WÄRTSILÄ IN CHINA KEVA trip to Shanghai TIMO KOPONEN VICE PRESIDENT, FINANCE & CONTROL, SHIP POWER 7.11.2011 1 Wärtsilä
Agenda What is Wärtsilä today? Where is ship building today? Why Wärtsilä is in China? What is Wärtsilä in China? 2 Wärtsilä
This is Wärtsilä SHIP POWER POWER PLANTS SERVICES 3 Wärtsilä
Net Sales and Profitability EUR 6 000 16% 5 000 4 000 8.2% 10.1% 11.4% 12.1% 10.7% 14% 12% 10% 3 000 8% 2 000 6% 4% 1 000 2% 0 2006 2007 2008 2009 2010 Net sales Operating profit, % 0% 4 Wärtsilä
Wärtsilä Globally # of employees 17 500 # of locations 160 # of countries 70 5 Wärtsilä
Wärtsilä Ship Power - covers all key shipping segments Merchant Offshore Cruise and Ferry Navy Special Vessels 6 Wärtsilä
China has gained the top builder position for merchant vessels 100% 90% Merchant vessels: contracting volumes (DWT), share by region 80% 70% 60% 50% 40% 30% 20% 10% 0% 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 China Japan Korea Other Asia Europe Rest of the World Source: Wärtsilä s Marine Market Database (MMDB) 7 Wärtsilä
but is also pushing in other vessel segments 100% Offshore vessels: contracting volumes (GT), share by region 100% Special* vessels: contracting volume (GT), share by region 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 China Japan Korea Other Asia Europe Rest of the World 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 China Japan Korea Other Asia Europe Rest of the World * Special includes: cruise, ferries (ropax and pax only), dredgers, and tugs Source: Wärtsilä s Marine Market Database (MMDB) 8 Wärtsilä
Contracting activity by ship building region Number of vessels contracted 2011 (ytd) DWT contracted 2011 (ytd) 13% 4% 2% 4% 6% 10% 41% 46% 44% 30% China Korea Japan Europe Rest of World China Korea Japan Europe Rest of World Source: Clarkson Research Services 9 Wärtsilä
Contracting activity - owners by region Contracting by country, No. of vessels 2011 ytd Contracting by country, DWT 2011 ytd 5% 5% 5% 8% 5% 12% 4% 4% 14% 38% 6% 6% 6% 6% 7% 4% 4% 16% 27% 18% Rest of world China Greece Singapore Norway United Kingdom United States South Korea Denmark Japan Rest of world Greece China Denmark Japan Singapore South Korea United Kingdom Hong Kong Canada 10 Wärtsilä
Customer behavior: ship yards Building regions have a very different mix of ship types built China is pushing to change this mix 100% Order book mix by shipbuilding region 90% 80% 70% 60% GT 50% 40% 30% 20% 10% 0% China Japan Korea Rest of Asia Europe Rest of the World Bulk Carriers Container Vessels Gas Tankers Tankers Offshore Cruise & Ferry Other vessels 11 Wärtsilä
Customers behavior: ship owners Who orders in China? At a global level, ship owning is shifting, with Chinese owners growing their fleets and importance in the shipping landscape Chinese owners prefer to order from Chinese yards 100% 90% 80% 70% Contracting activity in Chinese yards, by ship owner country DWT % 60% 50% 40% 30% 20% 10% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Contracting year CHINA GREECE GERMANY HONG KONG SINGAPORE DENMARK UNITED STATES ITALY Source: Marine Market Database 12 Wärtsilä
Wärtsilä in China today Wärtsilä Ventures 2-Stroke Engine Licensees Joint Ventures WCN Shanhaiguan Services WCN Beijing Rep. Office WCN Dalian Rep. Office Qingdao Qiyao Wärtsilä MHI Linshan Marine Diesel Co Ltd (QMD) Low-speed engines Wärtsilä CME Zhenjiang Propeller Co., Ltd. FPPs, shaft lines, blades and hubs Wärtsilä China Ltd. (H.K) JV with Cuixing Marine Offshore Engine Co. Ltd. Wärtsilä 26 and 32 engines Cosco-Shipyard Total Automation Co Ltd Wärtsilä China head quarters Wärtsilä Services (Shanghai) Co Ltd Wärtsilä Ship Design (Shanghai) Co Ltd Wärtsilä Qiyao Diesel Shanghai Co., Ltd. Wärtsilä Auxpac 20 and 26 gensets Wärtsilä Propulsion (Wuxi) Co., Ltd. TTs, LCTs, seals & bearings and components Wärtsilä Services (Shanghai) Co Ltd Nansha Office 13 Wärtsilä
Wärtsilä Propulsion Co. Ltd (Wuxi) Thrusters, Bearings Inauguration phase 2 November 2007 Employees: 179 (May 2010) 14 Wärtsilä China Oct 2010
Wärtsilä CME Zhenjiang Propeller Co., Ltd. (Zhenjiang )- FPP, CPP InaugurationPhase 2 June 2007 Joint Venture Wärtsilä 55% CSSC 1 45% Employees: 477 (May 2010) Note: 1 CSSC = China State Shipbuilding Corporation 15 Wärtsilä China
Wärtsilä Qiyao Diesel Shanghai Co., Ltd. (Shanghai) - Auxpac 20 & 26 InaugurationJune 2006 Joint Venture Wärtsilä 50% CSIC 1 50% Employees: 121 (May 2010) Note: 1 CSIC = China Shipbuilding Industry Corporation 16 Wärtsilä China
Qingdao Qiyao Wärtsilä MHI Linshan Marine Diesel Co Ltd (Qingdao) - 2-stroke engines Inauguration April 2009 Joint Venture Wärtsilä 27% CSIC 1 50% MHI 2 23% Employees: 435 (May 2010) Note: 1 CSIC = China Shipbuilding Industry Corporation, 2 Mitsubishi Heavy Industries 17 Wärtsilä China
Wärtsilä s ambitions in China Defend our strong position in China and aggressively pursue further growth Clear leadership for certain vessel types Differentiated approach to customers Maximized synergies with Ship Design Improvements of competitiveness for auxiliary engines Further strengthening of local organization New JV for 4-stroke engine manufacturing will be in operation in 2013 18 Wärtsilä
Uncertainty ahead? The fundamentals show risks and opportunities Risks of downturn in global economy are tangible, also for Chinese economy High oil prices represent a risk towards global economic growth, however they also stimulate investments in exploration and production for oil and gas Expansion of emerging economies (including China) continues to support growth of demand for transportation of raw materials and energy Highlights about the present Earnings are at very low levels Overcapacity continues to cast shadows in main merchant segments The future brings interesting challenges! Ship owners base is shifting and increasingly Chinese Increasing interest in the market for gas applications, Chinese yards interest in gas fuelled vessels increasing Increasing focus on energy efficiency and environmental performance Increased need for a total performance approach ship design capabilities are crucial! 19 Wärtsilä
Presentation name / Author IR Contact: Pauliina Tennilä Director, Investor Relations Tel. +358 (0) 40 570 5530 E-mail: pauliina.tennila@wartsila.com