WÄRTSILÄ S STRONG FINANCIAL POSITION Executive Vice President, CFO 1 Wärtsilä 29 March 212
Contents Topic 3 Growth over the cycle fulfils targeted levels 4 Net sales emphasis on high growth areas 5 Net sales by currency small impact on profitability 6 Operating costs by currency diversification shows 7 Joint venture performance supporting strategy 8 Customer financing solid project close 9 Customer support in financing: Seaboard 18 MW barge 1 Impact of purchase price allocations on profitability 11 Working capital development volatile but under control 12 Services working capital favourable trend continues 13 Solid cash flow from operating activities 14 Low maintenance capex needs 15 Good maturity profiles and RCFs secure financing 16 Acquisition of Hamworthy enhances growth 17 Sales guidance for 212 growth expected 18 Financial strength and solid outlook for growth 2 Wärtsilä 29 March 212
Growth over the cycle fulfills targeted levels Sales Acquisitions (cumulative) Growth % (incl. acquisitions) Sales, MEUR 6, Sales growth 6% 5, Acquisitions ~2.5 % of the growth 5% 4, 3, 2, 1, 3 % 13 % 27 % CAGR ~ 8.9%* 18 % 23 % 14 % 4% 3% 2% 1% 5-1% % -1, -7 % -13 % -8 % -1% -2, 23 24 25 26 27 28 29 21 211 212E -2% * Including acquisitions. Note: World nominal GDP growth 23 211 averages 8,2% USD denominated (source: IMF) 3 Wärtsilä 29 March 212
Net sales emphasis on high growth areas Net sales by market area 211 (MEUR): Forecasted GDP growth 212 1 Global 2,4 845 2% 52 12% 1,249 3% Europe Asia Euro Area UK Emerging Europe Latin America US Emerging Asia Japan - 1,3,2 1,2 2, 2,8 3,7 6,9 594 38% The Americas Others Africa and Middle East 4,2-2, - 2, 4, 6, 8, MEUR 2,5 Forecasted GDP growth 213 1 Global 3, 2, Euro Area UK Emerging Europe -,3 1, 3,7 1,5 Latin America US 1,8 4,4 1, Emerging Asia Japan 1,4 7,3 5 27 28 29 21 211 Africa and Middle East 5,1-2, - 2, 4, 6, 8, Notes: 1 Estimates by Citigroup Global Markets (22 February 212) Europe accounted for some 3% of Wärtsilä 211 sales, while the rest of the world accounted for more than 7% of the sales, offering diversification from the weak European economy 4 Wärtsilä 29 March 212
Net sales by currency small impact on profitability Net sales by currency 211: Sensitivity analysis 2% 18% Impact of EUR exchange rate compared to other currencies 212: 13% 68% EUR USD NOK Other currencies +/- 1% (compared to Feb 212) would result in -/+ 4% change in net sales Impact on profitability would be marginal 8% 7% 6% 5% 4% 3% 2% 1% % 27 28 29 21 211 5 Wärtsilä 29 March 212
Operating costs by currency diversification shows Operating costs by currency 211: 28% 5% 6% 61% EUR USD NOK Other currencies 8 % 7 % 6 % 5 % 4 % 3 % 2 % 1 % % 27 28 29 21 211 6 Wärtsilä 29 March 212
Joint venture performance supporting strategy Growing sales Strategic target MEUR 3 25 2 15 +18% +23% Gain market share in the main growth markets Team up with the leading local players Establish manufacturing capacity within the main markets 1 5 Outcome 29 21 211 Sales in JVs Sales in WCME JOINT VENTURES: Market shares developed favourably Growth exceeds the global average Profitability supports overall Wärtsilä targets WQDC: Wärtsilä Qiyao Diesel Co. Ltd., ownership 5% W2 auxiliary engines WHEC: Wärtsilä-Hyundai Engine Company Ltd., ownership 5% W5DF gas engines QMD: Qingdao Qiyao Wärtsilä MHI Linshan Marine Diesel Co. Ltd, ownership 34% 2-stroke engines WTEC: Wärtsilä-Transmasholding Diesel Engine Company, ownership 5% Locomotive engines WCME: Wärtsilä CME Zhenjiang Propeller Co. Ltd, ownership 55% FPP/CPP propellers 1% consolidation in Wärtsilä P&L, minority 45% deducted as minority interest
Customer financing solid project close Uncertainty in the financial markets has an impact on investments Projects may be delayed because of increased level of scrutiny by financiers Some weaker projects may not proceed at all Financially solid projects can always attract financing Wärtsilä has a strong track record, which mitigates the risks for financiers Turnkey delivery, short delivery and construction time Long-term Operations & Maintenance (O&M) contracts reduce operational risks and support project returns Our customer finance team arranges third-party financing for projects, offers IPP development support and provides carbon finance consulting Financially solid projects can always attract financing and Wärtsilä supports customers in sourcing funding for their projects 8 Wärtsilä 29 March 212
Customer support in financing: Seaboard 18 MW barge Export Credit Agency (ECA) transaction with a 12-year Finnvera guarantee and financing for a combined cycle floating power barge project Key details of project: Location: Santo Domingo, Dominican Republic Equipment: 6x18V5DF Dual-fuel engines Fuel: Natural gas (HFO as backup) Size: 18 MW Customer: Seaboard Corporation Export loan amount: USD114m Export guarantee and funding: Finnvera Lender: Standard Chartered Bank Tenor: 12 years from commissioning Financial close: September 21 Commercial operations date: Q1 212 Wärtsilä s offering: Engineering, Procurement, Construction (EPC) Arranging Export Guarantee and funding The importance of guarantees and funding by Export Credit Agencies has increased as a result of the uncertainty in the financial markets 9 Wärtsilä 29 March 212
Impact of purchase price allocations on profitability MEUR 6, 15% 5, 14% 4, 13% 3, 12% 2, 11% 1, 1% 28 29 21 211 Net Sales EBIT % 9% EBITA % (bef. depreciation of PPA) EBITDA % EBITA % (bef. all intang. depreciation) 1 Wärtsilä 29 March 212
Working capital volatile but under control MEUR 8 % of 12 month cumulative sales 12% 7 6 591 9% 5 511 482 4 6% 3 2 212 268 31 228 267 354 332 314 232 276 285 3% 1 176 164 175 1 12 123 17 12 17 142 116 Q4/25 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 26 27 28 29 21 211 Q4 % 11 Wärtsilä 29 March 212
Services working capital favourable trend continues MEUR 2, 4% 31 % 31 % 1,5 24 % 27 % 25 % 3% 2 % 1, 17 % 2% 5 344 393 369 493 462 311 367 1% % -5 25 26 27 28 29 21 211 Working capital Total inventories Receivables Payables Working capital / Net sales -1% 12 Wärtsilä 29 March 212
Solid cash flow from operating activities MEUR 1, 15% Average 333 MEUR or 8.3% of sales 8 6 663 12% 9% 431 4 32 278 349 232 6% 2 3% 76 25 26 27 28 29 21 211 Cash flow from operating activities % of Group sales % Cash flow from operating activities: including changes in working capital, financial items, and taxes 13 Wärtsilä 29 March 212
Low maintenance capex needs Acquisitions Other shares Investments in growth / process development Investments in maintenance Investments % of sales (no acq. & shares) Depreciation Depreciation w/o acquisition intangibles Investments and depreciations MEUR 6 Investments % of sales 9% 5 8% 7% 4 6% 3 5% 4% 2 3% 1 2% 1% 2 21 22 23 24 25 26 27 28 29 21 211 212E % Maintenance CAPEX has historically been low, and below depreciation 14 Wärtsilä 29 March 212
Good maturity profiles and RCFs secure financing Long-term loans 1 Revolving Credit Facilities 3 MEUR MEUR Pension loans Term loans EIB loan (undrawn) RCFs Maturing RCFs 7 6 6 5 567 Maturity (average) 2 : 4 months Interest rate (average) 2 : 3.% 5 4 494 Maturity (average): 33 months 4 3 3 2 2 1 1 211 212 213 214 215 216 217 218 219 22 221 221+ 211 212 213 214 215 216 Note: 1 As of end Q4 211, assumes Eur15m EIB R&D loan is drawn in 212, 2 Excludes undrawn EIB loan Note: 3 As of Q4 211. None of the RCFs are drawn Wärtsilä has a solid financial standing and the availability of funding has remained good throughout the recent years of uncertainty in the financial markets 15 Wärtsilä 29 March 212
Acquisition of Hamworthy enhances growth Transaction closed Price paid and indicative PPA Current performance Acquisition closed on Jan31 st Hamworthy will be consolidated into Wärtsilä FY12 numbers from February Total consideration is GBP 381m (EUR 455m), while net price of GBP 326m (EUR 399m) due to Hamworthy s cash balance at closing The Purchase Price Allocation (PPA) is currently under evaluation, with initial results indicating: identified intangible assets have a value of EUR 11-13m and will be recognised on the balance sheet as technologies, customer relationships and trademarks annual intangibles amortisation during first two years would be in the range of EUR 16-18m the transaction would create goodwill of EUR 28-3m The negative impact of the PPA will be diluted in the coming years Hamworthy s performance for its financial year ending March 212 is currently expected to exceed the latest analyst consensus (end October 211), which indicated sales of EUR 28m and operating result of 8% 16 Wärtsilä 29 March 212
Sales guidance for 212 growth expected Sales, EUR millions 2+ 25-3 185 6 Expected Ship Power and Power Plants order intake within 212 for 212 delivery Expected Hamworthy sales for 212 (11 months) Services sales for 212, assuming flat sales of which Services order book for 212 29 Order book for 212, at 31.12.211 The Hamworthy acquisition enhances 212 EBITA, EBIT and EPS Group profitability (EBIT%) is impacted by the PPA depreciation and will be 1-11% Quarterly sales and EBIT have traditionally been volatile, first quarter expected to be weakest and last quarter strongest 17 Wärtsilä 29 March 212
Financial strength and solid outlook for growth Resilient profitability Unleveraged balance sheet Good cash flow W Cap under control Financing secured Solid outlook for 212 Growth agenda has substance 18 Wärtsilä 29 March 212
19 Wärtsilä 29 March 212