Result presentation Q2 2014

© Wärtsilä

WÄRTSILÄ CORPORATION INTERIM REPORT JANUARY-JUNE 2014

18 JULY 2014

Björn Rosengren, President & CEO

• Order intake EUR 1,163 million, +9%

• Net sales EUR 1,132 million, -2%

• Book-to-bill 1.03

• EBIT EUR 122 million, 10.8% of net sales

(EUR 111 million or 9.6%)

• EPS EUR 0.42 (0.39)

• Prospects revised:

EBIT% before non-recurring items expected to be

around 11.5%, net sales to grow by around 5%

• Establishment of two joint ventures with China

State Shipbuilding Corporation announced in July

EBIT is shown excluding non-recurring items.

Highlights Q2/2014

NEW

PIC

2 © Wärtsilä

© Wärtsilä

0

200

400

600

800

1000

1200

1400

Q2/2013 Q2/2014

9%

12%

6%

9%

1,071

MEUR

Second quarter development

MEUR

3

Order intake supported by Ship Power and Services

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

2010 2011 2012 2013 1-6/2014

1,163

Q1-Q2 Q3-Q4

Power Plants

Ship Power

Services

© Wärtsilä

0

200

400

600

800

1000

1200

Q2/2013 Q2/2014

Net sales in line with our expectations

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2010 2011 2012 2013 1-6/2014

-7.6% 12%

-2%

1%

35%

-37%

1,152

MEUR


MEUR 1,132

4

Net sales in line with expectations

Power Plants

Ship Power

Services

Q1-Q2 Q3-Q4

-1%

© Wärtsilä

Net sales by business 1-3/2012

Ship Power

38% (28)

Power Plants

20% (28)

Services

42% (44)

5

Net sales by business 1-6/2014

© Wärtsilä

0.88

1.07 1.05 1.05 1.07

0,0

0,2

0,4

0,6

0,8

1,0

1,2

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

2010 2011 2012 2013 1-6/2014

Order intake Net sales Book-to-bill

MEUR

6

Book-to-bill ratio remains above one

© Wärtsilä

Order book distribution

MEUR

7

Order book distribution

0

500

1000

1500

2000

2500

3000

3500

30.6.2013 30.6.2014

Delivery current year Delivery next year or later

© Wärtsilä

9.6%

10.8%

0%

2%

4%

6%

8%

10%

12%

0

20

40

60

80

100

120

140

Q2/2013 Q2/2014

10.7% 11.1% 10.9%

11.2%

0%

2%

4%

6%

8%

10%

12%

14%

0

100

200

300

400

500

600

2010 2011 2012 2013

MEUR


MEUR

8

Profitability developed well

EBIT% before non-recurring items

EBIT before non-recurring items

© Wärtsilä 9

Continued uncertainty

in power generation

markets

Improvement in power plant quotations

10 © Wärtsilä

Activity remains focused on gas

0

2000

4000

6000

8000

10000

12000

14000

16000

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

MW

Quoted MW per Fuel Type

Others

Natural gas

Heavy fuel oil

© Wärtsilä

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 1-6/2014

MEUR Review period development

Total EUR 409 million (623)

IPP’s*

Utilities

Industrials

Oil

48%

Gas

52%

Review period order intake by fuel in MW

x%

11

Power Plants order intake by customer segment

17%

28%

55%

Q1-Q2 Q3-Q4

*IPP = Independent Power Producer

© Wärtsilä

308

50

217

30

118 130

Order intake 1-6/2014: 986 MW (1,113)

Americas 76 (324)

Asia 284 (210)

Africa and Middle East 265 (359)

Utilities

IPP’s

Industrials

12

Power Plants global order intake

3

18

37

Europe 361 (220)

76

© Wärtsilä

• The 47 MW power plant will be located in the

mountain desert close to Taif city

• Equipment will be fast-track delivered by

February 2015 and the power plant will enter

commercial operation by October 2015

• The power plant consists of five 20-cylinder

Wärtsilä 32TS engines designed to operate at

outstanding efficiency even in extreme ambient

conditions

• Wärtsilä has today over 1,600 MW of installed

power plant capacity in Saudi Arabia

13

Turnkey power plant order from Saudi Arabia

NEW

PIC

© Wärtsilä

Siemens

GE

MHI

Wärtsilä

Alstom

14

19.8%

2013

48.2%

22.1%

2.9%

Total market 73.2 GW (75.4)

3.3% 2.6%

Other GTs

Ansaldo

14

Market for gas and liquid based power plants

Includes all Wärtsilä power plants and other manufacturers’ gas and liquid fuelled power plants with prime

movers above 5 MW, as well as estimated output of steam turbines for combined cycles.

The data is gathered from the McCoy Power Report.

Other combustion engines not included. In engine technology Wärtsilä has a leading position.

1.1%

© Wärtsilä 15

Marine markets

active, especially

within the gas

carrier segment

© Wärtsilä

0

1

2

3

4

5

0

50

100

150

200

250

01.0

9

02.0

9

03.0

9

04.0

9

05.0

9

06.0

9

07.0

9

08.0

9

09.0

9

10.0

9

11.0

9

12.0

9

01.1

0

02.1

0

03.1

0

04.1

0

05.1

0

06.1

0

07.1

0

08.1

0

09.1

0

10.1

0

11.1

0

12.1

0

01.1

1

02.1

1

03.1

1

04.1

1

05.1

1

06.1

1

07.1

1

08.1

1

09.1

1

10.1

1

11.1

1

12.1

1

01.1

2

02.1

2

03.1

2

04.1

2

05.1

2

06.1

2

07.1

2

08.1

2

09.1

2

10.1

2

11.1

2

12.1

2

01.1

3

02.1

3

03.1

3

04.1

3

05.1

3

06.1

3

07.1

3

08.1

3

09.1

3

10.1

3

11.1

3

12.1

3

01.1

4

02.1

4

03.1

4

04.1

4

05.1

4

06.1

4

Millio

n C

GT

# o

f ve

ss

els

Merchant Offshore Cruise and Ferry Special vessels 3 months moving average in CGT

16

Vessel contracting development

Source: Clarkson Research Services, figures exclude late contracting

* CGT= gross tonnage compensated with workload

*

*

Vessel contracting in specialised segments

Source: Clarkson Research Services, figures exclude late contracting

0

10

20

30

40

50

60

70

80

01.0

9

02.0

9

03.0

9

04.0

9

05.0

9

06.0

9

07.0

9

08.0

9

09.0

9

10.0

9

11.0

9

12.0

9

01.1

0

02.1

0

03.1

0

04.1

0

05.1

0

06.1

0

07.1

0

08.1

0

09.1

0

10.1

0

11.1

0

12.1

0

01.1

1

02.1

1

03.1

1

04.1

1

05.1

1

06.1

1

07.1

1

08.1

1

09.1

1

10.1

1

11.1

1

12.1

1

01.1

2

02.1

2

03.1

2

04.1

2

05.1

2

06.1

2

07.1

2

08.1

2

09.1

2

10.1

2

11.1

2

12.1

2

01.1

3

02.1

3

03.1

3

04.1

3

05.1

3

06.1

3

07.1

3

08.1

3

09.1

3

10.1

3

11.1

3

12.1

3

01.1

4

02.1

4

03.1

4

04.1

4

05.1

4

06.1

4

# o

f ve

ss

els

LNG carriers - LPG carriers - Offshore - Special vessels - Cruise and Ferry

17 © Wärtsilä

© Wärtsilä

0

300

600

900

1200

1500

1800

2010 2011 2012 2013 1-6/2014

MEUR

Review period development Total EUR 875 million (827)

Offshore

30%

Traditional

merchant

18%

Special

vessels

4%

18

Ship Power order intake developed favourably

Others

1%

Q1-Q2 Q3-Q4

Gas carriers

37%

Cruise

and ferry

3%

Navy

5%

© Wärtsilä

• Order to supply exhaust gas cleaning systems

to six Finnlines vessels operating in the Baltic

and North Sea

• Wärtsilä’s scrubber systems enable compliance

with the new environmental regulations when

operating on heavy fuel oil

• The systems are also compliant with the water

discharge criteria set by regulators

• Wärtsilä has to date a total of 105 systems

delivered or on order, for 55 vessels

19

Finnlines selects Wärtsilä’s systems to reduce Baltic Sea

environmental impact

NEW

PIC

© Wärtsilä

• Joint venture order intake totalled

EUR 92 million (113) during

January-June 2014

• Wärtsilä’s share of ownership in

these companies is 50%, and the

results are reported as a share of

result of associates and joint

ventures

MEUR

Ship Power order intake

Joint venture order intake, includes figures from Wärtsilä Hyundai Engine Company Ltd.

and Wärtsilä Qiyao Diesel Company Ltd.

20

Joint venture ordering continues active

0

50

100

150

200

250

300

350

400

450

500

550

600

Q1/2

010

Q2/2

010

Q3/2

010

Q4/2

010

Q1/2

011

Q2/2

011

Q3/2

011

Q4/2

011

Q1/2

012

Q2/2

012

Q3/2

012

Q4/2

012

Q1/2

013

Q2/2

013

Q3/2

013

Q4/2

013

Q1/2

014

Q2/2

014

© Wärtsilä

Wärtsilä’s market shares are calculated on a 12 months rolling basis, numbers in brackets are from the end of the

previous quarter. The calculation is based on Wärtsilä’s own data portal.

Wärtsilä

52%(51)

Others

20%(20)

MAN D&T

17%(23)

Caterpillar

11%(6)

MAN D&T

88%(90)

Wärtsilä

11%(9)

Mitsubishi

1%(1)

Low-speed main engines

Total market volume last 12 months:

28,804 MW (31,017)


4,139 MW (3,787)

Medium-speed main engines

Wärtsilä

2%(3)

Auxiliary engines


7,860 MW (6,895)

Others

98%(97)

21

Ship Power market Market position of Wärtsilä’s marine engines

© Wärtsilä 22

Services customers

interest in long-term

partnerships

increasing

© Wärtsilä

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 1-6/2014

-3%

0

100

200

300

400

500

600

Q2/2013 Q2/2014

MEUR


MEUR

465 1% 468

0%

23

Services net sales development remains stable

5%

Q1-Q2 Q3-Q4

© Wärtsilä

Spare parts

52%(50)

Field service

25%(27)

Contracts

17%(16)

Projects

6%(7)

24

Total EUR 903 million (899)

Services net sales distribution 1-6/2014

© Wärtsilä

• Technical management agreements covering a

total of 15 vessels signed with three Greek LNG

ship owners during Q2/2014

• The agreement will enable higher availability,

increased engine performance and optimised

maintenance intervals

• The service outlook for gas fuelled vessels

remains favourable going forward

25

Strong interest for services agreements in LNG industry

© Wärtsilä

O&M and maintenance agreements Power Plants deliveries % of delivered MWs

MW

26

Development of new Power Plants service agreements

53%

57% 58% 57%

51%

31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2009 2010 2011 2012 2013 Q2/2014 12m rolling

© Wärtsilä

Fleet utilisation

* Source Bloomberg. Sample of more than 25 000 vessels (>299 GT) covered by IHS AIS Live.

** Source Bloomberg

27

Fleet utilisation

Fleet Average Speed, knots**

Anchored Vessels & Fleet Development*

20000

20500

21000

21500

22000

22500

15%

20%

25%

30%

35%

12.1

1

03.1

2

06.1

2

09.1

2

12.1

2

03.1

3

06.1

3

09.1

3

12.1

3

03.1

4

06.1

4

Nr

of

Active V

essels

Perc

ent A

nchore

d

Anchored Active Fleet

8,0

8,5

9,0

9,5

10,0

10,5

12.1

1

03.1

2

06.1

2

09.1

2

12.1

2

03.1

3

06.1

3

09.1

3

12.1

3

03.1

4

06.1

4

© Wärtsilä 28

Solid financial

standing

© Wärtsilä 29

MEUR

Favourable development in operating cash flow

0

20

40

60

80

100

120

140

160

180

200

1-6/2013 1-6/2014

Review period development

MEUR

0

100

200

300

400

500

600

700

2010 2011 2012 2013

© Wärtsilä

118

235

465

313 2.6%

5.6%

9.8%

6.7%

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013

Working capital Total inventories Advances received Working capital / Net sales

MEUR

30

Focus on working capital development

508

339

10.9%*

7.1%*

0%

2%

4%

6%

8%

10%

12%

0

200

400

600

800

1000

1200

1400

1600

30.6.2013 30.6.2014

MEUR


* Working capital / 12 months rolling net sales

© Wärtsilä 31

Gearing remains low

0,00

0,10

0,20

0,30

0,40

0,50

30.6.2013 30.6.2014

-0,10

0,00

0,10

0,20

0,30

0,40

0,50

2010 2011 2012 2013


© Wärtsilä

• Power Plants: Power generation markets closely follow

the global macro-economic situation. Based on the

market challenges seen during the first half year and the

revised GDP forecasts for 2014, the overall market for

liquid and gas fuelled power generation is expected to

continue to be challenging.

• Ship Power: Offshore activity is anticipated to continue;

however a decline in the contracting of drilling units and

certain support vessels may be seen. The shipping

markets are expected to remain active, especially within

the gas carrier segment, although the contracting of

traditional merchant vessel orders is likely to decline.

• Services: The overall service market outlook remains

stable, with positive developments in selected regions.

32

Market outlook

NEW

PIC

© Wärtsilä

• Wärtsilä and China State Shipbuilding

Corporation (CSSC) have signed an agreement

to establish a joint venture, which will take over

Wärtsilä’s 2-stroke engine business

• CSSC will own 70% and Wärtsilä 30% of the

business

• Responsibility for servicing Wärtsilä’s 2-stroke

engines will remain with Wärtsilä Services

• The deal will have a positive effect on Wärtsilä’s

continuing operations

• The closing of the transaction is subject to the

required regulatory approvals, which are

expected in the first quarter of 2015.

• Going forward, the 2-stroke engine business will

be reported as discontinued operations

33

Wärtsilä and China State Shipbuilding Corporation to join

forces in 2-stroke engine joint venture

NEW

PIC

© Wärtsilä 34

Wärtsilä estimates its profitability

for 2014 to be around 11.5%, due to

the two-stroke business

transaction. Net sales are expected

to grow by around 5%.

Prospects for 2014 revised

IR Contact:

Natalia Valtasaari

Director, Investor Relations

Tel. +358 (0) 40 187 7809

E-mail: [email protected]

Presentations & Public Speaking

Result presentation Q2 2014