthening of lifecycle partnerships with our customers to support progression towards our long-term target of profitable growth.”

Jaakko Eskola

President & CEO

Wärtsilä's prospects

The demand for Wärtsilä’s services and solutions in the coming 12 months is expected to be somewhat below that of the previous 12 months. Demand by business area is anticipated to be as follows:
  • Soft in Wärtsilä Marine Business, as low vessel contracting is expected to affect equipment ordering activity.
  • Soft in Wärtsilä Energy Business. While some recovery in equipment order intake is anticipated, market conditions remain challenging.
Wärtsilä’s current order book for 2020 deliveries is EUR 3,571 million (3,696), comprised mainly of equipment deliveries.


Highlights of the fourth quarter 2019

  • Order intake decreased 17% to EUR 1,555 million (1,874) 
  • Net sales increased 10% to EUR 1,684 million (1,532) 
  • Book-to-bill amounted to 0.92 (1.22) 
  • Comparable operating result decreased to EUR 202 million (226), which represents 12.0% of net sales (14.7)
  • Earnings per share decreased to 0.17 euro (0.25) 
  • Cash flow from operating activities decreased to EUR 295 million (349) 

Highlights of the review period January-December 2019

  • Order intake decreased 16% to EUR 5,327 million (6,307) 
  • Order book at the end of the period decreased 5% to EUR 5,878 million (6,166) 
  • Net sales were stable at EUR 5,170 million (5,174) 
  • Book-to-bill amounted to 1.03 (1.22) 
  • Comparable operating result decreased to EUR 457 million (577), which represents 8.8% of net sales (11.2) 
  • Earnings per share decreased to 0.37 euro (0.65) 
  • Cash flow from operating activities decreased to EUR 232 million (470) 
  • Dividend proposal 0.48 euro per share (0.48) 

The comparable operating result includes charges related to project cost overruns in the Marine and Energy businesses, which amounted to EUR 68 million in the fourth quarter and EUR 152 million for the full year 2019. 

Key figures
MEUR 10-12/2019 10-12/2018 Change 1-12/2019 1-12/2018 Change
Order intake 1 555 1 874 -17% 5 327 6 307 -16%
of which services 722 700 3% 2 676 2 598 3%
Order book, end of period 5 878 6 166 -5%
Net sales 1 684 1 532 10% 5 170 5 174 -0%
of which services 740 731 1% 2 502 2 419 3%
Book-to-bill 0.92 1.22 1.03 1.22
Operating result 164 206 -20% 362 543 -33%
% of net sales 9.7 13.4 7.0 10.5
Comparable operating result1 202 226 -10% 457 577 -21%
% of net sales 12.0 14.7 8.8 11.2
Comparable adjusted EBITA2 213 237 -10% 498 621 -20%
% of net sales 12.6 15.4 9.6 12.0
Profit before taxes 153 194 -21% 315 502 -37%
Earnings/share, EUR 0.17 0.25 0.37 0.65
Cash flow from operating activities 295 349 232 470
Net interest-bearing debt, end of period3 726 333
Gross capital expenditure 122 306
Gearing3 0.30 0.14
Solvency, % 40.8 44.4
Personnel, end of period 18 795 19 294 -3%
1Items affecting comparability in the fourth quarter of 2019 included costs of EUR 39 million (20). During January-December, items affecting comparability amounted to EUR 95 million (35).
2Comparable adjusted EBITA excludes items affecting comparability and purchase price allocation amortisation.
3The increase in net interest-bearing debt is partly related to the inclusion of lease liabilities on the balance sheet as a result of the new IFRS 16 standard.

As of the first quarter of 2019, Wärtsilä’s financial reporting has been amended to reflect its new organisational structure. Financial reporting for 2018 has been adjusted to reflect this change. The two business areas, Wärtsilä Marine Business and Wärtsilä Energy Business, constitute the reportable segments. Wärtsilä will additionally report the services related order intake and net sales for the two segments. In Wärtsilä Marine Business, order intake and net sales for retrofit scrubber projects have been transferred from services to new equipment. The comparison figures have been adjusted accordingly.

Wärtsilä presents certain alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definition of these alternative performance measures is presented in the calculation formulas of financial ratios at the end of this report.


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