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Wärtsilä’s Half Year results

(Posted on 22/07/20)

Wärtsilä Corporation has released its Half Year Financial Report

Highlights include:

Order intake decreased by 19% to EUR 2,259 million (2,793)
Order book at the end of the period decreased by 12% to EUR 5,401 million (6,157)
Net sales increased by 1% to EUR 2,390 million (2,368)
Book-to-bill amounted to 0.95 (1.18)
Comparable operating result decreased by 48% to EUR 111 million (215), which represents 4.7% of net sales (9.1)

Jaakko Eskola, President and CEO, said, “The adverse impact of COVID-19 on both our own operations and those of our customers increased during the second quarter. This was clearly visible in the decrease in orders received across all businesses. The decline in demand was especially strong in the cruise industry, as travel bans and other mitigation measures have kept most passenger vessels idle for the past few months. Customer interest in scrubber investments was another area of weakness, due to the turmoil in global oil markets. In the Energy business, customers remained hesitant to commit to new investments. With this is mind, the order to supply a 200 MW flexible baseload power plant to South America showed that progress can be made, even in exceptional circumstances. Service activity was negatively affected in our businesses by the lower utilisation of installations, as well as by virus containment measures.

Given this difficult back-drop, second quarter net sales held up reasonably well. This was mainly thanks to increased equipment deliveries, which offset the volume decline in services. The resulting sales mix weakened our profitability, as did COVID-19 driven cost inflation, lower than normal capacity utilisation in our European factories, and the ongoing limited mobility of field service personnel despite some recent easing of travel restrictions. While visibility remains low, it is clear that the effects of the pandemic on our financial performance this year will be material. The short-term cost saving initiatives announced in the first quarter to moderate these effects have progressed according to plan. In the second quarter, we realised the first savings, both from reduced discretionary spending and worktime reductions.

The highlight of the quarter was clearly the strong development in cash flow. I’m pleased to see that our efforts to decrease credit risk by intensifying receivables collection has paid off. Strengthening our liquidity reserves has also been a priority. During the second quarter, we extended and expanded our revolving credit facilities, and initiated arrangements for additional two-year term loans.

In addition to securing our financial position, we have taken extraordinary precautions to secure the health and safety of our people and focused on developing commercial solutions to support our customers in overcoming the COVID-19 related business disruption. One example of such a solution is Wärtsilä Energy Transition Lab, a platform that helps accelerate the energy transition by providing a better understanding of COVID-19 implications for electricity generation, demand, and pricing. Another example is the recently introduced Assured Operations remote support service, which enables technical experts to assess and resolve operational issues via a remote connection between vessels and Wärtsilä’s Expertise Centres.

Mitigating the COVID-19 related near-term business disruptions has naturally been high on our agenda. However, positioning ourselves for the eventual market recovery is of equal importance. Our new organisational structure, which became operational at the beginning of July, is central in this context. Our business areas are today in very different development phases and thus require different strategies for creating long-term value. Marine Power, Marine Systems, and Energy will continue to focus on driving performance by strengthening their lifecycle offerings. Voyage, on the other hand, still needs investments in R&D, sales, and marketing to scale the digital business and to create a basis for sustainable, profitable growth. Thanks to its unique offering, and with the maritime industry’s increasing interest in utilising data to optimise performance, I am confident that Voyage will eventually play a key role in Wärtsilä reaching its long-term financial targets.”