Wärtsilä: Good performance despite challenging market conditions

FOURTH QUARTER HIGHLIGHTS
– Order intake increased 14% to EUR 1,522 million (1,334)
– Net sales increased 10% to EUR 1,549 million (1,403)
– Book-to-bill 0.98 (0.95)
– Operating result before non-recurring items EUR 196 million, or 12.7% of net sales (EUR 211 million or 15.0%)
– Earnings per share EUR 0.60 (0.74)
– Cash flow from operating activities EUR 212 million (317)

HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-DECEMBER 2014
– Order intake increased 5% to EUR 5,084 million (4,821)
– Net sales increased 4% to EUR 4,779 million (4,607)
– Book-to-bill 1.06 (1.05)
– Operating result before non-recurring items EUR 569 million, or 11.9% of net sales (EUR 557 million or 12.1%)
– Earnings per share EUR 1.76 (1.98)
– Cash flow from operating activities EUR 452 million (578)
– Order book at the end of the period increased 5% to EUR 4,530 million (4,311)
– Dividend proposal 1.15 euro per share

BJÖRN ROSENGREN, PRESIDENT AND CEO

“Wärtsilä performed well in 2014, a year characterised by challenging market conditions. Net sales and profitability developed in line with our expectations. Net sales grew by 4% to EUR 4,779 million (4,607), largely due to a strong fourth quarter. Profitability reached 11.9% (12.1), with the development in Services and Ship Power performance and the restructuring measures introduced in January compensating for the effect of lower Power Plants’ sales.

Although overall vessel contracting slowed during 2014, the robust ordering of gas carriers and the continued demand for specialised tonnage resulted in good ordering activity for Ship Power. In the power generation markets, activity among our customers increased significantly during the second half. Consequently, Power Plants’ order intake picked up after a difficult first six months. I am especially pleased that we have achieved our ambition to grow the Services business. Supported by an all-time high fourth quarter, Services’ full year net sales increased by 5%.

In December we announced the acquisition of L-3 Marine Systems International, a global supplier of automation, navigation and electrical systems to the marine, naval and offshore markets. Through this acquisition our position in the electrical and automation business will be unique in terms of sector competence.

How the current market uncertainties will impact customers’ investment decisions is not yet clear, and therefore our market outlook remains cautious. We are, however, confident that our strategic focus areas position us well, and continue to see opportunities to grow sales and improve profitability in the coming year.”

WÄRTSILÄ’S PROSPECTS FOR 2015
Wärtsilä expects its net sales for 2015 to grow by 0-10% and its operational profitability (EBIT% before nonrecurring items) to be between 12.0-12.5%. The guidance excludes the impact of the L-3 Marine Systems International acquisition.

MARKET OUTLOOK
Power generation markets closely follow global macroeconomic development. Based on the difficult market situation seen during 2014 and the GDP forecasts for 2015, the overall market for liquid and gas fuelled power generation is expected to continue to be challenging. Ordering activity remains focused on emerging markets and countries benefiting from a stronger US dollar. The low oil prices may impact investments in new power generation capacity in oil and gas production based economies. In the OECD countries, there is still pent-up power sector demand, mainly driven by CO2 neutral generation and the ramp down of older, largely coal-based generation.

Our outlook for shipping and shipbuilding is cautious, due to the current uncertainties in the market. Overcapacity continues to affect demand for traditional merchant vessels. Vessels are being scrapped at a younger age, which along with a more balanced fleet growth, supports a gradual recovery in the freight market. Low oil prices are expected to impact investments in exploration and development, thus limiting the demand for offshore vessels. In other vessel markets, lower bunkering costs may have a positive impact on the operating expenses for ship owners. The outlook for gas carriers continues to be positive, although the strong ordering volumes seen in 2014 are expected to normalise. The importance of fuel efficiency and environmental regulations are clearly visible, driving interest in environmental solutions and gas as a marine fuel for the broader marine markets.

The overall service market outlook remains stable, with interesting developments in selected regions. An increase in the installed base of medium-speed engines and propulsion equipment offsets the slower service demand for older installations and the continued emphasis of merchant marine customers on reducing operating expenses. The service outlook for offshore and gas fuelled vessels remains favourable. Demand for services in the power plant segment continues to be good. Marine and power plant customers show healthy interest in long-term service agreements. From a regional perspective, the outlook for the Middle East and Africa is positive, and is supported by demand for power plant related services.

BOARD OF DIRECTORS’ DIVIDEND PROPOSAL
The Board of Directors proposes that a dividend of 1.15 euro per share be paid for the financial year 2014. The parent company’s distributable funds total 1,002,766,535.62 euro, which includes 183,367,874.92 euro in net profit for the year. There are 197,241,130 shares with dividend rights. The dividend will be paid to shareholders who are registered in the list of shareholders maintained by Euroclear Finland Ltd on the record date, which is 9 March 2015. The dividend payment date proposed by the Board is 16 March 2015.
Source: Wartsila