2010-07-21 07:30:00 CEST
2010-07-21 07:31:44 CEST
REGULATED INFORMATION
Wärtsilä - Interim report (Q1 and Q3)
WÄRTSILÄ CORPORATION INTERIM REPORT JANUARY - JUNE 2010
Wärtsilä Corporation INTERIM REPORT 21 July 2010 at 8.30 local time
STRONG SECOND QUARTER - CLEAR SIGNS OF MARKET RECOVERY
SECOND QUARTER HIGHLIGHTS
- Order intake increased 42% to EUR 1,117 million (785)
- Net sales decreased by 15% to EUR 1,131 million (1,333)
- Operating result decreased to EUR 117 million (155), 10.4% of net sales (11.7)
- Earnings per share amounted to 0.86 euro (1.06)
HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-JUNE 2010
- Order intake EUR 1,998 million (1,743), an increase of 15%
- At the end of the period the order book totalled EUR 4,315 million (5,829),
-26%
- Net sales decreased to EUR 2,052 million (2,574), -20%
- Operating result decreased to EUR 211 million (286), 10.3% of net sales (11.1)
- Earnings per share amounted to 1.53 euro (1.94)
- Cash flow from operating activities EUR 270 million (-72)
All numbers above are shown excluding nonrecurring items. Wärtsilä recognised
EUR 12 million (6) of nonrecurring items related to restructuring measures
during the second quarter and EUR 56 million (6) of nonrecurring items during
the review period January-June 2010.
OLE JOHANSSON, PRESIDENT AND CEO:"The second quarter of 2010 was strong for Wärtsilä in terms of ordering
activity and it confirms clear signs of improvement in our operating
environment. The recovery in the global economy is reflected in the contracting
activity of the shipping industry where activity has clearly picked up during
this year. The Power Plant markets have continued to be active and we closed
several large contracts during the period. With the Services markets continuing
to be stable, and following through restructuring measures to improve our
efficiency and competitiveness globally, we reiterate our prospects for 2010."
WÄRTSILÄ'S PROSPECTS FOR 2010 REITERATED
Based on the current order book, a stable service business and proper adaptation
of capacity we expect net sales to decline by 10-20 percent in 2010 and our
operational profitability (EBIT% before nonrecurring items) to be between
9-10%, well within the upper end of our long-term target range.
ANALYST AND PRESS CONFERENCE AT 10.45 AM FINNISH TIME
An analyst and press conference will be held today, Wednesday 21 July 2010, at
10.45 a.m. Finnish time (8.45 a.m. UK time), at the Wärtsilä headquarters in
Helsinki, Finland. The conference will be combined with a web- and
teleconference which will be held in English and can be viewed on the internet
at the following address:
http://storm.zoomvisionmamato.com/player/wartsila/objects/bw0j5r2z/
To participate in the teleconference please call: +44 (0)207 1620 177 and enter
the Conference ID: 870359. If you want to ask questions during the
teleconference, press the number 1 on your phone to register for a question and
the # -key to withdraw a question. The event title for the call is: Results Q2
2010. Please be ready to state your details and the name of the conference to
the operator. If problems occur, please press the *-button followed by the
0-button. We would recommend that you would register for the conference in
advance at the address:
https://eventreg2.conferencing.com/webportal3/reg.html?Acc=158744&Conf=202013
An on-demand version of the webcast will be available on the company website
later the same day.
For further information, please contact:
Raimo Lind
Executive Vice President & CFO
Tel: +358 10 7095640
raimo.lind@wartsila.com
Joséphine Mickwitz
Director, Investor Relations
Tel: +358 400784889
josephine.mickwitz@wartsila.com
For press information, please contact:
Atte Palomäki
Group Vice President, Communications & Branding
Tel: +358 40 547 6390
atte.palomaki@wartsila.com
Wärtsilä in brief
Wärtsilä is a global leader in complete lifecycle power solutions for the marine
and energy markets. By emphasising technological innovation and total
efficiency, Wärtsilä maximises the environmental and economic performance of the
vessels and power plants of its customers. In 2009, Wärtsilä's net sales
totalled EUR 5.3 billion with more than 18,000 employees. The company has
operations in 160 locations in 70 countries around the world. Wärtsilä is listed
on the NASDAQ OMX Helsinki, Finland.
WÄRTSILÄ CORPORATION INTERIM REPORT JANUARY - JUNE 2010
SECOND QUARTER 4-6/2010 IN BRIEF
MEUR 4-6/2010 4-6/2009 Change
Order intake 1 117 785 42%
Net sales 1 131 1 333 -15%
Operating result 117 155 -25%
% of net sales 10.4% 11.7%
Profit before taxes 109 141
Earnings/share, EUR 0.86 1.06
REVIEW PERIOD JANUARY - JUNE 2010 IN BRIEF
MEUR 1-6/2010 1-6/2009 Change 2009
Order intake 1 998 1 743 15% 3 291
Order book 30 June 4 315*) 5 829 -26% 4 491
Net sales 2 052 2 574 -20% 5 260
Operating result 211 286 -26% 638
% of net sales 10.3% 11.1% 12.1%
Profit before taxes 158 263 558
Earnings/share, EUR 1.53 1.94 4.30
Cash flow from operating activities 270 -72 349
Interest-bearing net debt
at the end of the period 328 759 414
Gross capital expenditure 36 72 152
*) Cancellations amounting to EUR 162 million have been eliminated from the
order book during the period January-June 2010.
All numbers in the tables above are shown excluding nonrecurring items. Wärtsilä
recognised EUR 12 million (6) of nonrecurring items related to restructuring
measures during the second quarter and EUR 56 million (6) of nonrecurring items
during the review period January-June 2010.
OPERATING ENVIRONMENT AND DEMAND DEVELOPMENT
SHIP POWER
Markets are recovering
During the second quarter, new vessel ordering activity continued to recover
with approximately 100 vessels being ordered per month. This is a clear
improvement compared to 2009 when only some 400 vessels were ordered during the
whole year. Contracting activity has been especially strong in the bulk carrier
segment with competitive new building prices, improved financing availability,
and healthier earnings levels making investments attractive. Last years'
renegotiations and cancellations of vessel orders have left the current vessel
orderbooks at levels where the imbalance between fleet capacity and demand will
be less than earlier expected.
Activity in the offshore segment has continued strong and recovery in the more
specialised tonnage continues.
Ship Power market shares
Wärtsilä's share of the medium speed main engine market increased from 35% (at
the end of the previous quarter) to 37%. The market share in low speed engines
increased to 15% (11). In the auxiliary engine market Wärtsilä's share remained
at 1% (1). Due to the very low contracting volumes, market shares are still very
sensitive to individual orders.
POWER PLANTS
The Power Plants markets remain solid
The Power Plants market activity continued to be at a good level during the
second quarter of 2010 and several large contracts were closed. The large
projects were mainly flexible power generation plants for utilities and IPP's.
Orders for small industrial captive power plants started to pick up, with the
main orders coming from the textile and cement industries.
SERVICES
Steady service market focusing on savings
In the marine industry, activity is slowly recovering in the major hubs as well
as in the merchant market as vessels are returning to normal operations.
Nevertheless, the pressure to reduce maintenance costs through postponing
overhauls and focusing only on essential repairs remains. The power plant
service market is active and there is an increased interest in efficiency
improvements and the outsourcing of plant operations and management. During the
second quarter, market activity was very strong in the Americas, especially in
Brazil. Demand in Europe showed signs of a pick-up in a challenging market.
ORDER INTAKE
Good growth in order intake
Wärtsilä's order intake for the second quarter totalled EUR 1,117 million (785)
an increase of 42%.
Ordering activity for Ship Power showed clear signs of a pick-up and the order
intake totalled EUR 213 million (67), 215% above the corresponding period last
year. During the quarter, Wärtsilä Ship Power signed a major contract with the
Brazilian industrial group QUIP to supply a total integrated power solution for
a new FPSO (Floating Production Supply and Offloading) vessel. The vessel is
unique in that it will be the first FPSO vessel ever to operate on more than
100 MWe of installed power, produced by gas engines. During the quarter Wärtsilä
Ship Power registered 14% of its orders in the Merchant segment and 57% in the
Offshore segment. Orders from the Navy segment represented 6%, Cruise&Ferry
segment 8%, the Special vessels segment 11% and Ship design 3% of Ship Power's
total order intake. Compared to the first quarter 2010 order intake grew by
136% (EUR 90 million during the first quarter of 2010). For the review period
January-June 2010 Ship Power's order intake was EUR 303 million (194), an
increase of 56% from the corresponding period last year.
The order intake for Power Plants for the second quarter totalled EUR 437
million (257), which was 70% higher than for the corresponding period last year.
During the second quarter, the largest power plant orders were received from
Brazil, the Caribbean and from Bangladesh. Compared to the previous quarter, the
order intake for Power Plants increased by 64% (EUR 267 million in the first
quarter of 2010). The order intake for the review period January-June 2010 was
EUR 704 million (577), which is 22% higher than in 2009.
Order intake for the Services business totalled EUR 465 million (458) in the
second quarter, a growth of 2% compared to the corresponding period 2009. During
the second quarter Wärtsilä Services signed several important Operations &
Management contracts in Brazil and several conversion contracts in Europe.
Compared to the first quarter, order intake fell 11% (EUR 522 million in the
first quarter of 2010). Services' order intake for the review period
January-June totalled EUR 988 million (965), an increase of 2% over the
corresponding period in 2009.
For the review period January-June 2010 Wärtsilä's total order intake amounted
to EUR 1,998 million (1,743), which represents an increase of 15% compared to
the corresponding period 2009.
ORDER BOOK
At the end of the review period Wärtsilä's total order book stood at EUR 4,315
million (5,829), a decrease of 26%. The Ship Power order book stood at EUR
2,157 million (3,602), -40%. During the review period January-June 2010,
cancellations of EUR 162 million materialised and were deducted from the order
book. As the remaining orders at risk have reached the levels of normal business
and as some of the recent cancellations were renegotiated and converted to new
orders, Wärtsilä will cease reporting the risk and the actual cancellations. At
the end of the review period, the Power Plants order book amounted to EUR 1,438
million (1,705), which is 16% lower than at the corresponding date last year.
The Services order book totalled EUR 720 million (522) at the end of the review
period, an increase of 38%.
Second quarter order intake by business
MEUR 4-6/2010 4-6/2009 Change
Ship Power 213 67 215%
Power Plants 437 257 70%
Services 465 458 2%
Order intake, total 1 117 785 42%
Order intake Power Plants
MW 4-6/2010 4-6/2009 Change
Oil 1 021 426 140%
Gas 14 51 -72%
Renewable fuels 0 0
Order intake for the review period by business
MEUR 1-6/2010 1-6/2009 Change 1-12/2009
Ship Power 303 194 56% 317
Power Plants 704 577 22% 1 048
Services 988 965 2% 1 917
Order intake, total 1 998 1 743 15% 3 291
Order intake Power Plants
MW 1-6/2010 1-6/2009 Change 1-12/2009
Oil 1 100 770 43% 1 172
Gas 374 294 27% 800
Renewable fuels 19 0 35
Order book by business
MEUR 30 June 2010 30 June 2009 Change 31 Dec. 2009
Ship Power 2 157 3 602 -40% 2 553
Power Plants 1 438 1 705 -16% 1 362
Services 720 522 38% 576
Order book, total 4 315*) 5 829 -26% 4 491
*) Cancellations amounting to EUR 162 million have been eliminated from the
order book during the review period January-June 2010.
NET SALES
As expected, Wärtsilä's net sales for the second quarter decreased by 15% to EUR
1,131 million (1,333) compared to the corresponding period last year. Net sales
for Ship Power totalled EUR 276 million (479), a decrease of 42%. Power Plants'
net sales for the second quarter totalled 390 million (379), which is 3% higher
than in the corresponding quarter last year. The second quarter net sales for
Services amounted to EUR 463 million (469), a decrease of 1%.
Wärtsilä's net sales for January-June 2010 fell by 20% and totalled EUR 2,052
million (2,574). Ship Power's net sales decreased by 35% and totalled EUR 554
million (852). Net sales for Power Plants totalled EUR 627 million (810), a
decrease of 23%. Net sales from the Services business decreased 3% from last
year's strong level and amounted to EUR 872 million (902). Ship Power accounted
for 27%, Power Plants for 31% and Services for 42% of the total net sales.
Of Wärtsilä's net sales for January-June 2010 approximately 70% was EUR
denominated, 11% USD denominated with the remainder being split between several
currencies.
Second quarter net sales by business
MEUR 4-6/2010 4-6/2009 Change
Ship Power 276 479 -42%
Power Plants 390 379 3%
Services 463 469 -1%
Net sales, total 1 131 1 333 -15%
Net sales for the review period by business
MEUR 1-6/2010 1-6/2009 Change 1-12/2009
Ship Power 554 852 -35% 1 767
Power Plants 627 810 -23% 1 645
Services 872 902 -3% 1 830
Net sales, total 2 052 2 574 -20% 5 260
FINANCIAL RESULTS
The second quarter operating result before nonrecurring expenses was EUR 117
million (155), 10.4% of net sales (11.7). For the review period January-June
2010, the operating result before nonrecurring expenses was EUR 211 million
(286), which is 10.3% of net sales (11.1). Including nonrecurring expenses, the
operating result decreased to EUR 155 million or 7.5% of net sales. Wärtsilä
recognised EUR 56 million of nonrecurring expenses related to the restructuring
measures during the first part of the year.
Financial items amounted to EUR 3 million (-16). Net interest totalled EUR -5
million (-10). Dividends received totalled EUR 7 million (5). The deviation in
other financial items is mainly due to gains from exchange rates, which were
negative in the corresponding period of 2009. Profit before taxes amounted to
EUR 158 million (263). Taxes in the reporting period amounted to EUR -45 million
(-73). Earnings per share were 1.10 euro (1.90) and equity per share was 14.75
euro (12.68).
BALANCE SHEET, FINANCING AND CASH FLOW
Wärtsilä's cash flow from operating activities developed favourably amounting to
EUR 270 million (-72) in January-June 2010. Net working capital at the end of
the period totalled EUR 314 million (591). Advances received at the end of the
period totalled EUR 860 million (1,143). Liquid reserves at the end of the
period amounted to EUR 331 million (118).
Wärtsilä had interest bearing loans totalling EUR 678 million at the end of June
2010. The existing funding programmes include long-term loans of EUR 599
million, unutilised Committed Revolving Credit Facilities totalling
EUR 555 million, and Finnish Commercial Paper programmes totalling EUR 700
million. The total amount of short-term debt maturing within the next 12 months
is EUR 79 million.
The solvency ratio was 38.1% (32.7) and gearing was 0.24 (0.61).
HOLDINGS
Wärtsilä owns 7,270,350 B shares in Assa Abloy, or 2.0% of the total. This
holding has been booked in the balance sheet at its market value at the end of
the reporting period, EUR 120 million.
CAPITAL EXPENDITURE
Gross capital expenditure in the review period totalled EUR 36 million (72),
which comprised EUR 4 million (15) in acquisitions and investments in
securities, and EUR 32 million (58) in production and information technology
investments. Depreciation amounted to EUR 58 million (61).
Maintenance capital expenditure for 2010 will be below depreciation. Wärtsilä
continues to pursue its strategy to expand the Services offering and network,
and any acquisition opportunities in this market may affect total capital
expenditure for the year.
STRATEGIC STEPS, ACQUISITIONS AND EXPANSION OF NETWORK
In May, Wärtsilä signed a joint venture agreement with the Russian company
Transmashholding (TMH) to manufacture modern and multipurpose diesel engines in
Russia. The engines, including a new and technically advanced version of the
Wärtsilä 20-engine, will be used in shunter locomotives and for various marine
and power applications. The two companies will jointly engineer the railway
application. Wärtsilä and TMH will also evaluate broadening the activities of
the joint venture to include the development and manufacturing of other diesel
engine models in the future. The value of Wärtsilä's investment in the joint
venture is approximately EUR 30 million and production of the engines is planned
to start in 2012. The closing of the agreement is subject to the relevant
regulatory approvals, which are expected during the coming months.
During the review period, Wärtsilä continued expanding its service network with
the inauguration of a new office and workshop facility in Panama.
RESTRUCTURING PROGRAMMES
In January, Wärtsilä announced plans to adjust its manufacturing footprint to
the fundamental changes in the market. Wärtsilä plans to eliminate approximately
1,400 jobs globally as part of this programme during 2010.
Wärtsilä plans to move the majority of its propeller production and W20
generating set production to China, close to the main marine markets. The
current propeller manufacturing in Drunen, and the component manufacturing DTS
in Zwolle, both in The Netherlands, will be closed. Adjusting the entire
organisation to current market developments means that 570 jobs are to be
reduced in the Netherlands from a total of 1,500. During the second quarter, the
consultation process was concluded and the closure of Drunen and DTS are
entering the implementation stage. The entire production restructuring programme
in the Netherlands will be finalised by the end of 2010. The Wärtsilä 20
generating set production in Vaasa Finland has been moved to China in order to
stay competitive in this market.
Various restructuring measures in other locations have been carried out during
the spring. Temporary lay-offs are currently underway in Finland and Norway. In
France, Wärtsilä plans to close the Mulhouse workshop and reduce the workforce
by 116 jobs. In addition to these, other readjustment programmes are also
ongoing in a number of countries around the world.
With these restructuring measures, Wärtsilä is looking for annual cost savings
of approximately EUR 80-90 million. The effect of the savings will start to
materialise gradually during 2010, and will take full effect in the first half
of 2011. The total nonrecurring costs related to the restructuring will be
approximately EUR 140 million, out of which EUR 40 million non-cash write-offs
were recognised in 2009 and EUR 100 million will be recognised in 2010. During
the review period January-June, EUR 56 million was recognised.
The programme to evaluate all Wärtsilä's global staff functions with the aim of
streamlining processes, decreasing overlaps, and improving the cost efficiency
of Wärtsilä's operations is proceeding according to plan.
The adjustment programme announced in May 2009 to reduce 400-450 jobs in Ship
Power is proceeding according to plan and the majority of the savings have
materialised. The annual savings of EUR 30 million will take full effect by the
end of 2010.
PERSONNEL
Wärtsilä had 17,905 (19,016) employees at the end of June 2010. On average
personnel for January-June 2010 totalled 18,295 (18,910). Ship Power employed
1,010 (1,321) people. The number of personnel in Ship Power has decreased as a
result of the restructuring measures initiated in May 2009. Power Plants
employed 851 (839) people, Services 11,318 (11,316) and manufacturing and R&D
(Wärtsilä Industrial Operations) 4,328 (5,098) people.
Of Wärtsilä's total number of employees, 18% (19) were located in Finland, 8%
(9) in the Netherlands and 31% (32) in the rest of Europe. Personnel employed in
Asia represented 30% (29), out of which 6% (7) were in China, in India 6% (6),
in Singapore 5% (6), and in the rest of the Asia 12% (11).
RESEARCH & DEVELOPMENT
During the second quarter, Wärtsilä's WFC20 fuel cell unit was installed onboard" the Udine", a car carrier owned by Swedish Wallenius Lines and managed by
Wallenius Marine. This unique power unit is the first of its kind in the world,
and during the test period will provide the vessel with auxiliary power while
producing close to zero emissions.
SUSTAINABLE DEVELOPMENT
Wärtsilä is well positioned to reduce the use of natural resources and
emissions, thanks to its various technologies and specialised services. Wärtsilä
continues to focus on the development of advanced environmental technologies.
During the second quarter Wärtsilä started a joint project, the aim of which is
to develop an innovative compact selective catalytic reduction (SCR) system
especially tailored to operation with 2-stage turbocharging. Wärtsilä also
joined, as a first associated partner, in the World Bank-led Global Gas Flaring
Reduction (GGFR) organisation, which strives to reduce the flaring or burning of
natural gas associated with oil production and thus reduce greenhouse gas
emissions.
During the second quarter Wärtsilä in co-operation with the Baltic Sea Action
Group (BSAG) arranged an environmental conference to seek shipping solutions
that can benefit the seriously polluted Baltic Sea.
SHARES AND SHAREHOLDERS
SHARES ON HELSINKI EXCHANGES
30 June 2010 Number of Number of Number of shares traded
shares votes 1-6/2010
--------------------------------------------------------------------------------
WRT1V 98 620 565 98 620 565 58 139 484
1 Jan. -30 June 2010 High Low Average 1) Close
--------------------------------------------------------------------------------
Share price 39.99 28.19 35.09 37.47
1) Trade-weighted average price
30 June 2010 30 June 2009
----------------------------------------------------------------------
Market capitalisation, EUR 3 695 2 262
million
Foreign shareholders 48.2% 46.1%
DECISIONS TAKEN BY THE ANNUAL GENERAL MEETING
Wärtsilä's Annual General Meeting held on 4 March 2010 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 2009. The
Meeting approved the Board of Directors' proposal to pay a dividend of 1.75 euro
per share. The dividend was paid on 16 March 2010.
The Annual General Meeting decided to change the eighth article of the Articles
of Association so that the publication of the notice for the general meeting
will be no later than three weeks, but at least nine (9) days before the record
date of the general meeting. The change is due to a change in the Finnish
Limited Liability Companies Act.
The Annual General Meeting decided to change the fourth article of the Articles
of Association so that the maximum number of members of the Board of Directors
was increased to ten, and that the Board of Directors consists of 5-10 members.
The Annual General Meeting decided that the Board of Directors shall have nine
members. The following were elected to the Board: Ms Maarit Aarni-Sirviö, Mr
Kaj-Gustaf Bergh, Mr Alexander Ehrnrooth, Mr Paul Ehrnrooth, Mr Ole Johansson,
Mr Antti Lagerroos, Mr Bertel Langenskiöld, Mr Mikael Lilius and Mr Matti
Vuoria.
The firm of public auditors KPMG Oy Ab was appointed as the company's auditors.
The Annual General Meeting authorised the Board to resolve on donations of EUR
1,500,000 at the maximum to be made to universities during 2010. The primary
recipient of the donations is Aalto University.
Organisation of the Board of Directors
The Board of Directors of Wärtsilä Corporation elected Antti Lagerroos as its
chairman and Matti Vuoria as the deputy chairman. The Board decided to establish
an Audit Committee, a Nomination Committee and a Compensation Committee. The
Board appointed from among its members the following members to the Committees:
Audit Committee:
Chairman Antti Lagerroos, Maarit Aarni-Sirviö, Alexander Ehrnrooth, Bertel
Langenskiöld
Nomination Committee:
Chairman Antti Lagerroos, Kaj-Gustaf Bergh, Paul Ehrnrooth, Matti Vuoria
Compensation Committee:
Chairman Antti Lagerroos, Bertel Langenskiöld, Mikael Lilius, Matti Vuoria
RISKS AND BUSINESS UNCERTAINTIES
Wärtsilä expects that its business environment will continue to improve in
2010. If the recovery in the global economy is interrupted by a new downturn, it
might affect new projects under negotiation.
Although the risks have decreased substantially, the main risks within Ship
Power remain the slippage of shipyard delivery schedules, as well as the risk of
cancellation of existing orders.
In the Power Plant business, the consequences from the financial crisis can
still be seen in the timing of bigger projects.
In Services, the biggest risk continues to be the uncertainty in the marine
markets.
The annual report for 2009 contains a thorough description of Wärtsilä's risks
and risk management.
MARKET OUTLOOK
In the marine industry, attractive new building prices, healthy earnings levels,
and a more balanced vessel orderbook have led to a pick-up in market activity in
all main vessel segments and this development is expected to continue throughout
the year. For Wärtsilä, the most interesting developments are in specialised
tonnage and in the offshore area.
Even though markets have bottomed out, the prevailing conditions will maintain
ordering volumes at lower levels than during the previous peak years.
Competition and price pressure among shipbuilding suppliers will remain intense.
Wärtsilä expects Ship Power's order intake to clearly improve compared to 2009.
The power generation market recovery is expected to continue in 2010. The
recovery will happen at a varying pace in different regions and countries. The
emerging markets are anticipated to be in the forefront of the recovery and the
Flexible baseload and Grid stability & peaking segments are expected to pick-up
first. Western Europe and the USA are not expected to recover during 2010.
Wärtsilä estimates its Power Plants' order intake to improve in 2010.
Uncertainty will continue in 2010 with regards to larger service projects, as
many customers are still adapting to the consequences of the economic crisis.
Services development is expected to remain steady. Though the size of the active
fleet remains stable, the scrapping of older tonnage and its replacement with
new tonnage, which is still under warranty and has lower maintenance needs, may
impact Services. Power plant installations continue to be run at high operating
levels. Environmental compliance and economic considerations have been the main
drivers of this business, and will remain so in the foreseeable future. Wärtsilä
is continuously developing its portfolio in these areas. Customers are
increasingly looking for remote management and optimisation of their assets, as
this allows them to simultaneously reduce both their costs and environmental
footprint. Wärtsilä also sees an increased interest in maintenance partnerships,
which reduce the fixed costs for our marine, offshore and power plant customers.
WÄRTSILÄ'S PROSPECTS FOR 2010 REITERATED
Based on the current order book, a stable service business and proper adaptation
of capacity we expect net sales to decline by 10-20 percent in 2010 and our
operational profitability (EBIT% before nonrecurring items) to be between
9-10%, well within the upper end of our long-term target range.
WÄRTSILÄ INTERIM REPORT JANUARY - JUNE 2010
This interim financial report is prepared in accordance with IAS 34 (Interim
Financial Reporting) using the same accounting policies and methods of
computation as in the annual financial statements for 2009. All figures in the
accounts have been rounded and consequently the sum of individual figures can
deviate from the presented sum figure.
Use of estimates
The preparation of the financial statements in accordance with IFRS requires
management to make estimates and assumptions that affect the valuation of the
reported assets and liabilities and other information, such as contingent
liabilities and the recognition of income and expenses in the income statement.
Although the estimates are based on the management's best knowledge of current
events and actions, actual results may differ from the estimates.
Of the amended International Financial Reporting Standards (IFRS) and
interpretations mandatory as of 1 January 2010 the following are applicable on
the Group reporting:
* Revised IFRS 3 Business Combinations
* Amendment to IAS 27 Consolidated and Separate Financial Statements
* Amendment to IAS 39 Financial Instruments: Recognition and Measurement:
Eligible Hedged Items
* IFRIC 18 Transfers of Assets from Customers
- Amendments to IFRIC 9 Reassessment of Embedded Derivatives and IAS 39
Financial Instruments: Recognition and Measurement - Embedded Derivatives
The adaption of the revised standards and interpretations does not have any
material effect on the interim report.
This interim report is unaudited.
CONDENSED INCOME STATEMENT
MEUR 1-6/2010 1-6/2009 2009
--------------------------------------------------------------------------------
Net sales 2 052 2 574 5 260
Other income 18 19 50
Expenses -1 859 -2 254 -4 559
Depreciation and impairment -58 -61 -165
Share of profit of associates and joint ventures 1 2 6
Operating result 155 280 592
Financial income and expenses 3 -16 -34
Profit before taxes 158 263 558
Income taxes -45 -73 -161
--------------------------------------------------------------------------------
Profit for the financial period 114 190 396
--------------------------------------------------------------------------------
Attributable to:
Owners of the parent 109 187 389
Non-controlling interest 5 3 8
--------------------------------------------------------------------------------
Total 114 190 396
--------------------------------------------------------------------------------
Earnings per share attributable to equity holders of the parent company:
--------------------------------------------------------------------------------
Earnings per share, EUR (basic and diluted) 1.10 1.90 3.94
--------------------------------------------------------------------------------
STATEMENT OF COMPREHENSIVE INCOME
Profit for the financial period 114 190 396
Other comprehensive income after tax:
Exchange differences on translating foreign
operations 22 5 18
Investments available for sale 17 10 34
Cash flow hedges -14 12 20
Share of other comprehensive income of associates and joint ventures 1
--------------------------------------------------------------------------------
Other comprehensive income for the period 24 28 73
--------------------------------------------------------------------------------
Total comprehensive income for the period 138 219 469
--------------------------------------------------------------------------------
Total comprehensive income attributable to:
Owners of the parent 131 214 460
Non-controlling interest 7 5 9
--------------------------------------------------------------------------------
138 219 469
CONDENSED BALANCE SHEET
MEUR 30 June 2010 30 June 2009 31 Dec. 2009
--------------------------------------------------------------------------------
Non-current assets
Intangible assets 787 801 779
Property, plant and equipment 461 462 457
Equity in associates and joint ventures 62 48 56
Investments available for sale 179 118 151
Deferred tax receivables 95 80 88
Other receivables 30 25 15
--------------------------------------------------------------------------------
1 614 1 536 1 548
Current assets
Inventories 1 590 1 823 1 577
Other receivables 1 202 1 522 1 287
Cash and cash equivalents 331 118 244
--------------------------------------------------------------------------------
3 122 3 463 3 108
--------------------------------------------------------------------------------
Assets 4 737 4 998 4 655
--------------------------------------------------------------------------------
Shareholders' equity
Share capital 336 336 336
Other shareholders' equity 1 118 915 1 160
--------------------------------------------------------------------------------
Total equity attributable to equity
holders of the parent 1 454 1 251 1 496
Minority interest 21 12 16
--------------------------------------------------------------------------------
Total shareholders' equity 1 476 1 262 1 512
Non-current liabilities
Interest-bearing debt 599 682 591
Deferred tax liabilities 95 86 93
Other liabilities 211 281 258
--------------------------------------------------------------------------------
905 1 049 941
Current liabilities
Interest-bearing debt 79 208 73
Other liabilities 2 277 2 479 2 129
--------------------------------------------------------------------------------
2 356 2 687 2 202
Total liabilities 3 261 3 736 3 143
--------------------------------------------------------------------------------
Shareholders' equity and liabilities 4 737 4 998 4 655
--------------------------------------------------------------------------------
CONDENSED CASH FLOW STATEMENT
MEUR 1-6/2010 1-6/2009 2009
--------------------------------------------------------------------------------
Cash flow from operating activities:
Profit before taxes 158 263 558
Depreciation and impairment 58 61 165
Financial income and expenses -3 16 34
Selling profit and loss of fixed assets and other
adjustments 4 -6 -7
Share of profit of associates and joint ventures -1 -2 -6
Changes in working capital 238 -305 -179
--------------------------------------------------------------------------------
Cash flow from operating activities before financial
items and taxes 453 28 564
Net financial items and income taxes -184 -100 -215
--------------------------------------------------------------------------------
Cash flow from operating activities 270 -72 349
--------------------------------------------------------------------------------
Cash flow from investing activities:
Investments in shares and acquisitions -4 -15 -16
Net investments in tangible and intangible assets -31 -58 -133
Proceeds from sale of shares -20 -21
Cash flow from other investing activities 10 3 7
--------------------------------------------------------------------------------
Cash flow from investing activities -25 -90 -163
--------------------------------------------------------------------------------
Cash flow from financing activities:
New long-term loans 26 239 263
Amortization and other changes in long-term loans -27 -106
Changes in short term loans and other financing
activities 6 -2 -141
Dividends paid -175 -156 -156
--------------------------------------------------------------------------------
Cash flow from financing activities -171 81 -140
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and cash equivalents, increase (+) /
decrease (-) 74 -80 47
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 244 197 197
Exchange rate changes 12 1
Cash and cash equivalents at end of period 331 118 244
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY
Total equity attributable to equity holders of
MEUR the parent Minority Total
interest equity
--------------------------------------------------------------------------------
Fair
Share value
Share issue Translation and other Retained
capital premium differences reserves earnings
--------------------------------------------------------------------------------
Shareholders'
equity on 1
January 2010 336 61 -6 99 1 006 16 1 512
Dividends -173 -2 -175
Total
comprehensive
income for the
period 19 3 109 7 138
--------------------------------------------------------------------------------
Shareholders'
equity on 30
June 2010 336 61 13 102 942 21 1 476
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders'
equity on 1
January 2009 336 61 -27 50 764 15 1 199
Dividends -148 -8 -156
Total
comprehensive
income for the
period 9 18 187 5 219
--------------------------------------------------------------------------------
Shareholders'
equity on 30
June 2009 336 61 -18 68 803 12 1 262
--------------------------------------------------------------------------------
Geographical distribution of net sales Europe Asia Americas Other Group
MEUR
-----------------------------------------------------------------------
Net sales 1-6/2010 578 739 473 262 2 052
Net sales 1-6/2009 792 947 537 298 2 574
-----------------------------------------------------------------------
INTANGIBLE ASSETS AND PROPERTY, PLANT & EQUIPMENT
MEUR 1-6/2010 1-6/2009 2009
-------------------------------------------------------------------
Intangible assets
Book value at 1 January 779 793 793
Changes in exchange rates 21 14 26
Acquisitions 12 12
Additions 7 8 24
Depreciation and impairment -21 -29 -62
Disposals and intra-balance sheet transfer 2 -14
-------------------------------------------------------------------
Book value at end of period 787 801 779
-------------------------------------------------------------------
Property, plant and equipment
Book value at 1 January 457 446 446
Changes in exchange rates 18 1 3
Acquisitions 1 1
Additions 25 49 112
Companies sold -32
Depreciation and impairment -37 -103
Disposals and intra-balance sheet transfer -2 -3 -2
-------------------------------------------------------------------
Book value at end of period 461 462 457
-------------------------------------------------------------------
GROSS CAPITAL EXPENDITURE
MEUR 1-6/2010 1-6/2009 2009
----------------------------------------------------------------------------
Investments in securities and acquisitions 4 15 16
Intangible assets and property, plant and equipment 32 58 136
----------------------------------------------------------------------------
Group 36 72 152
----------------------------------------------------------------------------
Wärtsilä centralises warehousing and logistics of spare parts by investing in a
new distribution centre in the Netherlands. The investments to the new
distribution centre amounted to EUR 8 million during the review period and
commitments related to the investment were EUR 27 million at the end of the
review period.
INTEREST-BEARING LOAN CAPITAL
MEUR 30 June 2010 30 June 2009 31 Dec. 2009
--------------------------------------------------------------------
Long-term liabilities 599 682 591
Current liabilities 79 208 73
Loan receivables -20 -14 -6
Cash and bank balances -331 -118 -244
--------------------------------------------------------------------
Net 328 759 414
--------------------------------------------------------------------
FINANCIAL RATIOS 1-6/2010 1-6/2009 2009
---------------------------------------------------------------------
Earnings per share, EUR (basic and diluted) 1.10 1.90 3.94
Equity per share, EUR 14.75 12.68 15.17
Solvency ratio, % 38.1 32.7 40.0
Gearing 0.24 0.61 0.28
---------------------------------------------------------------------
PERSONNEL
1-6/2010 1-6/2009 2009
-------------------------------------------
On average 18 295 18 910 18 830
At end of period 17 905 19 016 18 541
-------------------------------------------
CONTINGENT LIABILITIES
MEUR 30 June 2010 30 June 2009 31 Dec. 2009
----------------------------------------------------------------------------
Mortgages 56 56 56
Chattel mortgages 18 10 10
----------------------------------------------------------------------------
Total 74 66 66
----------------------------------------------------------------------------
Guarantees and contingent liabilities
on behalf of Group companies 681 647 678
on behalf of associated companies 9 8
Nominal amount of rents according
to leasing contracts 79 67 77
----------------------------------------------------------------------------
Total 770 714 763
----------------------------------------------------------------------------
NOMINAL VALUES OF DERIVATIVE INSTRUMENTS
MEUR Total amount of which closed
---------------------------------------------------------------
Interest rate swaps 20
Foreign exchange forward contracts 1 422 429
Currency options, purchased 40 7
Currency options, written 7 7
---------------------------------------------------------------
CONDENSED INCOME STATEMENT,
QUARTERLY
MEUR 4-6/2010 1-3/2010 10-12/2009 7-9/2009 4-6/2009 1-3/2009
--------------------------------------------------------------------------------
Net sales 1 131 922 1 519 1 167 1 333 1 241
Other income 11 7 11 20 13 5
Expenses -1 007 -851 -1 280 -1 026 -1 167 -1 087
Depreciation and
impairment -28 -30 -73 -31 -30 -30
Share of profit of
associates and joint
ventures 2 1 3 1 1
Operating result 105 49 179 133 149 130
Financial income and
expenses 4 -9 -9 -9 -7
Profit before taxes 109 49 170 125 141 123
Income taxes -31 -14 -51 -38 -39 -34
--------------------------------------------------------------------------------
Profit for the
financial period 79 35 119 87 102 89
--------------------------------------------------------------------------------
Attributable to:
Owners of the parent 76 32 115 86 100 87
Non-controlling
interest 3 2 4 1 2 1
--------------------------------------------------------------------------------
Total 79 35 119 87 102 89
--------------------------------------------------------------------------------
Earnings per share attributable to equity
holders of the parent company:
--------------------------------------------------------------------------------
Earnings per share,
EUR 0.77 0.33 1.17 0.87 1.01 0.89
--------------------------------------------------------------------------------
CALCULATION OF FINANCIAL RATIOS
Earnings per share (EPS)
Profit for the period attributable to equity holders of the parent
company
-------------------------------------------------------------------------
Adjusted number of shares over the
period
Equity per share
Equity attributable to equity holders of the parent company
-------------------------------------------------------------------------
Adjusted number of shares at the end of the period
Solvency ratio
Shareholders' equity
-------------------------------------------------------------------------x 100
Balance sheet total - advances received
Gearing
Interest-bearing liabilities - cash and bank balances
-------------------------------------------------------------------------
Shareholders' equity
20 July 2010
Wärtsilä Corporation
Board of Directors
[HUG#1433061]
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