Wärtsilä Corporation Interim Report January-March 2005 Ole Johansson, President & CEO 4 May 2005
Highlights of the first quarter Net sales up by 9.4% to EUR 570.7 million (521.7) Operating income improved to EUR 46.4 million (-63.2) Order book at new record level EUR 2,066.9 million (1,656.2) Profitability of Power Businesses 6.0% Agreement on transfer of Imatra Steel to new steel company Service base increased through acquisition of DEUTZ marine engine service business Propeller manufacturing expands in China 2
Wärtsilä Group IFRS MEUR Q1/2005 Q1/2004 2004 Net sales 570.7 521.7 2.478.2 Operating income 46.4-63.2² 112.0¹ Profit before taxes 42.2 40.1 217.3 EPS, EUR 0.33 0.22 1.42 FAS MEUR Q1/2004 Net Sales 521.7 Operating income 101.5 Profit before taxes 97.4 EPS, EUR 0.79 ¹ The Assa Abloy capital gains are entered below operating income in the income statement as required by IFRS. Q1/2005 Q1/2003 presentation presentaatio ² The IFRS and FAS figures for result in the first quarter of 2004 differ because under IFRS the restructuring provision made according to FAS in 2003 was required to be partially moved to 2004. 3
IFRS vs. FAS Adjustments in shareholders equity Pension liabilities Goodwill Timing of restructuring provisions R&D Deferred tax IAS 39 fair value adjustments Assa-Abloy (other holdings) Cash flow Hedges 4
Cash flow MEUR Q1/2005 Q1/2004 2004 Cash flow from operating activities 6.9 4.5 220.1 Cash flow from investing activities -125.8 124.3 85.0 Cash flow from financing activities 88.6-130.8-284.9 Liquid funds at the end of period 140.7 150.7 169.6 5
Solvency and gearing 50 Solvency 0,7 Gearing 45 40 0,6 35 0,5 30 25 0,4 20 0,3 15 0,2 10 5 0,1 0 00 01 02 03 04* Q1/05* 0 00 01 02 03 04* Q1/05* Solvency 1 Gearing 1 * IFRS-adjusted figures NOTE: Convertible subordinated debentures treated as equity 6
Power Businesses IFRS MEUR Q1/2005 Q1/2004 Change% 2004 Net sales 483.8 463.3 4.4% 2,224.7 Operating profit 29.3-66.1¹ 87.7 % net sales 6.0% -14.3% 3.9% Order intake 678.0 888.7-23.7% 2,791.4 Order book 2,066.9 1,656.2 24.8% 1,855.3 FAS MEUR Q1/2004 Net Sales 463.3 Operating Profit -9.2 % net sales -2.0% Order intake 888.7 Order book 1,656.2 ¹ The IFRS and FAS figures for result in the first quarter of 2004 differ because under IFRS the restructuring provision made according to FAS in 2003 was required to be partially moved to 2004. 7
Power Businesses Key figures MEUR Net sales Order intake Order book 600 500 400 463.3 +6.6% 483.8 1000 900 800 700 600 888.7 678.0 +16.3% 2500 2000 1500 2,066.9 1,656.2 1,855.3 +13.4% 300 200 100-9.2% +12.5% 500 400 300 200 100-74.4% +52.5% 1000 500 +10.7% +44.1% 0 Q1/04 Q1/05 Service Power Plants Ship Power 0 Q1/04 Q1/05 8 0 31.12 2004 31.3 2004 31.3 2005
Delivered engine megawatts from Wärtsilä factories MW 5 000 4 000 3 000 2 000 1 000 0 2000 2001 2002 2003 2004 Q1/2005 Power Plants Ship Power Estimate 2005 9
Ship Power MEUR Q1/2005 Q1/2004 Change 2004 Net sales 133.9 119.0 12.5% 631.2 Order intake 298.9 196.0 52.5% 836.7 Order book, end of period 974.0 675.9 44.1% 812.7 Power Businesses net sales Q1/2005 EUR 483.8 million. Ship Power 27.7 % 10
The market position of Wärtsilä s marine engines Own production Production of licensees Own production Medium speed main engines Low speed main engines Auxiliary engines Wärtsilä 36%(29) Wärtsilä 21%(20) Wärtsilä 10%(9) Others 64%(71) Others 79%(80) Others 90%(91) Total market volume last 12 months: 4,972 MW (3,471) Total market volume last 12 months: 24,488 MW (28,658) Total market volume last 12 months: 4,000 MW (3,500) Wärtsilä own calculation based on: Lloyd s Register Fairplay, Clarkson s Research Studies and BRL Shipping Consultants Monitoring Q1/2005 period presentation 12 months (31 March 2004-31 March 2005) 11
Vessel orders 12 Tankers Bulk carriers Containers Others 3 months moving average 10 Volume [ million DWT ] 8 6 4 2 0 12-99 03-00 06-00 09-00 12-00 03-01 06-01 09-01 12-01 03-02 06-02 09-02 12-02 03-03 06-03 09-03 12-03 03-04 06-04 09-04 12-04 03-05 Source: Clarkson Research Studies Note: Cargo vessels > 5,000 dwt 12
Net sales of Ship Power by vessel type MEUR 800 600 400 200 0 2000 2001 2002 2003 2004 Q1/2005 Tankers Container ships Wärtsilä Propulsion Bulk carriers Others 13
Service MEUR Q1/2005 Q1/2004 Change 2004 Net sales 237.9 223.2 6.6% 936.8 Personnel, end of period 6 489 6 135 5.8% 6 378 Long-term service agreements, MW 9,544 9,680-1.4% 9,609 O&M (operation and Maintenance agreements), MW 2,711 2,318 17.0% 2,569 Power Businesses net sales Q1/2005 EUR 483.8 million. Service 49.2% 14
Long-term service and O&M agreements Long-term service and O&M agreements cover 12,000 MW. MW 3000 2750 2500 2250 2000 1750 1500 1250 MW 10000 9500 9000 8500 8000 7500 Long-term service agreements O&M agreements 1000 2001 2002 2003 2004 Q1/2005 7000 15
Active engine base Active engine base 148,000 MW (135,500) Power Plants 30,500 MW (30,500) Medium & high speed 83,000 MW (70,500) Ship Power 117,500 MW (105,000) Low speed 65,000 MW (65,000) 16
Power Plants MEUR Q1/2005 Q1/2004 Change 2004 Net sales 109.4 120.5-9.2% 651.9 Order intake 120.7 470.8-74.4% 1,019.5 Order intake, MW heavy fuel oil, MW 151 782-80.7% 1,664 gas, MW 155 208-25.3% 649 BioPower, MWth 58 43 34,9% 110 Order book, end of period 766.7 692.8 10.7% 752.4 Power Businesses net sales Q1/2005 EUR 483.8 million. Power Plants 22.6% 17
Power plant order intake Q1/2005: 306,0 MW (990,1) Europe 44,9 (40,1) Asia 182,1 (207,1) Americas 0,0 (22,4) 36,6 (40,1) 8,3 (0) 118,5 (137,2) 63,5 (69,9) 0,0 (11,9) 0,0 (10,5) Africa and Middle East 79,1 (720,6) MW Gas Oil No order intake 0,0 (18,6) 79,1 (702,0) 18
Imatra Steel IFRS FAS MEUR Q1/2005 Q1/2004 Change 2004 Q1/2004 Net sales 87.3 58.7 48.8% 254.4 58.7 Operating income 17.1 2.9 490.1% 24.3 2.9 % net sales 19.6% 4.9% 9.5% 4.9% Demand for special steels remained buoyant and delivery volumes of both steels and forgings increased In February Wärtsilä, Rautaruukki and the Swedish SKF signed a Memorandum of Understanding of a new long steel company Wärtsilä s holding will be 26.5% Definitive agreement signed on 22 April 2005 The transaction is expected to be closed by 31 May 2005 19 A WÄRTSILÄ COMPANY
Outlook for the rest of the year 2005 Power Businesses Wärtsilä maintains its forecast for the year unchanged. Net sales of Wärtsilä's Power Businesses will rise 10-15% during 2005 based on the Group's strong order book. Profitability will vary from quarter to quarter, the first quarter being the weakest. The profitability target set for the Power Businesses will be reached by the end of the year. The profitability target (EBITA) is above 8%. Imatra Steel Imatra Steel is estimated to become part of a new steel company by 31 May 2005. 20