WÄRTSILÄ CORPORATION INTERIM REPORT JANUARY …

© Wärtsilä PUBLIC

WÄRTSILÄ CORPORATIONINTERIM REPORT JANUARY-SEPTEMBER 2019

25 October 2019

Jaakko Eskola, President & CEO

25 October 2019 INTERIM REPORT JANUARY-SEPTEMBER 20191


Third quarter burdened by project

related challenges and low equipment

demand – services activity remains sound


KEY FIGURES Q3/2019

Order intake EUR 979 million, -29%

Order book at the end of the period

EUR 6,294 million, +6%

Net sales EUR 1,118 million, -16%

Book-to-bill 0.88 (1.03)

Comparable operating result EUR 39 million

(141), or 3.5% of net sales (10.6)

Earnings per share EUR -0.01 (0.17)

Cash flow from operating activities

EUR -61 million (122)


72%

28%

Wärtsilä Marine

Wärtsilä Energy

INTERIM REPORT JANUARY-SEPTEMBER 20194

Order intake weak in both equipment businesses –solid development in services

Rolling 12m, MEUR

1 372979

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Q417-Q318 Q118-Q418 Q218-Q119 Q318-Q219 Q418-Q319

Q3

-29%

Third quarter 2019 and comparison 2018

25 October 2019

69%

31%

Services

Equipment

Order intake

by business type

Order intake

by business area

Third quarter development

(26)

(74)

(53)

(47)

© Wärtsilä PUBLIC INTERIM REPORT JANUARY-SEPTEMBER 20195

Decline in net sales due to concentration of deliveries towards Q4

1 330 1 118

0

1 000

2 000

3 000

4 000

5 000

6 000

Q417-Q318 Q118-Q418 Q218-Q119 Q318-Q219 Q418-Q319

Rolling 12m, MEUR

Third quarter 2019 and comparison 2018

25 October 2019

Q3

-16%

69%

31%

Wärtsilä Marine

Wärtsilä Energy

52%

48%Services

Equipment

Net sales

by business type

Net sales

by business area


(49)

(51)

(57)

(43)


Book-to-bill

1,081,15 1,15

1,201,17

1,221,18 1,15

1,13

0,00

0,20

0,40

0,60

0,80

1,00

1,20

1,40

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Q416-Q317 Q117-Q417 Q217-Q118 Q317-Q218 Q417-Q318 Q118-Q418 Q218-Q119 Q318-Q219 Q418-Q319

Order intake Net sales Book-to-bill

Rolling 12m, MEUR

25 October 2019


Order book distribution

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

30.9.2018 30.9.2019

Delivery current year Delivery next year or later

MEUR

25 October 2019


Comparable operating result burdened by project challenges

11,7%11,2% 11,3% 11,1%

9,6%

0%

2%

4%

6%

8%

10%

12%

14%

0

100

200

300

400

500

600

700

Q417-Q318 Q118-Q418 Q218-Q119 Q318-Q219 Q418-Q319*

Comparable operating result Comparable operating result, %

9,7%

7,3%

0%

2%

4%

6%

8%

10%

12%

14%

0

50

100

150

200

250

300

350

400

1-9/2018 1-9/2019*

Rolling 12m, MEUR Review period development

MEUR

◼ Wärtsilä

Energy

◼ Wärtsilä

Marine

◼ Wärtsilä Group,

% of sales

25 October 2019

*The operating result for January-September 2019 includes a charge of EUR 84 million related to cost overruns in certain large and complex project deliveries in the Marine and

Energy businesses, of which EUR 17 million was recognised in Wärtsilä Marine and EUR 67 million in Wärtsilä Energy.

© Wärtsilä PUBLIC 25 October 2019 INTERIM REPORT JANUARY-SEPTEMBER 20199

Cost overruns in certain complex marine and energy projects

Projects affected:

• Twelve marine gas solutions projects for multiple gas tanker vessel series

• One LNG terminal construction project

• Two engine EPC projects in countries with strict local standards and requirements

Financial impact:

• EUR 150 million one-time charge in full year 2019 result, of which EUR 84 million recognised during January-September


Reasons identified and corrective actions taken

Corrective actions to strengthen sales and project execution processes:

• Changes to the organisational structure to strengthen project management

• Process changes to ensure better upfront risk identification

• Tighter controls on technical assessments and supplier approval

• Training and introduction of new tools to facilitate sales and project execution processes

Main issues behind cost overruns:

• New technologies and applications

• Challenges related to new suppliers

• Local standards and codes not fully priced at sales phase

• Subcontracting and engineering costs underestimated


Cash flow from operating activities

0

100

200

300

400

500

600

700

2015 2016 2017 2018

MEUR Review period development

MEUR

-100

-50

0

50

100

150

1-9/2018 1-9/2019

25 October 2019


Working capital

251

543490

563 581

5,2%

10,8% 10,2%11,5% 11,2%

0%

5%

10%

15%

20%

0

250

500

750

1 000

1 250

1 500

2014 2015 2016 2017 2018

Working capital Total inventories Advances received Working capital / Net sales*

*Working capital / 12 months rolling net sales

MEUR

782

870

15,4%

17,3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

200

400

600

800

1 000

1 200

1 400

1 600

30.9.2018 30.9.2019

Review period development

MEUR

25 October 2019


Gearing

0,00

0,10

0,20

0,30

0,40

0,50

2015 2016 2017 20180,00

0,10

0,20

0,30

0,40

0,50

30.9.2018 30.9.2019

Review period development

25 October 2019


Wärtsilä

Marine Business

© Wärtsilä PUBLIC15

Vessel contracting remains subdued

Specialised tonnageTotal vessel contracting

Source: Clarksons, Contracting as per October 7th, 2019

CGT= gross tonnage compensated with workload

WÄRTSILÄ MARINE BUSINESS


0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

0

50

100

150

200

250

01/1

0

05/1

0

09/1

0

01/1

1

05/1

1

09/1

1

01/1

2

05/1

2

09/1

2

01/1

3

05/1

3

09/1

3

01/1

4

05/1

4

09/1

4

01/1

5

05/1

5

09/1

5

01/1

6

05/1

6

09/1

6

01/1

7

05/1

7

09/1

7

01/1

8

05/1

8

09/1

8

01/1

9

05/1

9

09/1

9

Mill

ion C

GT

Num

ber

of

vessels

Merchant Offshore

Cruise and Ferry Special vessels

3 months moving average in CGT

0

10

20

30

40

50

60

70

80

01/1

0

05/1

0

09/1

0

01/1

1

05/1

1

09/1

1

01/1

2

05/1

2

09/1

2

01/1

3

05/1

3

09/1

3

01/1

4

05/1

4

09/1

4

01/1

5

05/1

5

09/1

5

01/1

6

05/1

6

09/1

6

01/1

7

05/1

7

09/1

7

01/1

8

05/1

8

09/1

8

01/1

9

05/1

9

09/1

9

Num

ber

of

vessels

Offshore Cruise and Ferry Special vessels LNG carriers LPG carriers


Order intake development

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

0

200

400

600

800

1 000

1 200

7-9/2018 10-12/2018 1-3/2019 4-6/2019 7-9/2019

Wärtsilä Marine, equipment

Wärtsilä Marine, services

Wärtsilä Marine total, rolling 12 months


QTD, MEUR Rolling 12m, MEUR

23%

5%

6%

3%

31%

24%

7%

21%

13%

21%10%

21%

11%3%

Services

order intake

by segment

Equipment

order intake

by segment

◼ Offshore

◼ Navy

◼ Special Vessels

◼ Merchant

◼ Others

◼ Cruise & Ferry

◼ Gas carriers

25 October 2019



Marine installed base covered by long-term service agreements

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

5 000

10 000

15 000

20 000

25 000

2014 2015 2016 2017 2018 30.9.2019

MW under agreement % of Marine installed base


MW


Net sales development

0

500

1 000

1 500

2 000

2 500

3 000

3 500

0

200

400

600

800

1 000

7-9/2018 10-12/2018 1-3/2019 4-6/2019 7-9/2019


Wärtsilä Marine, services

Wärtsilä Marine total, rolling 12 months

25%

15%

5%

4%

51%

Spare parts Field service

Service agreements Service projects




Third quarter

development

EUR 776 million (680)

25 October 2019

(45)

(7)

(17)

(26)

(5)


• The Wärtsilä 31SG pure gas engine was

launched for marine market applications in

September

• The new engine further reduces the total

cost of ownership and the environmental

footprint for vessels operating in regions

where there is a developed gas

infrastructure

REDUCING EMISSIONS WITH A PURE GAS ENGINE


Wärtsilä

Energy Business


Market for gas and liquid fuel power plants, <500 MW

15% 19% 21% 17% 13% 14% 15% 14%0

5 000

10 000

15 000

20 000

25 000

30 000

Q416-Q317 Q117-Q417 Q217-Q118 Q317-Q218 Q417-Q318 Q118-Q418 Q218-Q119 Q318-Q219

Wärtsilä Others

WÄRTSILÄ ENERGY BUSINESS

The total market, including also power plants with prime movers above 500 MW, increased by 6% to 42.8 GW during the twelve-month period ending in June 2019 (40.5 at the end of March).

Market shares are calculated on a 12 months rolling basis. Market data includes all Wärtsilä power plants and other manufacturers’ gas and liquid fuelled gas turbine based power plants with prime movers below 500 MW, as well as the estimated output of steam turbines

for combined cycles. The data is gathered from the McCoy Power Report. The main gas turbine competitors are GE, Siemens, Mitsubishi, and Ansaldo. Other combustion engines are not included.

Rolling 12m, MW

25 October 2019


82%

18%

30%

25%

28%

16%

Services

order intake

by segment

Equipment

order intake

by segment

◼ Independent Power Producers

◼ Industrials

◼ Others

◼ Utilities

INTERIM REPORT JANUARY-SEPTEMBER 201922

Order intake development

0

500

1 000

1 500

2 000

2 500

0

100

200

300

400

500

600

700

800

900

1 000

7-9/2018 10-12/2018 1-3/2019 4-6/2019 7-9/2019

Wärtsilä Energy, equipment

Wärtsilä Energy, services

Wärtsilä Energy total, rolling 12 months



25 October 2019



Orders received for power plants globally


IPP’s

(Independent

Power Producers)

Utilities

Industrials

Order intake 1-9/2019:

1,005 MW (1,868)

Asia 480

(1,056)

Africa and

Middle East

262 (275)

Americas

240 (306)

Europe

24 (231)

25 October 2019

© Wärtsilä PUBLIC24

Energy installed base covered by long-term service agreements

0%

5%

10%

15%

20%

25%

30%

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2014 2015 2016 2017 2018 30.9.2019

MW under agreement % of Wärtsilä Energy installed base

A guaranteed asset

performance agreement with a

Hungarian power provider

extended by five years

• The agreement covers a 27.65

MW combined heat and power

plant

• Since first signing the

agreement with CHP Erömü kft

in 2005, the availability of the

facility has been well above 95

percent



MW


Net sales development

0

500

1 000

1 500

2 000

2 500

0

200

400

600

800

7-9/2018 10-12/2018 1-3/2019 4-6/2019 7-9/2019


Wärtsilä Energy, services

Wärtsilä Energy total, rolling 12 months

22%

7%

20%

10%

41%

Spare parts Field service

Service agreements Service projects




Third quarter

development

EUR 342 million (650)

25 October 2019

(69)

(3)

(9)

(14)

(4)


COLLABORATING FOR LIFECYCLE INNOVATION

• Wärtsilä’s hybrid, dual-fuel solution

establishes the new Wasaline RoPax ferry

as a benchmark in efficiency and

sustainability

• Predictive maintenance lowers operating

costs and improves reliability

• Wärtsilä benefits in the form of a floating

technology demonstrator and R&D lab

in connection to the Smart Technology

Hub being built in Vaasa

COLLABORATING TO REACH A 100% RENEWABLE ENERGY FUTURE

• Wärtsilä and Q Power Oy, a Finnish

pioneer in biomethanisation, signed a

cooperation agreement to accelerate the

development and commercialisation of

renewable fuels

• The companies will work closely together

to further develop the market and to find

business opportunities for

biomethanisation and synthetic fuels

globally


PROSPECTS

The demand for Wärtsilä’s services and

solutions in the coming twelve months is

expected to be somewhat below that of the

previous twelve months.

Demand by business area is anticipated

to be as follows:

• Soft in Wärtsilä Marine Business

• Weak in Wärtsilä Energy Business

(downgraded from soft)

THANK YOU

Further information:

Natalia Valtasaari

Vice President, Investor Relations

Tel. +358 (0) 10 709 5637

E-mail: [email protected]

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WÄRTSILÄ CORPORATION INTERIM REPORT JANUARY …