Wärtsilä CEO Eskola
President and CEO, Jaako Eskola (Photo: Wärtsilä)
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The Finnish company has reporteddecline in[ds_preview] operating profits from 612 to 583 mill. € for the period of January to December 2015. While Wärtsilä is performing well in the energy sector, some marine markets continue to be slow.

In the fourth quarter of 2016 the order intake declined 6% to 1,324 mill. € (1,403). Net sales declined 2% to 1,559 mill. € (1,590). The comparable operating result improved to 253 mill. €, or 16.3% of net sales (215 mill. € or 13.5%) for the last three months of the year. Book-to-bill 0.85 ratio was (0.88), earnings per share increased to 0.87 € (0.79). The cash flow from operating activities increased to 235 mill. € (176). Items affecting comparability in the fourth quarter of 2016 included costs related to restructuring programmes of 22 mill. €. In the comparison period, items affecting comparability also included 3 mill. € of acquisition related and other costs, the company stated.

In the 12 months period from January to December 2016 the order intake was stable at 4,927 mill. € (4,932), Wärtsilä stated. Net sales declined 5% to 4,801 mill. € (5,029), book-to-bill ratio was 1.03 (0.98). The comparable operating result declined to 583 mill. €, or 12.1% of net sales (612 mill. € or 12.2%). During the review period January-December 2016 restructuring costs amounted to 48 mill. €, and other costs to 3 mill. €. Earnings per share declined to 1.79 € (2.25). The cash flow from operating activities increased to 613 mill. € (255).

According to the company the order book at the end of the period decreased 4% to 4,696 mill. € (4,882). The dividend is proposed to increase by 8% to 1.30 (1.20) € per share. In line with growing practice, the dividend will be paid in two equal instalments in March and September.

As of 2017, Wärtsilä says it has changed its guidance policy to be consistent with general industry practice. Wärtsilä has discontinued providing numerical financial guidance on net sales and operating result developments. Instead, the company‘s prospects statement is based on expectations regarding demand development in its markets. Wärtsilä will continue to provide certain financial information, including the order book for current year deliveries, as well as information on key matters that may affect profitability.

Wärtsilä expects no change in 2017

The overall demand for Wärtsilä‘s services and solutions in 2017 is expected to be relatively unchanged from the previous year.

Thanks to growth in electricity demand in the emerging markets and the global shift towards renewable energy sources, which will support the need for distributed, flexible, gas fired power generation, the company expects to remain solid in Energy Solutions. Although the outlook for the cruise and ferry segment is positive, the merchant, gas carrier, and offshore segments continue to suffer from overcapacity, slow trade growth and customers‘ financial constraints, Marine Solutions are expected to be »soft«.

Wärtsilä‘s current order book for 2017 deliveries is 3,143 mill. € (3,097), which mainly comprises Marine Solutions and Energy Solutions‘ deliveries. Wärtsilä will continue to focus on improving efficiency, which is expected to partially offset lower volumes in the marine markets. The pricing environment in Energy Solutions‘ markets has stabilised, but the order book is still impacted by the competitive pressure seen in previous years. The good performance in Services is expected to continue.

Jaako Eskola, President and CEO, said: »Thanks to solid delivery execution, growth in services‘ revenues, and an improved project mix in the fourth quarter, we were able to meet our revised net sales and profitability targets for the year 2016. I am pleased with our cash flow development, which improved primarily due to our focus on working capital management.«

Wöärtsilä key figures for 2016
Source: Wärtsilä

The weak growth in seaborne trade, low oil and gas prices, as well as customers‘ financial constraints burdened the marine industry throughout the year, which resulted in exceptionally low contracting activity, Eskola said. »Considering these headwinds, Wärtsilä‘s order intake developed well. This was largely due to the improved sentiment in the energy markets, where growth in electricity demand and energy policy changes supported the demand for Wärtsilä‘s power generation solutions in both the emerging markets and the industrialised world. The development of our Services business was solid, despite challenges related primarily to the offshore service market«, he explained.

Eskola points out, that his company is in the midst of a major digital transformation: »I am excited about this journey, which will enhance our customer offering as well as our own operations. During the year, we strengthened our digital foundation with the appointment of a Chief Digital Officer to the Board of Management, as well as with the acquisition of Eniram. Going forward we expect to shape our markets with efficient use of data.«

Looking into 2017, Wärtsiläs expects its business environment to remain largely unchanged.