Wärtsilä Q1 2014 presentation

© Wärtsilä

WÄRTSILÄ CORPORATION INTERIM REPORT JANUARY-MARCH 2014

24 APRIL 2014

Björn Rosengren, President & CEO

• Order intake EUR 1,142 million, -16%

• Net sales EUR 1,012 million, +15%

• Book-to-bill 1.13

• EBIT EUR 90 million, 8.9% of net sales

(EUR 70 million or 8.0%)

• EPS EUR 0.31 (0.37)

• Cash flow from operating activities

EUR 111 million (84)

• Efficiency program proceeding

according to plan

EBIT is shown excluding non-recurring items.

Highlights Q1/2014

NEW

PIC

© Wärtsilä

0

200

400

600

800

1000

1200

1400

Q1/2013 Q1/2014

-16%

-59%

5%

1%

1,352

MEUR

First quarter development

MEUR

3

Order intake affected by challenging power plant markets

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

2010 2011 2012 2013 1-3/2014

1,142

Q1 Q2-Q4

Power Plants

Ship Power

Services

© Wärtsilä

0

200

400

600

800

1000

1200

Q1/2013 Q1/2014

Net sales in line with our expectations

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2010 2011 2012 2013 1-3/2014

-7.6% 12%

15%

0%

54%

-6%

882

MEUR

First quarter development

MEUR

1,012

4

Net sales increased by 15%

Power Plants

Ship Power

Services

Q1 Q2-Q4

-1%

© Wärtsilä

Net sales by business 1-3/2012

Ship Power

38% (28)

Power Plants

19% (23)

Services

43% (49)

5

Net sales by business 1-3/2014

© Wärtsilä

0.88

1.07 1.05 1.05

1.13

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 1-3/2014

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

31.03.2013 31.03.2014

Delivery current year Delivery next year or later

© Wärtsilä

8.0%

8.9%

0%

2%

4%

6%

8%

10%

0

20

40

60

80

100

Q1/2013 Q1/2014

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

First quarter development

MEUR

8

Profitability in line with expectations

EBIT% before non-recurring items

EBIT before non-recurring items

© Wärtsilä 9

Continued uncertainty

in the power

generation markets

Power Plants quotation activity remains on a good level

10 © Wärtsilä

The share of natural gas is consistently increasing.

0

2000

4000

6000

8000

10000

12000

14000

16000Q

1

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

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 1-3/2014

MEUR Review period development

Total EUR 165 million (406)

IPP’s*

Utilities

Industrials

Oil

41% Gas

59%

Review period order intake by fuel in MW

x%

11

Power Plants order intake by customer segment

25%

24%

51%

Q1 Q2-Q4

*IPP = Independent Power Producer

© Wärtsilä

Order intake 1-3/2014: 396 MW (760)

Power Plants global order intake Africa and Middle East the most active region

Europe

91 (72)

Africa and

Middle East

202 (314)

Asia

37 (50)

Americas

67 (324)

12

© Wärtsilä

Siemens

GE

MHI

Wärtsilä

Alstom

13

19.8%

2013

48.2%

22.1%

2.9%

Total market 73.2 GW (75.4)

3.3% 2.6%

Other GTs

Ansaldo

13

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 14

Marine market

activity on a

healthy level

© Wärtsilä 15

Good activity in vessel contracting

Source: Clarkson Research Services

* CGT= gross tonnage compensated with workload

*

*

0

1

2

3

4

5

0

50

100

150

200

250

01

.09

03

.09

05

.09

07

.09

09

.09

11

.09

01

.10

03

.10

05

.10

07

.10

09

.10

11

.10

01

.11

03

.11

05

.11

07

.11

09

.11

11

.11

01

.12

03

.12

05

.12

07

.12

09

.12

11

.12

01

.13

03

.13

05

.13

07

.13

09

.13

11

.13

01

.14

03

.14

Mil

lio

n C

GT

# o

f ve

ss

els

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

© Wärtsilä

0

300

600

900

1200

1500

1800

2010 2011 2012 2013 1-3/2014

MEUR

Review period development Total EUR 467 million (443)

Offshore

33%

Merchant

62%

Special

vessels

4%

16

Ship Power order intake by segment

Others

2%

Q1 Q2-Q4

© Wärtsilä

• Order received for Wärtsilä’s 2-stroke, dual-fuel

engine and gas valve unit

• The vessel will be built in China for the Chinese

ship owner and operator Zhejiang Huaxiang

Shipping Co. Ltd.

• Benefits of low-pressure, dual-fuel technology for

two stroke engines include:

– Reduced capital expenditure and gains in

operating expenditure

– Compliance with IMO Tier III emission

regulations without exhaust gas cleaning

systems when operating in gas mode

17

Wärtsilä’s 2-stroke, dual-fuel engine chosen to power a

new LNG carrier

NEW

PIC

© Wärtsilä

• Joint venture order intake totalled

EUR 25 million (25) during

January-March 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.

18

Joint venture ordering activity

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

© 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

51%(52)

Others

20%(19)

MAN D&T

23%(25)

Caterpillar

6%(4)

MAN D&T

90%(88)

Wärtsilä

9%(10)

Mitsubishi

1%(2)

Low-speed main engines

Total market volume last 12 months:

31,017 MW (22,935)

Total market volume last 12 months:

3,787 MW (4,137)

Medium-speed main engines

Wärtsilä

3%(4)

Auxiliary engines

Total market volume last 12 months:

6,895 MW (5,966)

Others

97%(96)

19

Ship Power market Market position of Wärtsilä’s marine engines

© Wärtsilä 20

Steady demand

in marine and

power plant

service markets

© Wärtsilä

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 1-3/2014

-3%

0

100

200

300

400

500

600

Q1/2013 Q1/2014

MEUR

First quarter development

MEUR

434

0%

435

0%

21

Services net sales development stable

5%

Q1 Q2-Q4

© Wärtsilä

Spare parts

53%(50)

Field service

24%(27)

Contracts

17%(16)

Projects

6%(6)

22

Total EUR 435 million (434)

Services net sales distribution 1-3/2014

© Wärtsilä

• Order for the technical design and installation of

a new fixed pitch propeller for an FPSO

conversion project

• The vessel is operated by Woodside Energy Ltd,

an independent Australian oil and gas company

• Fast-track project execution a key customer

requirement

• The major benefit of the new propeller is

increased vessel speed

23

Australian FPSO optimises propeller design

NEW

PIC

© Wärtsilä

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

MW

24

Development of Power Plants service agreements

57% 58% 57%

51% 49%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

500

1000

1500

2000

2500

3000

3500

4000

2010 2011 2012 2013 Q1/2014 12m rolling

© Wärtsilä

Fleet utilisation

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

** Source Bloomberg

25

Fleet utilisation

Fleet Average Speed, knots**

Anchored Vessels & Fleet Development*

20500

21000

21500

22000

22500

15%

20%

25%

30%

35%

09.1

1

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

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

09.1

1

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

© Wärtsilä 26

Strong financial

position

© Wärtsilä 27

MEUR

Favourable development in operating cash flow

0

25

50

75

100

125

150

Q1/2013 Q1/2014

First quarter development

MEUR

0

100

200

300

400

500

600

700

2010 2011 2012 2013

© Wärtsilä

Working capital Total inventories Advances received Working capital / Net sales

MEUR

28

Focus on working capital development

118

235

465

313 292 2.6%

5.6%

9.8%

6.7%

6.1%

0%

5%

10%

15%

20%

25%

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 31.3.2014

© Wärtsilä

Solvency Gearing

29

Financial position

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2010 2011 2012 2013 31.3.2014 -0,10

0,00

0,10

0,20

0,30

0,40

0,50

2010 2011 2012 2013 31.3.2014

© Wärtsilä

• Power Plants: Although customers are still

delaying their decision-making, the forecasted

GDP growth in 2014 is expected to result in a

slightly improved overall market for liquid and gas

fuelled power generation. Ordering activity

remains focused on the emerging markets.

• Ship Power: The main drivers supporting activity

in the shipping and offshore sectors are in place.

Overall contracting is expected to be in line with

that seen in 2013, keeping in mind the prevailing

overcapacity and the market’s limited capacity to

absorb new tonnage.

• Services: The overall service market outlook

remains stable.

30

Market outlook

NEW

PIC

© Wärtsilä 31

Wärtsilä expects its net sales

for 2014 to grow by 0-10% and

its operational profitability

(EBIT% before non-recurring

items) to be around 11%.

Prospects for 2014 unchanged

IR Contact:

Natalia Valtasaari

Director, Investor Relations

Tel. +358 (0) 40 187 7809

E-mail: [email protected]