Wärtsilä Corporation Interim Report

Wärtsilä has announced its interim report, with steady development in the second quarter of 2012.

Second quarter highlights

• Order intake increased 2% to €1,198m (1,170)
• Net sales increased 6% to €1,099m (1,036)
• Operating result €113m or 10.3% of net sales (€117m and 11.3%)
• Earnings per share amounted to €0.38 (0.35)
• Book-to-bill 1.09 (1.13)

Highlights of the review period: January-June 2012

• Order intake increased 7% to €2,308m (2,149)
• Net sales decreased 1% to €2,104m (2,119)
• Operating result €215m, or 10.2% of net sales (€230m and 10.9%)
• At the end of the period the order book totalled €4,515m (3,779), +19%
• Earnings per share amounted to 0.72 euro (0.73)
• Cash flow from operating activities €54 million (84)

"The second quarter marked steady progress for Wärtsilä," said Björn Rosengren, president and CEO. "Our net sales grew by 6% and our profitability was 10.3%. We continue to work towards reaching our growth and profitability targets this year. I am pleased with the good development within Ship Power’s specialised vessel segments, which compensated for Power Plants’ slightly weaker second quarter order intake. Ship Power also received interesting pump, gas and environmental system orders. Services development remained rather steady, despite the tough market conditions in the merchant vessel markets.

To further strengthen our competitiveness and to serve our customers more effectively, we have decided to change the organisational set up within Ship Power and Wärtsilä Industrial Operations (WIO). The main change will be that the product development related to 2-stroke, and the manufacturing and product development related to Propulsion and Electrical & Automation will be transferred from WIO to Ship Power. WIO will be renamed PowerTech and it will continue to serve both market areas of Ship Power and Power Plants. There are no job reductions planned based on this change."

Market outlook

The power generation market is expected to remain active in 2012. The growing emerging markets will continue to invest in new power generation capacity, which will drive demand – especially in the flexible baseload segment. In the OECD countries, there is still pent-up power sector demand, mainly driven by CO2 neutral generation and the ramp down of older, mainly coal-based, generation.

The outlook for overall vessel contracting activity during 2012 is slightly negative, with full year contracting expected to be somewhat lower than contracting during 2011. The decrease is largely driven by the low contracting levels in traditional merchant segments. Robust contracting activity, in line with activity levels seen during 2011 and so far in 2012, is expected for the offshore, gas carrier, and other specialised vessel markets. Interesting opportunities are seen in the following areas: efficiency improvement, gas as a fuel, and environmental solutions. These are now central issues in many newbuilding discussions and are expected to grow in importance going forward.

Despite the slightly improved market situation in the review period, some uncertainties remain in the service market. The merchant marine segments are still expected to be under pressure, as overcapacity in the market continues to impact the potential for services in this area. Development in the active installed base is also expected to be moderate, with continued scrapping, layups, slow steaming, and low utilisation of vessels in the merchant segments. The power plant service market is expected to develop steadily.

Wärtsilä’s prospects for 2012 reiterated

Wärtsilä expects its net sales for 2012 to grow by 5-10% and its operational profitability (EBIT% before non-recurring items) to be 10-11%.

Disclosure procedure

Wärtsilä Corporation follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority. This stock exchange release is a summary of Wärtsilä Corporation’s Interim Report January-June 2012. The complete report is attached to this release in pdf format and is also available on Wärtsilä’s website.