WÄRTSILÄ CORPORATION RESULT PRESENTATION 2014 29 JANUARY 2015 Björn Rosengren, President & CEO Wärtsilä
Highlights 2014 good performance in challenging markets Order intake EUR 5,084 million, +5% Net sales EUR 4,779 million, +4% Book-to-bill 1.06 (1.05) EBIT EUR 569 million, 11.9% of net sales (EUR 557 million or 12.1%) EPS EUR 1.76 (1.98) DPS proposal EUR 1.15 Acquisition of L-3 Marine Systems International announced in December 2014 Joint venture for 2-stroke engine business finalised in January 2015 EBIT is shown excluding non-recurring items. As of the third quarter of 2014, the two-stroke business is reported as discontinued operations. Income statement related comparison figures for 2013 have been restated. 2 Wärtsilä
Order intake growth supported by Ship Power & Services MEUR 5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 MEUR 1600 1400 1200 1000 800 600 400 Fourth quarter development 1,522 1,334 14% 23% -2% Services Ship Power Power Plants 500 200 23% 0 2010 2011 2012 2013 2014 0 Q4/2013 Q4/2014 Q1-Q3 Q4 3 Wärtsilä
Net sales in line with Net expectations sales in line with our expectations MEUR 5000 4500 4000 3500 3000 2500 MEUR 1600 1400 1200 Fourth quarter development 1,549 1,403 10% 2000 1500 1000 500 1000 800 600 400 200 11% 30% -8% Services Ship Power Power Plants 0 2010 2011 2012 2013 2014 0 Q4/2013 Q4/2014 Q1-Q3 Q4 4 Wärtsilä
Net sales by business 2014 Net sales by business 1-3/2012 Services 41% (40) Ship Power 36% (28) Power Plants 24% (32) 5 Wärtsilä
Book-to-bill ratio remains above one MEUR 5500 1,2 5000 1.07 1.05 1.05 1.06 4500 4000 3500 0.88 1,0 0,8 3000 2500 0,6 2000 1500 0,4 1000 500 0,2 0 2010 2011 2012 2013 2014 0,0 Order intake Net sales Book-to-bill 6 Wärtsilä
Order book distribution Order book distribution MEUR 3500 3000 2500 2000 1500 1000 500 0 31.12.2013 31.12.2014 Delivery next year Delivery after next year 7 Wärtsilä
Profitability at upper end of guidance range MEUR 600 14% 500 10.7% 11.1% 10.9% 11.2% 11.9% 12% 400 10% 8% 300 6% 200 4% 100 2% 0 2010 2011 2012 2013 2014 0% EBIT before non-recurring items EBIT% before non-recurring items 2014 EBIT and EBIT% include continuing operations. Figures for 2010-2013 include both discontinued and continuing operations. 8 Wärtsilä
Power plant market activity improved in the second half 9 Wärtsilä
Power Plants quotations strong in 2014 18000 16000 14000 Quoted MW per Fuel Type MW 12000 10000 8000 6000 4000 2000 0 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 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Others Natural gas Heavy fuel oil 70% of quotations for gas based installations 10 Wärtsilä
Power Plants order intake stable despite challenges MEUR 1800 Review period development Total EUR 1,293 million (1,292) 1600 Utilities 1400 35% 33% Industrials 1200 1000 32% x% IPP s* 800 600 Review period order intake by fuel in MW 400 200 Oil 39% Gas 61% 0 2010 2011 2012 2013 2014 Q1-Q3 Q4 *IPP = Independent Power Producer 11 Wärtsilä
Power Plants orders well distributed globally Europe 769 (320) Asia 394 (1,083) 423 308 124 Americas 686 (418) 72 274 38 Africa and Middle East 639 (581) 53 217 Utilities 340 130 171 IPP s Industrials 339 Order intake 2014: 2,489 MW (2,401) 12 Wärtsilä
Orders for 11 industrial power plants from Russia Order placed by EUROCEMENT group Scope of supply: 36 natural gas-fired Wärtsilä 34SG engines with a combined capacity of 314 MW The plants will produce electricity for cement factories and work in parallel with the grid Wärtsilä s total installed power generation capacity in Russia is approximately 1,000 MW 13 Wärtsilä
Market for gas and liquid fuel based power plants 1-9/2014 Total market 37.7 GW (38) Market <500MW 16.5 GW (25) 1.6% 5.0% 0.8% 1.8% 3.6% 1.8% 9.0% 10.5% 9.8% 48.0% 12.7% 55.2% 26.3% 14.5% GE Siemens MHI Wärtsilä Alstom Ansaldo Other GTs Market data includes all Wärtsilä power plants and other manufacturers gas and liquid fuelled turbine based 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. 14 Wärtsilä
Ship Power order intake supported by activity in gas carriers and cruise vessels 15 Wärtsilä
Slowdown in vessel contracting Merchant Offshore Cruise and Ferry Special vessels 3 months moving average in CGT * 250 5 200 4 # of vessels 150 100 3 2 * Million CGT 50 1 0 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 05.14 07.14 09.14 11.14 0 Source: Clarkson Research Services, figures exclude late contracting * CGT= gross tonnage compensated with workload 16 Wärtsilä
6% growth in Ship Power order intake MEUR 1800 1500 Review period development Total EUR 1,746 million (1,644) 1200 Gas carriers 34% Offshore 28% 900 600 Navy 4% 300 0 2010 2011 2012 2013 2014 Traditional merchant 10% Others 2% Cruise & Ferry 16% Special vessels 6% Q1-Q3 Q4 17 Wärtsilä
Joint venture ordering activity MEUR 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Q4/2014 Q3/2014 Q2/2014 Q1/2014 Q4/2013 Q3/2013 Q2/2013 Q1/2013 Q4/2012 Q3/2012 Q2/2012 Q1/2012 Q4/2011 Q3/2011 Q2/2011 Q1/2011 Q4/2010 Q3/2010 Q2/2010 Q1/2010 Joint venture order intake totalled EUR 306 million (222) during January-December 2014 In November Wärtsilä Hyundai Engine Company Ltd. received a major order to supply 54 dual-fuel engines for arctic LNG carriers for the Yamal project in Russia Joint venture order intake, includes figures from Wärtsilä Hyundai Engine Company Ltd. and Wärtsilä Qiyao Diesel Company Ltd. Ship Power order intake 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 18 Wärtsilä
Orders for integrated solutions increasing Order received for 6 integrated solutions to Anchor Handling Tug Supply vessels, being built for Maersk Supply Service A/S Scope of supply: complete power generation solution, electrical distribution and drives, vessel automation and propulsion The fully integrated systems will provide optimal power, efficiency, versatility and redundancy, with the lowest operating expenditures and a minimal environmental impact 19 Wärtsilä
Ship Power order book 31 December 2014 Cargo RoRo 1% 4% Tankers 4% Other merchant 2% Offshore 35% Gas carriers 24% Non-vessel 4% Special vessels 4% Navy 8% Cruise & Ferry 12% 20 Wärtsilä
Strong position in marine engine market Medium-speed main engines Others 5%(21) Auxiliary engines Wärtsilä 3%(2) Caterpillar 17%(11) Wärtsilä 52%(51) MAN D&T 25%(17) Others 97%(98) Total market volume last 12 months: 4,484 MW (4,554) Total market volume last 12 months: 6,682 MW (7,628) 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. 21 Wärtsilä
Wärtsilä strengthens its position in automation and electrical systems L-3 MSI is a global supplier of automation, navigation and electrical systems to the marine, naval and offshore markets Transaction value EUR 285 million (enterprise value), subject to customary adjustments Financing for the deal will be from existing cash resources and credit facilities The acquisition is subject to clearance from the regulatory authorities, and is expected to be closed during the second quarter of 2015 The acquisition is expected to be EPS accretive as of 2015 22 Wärtsilä
Growth in service demand 23 Wärtsilä
All-time high fourth quarter supported Services sales growth MEUR 2000 Fourth quarter development 1800 1600 1400 1200 1000 0% 5% -3% 5% MEUR 600 500 400 507 11% 564 800 300 600 200 400 200 100 0 2010 2011 2012 2013 2014 0 Q4/2013 Q4/2014 Q1-Q3 Q4 24 Wärtsilä
Services net sales distribution 2014 Field service 25%(26) Spare parts 51%(49) Contracts 16%(16) Projects 9%(8) Total EUR 1,939 million (1,842) 25 Wärtsilä
Services distribution per business 2014 Net sales Total EUR 1,939 million Installed base Total 181,000 MW Ship Power Power Plants Ship Power 2-stroke Power Plants Ship Power 4-stroke 26 Wärtsilä
Growing interest in marine service agreements Service contracts bring flexibility to operations through optimised maintenance planning Several agreements signed during 2014 in various vessel segments, including: 10-year maintenance and technical support agreement with Royal Caribbean Cruises Ltd covering 36 vessels 3-year service agreement with Dutch dredging and marine contractor Van Oord 5-year technical maintenance agreement with three Greek LNG carrier owners for a total of 15 vessels 6-year maintenance agreement for 15 of Wagenborg s dry cargo carriers 27 Wärtsilä
Development of service agreements MW 14000 30% 12000 25% 10000 20% 8000 15% 6000 4000 10% 2000 5% 0 2009 2010 2011 2012 2013 2014 0% MW under agreement Power Plants % of Power Plants installed base MW under agreement Ship Power % of Ship Power installed base 28 Wärtsilä
Fleet utilisation Fleet utilisation Anchored Vessels & Fleet Development* Percent Anchored 35% 30% 25% 20% 15% 23000 22500 22000 21500 21000 20500 Nr of Active Vessels 01.15 10.14 07.14 04.14 01.14 10.13 07.13 04.13 01.13 10.12 07.12 Anchored Active Fleet Fleet Average Speed, knots** 10,5 10,0 9,5 9,0 8,5 8,0 01.15 10.14 07.14 04.14 01.14 10.13 07.13 04.13 01.13 10.12 07.12 * Source Bloomberg. Sample of more than 25 000 vessels (>299 GT) covered by IHS AIS Live. ** Source Bloomberg 29 Wärtsilä
Solid financial standing 30 Wärtsilä
Cash flow from operating activities MEUR 700 600 500 400 300 200 100 0 2010 2011 2012 2013 2014 31 Wärtsilä
Working capital developed well MEUR 1600 25% 1400 1200 20% 1000 15% 800 600 400 200 118 2.6% 235 5.6% 465 9.8% 313 6.8% 251 5.2% 10% 5% 0 2010 2011 2012 2013 2014 Working capital Total inventories Advances received Working capital / Net sales 0% 32 Wärtsilä
Gearing remains low 0,50 0,40 0,30 0,20 0,10 0,00-0,10 2010 2011 2012 2013 2014 33 Wärtsilä
EPS and dividend per share EUR 2,50 2,00 1.76 1,50 1.15 1,00 0,50 0,00 2010 2011 2012 2013 2014 * EPS Dividend Extra dividend * Dividend 2014 - Proposal of the Board 34 Wärtsilä
Market outlook Power Plants: The overall market for liquid and gas fuelled power generation is expected to continue to be challenging. Ordering activity remains focused on emerging markets and countries benefiting from a stronger US dollar. Ship Power: The outlook for shipping and shipbuilding is cautious, due to the current uncertainties in the market. Low oil prices are expected to limit the demand for offshore vessels. The outlook for gas carriers continues to be positive. The importance of fuel efficiency and environmental regulations are clearly visible, driving interest in environmental solutions and gas as a marine fuel for the broader marine markets. Services: The overall service market outlook remains stable. The service outlook for offshore and gas fuelled vessels remains favourable. Demand for services in the power plant segment continues to be good. Marine and power plant customers show healthy interest in long-term service agreements. 35 Wärtsilä
Prospects for 2015 Wärtsilä expects its net sales for 2015 to grow by 0-10% and its operational profitability (EBIT% before non-recurring items) to be between 12.0-12.5%. 36 Wärtsilä
IR Contact: Natalia Valtasaari Director, Investor Relations Tel. +358 (0) 40 187 7809 E-mail: natalia.valtasaari@wartsila.com