ALL TIME HIGH NET SALES AND OPERATING PROFIT, STRONG CASH FLOW
FOURTH QUARTER HIGHLIGHTS
- Strong net sales EUR 1,519 million (1,530)
- All time high profitability 14.4 % of net sales (12.9). Operating result (before nonrecurring items) grew to EUR 219 million (197). EUR 40 million of nonrecurring expenses related to restructuring measures recognised
- Earnings per share excluding nonrecurring items amounted to 1.48 (1.46)
- Order intake at last year’s level, EUR 823 million (823). Recovery in Power Plants orders and signs of recovery in offshore. Services continued strong.
- Adjustment of production capacity to lower order intake was accelerated
- Cash flow from operating activities EUR 207 million (23)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-DECEMBER 2009
- Strong year, net sales grew 14%, to EUR 5,260 million (4,612),
- Profitability at record level, 12.1% of net sales (11.4). Operating result before nonrecurring restructuring items grew to EUR 638 million (525). Including the restructuring items, the operating result totalled EUR 592 million, 11.2% of net sales.
- Earnings per share excluding nonrecurring items amounted to 4.30 euros (3.88)
- Strong cash flow from operating activities EUR 349 million (278)
- Order intake EUR 3,291 million (5,573), a decrease of 41%
- Order book total EUR 4,491 million (6,883), a decrease of 35%
- Materialised order cancellations totalled EUR 410 million
- Dividend proposal 1.75 euros/share
OLE JOHANSSON, PRESIDENT AND CEO:
“The year 2009 was very successful for Wärtsilä in many ways. Group net sales grew by 14%, coupled with an all time high operating profit. The demand for power plants continued on a healthy level and the Services business maintained its volumes in spite of significant lay ups of vessels. The global recession of the marine market was reflected as low ordering activity and cancellations in the Ship Power business. While the standstill of new shipbuilding orders at large is expected to continue for another two years, first signs of recovery can be seen in some Offshore and Special vessel segments. Wärtsilä’s activity in all major segments of shipping is a valuable element of future competitiveness. The concentration of shipbuilding activity to Asia, particularly to China is expected to continue. This is the basis for the capacity adjustments within Wärtsilä Ship Power and Industrial operations that were initiated during 2009 and early 2010. With power plant demand continuing at a healthy level, opportunities in Services, operations and manufacturing adjusted to the changing global markets and with continued focus on innovation, Wärtsilä is well positioned for the year 2010 and beyond“.
WÄRTSILÄ’S PROSPECTS FOR 2010
Due to the weakness of the shipbuilding sector we expect net sales to decline by 10-20 percent in 2010. As a result of a stable service business, good demand for power plants and proper adaptation of capacity, our operational profitability (EBIT% before nonrecurring items) should be between 9-10 %, well within the upper end of our long-term target range.
ANALYST AND PRESS CONFERENCE
An analyst and press conference will be held on Thursday 28 January 2010, at 10.45 a.m. Finnish time (8.45 a.m. UK time), at the Wärtsilä headquarters in Helsinki, Finland.
To participate in the teleconference please call: +44 (0)20 7162 0125 and enter the Conference ID: 854586. If you want to ask questions during the teleconference, press the number 1 on your phone to register for a question and the # -key to withdraw a question. The event title for the call is: Annual Results. Please be ready to state your details and the name of the conference to the operator. If problems occur, please press the *-key followed by the 0-key. We would recommend that you would register to the conference in advance at the following address: https://eventreg2.conferencing.com/webportal3/reg.html?Acc=158744&Conf=200493.
An on-demand version of the webcast will be available on the company website later the same day.
Wärtsilä in brief
Wärtsilä is a global leader in complete lifecycle power solutions for the marine and energy markets. By emphasising technological innovation and total efficiency, Wärtsilä maximises the environmental and economic performance of the vessels and power plants of its customers. In 2009, Wärtsilä’s net sales totalled EUR 5.3 billion with more than 18,000 employees. The company has operations in 160 locations in 70 countries around the world. Wärtsilä is listed on the NASDAQ OMX Helsinki, Finland.
FINANCIAL STATEMENTS BULLETIN JANUARY-DECEMBER 2009
The annual figures in this financial statements bulletin are audited.
FOURTH QUARTER 10-12/2009 IN BRIEF
|
MEUR |
10-12/2009 |
10-12/2008 |
Change |
|
|
Order intake |
823 |
823 |
0% |
|
|
Net sales |
1 519 |
1 530 |
-1% |
|
|
Operating result (EBIT) before nonrecurring restructuring items |
219 |
197 |
11% |
|
|
% of net sales |
14.4% |
12.9% |
|
|
|
Nonrecurring items |
40 |
|
|
|
|
Operating result |
179 |
|
|
|
|
% of net sales |
11.8% |
|
|
|
|
Profit before taxes |
170 |
183 |
|
|
|
Earnings/share, EUR |
1.48 1) |
1.46 |
|
|
|
Cash flow from operating activities |
207 |
23 |
|
|
1) Earnings/share excluding nonrecurring items (EPS including nonrecurring items total EUR 1.17)
REVIEW PERIOD JANUARY-DECEMBER 2009 IN BRIEF
|
MEUR |
1-12/2009 |
1-12/2008 |
Change |
|
Order intake |
3 291 |
5 573 |
-41% |
|
Order book at the end of the period |
4491 1) |
6883 |
-35% |
|
Net sales |
5 260 |
4 612 |
14% |
|
Operating result (EBIT) before nonrecurring restructuring items |
638 |
525 |
21% |
|
% of net sales |
12.1% |
11.4% |
|
|
Nonrecurring items |
46 |
|
|
|
Operating result |
592 |
|
|
|
% of net sales |
11.2% |
|
|
|
Profit before taxes |
558 |
516 |
8% |
|
Earnings/share, EUR |
4.30 2) |
3.88 |
|
|
Cash flow from operating activities |
349 |
278 |
|
|
Interest-bearing net debt |
|
|
|
|
at the end of the period |
414 |
455 |
|
|
Gross capital expenditure |
152 |
366 |
|
1) Cancellations amounting to EUR 410 million have been eliminated form the order book during the review period January-December 2009.
2) Earnings/share excluding nonrecurring items (EPS including nonrecurring items total EUR 3.94)
MARKET DEVELOPMENT
CONTINUED WEAKNESS IN THE SHIP POWER MARKET
In 2009, only 400 new ships were ordered, which is less than 10% of average new orders during the all time high years. The first half of the year was particularly difficult, an environment of oversupply within the major vessel segments prevailed throughout the year. In the latter part of the year market activity picked up somewhat and a slight recovery was seen. Project financing still seems to remain the most important factor in many new investments, and this can be seen for example in offshore projects where there has not yet been a recovery, despite a surge in the price of oil. The strong and on-going recession in the shipping and shipbuilding industry has left its marks on the market, with both freight rates and new build prices at very low levels. Cancellations and rearrangements of existing orders will continue.
Ship Power geographical markets
In 2009, China secured approximately 50% (39) of global new building orders in terms of number of vessels, followed by Korea with approximately 30% (29) of the orders. China’s gain of market share continues to be at the expense of Japan 2% (16) and Europe 9% (10). In terms of Dead Weight Tons (DWT), China and Korea each secured around 45% of the global contracted volume. Once the broader recovery commences, the Asian shipbuilding market is expected to emerge even stronger than earlier. The dominance will grow in all areas, including the more specialised vessel segments.
Ship Power market shares
Wärtsilä’s market share in medium speed main engines increased from 31% at the end of the previous quarter to 36%. The company’s market share in low speed main engines remained stable at 12% (13). In auxiliary engines the market shares decreased to 2% (4). Market shares have become more sensitive to individual orders since the total contracting volume is low.
POWER PLANTS MARKETS RECOVERED SLIGHTLY BY THE END OF THE YEAR
In 2009, demand for power plants was at a good level and offering activity remained high. Ordering activity was hampered by difficulties in arranging financing and customer decision-making processes were slow. Ordering activity improved in the fourth quarter, due mainly to the improved situation in the financial markets.
Power Plants market shares
According to statistics compiled by Diesel and Gas Turbine magazine, the global market for oil and gas power plants in Wärtsilä’s power range declined to 11,570 MW (20,980) between June 2008 and May 2009. The market for gas power plants, including both reciprocating engines and gas turbines, declined to 7,090 MW (15,630), Wärtsilä’s share of the market being 13% (8). The market for heavy fuel oil plants decreased to 3,430 MW (4,050), Wärtsilä’s share being 46% (49). In light fuel oil plants the market decreased to 1.050 MW (1,300) and Wärtsilä’s market share was 3% (20). For Wärtsilä the relevant markets for light fuel oil power plants are those running on liquid bio-fuels where hardly any new plants were ordered.
SERVICES BUSINESS STABLE DESPITE CHALLENGING MARINE MARKET
The economic crisis has affected customers’ businesses, cash flow and investment levels. Marine customers have been especially hit and this has also impacted the maintenance of their installations, especially in the Merchant vessel segment. However, although approximately 10% of the total vessel fleet is laid-up and the active engine base is underutilised, the medium-speed engine base has largely maintained its planned maintenance schedules. In some market segments, fuel conversions, retrofits or other larger investments have been postponed while customers focus on essential repairs and maintenance. Power plant installations continue to run at high levels with a stable demand for maintenance.
Wärtsilä’s installed engine base in the Ship Power and Power Plant markets totals over 160,000 MW and consists of thousands of installations distributed throughout the world. Both end markets consist of several customer segments for Services, and Wärtsilä’s portfolio is the broadest in the market. These factors limit the impacts of fluctuations in any individual market or customer segment.
ORDER INTAKE
The Group order intake for the fourth quarter was at the same level as in the corresponding period last year, and totalled EUR 823 million (823).
The order intake for Ship Power totalled EUR 54 million (152), 64% below the corresponding period last year. The fourth quarter order intake was 21% lower than in the third quarter of 2009 (EUR 68 million in the third quarter of 2009). The order intake for Power Plants in the fourth quarter totalled EUR 300 million (263), which was 14% higher than for the corresponding period last year. The order intake was 77% higher than in the previous quarter. This was mainly due to the improved situation in the financial markets. During the quarter the largest oil-fired power plant orders were those received from Greece and Kenya. During the fourth quarter Wärtsilä was contracted to supply a 170 MW gas-fired power plant to Texas, USA. The power plant is to be located close to significant wind farm generation, and will serve to stabilise the grid when the output from the wind farms change unexpectedly because of weather changes. Wärtsilä also received several orders for gas-fired power plants to Turkey during the quarter.
Order intake for the Services business totalled EUR 470 million (410) in the fourth quarter, a growth of 15% compared to the corresponding period 2008. Compared to the third quarter order intake decreased by 3% (EUR 483 million in the third quarter of 2009). During the quarter an operation & maintenance agreement was signed for a 160 MW coal plant located in India supplied by a third party. In December, a major 5-year agreement with Maersk LNG for five LNG vessels equipped with Wärtsilä 50DF dual-fuel engines.
Wärtsilä’s order intake for the review period January-December 2009 totalled EUR 3,291 million (5,573), a decrease of 41%. Wärtsilä Ship Power’s order intake for the review period was EUR 317 million (1,826), a decrease of 83% from the corresponding period last year. The main part of the year reflected the very difficult circumstances in the market. The Merchant customer segment represented 36%, Offshore 17%, Navy 16% and Cruise & Ferry 15% of total orders received in Ship Power during the review period.
For the review period January-December 2009, the Power Plants order intake totalled EUR 1,048 million (1,883), a 44% decrease compared to last year. Ordering activity was low during the first three quarters of the review period due to the financial crisis but improved during the fourth quarter. Wärtsilä Power Plants’ order intake for the review period is the third highest order intake in the business’ history, which is notable considering the challenging market environment.
Services’ order intake for the review period January-December totalled EUR 1,917 million (1,858). During the review period Wärtsilä Services signed several operations and maintenance contracts in Brazil, Pakistan and the Philippines among others.
ORDER BOOK
At the end of the review period Wärtsilä’s total order book stood at EUR 4,491 million (6,883), a decrease of 35%.
The Ship Power order book stood at EUR 2,553 million (4,486), -43%. During the review period January-December 2009, cancellations of EUR 410 million materialised and were deducted from the order book. The cancellations were mainly within the Merchant and Offshore segments. Wärtsilä sees a cancellation risk in the year-end order book of approximately EUR 500 million (EUR 800 million at the end of 2008).
At the end of the review period the Power Plants order book amounted to EUR 1,362 million (1,949), which is 30% lower than at the same date last year.
The Services order book totalled EUR 576 million (445) at the end of the review period, an increase of 29%.
|
Fourth quarter order intake by business |
|
|
|
|
MEUR |
10-12/2009 |
10-12/2008 |
Change |
|
Ship Power |
54 |
152 |
-64% |
|
Power Plants |
300 |
263 |
14% |
|
Services |
470 |
410 |
15% |
|
Order intake, total |
823 |
823 |
0% |
|
Order intake Power Plants |
|
|
|
|
MW |
10-12/2009 |
10-12/2008 |
Change |
|
Oil |
293 |
290 |
1% |
|
Gas |
332 |
207 |
60% |
|
Renewable fuels |
0 |
0 |
0% |
|
Order intake for the review period by business |
|
|
|
|
MEUR |
1-12/2009 |
1-12/2008 |
Change |
|
Ship Power |
317 |
1 826 |
-83% |
|
Power Plants |
1 048 |
1 883 |
-44% |
|
Services |
1 917 |
1 858 |
3% |
|
Order intake, total |
3 291 |
5 573 |
-41% |
|
Order intake Power Plants |
|
|
|
|
MW |
1-12/2009 |
1-12/2008 |
Change |
|
Oil |
1 172 |
2 029 |
-42% |
|
Gas |
800 |
1 240 |
-35% |
|
Renewable fuels |
35 |
80 |
-56% |
|
Order book by business |
|
|
|
|
MEUR |
31 Dec. 2009 |
31 Dec. 2008 |
Change |
|
Ship Power |
2 553 |
4 486 |
-43% |
|
Power Plants |
1 362 |
1 949 |
-30% |
|
Services |
576 |
445 |
29% |
|
Order book, total |
4491*) |
6 883 |
-35% |
*) Cancellations amounting to EUR 410 million have been eliminated form the order book during the review period January-December 2009.
STRONG SALES GROWTH
During the fourth quarter, Wärtsilä’s net sales totalled EUR 1,519 million (1,530). Net sales for Ship Power totalled EUR 538 million (579), a decrease of 7%. Power Plants’ net sales for the fourth quarter totalled 476 million (464), +3%. In Services the fourth quarter of 2009 represented an all time high quarter and amounted to EUR 504 million (495), +2%.
Wärtsilä’s net sales for January-December 2009 grew by 14% and totalled EUR 5,260 million (4,612). Ship Power’s net sales grew 15% to EUR 1,767 million (1,531). Net Sales for Power Plants totalled EUR 1,645 million (1,261), a growth of 30%. Net sales from the Services business remained stable and on a good level amounting to EUR 1,830 million (1,830). Net sales were evenly distributed between the businesses during the review period, Ship Power accounted for 34%, Power Plants for 31% and Services for 35% of the total net sales.
|
Fourth quarter net sales by business |
|
|
|
|
MEUR |
10-12/2009 |
10-12/2008 |
Change |
|
Ship Power |
538 |
579 |
-7% |
|
Power Plants |
476 |
464 |
3% |
|
Services |
504 |
495 |
2% |
|
Net sales, total |
1 519 |
1 530 |
-1% |
|
Net sales for the review period by business |
|
|
|
|
MEUR |
1-12/2009 |
1-12/2008 |
Change |
|
Ship Power |
1 767 |
1 531 |
15% |
|
Power Plants |
1 645 |
1 261 |
30% |
|
Services |
1 830 |
1 830 |
0% |
|
Net sales, total |
5 260 |
4 612 |
14% |
PROFITABILITY IMPROVED CONSIDERABLY
The fourth quarter operating result before nonrecurring expenses was EUR 219 million (197), 14.4% of net sales (12.9). For the review period January-December 2009, the operating result before nonrecurring expenses rose to an all time high EUR 638 million (525), 12.1% of net sales (11.4). Including the nonrecurring expenses, the operating result was EUR 592 million or 11.2% of net sales. Wärtsilä recognised EUR 46 million of nonrecurring expenses related to the restructuring measures during the year.
Financial items amounted to EUR -34 million (-9). Net interest totalled EUR -17 million (-19). Dividends received totalled EUR 6 million (7). Other financial items include impairment write-offs of non-operating receivables of EUR 10 million and the interest rate differences on derivatives amounted to EUR 1 million (10). Profit before taxes amounted to EUR 558 million (516). Taxes in the reporting period amounted to EUR 161 million (127). The profit for the financial period amounted to EUR 396 million (389). Earnings per share were EUR 3.94 (3.88). Return on Investment (ROI) was 29.9% (32). Return on equity (ROE) was 29.2% (31).
BALANCE SHEET, FINANCING AND CASH FLOW
Wärtsilä’s fourth quarter cash flow from operating activities was strong and totalled EUR 207 million (23). For January-December 2009 the cash flow from operating activities was EUR 349 million (278). Working capital in the cash flow decreased by EUR 25 million during the fourth quarter. Net working capital at the end of the period totalled EUR 482 million (267). Advances received at the end of the period totalled EUR 879 million (1,243). Net working capital has been exceptionally low during the past years due to the high amount of advances received. Cash and cash equivalents at the end of the period amounted to EUR 244 million (197).
Net interest-bearing loan capital totalled EUR 414 million (455). Wärtsilä had interest bearing loans totalling EUR 664 million (664) at the end of December 2009. The existing funding programmes include long-term loans of EUR 591 million, unutilised Committed Revolving Credit Facilities totalling EUR 555 million and Finnish Commercial Paper programmes totalling EUR 700 million. The total amount of short-term debt maturing within the next 12 months is EUR 73 million.
The solvency ratio was 40.0% (34.3) and gearing was 0.28 (0.39).
HOLDINGS
Wärtsilä owns 7,270,350 B shares in Assa Abloy, or 2.0% of the total. This holding has been booked in the balance sheet at its market value at the end of the reporting period, EUR 98 million.
CAPITAL EXPENDITURE
Gross capital expenditure in the review period totalled EUR 152 million (366), which comprised EUR 16 million (198) in acquisitions and investments in securities, and EUR 136 million (168) in production and information technology investments. Depreciation and amortisations for the review period amounted to EUR 165 million (99), of which EUR 40 million is related to the restructuring measures announced at the beginning of 2010.
Maintenance capital expenditure for 2010 will be in line with or below depreciation. Wärtsilä continues to pursue its strategy to expand the Services offering and network, and any acquisition opportunities in this market may affect total capital expenditure for the year.
STRATEGIC ACQUISITIONS, JOINT VENTURES AND EXPANSION OF THE NETWORK
Wärtsilä continued pursuing its strategy of expanding its network with new service facilities in many countries, including Ukraine, Cameroon, Hungary, Chile, Dubai, Russia and Sweden. These facilities provide a good base for future service growth, and expansion the network will continue to be one of Wärtsilä’s strategic focus areas in the future.
In May, Wärtsilä acquired 60% of the shares of Wärtsilä Navim Diesel of Italy, thus increasing its ownership of the company to 100%. Wärtsilä Navim Diesel, which specialises in marine sales and service, has a strong market position, particularly in the Cruise & Ferry segment. The transaction resulted in EUR 8 million of new goodwill.
MANUFACTURING
In April, Wärtsilä, China Shipbuilding Industry Corporation (CSIC) and Mitsubishi Heavy Industries (MHI) inaugurated a jointly owned, low-speed marine engine factory in Qingdao, Shandong Province, China. The joint venture company Qingdao Qiyao Wartsila MHI Linshan Marine Diesel Co. Ltd. (QMD) is owned by CSIC (50%), Wärtsilä Corporation (27%), and MHI (23%).
In May, Wärtsilä and 3. Maj Shipbuilding Industry Ltd. of Croatia signed a ten-year renewal of the existing licence agreement for the marketing, sale, manufacturing and servicing of Wärtsilä low-speed marine diesel engines.
During the second quarter, an important milestone was reached for the Wärtsilä 32 engine with the 6000th engine produced Vaasa, Finland factory.
The newest expansion investment in the Wärtsilä CME Zhenjiang Propeller Co. Ltd joint venture in Zhenjiang, China was concluded and inaugurated in the second quarter according to plan.
The concentration of shipbuilding activity to Asia, particularly to China is expected to continue. This is the basis for the adjustments of capacity within Wärtsilä Industrial operations that were initiated during 2009. At the beginning of the year 2010 a plan was announced to move the main part of the propeller and W20 generating set production to China.
RESEARCH & DEVELOPMENT
During 2009 several R&D milestones were passed. The Hercules-Beta research project proposal was approved by the European Commission in March. Hercules-Beta represents a major international co-operative effort to maximise fuel efficiency while producing ultra-low emissions, and to develop future generations of optimally efficient and clean marine diesel engines.
After performing successfully in a series of tests, the Wärtsilä sulphur oxides (SOx) scrubber was awarded the Sulphur Emission Control Area (SECA) Compliance Certificate during the third quarter, by the classification societies Det Norske Veritas and Germanischer Lloyd.
In the fourth quarter, Wärtsilä extended its dual-fuel technology to the lower power range with the launch of the new environmentally advanced Wärtsilä 20DF engine. The new Wärtsilä 20DF engine is a testimony to Wärtsilä’s ability to successfully utilise gas as a main fuel for marine operations.
The joint development project between Wärtsilä and Mitsubishi Heavy Industries Ltd. to design and develop new small, low-speed marine diesel engines of less than 450 mm cylinder bore, proceeded according to plan. This agreement is an extension of the strategic alliance created by Wärtsilä and Mitsubishi in 2005.
Wärtsilä is one of the three leading companies driving a major national three-year combustion engine research programme in Finland. The initiative has been set up by a wide and cross-functional consortium of Finnish technology companies and leading research institutes. The principle aim of the Future Combustion Engine Power Plant (FCEP) programme is to develop reciprocating engine and related power plant technologies. The aim is to maintain a leading position in global markets while meeting the requirements of tightening environmental legislation.
In 2009, Wärtsilä’s research and development expenses totalled EUR 141 million (121), or 2.7% of net sales.
PERSONNEL
In May 2009, Wärtsilä Ship Power announced that it had initiated the formal process to reduce 400-450 jobs. The negotiations were initiated to adjust to the substantially weakened global marine market situation. The annual savings from these measures will be approximately EUR 30 million. The effect of the savings started to materialise gradually from the second half of 2009, and will take full effect by the end of 2010. In the second quarter Wärtsilä recognised EUR 6 million of nonrecurring expenses in its operating result related to the adjustment measures taken in the Ship Power business. Altogether, Wärtsilä Ship Power employs sales, project management, engineering services and ship design personnel in 30 countries.
As the order book started to diminish also the Industrial Operations commenced personnel reductions in the form of temporary lay-offs and by reducing temporary employment contracts. In January 2010 Wärtsilä announced its plans to adjust to the fundamental changes in the market by reducing its manufacturing capacity. Wärtsilä also plans to move the majority of its propeller production and W20-generating set production to China, close to the main marine markets. In the course of 2010 Wärtsilä plans to reduce approximately 1,400 jobs globally within the Group.
During the review period Wärtsilä’s personnel on average was 18,830 (17,623). At the end of December Wärtsilä had 18,541 (18,812) employees. As the biggest single business, Services had 11,219 employees (11,011) globally.
SUSTAINABLE DEVELOPMENT
At the beginning of 2009, Wärtsilä was for the first time included in the list of the 100 most sustainable companies in the world. The list was published at the World Economic Forum in Davos, Switzerland.
To illustrate its strong commitment to sustainability, Wärtsilä signed the United Nations Global Compact in 2009.
Wärtsilä’s Sustainability Report, which is part of the annual report, is prepared in accordance with the GRI G3 guidelines. It represents a balanced and reasonable view of Wärtsilä’s economic, environmental and social performance. The Sustainability Report is assured.
CHANGES IN MANAGEMENT
The following appointments were made to Wärtsilä Corporation’s Board of Management, with effect from 1 August 2009:
Christoph Vitzthum (40) MSc (Econ.) was appointed Group Vice President, Services.
Vesa Riihimäki (43) MSc (Eng.) was appointed Group Vice President, Power Plants and a member of the Board of Management.
Tage Blomberg, Group Vice President, Services, retired during 2009 in line with his employment contract.
DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING
Wärtsilä’s Annual General Meeting held on 11 March 2009 approved the financial statements and discharged the members of the Board of Directors and the company’s President & CEO from liability for the financial year 2008. The Meeting approved the Board of Directors’ proposal to pay a dividend of EUR 1.50 per share totalling EUR 148 million. Dividends were paid on 23 March 2009.
The Annual General Meeting decided that the Board of Directors shall have six members. The following were elected to the Board: Ms Maarit Aarni-Sirviö, Mr Kaj-Gustaf Bergh, Mr Kari Kauniskangas, Mr Antti Lagerroos, Mr Bertel Langenskiöld and Mr Matti Vuoria.
The firm of authorised public accountants KPMG Oy Ab, was appointed as the company’s auditors.
Organisation of the Board of Directors
The Board of Directors of Wärtsilä Corporation elected Antti Lagerroos as its chairman and Matti Vuoria as the deputy chairman. The Board decided to establish an Audit Committee, a Nomination Committee and a Compensation Committee. The Board appointed from among its members, the following members to the Committees:
Audit Committee:
Antti Lagerroos, chairman
Maarit Aarni-Sirviö
Bertel Langenskiöld
Nomination Committee:
Antti Lagerroos, chairman
Matti Vuoria
Kaj-Gustaf Bergh
Compensation Committee:
Antti Lagerroos, chairman
Matti Vuoria
Bertel Langenskiöld
EVENTS AFTER THE REPORTING PERIOD
On January 19th 2010, Wärtsilä announced its plans to adjust to the fundamental changes in the market by reducing its manufacturing capacity. Wärtsilä also plans to move the majority of its propeller production and W20 generating set production to China, close to the main marine markets. The current propeller manufacturing in Drunen, and the component manufacturing DTS in Zwolle, both in The Netherlands, are planned to be closed. The Wärtsilä 20 generating set production in Vaasa Finland is planned to be closed and moved to China in order to stay competitive in this market.
In the course of 2010 Wärtsilä plans to reduce approximately 1,400 jobs globally within the Group. Of these reductions 570 are planned to be in the Netherlands, where Wärtsilä employs 1,561 people. The remaining reduction will impact various divisions, functions and countries and will be clarified during the first half of this year.
The nonrecurring costs related to the restructuring will be approximately EUR 140 million. This includes non-cash write-offs of approximately EUR 50 million of which EUR 40 million is recognised in 2009. Wärtsilä is looking for an annual cost savings of approximately EUR 80-90 million. The effect of the savings will start to materialise gradually during 2010, and will take full effect in the first half of 2011.
BOARD OF DIRECTOR’S DIVIDEND PROPOSAL
The Board of Directors proposes that a dividend of 1.75 euros per share be paid for the financial year 2009. Wärtsilä’s distributable funds at the end of the period totalled EUR 585,892,877.82. The Annual Report 2009, including the financial review and the review by the Board of Directors, will be available on the company website www.wartsila.com on during week 6.
RISKS AND BUSINESS UNCERTAINTIES
Due to the uncertainties within the shipping industry, the main risk in Ship Power remains the slippage of ship yard delivery schedules and it seems probable that some orders will be rescheduled or cancelled. As a result of this development, Wärtsilä sees a cancellation risk of approximately EUR 500 million.
In the Power Plant business, the impact from the financial crisis can mainly be seen in the timing of larger projects.
In Services, the biggest risks still relate to the further deterioration of the shipping industry leading to a larger scale lay-up of ships, which could reduce demand for maintenance and services within this segment.
The current market situation has impacted the entire supply chain during 2009 and Wärtsilä is continuously monitoring its supplier base. The risk level has not significantly changed during the year.
The annual report for 2009 contains a thorough description of Wärtsilä’s risks and risk management.
MARKET OUTLOOK
At the end of the year, signs of easing in the financing of new projects have spurred project development, especially in the Offshore segment. The gradual normalisation of the financial markets is also expected to result in revitalisation in investments for various special vessels. These vessel categories have not faced any significant over supply issues during recent years. Some recovery in new ordering of Offshore and Special vessels is expected in the first two quarters of 2010. In the Merchant segment, demand for the biggest vessel categories is expected to remain low for another two years. The market is still burdened by overcapacity and finance related issues. It is expected that more cancellations, swaps and splits of old orders will be seen, all of which will hamper new ordering activity.
Even though markets seem to have bottomed out, it is clear that current overcapacity and prevailing conditions will lead to more intense competition and price pressure among shipbuilding suppliers. Wärtsilä Ship Power estimates order intake in 2010 to be moderately better than in 2009.
In 2010, the power generation market is expected to recover gradually, along with the improvements in the financial sector. The recovery is expected to happen at varying pace in different regions and countries, while emerging markets are expected to be in the forefront of the recovery. The flexible baseload and grid stability & peaking customer segments are expected to recover first. Wärtsilä Power Plants estimates order intake to improve in 2010.
Uncertainty will continue in 2010 with regards to larger service projects, as many customers are still adapting to the economic crisis. Power plant installations continue to be run at high operating levels. Environmental compliance and economic considerations have been the main drivers of this business, and will remain so in the foreseeable future. Wärtsilä is continuously developing its portfolio in these areas. Customers are increasingly looking for remote management and optimisation of their assets, as this allows them to reduce both their costs and environmental footprint at the same time. Wärtsilä also sees an increased interest in maintenance partnerships, which reduce the fixed costs for our marine, offshore and power plant customers.
In 2010, Services will continue its stable development.
WÄRTSILÄ’S PROSPECTS FOR 2010
Due to the weakness of the shipbuilding sector we expect net sales to decline by 10-20 percent in 2010. As a result of a stable service business, good demand for power plants and proper adaptation of capacity, our operational profitability (EBIT% before nonrecurring items) should be between 9-10 %, well within the upper end of our long-term target range.
WÄRTSILÄ FINANCIAL STATEMENTS BULLETIN 2009
This financial statement bulletin is prepared in accordance with IAS 34 (Interim Financial Reporting) using the same accounting policies and methods of computation as in the annual financial statements for 2008. All figures in the accounts have been rounded and consequently the sum of individual figures can deviate from the presented sum figure.
Use of estimates
The preparation of the financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the valuation of the reported assets and liabilities and other information, such as contingent liabilities and the recognition of income and expenses in the income statement. Although the estimates are based on the management’s best knowledge of current events and actions, actual results may differ from the estimates.
IFRS amendments
Of the amended International Financial Reporting Standards (IFRS) and interpretations mandatory as of 1 January 2009 the following are applicable to the Group reporting:
The adaption of the revised standards and interpretations does not have any material effect on the interim report.
The annual figures in this financial statements bulletin are audited.
