Wärtsilä Expects 5% Sales Growth

By Michelle Howard October 23, 2014

Wärtsilä announced its third quarter results, reporting that it sees good development in order intake and profitability.

According to Wärtsilä, third quarter highlights include

Order intake increased 21% to €1,309 million (1,086)
Net sales decreased 7% to €1,117 million (1,199)
Book-to-bill 1.17 (0.91)
Operating result before non-recurring items €142 million, or 12.7% of net sales (€148 million or 12.3%)
Earnings per share €0.43 (0.48)
Cash flow from operating activities €68 million (139)

Highlights of the review period January-September 2014

Order intake increased 2% to €3,562 million (3,487)
Net sales increased 1% to €3,230 million (3,203)
Book-to-bill 1.10 (1.09)
Operating result before non-recurring items €373 million, or 11.5% of net sales (€346 million or 10.8%)
Earnings per share €1.16 (1.24)
Cash flow from operating activities €240 million (261)
Order book at the end of the period increased 5% to €4,674 million (4,455)

Wärtsilä estimates its profitability for 2014 (EBIT% before non-recurring items) to be 11.5-12%. Previously profitability was expected to be around 11.5%. Wärtsilä reiterated that its expectation that net sales will grow by around 5%.

Bjӧrn Rosengren, president and CEO, said, "The third quarter was characterized by the strong development in order intake. In the power generation markets customers are gradually beginning to commit to investments. The improved activity levels especially for smaller orders, combined with the 139 MW order we received from Mexico and the 112 MW order from North Dakota, resulted in a 47% increase in Power Plants' order intake. In the marine markets the recent activity in LNG and LPG carriers has supported the ordering of gas handling systems. The 24% increase in Ship Power's order intake was further enhanced by good activity in the cruise markets. I am confident that the positive trend in order development will continue during the upcoming quarter.

“Power generation markets closely follow global macro-economic development. Based on the difficult market situation seen during the three first quarters of the year and the revised GDP forecasts for 2014, the overall market for liquid and gas fuelled power generation is expected to continue to be challenging. Ordering remains active in emerging markets, which continue to invest in new power generation capacity. Furthermore, the current market situation is creating pent-up demand in certain emerging countries where investment decisions have been delayed. In the OECD countries demand is mainly driven by CO2 neutral generation and the ramp down of older, largely coal-based generation.

“Overcapacity continues to affect the demand for traditional merchant vessels. Vessels are being scrapped at a younger age, which along with a more balanced fleet growth supports a gradual recovery in the freight market. In the offshore segment, the contracting of drilling units and certain support vessels is expected to continue to be at a lower level. The outlook for gas carriers remains positive, although the recent strong ordering volumes may affect activity in the short term. The importance of fuel efficiency and environmental regulations are clearly visible. The regulatory environment is also driving interest in gas as a marine fuel in the wider marine markets, a trend further strengthened in the U.S. by favorable pricing.

“The overall service market outlook remains stable, with positive developments in selected regions. An increase in the installed base offsets the slower service demand for older installations and the continued emphasis of merchant marine customers on reducing operating expenses. The outlook for services to offshore and gas fuelled vessels remains favorable. Demand for services in the power plant segment continues to be good. The interest in service agreements is strong in both of Wärtsilä's end markets. From a regional perspective, the outlook for the Middle East and Asia is positive, and is supported by interest in power plant related services. The outlook is also good in the Americas and in Africa.

“Third quarter net sales and profitability developed in line with our expectations. I am especially pleased that Services' net sales grew by 9%, which shows that our focus on growth is paying off. Profitability reached 12.7% partly thanks to the ongoing efficiency program, which resulted in savings of €10 million in the third quarter. Profitability has developed well thus far in 2014, reaching 11.5% for the period January-September, and consequently we raise our full year profitability guidance to 11.5-12%."