Wärtsilä’s Interim Report January–September 2022

Wärtsilä Corporation, Stock exchange release, 25 October 2022 at 8:30 AM EEST

Wärtsilä’s Interim Report January–September 2022

GOOD ORDER INTAKE – COST INFLATION AND BUSINESS MIX BURDENED PROFITABILITY

This release is a summary of Wärtsilä’s Interim Report January–September 2022. The complete report is attached to this release as a pdf file. It is also available on the company website at www.wartsila.com.

HIGHLIGHTS FROM JULY–SEPTEMBER 2022

• Order intake increased by 36% to EUR 1,616 million (1,186)
• Service order intake increased by 27% to EUR 732 million (578)
• Net sales increased by 30% to EUR 1,433 million (1,103), of which organic growth was 22%
• Book-to-bill amounted to 1.13 (1.07)
• Comparable operating result decreased by 6% to EUR 82 million (87), which represents 5.7% of net sales (7.9)
• Operating result decreased by 87% to EUR 10 million (75), which represents 0.7% of net sales (6.8). This includes EUR 75 million costs related to the ramp down of manufacturing in Trieste.
• Basic earnings per share decreased to 0.00 euro (0.08)
• Cash flow from operating activities increased to EUR 100 million (49)

HIGHLIGHTS FROM JANUARY–SEPTEMBER 2022

• Order intake increased by 24% to EUR 4,436 million (3,584)
• Service order intake increased by 22% to EUR 2,275 million (1,868)
• Order book at the end of the period increased by 17% to EUR 6,229 million (5,325)
• Net sales increased by 28% to EUR 4,072 million (3,181), of which organic growth was 23%
• Book-to-bill amounted to 1.09 (1.13)
• Comparable operating result increased by 17% to EUR 232 million (199), which represents 5.7% of net sales (6.3)
• Operating result decreased by EUR 232 million to EUR -62 million (170), which represents -1.5% of net sales (5.3). This includes EUR 200 million costs related to Wärtsilä’s exit from Russia and EUR 75 million costs related to the ramp down of manufacturing in Trieste.
• Basic earnings per share decreased to -0.16 euro (0.19)
• Cash flow from operating activities decreased to EUR -113 million (360)

WÄRTSILÄ'S PROSPECTS

Wärtsilä expects the demand environment in the fourth quarter to be weaker than that of the corresponding period in the previous year. Wärtsilä’s order intake in the comparison period, last quarter of 2021, was at an all-time high. For the full year 2022, the demand is expected to be slightly higher than in the previous year. The prevailing market conditions make the outlook uncertain.

HÅKAN AGNEVALL, PRESIDENT AND CEO: Orders continued to increase

“During the third quarter of 2022, uncertainty about economic development and geopolitical tensions continued. Intensifying cost inflation, prevailing disturbances in supply chains, tightening monetary policies, and challenging macro environment are creating turbulence within the global business environment. Despite the challenging market conditions, we were able to clearly grow our order intake.

The energy market remained volatile. Nevertheless, we again received important orders notably for thermal balancing and energy storage solutions. For example, we will deliver a total of 2 GWh of energy storage systems for one of the world’s largest solar-plus-storage project portfolios in California and Hawaii. One of the proof points on how we integrate renewables with our flexible engine technology is the order of ten Wärtsilä 34SG gas engines to a Japanese power plant, where they will replace a 100 MW combined cycle gas turbine. In Q3, 70% of thermal orders were related to balancing power. The service business in Energy also continued to perform very well, and we were awarded several upgrade projects and long-term service agreements.

Similarly in the marine markets, the service business remained on a good track. The active cruise fleet has been well over 90% on average during the quarter, the offshore fleet witnessed increasing utilisation and day rates, and the demand for LNG cargoes has exceeded the available supply. However, the demand for new ships has moderated during the year, as many shipyards are operating at close to full capacity, and prices have increased. Our position as a frontrunner in marine technology was demonstrated with an order to supply a propulsion package for the world’s largest aluminium catamaran. It will operate between Argentina and Uruguay with our dual-fuel engine technology.

Total order intake increased by 36% and service order intake by 27%. High utilisation of vessels and power plants continued to support the service business in both Marine Power and Energy. Our customers are also showing increasing interest in long-term agreements. The positive development of equipment orders was driven by demand for both energy and marine equipment. Net sales increased by 30%, driven by growth in all businesses, except Voyage. New equipment sales grew by 49%, while services grew by 13%. Our comparable operating result decreased by 6%, mainly due to cost inflation, a less favourable sales mix between equipment and services, higher storage volumes, and declined profitability of Voyage.

In October, we announced that we are taking the next step to further strengthen our marine end-to-end lifecycle offering by integrating the Voyage business into Marine Power as a business unit. During the last years Voyage has taken important steps to bring together the teams and competences from several Wärtsilä acquisitions in the marine digital space. During the same period, the Voyage business has been severely impacted by the pandemic and recently the closure of Wärtsilä’s operations in Russia. However, the turnaround of Voyage continues, and the intention is to accelerate these efforts through the outlined changes. By linking the unique digital expertise in Voyage with our well-established Performance Services, we take the next step in creating end-to-end digital solutions for maritime customers. With this offering we can further optimise marine operations for lower costs and reduced emissions. Customers can benefit from Wärtsilä’s unique set of capabilities, combining the optimisation of vessel operations with ports traffic management and performance-based services for port-to-port operations.

On the technology side, we introduced the new Wärtsilä 25 medium-speed 4-stroke engine, designed to accelerate and support the maritime sector’s efforts in achieving decarbonised operations. The engine is already capable of operating on diesel, LNG, or on either gas or liquid carbon-neutral biofuels. In the future it can easily be upgraded to operate with future carbon-free fuels as they become available. The Wärtsilä 25 engine is intended to be the first Wärtsilä engine to run on ammonia as a fuel.

We expect the demand environment in the fourth quarter to be weaker than that of the corresponding period in the previous year. This reflects the fact that order intake in the last quarter of 2021 was at an all-time high. For the full year 2022, the demand is expected to be slightly higher than in the previous year. The share of equipment sales relative to service sales will be higher in 2022 compared to 2021. Cost inflation is anticipated to remain high in the last quarter of 2022 and we continue to implement price realisation and continuous improvement to mitigate the impact of cost inflation. We are executing our strategy to make Wärtsilä a stronger and a better company. Order intake and sales are growing and we are making considerable progress in developing the solutions to shape the decarbonisation of marine and energy. We are moving up the service value ladder and increasing the performance-based service agreements. We are also simplifying our organisation and are addressing our cost structure. The decarbonisation journey will transform our industries and Wärtsilä is very well positioned to play a key role there.”

KEY FIGURES

*Comparable adjusted EBITA excludes items affecting comparability and purchase price allocation amortisation.

Wärtsilä’s financial information for the year 2021 has been adjusted to reflect a change in categorisation between equipment and services in Wärtsilä Marine Power and Wärtsilä Marine Systems. This restatement has no impact on the group’s total financial figures.

Wärtsilä presents certain alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definitions of these alternative performance measures are presented in the Calculations of financial ratios section.

ANALYST AND PRESS CONFERENCE

A virtual analyst and press conference will be held as a webinar today, Tuesday 25 October 2022, at 10:00 a.m. Finnish time (8:00 a.m. UK time).

If you only wish to view the stream, please register at: http://www.mediaserver.fi/live/wartsila.

If you plan to view the stream and ask questions in the Q&A session, please register at: https://register.gotowebinar.com/register/8815882458692762635.
 

Please register using only one of the links above, not both. Once you have registered, you will receive a confirmation email that includes specific joining instructions.

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A recording of the webcast will be available on the company website as soon as possible after the event.
 

For further information, please contact:

Arjen Berends
Executive Vice President & CFO
Tel. +358 10 709 5444
arjen.berends@wartsila.com

Hanna-Maria Heikkinen
Vice President, Investor Relations
Tel. +358 10 709 1461
hanna-maria.heikkinen@wartsila.com

For press information, please contact:

Atte Palomäki
Executive Vice President, Communications, Branding & Marketing
Tel: +358 10 709 5599
atte.palomaki@wartsila.com 

Wärtsilä in brief

Wärtsilä is a global leader in innovative technologies and lifecycle solutions for the marine and energy markets. We emphasise innovation in sustainable technology and services to help our customers continuously improve their environmental and economic performance. Our dedicated and passionate team of 17,000 professionals in more than 200 locations in 68 countries shape the decarbonisation transformation of our industries across the globe. In 2021, Wärtsilä’s net sales totalled EUR 4.8 billion. Wärtsilä is listed on Nasdaq Helsinki.

www.wartsila.com