Wärtsilä Corporation: Wärtsilä's Half-year financial report January-June 2024

Wärtsilä's Half-year financial report January-June 2024

This release is a summary of Wärtsilä's Half-year financial report January-June 2024. The complete report is attached to this release as a pdf file. It is also available on the company website at www.wartsila.com.

ORDER INTAKE, PROFITABILITY AND CASH FLOW ALL IMPROVED

Highlights from April-June 2024

• Order intake increased by 10% to EUR 1,854 million (1,687), and the organic growth, which excludes FX impact and the impact of acquisitions and divestments, was 12%
• Service order intake increased by 8% to EUR 982 million (913)
• Net sales increased by 7% to EUR 1,556 million (1,454), and organic growth was 9%
• Book-to-bill amounted to 1.19 (1.16)
• The comparable operating result increased by 63% to EUR 176 million (108), which represents 11.3% of net sales (7.4)
• The operating result increased by 156% to EUR 168 million (66), which represents 10.8% of net sales (4.5)
• Earnings per share increased to 0.20 euro (0.05)
• Cash flow from operating activities increased to EUR 216 million (75)

Highlights from January-June 2024

• Order intake increased by 10% to EUR 3,778 million (3,427), and organic growth was 15%
• Service order intake increased by 7% to EUR 1,931 million (1,802)
• The order book at the end of the period increased by 22% to EUR 7,607 million (6,249)
• Net sales remained stable at EUR 2,877 million (2,919), while organic growth was 1%
• Book-to-bill amounted to 1.31 (1.17)
• The comparable operating result increased by 57% to EUR 308 million (196), which represents 10.7% of net sales (6.7)
• The operating result increased by EUR 137 million to EUR 295 million (158), which represents 10.2% of net sales (5.4)
• Earnings per share increased to 0.34 euro (0.14)
• Cash flow from operating activities increased to EUR 475 million (219)

WÄRTSILÄ'S PROSPECTS

Marine

Wärtsilä expects the demand environment for the next 12 months (Q3/2024-Q2/2025) to be better than that of the comparison period.

Energy

Wärtsilä expects the demand environment for the next 12 months (Q3/2024-Q2/2025) to be better than that of the comparison period.

HÅKAN AGNEVALL, PRESIDENT & CEO: MAKING PROGRESS ON THE PATH TO FINANCIAL TARGETS 

"The market environment remained stable for Wärtsilä's businesses during the second quarter of 2024. The headwinds for the global economy continued, but economic activity has proven to be relatively resilient.

In the energy market, the quarter was characterised by an increase in protectionist policies, with trade risks elevated by developments such as the recently imposed import tariffs by the US and EU. The market for engine power plants was stable, with good activity especially in the US. The rapid growth of artificial intelligence (AI) is having a sizable impact on the global electricity demand. According to the IEA, data centres consume approximately 1-2% of global electricity at present, potentially doubling in share by 2026. In May, we signed a co-operation agreement with AVK, the largest and fastest-growing supplier of power solutions for data centres in Europe, to deliver on-site power generation for European data centres. The combination of AVK's track record in power system design for data centres and Wärtsilä's leading expertise in designing and manufacturing high-efficiency medium-speed engines has interesting potential moving forward.

Flexible power generation solutions play a vital role in balancing intermittent renewable energy sources. It is crucial for our customers that the solutions we sell are future-proof, and in the case of engine power plants, ready to run on sustainable fuels when these fuels become readily available. In June, Wärtsilä reached a significant milestone by launching the world's first large-scale 100% hydrogen-ready engine power plant concept. This solution can use natural gas today to provide flexibility and balancing, and can be converted to run on hydrogen, thereby future-proofing the journey to net zero.

In the marine market, trade flows continued to be heavily impacted by the sanctions on Russia, and attacks on ships in the Red Sea. Global trade is facing challenges from longer average shipping distances, higher transportation costs, and delays to global supply chains, which have ultimately increased the demand for ship capacity. Investments in new ships during the first half of the year were clearly higher than in the comparison period, and the uptake of alternative fuels remained at a healthy level. Despite a continued increase in shipyard capacity and output, especially in China and South Korea, newbuild ship prices continued to be high, indicating a shortage of yard capacity. Market sentiment continued to develop favourably for Wärtsilä, with momentum building in our key segments, and with decarbonisation-related retrofits and longer trade routes supporting services. For instance, in May, we announced that we will supply the electrical systems needed to convert two Scandlines ferries to a plug-in hybrid solution, the world's largest conversion project of its kind. Ship hybridisation is one of the solutions for decarbonisation, and with this project, we can help Scandlines towards their target of achieving emission-free operations on the route by 2030.

Wärtsilä's order intake in the second quarter increased organically by 12%. Service order intake increased, supported by good activity in Marine. Equipment order intake increased, supported by higher equipment order intake in Marine, Engine Power Plants, and Portfolio Business. Equipment order intake in Energy Storage & Optimisation decreased, resulting from lower battery material prices.

Net sales in the second quarter increased organically by 9%, with growth in both service and equipment. In Energy, the equipment business is lumpy by nature, which means that order intake, as well as revenue recognition, can vary significantly from one quarter to another. We expect that the equipment deliveries in the second half of 2024 will grow faster than the service deliveries. This is driven by equipment deliveries in Energy, both for Engine Power Plants and Energy Storage & Optimisation, being tilted towards the second half of 2024. In Marine, the lead times from equipment order intake to net sales are slightly longer, due to the remaining constraints in shipyard capacity.

The comparable operating result increased by 63% to EUR 176 million with a comparable operating margin of 11.3%. The comparable operating result increased in both Marine and Energy, and also in our businesses to be divested, reported under Portfolio Business. During recent years, Wärtsilä's comparable operating margin percentage has typically reached its high in the fourth quarter of each year. In 2024, we do not expect to see that normal seasonality, given the mix impact from increasing equipment deliveries in the second half of the year.

Cash flow from operating activities significantly improved to EUR 216 million during the second quarter. The improvement in cash flow was driven by a better operating result, but also by our good working capital development. Over the past twelve months, Wärtsilä has generated over a billion euros of cash flow from its operating activities.

In October 2023, we announced a strategic review of Energy Storage & Optimisation to accelerate its profitable growth in a way that benefits customers, employees, and value creation for Wärtsilä shareholders. This review is still ongoing.

We expect the demand environment for the coming 12 months to be better than for the comparison period in both Marine and Energy. Innovation in sustainable technology remains at the heart of Wärtsilä as we continue our focus on helping our customers to continuously improve their environmental and economic performance. We are focused on executing our strategy and remain very well positioned for the transformation towards carbon-neutral shipping and a 100% renewable energy future."

KEY FIGURES

MEUR 4-6/20 4-6/20 Change 1-6/20 1-6/2023 Change 2023
24 23 24
Order intake 1,854 1,687 10% 3,778 3,427 10% 7,070
of which 982 913 8% 1,931 1,802 7% 3,519
services
of which 872 774 13% 1,847 1,625 14% 3,550
equipment
Order book, 7,607 6,249 22% 6,694
end of
period
Net sales 1,556 1,454 7% 2,877 2,919 -1% 6,015
of which 834 807 3% 1,666 1,543 8% 3,148
services
of which 722 647 12% 1,211 1,376 -12% 2,867
equipment
Book-to-bill 1.19 1.16 1.31 1.17 1.18
Comparable 180 113 60% 317 206 54% 518
adjusted
EBITA*
% of net 11.6 7.8 11.0 7.1 8.6
sales
Comparable 176 108 63% 308 196 57% 497
operating
result
% of net 11.3 7.4 10.7 6.7 8.3
sales
Operating 168 66 156% 295 158 87% 402
result
% of net 10.8 4.5 10.2 5.4 6.7
sales
Result before 160 53 200% 278 137 103% 364
taxes
Earnings per 0.20 0.05 0.34 0.14 0.44
share
(EPS), basic
and
diluted, EUR
Cash flow 216 75 475 219 822
from
operating
activities
Net interest -250 462 35
-bearing
debt, end of
period
Gearing -0.11 0.23 0.02
Solvency, % 35.3 33.5 37.0
*Comparable
adjusted
EBITA
excludes
items
affecting
comparability
and purchase
price
allocation
amortisation.

Wärtsilä presents certain alternative performance measures in accordance with the guidance issued by the European Securities and Markets Authority (ESMA). The definitions of these alternative performance measures are presented in the Calculations of financial ratios section.

ANALYST AND PRESS CONFERENCE

A virtual analyst and press conference will be held as a webinar today, Friday 19 July 2024, at 10.00 a.m. Finnish time (8.00 a.m. UK time).

Participating via the web

Register and login to the web interface via the web address below. When you register, you are prompted to participate as a listener or as an active Q&A participant. Once the event starts, the event page will switch to the presentation mode automatically.

wartsila.videosync.fi/q2-2024/register

If you are participating via the web, you can enter the Q&A que by clicking the raise hand button on the bottom-right corner of the video/audio player. Once the event host announces your name, please open your microphone from the bottom-left corner of the video/audio player to be able to be heard.

Participating via the teleconference

Please use the teleconference dial-in option only if you experience issues with the web participation or your organisations firewalls set limitations for the web participation.

You can access the teleconference by registering on the link below. After the registration you will receive an email with the dial-in numbers and your personal PIN code to access the conference.

palvelu.flik.fi/teleconference/?id=50048992

If you are participating via the dial-in teleconference, you can enter the que by clicking *5 (star-five) in the telephone keypad, and if you want to withdraw your question, click *6 (star-six) respectively.

A recording of the webcast will be available on the company website as soon as possible after the event.

For further information, please contact:

Arjen Berends
Executive Vice President & CFO
Tel. +358 10 709 5444
arjen.berends@wartsila.com

Hanna-Maria Heikkinen
Vice President, Investor Relations
Tel. +358 10 709 1461
hanna-maria.heikkinen@wartsila.com 

For press information, please contact:

Anne Alarotu
Head of External Communications
Tel. +358 50 487 1308
anne.alarotu@wartsila.com

Wärtsilä in brief

Wärtsilä is a global leader in innovative technologies and lifecycle solutions for the marine and energy markets. We emphasise innovation in sustainable technology and services to help our customers continuously improve environmental and economic performance. Our dedicated and passionate team of 17,800 professionals in more than 280 locations in 79 countries shape the decarbonisation transformation of our industries across the globe. In 2023, Wärtsilä's net sales totalled EUR 6.0 billion. Wärtsilä is listed on Nasdaq Helsinki. www.wartsila.com