“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.”