Wärtsilä Capital Markets Day Streamlining for a less cyclical future Raimo Lind, Executive Vice President and CFO Trieste, Italy, May 31 2005
Reducing cyclicality 1. Streamlined capacity and increased flexibility Restructuring Power Plant focus 2. Future efficiency and growth Future growth Product cost 1. Imatra (increased and stable earnings) 2
Restructuring target eliminate overcapacity in manufacturing MW 6 000 5 000 4 000 Old capacity level New capacity level Flexibility through subcontracting China 3 000 2 000 1 000 Closure of the Turku factory 0 2000 2001 2002 2003 2004 Q1/2005 2006 2007 Power Plants Ship Power Estimate 2005 3
Wärtsilä Power Plants former and current scenario Sales Previously outsourced Be selective in sales Current power plants capacity Current breakeven point Profit Loss Increase outsourcing on projects exceeding the capacity Profit Reduce capacity and breakeven point 2005 Loss Years 4
Focused Power Plant operations Streamlined offering Outsourced customer engineering Slim organization closure of France sales of high speed products to Waukesha production facilities and 70 people to Mitsubishi Order intake 2004 > 1000 MEUR 5
Service Sales vs Total Power Businesses MEUR 1 000 750 (30,7%) (36,4%) (36,4%) (41,1%) (42,1%) (31,1%) 500 (25,2%) (25,4%) 250 1997 1998 1999 2000 2001 2002 2003 2004 Service sales Note: Service sales as a % of total Power Businesses sales in parenthesis above the bar 6
Service Sales vs Total Power Businesses MEUR 3 000 50,0% 2 000 40,0% 1 000 30,0% - 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Service sales Power Businesses sales Service (%) 20,0% Note: Data for 2005-06 is only for indicative purposes and should not be considered as Wärtsilä guidance 7
Ciserv net sales and personnel development 60000 700 50000 600 40000 30000 20000 500 400 300 200 Net sales Personnel 10000 100 0 31.12.2001 31.12.2002 31.12.2003 31.12.2004 0 8
Product cost 1) Design 46F Auxpac 9
Product cost 2) Initiatives on the Asian market Majority owned joint venture propeller manufacturing company in China with CME Zhenjiang Propeller Co Ltd. Transvere thrusters factory in China. Investment EUR 6.6 million Letter of intent with China Shipbuilding Industry Corporation (CSIC), 50/50 joint venture marine auxiliary engines manufacturing company in China Subsupplier/Sourcing network for own production Marine reduction gear factory in India 10
Imatra Steel into Imatra new Ovako Steel PRO FORMA 2004 MEUR Net sales 1.284 EBITDA 133 Operating income 86 Net Capital Employed 533 Total assets 836 Productivity in Imatra Steel improved through modernisation of the base metallurgical line In February Wärtsilä, Rautaruukki and the Swedish SKF signed a Memorandum of Understanding of a new long steel company Wärtsilä s holding is 26.5% Consolidated to Ovako 1.5.2005 Ovako has the critical mass to participate in European restructuring Current good cycle gives good start to the new Ovako. Demand for special steels has remained buoyant and delivery volumes of both steels and forgings has increased 11
Implications to Wärtsilä Imatra Steel MEUR Q1/2005 2004 EBIT 17 24 PRO FORMA: Ovako MEUR EBIT 86 26.5% ~23 Supports Wärtsilä s strategy to focus on core businesses, clarifies the group structure Upside on EPS through synergies (approx 40 million of synergies within 3 years) Annual net sales will decrease -Imatra Steel 2004 sales 254 million Capital release of 25-30 million following the planned refinancing of NewCo debt -Solvency will improve Pro forma book value of Wärtsilä s investment approximately 110 million following refinancing Q2 April into Wärtsilä May-June into Ovako 12
Power Businesses order book MEUR 1600 1400 1200 1000 800 600 2004 2005 2006 2007 + 400 200 0 31.12.2003 31.12.2004 31.3.2005 13
Power Businesses operational EBIT and profitability 180 9 160 8 140 7 120 6 100 80 5 4 Operational EBIT % net sales 60 3 40 2 20 1 0 2001 2002 2003 2004 Q1/2005 0 Note: the dashed line indicates the margin outlook for 2005 2001-2004 according to FAS and 2005 according IFRS 14