Annual report

T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
BOARD 
OF 
DIRECTORS' 
REPORT
BUSINESS 
MODEL 
Wärtsilä 
provides 
the 
marine 
and 
energy 
markets 
with 
smart 
technologies 
and 
optimised 
lifecycle 
services. 
In 
the 
energy 
industry, 
Wärtsilä 
offers 
flexible 
power 
plants 
as 
well 
as 
energy 
management 
and 
storage 
systems 
on 
an 
equipment 
only 
or 
turnkey 
delivery 
basis. 
The 
marine 
offering 
includes 
power 
systems, 
voyage 
solutions, 
as 
well 
as 
exhaust 
treatment 
applications, 
gas 
solutions, 
and 
shaft 
line 
solutions. 
Wärtsilä 
has 
the 
capabilities 
needed 
to 
combine 
its 
marine 
products 
into 
larger 
integrated 
systems 
and 
solutions. 
Wärtsilä’s 
portfolio 
of 
services 
ranges 
from 
spare 
parts 
and 
technical 
expertise, 
to 
lifecycle 
solutions 
ensuring 
a 
maximised 
installation 
lifetime, 
increased 
efficiency, 
and 
guaranteed 
performance. 
The 
company 
aims 
at 
maximising 
environmental 
and 
economic 
performance 
by 
emphasising 
sustainable, 
data 
-driven 
innovation 
and 
total 
efficiency. 
To 
support 
its 
geographically 
dispersed 
customer 
base, 
Wärtsilä’s 
sales 
and 
service 
network 
covers 
258 
locations 
in 
73 
countries 
around 
the 
world. 
Wärtsilä 
operates 
primarily 
through 
its 
subsidiaries 
and 
strategic 
joint 
ventures. 
The 
company’s 
manufacturing 
model 
is 
assembly 
based, 
thus 
emphasising 
the 
importance 
of 
developing 
long 
-term 
relationships 
with 
its 
global 
network 
of 
suppliers, 
which 
consists 
of 
appr 
oximately 
1,200 
global 
direct 
suppliers. 
Wärtsilä’s 
personnel 
is 
made 
up 
of 
approximately 
18,000 
employees 
comprising 
139 
nationalities. 
By 
recruiting 
and 
retaining 
the 
best 
talent, 
Wärtsilä 
is 
able 
to 
be 
the 
most 
valued 
business 
partner 
to 
its 
customers, 
and 
the 
employer 
of 
choice 
for 
current 
and 
future 
employees. 
Wärtsilä 
is 
committed 
to 
conducting 
its 
business 
in 
a 
responsible 
manner, 
and 
promotes 
responsible 
practices 
throughout 
its 
value 
chain. 
 
CEO 
APPOINTMENT 
In 
September, 
Håkan 
Agnevall 
(b. 
1966, 
M.Sc. 
(Tech), 
MBA) 
was 
appointed 
as 
the 
new 
President 
and 
CEO 
for 
Wärtsilä 
Corporation. 
Mr 
Agnevall 
assumed 
the 
role 
on 
1 
February 
2021. 
He 
succeeds 
Jaakko 
Eskola, 
who 
will 
continue 
as 
a 
senior 
advisor 
to 
the 
Board 
and 
executive 
team 
until 
he 
retires 
on 
30 
June 
2021. 
Mr 
Agnevall 
has 
a 
proven 
record 
of 
developing 
organisations 
and 
businesses 
with 
a 
strong 
focus 
on 
customers, 
technology, 
and 
people. 
His 
experience 
in 
pioneering 
electrification 
and 
autonomous 
transportation 
will 
strengthen 
Wärtsilä’s 
activities 
in 
corresponding 
areas. 
STRATEGY 
Strategy 
implementation 
in 
2020 
Despite 
the 
COVID 
-19 
related 
disruptions 
to 
business 
operations, 
Wärtsilä’s 
commitment 
to 
R&D 
activities 
has 
remained 
unchanged. 
The 
year 
saw 
progress 
in 
future-
proofing 
engine 
technology 
in 
line 
with 
the 
global 
trend 
towards 
the 
decarbonisation 
of 
the 
energy 
and 
marine 
markets 
. 
This 
was 
demonstrated 
by 
the 
initiation 
of 
full 
-scale 
testing 
of 
ammonia 
as 
a 
fuel 
in 
Wärtsilä’s 
four 
-stroke 
combustion 
engine 
, 
as 
well 
as 
with 
the 
announcement 
of 
efforts 
to 
develop 
the 
combustion 
process 
in 
gas 
engines 
to 
enabl 
e 
them 
over 
time 
to 
burn 
100% 
hydrogen 
fuel. 
Several 
new 
concepts 
utilising 
connectivity 
and 
digitalisation 
to 
enhance 
efficiency, 
sustainability 
, 
and 
the 
safety 
of 
customer 
operations 
were 
also 
introduced. 
These 
included 
solutions 
for 
smart 
navigation, 
remote 
support 
services, 
as 
well 
as 
a 
cloud 
simulation 
platform 
enabling 
remote 
training. 
For 
the 
energy 
ma 
rkets 
, 
Wärtsilä 
launched 
the 
Energy 
Transition 
Lab, 
an 
open 
-data 
p 
latform 
for 
the 
energy 
industry 
to 
understand 
the 
impact 
of 
greater 
utilisation 
of 
renewable 
energy 
and 
the 
effects 
of 
COVID 
-19, 
and 
help 
accelerate 
the 
energy 
transition 
. 
Wärtsilä’s 
emphasis 
on 
developing 
solutions 
utilising 
the 
latest 
technology, 
in 
line 
with 
its 
Smart 
Marine 
and 
Smart 
Energy 
strategies, 
resulted 
a 
number 
of 
important 
orders 
during 
the 
year. 
In 
the 
marine 
markets, 
Wärtsilä 
received 
several 
orders 
for 
hybrid 
solutions, 
including 
a 
contract 
to 
supply 
a 
fully 
integrated 
Wärtsilä 
hybrid 
solution 
for 
Misje 
Rederi’s 
three 
newbuild 
eco 
-friendly 
5,000 
DWT 
bulk 
carriers. 
Moreover, 
the 
order 
from 
UltraShip 
Denmark 
to 
install 
the 
cloud 
-based 
Wärtsilä 
Fleet 
Operations 
Solution 
( 
FOS 
) 
across 
their 
entire 
fleet 
demonstrates 
market 
development 
towards 
dig 
ital 
solutions 
to 
improve 
efficiency 
and 
lessen 
environmental 
impact. 
In 
the 
energy 
sector, 
the 
need 
for 
flexible 
power 
solutions 
to 
support 
the 
expansion 
of 
renewable 
energy 
and 
secure 
grid 
reliability 
was 
illustrated 
by 
the 
resilience 
of 
activity 
in 
the 
energy 
storage 
markets. 
Awarded 
contracts 
included 
the 
first 
order 
for 
the 
GridSolv 
Quantum 
energy 
storage 
system, 
a 
fully 
integrated 
modular 
and 
compact 
solution 
that 
enables 
the 
rapid 
deployment 
of 
cost 
-effective 
energy 
storage. 
Another 
order 
reflecting 
the 
benefits 
of 
flexibility 
was 
the 
contract 
received 
in 
Europe 
to 
deliver 
four 
natural 
gas 
driven 
power 
plants 
with 
a 
combined 
output 
of 
nearly 
300 
MW. 
The 
new 
fast 
-starting 
plants 
will 
provide 
flexible 
system 
balancing 
as 
more 
renewable 
power 
is 
incorpor 
ated 
into 
the 
power 
system. 
Collaboration 
with 
industry 
stakeholders 
is 
an 
essential 
element 
in 
the 
development 
of 
technologies 
needed 
to 
meet 
changing 
market 
requirements 
. 
Joint 
efforts 
includ 
ed 
agreements 
aimed 
at 
accelerating 
the 
marine 
industry’s 
ongoing 
digital 
transformation, 
developing 
autonomous 
shipping, 
and 
exploring 
the 
use 
of 
new 
technologies 
and 
alternative 
fuels 
to 
promote 
decarbonisation 
efforts. 

 
 
 
 
 
 
 
 
T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
While 
the 
health 
and 
safety 
of 
personnel 
is 
a 
continuous 
priority 
for 
Wärtsilä, 
it 
reached 
a 
new 
level 
of 
importance 
in 
2020 
with 
the 
onset 
of 
the 
global 
C 
OVID 
-19 
pandemic. 
Wärtsilä 
maintains 
a 
diverse 
global 
workforce 
with 
thousands 
of 
employees 
perform 
ing 
tasks 
onsite, 
either 
in 
the 
field 
or 
at 
customer 
premises. 
By 
establishing 
a 
global 
crisis 
response 
team 
and 
local 
country 
incident 
management 
teams, 
it 
was 
possible 
to 
monitor 
and 
act 
upon 
the 
rapidly 
developing 
situation. 
Global 
mobility 
was 
secured 
whilst 
observing 
appropriate 
safety 
and 
precautionary 
measures. 
Numerous 
Wärtsilä 
employees 
resorted 
to 
performing 
their 
work 
remotely. 
In 
order 
to 
accommodate 
this 
way 
of 
working, 
and 
to 
ensure 
that 
the 
change 
of 
routine 
functioned 
smoothly, 
Wärtsilä 
provided 
employees 
with 
digital 
collaboration 
tools 
and 
methods. 
Furthermore, 
guidelines 
and 
devices 
were 
provided 
to 
secure 
an 
appropriate 
working 
environment 
at 
their 
homes. 
Zero 
lost 
-time 
injuries 
continues 
to 
be 
the 
company’s 
global 
target. 
During 
2020, 
lost 
-time 
injury 
frequency 
was 
2.03 
(2.25), 
which 
represents 
a 
decrease 
of 
1 
0 
% 
compared 
to 
the 
previous 
year. 
 
Financial 
targets 
and 
outcome 
in 
2020 
Wärtsilä’s 
long 
-term 
financial 
target 
is 
to 
grow 
faster 
than 
global 
GDP, 
and 
to 
maintain 
its 
operating 
profit 
margin 
between 
14% 
at 
the 
peak 
of 
the 
cycle 
and 
10% 
at 
the 
trough. 
Furthermore, 
the 
target 
is 
to 
maintain 
gearing 
below 
0.50, 
and 
to 
pay 
a 
dividend 
of 
at 
least 
50% 
of 
earnings 
per 
share 
over 
the 
cycle. 
Wärtsilä’s 
financial 
performance 
in 
2020 
was 
below 
the 
long-
term 
target, 
as 
a 
result 
of 
the 
effects 
of 
the 
COVID 
-19 
pandemic 
on 
the 
company’s 
demand 
environment 
and 
business 
operations. 
Net 
sales 
for 
2020 
declined 
by 
11%, 
bringing 
Wärtsilä’s 
five 
-year 
compound 
annual 
growth 
rate 
to 
-2%. 
The 
five 
-year 
compound 
annual 
growth 
rate 
of 
the 
global 
GDP 
was 
2.3 
% 
(source: 
IMF 
estimate 
as 
of 
October 
202 
0 
). 
Wärtsilä’s 
comparable 
operating 
result 
amounted 
to 
EUR 
275 
million, 
which 
represents 
6.0% 
of 
net 
sales. 
Gearing 
decreased 
to 
0.18. 
The 
Board 
of 
Directors' 
proposed 
dividend 
of 
EUR 
0.20 
per 
share 
represents 
88.2% 
of 
operational 
earnings. 
THE 
YEAR 
2020 
Operating 
environment 
Marine 
The 
effects 
of 
the 
COVID 
-19 
pandemic 
significantly 
affected 
the 
demand 
for 
equipment 
and 
services 
in 
the 
shipping 
and 
shipbuilding 
markets 
throughout 
2020. 
The 
decline 
in 
seaborne 
trade 
and 
travel 
restrictions 
impacted 
the 
fleet 
utili 
s 
ation 
rate, 
especially 
in 
the 
passenger 
sector, 
and 
limited 
the 
appetite 
for 
newbuild 
investments. 
As 
a 
result, 
only 
815 
vessels 
were 
contracted 
during 
the 
year 
(1,153 
in 
2019, 
excluding 
late 
contracting) 
and 
the 
demand 
for 
spare 
parts 
and 
maintenance 
activities 
softened. 
The 
news 
released 
in 
Novembe 
r 
regarding 
COVID 
-19 
vaccine 
results 
improved 
confidence 
in 
a 
recovery 
in 
both 
newbuild 
and 
service 
activit 
ies 
across 
all 
vessel 
segments. 
Cruise 
operations 
were 
heavily 
affected 
by 
the 
travel 
restrictions 
and 
no 
-sail 
orders. 
Despite 
a 
marginal 
uptick 
in 
cruise 
activity 
towards 
the 
end 
of 
the 
year, 
the 
vast 
majority 
of 
the 
fleet 
remains 
idled. 
After 
the 
initial 
disruptions 
following 
the 
first 
virus 
outbreak, 
the 
ferry 
fleet 
was 
gradually 
reactivated 
over 
the 
summer, 
but 
was 
increasingly 
idled 
again 
in 
the 
fourth 
quarter 
as 
, 
on 
top 
of 
the 
typical 
seasonal 
unwinding 
, 
a 
new 
wave 
of 
COVID 
-19 
hit 
the 
European 
markets. 
The 
offshore 
sector 
continued 
to 
be 
under 
severe 
pressure 
due 
to 
low 
oil 
demand. 
Limited 
exploration 
activity 
led 
to 
a 
decline 
in 
utilisation 
of 
drilling 
rigs 
and 
support 
vessels 
to 
levels 
similar 
to 
the 
post 
-2014 
market 
cycle. 
Conversely, 
the 
expected 
growth 
in 
offshore 
wind 
projects 
generated 
demand 
for 
speciali 
sed 
vessels, 
providing 
newbuild 
and 
service 
opportunities 
in 
wind 
farm 
related 
vessels. 
In 
the 
LNG 
shipping 
sector, 
a 
positive 
trend 
in 
spot 
rates 
began 
in 
the 
third 
quarter 
as 
a 
result 
of 
the 
rapid 
increase 
in 
Asian 
LNG 
demand 
. 
This 
was 
due 
to 
seasonal 
factors 
as 
well 
as 
constrained 
supply 
resulting 
from 
outages 
at 
several 
liquefaction 
terminals. 
The 
containership 
market 
recovered 
rapidly 
from 
the 
initial 
shock 
posed 
by 
COVID 
-19. 
This 
recovery 
was 
supported 
by 
continuous 
gains 
in 
freight 
volumes 
resulting 
in 
higher 
freight 
rates 
and 
less 
idle 
capacity. 
Crude 
oil 
and 
product 
tanker 
earnings 
remained 
under 
significant 
pressure 
during 
the 
latter 
part 
of 
the 
year, 
as 
oil 
supply 
cuts 
and 
the 
unwinding 
of 
floating 
storage 
lowered 
the 
demand 
for 
oil. 
Although 
earnings 
for 
bulk 
carriers 
increased 
in 
the 
second 
half 
, 
thanks 
to 
a 
higher 
demand 
for 
iron 
ore 
from 
China, 
the 
number 
of 
idled 
vessels 
continues 
to 
be 
above 
normal 
levels. 
The 
HSFO/VLSFO 
price 
differential 
narrowed 
significantly 
as 
a 
result 
of 
both 
the 
sharp 
decline 
in 
oil 
prices 
and 
improved 
VLSFO 
availability, 
thus 
negatively 
impacting 
the 
pace 
of 
scrubber 
retrofits 
and 
installations 
on 
newbuilds. 
After 
the 
positive 
news 
regarding 
COVID 
-19 
vaccine 
breakthroughs 
in 
November, 
oil 
prices 
surged 
and, 
consequently, 
the 
price 
spread 
between 
bunker 
fuel 
types 
increased 
to 
around 
80 
USD 
per 
tonne. 
Nevertheless, 
the 
market 
for 
scrubber 
Target 
Development 
in 
2020 
Development 
in 
2019 
Net 
sales 
growth 
faster 
than 
global 
GDP 
-11% 
0% 
Comparable 
operating 
result 
margin 
between 
10% 
and 
14% 
6.0% 
8.8% 
Gearing 
below 
0.50 
0.18 
0.30 
Dividend 
payment 
at 
least 
50% 
of 
earnings 
per 
share 
over 
the 
cycle 
88.2%* 
130.8% 
*Proposal 
of 
the 
Board 
of 
Directors 
 
 

T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
contracting 
is 
still 
characteri 
sed 
by 
a 
high 
degree 
of 
uncertainty 
, 
mostly 
due 
to 
the 
limited 
visibility 
on 
future 
price 
spreads. 
While 
the 
pandemic 
has 
led 
to 
a 
significant 
contraction 
in 
trade 
volumes, 
it 
has 
also 
accelerated 
the 
digital 
transformation 
through 
new 
technologies 
and 
digital 
applications 
being 
adopted 
as 
a 
matter 
of 
necessity. 
The 
use 
of 
cloud 
-based 
remote 
solutions 
h 
as 
also 
accelerated 
in 
response 
to 
restrictions 
on 
physical 
travel. 
Ship 
-to 
-port 
communications, 
as 
well 
as 
document 
and 
data 
exchange 
, 
are 
increasingly 
being 
handled 
electronically 
rather 
than 
via 
personal 
interaction, 
both 
on 
ships 
and 
in 
port. 
Furthermore, 
fleet 
optimisation 
and 
performance 
management 
technologies 
are 
increasingly 
being 
accepted 
as 
central 
in 
order 
to 
secure 
profitability 
in 
a 
competitive 
market. 
Meanwhile, 
the 
path 
towards 
the 
decarbonisation 
of 
the 
shipping 
industry 
continued 
to 
gain 
p 
ace. 
The 
share 
of 
alternative 
-fuel 
capable 
vessels 
among 
the 
total 
newbuild 
contracting 
increased 
during 
the 
year. 
LNG 
has 
cemented 
its 
position 
as 
the 
most 
widely 
adopted 
alternative 
fuel, 
as 
it 
enables 
immediate 
GHG 
emission 
reductions. 
Moreover, 
the 
dua 
l-fuel 
engine 
technology 
used 
to 
burn 
LNG 
is 
fuel 
flexible, 
thus 
mitigating 
business 
risks 
associated 
with 
future 
fuel 
related 
uncertainties 
. 
Zero 
-carbon 
fuels 
, 
such 
as 
biofuels, 
ammonia 
and 
hydrogen 
, 
are 
also 
gaining 
interest 
as 
are 
various 
energy 
saving 
technologies. 
The 
IMO 
released 
a 
plan 
in 
November 
to 
drive 
the 
shipping 
industry 
towards 
its 
ambitious 
decarbonisation 
targets, 
with 
a 
set 
of 
policies 
coming 
into 
force 
from 
2022 
onwards. 
At 
the 
same 
time, 
the 
European 
Parliament 
approved 
a 
proposal 
to 
include 
shipping 
in 
its 
emissions 
trading 
scheme 
(ETS). 
With 
new 
rules 
expected 
in 
the 
coming 
years 
that 
will 
require 
shipowners 
to 
reduce 
their 
emissions 
through 
technical 
or 
operational 
measures, 
there 
is 
a 
growing 
consensus 
that 
vessels 
should 
increasingly 
adopt 
interoperable 
network 
technology 
to 
link 
onboard 
machinery, 
navigation, 
cargo 
handling 
, 
and 
other 
systems 
. 
Such 
technology 
will 
reduce 
fuel 
consumption, 
while 
representing 
an 
important 
step 
towards 
decarbonisation 
and 
increased 
efficiency. 
Energy 
The 
COVID 
-19 
pandemic 
and 
the 
resulting 
slowdown 
of 
economic 
activity 
had 
a 
negative 
impact 
on 
the 
global 
liquid 
and 
gas 
fuelled 
power 
plant 
markets 
throughout 
2020. 
While 
the 
market 
situation 
has 
stabilised 
and 
is 
showing 
some 
improvement, 
the 
prevailing 
uncertainty 
regarding 
the 
duration, 
development 
, 
and 
economic 
impacts 
of 
the 
pandemic 
continues 
to 
result 
in 
customers 
postpon 
ing 
investments 
in 
new 
power 
plant 
capacity. 
Additionally, 
energy 
policies 
are 
being 
developed 
to 
drive 
ambitious 
decarboni 
s 
ation 
ta 
rgets 
, 
and 
utilities 
continue 
to 
update 
their 
investment 
strategies, 
which 
is 
causing 
uncertainty 
and 
delays 
in 
decision 
- 
making. 
However, 
activity 
in 
energy 
storage 
was 
at 
a 
good 
level, 
driven 
by 
the 
increasing 
need 
for 
short 
-term 
flexible 
capacity 
in 
power 
systems 
with 
a 
high 
share 
of 
renewables. 
While 
mobility 
restrictions 
affected 
the 
ability 
to 
perform 
service 
activities, 
the 
demand 
for 
services 
held 
up 
reasonably 
well 
, 
and 
customers 
continued 
to 
show 
interest 
in 
long 
-term 
service 
agreements. 
Wärtsilä’s 
market 
share 
in 
the 
up 
to 
500 
MW 
market 
segment 
was 
stable 
at 
9% 
(9), 
while 
global 
orders 
for 
natural 
gas 
and 
liquid 
power 
plants 
increased 
by 
3% 
to 
16.6 
GW 
during 
the 
twelve 
-month 
period 
ending 
in 
September 
2020 
(16.0 
GW 
at 
the 
end 
of 
June). 
Global 
orders 
include 
gas 
turbine 
and 
Wärtsilä 
orders 
with 
prime 
movers 
over 
5 
MW 
in 
size. 
The 
data 
is 
gathered 
from 
the 
McCoy 
Power 
Report. 
Order 
intake 
and 
order 
book 
Wärtsilä’s 
o 
rder 
intake 
in 
2020 
decreased 
by 
18% 
to 
EUR 
4,359 
million 
(5,327) 
compared 
to 
the 
previous 
year
. 
Uncertainty 
related 
to 
the 
COVID 
-19 
pandemic 
and 
its 
long-
term 
implications 
weakened 
demand 
across 
all 
businesses. 
Book 
-to 
-bill 
was 
0.95 
(1.03). 
Service 
order 
intake 
decreased 
by 
16% 
to 
EUR 
2,267 
million 
(2,683), 
while 
equipment 
order 
intake 
decreased 
by 
21% 
to 
EUR 
2,091 
million 
(2,644). 
The 
order 
book 
at 
the 
end 
of 
the 
year 
decreased 
by 
14% 
to 
EUR 
5,057 
million 
(5,878). 
Cancellations 
during 
the 
year 
were 
largely 
in 
line 
with 
normal 
low 
levels. 
Wärtsilä 
has 
implemented 
stricter 
requirements 
for 
the 
inclusion 
of 
new 
and 
existing 
projects 
in 
the 
order 
book. 
This 
resulted 
in 
orders 
amounting 
to 
approximately 
EUR 
340 
million 
being 
removed 
from 
the 
order 
book 
during 
the 
year, 
primarily 
due 
to 
lack 
of 
progress 
or 
milestone 
payments 
not 
being 
received, 
as 
well 
as 
some 
cancellations. 
Wärtsilä’s 
current 
order 
book 
for 
2021 
deliveries 
is 
EUR 
3,298 
million 
( 
3,571 
). 
Net 
sales 
and 
operating 
result 
Wärtsilä’s
 
n 
et 
sales 
in 
2020 
decreased 
by 
11% 
to 
EUR 
4,604 
million 
(5,170) 
compared 
to 
the 
previous 
year. 
Service 
net 
sales 
decreased 
by 
10% 
to 
EUR 
2,255 
million 
(2,505). 
Equipment 
net 
sales 
decreased 
by 
12% 
to 
EUR 
2,349 
million 
(2,665). 
Of 
Wärtsilä’s 
net 
sales, 
approximately 
65% 
was 
EUR 
denominated 
and 
20% 
USD 
denominated, 
with 
the 
remainder 
being 
split 
between 
se 
veral 
currencies. 
The 
operating 
result 
amounted 
to 
EUR 
234 
million 
(362) 
or 
5.1% 
of 
net 
sales 
(7.0). 
The 
result 
was 
burdened 
by 
a 
decline 
in 
service 
volumes, 
COVID 
-19 
driven 
cost 
inflation, 
and 
weaker 
fixed 
cost 
absorption. 
The 
comparable 
operating 
result 
totalled 
EUR 
275 
million 
(457) 
or 
6.0% 
of 
net 
sales 
(8.8). 
Items 
affecting 
comparability 
comprised 
costs 
related 
to 
divestments 
and 
restructuring 
programmes 
of 
EUR 
41 
million 
(95). 
The 
comparable 
adjusted 
EBITA 
amounted 
to 
EUR 
308 
million 
(498) 
or 
6.7% 
of 
net 
sales 
(9.6). 
Purchase 
price 
allocation 
amortisation 
amounted 
to 
EUR 
33 
million 
(41). 
Financial 
items 
amounted 
to 
EUR 
-43 
million 
(-47). 
Net 
interest 
totalled 
EUR 
-10 
million 
( 
- 
12). 
Profit 
before 
taxes 
amounted 
to 
EUR 
191 
million 
(315). 
Taxes 
amounted 
to 
EUR 
58 
million 
(97), 
implying 
an 
effective 
tax 
rate 
of 
30.3% 
(30.7). 
Profit 
for 
the 
financial 
year 
amounted 
to 
EUR 
133 
million 
(218). 
Earnings 
per 
share 
totalled 
0.23 
euro 
(0.37). 
Return 
on 
investment 
(ROI) 
was 
7.1% 
(11.5), 
while 
return 
on 
equity 
(ROE) 
was 
5.8% 
(9.0).

T

his

is

Wärtsilä

/

Sustainability

/

Governance

/

F

inancial

review

0

150

300

450

600

750

2020

2021

2022

2023

2024

2025

2026

MEUR

0

50

100

150

200

250

300

21

22

23

24

25

26

27

28

29

30

31

31+

MEUR

Annual

repayments

of

long-term

loans

0,00

0,10

0,20

0,30

0,40

0,50

2016

2017

2018

2019

2020

Group

net

sales

development

Result

Megawatts

delivered

2020

2019

Change

Marine

Power

1,257

1,505

-

16%

Energy

1,172

2,072

-

43%

Wärtsilä

total

2,429

3,577

-

32%

By

joint

venture

274

432

-

37%

Deliveries

total

2,703

4,009

-

33%

*Restated

due

to

IFRS

15

*Restated

due

to

IFRS

15

Financing

and

cash

flow

Loans

Committed

revolving

credit

facilities

(end

of

period)

Wärtsilä’s

cash

flow

from

operating

activities

in

2020

increased

to

EUR

681

million

(232),

thanks

to

improved

working

capital.

Working

capital

decreased

to

EUR

257

million

at

the

end

of

the

year

(732),

driven

by

lower

inventories,

as

well

as

by

efforts

to

reduce

credit

risk

through

strengthening

the

collection

of

receivables.

Advances

received

totalled

EUR

452

million

(452).

Additionally,

EUR

38

million

of

advances

pertained

to

assets

held

for

sale.

Maturity

profiles

of

long

-

term

loans

Gearing

Wärtsilä

aims

to

ensure

sufficient

liquidity

at

all

times

through

efficient

cash

management

and

by

maintaining

the

availability

of

sufficient

committed

and

uncommitted

credit

lines.

Refinancing

risk

is

managed

by

having

a

balanced

and

sufficiently

long

loa

n

portfolio.

Wärtsilä

has

focused

on

further

strengthening

its

liquidity

reserves

during

the

year

in

response

to

the

COVID

-19

pandemic.

Measures

taken

include

the

extension

of

revolving

credit

facilities

and

the

negotiation

of

additional

loan

facilities.

T

his

is

Wärtsilä

/

Sustainability

/

Governance

/

F

inancial

review

0

100

200

300

400

2016

2017

2018

2019

2020

MEUR

acquisitions

Other

capital

expenditures

Depreciation,

amortisation,

and

impairment

Cash

and

cash

equivalents

amounted

to

EUR

919

million

at

the

end

of

the

year

(358).

Additionally,

EUR

14

million

of

cash

and

cash

equivalents

pertained

to

assets

held

for

sale

(

11

).

Unutilised

committed

credit

facilities

totalled

EUR

660

million

(640).

Wä

rtsilä

had

interest

-bearing

debt

totalling

EUR

1,327

million

at

the

end

of

the

year

(1,096).

The

total

amount

of

short

-term

debt

maturing

within

the

months

was

EUR

198

million.

Long

-

term

loans

amounted

to

EUR

1,129

million.

Net

interest

-bearing

debt

totalled

EUR

394

million

(726).

Gearing

was

0.18

(0.30),

while

the

solvency

ratio

was

38.1%

(40.8).

Equity

per

share

was

3.68

euro

(4.05).

Capital

expenditure

Capital

expenditure

intangible

assets

and

property,

plant,

and

equipment

amounted

to

EUR

115

million

(116)

in

2020.

Capital

expenditure

acquisitions

and

investments

in

securities

totalled

EUR

2

million

(6).

Depreciation,

amortisation,

and

impairment

amounted

to

EUR

174

million

(180).

In

2021,

capital

expenditure

intangible

assets

and

property,

plant,

and

equipment

is

expected

to

be

below

depreciation,

amortisation,

and

impairment.

Gross

capital

expenditure

Innovations,

research

and

development

Wärtsilä

is

committed

to

helping

minimise

the

environmental

footprint

of

the

maritime

and

energy

industries.

Investments

in

R&D

are

central

to

securing

Wärtsilä’s

future

positioning,

and

will

continue

despite

the

prevailing

market

uncertainty.

Developing

the

use

of

alternative,

commercially

viable,

and

environmentally

friendly

fuels

for

the

future

is

a

key

focus

area

of

research

and

development,

as

is

improving

the

connectivity,

efficiency,

sustainability,

and

safety

of

customer

operations

through

the

increased

use

of

digital

solutions.

With

its

lifecycle

solution

s

offering,

Wärtsilä

goes

beyond

mere

maintenance

and

operation

by

delivering

guaranteed

performance

based

on

mutually

agreed

target

levels.

Research

and

develo

pment

expenditure

totalled

EUR

153

million

(

164

)

in

2020

,

which

represents

3.3%

of

net

sales

(3.2

).

Marine

In

the

development

of

viable

future

fuels

Wärtsilä

,

in

close

cooperation

with

Knutsen

OAS

Shipping

AS,

Repsol,

and

Sustainable

Energy

Catapult

Centr

e

,

initiated

the

world’s

first

long

-term,

full

-scale

testing

of

ammonia

as

a

fuel

in

a

marine

4

-stroke

combustion

engine

in

2020.

The

testing

is

supported

by

a

NOK

20

million

grant

from

the

Norwegian

Research

Council

through

the

DEMO

2000

programme.

Key

developments

in

the

context

of

portfolio

enhancements

included

the

completion

of

full

-scale

testing

of

Wärtsilä’s

LPG

fuel

supply

system

with

a

full

-

sized

2

-stroke

marine

engine

burning

liquid

petroleum

gas

(LPG)

as

fuel.

The

tests

were

completed

by

retrofitting

the

system

on

four

very

large

gas

carriers

(VLGC)

owned

by

the

Norwegian

operator

BW

LPG.

In

addition,

Wärtsilä

launched

its

FuelFlex

Injection

Control

Unit

upgrade

solution

to

meet

the

requirements

of

operating

RT

-

flex

type

2

-

stroke

diesel

engines

with

both

residual

and

low

-viscosity

marine

fuels.

This

is

particularly

relevant

in

view

of

the

industry’s

increasing

use

of

low

-sulphur

-content

fuels

in

order

to

be

compliant

with

sulphur

emission

regulations.

Wärtsilä

also

introduced

its

Compact

Reliq

reliquefaction

plant,

designed

to

reliquefy

boil

-off

gas

(BOG)

onboard

gas

carriers

and

LNG

bunker

vessels

and

keep

the

cargo

cool

under

all

operational

conditions.

Thanks

to

its

compact

design,

the

system

can

be

installed

on

existing

vessels

without

extensive

modification

work.

During

the

year,

Wärtsilä

also

upgraded

the

power

output

of

the

Wärtsilä

31DF

dual-

fuel

engine,

further

heightening

the

engine’s

sustainability

factor

as

a

result

of

lower

greenhouse

gas

emissions,

while

allowing

a

reduction

in

both

installation

and

maintenance

costs.

As

the

shipping

industry

enters

a

new

era

of

innovation

and

unprecedented

efficiency,

Wärtsilä

is

using

high

levels

of

connectivity

and

digitalisation

to

bring

value

and

optimisation

to

all

marine

applications,

and

to

en

hance

the

efficiency,

sustainability

,

and

safety

of

customer

operations.

Achievements

in

the

field

of

smart

navigation

included

the

launch

of

Navi

-

Port,

a

new

solution

for

the

seamless

exchange

of

data

between

ship

and

shore

,

enabling

just

-in-

time

arrival

.

This

was

implemented

in

collaboration

with

Carnival

Maritime

and

the

Hamburg

Vessel

Coordination

Center

(HVCC).

Moreover,

Wärtsilä

Voyage

and

PSA

Marine

successfully

completed

initial

sea

trials

for

the

‘IntelliTug’

T

his

is

Wärtsilä

/

Sustainability

/

Governance

/

F

inancial

review

0,0

1,0

2,0

3,0

4,0

0

50

100

150

200

2016

2017

2018

2019

2020

%

MEUR

R&D

expenditure

Percentage

of

net

sales

project

in

Singapore,

thereby

proving

IntelliTug’s

capability

to

avoid

a

variety

of

obstacles,

including

virtual

and

real

-life

moving

vessels.

It

was

the

first

trial

to

use

the

Maritime

and

Port

Authority

of

Singapore

’s

(

MPA

)

Maritime

Autonomous

Surface

Ship

(

MASS

)

regulatory

sandbox,

which

was

established

to

facilitate

the

testing

of

MASS

and

other

autonomous

technologies

in

a

safe

and

controlled

environment

within

the

Port

of

Singapore.

Wärtsilä

also

successfully

trialled

the

Wärtsilä

SmartMove

Suite,

a

unique

pairing

of

sensor

tech

nology

with

navigation

systems

for

semi

-autonomous

ship

movement.

The

American

Steamship

Company

became

the

first

to

install

Wärtsilä

SmartMove

solutions

,

which

will

be

used

for

hands

-off

transit

along

the

Cuyahoga

River

in

Ohio,

US

A.

The

year

2020

also

saw

the

laun

ch

of

a

number

of

remote

support

services.

These

included

the

global

Smart

Support

Centre

service,

which

is

designed

to

deliver

operational

support

via

virtual

service

engineers

to

all

Wärtsilä

Voyage

equipment,

and

the

Assured

Operations

remote

support

se

rvice

for

Wärtsilä

4

-stroke

and

2

-stroke

engine

customers.

This

enables

technical

experts

to

assess

and

resolve

operational

issues

via

a

remote

connection

between

seagoing

vessels

and

Wärtsilä’s

Expertise

Centres.

During

the

year,

Wärtsilä

also

made

the

digital

predictive

maintenance

product

Expert

Insight

available

for

2

-stroke

engines

.

The

company

simultaneously

released

a

minimum

viable

product

for

remote

monitoring

of

scrubbers

to

provide

continuous

fleet

-wide

insight

into

vessel

compliance

and

scrubber

utilisation.

Moreover,

Wärtsilä

Voyage

expedited

the

launch

of

Wärtsilä’s

new

cloud

simulation

platform

to

enable

maritime

academies

and

seafarer

schools

to

continue

training

despite

the

lockdowns

and

distancing

imposed

by

the

COVID

-

19

outbreak.

The

solut

ion

was

selected

by

Anglo

-

Eastern

,

a

leading

ship

manage

ment

company,

to

provide

online

capacity

for

the

company’s

training

centres

in

India,

the

Philippines

,

and

Ukraine.

The

cloud

-based

simulators

are

being

used

for

navigation,

engineering,

and

liquid

cargo

handling

training.

Energy

In

line

with

its

aim

to

lead

the

transition

towards

a

100%

renewable

energy

future,

Wärtsilä

launched

the

Energy

Transition

Lab,

an

open

-data

platform

for

the

energy

industry

to

understand

the

impact

of

greater

utilisation

of

renewable

energy

and

the

effects

of

COVID

-19,

and

help

accelerate

the

energy

transition.

The

tool

provides

detailed

data

on

electricity

generation,

demand,

and

pricing

for

the

EU

countries

and

the

UK.

It

allows

users

to

model

how

systems

could

operate

in

the

future

with

more

renewables,

helping

to

pinpoint

problem

areas

and

highlighting

where

to

focus

policies

and

investments.

Key

achievements

in

the

advancement

of

engine

technology

included

Wärtsilä’s

highly

efficient

12

MWe

Wärtsilä

31SG

gas

-fuelled

generating

set

being

awarded

type

certification

by

the

classification

society

DNV

GL.

This

is

globally

the

largest

synchronous

generating

set

of

this

technology

to

have

been

awarded

the

unit

certificate

after

full

-scale

testing.

The

certification

verifies

the

design

and

engineering

standards

as

being

in

full

compliance

with

Germany’s

grid

code

requirements,

the

first

country

in

Europe

to

have

implemented

guidelines

for

grid

code

compliance,

although

other

countries

have

already

or

are

in

the

process

of

requiring

similar

compliance.

Wärtsilä

also

announced

during

the

year

that

it

is

developing

the

combustion

process

in

its

gas

engines

to

enable

them

over

time

to

burn

100%

hydrogen

fuel.

Wärtsilä

has

researched

hydrogen

as

a

fuel

for

20

years,

and

has

tested

its

engines

with

blends

of

up

to

60%

hydrogen

and

40%

natural

gas.

This

development

is

part

of

the

company’s

strategy

to

future

-proof

its

engine

technology

in

line

with

the

global

trend

towards

decarbonisation

of

the

energy

and

marine

markets.

In

addition

to

hydrogen,

other

potential

renewable

fuels

are

being

studied

for

future

applications.

Wärtsilä

engines

are

already

capable

of

combusting

100%

synthetic

carbon

-neutral

methane

and

methanol.

Developments

in

the

area

of

Power

-to

-

X

included

funding

granted

by

Business

Finland

for

the

X-Ahead

project,

as

well

as

an

agreement

with

Vantaa

Energy

Ltd.

regarding

a

joint

concept

feasibility

study

for

a

power

-to

-gas

facility

at

Vantaa

Energy’s

waste

-to

-energy

plant

in

the

city

of

Vantaa.

The

X-

Ahead

project

aims

at

developing

deep

expertise

in

both

the

technical

and

business

potential

of

Power

-to

-X,

which

will

be

used

to

promote

a

carbon

-neutral

economy

in

Finland.

It

will

also

act

as

a

base

for

defining

Wärtsilä’s

role

in

this

field

as

part

of

the

g

lobal

transition

to

carbon

-neutral

solutions.

Vantaa

Energy’s

power

-to

-

gas

facility

would

produce

carbon-

neutral

synthetic

biogas

using

carbon

dioxide

emissions

and

electricity

generated

at

the

waste

-to

-energy

plant.

The

purpose

of

the

joint

study

is

to

confirm

the

optimal

size

of

the

project

and

the

cost

of

synthetic

biogas

for

district

heating,

as

well

as

to

understand

the

boundary

conditions

for

project

feasibility.

Research

and

development

expenditure

Strategic

projects

In

February,

Wärtsilä

and

DNV

GL

agreed

to

work

together

to

contribute

to

the

marine

industry’s

ongoing

digital

transformation.

In

particular,

the

two

companies

wish

to

further

explore

the

potential

use

of

digital

technologies,

collaborative

data

sharing,

and

standardisation

to

enhance

the

performance

of

existing

products

and

services,

and

to

develop

new

ones.

The

project

will

examine

the

application

of

digital

technologies

in

areas

such

as

autonomous

ships,

T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
advanced 
remote 
services, 
new 
bridge 
technologies, 
and 
data 
sharing. 
Cyber 
security 
will 
be 
another 
natural 
area 
of 
co 
-operation.
 
In 
March, 
Wärtsilä 
together 
with 
a 
consortium 
of 
six 
other 
industry 
and 
academic 
partners, 
was 
awarded 
EU 
funding 
for 
a 
major 
project 
named 
SeaTech. 
The 
project 
is 
aimed 
at 
reducing 
fuel 
consumption 
and 
lowering 
emission 
levels 
for 
shipping 
by 
developing 
ship 
engine 
and 
propulsion 
systems 
to 
enable 
precise 
control 
of 
the 
engine 
and 
capturing 
wave 
energy 
to 
produce 
extra 
thrust. 
Wärtsilä 
also 
signed 
a 
licence 
and 
co 
-operation 
agreement 
covering 
the 
future 
development, 
sales, 
and 
servicing 
of 
gate 
rudders 
with 
Kuribayashi 
Steamship 
in 
Japan. 
As 
an 
authorised 
license 
holder 
and 
partner, 
Wärtsilä 
intends 
to 
fully 
integrate 
gate 
rudders 
within 
its 
propulsion 
product 
designs 
and 
will 
focus 
on 
global 
markets 
outside 
Japan. 
Gate 
rudder 
technology 
lowers 
fuel 
consumption 
and 
reduces 
emissions, 
while 
improving 
manoeuvrability 
and 
course 
stability 
in 
both 
calm 
and 
rough 
seas. 
In 
June, 
Wärtsilä 
joined 
a 
global 
consortium 
to 
develop 
the 
Mayflower 
Autonomous 
ship 
project, 
which 
will 
enable 
the 
world’s 
first 
fully 
autonomous, 
unmanned 
vessel 
to 
cross 
the 
Atlantic. 
Wärtsilä 
Voyage 
will 
equip 
the 
ship 
with 
the 
Wärtsilä 
RS24 
system, 
a 
ground 
-breaking 
high 
-speed, 
high 
-resolution 
FMCW 
K- 
Band 
radar 
designed 
to 
provide 
optimised 
levels 
of 
situational 
awareness, 
especially 
in 
densely 
populated 
marine 
environments. 
Wärtsilä 
also 
joined 
ING 
Bank, 
Engie, 
and 
the 
Port 
of 
Rotterdam 
Authority 
to 
form 
Zero 
Emission 
Services 
B.V. 
(ZES), 
an 
enterprise 
aimed 
at 
making 
inland 
waterway 
shipping 
more 
sustainable. 
The 
concept 
is 
based 
on 
the 
use 
of 
replaceable 
battery 
containers 
charged 
with 
renewable 
energy. 
It 
will 
be 
utilised 
, 
among 
others, 
by 
the 
Heineken 
beer 
company 
and 
is 
supported 
by 
the 
Dutch 
Ministry 
of 
Infrastructure 
and 
Water 
Managem 
ent. 
In 
July, 
Wärtsilä 
joined 
a 
global 
coalition 
dedicated 
to 
accelerating 
the 
energy 
transition 
in 
the 
transport 
and 
logistics 
industries, 
together 
with 
a 
cluster 
of 
market 
-leading 
companies 
representing 
a 
broad 
spectrum 
of 
industry 
stakeholders. 
The 
aim 
of 
the 
coalition 
is 
to 
drive 
the 
development 
of 
energy 
sources 
and 
technologies 
in 
order 
to 
curb 
global 
warming, 
reduce 
air 
pollution, 
and 
protect 
biodiversity. 
The 
members 
will 
pool 
their 
R&D 
efforts 
in 
pursuit 
of 
three 
key 
goals: 
unlocking 
a 
more 
extensive 
portfolio 
of 
clean 
energy 
sources, 
lowering 
energy 
consumption 
per 
kilometre 
-equivalent 
for 
transported 
goods 
, 
and 
eliminating 
a 
substantial 
proportion 
of 
the 
harmful 
emissions 
being 
released 
into 
the 
atmosphere. 
In 
October, 
Wärtsilä 
signed 
a 
Memorandum 
of 
Understanding 
(MoU) 
tied 
to 
a 
license 
and 
c 
o 
-operation 
agreement 
with 
the 
UK 
-based 
Anemoi 
Marine 
Technologies 
for 
the 
future 
sales 
and 
servicing 
of 
rotor 
sail 
solutions 
to 
the 
shipping 
industry. 
Rotor 
s 
ails 
are 
comprised 
of 
vertical 
cylinders 
which, 
when 
driven 
to 
rotate, 
harness 
the 
renewable 
power 
of 
the 
wind 
to 
propel 
ships. 
These 
highly 
efficient 
mechanical 
sails 
will 
provide 
additional 
thrust 
to 
vessels 
and 
deliver 
significant 
fuel 
and 
emission 
savings. 
Wärtsilä 
will 
fully 
integrate 
Anemoi 
Marine 
Technologies’ 
rotor 
s 
ails 
within 
its 
p 
ropulsion 
business 
and 
promote 
the 
solution 
for 
both 
newbuild 
projects 
and 
for 
retrofitting 
to 
existing 
ships. 
In 
December, 
Wärtsilä 
joined 
the 
CHEK 
project 
which 
aims 
to 
achieve 
zero 
emission 
s 
shipping. 
The 
project 
will 
develop 
and 
demonstrate 
a 
wind 
energy 
optimised 
bulk 
carrier 
, 
and 
a 
hydrogen 
powered 
cruise 
ship 
equipped 
with 
a 
combination 
of 
innovative 
technologies 
to 
reduce 
greenhouse 
gas 
emissions 
by 
99%, 
achieve 
at 
least 
50% 
energy 
savings 
, 
and 
reduce 
black 
carbon 
emissions 
by 
over 
95%. 
The 
CHEK 
partners 
are 
the 
University 
of 
Vaasa 
(coordinator), 
Wärtsilä, 
Cargill 
International, 
MSC 
Cruises, 
Lloyd’s 
Register, 
the 
World 
Maritime 
University, 
Silverstream 
Technologies, 
HASYTEC 
Electronics, 
Deltamarin, 
Climeon 
, 
and 
BAR 
Technologies. 
Capacity 
adjustments 
In 
March, 
Wärtsilä 
announced 
that 
proactive 
steps 
would 
be 
taken 
to 
minimise 
the 
negative 
business 
impact 
of 
the 
COVID 
-19 
pandemic 
and 
the 
measures 
initiated 
to 
contain 
it. 
These 
include 
d 
reducing 
working 
hours 
and 
initiating 
temporary 
layoffs, 
as 
well 
as 
streamlining 
hiring 
and 
minimising 
the 
use 
of 
external 
personnel 
and 
consultants. 
Discretionary 
spending 
was 
also 
reduced 
and 
non 
-critical 
development 
projects 
postponed. 
Decisions 
on 
temporary 
cost 
reduction 
actions 
were 
taken 
in 
key 
countries 
where 
such 
measures 
were 
deemed 
necessary. 
The 
actions 
taken 
resulted 
in 
temporary 
cost 
savings 
of 
approximately 
EUR 
100 
million 
being 
recognised 
during 
the 
year, 
which 
was 
in 
line 
with 
initial 
expectations
. 
The 
market 
situation 
is 
continuously 
monitored 
, 
and 
further 
actions 
will 
be 
taken 
as 
needed.
 
Changes 
in 
organisational 
structure 
Wärtsilä’s 
new 
organisational 
structure 
became 
operational 
on 
1 
July 
2020. 
With 
the 
new 
structure, 
Wärtsilä 
aims 
to 
accelerate 
strategy 
execution 
and 
drive 
long 
-term 
performance. 
Marine 
Power, 
Marine 
Systems, 
and 
Energy 
will 
focus 
on 
delivering 
profitable 
growth 
by 
strengthening 
their 
offering 
of 
solutions 
and 
lifecycle 
value 
propositions. 
Established 
through 
the 
combination 
of 
acquisitions 
during 
the 
past 
few 
years, 
notably 
Eniram 
and 
more 
recently 
Transas, 
Voyage 
positions 
Wärtsilä 
as 
a 
market 
leader 
in 
digital 
solutions 
for 
the 
commercial 
marine 
industry. 
Voyage’s 
focus 
will 
be 
on 
scaling 
and 
developing 
the 
business, 
with 
the 
support 
of 
continued 
investments 
in 
R&D, 
sales 
and 
marketing, 
in 
order 
to 
create 
a 
basis 
for 
sustainable, 
profitable 
growth 
over 
the 
long 
-term. 
Portfolio 
Business 
is 
run 
as 
an 
independent 
entity, 
with 
the 
objective 
of 
unlocking 
the 
value 
of 
business 
units 
that 
are 
not 
central 
to 
Wärtsilä’s 
strategy.
 
Personnel 
Wärtsilä 
had 
17,792 
(18,795) 
employees 
at 
the 
end 
of 
the 
year. 
On 
average, 
the 
number 
of 
personnel 
totalled 
18,307 
(19,110) 
in 
the 
year 
of 
2020 
. 

T

his

is

Wärtsilä

/

Sustainability

/

Governance

/

F

inancial

review

0

5

000

10

000

15

000

20

000

2016

2017

2018

2019

2020

Personnel

at

the

end

of

the

financial

period

Personnel

on

average

Personnel

in

Finland

Of

Wärtsilä’s

total

number

of

employees,

21%

(20)

were

located

in

Finland

and

41%

(42)

elsewhere

in

Europe.

Personnel

employed

in

Asia

represented

22%

(23)

of

the

total,

personnel

in

the

Americas

11%

(11),

and

personnel

in

other

countries

5%

(4).

Personnel

Changes

in

management

In

addition

to

the

appointment

of

a

new

President

and

CEO,

the

below

changes

in

Wärtsilä’s

Board

of

Management

took

place

during

2020

:

Following

the

announcement

that

Wärtsilä’s

Marine

Business

would

be

reorganised

into

three

independent

businesses,

Roger

Holm

(b.

1972,

M.Sc.

Economics),

previously

the

President

of

Wärtsilä

Marine

Business

and

Executive

Vice

President,

was

appointed

President

of

Wärtsilä

Marine

Power

and

Executive

Vice

President

as

of

5

March

2020,

Tamara

de

Gruyter

(b.

1972,

B.Sc.

Shipbuilding

Engineering)

was

appointed

President

of

Wärtsilä

Marine

Systems

and

Executive

Vice

President

as

of

5

March

2020,

and

Sean

Fernback

(b.

1963,

Dipl.

Electronics

Engineering)

was

appointed

President

of

Wärtsilä

Voyage

and

Executive

Vice

President

as

of

4

May

2020.

In

July,

Sushil

Purohit

(b.

1972,

B.Sc.

(Eng.),

MBA)

was

appointed

President

of

Wärtsilä

Energy

and

Executive

Vice

President

as

of

3

August

2020.

He

replaced

Marco

Wirén,

who

left

Wärtsilä

on

31

August

2020

for

a

position

outside

the

Group.

Non

-

financial

report

Increasing

environmental

awareness

is

resulting

in

fundamental

changes

in

both

the

marine

and

energy

industries.

Thanks

to

its

various

technologies

and

specialised

services,

Wärtsilä

is

well

positioned

to

reduce

exhaust

emissions

and

the

use

of

natural

resources,

as

well

as

to

support

its

customers

in

preparing

for

new

regulatory

requirements.

Wärtsilä’s

R&D

efforts

continue

to

focus

on

the

development

of

advanced

environmental

technologies

and

solutions.

The

company

is

committed

to

supporting

the

UN

Global

Compact

and

its

principles

with

respect

to

human

rights,

labour,

the

environment,

and

anti

-corruption.

Wärtsilä

is

also

committed

to

supporting

the

UN

Sustainable

Development

Goals

that

deal

with

issues

to

which

Wärtsilä

contributes

in

a

positive

way.

Such

goals

include

those

relate

d

to

clean

energy,

a

low

-carbon

marine

ecosystem,

and

responsible

business

conduct.

Responsible

business

conduct

The

Wärtsilä

Code

of

Conduct

defines

common

rules

for

all

employees,

and

provides

guidance

on

Wärtsilä’s

approach

to

responsible

business

practices.

The

Code

of

Conduct

is

complemented

by

group

-wide

policies,

including

the

quality,

environmental,

health

and

safety

policy,

the

corporate

policy

on

equal

opportunities

and

fair

employment

practices,

as

well

as

policies

anti

-corruption,

compliance

reporting,

and

sourcing

and

purchasing.

Wärtsilä

takes

an

active

approach

to

the

application

of

the

Code

of

Conduct

and

promotes

its

implementation

through

the

effective

communication

of

its

contents

to

its

employees.

Wärtsilä

monitors

the

application

of

the

Code

internally

to

ensure

understanding

and

commitment

throughout

the

organisation.

At

the

end

of

2020,

17,039

employees,

covering

9

6

%

of

the

total

number

of

employees,

had

participated

in

the

Code

of

Conduct

training

programme.

Suppliers

and

business

partners

are

an

integral

part

of

the

total

value

chain

of

the

products

and

services

of

Wärtsilä.

They

are

expected

to

conduct

their

businesses

in

compliance

with

the

same

high

legal

and

ethical

standards

and

business

practices

as

Wärtsilä.

Information

on

Wärtsilä’s

requirements

is

included

in

supplier

agreement

templates.

Environmental

performance

Wärtsilä’s

main

contribution

to

improved

environmental

performance

lies

in

providing

its

customers

with

reliable

and

safe

technologies

and

services,

which,

in

addition

to

enabling

environmental

compliance,

support

the

sustainable

development

of

the

marine

and

energy

industries.

Wärtsilä’s

products

and

solutions

are

designed

to

operate

for

up

to

30

years.

Therefore,

focusing

R&D

efforts

on

improving

the

product

or

system

level

performance

is

crucial,

as

is

adopting

a

lifecycle

approach

to

performance

optimisation.

In

addition

to

improving

the

environmental

performance

of

its

product

s

and

solutions,

Wärtsilä

also

continuously

monitors

the

impact

caused

by

its

own

activities

and

targets

reduced

energy

consumption

in

its

facilities.

Wärtsilä's

quality,

environmental,

health

and

safety

policy

sets

principles

for

managing

the

environmental

impacts

of

Wärtsilä’s

products

and

services.

The

potential

risks

environmental

matters

and

climate

change

are

in

the

areas

of

regulatory

emission

restrictions

and

changes

in

customer

attitudes

to

using

combustion

engines

and

fossil

fuels.

Risks

are

managed

by

focusing

on

product

efficiency

improvement

and

emission

reduction

in

R&D

activities,

as

well

as

by

developing

a

wide

product

offering,

including

technologies

waste

reduction,

noise

abatement,

and

effluent

and

T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
ballast 
water 
treatment 
. 
During 
2020, 
R&D 
investments 
totalled 
EUR 
153 
million, 
w 
hich 
represents 
3.3% 
of 
net 
sales. 
The 
majority 
of 
these 
investments 
targeted 
improved 
environmental 
performance. 
Significant 
achievements 
related 
to 
sustainable 
innovation 
included 
the 
progress 
made 
in 
developing 
engine 
technology 
to 
burn 
zero 
-carbon 
fuels. 
For 
the 
marine 
markets, 
Wärtsilä 
launched 
several 
solutions 
in 
support 
of 
its 
Smart 
Marine 
Ecosystem 
vision, 
including 
solutions 
for 
smart 
navigation, 
a 
number 
of 
remote 
support 
services, 
as 
well 
as 
a 
cloud 
simulation 
platform 
enabling 
remote 
training. 
In 
the 
energy 
sector, 
Wärtsilä 
introduced 
the 
GridSolv 
Quantum 
energy 
storage 
system, 
a 
fully 
integrated 
modular 
and 
compact 
solution 
that 
enables 
the 
rapid 
deployment 
of 
cost 
-effective 
energy 
storage, 
as 
well 
as 
data-
based 
solutions 
to 
better 
understand 
the 
impact 
of 
the 
energy 
transition. 
Social 
and 
employee 
matters 
Wärtsilä 
is 
a 
responsible 
employer, 
offering 
employees 
a 
workplace 
where 
openness, 
respect, 
trust, 
equal 
opportunities, 
and 
scope 
for 
personal 
development 
prevail. 
Wärtsilä 
is 
a 
signatory 
of 
the 
UN 
Global 
Compact 
initiative 
and 
supports 
the 
work 
-related 
rights 
defined 
by 
the 
International 
Labour 
Organization 
(ILO). 
Wärtsilä's 
corporate 
policy 
on 
equal 
opportunities 
and 
fair 
employment 
practices 
creates 
a 
common 
framework 
for 
employee 
practices 
in 
all 
Wärtsilä 
companies. 
People 
management 
processes, 
tools, 
and 
ways 
of 
working 
are 
developed 
to 
ensure 
consistency 
across 
national 
and 
organisational 
boundaries. 
Wärtsilä 
has 
a 
global 
job 
grading 
system 
and 
rewarding 
principles 
to 
ensure 
transparency 
and 
fairness 
for 
all 
employees, 
which 
are 
followed 
by 
all 
the 
entities 
in 
Wärtsilä 
globally. 
The 
objective 
of 
Wärtsilä’s 
people 
management 
strategy 
is 
to 
ensure 
that 
the 
businesses 
have 
the 
required 
resources, 
and 
skilled 
and 
motivated 
people 
at 
their 
disposal. 
In 
order 
to 
develop 
their 
competences, 
employees 
are 
offered 
a 
wide 
variety 
of 
internal 
training 
courses, 
including 
topics 
like 
technology, 
health 
and 
safety, 
language 
and 
culture, 
project 
management, 
environment, 
security, 
and 
leadership. 
The 
avera 
ge 
number 
of 
learning 
days 
was 
1.1 
per 
employee 
in 
2020. 
Wärtsilä 
aims 
at 
offering 
its 
employees 
and 
contractors 
a 
hazard 
-free 
working 
environment, 
and 
at 
minimising 
the 
health 
and 
safety 
risks 
associated 
with 
the 
use 
of 
its 
products 
and 
services. 
The 
company’s 
occupational 
health 
and 
safety 
principles 
are 
defined 
in 
the 
Code 
of 
Conduct, 
the 
quality, 
environmental, 
health 
and 
safety 
(QEHS) 
policy, 
and 
in 
the 
directive 
on 
environment, 
health, 
and 
safety 
(EHS). 
Wärtsilä's 
units 
are 
required 
to 
have 
a 
management 
system 
in 
place 
that 
conforms 
to 
the 
QEHS 
Policy 
and 
the 
EHS 
directive. 
In 
addition 
to 
the 
management 
system, 
Wärtsilä 
companies 
apply 
occupational 
health 
and 
safety 
programmes 
as 
required 
by 
local 
legislation. 
Wärtsilä’s 
aim 
is 
to 
reach 
a 
long 
-term 
goal 
of 
zero 
injuries. 
In 
2020, 
the 
corporate 
lost 
-time 
injury 
frequency 
rate 
was 
2.03 
(2.25). 
Respect 
for 
human 
rights 
Wärtsilä 
supports 
and 
respects 
basic 
human 
values 
as 
outlined 
in 
the 
UN's 
universal 
declaration 
of 
human 
rights. 
Wärtsilä 
is 
also 
a 
signatory 
of 
the 
UN 
Global 
Compact 
and 
is 
thereby 
committed 
to 
its 
principles 
with 
respect 
to 
human 
rights, 
labour, 
the 
environment 
, 
and 
anti 
-corruption. 
No 
employee 
is 
allowed 
to 
take 
any 
action 
that 
violates 
these 
human 
rights 
principles, 
either 
directly 
or 
indirectly. 
Wärtsilä 
does 
not 
accept 
the 
use 
of 
forced 
labour 
or 
child 
labour 
in 
any 
form. 
Human 
and 
labour 
rights 
are 
a 
part 
of 
the 
Code 
of 
Conduct 
training 
material, 
and 
are 
included 
in 
Wärtsilä’s 
policy 
on 
equal 
opportunities 
and 
fair 
employment 
practices 
as 
well 
as 
in 
the 
company’s 
supplier 
handbook. 
Anti 
- 
corruption 
and 
bribery 
matters 
Wärtsilä's 
Code 
of 
Conduct, 
anti 
-corruption 
policy, 
and 
broker 
directive 
expressly 
prohibit 
the 
company 
and 
its 
employees 
from 
offering 
or 
accepting 
any 
kind 
of 
benefit 
considered 
a 
bribe 
and 
from 
taking 
actions 
that 
could 
give 
rise 
to 
a 
conflict 
of 
interest 
or 
breach 
of 
loyalty. 
The 
instructions 
make 
it 
compulsory 
to 
comply 
with 
anti 
-corruption 
laws 
of 
all 
the 
countries 
in 
which 
Wärtsilä 
does 
or 
intends 
to 
do 
business 
and 
urge 
the 
reporting 
of 
any 
cases 
of 
corruption 
and 
bribery. 
Wärtsilä 
is 
aware 
of 
the 
risk 
of 
being 
subject 
to 
fraud 
by 
external 
business 
parties, 
and 
that 
the 
risk 
of 
corruption 
and 
fraud 
is 
heightened 
in 
many 
markets 
where 
the 
company 
operates. 
Therefore 
, 
full 
compliance 
with 
a 
stringent 
anti-
corruption 
regime 
is 
required 
of 
all 
employees. 
An 
extensive 
training 
programme 
is 
in 
place 
for 
personnel 
on 
anti-
corruption 
principles 
and 
applicable 
legislation 
as 
well 
as 
the 
relevant 
company 
policies 
and 
procedur 
es. 
By 
the 
end 
of 
2020, 
93% 
of 
Wärtsilä’s 
employees 
had 
participated 
in 
anti-
corruption 
trainings. 
Employees 
are 
encouraged 
to 
provide 
feedback 
and 
communicate 
suspected 
misconduct 
to 
line 
management 
or 
directly 
to 
the 
Compliance, 
L 
egal 
A 
ffairs 
, 
or 
Interna 
l 
Audit 
function. 
Wärtsilä 
also 
has 
a 
dedicated 
tool 
through 
which 
employees 
can 
report 
infringements. 
Reporting 
segments 
Wärtsilä 
Marine 
Power 
Marine 
Power’s 
o 
rder 
intake 
in 
2020 
decreased 
by 
23% 
to 
EUR 
1,737 
million 
(2,247) 
compared 
to 
the 
previous 
year. 
Book 
-to 
-bill 
was 
0.99 
(1.17). 
Service 
order 
intake 
decreased 
by 
19% 
to 
EUR 
1,070 
million 
(1,315), 
with 
the 
largest 
decline 
seen 
in 
the 
cruise 
segment 
where 
vessel 
utilisation 
remained 
low 
throughout 
the 
year. 
Equipment 
order 
intake 
decreased 
by 
28% 
to 
EUR 
667 
million 
(931). 
Demand 
was 
the 
highest 
in 
the 
merchant 
segment 
which, 
including 
both 
traditional 
merchant 
vessels 
and 
gas 
carriers, 
represented 
35% 
and 
42% 
of 
the 
order 
intake 
of 
equipment 
and 
services, 
respectively. 
Orders 
received 
from 
this 
segment 
included 
a 
sizeable 
order 
to 
supply 
dual 
-fuel 
engines 
to 
six 
new 
LNG 
vessels 
and 
a 
contract 
to 
supply 
a 
fully 
integrated 
Wärtsilä 
hybrid 
solution 
for 
Misje 
Rederi’s 
three 
newbuild 
eco 
-friendly 
5,000 
DWT 
bulk 
carriers. 
Other 
noteworthy 
orders 
included 
a 
contract 
to 
supply 
the 
engines 
and 
a 
range 
of 
electric 
solutions 
for 
two 
new 
ferries 
under 
construction 
for 
Finnlines, 
as 
well 
as 
a 
contract 
to 
supply 
Wärtsilä 
14 
EUR 
Stage 
V 

T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
compliant 
engines 
and 
related 
emissions 
control 
after-
treatment 
systems 
for 
two 
new 
passenger 
ferries 
being 
built 
for 
operation 
between 
Switzerland 
and 
France. 
The 
order 
book 
at 
the 
end 
of 
the 
year 
decreased 
by 
9% 
to 
EUR 
1,839 
million 
(2,019). 
 
Net 
sales 
decreased 
by 
9% 
to 
EUR 
1,748 
million 
(1,923) 
compared 
to 
the 
previous 
year. 
Service 
net 
sales 
decreased 
by 
14% 
to 
EUR 
1,096 
million 
(1,279), 
while 
equipment 
net 
sales 
increased 
by 
1% 
to 
EUR 
652 
million 
(643). 
The 
comparable 
operating 
result 
amounted 
to 
EUR 
137 
million 
(273) 
or 
7.8% 
of 
net 
sales 
(14.2). 
The 
result 
was 
burdened 
by 
the 
COVID 
-19 
related 
decline 
in 
the 
service 
business 
, 
as 
well 
as 
by 
weaker 
absorption 
of 
fixed 
costs 
and 
lower 
utilisation. 
Wärtsilä 
Marine 
Systems 
Marine 
Systems’ 
o 
rder 
intake 
in 
2020 
decreased 
by 
28% 
to 
EUR 
539 
million 
(754 
) 
compared 
to 
the 
previous 
year
, 
as 
reduced 
fuel 
spreads 
scaled 
back 
scrubber 
investments
. 
Book 
-to 
-bill 
was 
0.67 
(0.79). 
Service 
order 
intake 
decreased 
by 
11% 
to 
EUR 
205 
million 
(230). 
Equipment 
order 
intake 
decreased 
by 
36% 
to 
EUR 
334 
million 
(523). 
Noteworthy 
orders 
received 
during 
the 
year 
included 
the 
first 
order 
for 
the 
Compact 
Reliq 
reliquefaction 
plant, 
a 
system 
designed 
to 
reliquefy 
boil 
-off 
gas 
(BOG) 
onboard 
gas 
carriers 
and 
LNG 
bunker 
vessels 
and 
keep 
the 
cargo 
cool 
under 
all 
operational 
conditions. 
Wärtsilä 
also 
received 
a 
major 
contract 
to 
supply 
and 
construct 
a 
plant 
for 
the 
production 
of 
CO
2
-neutral 
liquid 
transport 
fuels, 
with 
a 
capacity 
of 
approximately 
100,000 
tons 
per 
year 
to 
be 
located 
in 
Cologne, 
Germany. 
The 
order 
book 
at 
the 
end 
of 
the 
year 
decreased 
by 
31% 
to 
EUR 
857 
million 
(1,232
) 
due 
to 
the 
shortage 
of 
scrubber 
orders. 
Net 
sales 
decreased 
by 
15% 
to 
EUR 
808 
million 
(952) 
compared 
to 
the 
previous 
year. 
Service 
net 
sales 
increased 
by 
8% 
to 
EUR 
219 
million 
(202), 
while 
equipment 
net 
sales 
decreased 
by 
22% 
to 
EUR 
588 
million 
(750). 
The 
comparable 
operating 
result 
amounted 
to 
EUR 
83 
million 
(60) 
or 
10.3% 
of 
net 
sales 
(6.3). 
The 
operating 
result 
for 
the 
comparison 
period 
was 
weakened 
by 
charges 
for 
cost 
overruns 
in 
certain 
gas 
solution 
projects.
 
Wärtsilä 
Voyage 
Voyage’s 
o 
rder 
intake 
in 
20 
20 
decreased 
by 
16% 
to 
EUR 
262 
million 
(310) 
compared 
to 
the 
previous 
year. 
Book 
-to 
-bill 
was 
1.06 
(1.11). 
Service 
order 
intake 
decreased 
by 
22% 
to 
EUR 
92 
million 
(117), 
while 
equipment 
order 
intake 
decreased 
by 
12% 
to 
EUR 
170 
million 
(193). 
While 
COVID 
-19 
put 
pressure 
on 
orders 
received 
from 
the 
cruise 
industry, 
order 
intake 
for 
fleet 
optimisation 
solutions 
developed 
well 
and 
Wärtsilä 
also 
received 
contracts 
for 
major 
newbuild 
projects 
in 
other 
segments. 
Highlights 
of 
the 
year 
included 
a 
contract 
with 
UltraShip 
Denmark 
to 
install 
the 
cloud 
-based 
Wärtsilä 
Fleet 
Operations 
Solution 
(
FOS 
) 
across 
their 
entire 
fleet 
in 
a 
move 
that 
will 
enable 
direct 
and 
real 
-time 
connection 
between 
shore 
and 
vessel 
systems 
for 
collaborative 
voyage 
planning 
and 
execution. 
The 
order 
book 
at 
the 
end 
of 
the 
year 
was 
stable 
at 
EUR 
275 
million 
(274). 
Net 
sales 
decreased 
by 
12% 
to 
EUR 
248 
million 
(280) 
compared 
to 
the 
previous 
year. 
The 
decline 
was 
primarily 
due 
to 
the 
COVID 
-19 
pandemic, 
which 
has 
resulted 
in 
project 
postponements 
and 
lower 
transactional 
service 
business. 
Service 
net 
sales 
decreased 
by 
18% 
to 
EUR 
85 
million 
(103), 
while 
equipment 
net 
sales 
decreased 
by 
8% 
to 
EUR 
163 
million 
(177). 
The 
comparable 
operating 
result 
amounted 
to 
EUR 
- 
41 
million 
(-31) 
or 
-16.5% 
of 
net 
sales 
( 
-1 
1.2). 
The 
result 
was 
negatively 
impacted 
by 
lower 
sales 
volumes 
and 
a 
less 
favourable 
service 
mix. 
In 
addition, 
investments 
in 
digital 
competences 
have 
been 
increased 
to 
further 
accelerate 
the 
execution 
of 
Wärtsilä’s 
Smart 
Marine 
strategy. 
In 
both 
the 
repo 
rting 
and 
the 
comparison 
period, 
the 
operating 
result 
was 
burdened 
by 
amortisation 
resulting 
from 
various 
acquisitions. 
Wärtsilä 
Energy 
Energy’s 
o 
rder 
intake 
in 
2020 
decreased 
by 
7% 
to 
EUR 
1,653 
million 
(1,769 
) 
compared 
to 
the 
previous 
year. 
Book 
- 
to 
-bill 
was 
1.02 
(0.99). 
Service 
order 
intake 
decreased 
by 
9% 
to 
EUR 
840 
million 
(920), 
while 
equipment 
order 
intake 
decreased 
by 
4% 
to 
EUR 
813 
million 
(849). 
Demand 
for 
equipment 
was 
evenly 
split 
across 
geographical 
areas. 
Noteworthy 
equipment 
orders 
received 
during 
the 
year 
included 
a 
200 
MW 
flexible 
baseload 
plant 
in 
South 
America 
to 
support 
the 
integration 
of 
renewables. 
Activity 
in 
the 
energy 
storage 
market 
was 
resilient, 
with 
orders 
including 
a 
90 
MW/90 
MWh 
storage 
system 
to 
provide 
flexibility 
and 
grid 
stability 
in 
South 
East 
Asia, 
an 
order 
for 
a 
123 
MW/185 
MWh 
storage 
system 
to 
support 
a 
major 
renewable 
project 
in 
the 
USA, 
as 
well 
as 
the 
first 
-ever 
GridSolv 
Quantum 
storage 
system 
in 
the 
USA. 
Received 
service 
orde 
rs 
included 
a 
5-
year 
maintenance 
agreement 
to 
support 
the 
availability, 
performance, 
and 
reliability 
of 
a 
200 
MW 
power 
plant 
in 
Cambodia, 
as 
well 
as 
a 
gas 
conversion 
project 
in 
Brazil 
along 
with 
a 
related 
10 
-year 
operations 
and 
maintenance 
agreement 
renewa 
l. 
The 
order 
book 
at 
the 
end 
of 
the 
year 
decreased 
by 
9% 
to 
EUR 
1,830 
million 
(2,014). 
Net 
sales 
decreased 
by 
9% 
to 
EUR 
1,620 
million 
(1,779) 
compared 
to 
the 
previous 
year. 
Service 
net 
sales 
decreased 
by 
2% 
to 
EUR 
782 
million 
(802), 
while 
equipment 
net 
sales 
decreased 
by 
14% 
to 
EUR 
838 
million 
(977). 
The 
comparable 
operating 
result 
amounted 
to 
EUR 
101 
million 
(155) 
or 
6.3% 
of 
net 
sales 
(8.7). 
The 
result 
was 
burdened 
by 
COVID 
-19 
impacts 
in 
the 
form 
of 
delivery 
delays, 
weaker 
absorption 
of 
fixed 
costs, 
and 
increased 
costs 
for 
project 
execution, 
as 
well 
as 
by 
the 
delivery 
of 
projects 
communicated 
in 
2019 
to 
be 
affected 
by 
cost 
overruns.
 
Other 
business 
activities 
Wärtsilä 
Portfolio 
Business 
Portfolio 
Business’ 
o 
rder 
intake 
in 
2020 
decreased 
by 
32% 
to 
EUR 
168 
mil 
lion 
(248) 
compared 
to 
the 
previous 
year. 
Activity 
was 
the 
highest 
in 
American 
Hydro, 
where 
orders 
received 
during 
the 
year 
included 
a 
contract 
to 
perform 
rehabilitation 
services 
and 
to 
complete 
the 
upgrade 
and 
refurbishment 
of 
two 
units 
at 
the 
Keokuk 
hydroelectric 
plant 
in 
Iowa, 
USA. 

T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
Water 
& 
Waste 
and 
Entertainment 
Systems 
continued 
to 
work 
closely 
with 
the 
Italian 
shipbuilder 
Fincantieri 
for 
a 
number 
of 
ships, 
resulting 
in 
orders 
for 
complete 
waste 
treatment 
systems 
and 
fresh 
water 
generators 
for 
two 
vessels, 
as 
well 
as 
entertainment 
systems 
for 
two 
new 
series 
of 
ships 
comprising 
eight 
vessels. 
The 
order 
book 
at 
the 
end 
of 
the 
year 
decreased 
by 
24% 
to 
EUR 
257 
million 
(338). 
Net 
sales 
decreased 
by 
24% 
to 
EUR 
181 
million 
(236) 
compared 
to 
the 
previous 
year. 
COVID 
-19 
lowered 
activity, 
particularly 
in 
the 
Water 
& 
Waste 
and 
Entertainment 
Systems 
business 
units, 
where 
especially 
the 
cruise 
segment 
was 
heavily 
affected. 
The 
comparable 
operating 
result 
amounted 
to 
EUR 
-6 
million 
(0) 
or 
-3.1% 
of 
net 
sales 
(0.1). 
Items 
affecting 
comparability 
amounting 
to 
EUR 
24 
million 
were 
recognised 
during 
the 
year 
largely 
as 
a 
result 
of 
the 
divestments 
of 
Wärtsilä 
JOVYATLAS 
GmbH 
and 
Wärtsilä 
Valves 
Ltd. 
Divestments 
In 
September, 
Wärtsilä 
announced 
the 
divestment 
of 
100% 
of 
the 
shares 
in 
Wärtsilä 
JOVYATLAS 
GmbH 
to 
Jacob 
Waitz 
Industrie 
GmbH, 
a 
German 
based 
industry 
holding. 
The 
Wärtsilä 
JOVYATLAS 
offering 
consists 
of 
UPS 
systems, 
rectifiers, 
power 
inverters, 
frequency 
transformers 
, 
and 
resistors 
with 
related 
services. 
The 
company, 
which 
became 
part 
of 
Wärtsilä 
as 
a 
result 
of 
the 
acquisition 
of 
L 
-3 
Communications 
MSI 
in 
2015, 
is 
located 
in 
Jemgum 
in 
Germany 
and 
currently 
has 
some 
125 
employees. 
In 
2019, 
its 
annual 
revenues 
were 
EUR 
20 
million. 
The 
divestment 
is 
driving 
Wärtsilä’s 
focus 
on 
creating 
a 
stronger 
and 
simpler 
core 
business. 
In 
October, 
Wärtsilä 
announced 
the 
divestment 
of 
100% 
of 
the 
shares 
in 
Wärtsilä 
Valves 
Ltd 
to 
an 
affiliate 
of 
Evergreen 
Capital 
L.P., 
based 
in 
New 
York, 
US 
A. 
Its 
activities 
include 
engineering, 
assembly, 
testing, 
sales 
, 
and 
delivery 
of 
nickel 
aluminium 
bronze 
(NAB) 
and 
duplex 
valves 
for 
the 
marine, 
oil 
and 
gas 
, 
and 
energy 
markets. 
Additionally, 
it 
offers 
applications 
for 
Valves’ 
products, 
including 
FPSO, 
petrochemical 
facilities, 
power 
generation, 
LNG, 
naval 
marine, 
marine 
services, 
waste 
water 
treatment 
plants 
, 
and 
pipelines. 
Wärtsilä 
Valves 
became 
part 
of 
Wärtsilä 
as 
a 
result 
of 
the 
Hamworthy 
acquisition 
in 
2012. 
The 
company 
is 
located 
in 
Brough, 
UK 
and 
currently 
has 
approximately 
65 
e 
mployees. 
The 
annual 
revenues 
were 
approximately 
EUR 
15 
million 
in 
2019. 
In 
December, 
Wärtsilä 
closed 
the 
divestment 
of 
Wärtsilä 
ELAC 
Nautik 
GmbH 
(ELAC 
Nautik) 
to 
Cohort 
plc, 
a 
UK 
listed 
company, 
specialising 
in 
defence, 
security 
and 
related 
market 
sectors. 
ELAC 
Nautik 
became 
part 
of 
Wärtsilä 
as 
a 
result 
of 
the 
acquisition 
of 
L 
-3 
Communications 
MSI 
in 
2015. 
Its 
main 
market 
focus 
is 
on 
hydroacoustic 
products, 
including 
sonars, 
underwater 
communication 
and 
echo 
systems 
for 
small 
and 
medium 
sized 
military 
submarines. 
The 
company 
is 
located 
in 
Kiel, 
Germany 
and 
employs 
125 
people. 
The 
annual 
revenues 
were 
approximately 
EUR 
20 
million 
in 
2019. 
Risks 
and 
business 
uncertainties 
The 
COVID 
-19 
pandemic 
and 
the 
measures 
taken 
to 
contain 
its 
spread 
represent 
the 
main 
sh 
ort 
-term 
risk 
to 
business 
operations 
and 
the 
demand 
environment, 
impacting 
global 
energy 
consumption, 
seaborne 
trade, 
as 
well 
as 
consumer 
confidence 
in 
cruise 
and 
ferry 
transportation. 
Mobility 
restrictions 
continue 
to 
affect 
business 
activities, 
project 
delivery 
schedules, 
and 
the 
ability 
to 
perform 
service 
activities. 
Disruptions 
to 
global 
supply 
chains 
resulting 
from 
new 
waves 
of 
COVID 
-19 
infections 
are 
a 
risk 
for 
both 
factory 
activity 
and 
the 
delivery 
of 
spare 
parts 
and 
services. 
Although 
vaccinations 
a 
gainst 
COVID 
-19 
have 
started 
in 
many 
countries, 
there 
is 
still 
significant 
uncertainty 
over 
the 
duration 
of 
the 
pandemic 
and 
how 
quickly 
country 
level 
vaccination 
program 
mes 
will 
be 
implemented 
on 
a 
global 
scale. 
In 
the 
marine 
markets, 
the 
risk 
of 
a 
prolonged 
period 
of 
weak 
demand 
affects 
the 
investment 
decisions 
of 
shipowners 
and 
operators, 
who 
are 
forced 
to 
re 
-evaluate 
their 
strategies 
related 
to 
both 
vessel 
newbuilding 
and 
existing 
fleets, 
and 
to 
cut 
capital 
and 
operational 
expenditures. 
The 
prevailing 
market 
conditions 
may 
result 
in 
continued 
price 
pressure 
and 
an 
elevated 
risk 
of 
order 
cancellations 
or 
slippage. 
Surplus 
capacity 
can 
drive 
further 
consolidation 
among 
shipyards, 
ship 
owners, 
and 
operators 
in 
certain 
segments, 
which 
may 
result 
in 
lower 
capture 
rates 
in 
services 
and 
equipment 
sales 
due 
to 
changed 
customer 
relationships. 
Extensions 
of 
no 
-sail 
orders, 
the 
limited 
ability 
or 
desire 
of 
people 
to 
travel, 
and 
the 
escalation 
of 
COVID 
-19 
cases 
are 
a 
risk 
for 
recovery 
in 
the 
cruise 
and 
ferry 
markets. 
In 
the 
offshore 
industry, 
crude 
oil 
price 
volatility 
is 
pushing 
the 
oil 
majors 
to 
reduce 
their 
spending, 
exploration 
activity, 
and 
operational 
costs, 
leading 
to 
an 
increasing 
number 
of 
laid 
-up 
drilling 
units 
and 
support 
vessels. 
The 
average 
price 
spread 
b 
etween 
high 
- 
and 
low-
sulphur 
fuels 
is 
projected 
to 
remain 
narrow 
in 
the 
near 
term, 
negatively 
impacting 
the 
scrubber 
investment 
case 
for 
both 
the 
existing 
fleet 
and 
newbuilds.
 
At 
the 
same 
time, 
the 
low 
oil 
price 
is 
widening 
the 
price 
differential 
between 
existing 
fuels 
and 
green 
alternatives. 
This 
, 
combined 
with 
the 
market 
challenges 
shipowners 
are 
facing 
, 
further 
raises 
the 
importance 
of 
a 
clear 
and 
foreseeable 
development 
of 
the 
regulatory 
environment 
as 
a 
fundamental 
condition 
to 
the 
decarbonisation 
of 
shipping.
 
In 
the 
e 
nergy 
markets, 
the 
slowdown 
in 
economic 
activity, 
currency 
fluctuations, 
and 
potential 
financing 
constraints 
are 
likely 
to 
postpone 
investment 
decisions 
on 
new 
power 
generation 
capacity. 
The 
energy 
transition 
may 
temporarily 
slow 
down, 
as 
the 
focus 
is 
on 
containing 
the 
virus 
spread 
and 
mitigating 
its 
impacts. 
Agreed 
and 
proposed 
stimulus 
packages 
to 
accelerate 
renewable 
energy 
investments 
still 
include 
uncertainties 
about 
the 
allocation 
of 
funding. 
However, 
once 
stimulus 
measures 
are 
execut 
ed, 
the 
need 
for 
flexibility 
in 
power 
systems 
will 
be 
emphasi 
s 
ed. 
Changes 
in 
c 
limate 
polic 
ies 
and 
regulation 
s 
cause 
uncertainty 
in 
the 
markets 
, 
as 
they 
may 
impact 
customers’ 
technology 
choices. 
Geopolitical 
tensions 
and 
trade 
barrier 
implications 
are 
also 
notable 
challenges 
to 
the 
demand 
environment. 
Price 

T

his

is

Wärtsilä

/

Sustainability

/

Governance

/

F

inancial

review

pressure

resulting

from

the

prevailing

competitive

environment

remains

a

risk.

The

Group

is

a

defendant

in

a

number

of

legal

cases

that

have

arisen

out

of,

or

are

incidental

to,

the

ordinary

course

of

its

business.

These

lawsuits

mainly

concern

issues

such

as

contractual

and

other

liability,

labour

relations,

property

damage,

and

regulatory

matters.

From

time

to

time,

the

Group

receives

claims

of

different

amounts

and

with

varying

degrees

of

substantiation.

There

is

currently

one

unusually

sizeable

claim.

It

is

the

Group’s

policy

to

provide

for

amounts

the

claims

as

well

as

for

litigation

and

arbitration

matters

when

an

unfavourable

outcome

is

probable

and

the

amount

of

loss

can

be

reasonably

estimated.

The

Risks

and

risk

management

section

of

the

annual

report

contains

a

more

detailed

description

of

Wärtsilä’s

risks

and

risk

management.

Shares

and

shareholders

In

2020

,

the

number

of

shares

traded

on

Nasdaq

Helsinki

was

635,449,872

,

equivalent

to

a

turnover

of

EUR

4,865

million.

Wärtsilä's

shares

are

also

traded

on

alternative

exchanges,

such

as

Turquoise,

BATS

CXE,

and

BATS

BXE.

The

total

trading

volume

on

these

alternative

exchanges

was

199,394,959

shares.

Wärtsilä

shares

on

Nasdaq

Helsinki

31.12.2020

Number

of

shares

and

votes

Number

of

shares

traded

1-12/2020

WRT1V

591,723,390

635,449,872

1.1.-

31.12.2020

High

Low

Average*

Close

Share

price

12.00

5.01

7.66

8.15

*Trade

-weighted

average

price

Market

capitalisation

31.12.2020

31.12.2019

MEUR

4,823

5,828

Foreign

shareholders

31.12.2020

31.12.2019

%

50.7

52.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
 
Decisions 
taken 
by 
the 
Annual 
General 
Meeting 
Wärtsilä’s 
Annual 
General 
Meeting, 
held 
on 
5 
March 
2020, 
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 
2019. 
The 
Annual 
General 
Meeting 
decided 
that 
the 
Board 
of 
Directors 
shall 
have 
eight 
members. 
The 
following 
were 
elected 
to 
the 
Board: 
Maarit 
Aarni 
-Sirviö, 
Karen 
Bomba, 
Karin 
Falk, 
Johan 
Forssell, 
Tom 
Johnstone, 
Risto 
Murto, 
Mats 
Rahmström 
and 
Markus 
Rauramo. 
The 
audit 
firm 
PricewaterhouseCoopers 
Oy 
was 
elected 
as 
the 
company’s 
auditor 
for 
the 
year 
2020. 
Dividend 
distribution 
The 
Annual 
General 
Meeting 
approved 
the 
Board 
of 
Directors’ 
proposal 
to 
pay 
a 
dividend 
of 
EUR 
0.48 
per 
share 
in 
two 
instalments. 
The 
first 
instalment 
of 
EUR 
0.24 
per 
share 
was 
paid 
on 
16 
March 
2020 
and 
the 
second 
instalment 
of 
EUR 
0.24 
per 
share 
on 
17 
September 
2020. 
Shareholders’ 
Nomination 
Board 
The 
Annual 
General 
Meeting 
decided 
to 
establish 
a 
Shareholders’ 
Nomination 
Board 
to 
prepare 
matters 
pertaining 
to 
the 
appointment 
and 
remuneration 
of 
the 
Board 
of 
Directors. 
It 
also 
adopted 
the 
proposed 
Charter 
of 
the 
Shareholders’ 
Nomination 
Board. 
The 
Charter 
is 
available 
on 
Wärtsilä 
Corporation’s 
website. 
The 
Nomination 
Board 
consists 
of 
five 
members. 
Four 
representatives 
are 
nominated 
by 
the 
company’s 
four 
largest 
shareholders, 
with 
the 
fifth 
member 
being 
the 
Chairman 
of 
Wärtsilä’s 
Board 
of 
Directors. 
The 
four 
largest 
shareholders 
are 
determined 
on 
the 
basis 
of 
the 
shareholders’ 
register 
maintained 
by 
Euroclear 
Finland 
Oy 
as 
of 
1 
June 
preceding 
the 
Annual 
General 
Meeting 
of 
shareholders. 
Flagging 
notifications 
Wärtsilä 
was 
informed 
of 
the 
following 
changes 
in 
ownership 
during 
2020 
: 
Transaction 
date 
Shareholder 
Treshold 
Direct 
holding, 
% 
Total 
holding, 
% 
24.3.2020 
BlackRock, 
Inc. 
Above 
5% 
4.85 
5.11 
31.3.2020 
BlackRock, 
Inc. 
Below 
5% 
4.30 
4.82 
1.4.2020 
BlackRock, 
Inc. 
Above 
5% 
4.48 
5.00 
2.4.2020 
BlackRock, 
Inc. 
Below 
5% 
4.37 
4.94 
25.5.2020 
BlackRock, 
Inc. 
Above 
5% 
4.48 
5.00 
26.5.2020 
BlackRock, 
Inc. 
Below 
5% 
Below 
5% 
Below 
5% 
18.6.2020 
BlackRock, 
Inc. 
Above 
5% 
4.69 
5.13 
15.7.2020 
BlackRock, 
Inc. 
Above 
5% 
5.02 
5.80 
23.7.2020 
BlackRock, 
Inc. 
Below 
5% 
4.88 
5.33 
24.7.2020 
BlackRock, 
Inc. 
Above 
5% 
5.12 
5.54 
27.7.2020 
BlackRock, 
Inc. 
Below 
5% 
4.98 
5.44 
28.7.2020 
BlackRock, 
Inc. 
Above 
5% 
5.01 
5.47 
29.7.2020 
BlackRock, 
Inc. 
Below 
5% 
4.95 
5.40 
31.7.2020 
BlackRock, 
Inc. 
Above 
5% 
5.04 
5.48 
5.8.2020 
BlackRock, 
Inc. 
Below 
5% 
4.99 
5.43 
6.8.2020 
BlackRock, 
Inc. 
Above 
5% 
5.08 
5.47 
11.8.2020 
BlackRock, 
Inc. 
Below 
5% 
4.96 
5.31 
11.9.2020 
BlackRock, 
Inc. 
Above 
5% 
5.03 
5.58 
18.9.2020 
BlackRock, 
Inc. 
Below 
5% 
4.78 
5.57 
21.10.2020 
BlackRock, 
Inc. 
Below 
5% 
Below 
5% 
Below 
5% 
14.12.2020 
BlackRock, 
Inc. 
Above 
5% 
4.89 
5.00 
15.12.2020 
BlackRock, 
Inc. 
Below 
5% 
Below 
5% 
Below 
5% 
 
 

T

his

is

Wärtsilä

/

Sustainability

/

Governance

/

F

inancial

review

0,30

0,33

0,35

0,38

0,40

0,43

0,46

0,48

0,20

0,00

0,25

0,50

0,75

1,00

11

12

13

14

15

16

17

18

19

20

EUR

Dividend

per

share

Earnings

per

share

The

following

members

were

appointed

to

Wärtsilä’s

Shareholders’

Nomination

Board:

●

Petra

Hedengran

(General

Counsel,

Investor

AB),

appointed

by

Invaw

Invest

AB

●

Reima

Rytsölä

(Deputy

CEO,

Investments,

Varma

Mutual

Pension

Insurance

Company),

appointed

by

Varma

Mutual

Pension

Insurance

Company

●

Mikko

Mursula

(Deputy

CEO,

Chief

Investment

Officer,

Ilmarinen

Mutual

Pension

Insurance

Company),

appointed

by

Ilmarinen

Mutual

Pension

Insurance

Company

●

Satu

Huber

(CEO,

Elo

Mutual

Pension

Insurance

Company),

appointed

by

Elo

Mutual

Pension

Insurance

Company

●

Tom

Johnstone

(Chairman

of

the

Board

of

Directors

of

Wärtsilä)

Authorisation

to

repurchase

the

company’s

own

shares

The

Board

of

Directors

was

authorised

to

resolve

to

repurchase

a

maximum

of

57,000,000

of

the

company’s

own

shares.

The

authorisation

to

repurchase

the

company’s

own

shares

shall

be

valid

until

the

close

of

the

General

Meeting,

however

no

longer

than

for

18

months

from

the

authorisation

of

the

shareholders’

meeting.

Authorisation

to

issue

shares

The

Board

of

Directors

was

authorised

to

resolve

to

issue

new

shares

or

transfer

shares

held

by

the

company.

The

maximum

amount

of

shares

to

be

so

issued

shall

not

exceed

57,000,000.

The

shares

can

be

issued

for

consideration

or

without

consideration.

They

can

also

be

issued

in

deviation

from

the

shareholders’

pre

-emptive

rights

by

way

of

a

directed

issue

if

there

is

a

weighty

financial

reason

for

the

company

to

do

so.

The

authorisation

for

the

Board

of

Directors

to

issue

shares

shall

be

valid

for

three

years

from

the

authorisation

of

the

shareholders’

meeting

and

it

cancels

the

authorisation

given

by

the

General

Meeting

on

7

March

2019

to

distribute

the

company’s

own

shar

es.

Organisation

of

the

Board

of

Directors

Convening

after

the

Annual

General

Meeting,

the

Board

of

Directors

elected

Tom

Johnstone

as

its

chairman

and

Markus

Rauramo

as

the

deputy

chairman.

The

Board

decided

to

establish

an

Audit

Committee

and

a

People

Committee.

The

Board

appointed

from

among

its

members

the

following

members

to

the

Committees:

Audit

Committee:

Chair

Markus

Rauramo,

Maarit

Aarni-

Sirviö,

Risto

Murto

People

Committee:

Chair

Maarit

Aarni

-Sirviö,

Johan

Forssell,

Tom

Johnstone

WÄRTSILÄ'S

PROSPECTS

FOR

2021

Wärtsilä

expects

the

near

-

term

demand

environment

to

be

similar

to

that

of

the

corresponding

period

in

the

However,

visibility

remains

limited,

and

the

prevailing

market

conditions

make

the

outlook

uncertain.

BOARD

OF

DIRECTORS’

DIVIDEND

PROPOSAL

The

Board

of

Directors

proposes

that

a

dividend

of

EUR

0.20

per

share

be

paid

for

the

financial

year

2020.

The

parent

company’s

distributable

funds

total

EUR

974,008,736.28,

which

includes

EUR

264,838,387.72

in

net

profit

for

the

year.

There

are

591,723,390

shares

with

dividend

rights.

The

dividend

shall

be

paid

in

two

instalments.

The

first

instalme

nt

of

EUR

0.10

per

share

shall

be

paid

to

the

shareholders

who

are

registered

in

the

list

of

shareholders

maintained

by

Euroclear

Finland

Oy

on

the

dividend

record

date

of

8

March

2021.

The

payment

day

proposed

by

the

Board

for

this

instalment

is

15

March

2021.

The

second

instalment

of

EUR

0.10

per

share

shall

be

paid

in

September

202

1.

The

second

instalment

of

the

dividend

shall

be

paid

to

shareholders

who

are

registered

in

the

list

of

shareholders

maintained

by

Euroclear

Finland

Oy

on

the

dividend

record

day,

which,

together

with

the

payment

day,

shall

be

decided

by

the

Board

of

Directors

in

its

meeting

scheduled

for

9

September

202

1.

The

dividend

record

day

for

the

second

instalment

as

per

the

current

rules

of

the

Finnish

book

-entry

system

would

be

13

September

2021

and

the

dividend

payment

day

20

September

202

1

.

EVENTS

AFTER

THE

REVIEW

PERIOD

In

January

2021,

Wärtsilä

announced

the

divestment

of

100%

of

the

shares

in

its

Entertainment

business,

Wärtsilä

Funa

GmbH,

to

Videlio

SA,

a

French

public

limited

company.

Wärtsilä

Entertainment

is

engaged

in

the

field

of

design,

fabrication,

engineering

and

integration

of

entertainment

systems,

illumination,

light

control,

cabin

control,

broadcast

Dividend

The

free

share

issue

approved

by

Wärtsilä

Corporation’s

Annual

General

Meeting

on

8

March

2018

increased

the

total

number

of

Wärtsilä

shares

to

591,723,390.

Figures

for

the

comparison

periods

201

1-2017

have

been

adjusted

to

reflect

the

increased

number

of

shares.

T 
his 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
F 
inancial 
review 
 
and 
digital 
audio 
distribution 
and 
announcement 
systems 
for 
cruise 
vessels 
and 
entertainment 
parks. 
The 
company 
became 
p 
art 
of 
Wärtsilä 
as 
a 
result 
of 
the 
acquisition 
of 
L 
-3 
Communications 
MSI 
in 
2015 
and 
has 
172 
employees 
in 
five 
countries, 
with 
the 
majority 
being 
based 
in 
Emden, 
Germany. 
The 
annual 
revenues 
were 
approximately 
EUR 
50 
million 
in 
2020. 
 
 

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

FIVE

YEARS

IN

FIGURES

Wärtsilä

provides

certain

financial

performance

measures,

which

are

accounting

measures

that

are

not

defined

by

IFRS.

These

alternative

performance

measures,

such

as

comparable

operating

result,

comparable

adjusted

EBITA,

cash

flow

from

operating

activities,

and

gearing,

are

followed

and

used

by

management

to

measure

the

Group's

performance

and

financial

position.

In

addition,

Wärtsilä's

targets

of

financial

performance

are

linked

to

for

example

comparable

operating

result

and

gearing.

Thus,

these

alternative

performance

measures

provide

useful

information

to

the

capital

markets.

The

alternative

performance

measures

should

not

be

evaluated

in

isolation

from

the

corresponding

IFRS

measures.

The

alternative

performance

measure

calculation

definitions

are

disclosed

in

Calculations

of

financial

ratios.

Restated

MEUR

2020

2019

2018

2017*

2016

Net

sales

4,604

5,170

5,174

4,911

4,801

of

which

outside

Finland

%

97.9

98.5

98.9

97.7

97.5

Exports

from

Finland

1,702

1,933

2,145

1,953

1,804

Personnel

on

average

18,307

19,110

18,899

17,866

18,332

of

which

in

Finland

3,706

3,868

3,766

3,521

3,482

Order

book

5,057

5,878

6,166

5,100

4,696

From

the

consolidated

statement

of

income

Depreciation,

amortisation

and

impairment

174

180

130

134

138

Share

of

result

of

associates

and

joint

ventures

3

-9

13

14

Comparable

operating

result

275

457

577

576

583

as

a

percentage

of

net

sales

%

6.0

8.8

11.2

11.7

12.1

Operating

result

234

362

543

538

532

as

a

percentage

of

net

sales

%

5.1

7.0

10.5

11.0

11.1

Comparable

adjusted

EBITA

308

498

621

612

618

as

a

percentage

of

net

sales

%

6.7

9.6

12.0

12.5

12.9

Financial

income

and

expenses

-43

-47

-40

-47

-53

Profit

before

taxes

191

315

502

491

479

as

a

percentage

of

net

sales

%

4.2

6.1

9.7

10.0

Profit

for

the

financial

period

133

218

386

375

357

as

a

percentage

of

net

sales

%

2.9

4.2

7.5

7.6

7.4

From

the

consolidated

statement

of

financial

position

Non

-current

assets

2,427

2,518

2,369

2,285

2,116

Current

assets

3,706

3,797

3,690

3,363

3,275

Assets

held

for

sale

99

82

-

Total

equity

attributable

to

equity

holders

of

the

parent

company

2,177

2,396

2,418

2,352

2,288

Non

-controlling

interests

11

14

24

34

Interest

-bearing

debt

1,327

1,096

823

619

629

Non

-interest

-bearing

liabilities

2,648

2,824

2,804

2,653

2,441

Liabilities

directly

attributable

to

assets

held

for

sale

68

-

Total

equity

and

liabilities

6,232

6,398

6,059

5,648

5,391

From

the

consolidated

statement

of

cash

flows

Cash

flow

from

operating

activities

681

232

470

430

613

Cash

flow

from

investing

activities

-55

-95

-240

-235

-126

Cash

flow

from

financing

activities

-44

-256

-118

-278

-339

Gross

capital

expenditure

117

122

306

255

146

as

a

percentage

of

net

sales

%

2.5

2.4

5.9

5.2

3.0

Research

and

development

expenditure

153

164

165

141

131

as

a

percentage

of

net

sales

%

3.3

3.2

2.9

2.7

Dividends

paid

118**

284

272

256

Financial

ratios

Earnings

per

share

(EPS),

basic

and

diluted***

EUR

0.23

0.37

0.65

0.63

0.60

Dividend

per

share***

EUR

0.20**

0.48

0.46

0.43

Dividend

per

earnings

%

88.2**

130.8

73.7

70.8

72.8

Interest

coverage

7.1

7.7

10.8

11.8

18.6

Return

on

investment

(ROI)

%

7.1

11.5

18.1

18.5

17.1

Return

on

equity

(ROE)

%

5.8

9.0

16.1

16.0

15.6

Solvency

ratio

%

38.1

40.8

44.4

46.3

47.6

Gearing

0.18

0.30

0.14

0.10

0.07

Equity

per

share***

EUR

3.68

4.05

4.09

3.97

3.87

Working

capital

(WCAP)

EUR

257

732

581

563

490

The

financial

ratios

include

assets

and

liabilities

pertaining

to

assets

held

for

sale.

*

Figures

in

the

comparison

period

2017

have

been

restated

due

to

the

adoption

of

IFRS

15.

**

Proposal

of

the

Board

of

Directors.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

***

Share

issue

without

payment

(share

split)

approved

by

Wärtsilä

Corporation’s

Annual

General

Meeting

on

8

March

2018

increased

the

total

number

of

Wärtsilä

shares

to

591,723,390.

Figures

in

the

comparison

periods

have

been

restated

accordingly.

QUARTERLY

FIGURES

MEUR

10–12/2020

7–9/2020

4–6/2020

1–3/2020

10–12/2019

7–9/2019

4–6/2019

1–3/2019

10–12/2018

Order

intake

Marine

Power*

440

410

391

496

656

449

632

509

Marine

Systems*

133

174

119

113

147

150

198

258

Voyage*

55

44

56

107

93

69

72

76

Wärtsilä

Marine

Business*

1,031

Energy*

469

319

390

475

585

260

435

489

843

Portfolio

Business*

21

34

55

57

74

51

40

83

Total

1,118

981

1,011

1,247

1,555

979

1,377

1,416

1,874

Order

book

at

the

end

of

the

financial

period**

Marine

Power*

1,839

1,908

1,913

1,967

2,019

1,981

1,976

1,800

Marine

Systems*

857

872

902

1,051

1,232

1,377

1,471

1,516

Voyage*

275

289

305

304

274

265

252

257

Wärtsilä

Marine

Business*

3,651

Energy*

1,830

1,865

1,939

2,087

2,014

2,023

2,120

2,043

2,515

Portfolio

Business*

257

331

341

336

338

336

338

361

Total

5,057

5,265

5,401

5,745

5,878

5,982

6,157

5,977

6,166

Net

sales

Marine

Power*

489

382

420

457

603

430

447

443

Marine

Systems*

167

169

238

234

279

244

237

192

Voyage*

68

54

56

69

82

60

73

65

Wärtsilä

Marine

Business*

831

Energy*

465

347

457

351

648

328

400

403

701

Portfolio

Business*

30

43

48

59

71

56

60

49

Total

1,220

995

1,220

1,170

1,684

1,118

1,217

1,151

1,532

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Share

of

result

of

associates

and

joint

ventures

0

1

-2

-6

-1

3

Comparable

adjusted

EBITA

111

69

63

65

213

49

123

113

237

as

a

percentage

of

net

sales

9.1

7.0

5.2

5.6

12.6

4.4

10.1

9.8

15.4

Depreciation,

amortisation

and

impairment

-49

-47

-38

-39

-58

-42

-41

-37

Purchase

price

allocation

amortisation

-8

-9

-10

-11

Comparable

operating

result

103

61

55

56

202

39

113

102

226

as

a

percentage

of

net

sales

8.4

6.1

4.5

4.8

12.0

3.5

9.3

8.9

14.7

Items

affecting

comparability,

total

-13

-18

-6

-4

-39

-28

-17

-11

-20

Operating

result

90

43

49

52

164

11

96

91

206

as

a

percentage

of

net

sales

7.4

4.3

4.0

4.5

9.7

1.0

7.9

13.4

Financial

income

and

expenses

-12

-9

-13

-9

-11

-13

-12

Profit

before

taxes

78

34

36

43

153

83

78

194

Income

taxes

-23

-9

-12

-14

-51

-5

-21

-19

-41

Profit

for

the

financial

period

55

25

23

29

102

-5

62

59

153

Earnings

per

share

(EPS),

basic

and

diluted,

EUR

0.10

0.04

0.05

0.17

-0.01

0.11

0.10

0.25

Gross

capital

expenditure

38

25

27

44

24

32

23

48

Investments

in

securities

and

acquisitions

1

2

4

-1

Cash

flow

from

operating

activities

274

114

252

42

295

-61

-37

35

349

Working

capital

(WCAP)

at

the

end

of

the

financial

period

257

431

492

660

732

870

784

656

581

Personnel

at

the

end

of

the

financial

period***

Marine

Power*

8,355

8,412

8,674

8,934

8,820

8,962

9,005

8,881

Marine

Systems*

1,897

1,891

1,846

1,862

1,870

1,828

1,887

1,882

Voyage*

1,915

1,946

1,917

1,939

1,889

1,875

1,849

1,852

Wärtsilä

Marine

Business*

13,582

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Energy*

4,888

4,837

4,799

4,819

5,137

5,295

5,449

5,513

5,712

Portfolio

Business*

737

1,097

1,098

1,088

1,080

1,058

1,050

1,096

Total

17,792

18,183

18,334

18,642

18,795

19,018

19,239

19,225

19,294

*

The

segment

figures

for

2018

have

been

restated

to

reflect

the

organisational

structure,

which

was

in

place

during

2019.

The

segment

figures

for

2019

and

1

-3/2020

have

been

restated

to

reflect

the

new

organisational

structure

effective

as

of

1

July

2020.

**

During

2019,

Wärtsilä

implemented

stricter

requirements

for

the

booking

of

new

orders,

which

resulted

in

certain

projects

being

removed

from

the

Energy

business’

order

book.

The

order

book

for

the

first

three

quarters

of

2019

has

been

adjusted

to

reflect

this

change.

***

Comparison

figures

have

been

adjusted

to

reflect

the

business

unit

composition

of

the

Portfolio

Business

and

a

change

in

allocation

principles.

CALCULATIONS

OF

FINANCIAL

RATIOS

Operating

result

Net

sales

+

other

operating

income

–

expenses

–

depreciation,

amortisation

and

impairment

+/

–

share

of

result

of

associates

and

joint

ventures

Earnings

per

share

(EPS),

basic

and

diluted

Profit

for

the

financial

period

attributable

to

equity

holders

of

the

parent

company

Adjusted

number

of

shares,

average

over

the

financial

period

Items

affecting

comparability

Certain

income

and

expenses

are

presented

as

items

affecting

comparability

when

they

have

significant

impact

on

the

consolidated

statement

of

income.

Items

affecting

comparability

consist

of

income

and

expenses,

which

result

from

restructuring

activities

aiming

to

adjust

the

capacity

of

Wärtsilä’s

operations.

They

may

also

include

other

income

and

expenses

incurred

outside

Wärtsilä’s

normal

course

of

business,

such

as

impairment

charges,

acquisition

settlements

recorded

as

a

result

of

legal

proceedings

with

third

parties

or

unforeseen

obligations

from

earlier

discontinued

businesses.

Comparable

operating

result

Operating

result

–

items

affecting

comparability

Comparable

adjusted

EBITA

Operating

result

–

items

affecting

comparability

–

purchase

price

allocation

amortisation

Gross

capital

expenditure

Investments

in

securities

and

acquisitions

+

investments

in

intangible

assets

and

property,

plant

and

equipment

Net

interest

-bearing

debt

Total

of

non-current

and

current

interest-bearing

debt

+

total

of

non-current

and

current

lease

liabilities

–

interest-bearing

receivables

–

cash

and

cash

equivalents

Equity

per

share

Equity

attributable

to

equity

holders

of

the

parent

company

Adjusted

number

of

shares

at

the

end

of

the

financial

period

Solvency

ratio

Equity

x

100

Total

equity

and

liabilities

–

advances

received

Gearing

Interest

-bearing

liabilities

–

cash

and

cash

equivalents

Equity

Return

on

investment

(ROI)

Profit

before

taxes

+

interest

and

other

financial

expenses

x

100

Total

equity

and

liabilities

–

non-interest

-bearing

liabilities

–

provisions,

average

over

financial

period

 
 
 
 
 
 
 
This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
Return 
on 
equity 
(ROE) 
Profit 
for 
the 
financial 
period 
 
x 
100 
Equity, 
average 
over 
the 
financial 
period 
 
Order 
intake 
Total 
amount 
of 
orders 
received 
during 
the 
financial 
period 
to 
be 
delivered 
either 
during 
the 
current 
financial 
period 
or 
thereafter. 
 
Order 
book 
The 
presentation 
in 
value 
of 
orders 
that 
are 
placed 
by 
customers 
but 
not 
yet 
delivered. 
For 
service 
agreements, 
only 
the 
expected 
net 
sales 
for 
the 
next 
24 
months 
are 
included 
in 
the 
order 
book. 
 
Working 
capital 
(WCAP) 
(Inventories 
+ 
trade 
receivables 
+ 
current 
tax 
receivables 
+ 
other 
non 
-interest 
-be 
aring 
receivables) 
– 
(trade 
payables 
+ 
advances 
received 
+ 
pension 
obligations 
+ 
provisions 
+ 
current 
tax 
liabilities 
+ 
other 
non-
interest 
-bearing 
liabilities 
– 
dividend 
payable) 
 
Interest 
coverage 
Profit 
before 
taxes 
+ 
depreciation, 
amortisation 
and 
impai 
rment 
+ 
interest 
and 
other 
financial 
expenses 
Interest 
and 
other 
financial 
expenses 
 
Dividend 
per 
share 
Dividends 
paid 
for 
the 
financial 
period 
Adjusted 
number 
of 
shares 
at 
the 
end 
of 
the 
financial 
period 
 
Dividend 
per 
earnings 
Dividend 
per 
share 
 
x 
100 
Earnings 
per 
share 
(EPS), 
basic 
and 
diluted 
 
Effective 
dividend 
yield 
Dividend 
per 
share 
 
x 
100 
Adjusted 
share 
price 
at 
the 
end 
of 
the 
financial 
period 
 
Price/earnings 
(P/E) 
Adjusted 
share 
price 
at 
the 
end 
of 
the 
financial 
period 
Earnings 
per 
share 
(EPS), 
basic 
and 
diluted 
 
Price/carrying 
amount 
per 
share 
(P/BV) 
Adjusted 
share 
price 
at 
the 
end 
of 
the 
financial 
period 
Equity 
per 
share 
 
 

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

FINANCIAL

STATEMENTS

CONSOLIDATED

FINANCIAL

STATEMENTS

CONSOLIDATED

STATEMENT

OF

INCOME

MEUR

2020

2019

Note

Net

sales

4,604

5,170

2.1.,

2.2.

Change

in

inventories

of

finished

goods

&

work

in

progress

-104

137

Work

performed

by

the

Group

and

capitalised

19

18

Other

operating

income

61

67

2.3.

Material

and

services

-2,551

-3,003

2.4.

Employee

benefit

expenses

-1,192

-1,260

2.5.

Result

from

net

position

hedges

-1

Depreciation,

amortisation

and

impairment

-174

-180

3.5.

Other

operating

expenses

-431

-578

2.3.

Share

of

result

of

associates

and

joint

ventures

3

-9

6.4.

Operating

result

234

362

as

a

percentage

of

net

sales

5.1

7.0

Financial

income

16

27

5.1.

Financial

expenses

-59

-74

5.1.

Profit

before

taxes

191

315

Income

taxes

-58

-97

2.6.

Profit

for

the

financial

period

133

218

Attributable

to:

equity

holders

of

the

parent

company

134

217

2.7.

non-controlling

interests

-1

1

133

218

Earnings

per

share

attributable

to

equity

holders

of

the

parent

company

(basic

and

diluted):

Earnings

per

share

(EPS),

basic

and

diluted,

EUR

0.23

0.37

2.7.

The

notes

are

an

integral

part

of

these

consolidated

financial

statements.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

CONSOLIDATED

STATEMENT

OF

COMPREHENSIVE

INCOME

MEUR

2020

2019

Note

Profit

for

the

financial

period

133

218

Other

comprehensive

income,

net

of

taxes:

Items

that

will

not

be

reclassified

to

the

statement

of

income

Remeasurements

of

defined

benefit

liabilities

6

-20

Tax

on

items

that

will

not

be

reclassified

to

the

statement

of

income

-1

5

Total

items

that

will

not

be

reclassified

to

the

statement

of

income

5

-16

Items

that

may

be

reclassified

subsequently

to

the

statement

of

income

Exchange

rate

differences

on

translating

foreign

operations

for

equity

holders

of

the

parent

company

-74

42

for

non-controlling

interests

-1

transferred

to

the

statement

of

income

-6

Associates

and

joint

ventures,

share

of

other

comprehensive

income

-2

-1

Cash

flow

hedges

measured

at

fair

value

-3

4

5.5.

transferred

to

the

statement

of

income

6

19

Tax

on

items

that

may

be

reclassified

to

the

statement

of

income

Cash

flow

hedges

transferred

to

the

statement

of

income

-1

-4

Total

items

that

may

be

reclassified

to

the

statement

of

income

-81

60

Other

comprehensive

income

for

the

financial

period,

net

of

taxes

-76

45

Total

comprehensive

income

for

the

financial

period

57

263

Total

comprehensive

income

attributable

to:

equity

holders

of

the

parent

company

59

262

non-controlling

interests

-1

1

57

263

The

notes

are

an

integral

part

of

these

consolidated

financial

statements.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

CONSOLIDATED

STATEMENT

OF

FINANCIAL

POSITION

MEUR

31.12.2020

31.12.2019

Note

Assets

Non

-current

assets

Goodwill

1,325

1,380

3.1.

Intangible

assets

391

397

3.2.

Property,

plant

and

equipment

282

307

3.3.

Right

-of

-use

assets

162

185

3.4.

Investments

in

associates

and

joint

ventures

23

42

6.4.

Other

investments

19

18

5.2.

Interest

-bearing

investments

1

5.2.

Deferred

tax

assets

183

155

4.6.

Trade

receivables

30

19

4.2.,

5.2.

Other

receivables

11

15

4.3.

Total

non

-current

assets

2,427

2,518

Current

assets

Inventories

1,192

1,365

4.1.

Trade

receivables

922

1,237

4.2.,

5.2.

Current

tax

receivables

27

42

Contract

assets

389

515

4.2.

Other

receivables

258

281

4.3.

Cash

and

cash

equivalents

919

358

5.3.,

5.4.

Total

current

assets

3,706

3,797

Assets

held

for

sale

99

82

6.3.

Total

assets

6,232

6,398

Equity

and

liabilities

Equity

Share

capital

336

5.5.

Share

premium

61

5.5.

Translation

differences

-197

-114

5.5.

Fair

value

reserve

-9

-11

5.5.

Remeasurements

of

defined

benefit

liabilities

-45

-55

4.7.

Retained

earnings

2,030

2,178

Total

equity

attributable

to

equity

holders

of

the

parent

company

2,177

2,396

Non

-controlling

interests

11

14

Total

equity

2,188

2,410

Liabilities

Non

-current

liabilities

Interest

-bearing

debt

1,129

997

5.2.,

5.4.,

5.6.

Deferred

tax

liabilities

76

83

4.6.

Pension

obligations

139

155

4.7.

Provisions

55

45

4.5.

Contract

liabilities

51

38

4.2.

Other

liabilities

1

3.4.,

4.4.

Total

non

-current

liabilities

1,451

1,317

Current

liabilities

Interest

-bearing

debt

198

99

5.2.,

5.4.,

5.6.

Provisions

269

278

4.5.

Trade

payables

411

624

4.4.,

5.2.,

5.6.

Current

tax

liabilities

56

100

Contract

liabilities

926

880

4.2.

Other

liabilities

664

622

3.4.,

4.4.

Total

current

liabilities

2,524

2,603

Total

liabilities

3,975

3,920

Liabilities

directly

attributable

to

assets

held

for

sale

68

6.3.

Total

equity

and

liabilities

6,232

6,398

The

notes

are

an

integral

part

of

these

consolidated

financial

statements.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

CONSOLIDATED

STATEMENT

OF

CASH

FLOWS

MEUR

2020

2019

Note

Cash

flow

from

operating

activities:

Profit

for

the

financial

period

133

218

Adjustments

for:

Depreciation,

amortisation

and

impairment

174

180

3.5.

Financial

income

and

expenses

43

47

5.1.

Gains

and

losses

on

sale

of

intangible

assets

and

property,

plant

and

equipment

and

other

changes

-9

-15

Share

of

result

of

associates

and

joint

ventures

-3

9

6.4.

Income

taxes

58

97

2.6.

Other

non-cash

flow

adjustments

7

3

Cash

flow

before

changes

in

working

capital

403

540

Changes

in

working

capital:

Receivables,

non-interest

-bearing,

increase

(-)

/

decrease

(+)

338

9

Inventories,

increase

(-)

/

decrease

(+)

122

-213

4.1.

Liabilities,

non-interest

-bearing,

increase

(+)

/

decrease

(-)

-32

74

Changes

in

working

capital

428

-130

Cash

flow

from

operating

activities

before

financial

items

and

taxes

832

410

Financial

items

and

taxes:

Interest

income

4

Interest

expenses

-14

-13

Other

financial

income

and

expenses

-19

-27

Income

taxes

paid

-122

-141

Financial

items

and

paid

taxes

-150

-178

Cash

flow

from

operating

activities

681

232

Cash

flow

from

investing

activities:

Acquisitions

-1

-4

6.1.

Other

investments

-1

-2

5.2.

Investments

in

property,

plant

and

equipment

and

intangible

assets

-115

-116

3.2.,

3.3.

Proceeds

from

sale

of

property,

plant

and

equipment

and

intangible

assets

13

25

3.2.,

3.3.

Proceeds

from

sale

of

shares

in

subsidiaries

22

1

6.2.

Proceeds

from

sale

of

shares

in

associates

and

joint

ventures

27

6.4.

Cash

flow

from

investing

activities

-55

-95

Cash

flow

after

investing

activities

627

137

Cash

flow

from

financing

activities:

Proceeds

from

non-current

debt

317

150

Repayments

and

other

changes

in

non-current

debt

-76

-105

5.6.

Loan

receivables,

increase

(-)

/

decrease

(+)

1

2

Current

loans,

increase

(+)

/

decrease

(-)

0

-18

Dividends

paid

-286

-284

Cash

flow

from

financing

activities

-44

-256

Change

in

cash

and

cash

equivalents,

increase

(+)

/

decrease

(-)

582

-119

Cash

and

cash

equivalents

at

the

beginning

of

the

financial

period*

369

487

Exchange

rate

changes

-19

Cash

and

cash

equivalents

at

the

end

of

the

financial

period*

932

369

*

Cash

and

cash

equivalents

on

31

December

2020

and

31

December

2019

include

the

cash

and

cash

equivalents

pertaining

to

assets

held

for

sale.

The

notes

are

an

integral

part

of

these

consolidated

financial

statements.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
CONSOLIDATED 
STATEMENT 
OF 
CHANGES 
IN 
EQUITY 
 
Total 
equity 
attributable 
to 
equity 
holders 
of 
the 
parent 
company 
Non 
- 
controlling 
interests 
Total 
equity 
MEUR 
Share 
capital 
Share 
premium 
Translation 
difference 
Fair 
value 
reserve 
Remeas 
- 
urements 
of 
defined 
benefit 
liabilities 
Retained 
earnings 
Total 
Equity 
on 
1 
January 
2019 
336
61
-155
-31
-39
2,245
2,418
14
2,432
Translation 
differences 
41
41
41
Cash 
flow 
hedges 
net 
change 
in 
fair 
value, 
net 
of 
taxes 
4
4
4
transferred 
to 
the 
statement 
of 
income, 
net 
of 
taxes 
16
16
16
Defined 
benefit 
plans 
-16
-16
-16
Other 
comprehensive 
income 
41
20
-16
45
45
Profit 
for 
the 
financial 
period 
217
217
1
218
Total 
comprehensive 
income 
for 
the 
financial 
period 
41
20
-16
217
262
1
263
Dividends 
paid 
-284
-284
-1
-285
Equity 
on 
31 
December 
2019 
336
61
-114
-11
-55
2,178
2,396
14
2,410

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Total

equity

attributable

to

equity

holders

of

the

parent

company

Non

-

controlling

interests

Total

equity

MEUR

Share

capital

Share

premium

Translation

difference

Fair

value

reserve

Remeas

-

urements

of

defined

benefit

liabilities

Retained

earnings

Total

Equity

on

1

January

2020

336

61

-114

-11

-55

2,178

2,396

14

2,410

Translation

differences

-76

-1

-77

Translation

differences,

transferred

to

statement

of

income

-6

Cash

flow

hedges

net

change

in

fair

value,

net

of

taxes

-3

transferred

to

the

statement

of

income,

net

of

taxes

5

Defined

benefit

plans

5

Other

changes

5

-5

Other

comprehensive

income

-82

2

10

-5

-75

-1

-76

Profit

for

the

financial

period

134

-1

133

Total

comprehensive

income

for

the

financial

period

-82

2

10

129

59

-1

57

Dividends

paid

-284

-2

-286

Other

changes

7

Equity

on

31

December

2020

336

61

-197

-9

-45

2,030

2,177

11

2,188

Additional

information

on

share

capital,

share

premium,

translation

difference

and

fair

value

reserve

is

presented

in

Note

5.

Equity.

The

notes

are

an

integral

part

of

these

consolidated

financial

statements.

This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
 
 
NOTES 
TO 
THE 
CONSOLIDATED 
FINANCIAL 
STATEMENTS 
 
1. 
ACCOUNTING 
PRINCIPLES 
FOR 
THE 
CONSOLIDATED 
FINANCIAL 
STATEMENTS 
 
1.1. 
BASIC 
INFORMATION 
Wärtsilä Corporation
 
is 
a 
Finnish 
listed company
 
organised 
under 
the 
laws 
of 
Finland
 
and 
domiciled 
in 
Helsinki
. 
The 
address 
of 
its 
registered 
office 
is 
Hiililaiturinkuja 2, 00180 Helsinki
. 
Wärtsilä Corporation
 
is 
the 
ultimate 
parent 
company 
in 
the 
Wärtsilä 
Group. 
 
Wärtsilä is a global leader in smart technologies and complete lifecycle solutions for the marine and energy 
markets. By emphasising sustainable innovation, total efficiency and data analytics, Wärtsilä maximises the 
environmental and economic performance of the vessels and power plants of its customers.
 
 
In 
2020, 
Wärtsilä
’s 
net 
sales 
totalled 
EUR 
4.6 
billion 
with 
approximately 
18,000 
employees. 
The 
company 
has 
operations 
in 
over 
200 
locations 
in 
more 
than 
70 
countries 
around 
the 
world. 
Wärtsilä 
is 
listed 
on 
Nasdaq 
Helsinki. 
 
These 
consolidated 
financial 
statements 
were 
authorised 
for 
release 
by 
the 
Board 
of 
Directors 
of 
Wärtsilä 
Corporation
 
on 
27 
January 
2021, 
after 
which, 
in 
accordance 
with 
the 
Finnish 
Corporate 
Act, 
the 
shareholders 
have 
a 
right 
to 
approve 
or 
reject 
the 
financial 
statements 
in 
the 
Annual 
General 
Meeting. 
The 
Annual 
General 
Meeting 
also 
has 
the 
possibility 
to 
decide 
upon 
changes 
to 
the 
financial 
statements. 
 
1.2. 
BASIS 
OF 
PREPARATION 
The 
consolidated 
financial 
statements 
are 
prepared 
in 
accordance 
with 
the 
International 
Financial 
Reporting 
Standards 
(IFRS) 
by 
applying 
IAS 
and 
IFRS 
standards 
and 
their 
SIC 
and 
IFRIC 
interpretations, 
which 
were 
in 
force 
on 
31 
December 
2020. 
International 
Financial 
Reporting 
Standards 
refer 
to 
the 
standards, 
and 
their 
interpretations, 
approved 
for 
application 
in 
the 
EU 
in 
accordance 
with 
the 
procedures 
stipulated 
in 
the 
EU’s 
regulation 
(EC) 
No. 
1606/2002 
and 
embodied 
in 
Finnish 
accounting 
legislation 
and 
the 
statutes 
enacted 
under 
it. 
The 
notes 
to 
the 
consolidated 
financial 
statements 
also 
comply 
with 
the 
Finnish 
accounting 
and 
corporate 
legislation. 
 
All 
intragroup 
transactions, 
dividend 
distributions, 
receivables 
and 
liabilities, 
as 
well 
as 
unrealised 
margins, 
are 
eliminated 
in 
the 
consolidated 
financial 
statements. 
In 
the 
consolidated 
statements 
of 
income 
and 
comprehensive 
income, 
non-controlling 
interests 
have 
been 
separated 
from 
the 
profit 
and 
the 
total 
comprehensive 
income 
for 
the 
financial 
period. 
In 
t 
he 
consolidated 
statement 
of 
financial 
position, 
non-
controlling 
interests 
are 
shown 
as 
a 
separate 
item 
under 
equity. 
 
Reporting 
is 
based 
on 
the 
historical 
cost 
convention. 
Exceptions 
are 
the 
financial 
assets 
and 
liabilities 
at 
fair 
value 
through 
the 
statement 
of 
income, 
the 
assets 
and 
liabilities 
arising 
from 
pension 
plans, 
hedged 
items 
under 
fair 
value 
hedging, 
the 
cash 
- 
and 
share 
-settled 
share 
-based 
payment 
transactions 
which 
are 
measured 
at 
fair 
value, 
and 
assets 
held 
for 
sale 
which 
are 
measured 
at 
the 
lower 
of 
the 
carrying 
amount 
and 
the 
fair 
value 
less 
costs 
to 
sell. 
The 
figures 
are 
in 
millions 
of 
euros 
except 
Note 
7.2. 
Related 
party 
disclosures, 
which 
is 
presented 
in 
thousands 
of 
euros. 
 
1.3. 
NEW 
AND 
AMENDED 
IFRS 
STANDARDS 
In 
2020, 
the 
Group 
has 
adopt 
ed 
the 
following 
amended 
standards 
issued 
by 
the 
IASB. 
 
Amendments 
to 
IFRS 
3 
Business 
Combinations 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
January 
2020). 
The 
amendments 
are 
intended 
to 
assist 
entities 
to 
determine 
whether 
a 
transaction 
should 
be 
accounted 
for 
as 
a 
business 
combination 
or 
as 
an 
asset 
acquisition. 
The 
amendments 
clarify 
the 
minimum 
requirements 
for 
a 
business, 
remove 
the 
assessment 
of 
whether 
market 
participants 
are 
capable 
of 
replacing 
any 
missing 
elements, 
add 
guidance 
to 
help 
entities 
assess 
whether 
an 
acquired 
process 
is 
substantive, 
narrow 
the 
definitions 
of 
a 
business 
and 
of 
outputs, 
and 
introduce 
an 
optional 
fair 
value 
concentration 
test. 
The 
amendments 
have 
no 
impact 
on 
the 
consolidated 
financial 
statements. 
 
Amendments 
to 
IAS 
1 
Presentation 
of 
Financial 
Statements 
and 
IAS 
8 
Accounting 
Policies, 
Changes 
in 
Accounting 
Estimates 
and 
Errors 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
January 
2020). 
The 
purpose 
of 
the 
amendments 
is 
to 
align 
the 
definition 
of 
‘material’ 
across 
the 
standards 
and 
to 
clarify 
certain 
aspects 
of 
the 
definition. 
The 
amendments 
clarify 
that 
materiality 
will 
depend 
on 
the 
nature 
or 
magnitude 
of 
information, 
or 
both. 
The 
amendments 
have 
no 
impact 
on 
the 
consolidated 
financial 
statements. 
 
Amendments 
to 
IFRS 
9 
Financial 
Instruments, 
IAS 
39 
Financial 
Instruments: 
Recognition 
and 
Measurement, 
and 
IFRS 
7 
Financial 
Instruments: 
Disclosures 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
January 
2020). 
These 
amendments 
provide 
certain 
reliefs 
in 
connection 
with 
interest 
rate 
benchmark 
reform. 
The 
reliefs 
relate 
to 
hedge 
accounting 
and 
have 
the 
effect 
that 
IBOR 
reform 
should 
not 
generally 
cause 
hedge 
accounting 
to 
terminate. 
Any 
hedge 
ineffectiveness 
should 
continue 
to 
be 
recognised 
in 
the 
statement 
of 
income. 
The 
amendments 
do 
not 
have 
a 
significant 
impact 
on 
the 
consolidated 
financial 
statements. 
 
Amendment 
to 
IFRS 
16 
Leases 
Covid 
-19 
-Related 
Rent 
Concessions 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
June 
2020). 
The 
amendment 
introduces 
an 
optional 
practical 
expedient 
that 
simplifies 
how 
a 
lessee 
accounts 
for 
rent 
concessions 
that 
are 
a 
direct 
consequence 
of 
the 
COVID-19 
pandemic. 
A 
lessee 
that 
applies 
the 
practical 
expedient 
is 
not 
required 
to 
assess 
whether 
eligible 
rent 
concessions 
are 
lease 
modifications 
when 
the 
criteria 
presented 
in 
the 
amendment 
are 
met. 
The 
amendment 
does 
not 
have 
a 
significant 
impact 
on 
the 
consolidated 
financial 
statements.

This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
 
In 
2021 
or 
later, 
the 
Group 
will 
adopt 
the 
following 
new 
or 
amended 
standar 
ds 
issued 
by 
the 
IASB. 
 
Amendments 
to 
IAS 
1 
Presentation 
of 
Financial 
Statements* 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
January 
2022). 
The 
amendments 
clarify 
that 
liabilities 
are 
classified 
as 
either 
current 
or 
non 
-current, 
depending 
on 
the 
rights 
that 
exist 
at 
the 
end 
of 
the 
reporting 
period. 
Classification 
is 
unaffected 
by 
the 
expectations 
of 
the 
entity 
or 
events 
after 
the 
reporting 
date. 
The 
amendments 
will 
have 
no 
impact 
on 
the 
consolidated 
financial 
statements. 
 
Amendments 
to 
IAS 
37: 
Provisions, 
Contingent 
Liabilities 
and 
Contingent 
Assets*
 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
January 
2022). 
The 
amendments 
specify 
which 
costs 
an 
entity 
needs 
to 
include 
when 
assessing 
whether 
a 
contract 
is 
onerous 
or 
loss 
-making. 
The 
amendments 
are 
intended 
to 
provide 
clarity 
and 
help 
to 
ensure 
consistent 
application 
of 
the 
standard. 
The 
amendments 
apply 
a 
directly 
related 
cost 
approach. 
The 
costs 
that 
relate 
directly 
to 
a 
contract 
to 
provide 
goods 
or 
services 
include 
both 
incremental 
costs 
and 
an 
allocation 
of 
costs 
directly 
related 
to 
contract 
activities. 
Judgement 
will 
be 
required 
in 
determining 
which 
costs 
are 
directly 
related 
to 
contract 
activities. 
The 
amendments 
are 
not 
expected 
to 
have 
a 
significant 
impact 
on 
the 
consolidated 
financial 
statements. 
 
Amendments 
to 
IAS 
16: 
Property, 
Plant 
and 
Equipment* 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
January 
2022). 
The 
amendments 
prohibit 
entities 
from 
deducting 
from 
the 
cost 
of 
an 
item 
of 
property, 
plant 
and 
equipment, 
any 
proceeds 
of 
the 
sale 
of 
items 
produced 
while 
bringing 
that 
asset 
to 
the 
location 
and 
condition 
necessary 
for 
it 
to 
be 
capable 
of 
operating 
in 
the 
manner 
intended 
by 
the 
management. 
The 
proceeds 
from 
selling 
such 
items 
and 
the 
costs 
of 
producing 
those 
items 
are 
recognised 
in 
the 
statement 
of 
income. 
The 
amendments 
will 
have 
no 
impact 
on 
the 
consolidated 
financial 
statements. 
 
IFRS 
17 
Insurance 
Contracts* 
(effective 
for 
financial 
periods 
beginning 
on 
or 
after 
1 
January 
2023). 
IFRS 
17 
applies 
to 
all 
types 
of 
insurance 
contracts 
(direct 
insurance 
and 
re 
-insurance) 
regardless 
of 
the 
type 
of 
entities 
that 
issue 
them, 
as 
well 
as 
to 
certain 
guarantees 
and 
financial 
instruments 
with 
discretionary 
participation 
features. 
The 
overall 
objective 
is 
to 
provide 
a 
consistent 
accounting 
model 
for 
insurance 
contracts. 
The 
impact 
is 
under 
review 
within 
the 
Group. 
 
* 
Not 
yet 
endorsed 
for 
use 
by 
the 
European 
Union 
as 
of 
31 
December 
2020 
 
1.4. 
MANAGEMENT 
JUDGEMENT 
AND 
USE 
OF 
ESTIMATES 
Preparation 
of 
the 
financial 
statements 
in 
accordance 
with 
the 
IFRS 
requires 
management 
to 
make 
judgements, 
estimates 
, 
and 
assumptions 
that 
affect 
the 
valuation 
of 
the 
reported 
assets 
and 
liabilities, 
as 
well 
as 
other 
information, 
such 
as 
contingent 
assets 
and 
liabilities 
and 
the 
recognition 
of 
income 
and 
expenses 
in 
the 
statement 
of 
income. 
Although 
these 
continuously 
evaluated 
judgements, 
estimates 
, 
and 
assumptions 
are 
based 
on 
management’s 
past 
experience 
and 
best 
knowledge 
of 
current 
events 
and 
actions 
, 
as 
well 
as 
expectations 
of 
future 
events, 
actual 
results 
may 
differ 
from 
the 
estimates. 
 
For 
Wärtsilä, 
the 
most 
significant 
judgements, 
estimates, 
and 
assumptions 
made 
by 
the 
management 
relate 
to 
the 
items 
listed 
below, 
more 
information 
can 
be 
found 
in 
the 
corresponding 
note: 
-
 
revenue 
recognition,
 
especially 
project 
estimates 
for 
long
-
term 
projects 
and 
agreements 
(
N
ote 
2.2. 
Revenue 
recognition), 
-
 
uncertain 
tax 
positions 
(Note 
2.6. 
Income 
taxes),
 
-
 
impairment 
testing 
(
N
ote 
3.1. 
Goodwill),
 
-
 
estimating 
useful 
lives 
and 
assessing 
indication 
of 
impairment
 
(
N
otes 
3.2. 
Other 
intangible 
assets 
and 
3.3. 
Property, 
plant 
and 
equi 
pment) 
, 
-
 
determining 
the 
length 
of 
lease 
terms 
(Note 
3.4. 
Leases),
 
-
 
valuation 
of 
inventories 
(Note 
4.1. 
Inventories),
 
-
 
valuation 
of 
trade 
receivables 
(
N
ote 
4.2. 
Trade 
receivables 
and 
contract
 
assets 
and 
liabilities),
 
-
 
recognition 
of 
warranty 
provisions 
and 
provisions 
for 
legal 
cases 
(
N
ote 
4.5. 
Provisions),
 
-
 
expected 
results 
on 
tax 
audits 
and 
deferred 
tax 
assets
 
from 
tax 
losses 
(
N
ote 
4.6. 
Deferred 
taxes)
, 
and
 
-
 
defined 
pension 
benefit 
obligations 
(
Note 
4.7. 
Pension 
obligations),
 
 
In 
addition, 
accounting 
for 
business 
combinations 
may 
require 
significant 
management 
judgement 
( 
Note 
6.1. 
Acquisitions). 
 
The 
COVID 
-19 
pandemic 
has 
caused 
Wärtsilä 
to 
review 
the 
estimates 
and 
assumptions 
used 
in 
the 
preparation 
of 
the 
consolidated 
financial 
statements. 
The 
possible 
impact 
of 
the 
situation 
caused 
by 
the 
coronavirus 
pandemic 
on 
the 
relevant 
factors 
in 
each 
estimate 
have 
been 
considered. 
The 
impact 
of 
the 
COVID- 
19 
pandemic 
on 
estimates 
in 
the 
financial 
reporting 
rely 
on 
management’s 
best 
judgement.

This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
 
2. 
GROUP 
FINANCIAL 
PERFORMANCE 
 
2.1. 
SEGMENT 
INFORMATION 
From 
1 
January 
to 
30 
June 
2020, 
Wärtsilä 
was 
organised 
into 
three 
business 
areas: 
Wärtsilä 
Marine 
Business, 
Wärtsilä 
Energy 
Business, 
and 
Portfolio 
Business. 
Wärtsilä 
Marine 
Business 
and 
Wärtsilä 
Energy 
Business 
constituted 
Wärtsilä’s 
operating 
and 
reportable 
segments, 
while 
Portfolio 
Business 
was 
reported 
as 
other 
business 
activities. 
 
Wärtsilä’s 
new 
organisational 
structure 
became 
operational 
on 
1 
July 
2020. 
In 
the 
new 
organisational 
structure, 
Wärtsilä 
Marine 
Power, 
Wärtsilä 
Marine 
Systems, 
Wärtsilä 
Voyage, 
and 
Wärtsilä 
Energy 
constitute 
the 
reportable 
segments 
of 
the 
Group, 
while 
Wärtsilä 
Portfolio 
Business 
continues 
to 
be 
reported 
as 
other 
business 
activities. 
The 
segments 
and 
other 
business 
activities 
cover 
both 
equipment 
sales 
and 
services 
for 
the 
respective 
business. 
 
Wärtsilä's 
highest 
operative 
decision 
maker 
(CODM, 
Chief 
Operating 
Decision 
Maker) 
is 
the 
President 
and 
CEO, 
with 
the 
support 
of 
the 
Board 
of 
Management, 
and 
in 
some 
cases 
the 
Board 
of 
Directors. 
 
Marine 
Power, 
Marine 
Systems, 
Voyage, 
Energy, 
and 
Portfolio 
Business 
are 
each 
led 
by 
their 
President. 
Discrete 
financial 
information 
for 
each 
business 
is 
provided 
to 
the 
CODM 
to 
support 
decision 
-making. 
The 
segment 
information 
presented 
by 
Wärtsilä 
reflects 
internal 
management 
reporting. 
Segment 
information 
is 
reported 
to 
the 
level 
of 
operating 
result, 
as 
items 
below 
operating 
result 
are 
not 
allocated 
to 
the 
business 
es. 
 
Internal 
sales 
between 
segments 
and 
other 
business 
activities 
are 
not 
reported 
in 
management 
reporting, 
but 
revenue 
and 
costs 
of 
sales 
are 
booked 
directly 
to 
the 
respective 
customer 
projects 
and 
orders. 
The 
main 
factors 
affecting 
the 
allocation 
of 
indirect 
and 
administration 
costs 
to 
the 
segments 
and 
other 
business 
activities 
are 
net 
sales 
and 
the 
number 
of 
personnel. 
Management 
considers 
these 
allocation 
principles 
to 
be 
the 
most 
suitable 
means 
for 
reflecting 
the 
costs 
carried 
by 
each 
segment 
and 
other 
business 
activities. 
The 
allocation 
principles 
are 
reviewed 
regularly. 
 
The 
aim 
of 
Wärtsilä 
is 
to 
lead 
the 
industry’s 
transformation 
towards 
a 
Smart 
Marine 
Ecosystem. 
Building 
on 
the 
sound 
foundation 
of 
being 
a 
leading 
provider 
of 
innovative 
products, 
integrated 
solutions, 
and 
lifecycle 
services 
to 
the 
marine 
and 
oil 
& 
gas 
industries, 
Wärtsilä 
aims 
to 
unlock 
new 
customer 
values 
through 
connectivity, 
digitalisation, 
and 
smart 
technology. 
 
Wärtsilä’s 
marine 
customer 
base 
covers 
all 
the 
main 
vessel 
segments, 
including 
traditional 
merchant 
vessels, 
gas 
carriers, 
cruise 
& 
ferry, 
navy, 
and 
special 
vessels. 
In 
the 
oil 
& 
gas 
industry, 
Wärtsilä 
is 
active 
in 
serving 
offshore 
installations 
and 
related 
industry 
vessels, 
as 
well 
as 
land-based 
gas 
installations. 
Wärtsilä’s 
customers 
comprise 
ship 
owners, 
shipyards, 
and 
ship 
management 
companies.
 
Energy 
leads 
the 
transition 
towards 
a 
100% 
renewable 
energy 
future. 
Wärtsilä 
helps 
its 
customers 
unlock 
the 
value 
of 
the 
energy 
transition 
by 
optimising 
their 
energy 
systems 
and 
future-proofing 
their 
assets. 
 
Wärtsilä 
Marine 
Power 
Marine 
Power 
focuses 
on 
Wärtsilä’s 
comprehensive 
range 
of 
engine 
and 
propulsion 
solutions. 
Its 
offering, 
which 
includes 
engines, 
generating 
sets, 
gearboxes, 
propulsion 
equipment, 
as 
well 
as 
LNG 
fuel 
handling, 
power 
management, 
and 
NOx 
reduction 
technologies 
, 
positions 
Marine 
Power 
as 
a 
leading 
partner 
for 
its 
customers 
in 
the 
decarbonisation 
of 
the 
maritime 
industry, 
particularly 
through 
fuel 
flexibility 
and 
hybrid 
solutions. 
 
Marine 
Power 
has 
six 
business 
units: 
Power 
Supply, 
Propulsion, 
Parts, 
Performance, 
Projects, 
and 
Field 
Services 
& 
Workshops. 
The 
Marine 
Power 
setup 
has 
been 
specifically 
designed 
to 
support 
its 
customers 
throughout 
the 
entire 
lifecycle 
of 
their 
vessels: 
from 
designing, 
developing, 
and 
delivering 
high 
quality 
products 
and 
solutions 
that 
ensure 
superior 
performance 
and 
that 
are 
capable 
of 
meeting 
evolving 
environmental 
requirements, 
to 
assisting 
customers 
with 
a 
wide 
service 
network 
supplying 
spare 
parts, 
competent 
field 
service 
personnel, 
and 
product 
and 
solution 
upgrades, 
as 
well 
as 
reducing 
operational 
risk. 
 
Wärtsilä 
Marine 
Systems 
Marine 
Systems 
consists 
of 
four 
end-to- 
end 
business 
units: 
Exhaust 
Treatment, 
Gas 
Solutions, 
Marine 
Electrical 
Systems, 
and 
Shaft 
Line 
Solutions. 
 
Exhaust 
Treatment 
focuses 
on 
developing 
the 
exhaust 
gas 
cleaning 
business. 
Wärtsilä’s 
exhaust 
gas 
cleaning 
technology 
is 
an 
economical 
and 
environmentally 
friendly 
solution 
for 
addressing 
all 
existing 
and 
anticipated 
rules 
and 
regulations. 
Wärtsilä 
scrubber 
systems 
are 
designed 
to 
provide 
flexibility 
and 
reliable 
operations 
wherever 
custom 
ers 
operate. 
 
Gas 
Solutions 
is 
the 
leading 
technology 
and 
service 
provider 
for 
the 
gas 
value 
chain, 
with 
a 
broad 
range 
of 
products 
covering 
cargo 
handling 
systems 
for 
gas 
carriers, 
liquefaction 
and 
gasification 
systems 
for 
various 
applications, 
fuel 
systems 
for 
alternative 
engine 
configurations 
and 
fuels, 
and 
renewable 
gas 
systems 
with 
solutions 
for 
biogas 
upgrading 
and 
liquefaction. 
 
Marine 
Electrical 
Systems 
offers 
comprehensive 
electrical 
turnkey 
solutions 
to 
selected 
niche 
segments 
, 
such 
as 
navy 
and 
super 
yachts, 
assuming 
responsibility 
for 
the 
entire 
project 
from 
basic 
design 
to 
commissioning. 
 
Shaft 
Line 
Solutions 
(formerly 
Seals 
& 
Bearings) 
comprises 
all 
capabilities 
required 
to 
provide 
complete 
integrated 
shaft 
line 
solutions 
from 
its 
global 
factories 
and 
service 
locations 
to 
customers 
in 
its 
core 
market 
segments, 
namely 
navy, 
merchant, 
and 
cruise.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Wärtsilä

Voyage

helps

transform

the

way

vessels

perform

their

voyage

by

leveraging

the

latest

digital

technologies

to

deliver

a

step

-change

in

safety,

efficiency,

reliability,

and

emissions.

By

combining

bridge

systems,

cloud

data

management,

data

services,

decision

support

tools,

and

access

to

real-time

information,

Voyage

collaborates

in

creating

the

digital

ecosystem

of

the

future.

Voyage

has

one

of

the

largest

installed

bases

and

offerings

of

navigation,

automation,

simulation,

and

training

solutions,

and

ship

traffic

control

solutions.

Serving

the

key

market

segments

across

cruise,

ferry,

merchant,

navy,

and

non

-vessel

such

as

port

authorities

and

maritime

institutes,

Voyage

is

active

in

both

the

newbuild

and

existing

vessel

markets.

Voyage

executes

a

growth

strategy

based

on

innovative

product

development,

system

integration,

connectivity,

remote

operations,

and

cyber

security,

in

line

with

the

development

of

a

Smart

Marine

Ecosystem.

Wärtsilä

Energy

Wärtsilä’s

offering

comprises

flexible

power

plants,

energy

management

and

storage

systems,

as

well

as

lifecycle

services

that

enable

increased

efficiency

and

guaranteed

performance.

Wärtsilä’s

three

main

customer

segments

in

the

energy

markets

are

utilities,

independent

power

producers,

and

industrial

customers.

Wärtsilä’s

energy

solutions

are

used

for

a

wide

variety

of

applications.

These

include

baseload

generation,

capacity

for

grid

stability,

peaking

and

load

-following

generation,

and

for

the

integration

of

wind

and

solar

power.

Wärtsilä

provides

its

customers

with

a

comprehensive

understanding

of

energy

systems,

including

fully

integrated

assets

and

software,

complete

with

value

adding

lifecycle

services.

Wärtsilä

Portfolio

Business

Wärtsilä

reports

Portfolio

Business

as

other

business

activities.

Portfolio

Business

consists

of

multiple

business

units,

which

are

run

independently

with

the

aim

of

accelerating

performance

improvement

and

unlocking

value

through

divestments

or

other

strategic

alternatives.

The

business

units

included

in

Portfolio

Business

comprise

Entertainment

Systems,

Special

Products

covering

power

converter

products

and

UPS

systems,

Tank

Control

Systems,

Water

&

Waste,

as

well

as

American

Hydro,

the

hydropower

solutions

and

turbine

services

business

.

Until

30

September

2020,

Portfolio

Business

also

included

Wärtsilä

JOVYATLAS

GmbH

and

Wärtsilä

Valves

Ltd.

On

1

October,

Wärtsilä

divested

100%

of

the

shares

of

Wärtsilä

JOVYATLAS

and

100%

of

the

shares

of

Wärtsilä

Valves.

Portfolio

Business

also

included

Wärtsilä

ELAC

Nautik

GmbH

until

the

divestment

of

shares,

which

was

finalised

on

2

December

2020.

The

comparison

figures

for

the

segment

reporting

and

service

information

have

been

restated

to

reflect

the

new

reporting

structure.

MEUR

2020

2019

Net

sales

Marine

Power

1,748

1,923

Marine

Systems

808

952

Voyage

248

280

Energy

1,620

1,779

Portfolio

Business

181

236

Total

4,604

5,170

Depreciation,

amortisation

and

impairment

Marine

Power

-68

-88

Marine

Systems

-20

-23

Voyage

-27

-26

Energy

-32

-31

Portfolio

Business

-28

-11

Total

-174

-180

Share

of

result

of

associates

and

joint

ventures

Marine

Power

2

-9

Total

3

-9

Operating

result

Marine

Power

134

221

Marine

Systems

81

53

Voyage

-42

-37

Energy

91

131

Portfolio

Business

-29

-7

Total

234

362

Operating

result

as

a

percentage

of

net

sales

(%)

Marine

Power

7.7

11.5

Marine

Systems

10.0

5.6

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Voyage

-17.0

-13.3

Energy

5.6

7.4

Portfolio

Business

-16.2

-2.8

Total

5.1

7.0

Comparable

operating

result

Marine

Power

137

273

Marine

Systems

83

60

Voyage

-41

-31

Energy

101

155

Portfolio

Business

-6

Total

275

457

Comparable

operating

result

as

a

percentage

of

net

sales

(%)

Marine

Power

7.8

14.2

Marine

Systems

10.3

6.3

Voyage

-16.5

-11.2

Energy

6.3

8.7

Portfolio

Business

-3.1

0.1

Total

6.0

8.8

Alternative

performance

measures

Wärtsilä

provides

certain

financial

performance

measures,

which

are

not

defined

by

IFRS.

These

alternative

performance

measures

are

followed

and

used

by

management

to

measure

the

Group's

performance

and

financial

position,

and

also

provide

useful

information

to

the

capital

markets.

The

alternative

performance

measures

should

not

be

evaluated

in

isolation

from

the

corresponding

IFRS

measures.

The

alternative

performance

measure

calculation

definitions

are

disclosed

in

Calculations

of

financial

ratios.

Wärtsilä

discloses

certain

comparable

performance

measures

to

enhance

comparability

between

periods.

Certain

income

and

expenses

are

presented

as

items

affecting

comparability

when

they

have

significant

impact

on

the

consolidated

statement

of

income.

Items

affecting

comparability

consist

of

income

and

expenses,

which

result

from

restructuring

activities

aiming

to

adjust

the

capacity

of

Wärtsilä’s

operations.

They

may

also

include

other

income

and

expenses

incurred

outside

Wärtsilä’s

normal

course

of

business,

such

as

impairment

charges,

acquisition

settlements

recorded

as

a

result

of

legal

proceedings

with

third

parties,

or

unforeseen

obligations

from

earlier

discontinue

d

businesses.

The

reconciliation

of

the

comparable

operating

result

to

the

operating

result

is

presented

in

the

table

below.

Measures

of

profit

and

items

affecting

comparability

MEUR

2020

2019

Comparable

adjusted

EBITA

308

498

Purchase

price

allocation

amortisation

-33

-41

Comparable

operating

result

275

457

Items

affecting

comparability:

Social

plan

costs

-12

-31

Impairment

and

write

-downs

-22

-36

Profits

and

losses

from

disposals

6

Other

costs

-14

-27

Items

affecting

comparability,

total

-41

-95

Operating

result

234

362

Entity

wide

information

In

addition

to

segment

information,

Wärtsilä

reports

the

service

net

sales

for

all

segments

and

for

other

business

activities.

Wärtsilä

continues

to

report

information

for

the

geographical

areas

Finland,

other

Europe

an

countries,

Asia,

the

Americas,

and

other.

In

the

geographical

information

provided,

net

sales

are

split

by

customer

destination

and

non-current

assets

by

origin.

Non-current

assets

consi

st

of

goodwill,

intangible

assets,

property,

plant

and

equipment,

right-

of-use

assets,

and

investments

in

associates

and

joint

ventures.

Geographical

information

During

the

financial

period

1

January

-

31

December

2020

and

1

January

-

31

December

2019

Wärtsilä

did

not

have

any

individual

significant

customers

or

countries.

Of

the

total

net

sales,

sales

to

the

USA

represented

11%

(11)

and

sales

to

China

10%

(11).

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

MEUR

2020

2019

Net

sales

Finland

98

78

Other

European

countries

1,445

1,612

Asia

1,570

1,968

The

Americas

1,077

1,098

Other

415

414

Total

4,604

5,170

Non

-current

assets

Finland

329

324

Other

European

countries

1,515

1,595

Asia

97

114

The

Americas

235

271

Other

6

7

Total

2,183

2,310

Service

net

sales

MEUR

2020

2019

Net

sales

Marine

Power,

service

1,096

1,279

Marine

Systems,

service

219

202

Voyage,

service

85

103

Energy,

service

782

802

Portfolio

Business,

service

74

119

Total

2,255

2,505

2.2.

REVENUE

RECOGNITION

Accounting

principles

Revenue

is

presented

net

of

indirect

sales

taxes,

penalties

and

discounts.

Revenue

is

recognised

when

control

of

the

goods

or

services

is

transferred

to

the

customer

at

an

amount

that

reflects

the

consideration

to

which

the

Group

expects

to

be

entitled

in

exchange

for

those

goods

and

services.

The

transaction

price

may

include

variable

considerations,

such

as

penalties,

performance

bonuses

and

discounts.

Revenue

recognised

by

the

reporting

date

corresponds

to

the

benefit

of

the

service

provided

by

Wärtsilä

to

the

customer.

The

Group

recognises

revenue

when

it

satisfies

an

identified

performance

obligation

by

transferring

promised

goods

or

service

s

to

the

customer.

Goods

and

services

are

generally

considered

to

be

transferred

when

the

customer

obtains

control

of

them.

Such

control

is

transferred

either

at

a

point

in

time

or

over

time.

Revenue

from

contracts

with

customers

is

derived

from

four

revenue

types.

All

these

revenue

types

are

represented

within

all

reportable

segments

and

other

business

activities

:

Marine

Power,

Marine

Systems,

Voyage

,

Energy

and

Portfolio

Business.

Product

sales

consist

of

sales

of

spare

parts

and

standard

equipment

,

for

which

the

revenue

is

recognised

at

a

point

in

time

when

the

control

of

the

product

has

transferred

to

the

custom

er,

in

general

upon

delivery

of

the

goods.

Product

sale

contracts

generally

include

one

performance

obligation.

Goods

and

services

-type

of

revenue

involves

short-term

field

service

jobs,

including

the

delivery

of

a

combination

of

service

and

equipment.

The

revenue

is

recognised

at

a

point

in

time

when

the

service

is

rendered.

Goods

and

service

-type

contracts,

such

as

service

orders,

generally

include

one

performance

obligation.

Projects

are

of

both

short-

and

long-term

duration

.

Depending

on

the

contract

terms

and

the

duration

of

the

project,

the

revenue

is

recognised

at

a

point

in

time

or

over

time.

In

large-scale

system

or

equipment

deliveries

which

require

engineering,

for

example

power

plants

and

gas

solution

s

construction

contracts,

the

reven

ue

is

recognised

over

time

as

the

asset

produced

does

not

have

alternative

use

and

the

Group

has

an

enforceable

right

to

payment.

These

contracts

usually

contain

one

performance

obligation.

Revenue

from

tailor-made

equipment

delivery

projects

is

recognised

at

a

point

in

time

when

the

control

of

the

equipment

is

transferred,

in

general

upon

delivery.

These

contracts

generally

represent

one

performance

obligation,

but

under

certain

circumstances

they

can

contain

multiple

performance

obligations

when

a

contract

contains

multiple

units

of

delivery.

Revenue

from

service

,

such

as

modernisation

and

upgrade

projects

is

recognised

over

time

because

the

customer

typically

controls

the

asset

that

is

enhanced.

Service

usually

contain

one

performance

obligation.

Long-term

agreements

include

long-term

operating

and

maintenance

agreements

for

which

the

revenue

is

recognised

over

time

because

the

customer

simultaneously

receives

and

consumes

the

service

provided.

These

contracts

generally

c

ontain

one

performance

obligation

per

installation.

Contracts

with

customers

often

include

warranties

in

line

with

Wärtsilä’s

General

terms

and

conditions,

which

are

regarded

as

part

of

the

promise

to

the

customer.

Extended

warranties

or

warranties

purchased

as

an

option

are

identified

as

separate

performance

obligations

with

revenue

being

recognised

evenly

over

the

warranty

period.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Revenue

recognised

over

time

is

measured

in

accordance

with

the

input

method

(progress

measured

based

on

costs

incurred)

when

the

outcome

of

the

contract

can

be

estimated

reliably.

When

the

outcome

cannot

be

reliably

determined,

the

costs

arising

are

expensed

in

the

same

reporting

period

in

which

they

occur,

but

the

revenue

is

recorded

only

to

the

extent

that

the

company

will

receive

an

amount

corresponding

to

actual

costs.

Any

losses

are

expensed

immediately.

If

revenue

for

goods

and

services

is

recognised

at

a

point

in

time,

it

is

when

control

is

transferred

to

the

customer.

The

transfer

of

control

is

based

mainly

on

transferring

risks

and

rewards

according

to

the

delivery

terms.

Should

there

be

multiple

contracts

entered

into

with

the

same

client

at

near

the

same

time,

the

combination

of

the

contracts

is

evaluated.

The

Group

applies

the

practical

expedient

according

to

IFRS

15.63

concerning

significant

financing

components

arising

from

contracts

with

customers.

In

case

the

lead

time

between

the

payments

specified

in

the

contract

and

the

corresponding

transferral

of

the

promised

good

or

service

to

the

customer

is

one

year

or

less,

no

adjustment

is

made

for

the

effect

of

a

possible

significant

financing

component.

The

Group

also

applies

the

practical

expedient

stated

in

IFRS

15.94

according

to

which

an

entity

can

recognise

the

incremental

costs

of

obtaining

a

contract

as

an

expense

when

incurred

if

the

amortisation

period

of

the

asset

that

the

entity

would

have

recognised

is

one

year

or

less.

Wärtsilä

has

not

incurred

any

costs

for

obtaining

a

contract

to

be

recognised

as

an

asset.

Accounting

estimates

and

judgemen

ts

Revenue

from

certain

projects

and

long

-term

agreements

is

recognised

over

time

according

to

the

input

method

when

the

profit

on

the

project

or

agreement

can

be

reliably

determined.

The

progress

and

the

profitability

are

based

on

the

management’s

estimates,

which

require

significant

judgement

concerning

the

stage

of

completion,

the

cost

to

complete,

and

the

time

of

completion.

These

estimates

are

reviewed

regularly.

Recognised

revenue

and

costs

recorded

are

adjusted

during

the

project

when

assumptions

concerning

the

outcome

of

the

entire

project

are

updated.

Changes

in

assumptions

relate

to

changes

in

the

project’s

or

agreement’s

schedule,

the

scope

of

supply,

technology,

costs,

and

any

other

relevant

factors.

Establishing

whether

distinct

goods

or

services

are

considered

as

separate

performance

obligations

requires

judgement

and

might

impact

the

timing

and

amount

of

revenue

recognition.

Project

business

contracts

usually

involve

elements

of

variable

consideration.

At

each

reporting

date,

management

reassesses

the

transaction

price,

which

requires

significant

judgement

as

it

affects

the

timing

of

the

revenue

recognition.

The

valuation

of

accounts

receivables

also

includes

estimates

mainly

concerning

the

recoverability

of

receivables.

Determining

whether

different

contracts

with

the

same

customer

are

accounted

for

as

one

contract

involves

the

use

of

judgement,

as

it

requires

an

assessment

of

whether

the

contracts

are

negotiated

together

or

linked

in

any

other

way.

The

timing

and

amount

of

revenue

recognition

can

vary

depending

on

whether

two

contracts

are

accounted

for

separately,

or

as

one

single

arrangement.

Warranty

provisions

are

recorded

on

the

recognition

of

revenue.

The

provision

is

based

on

the

accumulated

experience

of

the

level

of

warranty

needed

to

manage

future

and

current

cost

claims.

Products

can

contain

new

and

complex

technology

that

can

affect

warranty

estimates

,

with

the

result

that

earlier

recognised

provisions

are

not

always

sufficient.

Net

sales

by

revenue

type

MEUR

2020

2019

Products

Marine

Power

586

650

Marine

Systems

139

133

Voyage

21

24

Energy

319

337

Portfolio

Business

27

38

Total

1,091

1,184

Goods

and

services

Marine

Power

309

369

Marine

Systems

60

69

Voyage

47

63

Energy

88

92

Portfolio

Business

8

10

Total

511

603

Projects

Marine

Power

712

726

Marine

Systems

606

750

Voyage

173

185

Energy

919

1,053

Portfolio

Business

147

187

Total

2,557

2,899

Long

-term

agreements

Marine

Power

142

178

Marine

Systems

2

1

Voyage

7

8

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Energy

293

296

Portfolio

Business

2

Total

445

484

Total

4,604

5,170

Timing

of

satisfying

performance

obligations

MEUR

2020

2019

At

a

point

in

time

Marine

Power

1,536

1,687

Marine

Systems

546

618

Voyage

169

195

Energy

809

1,102

Portfolio

Business

90

124

Total

3,150

3,728

Over

time

Marine

Power

213

236

Marine

Systems

261

334

Voyage

79

85

Energy

811

676

Portfolio

Business

92

113

Total

1,455

1,442

Total

4,604

5,170

2.3.

OTHER

OPERATING

INCOME

AND

EXPENSES

Accounting

principles

Other

operating

income

and

expenses

comprise

income

and

expenses

that

do

not

directly

relate

to

the

operating

activities.

Other

operating

income

includes

,

for

example,

gains

from

the

sale

of

assets

and

regular

incomes,

such

as

rental

income

,

and

gains

relating

to

business

combinations,

which

have

not

been

derived

from

primary

activities.

Other

operating

income

includes

also

grants.

Government

al

and

other

grants

are

recognised

in

the

statement

of

income

on

a

systematic

basis

in

the

same

periods

in

which

the

expenses

are

incurred.

Other

operating

expenses

include,

for

example

,

travel

costs,

legal

and

consultancy

costs,

rental

costs,

voluntary

personnel

and

administrative

costs.

Also

,

expenses

short

-term

lease

contracts

and

lease

contracts

of

low-value

assets

are

recognised

in

other

operating

expenses

.

In

addition,

losses

the

sale

of

assets

,

as

well

as

losses

arising

from

modifications

and

terminations

of

lease

agreements

,

are

recognised

in

other

operating

expenses.

Other

operating

income

MEUR

2020

2019

Capital

gains

11

15

Government

grants

17

8

Sale

of

scrapped

material

2

3

Sale

of

by-products

2

Rental

income

0

1

Income

cancelled

orders*

2

Insurance

indemnities

3

9

Other**

24

27

Total

61

67

*

Expenses

cancelled

orders

are

reco

gnised

on

respective

expense

accounts.

**

Other

does

not

include

any

significant

single

items.

Other

operating

expenses

MEUR

2020

2019

Travel

costs

75

134

Rental

costs

40

48

Legal

and

consultancy

costs

77

95

Information

technology

costs

59

65

Other

personnel

48

59

Administrative

costs

39

49

Other*

93

128

Total

431

578

*

Other

does

not

include

any

significant

single

items.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

2.4.

MATERIAL

AND

SERVICES

Accounting

principles

Material

and

services

expenses

relate

to

purchases

of

goods

and

consumables

from

suppliers

for

manufacturing

less

discounts

and

tax

refunds

purchases.

Exchange

gains

or

losses

on

accounts

payable

are

included.

MEUR

2020

2019

Purchases

during

the

financial

period

-1,475

-1,723

Change

in

inventories

-50

7

External

services

-1,026

-1,287

Total

-2,551

-3,003

2.5.

EMPLOYEE

BENEFIT

EXPENSES

Accounting

principles

Employee

benefits

are

all

forms

of

consideration

given

in

exchange

for

service

s

rendered

by

employees

or

for

the

termination

of

employment.

In

addition,

the

Group

has

personnel

expenses

share

-based

payments

and

other

personnel

expenses.

The

company’s

incentive

scheme,

which

is

tied

to

the

price

development

of

the

company’s

share

during

a

pre-determined

timeframe,

is

measured

at

the

fair

value

of

the

share

on

the

reporting

date

and

reported

in

the

statement

of

income

for

the

term-to

-maturity

of

the

bonus

scheme.

An

upper

limit

is

set

for

the

bonus.

When

a

bonus

scheme

ends,

and

the

employment

requirement

is

fulfilled,

the

bonus

is

settled

in

cash

and/or

shares.

The

Group

companies

have

various

pension

and

other

post

-employment

benefit

plans

in

accordance

with

local

conditions

and

practices

worldwide.

These

plans

are

classified

either

as

defined

contribution

plans

or

defined

benefit

plans.

In

defined

contribution

plans,

the

Group

pay

s

fixed

contributions

into

a

separate

entity

,

such

as

an

insurance

company.

The

Group

has

no

legal

or

constructive

obligation

to

pay

further

contributions

if

the

fund

does

not

hold

sufficient

assets

to

pay

employee

benefits.

The

contributions

are

recognised

in

employee

benefit

expenses

in

the

statement

of

income

in

the

period

to

which

they

relate.

Accounting

principles

for

defined

benefit

plans

are

presented

in

Note

4.7.

Pension

obligations.

MEUR

2020

2019

Wages

and

salaries

984

1,028

Pension

costs

Defined

benefit

plans

12

Defined

contribution

plans

64

74

Other

compulsory

personnel

costs

132

146

Total

1,192

1,260

Management

remuneration

is

specified

in

Note

7.2.

disclosures.

Long-term

incentive

schemes

Wages

and

salaries

include

EUR

7

million

(4)

in

expenses

arising

from

share

-based

long-term

incentive

schemes.

At

the

end

of

2020,

Wärtsilä

had

three

active

long-term

incentive

schemes.

These

schemes

are

tied

to

the

price

development

of

the

company’s

share

during

a

pre-determined

timeframe,

and

an

upper

limit

is

set

for

the

payable

incentive.

When

an

incentive

scheme

ends

and

the

employment

requirement

is

fulfilled,

the

incentive

is

settled

in

cash

(2018-2020

incentive

scheme)

or

in

company

shares

(2019-

2021

and

2020-2022

incentive

schemes).

The

Board

of

Management

members

shall

acquire

Wärtsilä

shares

with

50%

of

the

net

bonuses

received,

until

the

share

ownership

corresponding

to

the

individuals'

annual

gross

base

salary

level

has

been

achieved.

The

payment

for

incentive

schemes

is

based

on

the

share

price

development

during

a

three

-year

period.

The

2018-2020

incentive

scheme

comprises

3,150,000

rights,

the

2019-2021

incentive

scheme

4,585,000

rights

and

the

2020

-2022

incentive

scheme

8,400,000

rights.

For

the

incentive

scheme

2018-

2020

the

share

price

basis

is

EUR

22.58,

for

the

incentive

scheme

2019-

2021

EUR

16.76,

and

for

the

incentive

scheme

2020-2022

EUR

11.10.

The

incentive

schemes

take

into

account

100%

of

dividends

paid,

and

the

paid

bonus

cannot

exceed

EUR

8.47

per

incentive

right

in

the

2018-2020

scheme,

EUR

6.56

in

the

2019-2021

scheme

,

or

EUR

4.31

in

the

2020

-2022

scheme.

The

incentive

rights,

which

are

settled

in

cash,

are

valued

and

recognised

at

fair

value

on

the

balance

sheet

date

taking

into

account

the

proportion

of

vesting

period

passed.

The

incentive

rights,

which

are

settled

in

company

shares,

are

valued

at

fair

value

on

the

grant

date

of

the

scheme

and

are

expensed

evenly

during

the

vesting

period.

The

fair

value

determined

for

the

incentive

right

in

2019

-2021

scheme

is

EUR

2.69

and

in

2020-

2022

scheme

EUR

1.34

.

2020

2019

Personnel

on

average

18,307

19,110

Personnel

at

the

end

of

the

financial

period

17,792

18,795

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

2.6.

INCOME

TAXES

Accounting

principles

The

statement

of

income

includes

taxes

payable

based

on

the

Group’s

consolidated

taxable

income

for

the

financial

period

in

accordance

with

local

tax

regulations,

tax

adjustments

for

periods,

and

changes

in

deferred

taxes.

Tax

effects

transactions

recognised

through

the

statement

of

income

and

other

events

are

recognised

in

the

statement

of

income.

Tax

effects

transactions

or

other

events

to

be

presented

as

components

of

other

comprehensive

income

or

directly

in

equity

are

also

recognised,

respectively,

in

other

comprehensive

income

or

directly

in

equity.

The

current

income

tax

charge

is

calculated

according

to

tax

laws

enacted,

or

substantively

enacted,

on

the

balance

sheet

date

in

the

countries

where

the

company

and

its

subsidiaries

operate

and

generate

taxable

income.

Accounting

estimates

and

judgements

The

Group

is

subject

to

income

taxes

in

several

jurisdictions

and

the

computation

of

the

Group´s

income

tax

expense

and

income

tax

liabilities

require

judgement

and

estimation.

Income

tax

positions

are

regularly

evaluated

by

the

management

to

identify

situations

when

there

might

be

uncertainty

due

to

tax

regulation

being

subject

to

interpretation.

Provi

sions

for

these

uncertain

tax

positions

are

recognised

when

it

is

considered

more

likely

than

not

that

the

positions

will

be

challenged

by

the

tax

authorities.

The

provision

recognised

is

based

on

the

estimation

of

the

amount

of

the

final

taxes

to

be

paid

to

the

tax

authorities.

MEUR

2020

2019

Income

taxes

for

the

financial

period

-107

-130

for

prior

financial

periods

8

-8

Change

in

deferred

tax

origination

and

reversal

of

temporary

differences

40

43

changes

in

tax

rates

-2

Total

-58

-97

Reconciliation

of

effective

tax

rate:

Profit

before

taxes

191

315

Tax

calculated

at

the

domestic

corporate

tax

rate

20.0%

-38

-63

Effect

of

changed

tax

rates

-2

Effect

of

different

tax

rates

in

foreign

subsidiaries

15

Effect

of

income

not

subject

to

tax

and

non-deductible

expenses

-7

-1

Effect

of

share

of

result

of

associates

and

joint

ventures

1

-2

Utilisation

of

previously

unrecognised

tax

losses

carried

forward

2

1

Unrecognised

taxes

on

losses

carried

forward

-25

-13

Other

taxes*

-14

-10

Other

temporary

differences

-13

Income

taxes

for

prior

financial

periods

8

-8

Tax

charge

in

the

consolidated

statement

of

income

-58

-97

Effective

tax

rate

(%)

30.3

30.7

*

Other

taxes

consist

mainly

of

withholding

taxes

not

utilised

and

taxes

not

directly

based

on

taxable

income.

Income

taxes

other

comprehensive

income

are

presented

in

Consolidated

statement

of

comprehensive

income.

Changes

in

deferred

tax

assets

and

liabilities

are

presented

in

Note

4.6.

Deferred

taxes.

In

some

countries

Wärtsilä

is

subject

to

tax

audits,

which

can

result

in

tax

reassessment

decisions

and

obligations

to

pay

additional

taxes

and

2.7.

EARNINGS

PER

SHARE

Earnings

per

share

is

calculated

by

dividing

the

profit

for

the

financial

period

attributable

to

equity

holders

of

the

parent

company

by

the

adjusted

average

number

of

shares

outstanding.

During

the

financial

periods

there

were

no

programmes

with

dilutive

effect.

MEUR

2020

2019

Profit

for

the

financial

period

attributable

to

equity

holders

of

the

parent

company

134

217

Thousands

of

shares

adjusted

average

number

of

shares

outstanding*

591,723

Earnings

per

share

attributable

to

equity

holders

of

the

parent

company

(basic

and

diluted):

Earnings

per

share

(EPS),

basic

and

diluted,

EUR

0.23

0.37

*

Additional

information

on

the

number

of

shares

is

presented

in

Note

5.5.

Equity.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

3.

INTANGIBLE

AND

TANGIBLE

ASSETS

3.1.

GOODWILL

Accounting

principles

Goodwill

is

the

difference

between

the

aggregate

of

the

acquisition

-date

fair

value

of

the

consideration

transferred,

and

the

acquirer’s

share

of

the

company’s

net

identifiable

assets

and

liabilities

measured

at

fair

value

on

the

acquisition

date.

The

consideration

is

measured

at

fair

value,

including

also

the

acquirer’s

previously

held

equity

interest.

Impairment

of

goodwill

The

carrying

amount

of

goodwill

allocated

to

cash

generating

units

(CGU)

is

reviewed

annually

for

signs

of

possible

impairment

,

or

more

frequently

should

any

indication

of

impairment

arise.

If

any

such

indication

exists,

the

recoverable

amount

of

the

goodwill

is

estimated.

In

order

to

define

a

possible

impairment,

the

Group’s

assets

are

divided

into

the

smallest

possible

cash

generating

units,

which

are

mainly

independent

of

other

units

,

and

the

cash

flows

of

which

are

separately

identifiable

and

to

a

large

extent

independent

of

the

cash

flows

of

other

similar

units.

An

impairment

loss

is

recognised

when

the

carrying

amount

of

an

asset

is

greater

than

its

recoverable

amount.

The

recoverable

amount

is

the

higher

of

an

asset’s

fair

value

less

costs

to

sell

and

its

value

in

use.

The

value

in

use

for

goodwill

is

based

on

the

expected

discounted

future

net

cash

flows

resulting

from

the

asset

or

cash

generating

unit.

A

pre-tax

rate,

which

reflects

the

markets’

position

on

the

time

value

of

money

and

asset

-specific

risks,

is

used

as

the

discount

rate.

An

impairment

loss

is

recognised

immediately

as

depreciation,

amortisation

and

impairment

in

the

statement

of

income.

An

impairment

loss

recognised

for

goodwill

is

not

reversed

under

any

circumstances.

Accounting

estimates

and

judgement

s

The

recoverable

amounts

of

goodwill

are

determined

for

all

cash

generating

units

annually,

or

more

often

if

there

is

an

indication

of

an

impairment,

where

its

value

in

use

is

determined.

The

value

in

use

is

determined

using

estimates

of

future

market

development,

such

as

growth

and

profitability,

as

well

as

other

significant

factors.

The

most

important

factors

underlying

such

estimates

are

the

net

sales

growth

in

the

market

area,

the

operating

margin,

the

useful

life

of

the

assets,

future

investment

needs,

and

the

discount

rate.

Changes

in

these

ass

umptions

can

significantly

affect

the

expected

future

cash

flows.

Significant

judgement

has

been

used

when

Wärtsilä

management

has

evaluated

indications

of

impairment.

The

recoverable

amounts

of

the

operating

segments

have

been

evaluated

against

the

carrying

values.

The

full

financial

impact

of

the

coronavirus

(C

OVID-19)

outbreak

cannot

be

quantified

at

this

time,

as

it

will

depend

on

the

duration

and

severity

of

the

virus

in

different

geographies,

which

largely

depends

on

the

measures

taken

to

contain

the

virus,

which

in

turn

will

determine

the

pace

of

recovery

in

these

geographies.

Therefore,

estimates

for

market

development,

growth,

and

other

significant

factors

is

challenging

in

the

current

situation.

The

assumptions

used

in

the

evaluation

of

goodwill

recoverability

are

based

on

management’s

best

estimates

under

the

current

circumstances.

Goodwill

2020

MEUR

2020

Wärtsilä

Group

Wärtsilä

on

1

January

1,380

Changes

in

exchange

rates

-41

Wärtsilä

on

30

June

1,339

Changes

in

exchange

rates

-3

Disposals

and

impairments

-4

Reclassification

to

assets

held

for

sale

-7

Wärtsilä

on

31

December

1,325

Disposals

and

impairments

of

goodwill

relate

to

divested

businesses

in

Portfolio

Business.

These

businesses

were

first

classified

as

assets

held

for

sale

and

later

divested

.

The

total

impact

of

these

divestments

on

the

profit

for

the

financial

period

is

presented

in

Note

6.2.

Disposals.

All

businesses

currently

presented

as

assets

held

for

sale

belong

to

Portfolio

Business.

The

total

impact

on

the

profit

for

the

financial

period

is

presented

in

Note

6.3.

Assets

held

for

sale.

Goodwill

allocation

Goodwill

arising

from

business

acquisitions

has

been

allocated

to

the

new

operating

segments

and

other

business

activities,

which

are

also

the

Group’s

CGUs

in

impairment

testing

of

goodwill.

From

1

July

2020

onwards,

these

are

Marine

Power,

Marine

Systems,

Voyage,

Energy,

and

Portfolio

Business.

The

reallocation

has

been

performed

using

a

relative

value

approach

with

minor

exceptions.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

MEUR

1.7.2020

31.12.2020

Marine

Power

535

534

Marine

Systems

165

Voyage

98

Energy

502

Portfolio

Business

39

26

Total

1,339

1,325

Intermediate

impairment

testing

Due

to

the

COVID

-

19

outbreak

and

the

new

organisational

structure,

Wärtsilä

performed

an

intermediate

impairment

testing

of

goodwill

during

the

second

quarter

of

2020.

As

a

result

of

the

impairment

test,

no

impairment

loss

for

the

CGUs

was

recognised

for

the

reporting

period

ended

30

June

2020.

Annual

impairme

nt

testing

of

goodwill

The

Group

performed

its

annual

impairment

testing

of

goodwill

during

the

third

quarter

of

the

year.

Wärtsilä

compared

the

recoverable

amount

of

each

business

against

its

carrying

amount

to

define

whether

there

were

any

indications

of

goodwill

impairment.

For

Marine

Power,

Marine

Systems,

Voyage,

and

Energy,

the

recoverable

amounts

were

defined

based

on

the

discounted

cash

flow

method,

derived

from

the

order

book

and

four

-year

cash

flow

projections.

The

estimated

cash

flows

of

the

CGUs

were

based

on

the

utilisation

of

existing

property,

plant,

and

equipment

in

their

current

condition

with

normal

maintenance

capital

expenditure,

excluding

any

potential

future

acquisitions.

Cash

flows

beyond

the

four

-year

period

were

calcul

ated

using

the

terminal

value

method.

For

the

Portfolio

Business

units,

which

were

classified

as

assets

held

for

sale,

the

recoverable

amounts

were

defined

based

on

estimations

of

the

selling

price

on

cash

-free,

debt

-free

basis.

For

the

other

business

units,

the

recoverable

amounts

were

defined

based

on

either

the

discounted

cash

flow

method

or

estimations

of

the

selling

price

on

cash

-free,

debt

-free

basis,

whichever

was

higher

at

the

time.

The

terminal

growth

rate

used

in

projections

is

based

on

manageme

nt’s

assessment

on

conservative

long-term

growth.

The

terminal

growth

rate

used

in

the

calculation

were:

Terminal

growth

rate,

%

2020

Marine

Power

1.5

Marine

Systems

1.5

Voyage

2.5

Energy

2.0

Portfolio

Business

0.0

The

key

driver

for

the

valuation

is

growth

in

the

global

economy,

and

in

particular,

the

development

of

the

global

power

market,

the

global

shipbuilding

industry,

and

the

demand

for

any

The

projected

development

of

total

costs

in

the

market

affects

the

profitability,

whereas

no

single

cost

item

is

considered

to

have

a

material

impact.

The

valuation

driver

for

new

equipment

sales

is

growth

in

the

global

economy,

whereas

for

after

sales

the

drivers

are

also

the

demand

for

and

the

projected

development

in

labour

costs.

The

applied

discount

rates

are

the

weighted

average

pre-tax

cost

of

capital

(WACC)

for

each

CGU

as

defined

by

Wärtsilä.

The

components

of

the

WACC

rates

are

risk

-free

rate,

market

risk

premium,

industry

specific

beta,

cost

of

debt

and

debt

equity

ratio.

Wärtsilä

has

used

the

following

WACC

rates

for

each

CGU:

WACC

rate,

%

2020

Marine

Power

9.2

Marine

Systems

9.5

Voyage

9.2

Energy

9.6

Portfolio

Business

10.1

As

a

result

of

the

impairment

test,

no

impairment

loss

for

the

CGUs

was

recognised

for

the

financial

period

ended

on

30

September

2020.

The

recoverable

amounts

of

Marine

Power,

Marine

Systems,

and

Energy

CGUs

exceeded

their

respective

carrying

values

subst

antially.

Also,

the

defined

recoverable

amount

of

Voyage

CGU

exceeded

the

carrying

amount

of

the

unit.

The

key

assumption

for

Voyage

CGU

is

that

Voyage

is

estimated

to

break

even

within

the

years

on

the

EBITDA

level

and

that

its

growth

rate

will

exceed

the

Group

average.

Any

future

negative

changes

in

these

assumptions

would

have

an

adverse

impact

on

the

valuation

of

the

business.

According

to

the

measuring

requirements

assets

held

for

sale,

Wärtsilä

has

written

down

certain

assets

in

Portfolio

Business

in

2020.

Part

of

these

write-downs

goodwill.

However,

based

on

the

testing

conducted

in

the

annual

impairment

test,

there

was

no

additional

impairment

noted

for

Portfolio

Business.

There

are

no

recent

indications

of

impairmen

t

of

goodwill

after

the

annual

impairment

testing

.

Sensitivity

analysis

The

management

has

assessed

that

no

reasonable

possible

changes

in

the

key

assumptions

would

cause

the

carrying

amount

of

any

CGU

to

exceed

its

recoverable

amount.

A

s

ensitivity

analysis

has

been

carried

out

for

the

valuation

of

the

recoverable

amount

for

each

CGU

by

changing

the

assumptions

used

in

the

calculation.

A

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

change

in

an

assumption

that

would

cause

the

recoverable

amount

to

equal

the

carrying

amount

is

presented

in

the

table

below

separately

for

each

CGU.

Change

Marine

Power

Pre-tax

discount

rate

increase

more

than

8

percentage

points

Terminal

growth

rate

decrease

more

than

8

percentage

points

Profitability

decrease

more

than

51

percentage

Marine

Systems

Pre-tax

discount

rate

increase

more

than

25

percentage

points

Terminal

growth

rate

decrease

more

than

34

percentage

points

Profitability

decrease

more

than

72

percentage

Voyage

Pre-tax

discount

rate

increase

more

than

4

percentage

points

Terminal

growth

rate

decrease

more

than

3

percentage

points

Profitability

decrease

more

than

37

percentage

Energy

Pre-tax

discount

rate

increase

more

than

12

percentage

points

Terminal

growth

rate

decrease

more

than

13

percentage

points

Profitability

decrease

more

than

61

percentage

For

Portfolio

Business,

the

recoverable

amount

of

the

CGU

was

mainly

defined

based

on

estimations

of

the

selling

price

on

a

cash

-free

debt

-free

basis

for

each

individual

business

unit.

Thus,

the

change

in

the

pre-tax

discount

rate

and

in

the

terminal

growth

rate

only

has

minimal

impact

on

the

valuation

of

the

CGU.

The

recoverable

amount

of

the

CGU

would

need

to

decrease

by

9

percentage

to

equal

the

carrying

amount

of

the

CGU.

In

management’s

opinion,

the

changes

in

the

basic

assumptions

shall

not

be

seen

as

an

indication

that

these

factors

are

likely

to

materialise.

The

sensitivity

analyses

are

hypothetical

and

should

therefore

be

treated

with

caution.

Goodwill

2019

MEUR

2019

Wärtsilä

Group

Wärtsilä

on

1

January

1,355

Acquisitions

-1

Changes

in

exchange

rates

26

Total

1,380

Goodwill

allocation

Goodwill

arising

from

business

acquisitions

is

allocated

to

the

Group

cash

generating

units

(CGU)

that

are

the

Group´s

operating

segments

Wärtsilä

Marine

Business

and

Wärtsilä

Energy

Business.

As

of

1

January

2019,

the

goodwill

formerly

allocated

to

the

Group

CGU

has

been

allocated

to

the

respective

CGUs

based

on

the

fair

value

of

the

operating

segments.

The

operating

segments

represent

the

lowest

level

within

the

Group

at

which

the

goodwill

is

monitored.

The

companies

acquired

during

the

financial

period

are

integrated

within

the

respective

CGU

at

the

acquisition

date.

The

goodwill

per

CGU

is

presented

in

the

table

below.

Goodwill

per

cash

generating

unit

MEUR

2019

Wärtsilä

Marine

Business

847

Wärtsilä

Energy

Business

533

Total

1,380

Impairment

testing

of

goodwill

The

Group

performs

its

annual

impairment

testing

of

goodwill

on

30

September.

Impairment

of

goodwill

is

also

carried

out

when

changes

in

circumstances

indicate

that

the

carrying

amount

may

not

be

recoverable.

The

recoverable

amounts

from

the

CGUs

are

determined

based

on

value

-

in-use

calculations.

The

calculations

are

made

on

a

discounted

cash

flow

method

basis,

derived

from

the

order

book

and

five

-year

cash

flow

projections

from

strategic

plans

approved

by

management.

The

estimated

cash

flows

of

the

CGUs

are

based

on

utilisation

of

the

existing

property,

plant

and

equipment

in

their

current

condition

with

normal

maintenance

capital

expenditure,

excluding

any

potential

future

acquisitions.

Cash

flows

beyond

the

five

-year

period

are

calculated

using

the

terminal

value

method.

The

terminal

growth

rate

used

in

projections

is

based

on

management’s

assessment

on

conservative

long-term

growth.

The

terminal

growth

rate

used

is

2%.

The

key

driver

for

the

valuation

is

growth

in

the

global

economy

and,

in

particular,

the

development

of

the

global

power

market,

the

global

shipbuilding

industry,

and

the

demand

for

The

projected

 
 
 
 
 
 
 
 
 
 
 
 
This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
development 
of 
total 
costs 
in 
the 
market 
affects 
the 
profitability, 
whereas 
no 
single 
cost 
item 
is 
considered 
to 
have 
a 
material 
impact. 
The 
valuation 
driver 
for 
the 
new 
equipment 
sales 
is 
growth 
in 
the 
global 
economy, 
whereas 
for 
after 
sales 
the 
drivers 
are 
also 
the 
demand 
for 
related 
services 
and 
the 
projected 
development 
in 
labour 
costs. 
 
The 
appl 
ied 
discount 
rates 
are 
the 
weighted 
average 
pre-tax 
cost 
of 
capital 
(WACC) 
for 
each 
CGU 
as 
defined 
by 
Wärtsilä. 
The 
components 
of 
the 
WACC 
rates 
are 
the 
risk 
-free 
rate, 
market 
risk 
premium, 
industry 
specific 
beta, 
cost 
of 
debt, 
and 
debt 
equity 
ratio. 
Wärtsilä 
has 
used 
a 
WACC 
rate 
of 
9.1% 
in 
the 
calculations 
for 
Wärtsilä 
Marine 
Business 
CGU 
and 
a 
WACC 
rate 
of 
9.4% 
for 
Wärtsilä 
Energy 
Business 
CGU. 
 
As 
a 
result 
of 
the 
impairment 
tests, 
no 
impairment 
loss 
for 
the 
CGUs 
was 
recognised 
for 
the 
financial 
period 
ended 
31 
December 
2019. 
The 
recoverable 
amounts 
of 
both 
CGUs 
exceeded 
their 
respective 
carrying 
value 
substantially. 
 
Sensitivity 
analysis 
The 
management 
has 
assessed 
that 
no 
reasonable 
possible 
changes 
in 
the 
key 
assumptions 
would 
cause 
the 
carrying 
amount 
of 
either 
CGU 
to 
exceed 
its 
recoverable 
amount. 
A 
sensitivity 
analysis 
has 
been 
carried 
out 
for 
the 
valuation 
of 
the 
recoverable 
amount 
for 
each 
CGU 
by 
changing 
the 
assumptions 
used 
in 
the 
calculations. 
A 
change 
in 
an 
assumption 
that 
would 
cause 
the 
recoverable 
amount 
to 
equal 
the 
carrying 
amount 
is 
presented 
in 
the 
table 
below 
separately 
for 
each 
CGU. 
 
Change 
Wärtsilä 
Marine 
Business 
Pre-tax 
discount 
rate 
increase 
more 
than 
15 
percentage 
points 
Terminal 
growth 
rate 
decrease 
more 
than 
35 
percentage 
points 
Profitability 
decrease 
more 
than 
66 
percentage 
Wärtsilä 
Energy 
Business 
Pre-tax 
discount 
rate 
increase 
more 
than 
13 
percentage 
points 
Terminal 
growth 
rate 
decrease 
more 
than 
28 
percentage 
points 
Profitability 
decrease 
more 
than 
64 
percentage 
 
In 
management’s 
opinion, 
the 
changes 
in 
the 
basic 
assumptions 
should 
not 
be 
seen 
as 
an 
indication 
that 
these 
factors 
are 
likely 
to 
materialise. 
The 
sensitivity 
analyses 
are 
hypothetical 
and 
should 
therefore 
be 
treated 
with 
caution.
 
3. 
2. 
OTHER 
INTANGIBLE 
ASSETS 
Accounting 
principles 
Research 
and 
development 
costs 
Research 
costs 
are 
expensed 
in 
the 
reporting 
period 
during 
which 
they 
occur. 
Development 
costs 
are 
capitalised 
when 
it 
is 
probable 
that 
the 
development 
project 
will 
generate 
future 
economic 
benefits 
for 
the 
Group 
and 
when 
the 
related 
criteria, 
including 
commercial 
and 
technological 
feasibility, 
have 
been 
met. 
These 
projects 
involve 
the 
development 
of 
new 
or 
significantly 
improved 
products 
or 
production 
processes. 
Earlier 
expensed 
development 
costs 
are 
not 
capitalised. 
Capitalised 
development 
costs 
are 
measured 
at 
cost 
less 
accumulated 
amortisations 
and 
impairment. 
Capitalised 
development 
costs 
are 
amortised 
and 
the 
cost 
of 
buildings, 
machinery, 
and 
facilities 
for 
development 
depreciated 
on 
a 
straight 
-line 
basis 
over 
their 
expected 
useful 
lives 
of 
5-10 
years. 
Amortisations 
are 
started 
when 
the 
asset 
is 
completed 
and 
can 
be 
taken 
into 
use. 
Before 
that, 
the 
asset 
is 
tested 
annually 
for 
impairment. 
Grants 
received 
for 
research 
and 
development 
are 
reported 
as 
other 
operating 
income. 
Grants 
related 
to 
capitalised 
development 
costs 
are 
netted 
with 
the 
costs 
incurred 
before 
the 
capitalisation. 
Other 
intangible 
assets 
Other 
intangible 
assets 
are 
recognised 
at 
cost 
if 
the 
cost 
is 
reliably 
measurable 
and 
the 
future 
economic 
benefits 
for 
the 
Group 
are 
probable. 
Wärtsilä’s 
other 
intangible 
assets 
include 
patents, 
licenses, 
software, 
customer 
relations 
and 
other 
intellectual 
property 
rights 
that 
can 
be 
transferred 
to 
a 
third 
party. 
These 
are 
measured 
at 
cost, 
except 
for 
intangible 
assets 
identified 
in 
connection 
with 
acquisitions, 
which 
are 
measured 
at 
the 
fair 
value 
at 
the 
acquisition 
date. 
The 
cost 
of 
intangible 
assets 
comprises 
the 
purchase 
price 
and 
all 
costs 
that 
can 
be 
directly 
attributed 
to 
preparing 
an 
asset 
for 
its 
intended 
use. 
Other 
intangible 
assets 
are 
amortised 
on 
a 
straight 
-line 
basis 
over 
their 
estimated 
useful 
lives. 
Intangible 
assets, 
for 
which 
the 
time 
limit 
for 
the 
right 
of 
use 
is 
agreed, 
are 
amortised 
over 
the 
life 
of 
the 
contract. 
Intangible 
assets 
identified 
in 
connection 
with 
acquisitions 
are 
amortised 
over 
their 
delivery 
times 
or 
estimated 
useful 
lives. 
The 
general 
guidelines 
for 
scheduled 
amortisation 
are: 
• 
Software 
3- 
7 
years 
• 
Development 
expenses 
5-10 
years 
• 
Other 
intangible 
assets 
5-20 
years 
The 
amortisation 
of 
intangible 
assets 
is 
discontinued 
when 
an 
item 
is 
classified 
as 
held 
for 
s 
ale. 
A 
gain 
or 
loss 
arising 
from 
the 
sale 
of 
intangible 
assets 
is 
recognised 
as 
other 
operating 
income 
or 
other 
operating 
expenses 
in 
the 
statement 
of 
income. 

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Impairment

of

assets

The

carrying

amounts

of

assets

are

reviewed

annually

for

signs

of

possible

impairment

or

more

frequently

should

any

indication

of

impairment

arise.

If

any

such

indication

exists,

the

recoverable

amount

of

the

asset

is

estimated

and

compared

to

the

carrying

amount

of

the

asset.

An

impairment

loss

is

recognised

when

the

carrying

amount

of

an

asset

is

greater

than

its

recoverable

amount.

The

recoverable

amount

is

the

higher

of

an

asset’s

fair

value

less

costs

to

sell

and

its

value

in

use.

An

impairment

loss

is

recognised

immediately

as

depreciation,

amortisation

and

impairment

in

the

statement

of

income.

In

connection

with

the

recognition

of

the

impairment

loss,

the

useful

life

of

the

amortisable

asset

is

reassessed.

An

earlier

impairment

loss

recognised

for

an

asset

is

reversed

if

the

estimates

used

to

determine

the

recoverable

amount

change.

However,

any

reversal

of

impairment

shall

not

exceed

the

asset’s

carrying

amount

less

impairment

loss.

Accounting

estimates

and

judgement

s

Assessing

the

probability

of

expected

future

economic

benefits

and

the

useful

lives

of

intangible

assets

require

management

judgement.

The

estimated

useful

lives

and

the

residual

values

are

reviewed

at

least

at

the

end

of

each

reporting

period,

and

if

they

differ

significantly

from

the

amortisation

periods

are

adjusted

accordingly.

Also

,

assessing

any

indication

of

impairment

requires

management

judgement.

2020

MEUR

Develop

-

ment

expenses

Construc

-

tion

in

progress

and

advances

paid

Other

intangible

assets

Total

Cost

on

1

January

2020

169

85

860

1,114

Changes

in

exchange

rates

0

-17

-18

Acquisitions

and

disposals

0

-1

Additions

1

54

6

61

Decreases

and

other

changes

-2

1

-21

-22

Reclassifications

15

-17

1

0

Cost

on

31

December

2020

182

123

829

1,134

Accumulated

amortisation

and

impairment

on

1

January

2020

-104

-613

-717

Changes

in

exchange

rates

0

12

Accumulated

amortisation

on

decreases

and

other

changes

2

0

19

20

Amortisation

during

the

financial

period

-12

0

-43

-54

Impairments

-1

-2

-4

Accumulated

amortisation

and

impairment

on

31

December

2020

-115

-1

-628

-743

Carrying

amount

on

31

December

2020

68

122

201

391

Development

costs

for

internally

generated

assets

capitalised

during

the

financial

period

amounted

to

EUR

52

million

(49).

The

carrying

amount

was

EUR

179

million

(135).

Purchase

price

allocation

amortisation

amounted

to

EUR

33

million

(41)

and

the

amount

was

EUR

171

million

(209).

2019

MEUR

Develop

-

ment

expenses

Construc

-

tion

in

progress

and

advances

paid

Other

intangible

assets

Total

Cost

on

1

January

2019

141

53

857

1,051

Changes

in

exchange

rates

11

Acquisitions

1

Additions

1

55

8

65

Decreases

and

other

changes

-1

-13

-14

Reclassifications

28

-24

-4

Cost

on

31

December

2019

169

85

860

1,114

Accumulated

amortisation

and

impairment

on

1

January

2019

-94

-565

-659

Changes

in

exchange

rates

-7

Accumulated

amortisation

on

decreases

and

other

changes

11

Amortisation

during

the

financial

period

-11

-52

-62

Accumulated

amortisation

and

impairment

on

31

December

2019

-104

-613

-717

Carrying

amount

on

31

December

2019

65

85

247

397

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

3.3.

PROPERTY,

PLANT

AND

EQUIPMENT

Accounting

principles

Property,

plant

and

equipment

acquired

by

the

Group

are

measured

in

the

statement

of

financial

position

at

cost

less

accumulated

depreciation

and

impairment

losses.

The

cost

of

an

asset

includes

costs

directly

attributed

to

preparing

the

asset

for

its

intended

use.

Grants

received

are

reported

as

a

reduction

in

costs.

The

property,

plant

and

equipment

of

acquired

subsidiaries

are

measured

at

their

fair

value

at

the

acquisition

date.

The

borrowing

costs

that

are

directly

attributable

to

the

asset

acquisition,

construction

or

production,

and

to

the

completion

of

the

asset

for

its

intended

use

or

sale

requiring

necessarily

a

considerable

length

of

time,

will

be

capitalised

in

the

statement

of

financial

position

as

part

of

the

cost

of

the

asset.

Other

than

directly

attributable

borrowing,

costs

are

expensed

in

the

period

in

which

they

are

incurred.

Subsequent

expenditure

is

included

in

the

cost

of

an

asset

only

if

the

future

economic

benefits

are

probable

and

the

costs

are

reliably

measurable.

Expenditure

regular,

extensive

inspections

and

maintenance

is

treated

as

an

investment,

capitalised

and

depreciated

during

the

useful

life.

All

other

expenditure,

such

as

ordinary

maintenance

and

repairs,

is

recognised

in

the

statement

of

income

as

an

expense

as

incurred.

Depreciation

is

based

on

the

following

estimated

useful

lives:

•

Buildings

10-

40

years

•

Machinery

and

equipment

5

-20

years

•

Other

tangible

assets

3-10

years

Depreciation

is

expensed

on

a

straight

-line

basis

over

the

estimated

useful

lives

of

the

assets.

Land

is

not

depreciated,

as

its

useful

life

is

considered

as

infinite.

The

estimated

useful

lives

and

the

residual

values

are

reviewed

at

least

at

the

end

of

each

reporting

period,

and

if

they

differ

significantly

from

the

depreciation

periods

are

adjusted

accordingly.

Depreciation

of

property,

plant

and

equipment

is

discontinued

when

an

item

is

classified

as

held

for

sale.

A

gain

or

loss

arising

from

the

sale

of

property,

plant

and

equipment

is

recognised

as

other

operating

income

or

other

operating

expenses

in

the

statement

of

income.

Impairment

of

assets

The

carrying

amounts

of

assets

are

reviewed

annually

for

signs

of

possible

impairment

,

or

more

frequently

should

any

indication

of

impairment

arise.

If

any

such

indication

exists,

the

recoverable

amount

of

the

asset

is

estimated

and

compared

to

the

carrying

amount

of

the

asset.

An

impairment

loss

is

recognised

when

the

carrying

amount

of

an

asset

is

greater

than

its

recoverable

amount.

The

recoverable

amount

is

the

higher

of

an

asset’s

fair

value

less

costs

to

sell

and

its

value

in

use.

An

impairment

loss

is

recognised

immediately

as

depreciation,

amortisation

and

impairment

in

the

statement

of

income.

In

connection

with

the

recognition

of

the

impairment

loss,

the

useful

life

of

the

depreciable

asset

is

reassessed.

An

earlier

impairment

loss

recognised

for

an

asset

is

reversed

if

the

estimates

used

to

determine

the

recoverable

amount

change

.

However,

any

reversal

of

impairment

shall

not

exceed

the

asset’s

carrying

amount

less

impairment

loss

.

Accounting

estimates

and

judgement

s

Assessing

the

probability

of

expected

future

economic

benefits

and

useful

lives

of

property,

plant

and

equipment

require

management

judgement.

The

estimated

useful

lives

and

residual

values

are

reviewed

at

least

at

the

end

of

each

reporting

period,

and

if

they

differ

significantly

from

the

depreciation

periods

are

adjusted

accordingly.

Also

,

assessing

any

indication

of

impairment

requires

management

judgement.

2020

MEUR

Land

and

water

Build

-

ings

and

struc

-

tures

Machin

-

ery

and

equip

-

ment

Construc

-

tion

in

progress

and

ad-

vances

paid

Other

tangible

assets

Total

Cost

on

1

January

2020

30

283

798

32

25

1,167

Changes

in

exchange

rates

0

-7

-14

0

-22

Acquisitions

and

disposals

0

-1

-8

0

-10

Additions

0

4

26

22

2

54

Decreases

-5

-13

-35

0

-52

Reclassifications

0

4

16

-20

0

-1

Cost

on

31

December

2020

25

270

782

32

26

1,135

Accumulated

depreciation

and

impairment

on

1

January

2020

-1

-179

-659

0

-21

-860

Changes

in

exchange

rates

0

5

11

0

16

Accumulated

depreciation

on

decreases

and

disposals

0

11

37

0

49

Depreciation

during

the

financial

period

0

-12

-38

0

-1

-51

Impairments

0

-1

-5

0

-6

Accumulated

depreciation

and

impairment

on

31

December

2020

-1

-176

-654

0

-22

-853

Carrying

amount

on

31

December

2020

24

93

128

32

4

282

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
2019 
 
MEUR 
Land 
and 
water 
Build 
- 
ings 
and 
struc 
- 
tures 
Machin 
- 
ery 
and 
equip 
- 
ment 
Construc 
- 
tion 
in 
progress 
and 
ad- 
vances 
paid 
Other 
tangible 
assets 
Total 
Cost 
on 
1 
January 
2019 
31 
297 
780 
40 
24 
1,171 
Transfer 
to 
right 
-of 
-use 
assets 
-1 
-1 
-2 
Changes 
in 
exchange 
rates 
1 
2 
3 
Additions 
3 
27 
18 
1 
49 
Decreases 
-1 
-18 
-30 
-50 
Reclassifications 
1 
22 
-25 
-2 
Cost 
on 
31 
December 
2019 
30 
283 
798 
32 
25 
1,167 
Accumulated 
depreciation 
and 
impairment 
on 
1 
January 
2019 
-1 
-177 
-648 
-21 
-847 
Changes 
in 
exchange 
rates 
-1 
-1 
Accumulated 
depreciation 
on 
decreases 
11 
29 
41 
Depreciation 
during 
the 
financial 
period 
-13 
-40 
-1 
-54 
Impairments 
-1 
-1 
Accumulated 
depreciation 
and 
impairment 
on 
31 
December 
2019 
-1 
-179 
-659 
-21 
-860 
Carrying 
amount 
on 
31 
December 
2019 
29 
104 
139 
31 
3 
307 
 
3.4. 
LEASES 
Accounting 
principles 
The 
Group's 
capitalised 
lease 
agreements 
consist 
mainly 
of 
office 
premises, 
vehicles 
, 
and 
production 
machinery 
and 
equipment. 
The 
average 
lease 
period 
for 
buildings 
is 
approximately 
eight 
years, 
and 
for 
machinery 
and 
equipment 
approximately 
four 
years. 
The 
Group 
recognises 
a 
right-of-use 
(ROU) 
asset 
and 
a 
lease 
liability 
at 
the 
commencement 
of 
the 
lease. 
Whether 
a 
contract 
contains 
a 
lease 
is 
determined 
based 
on 
whether 
Wärtsilä 
has 
the 
right 
to 
control 
the 
use 
of 
an 
identified 
asset 
for 
a 
period 
of 
time. 
At 
the 
commencement 
date, 
a 
right 
-of- 
use 
asset 
as 
defined 
by 
IFRS 
16 
is 
measured 
at 
cost. 
The 
cost 
of 
the 
right- 
of-use 
asset 
shall 
comprise 
the 
amount 
of 
the 
initial 
measurement 
of 
the 
lease 
liability, 
any 
lease 
payments 
made 
at 
or 
before 
the 
commencement 
date 
(less 
any 
lease 
incentives 
received), 
any 
initial 
direct 
costs 
incurred 
by 
the 
lessee 
and 
an 
estimate 
of 
costs 
to 
be 
incurred 
by 
the 
lessee 
in 
dismantling 
and 
removing 
the 
underlying 
asset, 
restoring 
the 
site 
on 
which 
it 
is 
located 
or 
restoring 
the 
underlying 
asset 
to 
the 
condition 
required 
by 
the 
terms 
and 
conditions 
of 
the 
lease, 
unless 
those 
costs 
are 
incurred 
to 
produce 
inventories. 
The 
nominal 
lease 
liability 
is 
initially 
measured 
at 
the 
present 
value 
of 
the 
lease 
payments 
over 
the 
lease 
term. 
The 
lease 
payments 
include 
fixed 
payments, 
amounts 
to 
be 
expected 
to 
be 
paid 
under 
residual 
value 
guarantees, 
the 
exercise 
price 
of 
reasonably 
certain 
extension 
options, 
and 
payments 
of 
penalties 
for 
terminating 
a 
lease 
in 
case 
this 
reflects 
the 
lease 
term. 
The 
lease 
payments 
are 
discounted 
using 
the 
interest 
rate 
implicit 
in 
the 
lease, 
if 
this 
rate 
can 
be 
readily 
determined. 
Otherwise 
, 
the 
lessee´s 
incremental 
borrowing 
rate 
is 
used. 
The 
incremental 
borrowing 
rates 
used 
are 
the 
sum 
of 
relevant 
interbank 
rates 
and 
the 
average 
margin 
of 
the 
Group 
loan 
portfolio 
, 
and 
are 
currency 
specific. 
The 
initial 
measurement 
of 
the 
lease 
payments 
does 
not 
include 
possible 
variable 
elements. 
Variable 
lease 
payments 
not 
included 
in 
the 
initial 
measurement 
of 
the 
lease 
liability 
are 
recognised 
directly 
in 
the 
statement 
of 
income 
as 
other 
operating 
expenses 
. 
The 
lease 
term 
is 
the 
non-cancellable 
period 
of 
the 
lease 
plus 
the 
period 
covered 
by 
an 
option 
to 
extend 
or 
terminate 
if 
the 
lessee 
is 
reasonably 
certain 
to 
exercise 
the 
option. 
Subsequently, 
the 
right-of- 
use 
assets 
are 
measured 
at 
initial 
measurement 
less 
accumulated 
depreciation 
and 
impairment 
losses. 
The 
right-of-use 
assets 
are 
depreciated 
and 
interest 
on 
lease 
liabilities 
recognised 
in 
interest 
expenses 
in 
the 
statement 
of 
income 
over 
the 
lease 
term. 
The 
lease 
liabilities 
are 
subsequently 
measured 
at 
initial 
recognition 
less 
occurring 
lease 
payments 
that 
are 
allocated 
to 
the 
principal. 
Lease 
payments 
are 
presented 
as 
repayments 
of 
liabilities 
and 
related 
interest 
expenses. 
The 
lease 
payments 
are 
presented 
in 
the 
cash 
flow 
from 
financing 
activities 
, 
and 
the 
interest 
related 
to 
leases 
are 
presented 
in 
the 
cash 
flow 
from 
operating 
activities. 
Lease 
payments 
related 
to 
short-term 
leases, 
low-value 
assets 
, 
and 
variable 
payments 
are 
presented 
in 
the 
cash 
flow 
from 
operating 
activities. 
Contracts 
may 
combine 
different 
kinds 
of 
obligations 
to 
the 
supplier, 
which 
might 
be 
a 
combination 
of 
lease 
components 
or 
a 
combination 
of 
lease 
and 
non 
-lease 
components. 
These 
lease 
and 
non-lease 
components 
are 
accounted 
for 
separately 
and 
the 
consideration 
is 
allocated 
between 
the 
components 
based 
on 
relative 
stand-alone 
selling 
prices. 
The 
lease 
and 
non-lease 
components 
are 
separated. 
Should 
separating 
the 
components 
not 
be 
possible, 
judgement 
is 
used 
to 
allocate 
the 
non-lease 
component 
in 
the 
accounting. 
The 
selection 
of 
separating 
the 
non-lease 
component 
or 
not 
from 
the 
lease 
, 
is 
applied 
to 
the 
whole 
asset 
class, 
buildings, 
and 
machinery 
and 
equipment. 

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Modifications

to

lease

agreements

may

result

in

adjustments

to

existing

right-of-use

assets

and

lease

liabilities.

A

gain

or

loss

arising

from

a

modification

or

a

termination

of

a

lease

agreement

is

recognised

as

other

operating

income

or

other

operating

expenses

in

the

statement

of

income.

The

Group

applies

the

two

available

exemptions,

which

relate

to

either

short-term

contracts,

in

which

the

lease

term

is

less

than

12

months,

or

low

-value

assets,

which

are

expensed

to

other

operating

expenses.

Accounting

estimates

and

judgements

Management

judgement

based

on

realistic

estimates

is

used

when

determining

the

lease

term,

especially

concerning

lease

agreements

for

buildings

containing

termination

or

extension

options

and

lease

agreements

with

an

indefinite

lease

term.

MEUR

2020

2019

Land

and

buildings,

right-of

-use

assets

Carrying

amount

on

1

January

2020

174

203

Changes

in

exchange

rates

-6

Acquisitions

and

disposals

-2

Additions

29

28

Depreciation

and

impairment

-40

-43

Decreases

and

reclassifications

-6

-14

Carrying

amount

on

31

December

2020

151

174

Machinery

and

equipment,

right-of

-use

assets

Carrying

amount

on

1

January

2020

11

12

Additions

8

6

Depreciation

and

impairment

-7

-6

Decreases

and

reclassifications

-1

Carrying

amount

on

31

December

2020

11

Lease

liabilities

Carrying

amount

on

1

January

2020

188

215

Changes

in

exchange

rates

-6

Acquisitions

and

disposals

-1

Additions

37

33

Interest

expenses

2

Payments

-45

-49

Other

adjustments

-7

-13

Carrying

amount

on

31

December

2020

166

188

Total

lease

liabilities

Non

-current

124

146

Current

42

MEUR

2020

2019

Amounts

recognised

in

statement

of

income

Depreciation

and

impairment

of

right-of

-use

assets

-47

-49

Interest

expenses

-4

-5

Expense

-

short

-term

leases

-27

-32

Expense

-

leases

of

low

-value

assets

-4

-6

Expense

-

variable

lease

payments

-4

3.5.

DEPRECIATION,

AMORTISATION

AND

IMPAIRMENT

MEUR

2020

2019

Development

expenses

12

11

Purchase

price

allocation

amortisation

33

41

Other

intangible

assets

9

10

Buildings

and

structures

12

13

Land

and

buildings,

right

-of

-use

assets

40

43

Machinery

and

equipment

38

40

Machinery

and

equipment,

right-of

-use

assets

7

6

Other

tangible

assets

1

Impairment

21

15

Total

174

180

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

4.

WORKING

CAPITAL

AND

OTHER

BALANCE

SHEET

ITEMS

4.1.

INVENTORIES

Accounting

principles

Inventories

are

valued

at

the

lower

of

cost

and

net

realisable

value.

Materials

and

consumables

are

valued

at

weighted

average

cost

or

at

moving

average

price.

Finished

products

are

valued

at

direct

purchasing

and

manufacturing

costs

plus

allocated

purchasing

and

manufacturing

overhead

costs.

Work

in

progress

includes

costs

for

direct

labour

and

material

costs

,

and

allocated

overhead

costs

manufacturing

and

purchasing

when

control

has

not

yet

been

transferred

to

the

customer

.

Accounting

estimates

and

judgements

Writing

down

inventories

to

net

realisable

value

due

to

obsolete

and

excess

stock,

is

performed

based

on

the

management’s

best

estimate

on

the

balance

sheet

date.

An

analysis

of

inventory

ageing,

turn-

over,

and

compos

ition

compared

to

anticipated

future

use,

is

the

basis

for

the

estimates.

MEUR

2020

2019

Materials

and

consumables

453

484

Work

in

progress

632

736

Finished

products

45

53

Advances

paid

62

93

Total

1,192

1,365

In

2020,

EUR

24

million

(4)

impairment

for

obsolete

inventories

has

been

recognised

in

the

consolidated

statement

of

income.

The

total

value

of

inventories

assets

held

for

sale

amounts

to

EUR

23

million

(18).

Although

COVID-

19

has

impacted

spare

part

sales

volumes

to

some

extent,

the

impact

is

not

so

significant

that

it

would

elevate

the

inherent

risk

of

valuation

relating

to

inventories.

Cancellations

of

orders

have

been

largely

in

line

with

normal

levels

in

Wärtsilä.

Also,

Wärtsilä

safeguards

the

recoverability

of

work

in

progress

with

advance

payments

collected

from

customers.

4.2.

TRADE

RECEIVABLES

AND

CONTRACT

ASSETS

AND

LIABILITIES

Accounting

principles

Trade

receivables

are

recognised

when

the

right

to

consideration

becomes

unconditional.

The

Group’s

trade

receivables

are

measured

at

amortised

cost,

which

is

the

original

invoiced

amount

less

an

estimated

valuation

allowance

for

impairment.

The

Group

assesses

any

possible

increase

in

the

credit

risk

for

financial

assets

measured

at

amortised

cost

at

the

end

of

each

reporting

period

individually.

The

methodology

applied

depends

on

whether

there

has

been

a

significant

increase

in

credit

risk.

If

there

has

not

been

a

significant

increase

in

credit

risk,

the

loss

allowance

is

estimated

at

an

amount

equal

to

lifetime

expected

credit

losses

at

the

current

reporting

date.

For

trade

receivables

and

contract

assets,

a

simplified

approach

is

used,

and

the

loss

allowance

is

measured

at

the

estimate

of

the

lifetime

expected

credit

losses.

The

Group

uses

a

provision

matrix

for

estimating

the

expected

credit

loss

where

receivables

are

segregated

depending

on

the

ag

eing

category

and

the

origin

of

the

receivable.

The

Group

has

an

effective

collection

process

in

place

which

decreases

the

possible

risk

of

credit

losses.

Also,

to

mitigate

the

credit

risk,

advance

payments

and

payment

guarantees

are

in

use.

In

calculating

the

expected

credit

loss

rates,

the

Group

considers

historical

loss

rates

for

each

category,

and

adjusts

for

forward

looking

macroeconomic

data.

Based

on

the

analysis,

for

trade

receivables

not

due,

or

a

maximum

of

359

days

overdue,

an

impairment

of

0.1%

-2.0%

is

made.

In

addition

to

that,

trade

receivables

more

than

360

days

old

are

assessed

individually

for

impairment.

Examples

of

events

giving

rise

to

impairment

include

a

debtor’s

serious

financial

problems,

and

a

debtor’s

probable

bankruptcy

or

other

financial

arrangement.

Trade

receivables

are

permanently

written

off

when

there

is

no

reasonable

expectation

of

recovery.

The

Group

may

sell

undivided

interests

in

trade

receivables

on

an

ongoing

and

one

-time

basis

to

lending

institutions.

Financial

assets

sold

under

these

arrangements

are

excluded

from

trade

receivables

in

the

statement

of

financial

position

at

the

time

of

payment

from

the

acquirer,

providing

that

substantially

all

risks

and

rewards

have

been

transferred.

If

the

acquirer

has

not

settled

payment

to

the

extent

that

the

ownership,

risk

,

and

control

over

the

receivable

have

been

substantially

transferred,

then

such

financial

assets

sold

are

re-

recognised

in

the

statement

of

financial

position

at

the

end

of

the

reporting

period.

Contract

assets

and

liabilities

are

contracts

with

customers.

When

control

over

goods

or

services

is

transferred

to

a

customer

before

the

customer

pays

the

consideration,

the

receivable

is

recognised

as

a

contract

asset.

The

contract

asset

represents

the

right

to

future

consideration.

Contract

assets

primarily

relate

to

the

Group’s

right

to

consideration

for

transferred

goods

or

services,

but

which

is

not

yet

billed

at

the

reporting

date.

The

contract

assets

are

transferred

to

trade

receivables

when

the

rights

become

unconditional.

When

the

customer

pays

consideration

in

advance,

or

when

the

consideration

is

due

before

transferring

the

contractual

performance

obligation,

the

amount

received

in

advance

is

presented

as

a

contract

liability.

Contract

liabilities

are

recognised

as

revenue

when

the

Group

performs

under

the

contract.

Advances

received

and

deferred

revenue

relate

to

payment

s

received,

or

invoicing

in

excess

of

revenue

recognised.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Accounting

estimates

and

judgements

Estimated

expected

credit

loss

provisions

are

based

on

management’s

best

judgement.

Management

judgement

includes

past

years’

experience

and

a

forward

-looking

understanding

of

the

client

’s

payment

behaviour

and

economic

situation.

Assessing

whether

or

not

it

is

probable

that

the

consideration

from

contracts

with

customers

will

be

collected

requires

judgement,

and

might

impact

the

timing

and

amount

of

revenue

recognition.

Contract

assets

and

liabilities

MEUR

2020

2019

Trade

receivables

953

1,255

Contract

assets

389

515

Contract

liabilities

Advances

received

452

Deferred

income

524

465

Trade

receivables

and

contract

assets

Non

-current

30

19

Current

1,311

1,752

Contract

liabilities

Non

-current

51

38

Current

926

880

Revenue

recognised

in

the

financial

period

that

was

included

in

the

contract

liability

on

1

January

880

888

Unsatisfied

performance

obligations,

all

revenue

types

6,748

7,427

of

which

remaining

performance

obligations

from

projects

and

contracts

under

execution

3,898

3,959

The

contract

assets

and

liabilities

arise

from

long

-term

service

agreements

and

projects

recognised

over

time,

such

as

gas

solutions

construction

contracts,

integrated

solutions

projects,

ship

design,

and

energy

solutions

turnkey

contracts.

The

decrease

in

contract

assets

arises

from

usual

business

-related

project

variations

mainly

in

Energy

business.

Also

,

the

increase

in

contract

liabilities

arises

from

usual

business

-related

project

variations,

mainly

in

Marine

Systems

business.

Credit

risk

included

in

Wärtsilä’s

receivables

and

the

recoverability

of

contract

assets

has

been

evaluated

under

the

uncertain

ty

caused

by

the

COVID

-19

pandemic.

There

has

not

been

any

significant

indication

of

change

in

customer

payment

behavior,

and

therefore

same

principles

have

been

applied

for

expected

credit

loss

recognition

as

in

the

annual

report

2019.

The

collection

of

trade

receivables

has

been

emphasised.

The

risk

in

the

recoverability

of

the

contract

assets

is

not

seen

to

have

significantly

increased.

As

of

the

reporting

date,

Wärtsilä

has

not

received

any

significant

cancellations

for

projects

or

long

-term

agreements

under

execution.

Cancellations

and

postponements

of

orders

have

largely

been

in

line

with

the

normal

levels.

Ageing

of

trade

receivables

2020

2019

MEUR

Trade

receivables

of

which

impaired

Trade

receivables

of

which

impaired

Not

past

due

657

1

788

1

Past

due

1–30

days

112

0

149

0

Past

due

31–180

days

123

2

227

2

Past

due

181–360

days

29

3

73

1

Past

due

1

year

93

56

81

57

Total

1,014

61

1,317

61

In

2020,

the

result

impact

of

write-offs

was

EUR

-5

million

(-7).

Impairment

MEUR

2020

2019

Impairment,

beginning

of

period

61

62

Money

received

-27

-10

Impairment

during

the

period

34

17

Write

-off

during

the

period

-5

-7

Impairment,

end

of

period

61

The

Group

sells

trade

receivables

in

an

amount

that

is

currently

not

significant

compared

to

the

trade

receivables

as

a

whole.

Sold

receivables

have

been

de

-recognised

in

the

statement

of

financial

position.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

4.3.

OTHER

RECEIVABLES

Accounting

principles

Other

receivables

are

recognised

at

amortised

cost.

MEUR

2020

2019

Derivatives

37

24

Interest

and

other

financial

items

4

6

Insurance

receivables

3

6

Rental

accruals

2

3

Prepaid

expenses

6

14

Other

accruals

34

41

Loan

receivables

2

Defined

benefit

plans

1

VAT

receivables

124

111

Other*

56

88

Total

269

296

Non

-current

11

15

Current

258

281

*

Other

receivables

includes

payroll

receivables

of

EUR

7

million

(9)

in

Brazil,

which

cannot

be

utilised

likely

within

a

year.

In

2019

current

other

receivables

also

included

a

receivable

of

EUR

21

million

relating

to

disposal

of

pump

business,

which

has

been

received

in

2020.

4.4.

TRADE

PAYABLES

AND

OTHER

LIABILITIES

Accounting

principles

Trade

payables

and

other

liabilities

are

initially

recognised

at

fair

value

and

subsequently

measured

at

amortised

cost.

MEUR

2020

2019

Trade

payables

411

624

Accrued

expenses

315

320

Personnel

costs

154

125

Derivatives

27

23

Interest

and

other

financial

items

4

Other

accruals

43

41

VAT

liabilities

40

39

Other

81

70

Total

1,076

1,247

Non

-current

1

Current

1,075

1,246

4.5.

PROVISIONS

Accounting

principles

Provisions

are

recognised

in

the

statement

of

financial

position

when

the

Group

has

a

present

legal

or

constructive

obligation

as

a

result

of

a

past

event,

and

it

is

probable

that

an

outflow

of

economic

benefits

will

be

required

to

settle

the

obligation

and

a

reliable

estimate

can

be

made

of

the

amount

of

the

obligation.

Provisions

can

arise,

for

example,

from

warranties,

environmental

risks,

litigation,

foreseeable

losses

on

projects,

and

restructuring

costs.

The

amount

to

be

recognised

as

provisions

corresponds

to

the

management’s

best

estimate

of

the

expenses

that

will

be

necessary

to

meet

the

existing

obligation

at

the

end

of

the

reporting

period.

Warranty

provisions

include

estimated

future

warranty

costs

relating

to

products

delivered.

The

amount

of

future

warranty

costs

is

based

on

accumulated

historical

experience.

Typically

the

standard

warranty

period

is

one

year

from

the

delivery

onwards.

Provisions

for

restructuring

costs

are

made

once

the

restructuring

plan

has

been

approved

and

the

implementation

started,

or

the

personnel

concerned

have

been

informed

of

the

terms.

The

plan

must

indicate

which

activities

and

personnel

will

be

affected

,

as

well

as

the

timing

and

cost

of

implementation.

The

Group

is

a

defendant

in

a

number

of

legal

cases

which

arise

out

of,

or

are

incidental

to,

the

ordinary

course

of

its

business.

These

lawsuits

concern

mainly

issues

,

such

as

contractual

and

other

liability,

labour

relations,

property

damage

and

regulatory

matters.

The

Group

receives

from

time

to

time

claims

of

different

amounts

and

with

varying

degrees

of

substantiation.

It

is

the

Group’s

policy

to

provide

for

amounts

the

claims

,

as

well

as

for

the

litigation

and

arbitration

matters

when

an

unfavourable

outcome

is

probable

and

the

amount

of

loss

can

be

reasonably

estimated.

Accounting

estimates

and

judgements

The

Group

is

a

defendant

in

a

number

of

legal

cases

arising

from

its

business

operations.

A

provision

for

a

court

case

is

recognised

when

an

unfavourable

result

is

probable,

and

the

loss

can

be

determined

with

reasonable

certainty.

The

final

result

can

differ

from

these

estimates.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

2020

MEUR

Litigation

Warranties

Onerous

contracts

Restruc

-

turing

Other

provisions

Total

Provisions

on

1

January

2020

10

174

89

13

38

323

Changes

in

exchange

rates

0

-2

-3

0

-1

-6

Disposals

0

-2

0

-2

Additions

2

49

87

12

21

170

Used

provisions

-1

-42

-87

-13

-5

-148

Released

provisions

0

-2

-6

-2

-13

Provisions

on

31

December

2020

10

174

80

9

50

324

Non

-current

55

Current

269

There

is

currently

one

unusually

sizeable

claim,

but

it

is

highly

unlikely

that

the

outcome

of

it

will

be

unfavourable.

The

claim

is

treated

as

a

contingent

liability.

2019

MEUR

Litigation

Warranties

Onerous

contracts

Restruc

-

turing

Other

provisions

Total

Provisions

on

1

January

2019

21

172

67

7

38

305

Changes

in

exchange

rates

1

Additions

4

52

100

20

14

190

Used

provisions

-14

-51

-71

-13

-9

-159

Released

provisions

-1

-7

-2

-5

-14

Provisions

on

31

December

2019

10

174

89

13

38

323

Non

-current

45

Current

278

4.6.

DEFERRED

TAXES

Accounting

principles

Deferred

tax

liabilities

and

assets

are

calculated

on

temporary

differences

arising

from

the

difference

between

the

tax

basis

of

assets

and

liabilities

,

and

the

carrying

values

using

the

enacted

or

substantially

enacted

tax

rates

at

the

end

of

t

he

reporting

period.

The

statement

of

financial

position

includes

deferred

tax

liabilities

in

their

entirety

and

deferred

tax

assets

at

their

estimated

probable

amount.

Deferred

tax

assets

and

liabilities

are

offset

when

there

is

a

legally

enforceable

right

to

offset

current

tax

assets

against

current

tax

liabilities,

and

when

the

deferred

tax

assets

and

liabilities

relate

to

income

taxes

levied

by

the

same

taxation

authority

on

either

the

same

taxable

entity

,

or

different

taxable

entities

which

intend

to

settle

the

balances

on

a

net

basis.

Accounting

estimates

and

judgements

Estimates

of

tax

liabilities

and

receivables

relate

mainly

to

the

expected

result

of

ongoing

tax

audits,

and

to

the

recognition

of

deferred

tax

receivables

from

tax

losses.

Deferred

tax

assets

on

unutilised

tax

losses

and

other

temporary

differences

are

recognised

to

the

extent

it

is

highly

probable

that

taxable

profit

is

available.

No

deferred

tax

assets

are

recognised

from

tax

losses

when

there

is

uncertainty

of

their

utili

sation.

Changes

in

deferred

taxes

during

2020

MEUR

1

January

2020

Recog

-

nised

in

the

con-

solidated

statement

of

income

Other

compre

-

hensive

income

Transla

-

tion

dif-

ferences

Acquisi

-

tions

and

disposals

31

December

2020

Deferred

tax

assets

Tax

loss

carry

-forwards

34

27

0

-1

58

Pension

obligations

27

-1

0

25

Provisions

35

2

0

-1

0

36

Elimination

of

intragroup

margin

in

inventories

6

1

0

7

Fair

value

reserve

6

0

1

-1

0

6

Other

temporary

differences

55

10

0

-4

2

63

Reclassification

to

assets

held

for

sale

-8

-12

Total

155

39

0

-8

0

183

Deferred

tax

liabilities

Intangible

assets

and

property,

plant

and

equipment

59

-7

0

-2

0

50

Fair

value

reserve

1

0

1

0

2

Other

temporary

differences

32

5

-1

1

36

Reclassification

to

assets

held

for

sale

-8

-12

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Total

83

-1

0

-2

1

76

Net

deferred

tax

assets/liabilities

72

40

0

-6

-1

107

On

31

December

2020,

the

Group

had

temporary

differences

on

which

no

deferred

tax

assets

were

booked

,

totalling

EUR

68

million

(64),

as

it

is

uncertain

if

they

will

be

realised.

Most

of

the

unrecognised

deferred

tax

assets

are

cumulative

tax

losses.

Of

these,

EUR

19

million

(29)

will

expire

within

the

years

and

the

rest

will

expire

later

or

never.

Most

of

the

cumulative

tax

losses

on

which

deferred

tax

assets

have

been

booked

will

never

expire.

Changes

in

deferred

taxes

during

2019

MEUR

1

January

2019

Recog

-

nised

in

the

con-

solidated

statement

of

income

Other

compre

-

hensive

income

Transla

-

tion

dif-

ferences

Acquisi

-

tions

31

December

2019

Deferred

tax

assets

Tax

loss

carry

-forwards

18

17

-1

34

Pension

obligations

21

1

5

27

Provisions

28

7

35

Elimination

of

intragroup

margin

in

inventories

5

1

6

Fair

value

reserve

9

-3

6

Other

temporary

differences

49

6

-1

55

Reclassification

to

assets

held

for

sale

-8

Total

129

32

2

-2

155

Deferred

tax

liabilities

Intangible

assets

and

property,

plant

and

equipment

66

-10

2

59

Fair

value

reserve

1

Other

temporary

differences

32

Reclassification

to

assets

held

for

sale

-8

Total

99

-10

1

83

Net

deferred

tax

assets/liabilities

30

41

1

-1

-2

72

4.7.

PENSION

OBLIGATIONS

Accounting

principles

Group

companies

in

different

countries

have

various

pension

plans

in

accordance

with

local

conditions

and

practices.

These

pension

plans

are

classified

either

as

defined

contribution

or

defined

benefit

plans.

Defined

benefit

plans

are

funded

through

contributions

to

pension

funds

or

pension

insurance

companies.

Defined

benefit

plans

may

be

unfunded

or

wholly

or

partly

funded.

The

present

value

of

the

obligation

arising

from

the

defined

benefit

plans

is

determined

per

each

plan

using

actuarial

techniques,

the

projected

unit

credit

method.

The

Group

recognises

the

defined

benefit

obligation

,

net

of

fair

value

of

the

plan

assets

,

at

the

end

of

the

financial

period.

Actuarial

gains

and

losses

and

other

re

-measurements

of

the

net

defined

benefit

obligation

are

recognised

immediately

in

the

statement

of

other

comprehensive

income.

Current

service

cost

is

the

present

value

of

the

post-employment

benefit,

which

is

earned

by

the

employees

during

the

year.

The

Group

determines

the

net

interest

expense

on

the

net

defined

benefit

plan

by

applying

the

discount

rate

used

to

measure

the

defined

benefit

obligation.

Service

cost

is

recognised

in

employee

benefit

expenses

and

the

net

interest

in

financial

expenses.

The

defined

benefit

plans

are

calculated

by

qualified

actuaries.

In

addition

to

defined

benefit

plans,

Wärtsilä

has

other

long

-term

employee

benefits

,

which

are

presented

separately

from

the

defined

benefit

plans.

As

with

the

accounting

for

a

defined

benefit

plan,

for

any

other

long-term

benefit

the

Group

recognises

a

liability

for

the

obligation

,

net

of

the

fair

value

of

the

plan

assets,

if

any.

Changes

in

other

long

-term

employee

benefits

are

recognised

in

the

statement

of

income.

Accounting

principles

for

defined

contribution

plans

are

presented

in

Note

2.5.

Employee

benefit

expenses.

Accounting

estimates

and

judgements

Estimates

of

pension

obligations

regarding

each

defined

benefit

plan

are

based

on

actuarial

estimates

of

factors

,

including

future

salary

increases,

discount

rates,

and

return

on

plan

assets.

Changes

in

these

assumptions

can

significantly

affect

the

Group’s

pension

obligations

and

pension

costs.

MEUR

2020

2019

Net

defined

benefit

liabilities

on

31

December

139

155

Liability

for

other

long-term

employee

benefits

on

31

December

16

15

Wärtsilä

has

defined

benefit

plans

for

its

employees

mainly

in

Europe

and

Asia.

The

major

plans

are

located

in

Switzerland,

Germany,

United

Kingdom

and

Sweden.

The

Swiss

defined

benefit

plan

accounts

for

32%

of

the

Group's

total

defined

benefit

obligations

and

56%

of

the

plans'

assets.

Most

of

the

plans

provide

a

lifetime

pension

to

the

members

at

the

normal

retirement

age,

but

there

are

also

plans

that

provide

a

lump

sum

payment

at

the

retirement

date.

Most

of

these

defined

benefit

pension

plans

are

managed

by

pension

funds.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Their

assets

are

not

included

in

the

Group's

assets.

The

plans'

assets

are

typically

invested

according

to

the

investment

strategies

approved

by

the

funds'

Board

of

Trustees,

or

in

some

cases

are

completely

administered

by

insurance

companies.

Wärtsilä

Group

companies

make

their

payments

to

pension

funds

in

accordance

with

local

legislation

and

practice.

Authorised

actuaries

in

each

country

have

performed

the

actuarial

calculations

required

for

the

defined

benefit

plans.

The

Swiss

plan

Wärtsilä

operates

a

defined

benefit

plan

in

Switzerland

in

accordance

with

the

local

pension

laws

and

regulations.

The

plan

provides

benefits

to

the

members

in

the

form

of

a

pension

payable

after

retirement.

The

level

of

benefits

provided

depends

on

the

accrued

retirement

savings

capital,

which

is

a

result

of

contributions

paid

up

to

retirement

plus

respective

interest.

The

plan

is

run

as

a

pension

fund

by

the

Board

of

Trustees

separately

from

the

company.

Contributions

to

the

plan

are

paid

both

by

the

employees

,

as

well

as

by

the

employers

based

on

a

percentage

of

the

insured

salary

as

defined

in

the

pension

fund

regulations.

Contributions

by

the

employers

vary

depending

on

the

age

of

the

emp

loyee,

and

cover

on

average

two

thirds

of

the

total

contributions.

The

investment

strategy

for

a

pension

fund's

asset

is

the

responsibility

of

the

Board

of

Trustees.

Assets

are

invested

in

accordance

with

the

strategy

and

the

corridors

for

different

investment

categories

as

defined

by

local

laws.

Other

risks

of

the

plan

are

the

longevity

of

plan

members,

as

well

as

the

death

or

disability

of

employees

before

their

retirement.

The

pension

plan

is

reinsured

for

the

risk

of

death

and

disability

until

31

December

2021.

Inflationary

increases

for

pensions

in

payment

are

at

the

discretion

of

the

Board

of

Trustees

when

benefits

paid

by

the

plan

are

exceeding

the

minimum

level

required

by

law.

The

German

plans

Wärtsilä

operates

defined

benefit

plans

in

Germany

in

accordance

with

local

pension

laws

and

regulations.

The

plans

provide

benefits

to

the

members

in

the

form

of

a

pension

payable

after

retirement.

The

level

of

benefits

provided

depends

on

the

accrued

retirement

savings

capital,

which

is

a

result

of

contributions

paid

up

to

retirement

plus

respective

interest.

The

plans

vary

from

unfunded

plans

,

to

a

plan

run

as

a

pension

fund.

In

some

of

the

plans,

contributions

are

paid

to

the

plan

,

both

by

the

employees

and

the

employers

based

on

a

percentage

of

the

insured

salary

as

defined

in

the

pension

fund

regulations.

However,

in

some

plans

only

the

employer

is

obliged

to

make

the

payments.

Contributions

by

the

employers

vary

depending

on

the

age

of

the

employee,

the

duration

of

the

employment

,

and

also

on

the

positi

on

of

the

employee.

The

main

risks

of

the

plans

are

the

longevity

of

plan

members

,

and

the

death

or

disability

of

employees

before

their

retirement.

In

a

funded

plan,

the

investment

strategy

chosen

also

includes

certain

risk.

Inflationary

increases

for

pensions

in

payment

are

valuated

on

a

yearly

basis.

MEUR

2020

2019

Present

value

of

unfunded

defined

benefit

obligations

111

119

Present

value

of

funded

defined

benefit

obligations

180

182

Fair

value

of

plan

assets

-151

-146

Net

liability

in

the

statement

of

financial

position

139

155

%

Present

value

of

defined

benefit

obligations

Fair

value

of

plan

assets

Switzerland

32

56

Germany

19

0

Other

Europe

39

32

Asia

9

12

Total

100

MEUR

Present

value

of

defined

benefit

obligation

Fair

value

of

plan

assets

Net

defined

benefit

liability

Balance

on

1

January

2019

282

-134

149

Changes

in

exchange

rates

5

-4

Recognised

in

the

statement

of

income:

Current

service

cost

13

Gains

(-)

/

losses

(+)

on

curtailments

and

settlements

-1

Interest

cost

(+)

/

interest

income

(-)

5

-2

3

Remeasurements

recognised

in

other

comprehensive

income:

Return

on

plan

assets,

excluding

interest

income

-11

Experience

adjustments

1

Changes

in

demographic

assumptions

-1

Changes

in

financial

assumptions

30

Contribution

paid

by

the

plan

members

1

-1

Contribution

paid

by

the

employer

-10

Benefits

paid

-21

10

-12

Reclassification

to

assets

held

for

sale

-15

7

-8

Balance

on

31

December

2019

299

-146

155

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Balance

on

1

January

2020

299

-146

155

Changes

in

exchange

rates

-2

2

0

Recognised

in

the

statement

of

income:

Current

service

cost

10

Past

service

cost

(-

credit)

1

Gains

(-)

/

losses

(+)

on

curtailments

and

settlements

1

Interest

cost

(+)

/

interest

income

(-)

3

-2

2

Remeasurements

recognised

in

other

comprehensive

income:

Return

on

plan

assets,

excluding

interest

income

-6

Experience

adjustments

-4

Changes

in

financial

assumptions

5

Contribution

paid

by

the

plan

members

1

-1

0

Contribution

paid

by

the

employer

-8

Benefits

paid

-22

9

-14

Reclassification

to

assets

held

for

sale

-2

Balance

on

31

December

2020

290

-151

139

Plan

assets

invested

in:

%

2020

2019

Shares

and

other

equity

instruments

18

Bonds

and

other

debt

instruments

39

35

Property

17

Other

assets

26

30

The

main

actuarial

assumptions

at

the

end

of

the

financial

period

are

(expressed

as

weighted

averages):

%

2020

2019

Discount

rate

1.00

1.08

Future

salary

growth

2.01

2.03

Future

pension

growth

1.00

1.14

On

31

December

2020,

the

weighted

average

duration

of

the

defined

benefit

obligation

was

8

years

(12).

The

Group

expects

to

contribute

EUR

3

million

(7)

to

the

plans

during

the

period.

Assumptions

regarding

future

mortality

are

set

based

on

actuarial

advice

in

accordance

with

the

published

statistics

and

experience

in

each

country.

These

assumptions

translate

into

a

weighted

average

life

expectancy

in

years

for

a

pensioner

at

the

retirement

age

as

follows:

2020

2019

Plan

participants

retiring

at

the

end

of

the

financial

period:

Male

17.3

17.4

Female

19.8

20.0

Plan

participants

retiring

20

years

after

the

end

of

the

financial

period:

Male

17.0

18.4

Female

19.1

20.4

The

following

table

presents

a

sensitivity

analysis

for

each

significant

actuarial

assumption

showing

how

the

defined

benefit

obligation

would

have

been

affected

by

changes

in

the

relevant

actuarial

assumption

that

were

reasonably

possible

at

the

end

of

the

financial

period.

This

sensitivity

analysis

applies

to

the

defined

benefit

obligation

only

and

not

to

the

net

defined

benefit

pension

liability

in

its

entirety.

Sensitivity

analysis

Effect

to

defined

benefit

obligation,

MEUR

Change

in

assumption

2020

2019

Discount

rate

increase

1%

-37

-41

Discount

rate

decrease

1%

48

51

Future

salary

growth

increase

1%

8

10

Future

salary

growth

decrease

1%

-7

-8

Future

pension

growth

increase

1%

29

30

Future

pension

growth

decrease

1%

-15

-16

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

5.

CAPITAL

STRUCTURE

AND

FINANCIAL

ITEMS

5.1.

FINANCIAL

INCOME

AND

EXPENSES

Accounting

principles

Service

cost

pension

plans

is

recognised

in

employee

benefit

expenses

and

the

net

interest

in

financial

expenses.

Also

,

gains

and

losses

from

fair

valuation

and

disposal

and

impairments

of

other

shares

are

included

in

financial

income

and

expenses.

Changes

in

the

fair

value

of

interest

rate

hedges

against

Wärtsilä

Group’s

loan

portfolio

are

immediately

recognised

in

financial

income

or

expenses

in

the

statement

of

income.

The

fair

value

of

interest

rate

swaps

is

calculated

by

discounting

the

future

cash

flows.

Exchange

rate

differences

financial

assets

and

financial

liabilities

are

reported

as

financial

items

in

the

statement

of

income,

except

exchange

rate

differences

non

-current

debt

that

is

part

of

the

Group's

net

investment

in

a

subsidiary.

MEUR

2020

2019

Interest

income

on

loans

and

receivables

3

1

Interest

income

on

financial

assets

at

fair

value

through

the

statement

of

income

12

23

Interest

income

on

investments

at

amortised

cost

1

2

Other

financial

income

0

1

Total

financial

income

16

27

Interest

expenses

on

financial

liabilities

recognised

at

amortised

cost

-9

-10

Interest

expenses

on

lease

liabilities

recognised

at

amortised

cost

-4

-5

Interest

expenses

on

financial

liabilities

at

fair

value

through

the

statement

of

income

-21

-36

Net

interest

from

defined

benefit

plans

-2

-3

Changes

in

fair

values

of

financial

assets/liabilities

at

fair

value

through

the

statement

of

income

0

-5

Exchange

rate

differences*

-16

-10

Fee

expenses

-2

Other

financial

expenses

-4

Total

financial

expenses

-59

-74

Total

-43

-47

*

In

2020,

the

result

from

the

ineffective

portion

of

cash

flow

hedges

cancelled

projects

,

EUR

-1

million

(-5),

and

exchange

rate

differences

from

unhedged

internal

loans,

EUR

-10

million

(

-8)

were

included

in

exchange

rate

differences.

5.2.

FINANCIAL

ASSETS

AND

LIABILITIES

BY

MEASUREMENT

CATEGORY

Accounting

principles

Financial

instruments

Financial

instruments

are

initially

recognised

at

fair

value.

Subsequently,

financial

assets

are

classified

and

measured

at

amortised

cost,

at

fair

value

through

statement

of

income,

or

at

fair

value

through

other

comprehensive

income.

The

classification

of

financial

assets

is

defined

by

the

business

model

and

the

cash

flow

characteristics

of

the

asset.

Financial

liabilities

are

subsequently

classified

and

measured

at

amortised

cost

or

at

fair

value

through

statement

of

income.

Financial

instruments

are

classified

as

current

financial

instruments

unless

the

maturity

of

the

financial

instrument

exceeds

12

months

from

the

reporting

date.

Financial

instruments

are

derecognised

only

when

the

financial

instrument

is

extinguished,

or

when

the

contractually

specified

right

or

obligation

is

discharged,

cancelled,

or

when

it

expires.

The

status

of

financial

instruments

is

evaluated

at

each

reporting

date.

Financial

instruments

at

amortised

cost

Financial

assets

Financial

assets

measured

at

amortised

cost

include

cash

and

cash

equivalents,

investments

in

debt

instruments,

commercial

papers,

trade

receivables

and

other

receivables.

The

assets

are

initially

recognised

at

fair

value

less

the

transaction

costs,

and

are

subsequently

measured

at

amortised

cost

by

using

the

effective

interest

rate

method.

These

assets

are

held

for

collecting

contractual

cash

flows,

which

are

solely

payments

of

principal

and

interest.

Interest

income

is

recognised

as

financial

income

in

the

statement

of

income.

The

Group

applies

the

simplified

method

in

IFRS

9

for

the

expected

credit

losses

from

its

trade

receivables.

This

requires

expected

lifetime

credit

losses

to

be

recognised

from

the

initial

recognition

of

the

receivables,

as

defined

in

Note

4.2.

Trade

receivables

and

contract

assets

and

liabilities.

Financial

Liabilities

Financial

liabilities

measured

at

amortised

cost

include

trade

and

other

payables,

loans,

and

borrowings.

These

liabilities

are

initially

recognised

at

fair

value

less

the

transaction

costs

the

acquisition

of

these

liabilities.

The

liabilities

are

subsequently

classified

and

measured

using

the

effective

interest

rate

method

by

amortising

the

discounted

interest

payments

over

the

maturity

of

the

liabilities.

Interest

expense

is

recognised

in

the

financial

expense

in

the

statement

of

income.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Financial

in

struments

at

fair

value

through

the

statement

of

income

Financial

assets

Financial

assets

measured

at

fair

value

through

the

statement

of

income

include

other

financial

investments,

other

short-term

cash

investments

and

derivatives,

which

are

not

included

in

the

hedge

accounting.

These

financial

investments

include

Wärtsilä’s

investments

in

other

companies

(both

listed

and

unlisted

shares).

Changes

in

fair

value

and

gains

and

losses

at

derecognition

of

these

financial

assets

are

recognised

in

the

statement

of

income.

Gains

and

losses

from

fair

valuation

and

the

disposal

and

impairments

of

shares

that

are

attributable

to

operating

activities

are

included

in

operating

income,

while

gains

and

losses

from

fair

valuation

and

the

disposal

and

impairments

of

other

shares

are

included

in

financial

income

and

expenses.

Financial

liabilities

Financial

liabilities

recognised

at

fair

value

through

the

statement

of

income

include

derivatives

that

are

not

eligible

for

hedge

accounting.

Changes

in

fair

value

and

gains

and

losses

at

derecognition

of

these

financial

assets

are

recognised

in

the

statement

of

income.

Financial

Instruments

at

fair

value

through

other

comprehensive

income

Financial

assets

and

liabilities

recognised

at

fair

value

through

other

comprehensive

income

include

the

effective

portion

of

derivates

eligible

for

hedge

accounting.

Information

on

measurement

category

1,608

302

22

1,934

Non

-current

financial

liabilities

Interest

-bearing

debt

1,129

1,139

Derivatives

19

6

25

Current

financial

liabilities

Interest

-bearing

debt

198

Trade

payables

411

Derivatives

1

2

3

Other

financial

liabilities

4

Carrying

amount

by

measurement

category

1,743

20

8

1,770

1,780

*

In

addition,

the

Group

has

cash

and

cash

equivalents

measured

at

amortised

cost

of

EUR

14

million

assets

held

for

sale.

2019

MEUR

Measured

at

amortised

cost

At

fair

value

through

the

statement

of

income

At

fair

value

through

other

compre

-

hensive

income

Carrying

amounts

of

the

statement

of

financial

position

items

Fair

value

Non

-current

financial

assets

Interest

-bearing

investments

1

Trade

receivables

19

Derivatives

5

Other

investments

18

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Other

receivables

2

Current

financial

assets

Trade

receivables

1,232

Trade

receivables

for

sale

4

Derivatives

5

14

18

Other

financial

receivables

6

Cash

and

cash

equivalents

343*

15

358

Carrying

amount

by

measurement

category

1,600

48

14

1,662

Non

-current

financial

liabilities

Interest

-bearing

debt

997

1,005

Derivatives

14

2

16

Current

financial

liabilities

Interest

-bearing

debt

99

Trade

payables

624

Derivatives

1

6

7

Other

financial

liabilities

4

Carrying

amount

by

measurement

category

1,724

15

8

1,747

1,756

*

In

addition,

the

Group

has

cash

and

cash

equivalents

measured

at

amortised

cost

of

EUR

11

million

assets

held

for

sale.

Fair

value

hierarchy

Accounting

principles

Wärtsilä

uses

the

following

categorisation

for

determining

and

disclosing

the

fair

value

of

financial

instruments

by

valuation

technique:

Level

1:

The

quoted

prices

for

the

financial

instruments

are

directly

and

regularly

available

on

active

publicly

traded

markets

or

other

publicly

available

sources.

Level

2:

The

prices

for

the

financial

instruments

are

determined

by

using

a

valuation

method

for

which

the

input

data

is

directly

or

indirectly

available

on

a

publicly

traded

markets

or

other

publicly

available

sources.

Level

3:

The

financial

instruments

are

categorised

into

level

3

fair

value

if

the

prices

for

the

inputs

of

the

valuation

method

are

not

publicly

available,

and

when

the

financial

instruments

are

measured

using

an

independent

valuation

method.

Specific

valuation

techniques

used

to

value

financial

instruments

include:

•

the

fair

value

of

forward

foreign

exchange

contracts

is

determined

by

using

forward

rates

at

the

closing

date

•

the

fair

value

of

interest

rate

swaps

is

calculated

as

being

the

present

value

of

the

estimated

future

cash

flows

based

on

observable

yield

curves

•

the

use

of

quoted

market

prices

or

dealer

quotes

for

similar

instruments

2020

2019

MEUR

Level

2

Level

3

Level

2

Level

3

Financial

assets

Other

investments

19

18

Interest

-bearing

investments,

non-current

1

Other

receivables,

non-current

2

Derivatives

37

24

Financial

liabilities

Interest

-bearing

debt,

non-current*

1,139

1,005

Derivatives

27

23

*

Measured

at

amortised

cost

in

the

statement

of

financial

position.

Additional

information

on

financial

liabilities

is

presented

in

Note

5.6.

Maturity

analysis

of

financial

liabilities.

Other

investments

Other

investments

include

unlisted

shares

carried

at

fair

value.

These

investments

are

valued

using

certain

DCF

models

where

critical

assumptions

relate

to

WACC

level

and

expected

cash

flows

from

future

dividends.

However,

the

results

from

different

scenarios

vary

a

lot.

The

management

therefore

considers

that

the

valuation

at

amortised

cost

is

the

best

estimate

of

fair

value.

MEUR

2020

2019

Carrying

amount

on

1

January

18

16

Acquired

shares

1

2

Carrying

amount

on

31

December

19

18

In

2020,

the

cost

for

other

unlisted

shares

(level

3)

was

EUR

19

million

(18),

and

the

market

value

of

them

was

EUR

19

million

(18).

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

5.3.

CASH

AND

CASH

EQUIVALENTS

Accounting

principles

Cash

and

cash

equivalents

comprise

cash

in

hand,

deposits

held

at

cal

l

with

banks,

and

other

short

-term

cash

investments.

Other

short-term

cash

investments

are

highly

liquid

investments

that

are

subject

to

only

minor

fluctuations

in

value,

and

which

have

a

maturity

of

up

to

three

months

on

the

date

of

acquisition.

Cash

in

hand

and

deposits

held

at

call

are

presented

at

amortised

cost.

Other

cash

investments

are

mainly

measured

at

fair

value,

except

for

commercial

paper

investments

that

are

presented

at

amortised

cost.

Credit

accounts

Group

cash

pool

accounts

are

included

in

current

financial

liabilities.

MEUR

2020

2019

Cash

and

bank

balances*

628

343

Cash

equivalents

290

15

Total

919

358

*

EUR

175

million

(171)

of

cash

and

bank

balances

relate

to

cash

in

countries

where

repatriation

is

limited

due

to

local

regulation

and,

consequently

,

the

cash

is

not

immediately

available

to

the

parent

company.

In

addition,

the

Group

has

cash

and

cash

equivalents

of

EUR

14

million

(11)

assets

held

for

sale.

5.4.

NET

DEBT

RECONCILIATION

Net

interest

-bearing

debt

MEUR

2020

2019

Interest

-bearing

debt,

non-current

1,005

851

Lease

liabilities,

non-current

124

146

Interest

-bearing

debt,

current

156

58

Lease

liabilities,

current

42

Total

interest

-bearing

liabilities

1,327

1,096

Interest

-bearing

receivables

-1

Cash

and

cash

equivalents

-919

-358

Cash

and

cash

equivalents

pertaining

to

assets

held

for

sale

-14

-11

Total

interest

-bearing

assets

-933

-370

Total

net

interest

-bearing

debt

394

726

Net

debt

reconciliation

2020

MEUR

Carrying

amount

on

1

January

2020

Cash

flows

Changes

in

exchange

rates

Other

non

-cash

movements

Acquistions

and

disposals

Carrying

amount

on

31

December

2020

Interest

-bearing

debt,

non-current

851

155

1,005

Interest

-bearing

debt,

current

58

121

-14

-8

156

Lease

liabilities

188

-49

-6

34

-1

166

Interest

-bearing

receivables

-1

1

-1

Cash

and

cash

equivalents*

-369

-601

22

16

-932

Net

debt

726

-374

3

34

8

394

*

Includes

cash

and

cash

equivalents

pertaining

to

assets

held

for

sale.

2019

MEUR

Carrying

amount

on

1

January

2019

Cash

flows

Changes

in

exchange

rates

Other

non

-cash

movements

Carrying

amount

on

31

December

2019

Interest

-bearing

debt,

non-current

746

104

851

Interest

-bearing

debt,

current

73

-11

-5

58

Lease

liabilities

215

-52

26

188

Interest

-bearing

receivables

-3

2

-1

Cash

and

cash

equivalents

-487

119

-369*

Net

debt

545

162

-5

26

726

*

Includes

cash

and

cash

equivalents

pertaining

to

assets

held

for

sale.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

5.5.

EQUITY

Equity

consists

of

share

capital,

share

premium,

translation

differences,

fair

value

reserve,

remeasurements

of

defined

benefit

liabilities

and

retained

earnings.

Share

capital

and

number

of

shares

MEUR

Share

capital

Number

of

shares

and

votes

Share

capital

Share

premium

Total

1

January

2019

591,723,390

336

61

397

31

December

2019

591,723,390

336

61

397

31

December

2020

591,723,390

336

61

397

Wärtsilä's

share

does

not

have

a

nominal

value.

Wärtsilä

has

one

series

of

shares.

Each

share

is

assigned

one

vote

in

the

Annual

General

Meeting

and

has

an

equal

right

to

dividend.

Share

Capital

The

subscription

price

of

a

share

received

by

the

company

in

connection

with

share

issues

is

credited

to

the

share

capital,

unless

it

is

provided

in

the

share

issue

decision

that

a

part

of

the

subscription

price

is

to

be

recorded

in

the

fund

for

invested

non-

restricted

equity.

Share

Premium

Share

premium

is

restricted

equity.

It

may

be

reduced

in

accordance

with

the

rules

applying

to

decreasing

share

capital

in

accordance

with

the

Finnish

Limited

Liability

Companies

Act.

It

can

also

be

used

to

increase

the

share

capital.

Translation

differences

Translating

foreign

subsidiaries'

financial

statements

by

using

different

exchange

rates

in

the

statement

of

comprehensive

income

and

in

the

statement

of

financial

position

causes

translation

differences,

which

are

recognised

in

equity.

Translation

differences

of

foreign

subsidiaries’

acquisition

cost

eliminations

and

pos

t-

acquisition

gains

and

losses

are

also

presented

in

equity.

Also

,

translation

differences

arising

from

subsidiary

net

investment

s

and

non-current

subsidiary

loans

without

agreed

settlement

dates

are

presented

in

equity.

The

change

in

translation

differences

is

recognised

in

other

comprehensive

income.

Fair

value

reserve

Fair

value

reserve

includes

the

changes

in

fair

value

of

derivative

financial

instruments,

if

the

hedging

is

effective

and

eligible

for

hedge

accounting.

The

changes

in

items

included

in

fair

value

reserve

are

recognised

in

other

comprehensive

income.

In

2020,

EUR

-4

million

(4)

of

fair

value

adjustments

cash

flow

hedges

was

recognised

in

equity.

EUR

6

million

(19)

of

the

fair

value

adjustments

was

transferred

from

equity

to

the

statement

of

income

as

net

sales

or

operating

expenses

during

2020.

MEUR

Ca

sh

flow

hedges

Fair

value

reserve

on

1

January

2019

-39

Taxes

fair

value

adjustments

8

Fair

value

reserve

on

1

January

2019

-31

Transferred

to

the

statement

of

income,

net

of

taxes

16

Fair

value

adjustments

4

Fair

value

reserve

on

31

December

2019

-11

Transferred

to

the

statement

of

income,

net

of

taxes

5

Fair

value

adjustments

-4

Taxes

fair

value

adjustments

1

Fair

value

reserve

on

31

December

2020

-9

Parent

company's

distributable

funds

Accounting

principles

The

dividend

proposed

by

the

Board

of

Directors

is

deducted

from

distributable

equity

when

approved

by

the

company’s

Annual

General

Meeting.

Unpaid

dividends

are

presented

as

liability

in

the

consolidated

financial

statements.

After

the

balance

sheet

date,

the

Board

of

Directors

proposed

that

a

dividend

of

EUR

0.20

per

share

be

paid

for

the

financial

period

2020,

the

total

dividend

payable

being

EUR

118

million.

The

remaining

part

of

the

retained

profits

will

be

carried

further

in

the

unrestricted

equity.

For

the

profit

for

the

financial

period

2019,

a

dividend

of

EUR

0.48

per

share

was

distributed,

totalling

EUR

284

million,

and

the

rest

of

the

retained

profits

were

carried

further

in

the

unrestricted

equity.

Additional

information

on

equity

is

presented

in

Notes

to

the

parent

company

financial

statements,

in

Note

10.

Shareholders'

equity.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

5.6.

MATURITY

ANALYSIS

OF

FINANCIAL

LIABILITIES

2020

Current

Non

-current

MEUR

<

1

year

1–3

years

3–5

years

>

5

years

Total

Loans

from

other

financial

institutions*

155

481

232

292

1,160

Lease

liabilities

45

59

35

51

190

Other

interest

-bearing

debt*

1

0

1

Trade

payables

411

Derivatives**

13

5

2

7

27

Other

liabilities

4

Total

629

545

270

350

1,794

*

Estimated

interest

expenses,

total

8

11

6

2

28

Estimated

contractual

cash

flows

637

557

276

353

1,822

2019

Current

Non

-current

MEUR

<

1

year

1–3

years

3–5

years

>

5

years

Total

Loans

from

other

financial

institutions*

56

263

258

328

906

Lease

liabilities

48

65

37

64

215

Other

interest

-bearing

debt*

2

Trade

payables

624

Derivatives**

7

10

5

2

23

Other

liabilities

4

Total

741

339

301

392

1,774

*

Estimated

interest

expenses,

total

8

12

8

3

31

Estimated

contractual

cash

flows

748

351

309

395

1,804

**

Valuation

for

derivatives

with

negative

market

value

by

maturity

date.

Nominal

contractual

amounts

are

presented

in

Note

5.7.

Derivative

financial

instruments.

Interest

expenses

for

long-term

loans

are

calculated

by

using

the

average

interest

rate

prevailing

on

31

December

2020.

Fair

values

of

financial

liabilities

are

presented

in

Note

5.2.

Financial

assets

and

liabilities

by

measurement

category.

Information

on

measurement

categories

of

financial

liabilities

in

Note

5.2.

Financial

assets

and

liabilities

by

measurement

category.

5.7.

DERIVATIVE

FINANCIAL

INSTRUMENTS

Accounting

principles

Derivatives

and

hedge

accounting

Derivatives

are

initially

recognised

on

the

statement

of

financial

position

at

fair

value

and

are

subsequently

classified

and

measured

at

their

fair

value

at

the

end

of

each

reporting

period.

Gains

and

losses

from

the

fair

value

measurement

are

recognised

in

the

statement

of

income

as

determined

by

the

purpose

of

the

derivatives.

Hedge

accounting

Wärtsilä

hedges

its

sales

and

purchases

in

foreign

currencies

with

foreign

exchange

forwards

or

currency

options,

and

Wärtsilä

applies

hedge

accounting

according

to

IFRS

9

to

the

majority

of

these

foreign

exchange

forwards.

Forward

points

are

excluded

from

the

hedge

relationship,

and

in

case

of

a

hedge

being

fully

or

partially

ineffective,

the

ineffective

portion

is

immediately

recognised

in

the

financial

items

for

the

reporting

period.

Wärtsilä

may

also

apply

c

ash

flow

hedging

to

some

of

its

interest

rate

derivatives.

The

Group

documents

the

relationship

between

each

hedging

instrument

and

the

hedged

item

upon

entering

into

a

hedging

arrangement,

along

with

the

risk

management

objective

and

the

strategy

applied.

Through

this

process,

the

hedging

instrument

is

linked

to

the

relevant

assets

and

liabilities,

projected

business

transactions

,

or

binding

contracts.

Wärtsilä

designates

its

hedge

relationships

of

foreign

exchange

hedges

as

either

hedges

of

highly

probable

forecast

transactions

or

firm

commitments.

The

Group

uses

a

hedge

designation

for

foreign

exchange

hedging,

where

critical

terms

match

or

are

closely

aligned

between

the

hedging

instrument

and

the

hedged

item.

The

hedge

ratio

is

typically

100%.

Since

underlying

risks

match,

hedging

instruments

are

considered

to

offset

any

changes

the

hedged

transactions.

Wärtsilä

recognises

that

potential

sources

of

ineffectiveness

arise

when

hedged

transactions

are

delayed

or

cancelled.

However,

Wärtsilä

applies

a

roll-forward

strategy

where

derivatives

are

roll

-forwarded

or

terminated

early

to

match

these

underlying

transactions.

Hedge

effectiveness

requirements

are

assessed

in

accordance

with

IFRS

9

requirements

,

including

requirements

for

economic

relationship,

credit

risk

and

hedge

ratio.

External

hedges

are

typically

made

for

short

maturities

(up

to

1

year)

and

only

high

credit

quality

(A-

minimum

rating

requirement)

counterparties

are

utilised

.

Counterparty

credit

risk

is

expected

to

have

minimal

effect

on

hedge

valuations.

Due

to

some

underlying

hedged

cash

flows

having

longer

maturities

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

than

the

changes

in

present

value

of

the

hedge

and

the

underlying

cash

flow

do

not

always

fully

offset

each

other

during

the

lifetime

of

a

hedge.

This

ineffectiveness

is

calculated

on

a

quarterly

basis

and

booked

in

financial

items

at

Group

level.

Cash

flow

hedge

Changes

in

the

fair

value

of

derivative

contracts

designated

and

qualifying

as

cash

flow

hedges

are

recognised

in

other

comprehensive

income

and

presented

in

the

fair

value

reserve

in

equity,

provided

that

the

hedging

is

effective.

In

the

case

of

foreign

exchange

forwards,

the

spot

element

is

included

for

the

hedging

relationship

where

forward

points

have

been

excluded

from

the

hedge

designation.

Any

gain

or

loss

in

the

fair

value

reserve

derivatives

accumulated

through

other

comprehensive

income

is

reported

in

the

statement

of

income

in

the

same

period

as

any

transactions

relating

to

the

hedged

obligations

or

estimates,

for

example

as

an

adjustment

to

net

sales

or

material

and

services.

The

ineffective

portion

is

immediately

recognised

in

the

financial

items

in

the

statement

of

income

for

the

reporting

period.

Changes

in

fair

value

of

foreign

exchange

derivatives

due

to

interest

rate

differences

are

recognised

in

the

statement

of

income.

More

information

on

fair

value

adjustments

cash

flow

hedges

is

presented

in

Note

5.5.

Equity,

and

more

information

on

the

ineffective

portion

of

cash

flow

hedges

is

presented

in

Note

5.1.

Financial

income

and

expenses.

The

Group

applies

hedge

accounting

to

the

majority

of

its

foreign

currency

forward

contracts.

The

open

operative

currency

positions

including

financing

are

hedged

by

using

derivative

financial

instruments

according

to

the

table

below.

Foreign

exchange

forwards

2020

2019

MEUR

Net

against

fixed

sales

and

purchase

contracts

Against

net

loans

Net

against

fixed

sales

and

purchase

contracts

Against

net

loans

Currency

forwards

USD

292

287

614

356

NOK

396

1

451

41

CHF

22

61

31

103

CNY

15

12

107

13

AUD

47

1

52

MXN

46

5

47

2

SGD

11

8

31

SEK

25

1

26

CAD

20

11

13

11

Other

currencies*

120

1

67

7

Total

net

amount

of

currency

derivatives

936

437

1,364

616

*

Other

currencies

do

not

include

any

material

single

currencies.

Net

loans

include

non-euro

intragroup

loans

and

deposits

given

by

the

parent

company.

IFRS

hedge

accounting

has

been

applied

to

EUR

1,861

million

(2,448)

currency

forwards.

A

5%

change

in

the

exchange

rates

would

cause

from

these

currency

forwards

an

approximately

EUR

45

million

(74)

impact

on

the

equity.

As

all

material

fixed

sales

and

purchase

contracts

are

hedged,

the

profit

and

loss

sensitivity

of

foreign

exchange

from

operations

(excluding

internal

financing)

is

considered

minimal.

2020

2019

MEUR

Gross

amount

Net

amount

Equity

impact

Gross

amount

Net

amount

Equity

impact

Both

legs

of

currency

forwards

under

hedge

accounting*

EUR

1,424

123

6

1,772

83

USD

1,077

295

15

1,332

640

32

NOK

803

248

12

1,202

509

25

GBP

79

57

3

128

34

2

MXN

128

46

2

132

47

2

CNY

50

40

2

110

104

5

JPY

26

2

50

31

2

CHF

18

8

38

28

1

Other

currencies

116

81

4

108

74

4

Total

(single

leg)

1,861

900

45

2,435

776

73

*

Intragroup

transactions,

on

which

the

actual

hedge

accounting

bookings

are

based.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

MEUR

2020

2019

External

currency

forwards

under

hedge

accounting

by

year

2020

-

1,769

2021

1,010

-

Hedged

highly

probable

forecasted

cash

flows

by

year

2020

-

1,977

2021

1,341

193

2022

233

71

2023

50

31

2024

45

176*

2025-

192

-

*

Includes

2024

and

later

for

comparison

period.

Derivatives

MEUR

2020

of

which

closed

2019

of

which

closed

Nominal

values

of

derivative

financial

instruments

(level

2)

Interest

rate

swaps

450

400

Cross

currency

swaps

237

246

Currency

forwards,

included

in

hedge

accounting

1,010

558

1,769

873

Currency

forwards,

no

hedge

accounting

650

245

597

213

Total

2,347

803

3,012

1,086

Fair

values

of

derivative

financial

instruments

(level

2)

Interest

rate

swaps

-12

-7

Cross

currency

swaps

-12

-4

Currency

forwards,

included

in

hedge

accounting

21

8

Currency

forwards,

no

hedge

accounting

14

4

Total

10

In

addition,

the

Group

had

copper

futures

and

swaps

amounting

to

113

tons

(173)

valued

at

EUR

1

million

(1).

Foreign

currency

forward

contracts

are

against

transactional

risks

and

fall

due

during

the

following

12

months

(12).

A

currency

forward

is

considered

closed

when

there

are

offsetting

cash

flows

in

the

same

currency

with

the

same

value

date.

Interest

rate

swaps

are

denominated

in

euros

and

their

average

maturity

is

59

months

(69).

The

average

maturity

for

cross

currency

swaps

is

30

months

(41).

Changes

in

the

market

value

of

interest

rate

derivatives

are

usually

immediately

recognised

in

the

statement

of

income.

However,

cash

flow

hedge

accounting

in

accordance

with

IFRS

9

is

applied

to

a

EUR

130

million

(130)

amortising

interest

rate

swap

maturing

in

2031.

The

interest

rate

hedge

swaps

variable

interest

payments

of

a

large

lease

agreement

,

to

fixed

interest

payments.

As

the

hedge

and

the

underlying

cash

flow

have

matching

critical

terms,

the

hedge

ratio

is

1:1

and

the

hedge

is

expected

to

be

100%

effective.

In

2020,

a

EUR

-6

million

(2)

fair

value

adjustment

cash

flow

hedge

was

recognised

in

equit

y

,

and

no

amounts

have

been

reclassified

to

profit

and

loss.

Wärtsilä

does

not

see

any

significant

increase

in

counterparty

credit

risk

to

outstanding

derivatives

due

to

COVID-

19

pandemic,

as

only

high

credit

quality

counterparties

have

been

used.

Derivatives

under

hedge

accounting

are

expected

to

remain

effective,

as

there

has

been

no

significant

increase

in

the

cancellations

of

orders.

The

hedged

cash

flows

are

still

considered

to

be

highly

probable.

Normally

all

of

the

Groups'

derivatives

are

carried

out

according

to

International

Swaps

and

Derivatives

Association's

Master

Agreements

(ISDA).

In

case

of

an

event

of

default

under

these

agreements,

the

non-

defaulting

party

may

request

early

termination

and

set

-off

of

all

outstanding

transactions.

These

agreements

do

not

meet

the

criteria

for

offsetting

in

the

statement

of

financial

position.

The

following

table

sets

out

the

carrying

amounts

of

recognised

financial

instruments

that

are

subject

to

the

above

agreements.

MEUR

2020

2019

Gross

fair

values

of

derivative

financial

instruments

subject

to

ISDAs

Assets

Cross

currency

swaps

1

5

Currency

forwards

37

18

Total

37

24

Liabilities

Interest

rate

swaps

-12

-7

Cross

currency

swaps

-13

-9

Currency

forwards

-3

-7

Total

-27

-23

Net

fair

values

of

derivative

financial

instruments

subject

to

ISDAs

Assets

25

8

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Liabilities

-16

-8

Total

10

5.8.

FINANCIAL

RISKS

General

Wärtsilä

has

a

centralised

Group

Treasury,

which

has

two

main

objectives:

1)

to

arrange

adequate

funding

for

the

Group’s

underlying

operations

on

competitive

terms

and

2)

to

identify

and

evaluate

the

financial

risks

within

the

Group

and

implement

the

hedges

for

the

Group

companies.

The

objective

is

to

hedge

against

unfavourable

changes

in

the

financial

markets

and

to

minimise

the

impact

of

foreign

exchange,

interest

rate,

credit,

and

liquidity

risks

on

the

Group’s

cash

reserves,

profits

,

and

shareholder

equity.

The

Financial

Risk

Policy

is

approved

by

the

Board

of

Directors.

The

Group

Treasury

employs

only

such

instruments

whose

market

value

and

risk

profile

it

can

reliably

monitor.

Foreign

exchange

risk

Foreign

exchange

exposures

are

monitored

at

the

Business

level,

hedged

at

company

level

against

the

Group

Treasury

,

and

then

netted

and

covered

externally

at

Group

level

by

the

Group

Treasury.

All

material

fixed

sales

and

purchase

contracts,

including

both

future

cash

flows

and

receivable

and

payable,

are

hedged.

The

estimated

future

commercial

exposures

are

evaluated

by

the

Businesses,

and

the

level

of

hedging

is

decided

by

the

Board

of

Management.

Hedge

accounting

in

accordance

with

IFRS

9

is

applied

to

most

of

the

hedges

of

these

exposures.

The

hedges

cover

such

time

periods

that

both

the

prices

and

costs

can

be

adjusted

to

new

exchange

rates.

These

periods

vary

among

Group

companies

from

one

month

to

two

years.

The

Group

also

hedges

its

position

of

the

statement

of

financial

position,

which

includes

cash

balances,

loans/deposits

,

as

well

as

other

receivables

and

payables

denominated

in

foreign

currencies.

As

field

service

work

is

invoiced

in

local

currencies,

there

is

some

foreign

exchange

change

in

the

consolidated

net

sales

.

However,

the

effect

on

the

profitability

is

limited

as

the

are

in

the

same

currency.

Spare

part

sal

es

are

based

on

a

euro

price

list

and

in

non-euro

currencies

are

hedged,

so

the

effect

from

foreign

currency

rate

changes

on

spare

part

sales

is

minimal.

As

project/hardware

sales/purchases

,

as

well

as

estimated

currency

exposures

from

long-term

agreements

,

are

hedged,

the

Group

does

not

expect

significant

gains/losses

from

foreign

exchange

rate

changes

in

2021

its

operations,

excluding

internal

financing.

The

instruments,

and

their

nominal

values,

used

to

hedge

the

Group’s

foreign

exchange

exposures

are

listed

in

Note

5.7.

Derivative

financial

instruments.

Since

Wärtsilä

has

subsidiaries

and

joint

ventures

outside

the

euro

zone,

the

Group’s

equity,

goodwill

and

purchase

price

allocations

are

sensitive

to

exchange

rate

fluctuations.

At

the

end

of

2020,

the

net

assets

of

Wärtsilä’s

foreign

subsidiaries

and

joint

ventures

outside

the

euro

zone

totalled

EUR

956

million

(1,041).

In

addition,

goodwill

and

purchase

price

allocations

from

acquisitions

nominated

in

foreign

currencies

amounted

to

EUR

865

million

(926).

In

2020,

the

translation

differences

recognised

in

other

comprehensive

income

mainly

come

from

changes

in

the

GBP

exchange

rate.

Approximately

65%

(67)

of

sales

and

61%

(59)

of

operating

costs

were

denominated

in

euros,

and

approximately

20%

(20)

of

sales

and

11%

(10)

of

operating

costs

were

denominated

in

US

dollars.

The

remainder

were

split

between

several

currencies.

The

Group’s

profits

and

competitiveness

are

also

indirectly

affected

by

the

home

currencies

(USD,

GBP,

JP

Y

and

KRW)

of

its

main

competitors.

As

Wärtsilä's operations are global

,

they

often

involve

currency

risks.

The

largest

operative

currency

positions

(excluding

financing)

open

as

of

31

December

2020

by

currency

pair

are

listed

below.

2020

Statement

of

financial

position

Estimated

cash

flows

MEUR

Base

currency

received

Base

currency

paid

Base

currency

received

Base

currency

paid

Net

EUR/USD

42

53

147

303

167

EUR/NOK

61

30

281

1

310

USD/NOK

30

231

3

259

EUR/CNY

13

20

65

4

63

EUR/GBP

18

20

89

88

EUR/SGD

16

11

20

26

EUR/JPY

13

6

18

3

22

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

2019

Statement

of

financial

position

Estimated

cash

flows

MEUR

Base

currency

received

Base

currency

paid

Base

currency

received

Base

currency

paid

Net

EUR/USD

77

152

338

512

249

EUR/NOK

119

48

304

17

358

USD/NOK

50

14

72

108

EUR/CNY

32

26

70

76

EUR/GBP

24

18

8

71

56

EUR/JPY

11

7

9

25

12

As

the

main

funding

currency

for

the

Group,

including

the

Group

Treasury,

is

the

euro

and

since

the

subsidiaries

are

normally

funded

in

their

home

currencies

by

the

Group

Treasury,

the

Group

Treasury

had

the

following

currency

positions

as

of

31

December

2020.

2020

2019

MEUR

Loans

Deposits

Net

Loans

Deposits

Net

Intragroup

loans/deposits

USD

15

282

266

35

391

356

GBP

68

60

9

48

93

46

CHF

61

103

AUD

49

52

NOK

1

41

SGD

19

1

32

31

CNY

12

13

CAD

11

Other

currencies*

6

1

7

2

5

7

External

loans/deposits

JPY

237**

237

246**

246

USD

20

Total

388

455

692

435

639

906

*

The

other

currencies

do

not

net

as

they

are

of

different

currencies.

**

External

JPY

loans

are

fully

hedged

with

cross

currency

swaps.

Some

Group

companies

in

countries

whose

currencies

are

not

fully

convertible,

such

as

Argentina,

Brazil,

and

Indonesia,

have

unhedged,

intercompany

loans

nominated

either

in

EUR

or

USD,

which

may

result

in

some

foreign

exchange

differences.

The

total

amount

of

these

loans

is

EUR

66

million

(192).

Wärtsilä

does

not

hedge

translation

risk.

The

most

significant

currencies

for

Wärtsilä

are

presented

in

Note

6.6.

Exchange

rates.

Interest

rate

risk

Wärtsilä

is

exposed

to

interest

rate

risk

primarily

through

market

value

changes

to

the

net

debt

portfolio

(price

risk)

,

as

well

as

through

changes

in

interest

rates

(re-fixing

on

rollovers).

Interest

rate

risk

is

managed

by

constantly

monitoring

the

market

value

of

the

financial

instruments

and

by

using

sensitivity

analysis.

Interest

-bearing

loan

capital

at

the

end

of

2020

totalled

EUR

1,161

million

(908).

The

average

interest

rate

was

0.8%

(0.9)

and

the

average

re

-fixing

time

13

months

(21).

Wärtsilä

spreads

its

interest

rate

risk

exposure

by

taking

both

fixed

and

floating

rate

loans.

The

share

of

fixed

rate

loans

as

a

proportion

of

the

total

debt

can

vary

between

30

and

70%.

The

Board

of

Directors

has

given

authorisation

to

temporarily

increase

the

share

of

fixed

loans

up

to

100%,

and

the

authorisation

is

valid

until

January

2022.

Wärtsilä

hedges

its

loan

portfolio

by

using

derivat

ive

instruments

,

such

as

interest

rate

swaps,

futures

and

options.

MEUR

2020

2019

Fixed

rate

loans

366

406

Floating

rate

loans

796

503

Derivatives

424

Share

of

fixed

rate

loans

of

total

loans

(including

derivatives),

%

68

91

At

the

end

of

2020,

a

one

percentage

point

parallel

decrease/increase

of

the

yield

curve

would

have

resulted

in

a

EUR

26

million

(28)

increase/decrease

in

the

value

of

the

net

debt

portfolio,

including

derivatives.

A

one

percentage

point

change

in

the

inte

rest

level

would

cause

a

EUR

4

million

(1)

change

in

the

following

year’s

interest

expenses

from

the

debt

portfolio,

including

derivatives.

Additional

information

loans

can

be

found

in

Note

5.2.

Financial

assets

and

liabilities

by

measurement

c

ategory

and

Note

5.6.

Maturity

analysis

of

financial

liabilities.

Information

on

interest

rate

derivatives

is

presented

in

Note

5.7.

Derivative

financial

instruments.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Liquidity

and

refinancing

risk

Wärtsilä

ensures

sufficient

liquidity

at

all

times

by

efficient

cash

management

and

by

maintaining

sufficient

available

committed

and

uncommitted

credit

lines.

Refinancing

risk

is

managed

by

having

a

balanced

and

sufficiently

long

loan

portfolio.

Due

to

the

COVID

-

19

pandemic,

the

liquidity

reserves

of

the

Group

have

been

strengthened.

The

Revolving

Credit

Facilities

(RCF)

having

maturity

dates

in

2020

were

extended

until

the

end

of

2021,

and

their

total

amount

was

increased

by

EUR

20

million.

The

total

amount

of

available

RCFs,

EUR

660

million,

is

fully

un-

utili

sed.

Other

COVID

-19

arrangements

resulted

in

disbursement

of

new

long

-term

loans

totalling

EUR

190

million.

As

of

31

December

2020,

the

Group’s

liquidity

reserves

were

at

high

level

and

the

liquidity

position

is

expected

to

remain

strong

du

ring

2021.

The

existing

loan

facilities

include:

•

Committed

Revolving

Credit

Facilities

totalling

EUR

660

million

(640).

•

Finnish

Commercial

Paper

programmes

totalling

EUR

850

million

(800).

The

average

maturity

of

the

non-current

debt

is

36

months

(4

6)

and

the

average

maturity

of

the

confirmed

credit

lines

is

21

months

(30).

Additional

information

in

Note

5.6.

Maturity

analysis

of

financial

liabilities.

At

year-end,

the

Group

had

cash

and

cash

equivalents

totalling

EUR

932

million

(369),

of

which

EUR

14

million

(11)

is

assets

held

for

sale,

as

well

as

EUR

660

million

(640)

of

non-utilised

committed

credit

facilities.

Commercial

Paper

Programmes

were

not

utilised

on

31

December

2020

nor

on

31

December

2019.

Committed

Revolving

Credit

Facilities

,

as

well

as

the

parent

company's

long-term

loans,

include

a

financial

covenant

(solvency

ratio).

The

s

olvency

ratio

is

expected

to

remain

clearly

over

the

covenant

level

for

the

foreseeable

future.

Revolving

credit

facilities

MEUR

2020

2019

Year

Maturing

Available

(end

of

period)

Maturing

Available

(end

of

period)

2019

-

640

2020

660

130

510

2021

280

380

130

380

2022

90

290

90

290

2023

160

130

160

130

2024

130

Credit

risk

Responsibility

for

managing

the

credit

risks

associated

with

ordinary

commercial

activities

lies

with

the

Businesses

and

the

Group

companies.

Major

trade

and

project

finance

credit

risks

are

minimised

by

transferring

risks

to

banks,

insurance

companies

,

and

export

credit

organisations.

The

credit

risks

the

placement

of

liquid

funds

and

to

trading

in

financial

instruments

are

minimised

by

setting

explicit

limits

for

the

counterparties,

and

by

making

agreements

only

with

the

most

reputable

domestic

and

international

banks

and

financial

institutions.

As

only

high

credit

quality

(A-

minimum

rating

requirement)

counterparties

are

utilised

for

derivative

financial

instruments

,

and

the

transactions

are

made

under

ISDA

Master

Agreements,

no

credit

losses

are

expected

from

these

instruments.

The

Group

companies

deposit

the

maximum

amount

of

their

liquid

financial

assets

with

the

centralised

treasury

when

local

laws

and

central

bank

regulations

allow

it.

The

Group’s

funds

are

placed

in

instruments

with

sufficient

liquidity

(current

bank

deposits

or

Finnish

Commercial

Papers)

and

rating

(at

least

single

-A

rated

instruments

or

other

instruments

approved

by

the

Group’s

CFO).

These

placements

are

constantly

monitored

by

the

Group

Treasury,

and

Wärtsilä

does

not

expect

any

future

defaults

from

the

placements.

The

expected

credit

losses

associated

with

investments

carried

at

amortised

cost

are

assessed

on

a

forward-

looking

basis

based

on

investment

maturity

dates,

and

counterparty

credit

risk

on

a

quarterly

basis.

As

of

31

December

2020,

the

expected

credit

loss

was

not

material.

The

expected

credit

losses

are

presented

in

Note

4.2.

Trade

receivables

and

contract

assets

and

liabilities

.

Equity

price

risk

Wärtsilä

has

equity

investments

totalling

EUR

12

million

(14)

in

power

plant

companies,

most

of

which

are

located

in

developing

countries

and

performing

well

according

to

expectations.

Additional

information

is

given

in

Note

5.2.

Financial

assets

and

liabilities

by

measurement

category.

Capital

risk

management

Wärtsilä’s

policy

is

to

secure

a

strong

capital

base,

both

to

maintain

the

confidence

of

investors

and

creditors

and

for

the

future

development

of

the

business.

The

capital

is

defined

as

total

equity,

including

non-controlling

interests

and

net

interest

-bearing

debt.

The

target

for

Wärtsilä

is

to

maintain

gearing

below

0.50

and

to

pay

a

dividend

of

at

least

50%

of

earnings

over

the

cycle.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

MEUR

2020

2019

Interest

-bearing

debt,

non-current

1,005

851

Lease

liabilities,

non-current

124

146

Interest

-bearing

debt,

current

156

58

Lease

liabilities,

current

42

Total

interest

-bearing

liabilities

1,327

1,096

Interest

-bearing

receivables

-1

Cash

and

cash

equivalents

-919

-358

Cash

and

cash

equivalents

pertaining

to

assets

held

for

sale

-14

-11

Total

interest

-bearing

assets

-933

-370

Total

net

interest

-bearing

debt

394

726

Total

equity

2,188

2,410

Gearing

0.18

0.30

In

the

capital

management

Wärtsilä

also

follows

the

gearing

development:

Equity

and

liabilities

6,232

6,398

Advances

received

-452

5,780

5,946

Solvency

ratio,

%

38.1

40.8

6.

GROUP

STRUCTURE

6.1.

ACQUISITIONS

Accounting

principles

Acquired

and

established

companies

are

accounted

for

using

the

acquisition

method.

Accordingly,

the

purchase

price

and

the

acquired

company’s

identifiable

assets,

liabilities

,

and

contingent

liabilities

are

measured

at

fair

value

on

the

date

of

acquisition.

In

the

acquisition

of

additional

interest,

where

the

Group

already

has

control,

the

non-controlling

interest

is

measured

either

at

fair

value

or

at

the

non

-controlling

interests’

proportionate

share

of

the

identifiable

net

assets.

The

difference

between

the

purchase

price,

possible

equity

belonging

to

the

non-controlling

interests

,

and

the

acquired

company’s

net

identifiable

assets,

liabilities

and

contingent

liabilities

measured

at

fair

value,

is

goodwill.

Goodwill

is

tested

for

impairment

at

least

annually.

The

purchase

price

includes

the

consideration

paid,

measured

at

fair

value.

The

consideration

does

not

include

transaction

costs,

which

are

recognised

in

the

statement

of

income.

The

transaction

costs

are

expensed

in

the

same

reporting

period

in

which

they

occur,

except

those

costs

resulting

from

issued

debt

or

equity

instruments.

In

significant

business

combinations,

the

Group

has

used

external

advis

ors

when

estimating

the

fair

values

of

property,

plant

and

equipment

and

intangible

assets.

For

property,

plant

and

equipment,

comparisons

have

been

made

of

the

market

prices

of

similar

assets,

and

the

depreciation

of

the

acquired

assets

due

to

ageing,

wear,

and

other

similar

factors

has

been

estimated.

The

fair

value

measurement

of

intangible

assets

is

based

on

estimates

of

the

future

cash

flows

associated

with

the

assets.

The

acquired

identifiable

intangible

assets

typically

include

technology,

customer

relationships,

and

trademarks.

Any

contingent

consideration

(additional

purchase

price)

the

combination

of

businesses

is

measured

at

fair

value

on

the

date

of

acquisition.

It

is

classified

either

as

a

liability

or

equity.

Contingent

consideration

classified

as

a

liability

is

measured

at

fair

value

on

the

last

day

of

each

reporting

period,

and

the

resulting

loss

or

gain

is

recognised

through

the

statement

of

income.

Contingent

consideration

classified

as

equity

is

not

re-

measured.

The

acquired

subsidiaries

are

included

in

the

consolidated

financial

statements

from

the

day

the

Group

has

control.

Accounting

estimates

and

judgements

Accounting

for

the

business

combinations

may

require

estimates

of

the

fair

value

of

acquired

assets

and

the

expected

amount

of

realised

contingent

consideration.

2020

In

2020,

there

were

no

acquisitions.

 
 
 
 
This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
 
2019 
Ships 
Electronic 
Services 
Ltd 
In 
May, 
Wärtsilä 
acquired 
100% 
of 
Ships 
Electronic 
Services 
Ltd 
(“SES”), 
a 
UK 
based 
company 
specialising 
in 
navigation 
and 
communication 
electronics, 
installation, 
maintenance 
and 
repair 
services, 
mainly 
for 
commercial 
and 
leisure 
vessels. 
SES’ 
turnover 
was 
approximately 
GBP 
10 
million 
and 
the 
company 
employed 
a 
staff 
of 
47. 
The 
enterprise 
value 
of 
the 
transaction 
was 
GBP 
3.2 
million. 
 
The 
consideration 
paid 
and 
the 
impact 
on 
profit 
for 
the 
fi 
nancial 
period 
were 
not 
significant. 
 
6.2. 
DISPOSALS 
Accounting 
principles 
The 
disposed 
subsidiaries 
are 
included 
in 
the 
consolidated 
financial 
statements 
until 
the 
control 
ends. 
 
2020 
In 
October 
2020, 
Wärtsilä 
divested 
the 
shares 
in 
Wärtsilä 
JOVYATLAS 
GmbH 
to 
Jacob 
Waitz 
Industrie 
GmbH. 
Wärtsilä 
JOVYATLAS 
has 
been 
manufacturing 
UPS 
systems, 
rectifiers, 
power 
inverters, 
frequency 
transformers 
and 
resistors 
with 
related 
services 
for 
many 
industries 
already 
for 
seven 
decades. 
In 
2019, 
its 
net 
sales 
were 
EUR 
20 
million. 
The 
impact 
of 
the 
divestment 
on 
the 
profit 
for 
the 
financial 
period 
is 
approximately 
EUR 
-6 
million. 
 
Also 
, 
in 
October 
2020, 
Wärtsilä 
divested 
the 
shares 
in 
Wärtsilä 
Valves 
Ltd 
to 
an 
affiliate 
of 
Evergreen 
Capital 
L.P. 
Wärtsilä 
Valves 
’ 
activities 
included 
the 
engineering, 
assembly, 
testing, 
sales 
, 
and 
delivery 
of 
nickel 
aluminium 
bronze 
(NAB) 
and 
duplex 
valves 
for 
marine, 
oil 
& 
gas 
and 
energy 
markets. 
It 
also 
offers 
applications 
for 
Valves’ 
products, 
including, 
for 
example, 
FPSO, 
petrochemical 
facilities, 
power 
generation, 
LNG, 
naval 
marine, 
marine 
services, 
waste 
water 
treatment 
plants 
and 
pipelines. 
The 
annual 
net 
sales 
were 
approximately 
EUR 
15 
million 
in 
2019. 
The 
impact 
of 
the 
divestment 
on 
the 
profit 
for 
the 
financial 
period 
is 
approximately 
EUR 
-10 
million. 
 
In 
December 
2020, 
Wärtsilä 
finali 
sed 
the 
divestment 
of 
shares 
in 
Wärtsilä 
ELAC 
Nautik 
GmbH 
(ELAC 
Nautik) 
to 
Cohort 
plc. 
The 
divestment 
was 
originally 
announced 
in 
December 
2019. 
ELAC 
Nautik’s 
main 
market 
focus 
was 
hydroacoustic 
products, 
including 
sonars, 
underwater 
communication 
systems, 
and 
echo 
systems 
for 
small 
and 
medium 
sized 
military 
submarines. 
The 
annual 
net 
sales 
were 
approximately 
EUR 
21 
million 
in 
2019. 
The 
impact 
of 
the 
divestment 
on 
the 
profit 
for 
the 
financial 
period 
is 
not 
significant. 
 
All 
businesses 
disposed 
belonged 
to 
Portfolio 
Business. 
 
2019 
In 
2019, 
there 
were 
no 
disposals. 
6.3. 
ASSETS 
HELD 
FOR 
SALE 
Accounting 
principles 
Non-current 
assets 
and 
assets 
and 
liabilities 
related 
to 
discontinued 
operations 
are 
classified 
as 
held 
for 
sale 
if 
their 
carrying 
amounts 
are 
expected 
to 
be 
recovered 
primarily 
through 
sale 
rather 
than 
through 
continuing 
use. 
Classification 
as 
held 
for 
sale 
requires 
that 
the 
following 
criteria 
are 
met; 
the 
sale 
is 
highly 
probable, 
the 
asset 
is 
available 
for 
immediate 
sale 
in 
its 
present 
condition 
subject 
to 
usual 
and 
customary 
terms, 
the 
management 
is 
committed 
to 
the 
sale, 
and 
the 
sale 
is 
expected 
to 
be 
completed 
within 
one 
year 
from 
the 
date 
of 
classification. 
Prior 
to 
classification 
as 
held 
for 
sale, 
the 
assets 
or 
assets 
and 
liabilities 
related 
to 
a 
disposal 
group 
in 
question 
are 
measured 
according 
to 
the 
respective 
IFRS 
standards. 
From 
the 
date 
of 
classification, 
non-
current 
assets 
held 
for 
sale 
are 
measured 
at 
the 
lower 
of 
the 
carrying 
amount 
and 
the 
fair 
value 
less 
costs 
to 
sell, 
and 
the 
recognition 
of 
depreciation 
and 
amortisation 
is 
discontinued. 
Non-current 
assets 
held 
for 
sale 
are 
presented 
in 
the 
statement 
of 
financial 
position 
separately 
from 
other 
items. 
The 
comparison 
figures 
for 
the 
statement 
of 
financial 
position 
are 
not 
restated. 
 
2020 
Wärtsilä 
has 
classified 
Entertainment 
and 
Tank 
Control 
businesses 
as 
assets 
held 
for 
sale. 
Entertainment 
business 
has 
been 
classified 
as 
assets 
held 
for 
sale 
since 
the 
fourth 
quarter 
of 
2019 
and 
Tank 
Control 
business 
since 
the 
second 
quarter 
of 
2020. 
Completion 
of 
the 
transactions 
are 
expected 
in 
the 
first 
half 
of 
2021. 
 
Additionally, 
Wärtsilä 
has 
started 
preparations 
to 
divest 
Wärtsilä 
EUROATLAS 
GmbH, 
which 
is 
also 
classified 
as 
assets 
held 
for 
sale. 
Completion 
of 
the 
transaction 
is 
expected 
during 
the 
second 
half 
of 
2021. 
The 
impact 
on 
the 
profit 
for 
the 
financial 
period 
is 
approximately 
EUR 
- 
6 
million. 
 
All 
assets 
held 
for 
sale 
belong 
to 
Portfolio 
Business 
and 
they 
are 
valued 
at 
the 
lower 
of 
book 
value 
or 
fair 
value. 
 
2019 
In 
December, 
Wärtsilä 
announced 
the 
divestment 
of 
shares 
in 
Wärtsilä 
ELAC 
Nautik 
GmbH 
(ELAC 
Nautik) 
to 
Cohort 
plc. 
ELAC 
Nautik's 
main 
market 
focus 
is 
on 
hydroacoustic 
products, 
including 
sonars, 
underwater 
communication 
systems 
and 
echo 
systems 
for 
small 
and 
medium 
sized 
military 
submarines. 
 
Wärtsilä, 
through 
its 
Smart 
Marine 
Ecosystem 
approach, 
is 
leading 
the 
marine 
industry’s 
transition 
into 
a 
new 
era 
of 
high 
efficiency, 
greater 
safety, 
and 
outstanding 
environmental 
performance. 
As 
this 
is 
Wärtsilä's 
core 
strategy 
for 
Marine 
Business, 
and 
ELAC 
Nautik 
’s 
business 
has 
no 
clear 
synergistic 
link 
to 
Wärtsilä’s 
Smart 
Marine 
activities 
in 
transforming 
the 
marine 
sector, 
Wärtsilä’s 
portfolio 
is 
being 
aligned 
to 
those 
growth 
businesses 
that 
can 
drive 
this 
transition.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Additionally,

Wärtsilä

has

started

preparations

to

divest

its

Entertainment

business,

which

is

also

classified

as

assets

held

for

sale.

The

assets

held

for

sale

belong

to

the

Wärtsilä

Marine

Business

segment

and

they

are

valued

at

the

lower

of

book

value

or

fair

value.

Subject

to

approvals,

completion

of

these

transactions

is

expected

in

the

early

part

of

2020.

Items

on

statement

of

financial

positi

on

MEUR

31.12.2020

31.12.2019

Goodwill

7

Other

intangible

assets

1

Property,

plant

and

equipment

4

3

Right

-of

-use

assets

2

4

Deferred

tax

assets

12

8

Inventories

23

18

Other

receivables,

current

42

39

Cash

and

cash

equivalents

14

11

Assets

held

for

sale

105

82

Write

-down

of

assets

-6

Net

for

assets

held

for

sale

99

82

Interest

-bearing

debt,

non-current

4

Deferred

tax

liabilities

12

8

Other

liabilities,

non-current

3

8

Other

liabilities,

current

52

47

Liabilities

directly

attributable

to

assets

held

for

sale

68

Net

assets

31

14

In

2020,

the

write

-down

of

assets

EUR

-6

million,

relates

to

the

classification

of

Wärtsilä

EUROATLAS

GmbH

as

assets

held

for

sale.

The

expense

is

recognised

in

depreciation,

amorti

s

ation

and

impairment

in

the

statement

of

income.

6.4.

INVESTMENTS

IN

ASSOCIATES

AND

JOINT

VENTURES

Accounting

principles

Associated

companies

are

all

entities

over

which

the

Group

has

significant

influence

but

not

control

or

joint

control.

This

is

generally

the

case

where

the

Group

holds

between

20%

and

50%

of

the

voting

rights.

A

joint

venture

is

a

joint

arrangement

whereby

the

parties

that

have

joint

control

of

the

arrangement

have

rights

to

the

net

assets

of

the

joint

venture.

Joint

control

is

established

by

contractual

agreement.

Associated

companies

and

joint

ventures

are

included

in

the

consolidated

financial

statements

using

the

equity

method

from

the

date

the

Group’s

significant

influence

or

joint

control

commences

until

the

date

it

ceases.

Investments

in

associates

are

initially

recognised

at

cost,

and

the

carrying

amount

is

increased

or

decreased

according

to

the

Group´s

share

of

changes

in

the

net

assets

of

the

associate

after

the

date

of

the

acquisition.

The

Group’s

share

of

the

associated

company’s

or

joint

venture’s

profit

for

the

reporting

period

is

shown

as

a

separate

item

before

the

Group’s

operating

result,

on

the

line

Share

of

result

of

associates

and

joint

ventures.

The

Group’s

share

of

the

associated

company’s

or

joint

venture’s

changes

recognised

in

other

comprehensive

income

is

recognised

in

the

Group’s

other

comprehensive

income.

Wärtsilä’s

proportion

of

the

associated

company’s

or

joint

venture’s

post

-acquisition

accumulated

equity

is

included

in

the

Group’s

equity.

If

the

Group’s

share

of

the

associated

company's

or

joint

venture's

losses

exceeds

its

interest

in

the

company,

the

carrying

amount

is

written

down

to

zero.

After

this,

losses

are

only

recognised

if

the

Group

has

incurred

obligations

from

the

associated

company

or

joint

venture.

The

accumulated

exchange

rate

differences

arising

from

the

consolidation

of

associated

companies

and

joint

ventures,

which

are

recognised

in

equity,

are

recognised

in

the

statement

of

income

as

part

of

the

gain

or

loss

when

change

in

ownership

occurs.

MEUR

2020

2019

Carrying

amount

on

1

January

42

66

Share

of

result

3

-9

Dividends

-1

Translation

differences

-2

-1

Reduction

of

share

capital

in

associates

and

joint

ventures

-28

Impairment

9

-13

Carrying

amount

on

31

December

23

42

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Summary

of

financial

information

(100%):

2020

MEUR

Holding

%

Non

-current

assets

Current

assets

Equity

Non

-current

liabilities

Current

liabilities

Net

sales

Profit

for

the

financial

period

Joint

ventures

Wärtsilä

Qiyao

Diesel

Company

Ltd.

China

50.0

7

32

22

0

17

54

5

Wärtsilä

Hyundai

Engine

Co

Ltd.

South

Korea

0.0

-2

CSSC

Wärtsilä

Electrical

&

Automation

Co.,

Ltd.

China

49.0

0

4

2

0

2

19

0

CSSC

Wärtsilä

Engine

(Shanghai)

Co.,

Ltd.

China

49.0

21

73

20

0

74

66

1

Repropel

Sociedad

de

reparacao

de

helices

Portugal

50.0

2

1

CSSC

Wärtsilä

Engine

(Shanghai)

Co.,

Ltd.

manufactures

medium

and

large

bore

medium

speed

diesel

and

dual

-fuel

engines

at

its

factory

in

Lingang,

Shanghai,

China.

Wärtsilä

Hyundai

Engine

Co

Ltd.

manufactures

Wärtsilä

50DF

dual-fuel

engines

for

LNG

carriers

and

other

marine

applications

in

Mokpo,

South

Korea.

Wärtsilä

Qiyao

Diesel

Company

Ltd.

manufac

tures

marine

auxiliary

engines

in

Shanghai,

China.

CSSC

Wärtsilä

Electrical

&

Automation

Co.,

Ltd.

manufactures

advanced

electronical

and

automation

solutions

for

the

cruise

industry.

Wärtsilä

Hyundai

Engine

Co

Ltd.

was

disposed

on

31

December

2020.

During

the

financial

period,

Wärtsilä

Land

&

Sea

Academy,

Inc

.

was

liquidated,

and

the

shares

of

Neptun

Maritime

AS

were

sold.

2019

MEUR

Holding

%

Non

-current

assets

Current

assets

Equity

Non

-current

liabilities

Current

liabilities

Net

sales

Profit

for

the

financial

period

Joint

ventures

Wärtsilä

Qiyao

Diesel

Company

Ltd.

China

50.0

7

32

19

20

30

2

Wärtsilä

Hyundai

Engine

Co

Ltd.

South

Korea

50.0

14

57

68

1

2

19

-21

CSSC

Wärtsilä

Electrical

&

Automation

Co.,

Ltd.

China

49.0

10

2

8

9

CSSC

Wärtsilä

Engine

(Shanghai)

Co.,

Ltd.

China

49.0

19

77

20

76

78

1

Repropel

Sociedad

de

reparacao

de

helices

Portugal

50.0

1

Associated

companies

Wärtsilä

Land

&

Sea

Academy,

Inc.

Philippines

40.0

-2

2

Neptun

Maritime

AS

Norway

40.0

1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
6.5. 
SUBSIDIARIES 
Accounting 
principles 
The 
consolidated 
financial 
statements 
include 
the 
parent 
company 
Wärtsilä 
Corporation 
and 
all 
subsidiaries 
over 
which 
the 
Group 
has 
control. 
The 
Group 
controls 
an 
entity 
when 
the 
Group 
is 
exposed 
to, 
or 
has 
rights 
to, 
variable 
returns 
from 
its 
involvement 
with 
the 
entity 
and 
has 
the 
ability 
to 
affect 
those 
returns 
through 
its 
power 
to 
direct 
the 
activities 
of 
the 
entity. 
When 
the 
Group 
has 
less 
than 
a 
majority 
of 
voting 
or 
similar 
rights 
in 
an 
entity, 
the 
Group 
considers 
all 
relevant 
facts 
and 
circumstances 
in 
assessing 
whether 
it 
has 
power 
over 
an 
entity, 
including 
the 
contractual 
arrangements, 
voting 
rights, 
and 
potential 
voting 
rights. 
The 
Group 
reassesses 
whether 
or 
not 
it 
controls 
an 
entity 
if 
facts 
and 
circumstances 
indicate 
that 
there 
are 
changes 
to 
the 
elements 
of 
control. 
The 
financial 
information 
from 
subsidiaries 
in 
countries 
with 
hyperinflation 
are 
adjusted 
according 
to 
IAS 
29, 
when 
the 
impact 
of 
the 
hyperinflation 
is 
considered 
material 
for 
the 
consolidated 
financial 
statements. 
 
Geo 
- 
graph 
- 
ical 
area 
Company 
name 
Location 
Activities 
Share 
% 
Europe 
Wärtsilä 
Cyprus 
Limited 
Cyprus 
Sales 
and 
services 
100.0 
Wärtsilä 
Danmark 
A/S 
Denmark 
Sales 
and 
services 
100.0 
Wärtsilä 
Lyngsø 
Marine 
A/S 
Denmark 
Sales 
and 
services 
100.0 
Wärtsilä 
Puregas 
Solutions 
A/S 
Denmark 
Sales 
and 
services 
100.0 
Wärtsilä 
BLRT 
Estonia 
Oü 
Estonia 
Sales 
and 
services 
51.7 
Eniram 
Oy 
Finland 
Sales 
and 
services 
100.0 
Wärtsilä 
Finland 
Oy 
Finland 
Production, 
sales 
and 
services 
100.0 
Wärtsilä 
Projects 
Oy 
Finland 
Sales 
and 
services 
100.0 
Wärtsilä 
Solutions 
Oy 
Finland 
Sales 
and 
services 
100.0 
Wärtsilä 
Technology 
Oy 
Ab 
Finland 
Holding 
100.0 
Wärtsilä 
France 
S.A.S. 
France 
Sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
Mediterranean 
SAS 
France 
Sales 
and 
services 
100.0 
Wärtsilä 
Deutschland 
GmbH 
Germany 
Sales 
and 
services 
100.0 
Wärtsilä 
Funa 
International 
GmbH 
Germany 
Sales 
and 
services 
100.0 
Wärtsilä 
SAM 
Electronics 
GmbH 
Germany 
Sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
Germany 
GmbH 
Germany 
Sales 
and 
services 
100.0 
Wärtsilä 
Serck 
Como 
GmbH 
Germany 
Sales 
and 
services 
100.0 
Wärtsilä 
Guidance 
Marine 
Ltd 
the 
United 
Kingdom 
Sales 
and 
services 
100.0 
Wärtsilä 
Puregas 
Solutions 
Ltd 
the 
United 
Kingdom 
Sales 
and 
services 
100.0 
Wärtsilä 
UK 
Ltd 
the 
United 
Kingdom 
Production, 
sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
UK 
Limited 
the 
United 
Kingdom 
Sales 
and 
services 
100.0 
Ships 
Electronic 
Services 
Ltd 
the 
United 
Kingdom 
Sales 
and 
services 
100.0 
Greenham 
Regis 
Ltd 
the 
United 
Kingdom 
Sales 
and 
services 
100.0 
Wärtsilä 
Water 
Systems 
Ltd 
the 
United 
Kingdom 
Sales 
and 
services 
100.0 
Wärtsilä 
Defence 
Solutions 
Ltd 
the 
United 
Kingdom 
Sales 
and 
services 
100.0 
Wärtsilä 
Greece 
S.A. 
Greece 
Sales 
and 
services 
100.0 
Wärtsilä 
Hungary 
Kft 
Hungary 
Sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
Investments 
Unlimited 
Company 
Ireland 
Sales 
and 
services 
100.0 
Transas 
New 
Building 
Limited 
Ireland 
Sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
Limited 
Ireland 
Sales 
and 
services 
100.0 
Wärtsilä 
APSS 
Srl 
Italy 
Sales 
and 
services 
100.0 
Wärtsilä 
Italia 
S.p.A. 
Italy 
Production, 
sales 
and 
services 
100.0 
Trident 
Italia 
Srl 
Italy 
Sales 
and 
services 
100.0 
Wärtsilä 
Moss 
AS 
Norway 
Production, 
sales 
and 
services 
100.0 
Wärtsilä 
Norway 
AS 
Norway 
Production, 
sales 
and 
services 
100.0 
Wärtsilä 
Gas 
Solutions 
Norway 
AS. 
Norway 
Sales 
and 
services 
100.0 
Wärtsilä 
Valmarine 
AS 
Norway 
Sales 
and 
services 
100.0 
Wärtsilä 
Baltic 
Design 
Centre 
Sp.z.o.o. 
Poland 
Sales 
and 
services 
100.0 
Wärtsilä 
Polska 
Sp.z.o.o. 
Poland 
Sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
Poland 
sp. 
z.o.o. 
Poland 
Sales 
and 
services 
100.0 
Wärtsilä 
Portugal 
S.A. 
Portugal 
Sales 
and 
services 
100.0 
Wärtsilä 
Vostok, 
LLC 
Russia 
Sales 
and 
services 
100.0 
Transas 
Navigator 
Ltd. 
Russia 
Sales 
and 
services 
100.0 
Wärtsilä 
Digital 
Technologies, 
JSC 
Russia 
Sales 
and 
services 
100.0 
Wärtsilä 
Ibérica 
S.A. 
Spain 
Production, 
sales 
and 
services 
100.0 
Burriel 
Navarro 
S.L. 
Spain 
Sales 
and 
services 
100.0 
Trident 
Las 
Palmas 
S.L. 
Spain 
Sales 
and 
services 
100.0 
Wärtsilä 
Sweden 
AB 
Sweden 
Production, 
sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
Sweden 
AB 
Sweden 
Sales 
and 
services 
100.0 
Wärtsilä 
Services 
Switzerland 
AG 
Switzerland 
Sales 
and 
services 
100.0 
Quantiparts 
B.V. 
The 
Netherlands 
Sales 
and 
services 
100.0 
Wärtsilä 
Netherlands 
B.V. 
The 
Netherlands 
Production, 
sales 
and 
services 
100.0 
Trident 
B.V. 
The 
Netherlands 
Sales 
and 
services 
100.0 
Wärtsilä 
Voyage 
Netherlands 
BV 
The 
Netherlands 
Sales 
and 
services 
100.0 

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

The

Americas

Wärtsilä

Argentina

S.A.

Argentina

Sales

and

services

100.0

Wärtsilä

Brasil

Ltda.

Brazil

Production,

sales

and

services

100.0

Wärtsilä

Canada

Inc.

Canada

Sales

and

services

100.0

Wärtsilä

Chile

Ltda.

Chile

Sales

and

services

100.0

Wärtsilä

Colombia

S.A.

Colombia

Sales

and

services

100.0

Wärtsilä

Dominicana

Inc.

Dominican

Republic

Sales

and

services

100.0

Wärtsilä

Ecuador

S.A.

Ecuador

Sales

and

services

100.0

Wärtsilä

Guatemala

S.A.

Guatemala

Sales

and

services

100.0

Wärtsilä

Operations

Guyana

Inc.

Guyana

Sales

and

services

100.0

Wärtsilä

de

Mexico

S.A.

de

C.V.

Mexico

Sales

and

services

100.0

Wärtsilä

Panama

Services

S.A.

Panama

Sales

and

services

100.0

Wärtsilä

Peru

S.A.C.

Peru

Sales

and

services

100.0

Wärtsilä

Caribbean,

Inc.

Puerto

Rico

Sales

and

services

100.0

Wärtsilä

Uruguay

S.A.

Uruguay

Sales

and

services

100.0

American

Hydro

Corporation

USA

Sales

and

services

100.0

Guidance

Marine

LLC

USA

Sales

and

services

100.0

Wärtsilä

Defence

Inc.

USA

Sales

and

services

100.0

Wärtsilä

Dynamic

Positioning

Inc.

USA

Sales

and

services

100.0

Wärtsilä

North

America,

Inc.

USA

Sales

and

services

100.0

LOCK

-N

-STITCH

Inc.

USA

Sales

and

services

100.0

Wartsila

Voyage

Americas

Inc

USA

Sales

and

services

100.0

Asia

PT.

Wärtsilä

Indonesia

Sales

and

services

100.0

Wärtsilä

Azerbaijan

LLC

Azerbaijan

Sales

and

services

100.0

Wärtsilä

Bangladesh

Ltd.

Bangladesh

Sales

and

services

100.0

Wärtsilä

SAM

Electronics

(Taizhou)

Co.,

Ltd.

China

Sales

and

services

100.0

Wärtsilä

Propulsion

(Wuxi)

Co.

Ltd.

China

Production,

sales

and

services

100.0

Wärtsilä

Services

(Shanghai)

Co.

Ltd.

China

Sales

and

services

100.0

Wärtsilä

Ship

Design

(Shanghai)

Co.,

Ltd

China

Sales

and

services

100.0

Wärtsilä

Suzhou

Ltd.

China

Production,

sales

and

services

100.0

Wärtsilä

-CME

Zhenjiang

Propeller

Co.

Ltd.

China

Production,

sales

and

services

55.0

Wärtsilä

Voyage

(Shanghai)

Co.

Ltd.

Hong

Kong

Sales

and

services

100.0

Wärtsilä

China

Ltd.

Hong

Kong

Sales

and

services

100.0

Wärtsila

India

Private

Ltd.

India

Production,

sales

and

services

100.0

Wärtsilä

Japan

Ltd.

Japan

Production,

sales

and

services

100.0

Wärtsilä

Malaysia

Sdn.

Bhd.

Malaysia

Sales

and

services

100.0

Wärtsilä

Myanmar

Sales

and

services

100.0

Wärtsilä

Pakistan

(Pvt.)

Ltd.

Pakistan

Sales

and

services

100.0

Wärtsilä

Philippines

Inc.

Philippines

Sales

and

services

100.0

Wärtsilä

Doha

L.L.C.

Qatar

Sales

and

services

100.0

Wärtsilä

Power

Contracting

Company

Ltd.

Saudi

Arabia

Sales

and

services

60.0

Guidance

Marine

Pte

Ltd

Singapore

Sales

and

services

100.0

Wärtsilä

Singapore

Pte

Ltd

Singapore

Sales

and

services

100.0

Wärtsilä

Voyage

Pacific

Pte

Ltd

Singapore

Sales

and

services

100.0

Wärtsilä

Korea

Ltd.

South

Korea

Sales

and

services

100.0

Wärtsilä

Lanka

(PVT)

Ltd

Sri

Lanka

Sales

and

services

100.0

Wärtsilä

Taiwan

Ltd.

Taiwan

Sales

and

services

100.0

Wärtsilä

-Enpa

A.S.

Turkey

Sales

and

services

51.0

Wärtsilä

Gulf

FZE

United

Arab

Emirates

Sales

and

services

100.0

Wärtsilä

Hamworthy

Middle

East

(FZE)

United

Arab

Emirates

Sales

and

services

100.0

Wärtsilä

LLC

United

Arab

Emirates

Sales

and

services

100.0

Wärtsilä

Ships

Repairing

&

Maintenance

LLC

United

Arab

Emirates

Sales

and

services

100.0

Wärtsilä

Voyage

Middle

East

DMCEST

United

Arab

Emirates

Sales

and

services

100.0

Wärtsilä

(Vietnam)

Company

Limited

Vietnam

Sales

and

services

100.0

Other

Wärtsilä

Australia

Pty

Ltd.

Australia

Sales

and

services

100.0

Wärtsilä

Burkina

Faso

Burkina

Faso

Sales

and

services

100.0

Wärtsilä

Central

Africa

Plc

Cameroon

Sales

and

services

100.0

Wärtsilä

Egypt

Power

S.A.E

Egypt

Sales

and

services

100.0

Wärtsilä

Central

Africa

Gabon

Sales

and

services

100.0

Wärtsilä

West

Africa

Guinea

S.A.

Guinea

Sales

and

services

100.0

Wärtsilä

Eastern

Africa

Limited

Kenya

Sales

and

services

100.0

Wärtsilä

Mauritanie

SA

Mauritania

Sales

and

services

100.0

Wärtsilä

Mocambique

LDA

Mozambique

Sales

and

services

100.0

Wärtsilä

Muscat

LLC

Oman

Sales

and

services

100.0

Wärtsilä

New

Zealand

Ltd

New

Zealand

Sales

and

services

100.0

Wärtsilä

Marine

&

Power

Services

Nigeria

Limited

Nigeria

Sales

and

services

100.0

Wärtsilä

PNG

Ltd

Papua

New

Guinea

Sales

and

services

100.0

Wärtsilä

West

Africa

S.A.

Senegal

Sales

and

services

100.0

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Wärtsilä

Southern

Africa

(Pty)

Ltd.

South

Africa

Sales

and

services

100.0

Wärtsilä

Tanzania

Ltd

Tanzania

Sales

and

services

100.0

Wärtsilä

Uganda

Ltd.

Uganda

Sales

and

services

100.0

Non-controlling

interests

are

not

significant

in

the

Group's

activities

and

cash

flows

in

individual

subsidiaries.

The

list

excludes

subsidiaries,

which

do

not

have

a

significant

impact

on

the

profit

or

assets

of

the

Group.

A

complete

list

of

shares

and

securities

in

accordance

with

the

Finnish

Accounting

Ordinance

is

included

in

the

official

financial

statements

of

the

parent

company

prepared

in

accordance

with

the

Finnish

Accounting

Standards

(FAS).

6.6.

EXCHANGE

RATES

Accounting

principles

Translating

the

transactions

in

foreign

currencies

The

items

included

in

the

financial

statements

are

initially

recognised

in

the

functional

currency,

which

is

defined

for

each

Group

company

based

on

its

primary

economic

environment.

The

presentation

currency

of

the

consolidated

financial

statements

is

the

euro,

which

is

also

the

functional

and

presentation

currency

of

Wärtsilä

Corporation.

Foreign

subsidiaries

The

income

and

expenses

for

statements

of

income

and

statements

of

comprehensive

income

of

foreign

subsidiaries

are

translated

into

euros

at

the

quarterly

average

exchange

rates.

Statements

of

financial

position

are

translated

into

euros

at

the

exchange

rates

prevailing

at

the

end

of

the

reporting

period.

The

translation

of

the

profit

for

the

reporting

period

and

other

comprehensive

income

using

different

exchange

rates

in

the

statement

of

comprehensive

income

and

the

statement

of

financial

position

causes

translation

differences,

which

are

recognised

in

equity

and

in

other

comprehensive

income

as

change.

Translation

differences

of

foreign

subsidiaries’

acquisition

cost

eliminations

and

post

-acquisition

profits

and

losses

are

recognised

in

other

comprehensive

income

and

are

presented

as

a

separate

item

in

equity.

The

goodwill

generated

in

the

acquisition

of

foreign

entities

and

their

fair

value

adjustments

of

assets

and

liabilities

are

considered

as

assets

and

liabilities

of

foreign

entities,

which

are

translated

into

euros

using

the

exchange

rates

prevailing

at

the

end

of

the

reporting

period.

When

a

foreign

subsidiary

is

sold,

the

accumulated

exchange

rate

differences

recognised

in

the

equity

the

subsidiary

are

recognised

in

the

statement

of

income

as

a

part

of

the

gain

or

loss

on

sale.

Transactions

and

balances

in

foreign

currencies

Transactions

denominated

in

a

foreign

currency

are

translated

into

the

functional

currency

using

the

exchange

rate

prevailing

at

the

dates

of

the

transactions.

Receivables

and

liabilities

are

translated

at

the

exchange

rate

prevailing

at

the

end

of

the

reporting

period.

Exchange

rate

gains

and

losses

trade

receivables

and

liabilities

are

reported

on

the

applicable

line

in

the

statement

of

income

and

are

included

in

the

operating

result.

Exchange

rate

differences

financial

assets

and

financial

liabilities

are

reported

as

financial

items

in

the

statement

of

income,

except

exchange

rate

differences

non-

current

debt

that

is

part

of

the

Group's

net

investment

in

a

subsidiary.

Those

are

recognised

in

other

comprehensive

income

and

reported

as

translation

differences

in

equity.

In

the

consolidated

financial

statements,

there

are

approximately

60

currencies

consolidated.

The

most

significant

currencies

are

presented

here.

Closing

rates

Average

rates

31

December

2020

31

December

2019

2020

2019

AED

UAE

Dirham

4.50689

4.12602

4.19169

4.11203

AUD

Australian

Dollar

1.58960

1.59950

1.65540

1.61059

BRL

Brazilian

Real

6.37350

4.51570

5.89001

4.41354

CHF

Swiss

Franc

1.08020

1.08540

1.07031

1.11683

CNY

Yuan

Renminbi

8.02250

7.82050

7.87084

7.73388

DKK

Danish

Krone

7.44090

7.47150

7.45440

7.46607

GBP

Pound

Sterling

0.89903

0.85080

0.88921

0.87731

IDR

Indonesian

Rupiah

17,240.76000

15,595.60000

16,619.78000

15,835.95000

INR

Indian

Rupee

89.66050

80.18700

84.57954

78.85014

JPY

Yen

126.49000

121.94000

121.77545

122.05637

NOK

Norwegian

Krone

10.47030

9.86380

10.72476

9.84967

RUB

Russian

Ruble

91.46710

69.95630

82.64545

72.45934

SAR

Saudi

Riyal

4.60347

4.21365

4.28208

4.19884

SEK

Swedish

Krona

10.03430

10.44680

10.48813

10.58666

SGD

Singapore

Dollar

1.62180

1.51110

1.57357

1.52721

USD

US

Dollar

1.22710

1.12340

1.14128

1.11960

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

7.

OTHER

NOTES

7.1.

COLLATERAL,

CONTINGENT

LIABILITIES,

AND

OTHER

COMMITMENTS

Accounting

principles

Contingent

liabilities

are

possible

obligations

resulting

from

the

existence

of

which

will

only

be

ascertained

once

the

uncertain

event

that

is

beyond

the

Group’s

control

materialises.

Existing

obligations

that

are

not

likely

to

require

the

fulfilment

of

a

payment

obligation,

or

the

amount

of

which

cannot

be

reliably

determined,

are

also

considered

contingent

liabilities.

2020

2019

MEUR

Debt

in

the

statement

of

financial

position

Collateral

Debt

in

the

statement

of

financial

position

Collateral

Mortgages

given

as

collateral

for

liabilities

and

commitments

Other

commitments

13

10

18

10

Total

13

10

18

10

Chattel

mortgages

and

other

pledges

and

securities

given

as

collateral

for

liabilities

and

commitments

Loans

from

credit

institutions

3

5

1

Other

commitments

17

21

Total

3

17

5

22

MEUR

2020

2019

Guarantees

and

contingent

liabilities

on

behalf

of

Group

companies

887

718

Total

887

718

Nominal

amounts

of

lease

liabilities

Low

-value

lease

liabilities

7

3

Short

-term

lease

liabilities

3

5

Leases

not

yet

commenced,

but

to

which

Wärtsilä

is

committed

191

143

Total

201

151

7.2.

DISCLOSURES

comprise

the

parent

company,

subsidiaries,

the

associated

companies

,

and

joint

ventures.

also

include

the

Board

of

Directors,

the

President

and

CEO,

the

Board

of

Management,

their

family

members,

and

entities

controlled

directly

or

indirectly

by

them.

Management

remuneration

Benefits

recognised

in

the

statement

of

income

TEUR

2020

2019

President

and

CEO

Salaries

and

other

short

-term

benefits

1,177

894

Statutory

pension

costs

184

123

Voluntary

pension

costs

179

Other

members

of

the

Board

of

Management

Salaries

and

other

short

-term

benefits

3,225

2,371

Statutory

pension

costs

267

305

Voluntary

pension

costs

247

342

Total

5,279

4,214

Board

of

Directors

on

31

December

2020

Tom

Johnstone,

Chairman

163

117

Markus

Rauramo,

Deputy

Chairman

135

97

Maarit

Aarni-Sirviö,

member

100

92

Karen

Bomba,

member

79

Karin

Falk,

member

80

77

Johan

Forssell,

member

85

81

Risto

Murto,

member

90

91

Mats

Rahmström,

member

79

Board

of

Directors,

until

5

March

2020

Kaj-Gustaf

Bergh,

member

2

81

Mikael

Lilius,

member

3

172

Total

814

806

Management

remuneration,

total

6,093

5,020

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

The

holdings

of

Wärtsilä

shares

of

the

President

and

CEO,

and

the

members

of

the

Board

of

Directors

and

Board

of

Management

at

year

-end

were

238,875

shares

(289,036).

The

President

and

CEO

is

entitled

to

retire

on

reaching

63

years

of

age.

The

members

of

the

Board

of

Management

are

entitled

to

retire

on

reaching

the

statutory

retirement

age.

One

member

of

the

Board

of

Management

is

entitled

to

retire

earlier,

on

reaching

60

years

of

age.

The

Group

has

no

loan

receivables

from

the

executive

management

or

the

Board

of

Directors.

No

pledges

or

other

commitments

have

been

given

on

behalf

of

management

or

shareholders.

Business

transactions

with

the

associated

companies

and

joint

ventures

MEUR

2020

2019

Sales

to

the

associates

and

joint

ventures

23

31

Purchases

from

the

associates

and

joint

ventures

67

35

Receivables

from

the

associates

and

joint

ventures

6

8

Advances

paid

to

the

associates

and

joint

ventures

4

2

Payables

to

the

associates

and

joint

ventures

3

5

Detailed

financial

information

on

the

associated

companies

and

joint

ventures

is

presented

in

Note

6.4.

Investments

in

associates

and

joint

ventures.

7.3.

AUDITORS’

FEES

AND

SERVICES

The

following

remuneration

was

paid

to

auditors

and

accounting

firms

for

audits

based

on

applicable

legislation

and

for

other

services.

In

2020,

the

AGM

appointed

the

audit

firm

PricewaterhouseCoopers

Oy

as

Wärtsilä

Corporation's

auditor.

PricewaterhouseCoopers

Oy

has

provided

non

-

audit

services

totalling

EUR

0.4

million

to

entities

of

Wärtsilä

Group.

These

services

included

tax

services

(EUR

0.3

million

)

and

other

services

(EUR

0.1

million

).

2020

2019

MEUR

PwC

Others

PwC

Others

Audit

4.2

0.4

4.3

0.5

Tax

advisory

0.3

0.2

0.3

Other

services

0.1

0.3

Total

4.6

0.7

4.8

0.8

7.4.

EVENTS

AFTER

THE

BALANCE

SHEET

DATE

In

January

2021,

Wärtsilä

announced

the

divestment

of

100%

of

the

shares

in

its

Entertainment

business,

Wärtsilä

Funa

GmbH,

to

Videlio

SA,

a

French

public

limited

company.

Entertainment

is

engaged

in

the

field

of

design,

fabrication,

engineering

and

integration

of

entertainment

systems,

illumination,

light

control,

cabin

control,

broadcast

and

digital

audio

distribution

and

announcement

systems

for

cruise

vessels

and

entertainment

parks.

The

annual

revenues

were

approximately

EUR

50

million

in

2020.

The

ev

ent

is

not

expected

to

have

a

material

impact

on

the

profit

for

the

financial

period

2021.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

PARENT

COMPANY

FINANCIAL

STATEMENTS

PARENT

COMPANY

INCOME

STATEMENT

MEUR

2020

2019

Note

Other

operating

income

93

89

1

Personnel

expenses

-38

-37

2

Depreciation,

amortisation

and

impairments

-5

-4

3

Other

operating

expenses

-89

-108

Operating

result

-39

-60

Financial

income

and

expenses

4

Income

from

financial

assets

301

304

Interest

income

and

other

financial

income

64

90

Exchange

gains

and

losses

-2

1

Interest

expenses

and

other

financial

expenses

-58

-91

305

304

Result

before

appropriations

and

taxes

266

243

Group

contribution

2

Result

before

taxes

268

243

Income

taxes

-3

5

Result

for

the

financial

period

265

240

PARENT

COMPANY

BALANCE

SHEET

MEUR

2020

2019

Note

ASSETS

Fixed

assets

6

Intangible

assets

Other

long-term

expenditure

8

10

Intangable

assets

and

construction

in

progress

1

9

11

Tangible

assets

Land

and

water

2

7

Machinery,

equipment

and

other

tangible

assets

6

9

13

Financial

assets

Shares

in

Group

companies

950

Other

shares

and

securities

2

1

951

Total

fixed

assets

969

974

Non

-current

receivables

Receivables

from

Group

companies

90

100

7

Loan

receivables

1

91

101

Current

receivables

Trade

receivables

1

Receivables

from

Group

companies

1,846

2,193

8

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Other

receivables

1

Prepaid

expenses

and

accrued

income

41

29

9

1,890

2,224

Cash

and

bank

balances

699

113

Total

current

assets

2,680

2,438

Assets

3,649

3,413

MEUR

2020

2019

Note

EQUITY

AND

LIABILITIES

Equity

10

Share

capital

336

Share

premium

reserve

61

Retained

earnings

709

754

Result

for

the

financial

period

265

240

Total

equity

1,371

1,391

Accumulated

appropriations

Depreciation

difference

1

Provisions

13

18

Liabilities

11

Non

-current

Loans

from

credit

institutions

953

847

953

847

Current

Loans

from

credit

institutions

130

51

Trade

payables

6

14

Liabilities

to

Group

companies

1,129

1,052

13

Other

current

liabilities

1

2

Accrued

expenses

and

deferred

income

44

36

12

1,310

1,155

Total

liabilities

2,263

2,003

Equity

and

liabilities

3,649

3,413

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

PARENT

COMPANY

CASH

FLOW

STATEMENT

MEUR

2020

2019

Cash

flow

from

operating

activities:

Result

before

appropriations

and

taxes

266

243

Adjustments

for:

Depreciation

and

amortisation

5

4

Gains

and

losses

on

sale

of

intangible

and

tangible

assets

-2

Financial

income

and

expenses

-305

-304

Cash

flow

before

changes

in

working

capital

-36

-56

Changes

in

working

capital:

Assets,

non-interest

-bearing,

increase

(-)

/

decrease

(+)

-14

11

Liabilities,

non-interest

-bearing,

increase

(+)

/

decrease

(-)

3

-45

-11

-34

Cash

flow

from

operating

activities

before

financial

items

and

taxes

-47

-90

Interest

and

other

financial

expenses

-60

-89

Dividends

received

from

operating

activities

301

304

Interest

and

other

financial

income

from

operating

activities

64

89

Income

taxes

paid

-3

-8

301

295

Cash

flow

from

operating

activities

254

205

Cash

flow

from

investing

activities:

Investments

in

tangible

and

intangible

assets

-3

-2

Proceeds

from

sale

of

tangible

and

intangible

assets

6

Cash

flow

from

investing

activities

3

-2

Cash

flow

after

investing

activities

257

203

Cash

flow

from

financing

activities:

Loans

receivables,

increase

(-)

/

decrease

(+)

355

18

Current

loans,

increase

(+)

/

decrease

(-)

63

-284

Proceeds

from

non-current

borrowing

245

150

Repayments

and

other

changes

of

non-current

loans

-51

-56

Group

contributions

76

Dividends

paid

-284

Cash

flow

from

financing

activities

329

-381

Change

in

cash

and

bank

balances,

increase

(+)

/

decrease

(-)

586

-178

Cash

and

bank

at

beginning

of

period

113

291

Cash

and

bank

at

end

of

period

699

113

This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
 
 
 
ACCOUNTING 
PRINCIPLES 
FOR 
THE 
PARENT 
COMPANY 
The 
financial 
statements 
of 
the 
parent 
company, 
Wärtsilä 
Corporation, 
have 
been 
prepared 
in 
accordance 
with 
the 
provisions 
of 
the 
Finnish 
Accounting 
Standards 
(FAS). 
 
The 
preparation 
of 
the 
financial 
statements 
requires 
management, 
in 
compliance 
with 
the 
regulations 
in 
force 
and 
good 
accounting 
practice, 
to 
make 
estimates 
and 
assumptions 
that 
affect 
the 
measurement 
and 
timing 
of 
the 
reported 
information. 
Actual 
results 
may 
differ 
from 
these 
estimates. 
 
Transactions 
denominated 
in 
foreign 
currencies 
and 
derivatives 
Business 
transactions 
in 
foreign 
currencies 
are 
recorded 
at 
the 
rates 
of 
exchange 
prevailing 
on 
the 
transaction 
date. 
Receivables 
and 
payables 
on 
the 
balance 
sheet 
date 
are 
valued 
at 
the 
exchange 
rates 
prevailing 
on 
that 
date. 
Exchange 
gains 
and 
losses 
related 
to 
business 
operations 
are 
treated 
as 
adjustments 
to 
other 
operating 
income 
and 
operating 
expenses. 
Exchange 
gains 
and 
losses 
related 
to 
financing 
operations 
are 
entered 
under 
financial 
income 
and 
expenses. 
 
Derivatives 
are 
measured 
at 
fair 
value. 
Open 
currency 
derivatives, 
including 
interest 
components, 
are 
valued 
at 
the 
balance 
sheet 
date. 
The 
fair 
value 
of 
interest 
rate 
swaps 
is 
calculated 
by 
discounting 
the 
future 
cash 
flows. 
Derivative 
changes 
in 
fair 
value 
are 
immediately 
recognised 
in 
financial 
income 
or 
expenses 
in 
the 
statement 
of 
income. 
 
Research 
and 
development 
costs 
Research 
and 
development 
costs 
are 
expensed 
in 
the 
financial 
period 
in 
which 
they 
occur. 
 
Receivables 
Receivables 
are 
valued 
to 
acquisition 
cost 
or 
to 
a 
lower 
probable 
value. 
 
Fixed 
assets 
and 
depreciation 
and 
amortisation 
Fixed 
assets 
are 
valued 
in 
the 
balance 
sheet 
at 
their 
direct 
acquisition 
cost 
less 
accumulated 
depreciation 
and 
amortisastion. 
Certain 
land 
areas 
also 
include 
revaluations. 
 
Depreciation 
and 
amortisation 
is 
based 
on 
the 
following 
useful 
lives: 
Other 
long
-
term 
expenditure
 
3
-
10 
years
 
Buildings
 
 
 
20
-
40 
years
 
Machinery 
and 
equipment
 
5
-
20 
years
 
 
Leasing 
Lease 
payments 
are 
treated 
as 
rentals. 
 
Provisions 
Provisions 
in 
the 
balance 
sheet 
comprise 
those 
items 
which 
the 
company 
is 
committed 
to 
covering 
either 
through 
agreements 
or 
otherwise, 
but 
which 
are 
not 
yet 
realised. 
Changes 
to 
provisions 
are 
included 
in 
the 
income 
statem 
ent. 
 
Income 
taxes 
Income 
taxes 
in 
the 
income 
statement 
include 
taxes 
calculated 
for 
the 
financial 
year 
based 
on 
Finnish 
tax 
provisions, 
as 
well 
as 
adjustments 
to 
taxes 
in 
prior 
years. 
Taxes 
allocated 
to 
extraordinary 
items 
are 
shown 
in 
the 
notes 
to 
the 
financial 
statements. 
 
Dividends 
Dividends 
proposed 
by 
the 
Board 
of 
Directors 
are 
not 
recorded 
in 
the 
financial 
statements 
until 
they 
have 
been 
approved 
by 
the 
Annual 
General 
Meeting.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

NOTES

TO

THE

PARENT

COMPANY

FINANCIAL

STATEMENTS

1.

OTHER

OPERATING

INCOME

MEUR

2020

2019

Rental

income

3

Services

to

Group

companies

88

85

Profit

on

sales

of

fixed

assets

2

Other

1

Total

93

89

2.

PERSONNEL

EXPENSES

MEUR

2020

2019

Wages

and

salaries

-32

-30

Pension

costs

-5

Other

compulsory

personnel

costs

-1

Total

-38

-37

Salaries

and

remunerations

paid

to

senior

management

Salaries

and

remunerations

paid

to

the

President

and

CEO

and

members

of

the

Board

of

Directors

was

EUR

2

million

(2).

The

President

and

CEO

has

the

right

to

retire

at

the

age

of

63

years.

The

members

of

the

Board

of

Management

are

entitled

to

retire

on

reaching

the

statutory

retirement

age.

One

member

of

the

Board

of

Management

is

entitled

to

retire

earlier,

on

reaching

60

years

of

age.

The

company's

Board

of

Directors

decides

the

remunerations

of

the

President

and

CEO

and

his

immediate

subordinates.

Additional

information

about

Management

remuneration

can

be

found

in

Consolidated

Financial

Statements

Note

7.2.

arty

disclosures.

Personnel

on

average

during

the

year

was

373

(392).

3.

DEPRECIATION

AND

AMORTISATION

MEUR

2020

2019

Depreciation

and

amortisation

according

to

plan

Other

long-term

expenditure

-2

-3

Machinery

and

equipment

-2

-1

Total

depreciation

according

to

plan

-5

-4

Tax

depreciations

-5

-4

Depreciation

difference

Depreciation

difference

on

1

January

1

Depreciation

difference

on

31

December

1

4.

FINANCIAL

INCOME

AND

EXPENSES

MEUR

2020

2019

Dividend

income

From

Group

companies

301

304

Total

301

304

Other

interest

income

From

Group

companies

27

34

From

other

companies

1

Total

29

35

Other

financial

income

From

Group

companies

23

32

From

other

companies

12

22

Total

35

55

Exchange

gains

and

losses

-2

1

Interest

expenses

To

Group

companies

-4

-6

To

other

companies

-8

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Total

-12

-14

Other

financial

expenses

To

Group

companies

-18

-32

To

other

companies

-28

-45

Total

-46

-77

Financial

income

and

expenses,

total

305

304

5.

INCOME

TAXES

MEUR

2020

2019

Income

taxes

For

the

financial

period

-3

Total

-3

6.

FIXED

ASSETS

Intangible

assets

MEUR

Other

long

-term

expenditur

es

Intangible

assets

and

constructio

n

in

progress

Total

2020

Total

2019

Acquisition

cost

at

1

January

123

1

124

125

Additions

1

2

Disposals

-6

-7

-3

Acquisition

cost

at

31

December

117

1

118

124

Accumulated

amortisation

at

1

January

-113

Accumulated

amortisation

on

disposals

and

other

changes

6

3

Amortisation

during

the

financial

period

-2

-3

Accumulated

amortisation

at

31

December

-109

-113

Carrying

amount

at

31

December

2020

8

1

9

Carrying

amount

at

31

December

2019

10

1

11

Tangible

assets

MEUR

Land

and

water

Buildings

and

structures

Machinery,

equipment

and

other

tangible

assets

Total

2020

Total

2019

Acquisition

cost

at

1

January

7

2

8

17

Additions

2

3

Disposals

-4

Acquisition

cost

at

31

December

2

11

15

17

Accumulated

depreciation

at

1

January

-2

-3

-4

-3

Amortisation

during

the

financial

period

-2

-1

Accumulated

depreciation

at

31

December

-1

-5

-6

-4

Carrying

amount

at

31

December

2020

2

6

9

Carrying

amount

at

31

December

2019

7

6

13

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Shares

and

securities

MEUR

Shares

in

Group

companies

Shares

in

other

companies

Total

2020

Total

2019

Acquisition

cost

at

1

January

950

1

951

Acquisition

cost

at

31

December

950

2

951

Carrying

amount

at

31

December

2020

950

2

951

Carrying

amount

at

31

December

2019

950

1

951

7.

NON-CURRENT

RECEIVABLES

MEUR

2020

2019

Receivables

from

Group

companies

Loan

receivables

90

100

Total

90

100

8.

CURRENT

RECEIVABLES

FROM

GROUP

COMPANIES

MEUR

2020

2019

Trade

receivables

27

24

Loan

receivables

1,790

2,135

Derivatives

25

27

Other

receivables

2

Prepaid

expenses

and

accrued

income

3

7

Total

1,846

2,193

9.

PREPAID

EXPENSES

AND

ACCRUED

INCOME

MEUR

2020

2019

Derivatives

37

24

Other

4

5

Total

41

29

10.

SHAREHOLDERS’

EQUITY

MEUR

2020

2019

Share

capital

Share

capital

on

1

January

336

Share

capital

on

31

December

336

Share

premium

reserve

Share

premium

reserve

on

1

January

61

Share

premium

reserve

on

31

December

61

Retained

earnings

Retained

earnings

on

1

January

994

1038

Dividends

paid

-284

Result

for

the

financial

period

265

240

Retained

earnings

on

31

December

974

994

Total

shareholders'

equity

1371

1391

Distributable

equity

974

994

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

11.

LIABILITIES

MEUR

2020

2019

Non

-current

Interest

-bearing

953

847

Total

953

847

Current

Non

-interest

-bearing

108

96

Interest

-bearing

1,202

1,060

Total

1,310

1,155

Debt

with

maturity

profile

MEUR

2020

2019

Loans

from

financial

institutions:

1,084

899

Current

<1

year

130

51

Long

-term

1-5

years

661

519

>5

years

292

328

Total

1,084

899

12.

ACCRUED

EXPENSES

AND

DEFERRED

INCOME

MEUR

2020

2019

Derivatives

27

23

Personnel

costs

9

6

Interest

and

other

financial

items

3

Other

4

Total

44

36

13.

LIABILITIES

TO

GROUP

COMPANIES

MEUR

2020

2019

Trade

payables

13

15

Other

current

liabilities

1,072

1,008

Derivatives

43

25

Accrued

expenses

and

deferred

income

1

4

Total

1,129

1,052

14.

FINANCIAL

ASSETS

AND

LIABILITIES

BY

MEASUREMENT

category

2,610

63

2,673

Non

-current

financial

liabilities

Interest

-bearing

debt

953

963

Current

financial

liabilities

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

Interest

-bearing

debt

130

Interest

-bearing

debt

to

Group

companies

1,072

Trade

payables

6

Trade

payables

to

Group

companies

13

Derivatives

27

Derivatives

to

Group

companies

43

Other

liabilities

3

Carrying

amount

by

category

2,177

70

2,247

2,257

2019

MEUR

Measured

at

amortised

cost

At

fair

value

through

the

statement

of

income

Carrying

amounts

of

the

statement

of

financial

position

items

Fair

value

Non

-current

financial

assets

Interest

-bearing

receivables

from

Group

companies

100

Other

receivables

1

Current

financial

assets

Interest

-bearing

receivables

from

Group

companies

2,135

Trade

receivables

from

Group

companies

24

Derivatives

24

Derivatives

from

Group

companies

27

Other

receivables

from

Group

companies

6

Cash

equivalents

Cash

and

bank

113

Carrying

amount

by

category

2,379

51

2,430

Non

-current

financial

liabilities

Interest

-bearing

debt

847

856

Current

financial

liabilities

Interest

-bearing

debt

52

Interest

-bearing

debt

to

Group

companies

1,008

Trade

payables

14

Trade

payables

to

Group

companies

15

Derivatives

23

Derivatives

to

Group

companies

25

Other

liabilities

3

Carrying

amount

by

category

1,940

49

1,988

1,996

Information

about

the

fair

value

hierarchy

and

valuation

principle

can

be

found

in

Consolidated

Financial

Statements

Note

5.2.

Financial

assets

and

liabilities

by

measurement

category.

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

15.

DERIVATIVE

FINANCIAL

INSTRUMENTS

2020

MEUR

With

external

financial

institutions

With

Group

companies

Total

2020

Nominal

values

of

derivative

financial

instruments

Currency

forwards,

transaction

risk

1,649

1,861

3,509

Interest

rate

swaps

450

130

580

Cross

currency

swaps

237

Total

4,327

Fair

values

of

derivative

financial

instruments

(level

2)

Currency

forwards,

transaction

risk

34

-23

11

Interest

rate

swaps

-12

6

-6

Cross

currency

swaps

-12

Total

-8

2019

MEUR

With

external

financial

institutions

With

Group

companies

Total

2019

Nominal

values

of

derivative

financial

instruments

Currency

forwards,

transaction

risk

2,358

2,448

4,806

Interest

rate

swaps

400

130

530

Cross

currency

swaps

246

Total

5,582

Fair

values

of

derivative

financial

instruments

(level

2)

Currency

forwards,

transaction

risk

11

Interest

rate

swaps

-7

2

-6

Cross

currency

swaps

-4

Total

2

Foreign

currency

forward

contracts

are

against

transactional

risks

and

are

matched

against

the

hedged

cashflows.

Interest

rate

swaps

are

denominated

in

euros

and

the

average

interest

-bearing

period

for

external

contracts

is

59

(69)

months

and

125

(137)

months

for

intragroup

contracts.

The

average

maturity

for

cross

currency

swaps

is

30

(41)

months.

16.

FINANCIAL

RISKS

General

Wärtsilä

has

a

centralised

Group

Treasury

with

two

main

objectives:

1)

to

arrange

adequate

funding

for

the

Group’s

underlying

operations

on

competitive

terms

and

2)

to

identify

and

evaluate

the

financial

risks

within

the

Group

and

implement

the

hedges

for

the

Group

companies.

The

Group

Treasury

is

organisationally

within

the

Parent

Company.

The

details

about

the

management

of

the

Group's

financial

risks

are

in

Note

5.8.

of

the

Consolidated

Financial

statements.

As

the

Group's

liquidity

and

interest

rate

risks

are

managed

at

the

parent

company

level

the

group

reporting

applies

fully

to

the

Parent

Company.

Foreign

exchange

risk

Operative

foreign

currency

risks

are

followed

and

hedged

at

the

subsidiary

level.

The

Group

Treasury

acts

as

a

counterparty

to

these

hedges,

if

that

is

allowed

by

local

regulations.

To

enable

netting

of

intragroup

currency

flows

and

to

reduce

the

amount

of

external

transactions

the

Group

Treasury

is

allowed

to

have

minor

unhedged

exposures

in

different

currencies.

Any

gains/losses

from

the

Group

Treasury's

operations

are

booked

directly

into

the

financial

items

and

we

do

not

expect

any

material

foreign

exchange

gains/losses

from

the

Group

Treasury's

operations.

17.

COLLATERAL,

CONTINGENT

LIABILITIES

AND

OTHER

COMMITMENTS

MEUR

2020

2019

Guarantees

and

contingent

liabilities

On

behalf

of

Group

companies

2,889

2,773

Total

2,889

2,773

Future

nominal

lease

payments

Payable

within

one

year

4

Payable

after

one

year

26

29

Total

30

33

This

is

Wärtsilä

/

Sustainability

/

Governance

/

Financial

review

18.

LOANS

AND

OTHER

COMMITMENTS

There

are

no

loans

receivables

from

senior

management

and

the

members

of

the

Board

of

Directors.

No

pledges

or

other

commitments

were

given

on

behalf

of

senior

management

or

shareholders.

In

Note

7.2

in

Consolidated

Financial

Statements,

disclosures

are

specified.

comprise

the

Board

of

Directors,

the

President

and

CEO,

the

Board

of

Management

as

well

as

the

associated

companies

and

joint

ventures.

In

Notes

8

and

13

in

Parent

Company

financial

statement,

receivables

and

liabilities

from

Group

companies

are

specified.

19.

AUDITORS’

FEES

AND

SERVICES

The

following

fees

were

paid

to

auditors

and

accounting

firms

for

audits

and

other

services.

In

2020,

the

AGM

appointed

the

audit

firm

PricewaterhouseCoopers

Oy

as

Wärtsilä

Corporati

on's

auditor.

Auditors'

fees

TEUR

2020

2019

Audit

341

583

Tax

advisory

10

Other

services

14

111

Total

355

705

 
 
 
This 
is 
Wärtsilä 
/ 
Sustainability 
/ 
Governance 
/
 
Financial 
review 
 
 
PROPOSAL 
OF 
THE 
BOARD
 
The 
parent 
company’s 
distributable 
funds 
total 
EUR 
974 
,008,736.28, 
which 
includes 
EUR 
2 
64,838,387.72 
in 
net 
profit 
for 
the 
year. 
There 
are 
591,723,390 
shares 
with 
dividend 
rights. 
 
The 
Board 
of 
Directors 
proposes 
to 
the 
Annual 
General 
Meeting 
that 
the 
company’s 
distributable 
earnings 
be 
disposed 
of 
in 
the 
following 
way: 
 
EUR 
A 
dividend 
of 
EUR 
0.20 
per 
share 
be 
paid, 
making 
a 
total 
of 
118 
344 
678.00 
That 
the 
following 
sum 
be 
retained 
in 
shareholders’ 
equity 
855 
664 
058.28 
Totalling 
974 
008 
736.28 
 
The 
dividend 
shall 
be 
paid 
in 
two 
instalments. 
The 
first 
instalment 
of 
EUR 
0.10 
per 
share 
shall 
be 
paid 
to 
the 
shareholders 
who 
are 
registered 
in 
the 
list 
of 
shareholders 
maintained 
by 
Euroclear 
Finland 
Ltd 
on 
the 
dividend 
record 
date 
of 
8 
March 
2021. 
The 
payment 
day 
proposed 
by 
the 
Board 
for 
this 
instalment 
is 
15 
March 
2021. 
 
The 
second 
instalment 
of 
EUR 
0.10 
per 
share 
shall 
be 
paid 
in 
September 
2021. 
The 
second 
instalment 
of 
the 
dividend 
shall 
be 
paid 
to 
shareholders 
who 
are 
registered 
in 
the 
list 
of 
shareholders 
maintained 
by 
Euroclear 
Finland 
Ltd 
on 
the 
dividend 
record 
day, 
which, 
together 
with 
the 
payment 
day, 
shall 
be 
decided 
by 
the 
Board 
of 
Directors 
in 
its 
meeting 
scheduled 
for 
9 
September 
2021. 
The 
dividend 
record 
day 
for 
the 
second 
instalment 
as 
per 
the 
curren 
t 
rules 
of 
the 
Finnish 
book 
-entry 
system 
would 
be 
13 
September 
2021 
and 
the 
dividend 
payment 
day 
20 
September 
2021 
 
No 
significant 
changes 
have 
taken 
place 
in 
the 
company’s 
financial 
position 
since 
the 
end 
of 
the 
financial 
year. 
The 
company’s 
liquidity 
is 
good 
and 
in 
the 
opinion 
of 
the 
Board 
of 
Directors 
the 
proposed 
dividend 
will 
not 
put 
the 
company’s 
solvency 
at 
risk. 
 
 
 
Helsinki, 
Finland, 
27 
January 
2021 
 
Tom 
Johnstone 
Markus 
Rauramo 
Maarit 
Aarni
-
Sirviö
Karen 
Bomba 
Karin 
Falk
Johan 
Forssell 
Risto 
Murto 
Mats 
Rahmström 
 
Jaakko 
Eskola, 
President 
and 
CEO

 
 
 
 
 
 
Auditor’s 
Report 
(Translation 
of 
the 
Finnish 
Original)
 
To 
the 
Annual 
General 
Meeting 
of 
Wärtsilä 
Corporation 
Report 
on 
the 
Audit 
of 
the 
Financial 
S 
tatements 
Opinion 
In 
our 
opinion 
●
 
the 
consolidated 
financial 
statements 
give 
a 
true 
and 
fair 
view 
of 
the 
group’s 
financial 
position 
and 
financial 
performance 
and 
cash 
flows 
in 
accordance 
with 
International 
Financial 
Reporting 
Standards 
(IFRS) 
as 
adopted 
by 
the 
EU 
●
 
the 
financial 
statements 
give 
a 
true 
and 
fair 
view 
of 
the 
parent 
company’s 
financial 
performance 
and 
financial 
position 
in 
accordance 
with 
the 
laws 
and 
regulations 
governing 
the 
preparation 
of 
the 
financial 
statements 
in 
Finland 
and 
comply 
with 
statutory 
requirements. 
Our 
opinion 
is 
consistent 
wit 
h 
the 
additional 
report 
to 
the 
Audit 
Committee. 
What 
we 
have 
audited 
We 
have 
audited 
the 
financial 
statements 
of 
Wärtsilä 
Corporation 
(business 
identity 
code 
0128631-1) 
for 
the 
year 
ended 
31 
December 
2020. 
The 
financial 
statements 
comprise: 
●
 
the 
consolidated 
balance 
sheet, 
income 
statement, 
statement 
of 
comprehensive 
income, 
statement 
of 
changes 
in 
equity, 
statement 
of 
cash 
flows 
and 
notes, 
including 
a 
summary 
of 
significant 
accounting 
policies 
●
 
the 
parent 
company’s 
balance 
sheet, 
income 
statement, 
statement 
of 
cash 
flows 
and 
notes. 
 
Basis 
for 
O 
pinion 
We 
conducted 
our 
audit 
in 
accordance 
with 
good 
auditing 
practice 
in 
Finland. 
Our 
responsibilities 
under 
good 
auditing 
practice 
are 
further 
described 
in 
the 
Auditor’s 
R 
esponsibilities 
for 
the 
Audit 
of 
the 
Financial 
Statements 
section 
of 
our 
report. 
We 
believe 
that 
the 
audit 
evidence 
we 
have 
obtained 
is 
sufficient 
and 
appropriate 
to 
provide 
a 
basis 
for 
our 
opinion. 
Independence 
We 
are 
independent 
of 
the 
parent 
company 
and 
of 
the 
group 
companies 
in 
accordance 
with 
the 
ethical 
requirements 
that 
are 
applicable 
in 
Finland 
and 
are 
relevant 
to 
our 
audit, 
and 
we 
have 
fulfilled 
our 
other 
ethical 
responsibilities 
in 
accordance 
with 
these 
requirements. 
To 
the 
best 
of 
our 
knowledge 
and 
belief, 
the 
non-audit 
services 
that 
we 
have 
provided 
to 
the 
parent 
company 
and 
to 
the 
group 
companies 
are 
in 
accordance 
with 
the 
applicable 
law 
and 
regulations 
in 
Finland 
and 
we 
have 
not 
provided 
non-audit 
services 
that 
are 
prohibited 
under 
Article 
5(1) 
of 
Regulation 
(EU) 
No 
537/2014. 
The 
non-audit 
services 
that 
we 
have 
provided 
are 
disclosed 
in 
note 
7.3 
to 
the 
Financial 
Statements. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our 
Audit 
A 
pproach 
Overview 
 
●
 
We 
have 
applied 
an 
overall 
group 
materiality 
of 
€ 
20 
million. 
●
 
The 
group 
audit 
scope 
included 
Wärtsilä 
Corporation 
parent 
company 
and 
all 
significant 
operating 
companies, 
as 
well 
as 
a 
large 
number 
of 
smaller 
companies, 
covering 
the 
vast 
majority 
of 
revenues, 
assets 
and 
liabilities. 
●
 
Revenue 
recognition 
of 
long-term 
contracts 
●
 
Valuation 
of 
goodwill 
●
 
Valuation 
of 
trade 
receivables 
 
As 
part 
of 
designing 
our 
audit, 
we 
determined 
materiality 
and 
assessed 
the 
risks 
of 
material 
misstatement 
in 
the 
financial 
statements. 
In 
particular, 
we 
considered 
where 
management 
made 
subjective 
judgements; 
for 
example, 
in 
respect 
of 
significant 
accounting 
estimates 
that 
involved 
making 
assumptions 
and 
considering 
future 
events 
that 
are 
inherently 
uncertain. 
Materiality 
The 
scope 
of 
our 
audit 
was 
influenced 
by 
our 
application 
of 
materiality. 
An 
audit 
is 
designed 
to 
obtain 
reasonable 
assurance 
whether 
the 
financial 
statements 
are 
free 
from 
material 
misstatement. 
Misstatements 
may 
arise 
due 
to 
fraud 
or 
error. 
They 
are 
considered 
material 
if 
individually 
or 
in 
aggregate, 
they 
could 
reasonably 
be 
expected 
to 
influence 
the 
economic 
decisions 
of 
users 
taken 
on 
the 
basis 
of 
the 
financial 
statements. 
Based 
on 
our 
professional 
judgement, 
we 
determined 
certain 
quantitative 
thresholds 
for 
materiality, 
including 
the 
overall 
group 
materiality 
for 
the 
consolidated 
financial 
statements 
as 
set 
out 
in 
the 
table 
below. 
These, 
together 
with 
qualitative 
considerations, 
helped 
us 
to 
determine 
the 
scope 
of 
our 
audit 
and 
the 
nature, 
timing 
and 
extent 
of 
our 
audit 
procedures 
and 
to 
evaluate 
the 
effect 
of 
misstatements 
on 
the 
financial 
statements 
as 
a 
whole. 
 
Overall 
group 
materiality 
€ 
2 
0 
million 
(prior 
year 
€ 
24 
million) 
How 
we 
determined 
it 
5 
% 
of 
profit 
before 
tax 
(five-year 
average) 
Rationale 
for 
the 
materiality 
benchmark 
applied 
We 
chose 
profit 
before 
tax 
as 
the 
benchmark 
because, 
in 
our 
view, 
the 
performance 
of 
the 
Group 
is 
most 
commonly 
measured 
by 
using 
this 
criteria, 
and 
it 
is 
a 
generally 
accepted 
benchmark. 
We 
chose 
5 
% 
which 
is 
within 
the 
range 
of 
acceptable 
quantitative 
materiality 
thresholds 
in 
auditing 
standards. 
How 
we 
tailored 
our 
group 
audit 
scope 
The 
group 
audit 
scope 
was 
tailored 
to 
take 
into 
account 
the 
structure 
of 
the 
Group 
and 
the 
size, 
complexity 
and 
risk 
of 
individual 
subsidiaries. 
Using 
this 
criteria 
we 
selected 
companies 
and 
accounts 
into 
our 
audit 
scope 
and 
at 
the 
same 
time 
ensured 
that 
we 
get 
sufficient 
coverage 
to 
our 
audit, 
in 
order 
to 
issue 
an 
audit 
opinion 
for 
the 
Group. 
Key 
Audit 
Matters 
Key 
audit 
matters 
are 
those 
matters 
that, 
in 
our 
professional 
judgment, 
were 
of 
most 
significance 
in 
our 
audit 
of 
the 
financial 
statements 
of 
the 
current 
period. 
These 
matters 
were 
addressed 
in 
the 
context 
of 
our 
audit 
of 
the 
financial 

 
 
 
 
 
 
 
 
 
 
 
statements 
as 
a 
whole, 
and 
in 
forming 
our 
opinion 
thereon, 
and 
we 
do 
not 
provide 
a 
separate 
opinion 
on 
these 
matters. 
As 
in 
all 
of 
our 
audits, 
we 
also 
addressed 
the 
risk 
of 
management 
override 
of 
internal 
controls, 
including 
among 
other 
matters 
consideration 
of 
whether 
there 
was 
evidence 
of 
bias 
t 
hat 
represented 
a 
risk 
of 
material 
misstatement 
due 
to 
fraud. 
Key 
audit 
matter
 
in 
the 
audit 
of 
the 
group
 
How 
our 
audit 
addressed 
the 
key 
audit 
matter
 
Revenue 
recognition 
of 
long-term 
contracts 
Refer 
to 
the 
consolidated 
financial 
statements 
note 
2.2 
. 
The 
group 
has 
significant 
revenue 
from 
construction 
contracts 
and 
long-term 
operating 
and 
maintenance 
agreements. 
These 
long-term 
contracts 
are 
often 
complex 
customised 
solutions 
and 
meet 
the 
definition 
for 
revenue 
recognition 
over 
time 
in 
accordance 
with 
IFRS 
15. 
Revenue 
related 
to 
these 
construction 
contracts 
and 
long-
term 
operating 
and 
maintenance 
agreements 
is 
recognised 
using 
the 
percentage 
of 
completion 
method, 
where 
progress 
is 
determined 
by 
comparing 
actual 
costs 
incurred 
to 
date, 
with 
the 
total 
estimated 
costs 
of 
the 
project. 
Revenue 
recognition 
for 
long-term 
contracts 
includes 
 
Our 
revenue 
testing 
included 
both 
testing 
of 
the 
company’s 
controls, 
as 
well 
as 
substantive 
audit 
procedures 
targeted 
at 
selected 
major 
long-term 
projects. 
Our 
substantive 
testing 
focused 
on 
estimates 
applied 
by 
management 
in 
the 
accounting. 
Our 
procedures 
included, 
among 
others 
things, 
the 
following: 
-
 
Ensured 
that 
the 
revenue 
recognition 
method 
applied 
was 
appropriate 
based 
on 
the 
terms 
of 
the 
arrangement; 
-
 
Agreed 
the 
total 
project 
revenue 
estimates 
to 
sales 
agreements, 
including 
amendments 
as 
appropriate; 
-
 
We 
obtained 
an 
understanding 
of 
the 
processes 
and 
tested 
relevant 
controls, 
which 
impact 
the 
revenue 
recognition; 
-
 
We 
assessed 
the 
reliability 
of 
management’s 
estimates 
by 
comparing 
the 
actual 
results 
of 
delivered 
projects 
to 
previous 
estimates; 
management 
judgment 
in 
a 
form 
of 
estimates, 
which 
are 
subject 
to 
management 
experience 
and 
expectations 
of 
future 
events. 
The 
most 
important 
judgment 
relates 
to 
the 
estimated 
total 
costs 
of 
the 
project. 
Revenue 
recognition 
of 
long-term 
contracts 
is 
a 
key 
audit 
matter 
in 
the 
audit 
due 
to 
the 
high 
level 
of 
management 
judgement 
involved 
in 
the 
project 
estimates.
 
-
 
We 
challenged 
the 
management 
estimates 
and 
assumptions 
in 
projects, 
which 
were 
considered 
to 
include 
specific 
risk 
factors; 
and 
-
 
Recalculated 
the 
revenue 
based 
on 
the 
stage 
of 
completion 
of 
the 
projects. 
Ensured 
that 
the 
stage 
of 
completion 
is 
correct 
by 
comparing 
actual 
costs 
per 
the 
company’s 
accounting 
records 
to 
the 
estimated 
total 
costs 
of 
the 
projects. 
Valuation 
of 
goodwill 
Refer 
to 
the 
consolidated 
financial 
statements 
note 
3.1. 
Goodwill 
is 
one 
of 
the 
most 
significant 
balance 
sheet 
items 
and 
amounts 
to 
€ 
1 
325 
million. 
The 
determination 
and 
whether 
an 
impairment 
charge 
is 
required 
involves 
significant 
management 
judgement, 
including 
identifying 
on 
which 
cash 
generating 
unit 
level 
the 
goodwill 
is 
tested 
and 
estimating 
the 
future 
performance 
of 
the 
business 
and 
the 
discount 
rate 
applied 
to 
these 
future 
cash 
flows. 
Valuation 
of 
goodwill 
is 
a 
key 
audit 
matter 
in 
the 
audit 
due 
to 
the 
size 
of 
the 
goodwill 
balance 
and 
the 
high 
Our 
audit 
focused 
on 
assessing 
the 
reasonableness 
of 
the 
determination 
of 
cash 
generating 
units, 
which 
forms 
the 
basis 
for 
the 
goodwill 
impairment 
testing 
and 
assessing 
the 
appropriateness 
of 
management’s 
judgments 
and 
estimates 
used 
in 
the 
goodwill 
impairment 
analysis. 
Our 
procedures 
relating 
to 
the 
impairment 
analysis 
included 
the 
following: 
-
 
We 
tested 
the 
methodology 
applied 
in 
the 
goodwill 
impairment 
analysis 
as 
compared 
to 
the 
requirements 
of 
IAS 
36, 
Impairment 
of 
Assets; 
-
 
We 
evaluated 
the 
process 
by 
which 
the 
future 
cash 
flow 
forecasts 
were 
drawn 
up, 
including 
comparing 
them 
to 
the 
latest 
Board 
approved 
targets 
and 
long 
term 
plans; 

 
 
 
 
 
 
 
 
 
 
level 
of 
management 
judgement 
involved. 
-
 
We 
tested 
the 
key 
underlying 
assumptions 
for 
the 
cash 
flow 
forecasts, 
including 
sales 
and 
profitability 
forecasts, 
discount 
rate 
used 
and 
the 
implied 
growth 
rates 
beyond 
the 
forecasted 
period; 
-
 
We 
compared 
the 
current 
year 
actual 
results 
included 
in 
the 
prior 
year 
impairment 
model 
to 
consider 
whether 
forecasts 
included 
assumptions 
that, 
with 
hindsight, 
had 
been 
optimistic; 
and 
-
 
We 
considered 
whether 
the 
sensitivity 
analysis 
performed 
by 
the 
management 
around 
key 
assumptions 
of 
the 
cash 
flow 
forecast 
was 
appropriate 
by 
considering 
the 
likelihood 
of 
the 
movements 
of 
these 
key 
assumptions. 
Valuation 
of 
trade 
receivables 
Refer 
to 
the 
consolidated 
financial 
statements 
note 
4.2 
. 
Net 
trade 
receivables 
amount 
to 
€ 
952 
million, 
including 
an 
impairment 
provision 
of 
€ 
61 
million. 
The 
trade 
receivables 
include 
€ 
30 
million 
long-term 
trade 
receivables.
 
Trade 
receivables 
are 
recognised 
at 
their 
anticipated 
realisable 
value, 
which 
is 
the 
original 
invoiced 
For 
trade 
receivables 
and 
the 
management’s 
estimations 
for 
trade 
receivables 
impairment 
provision, 
our 
key 
audit 
procedures 
included 
the 
following:
 
-
 
We 
obtained 
trade 
receivables 
balance 
confirmations; 
-
 
We 
analysed 
the 
aging 
of 
trade 
receivables; 
and 
-
 
We 
obtained 
a 
list 
of 
long 
outstanding 
receivables 
and 
assessed 
the 
recoverability 
of 
these 
through 
inquiry 
with 
management 
and 
by 
obtaining 
amount 
less 
an 
estimated 
valuation 
allowance. 
 
Valuation 
of 
trade 
receivables 
is 
a 
key 
audit 
matter 
in 
the 
audit 
due 
to 
the 
size 
of 
the 
trade 
receivable 
balance 
and 
the 
high 
level 
of 
management 
judgement 
used 
in 
determining 
the 
impairment 
provision.
 
sufficient 
corroborative 
evidence 
to 
support 
the 
conclusions.
 
We 
have 
no 
key 
audit 
matters 
to 
report 
with 
respect 
to 
our 
audit 
of 
the 
parent 
company 
financial 
statements. 
There 
are 
no 
significant 
risks 
of 
material 
misstatement 
referred 
to 
in 
Article 
10(2c) 
of 
Regulation 
(EU) 
No 
537/2014 
with 
respect 
to 
the 
consolidated 
financial 
statements 
or 
the 
parent 
company 
financial 
statements. 
 
Responsibilities 
of 
the 
Board 
of 
Directors 
and 
the 
Managing 
Director 
for 
the 
Financial 
Statements 
The 
Board 
of 
Directors 
and 
the 
Managing 
Director 
are 
responsible 
for 
the 
preparation 
of 
consolidated 
financial 
statements 
that 
give 
a 
true 
and 
fair 
view 
in 
accordance 
with 
International 
Financial 
Reporting 
Standards 
(IFRS) 
as 
adopted 
by 
the 
EU, 
and 
of 
financial 
statements 
that 
give 
a 
true 
and 
fair 
view 
in 
accordance 
with 
the 
laws 
and 
regulations 
governing 
the 
preparation 
of 
financial 
statements 
in 
Finland 
and 
comply 
with 
statutory 
requirements. 
The 
Board 
of 
Directors 
and 
the 
Managing 
Director 
are 
also 
responsible 
for 
such 
internal 
control 
as 
they 
determine 
is 
necessary 
to 
enable 
the 
preparation 
of 
financial 
statements 
that 
are 
free 
from 
material 
misstatement, 
whether 
due 
to 
fraud 
or 
error. 
In 
preparing 
the 
financial 
statements, 
the 
Board 
of 
Directors 
and 
the 
Managing 
Director 
are 
responsible 
for 
assessing 
the 
parent 
company’s 
and 
the 
group’s 
ability 
to 
continue 
as 
a 
going 
concern, 
disclosing, 
as 
applicable, 
matters 
relating 
to 
going 

 
 
 
 
 
concern 
and 
using 
the 
going 
concern 
basis 
of 
accounting. 
The 
financial 
statements 
are 
prepared 
using 
the 
going 
concern 
basis 
of 
accounting 
unless 
there 
is 
an 
intention 
to 
liquidate 
the 
parent 
company 
or 
the 
group 
or 
to 
cease 
operations, 
or 
there 
is 
no 
realistic 
alternative 
but 
to 
do 
so. 
Auditor’s 
Responsibilities 
for 
the 
A 
udit 
of 
the 
Financial 
Statements 
Our 
objectives 
are 
to 
obtain 
reasonable 
assurance 
about 
whether 
the 
financial 
statements 
as 
a 
whole 
are 
free 
from 
material 
misstatement, 
whether 
due 
to 
fraud 
or 
error, 
and 
to 
issue 
an 
auditor’s 
report 
that 
includes 
our 
opinion. 
Reasonable 
assurance 
is 
a 
high 
level 
of 
assurance, 
but 
is 
not 
a 
guarantee 
that 
an 
audit 
conducted 
in 
accordance 
with 
good 
auditing 
practice 
will 
always 
detect 
a 
material 
misstatement 
when 
it 
exists. 
Misstatements 
can 
arise 
from 
fraud 
or 
error 
and 
are 
considered 
material 
if, 
individually 
or 
in 
the 
aggregate, 
they 
could 
reasonably 
be 
expected 
to 
influence 
the 
economic 
decisions 
of 
users 
taken 
on 
the 
basis 
of 
these 
financial 
statements. 
As 
part 
of 
an 
audit 
in 
accordance 
with 
good 
auditing 
practice, 
we 
exercise 
professional 
judgment 
and 
maintain 
professional 
skepticism 
throughout 
the 
audit. 
We 
also: 
●
 
Identify 
and 
assess 
the 
risks 
of 
material 
misstatement 
of 
the 
financial 
statements, 
whether 
due 
to 
fraud 
or 
error, 
design 
and 
perform 
audit 
procedures 
responsive 
to 
those 
risks, 
and 
obtain 
audit 
evidence 
that 
is 
sufficient 
and 
appropriate 
to 
provide 
a 
basis 
for 
our 
opinion. 
The 
risk 
of 
not 
detecting 
a 
material 
misstatement 
resulting 
from 
fraud 
is 
higher 
than 
for 
one 
resulting 
from 
error, 
as 
fraud 
may 
involve 
collusion, 
forgery, 
intentional 
omissions, 
misrepresentations, 
or 
the 
override 
of 
internal 
control. 
●
 
Obtain 
an 
understanding 
of 
internal 
control 
relevant 
to 
the 
audit 
in 
order 
to 
design 
audit 
procedures 
that 
are 
appropriate 
in 
the 
circumstances, 
but 
not 
for 
the 
purpose 
of 
expressing 
an 
opinion 
on 
the 
effectiveness 
of 
the 
parent 
company’s 
or 
the 
group’s 
internal 
control. 
●
 
Evaluate 
the 
appropriateness 
of 
accounting 
policies 
used 
and 
the 
reasonableness 
of 
accounting 
estimates 
and 
related 
disclosures 
made 
by 
management. 
●
 
Conclude 
on 
the 
appropriateness 
of 
the 
Board 
of 
Directors’ 
and 
the 
Managing 
Director’s 
use 
of 
the 
going 
concern 
basis 
of 
accounting 
and 
based 
on 
the 
audit 
evidence 
obtained, 
whether 
a 
material 
uncertainty 
exists 
related 
to 
events 
or 
conditions 
that 
may 
cast 
significant 
doubt 
on 
the 
parent 
company’s 
or 
the 
group’s 
ability 
to 
continue 
as 
a 
going 
concern. 
If 
we 
conclude 
that 
a 
material 
uncertainty 
exists, 
we 
are 
required 
to 
draw 
attention 
in 
our 
auditor’s 
report 
to 
the 
related 
disclosures 
in 
the 
financial 
statements 
or, 
if 
such 
disclosures 
are 
inadequate, 
to 
modify 
our 
opinion. 
Our 
conclusions 
are 
based 
on 
the 
audit 
evidence 
obtained 
up 
to 
the 
date 
of 
our 
auditor’s 
report. 
However, 
future 
events 
or 
conditions 
may 
cause 
the 
parent 
company 
or 
the 
group 
to 
cease 
to 
continue 
as 
a 
going 
concern. 
●
 
Evaluate 
the 
overall 
presentation, 
structure 
and 
content 
of 
the 
financial 
statements, 
including 
the 
disclosures, 
and 
whether 
the 
financial 
statements 
represent 
the 
underlying 
transactions 
and 
events 
so 
that 
the 
financial 
statements 
give 
a 
true 
and 
fair 
view. 
●
 
Obtain 
sufficient 
appropriate 
audit 
evidence 
regarding 
the 
financial 
information 
of 
the 
entities 
or 
business 
activities 
within 
the 
group 
to 
express 
an 
opinion 
on 
the 
consolidated 
financial 
statements. 
We 
are 
responsible 
for 
the 
direction, 
supervision 
and 
performance 
of 
the 
group 
audit. 
We 
remain 
solely 
responsible 
for 
our 
audit 
opinion. 
We 
communicate 
with 
those 
charged 
with 
governance 
regarding, 
among 
other 
matters, 
the 
planned 
scope 
and 
timing 
of 
the 
audit 
and 
significant 
audit 
findings, 
including 
any 
significant 
deficiencies 
in 
internal 
control 
that 
we 
identify 
during 
our 
audit. 
We 
also 
provide 
those 
charged 
with 
governance 
with 
a 
statement 
that 
we 
have 
complied 
with 
relevant 
ethical 
requirements 
regarding 
independence, 
and 
to 

 
 
 
 
 
 
 
communicate 
with 
them 
all 
relationships 
and 
other 
matters 
that 
may 
reasonably 
be 
thought 
to 
bear 
on 
our 
independence, 
and 
where 
applicable, 
related 
safeguards. 
From 
the 
matters 
communicated 
with 
those 
charged 
with 
governance, 
we 
determine 
those 
matters 
that 
were 
of 
most 
significance 
in 
the 
audit 
of 
the 
financial 
statements 
of 
the 
current 
period 
and 
are 
therefore 
the 
key 
audit 
matters. 
We 
describe 
these 
matters 
in 
our 
auditor’s 
report 
unless 
law 
or 
regulation 
precludes 
public 
disclosure 
about 
the 
matter 
or 
when, 
in 
extremely 
rare 
circumstances, 
we 
determine 
that 
a 
matter 
should 
not 
be 
communicated 
in 
our 
report 
because 
the 
adverse 
consequences 
of 
doing 
so 
would 
reasonably 
be 
expected 
to 
outweigh 
the 
public 
interest 
benefits 
of 
such 
communication. 
Other 
Reporting 
R 
equirements 
Appointment 
We 
were 
first 
appointed 
as 
auditors 
by 
the 
annual 
general 
meeting 
on 
2 
March 
2017 
. 
Our 
appointment 
represents 
a 
total 
period 
of 
uninterrupted 
engagement 
of 
four 
years. 
Other 
I 
nformation 
The 
Board 
of 
Directors 
and 
the 
Managing 
Director 
are 
responsible 
for 
the 
other 
information. 
The 
other 
information 
comprises 
the 
report 
of 
the 
Board 
of 
Directors 
and 
the 
information 
included 
in 
the 
Annual 
Report, 
but 
does 
not 
include 
the 
financial 
statements 
and 
our 
auditor’s 
report 
thereon. 
Our 
opinion 
on 
the 
financial 
statements 
does 
not 
cover 
the 
other 
information. 
In 
connection 
with 
our 
audit 
of 
the 
financial 
statements, 
our 
responsibility 
is 
to 
read 
the 
other 
information 
and, 
in 
doing 
so, 
consider 
whether 
the 
other 
information 
is 
materially 
inconsistent 
with 
the 
financial 
statements 
or 
our 
knowledge 
obtained 
in 
the 
audit, 
or 
otherwise 
appears 
to 
be 
materially 
misstated. 
With 
respect 
to 
the 
report 
of 
the 
Board 
of 
Directors, 
our 
responsibility 
also 
includes 
considering 
whether 
the 
report 
of 
the 
Board 
of 
Directors 
has 
been 
prepared 
in 
accordance 
with 
the 
applicable 
laws 
and 
regulations. 
In 
our 
opinion 
●
 
the 
information 
in 
the 
report 
of 
the 
Board 
of 
Directors 
is 
consistent 
with 
the 
information 
in 
the 
financial 
statements 
●
 
the 
report 
of 
the 
Board 
of 
Directors 
has 
been 
prepared 
in 
accordance 
with 
the 
applicable 
laws 
and 
regulations. 
If, 
based 
on 
the 
work 
we 
have 
performed, 
we 
conclude 
that 
there 
is 
a 
material 
misstatement 
of 
the 
other 
information, 
we 
are 
required 
to 
report 
that 
fact. 
We 
have 
nothing 
to 
report 
in 
this 
regard. 
Other 
Statements 
We 
support 
that 
the 
financial 
statements 
should 
be 
adopted. 
The 
proposal 
by 
the 
Board 
of 
Directors 
regarding 
the 
use 
of 
the 
distributable 
funds 
is 
in 
compliance 
with 
the 
Limited 
Liability 
Companies 
Act. 
We 
support 
that 
the 
Members 
of 
the 
Board 
of 
Directors 
and 
the 
President 
and 
CEO 
should 
be 
discharged 
from 
liability 
for 
the 
financial 
period 
audited 
by 
us. 
 
Helsinki 
5 
February 
202 
1 
PricewaterhouseCoopers 
Oy
 
Authorised 
Public 
Accountants 
 
Merja 
Lindh 
Authorised 
Public 
Accountant 
(KHT) 
 
 