Wärtsilä’s Financial Statements Bulletin January–December 2023

Wärtsilä Corporation, Financial Statements Bulletin January–December 2023, 31 January 2024 at 8:30 (EET)

Wärtsilä’s Financial Statements Bulletin January–December 2023

This release is a summary of Wärtsilä’s Financial Statements Bulletin January–December 2023. The complete report is attached to this release as a pdf file. It is also available on the company website at www.wartsila.com.

ALL-TIME HIGHS IN ORDER INTAKE, NET SALES AND CASH FLOW IN 2023

Highlights from October–December 2023

• Order intake increased by 13% to EUR 1,856 million (1,638), and the organic growth, which excludes FX impact and the impact of acquisitions and divestments, was 21%
• Service order intake increased by 11% to EUR 876 million (791)
• Net sales decreased by 7% to EUR 1,644 million (1,770), and the organic decrease was 3%
• Book-to-bill amounted to 1.13 (0.93)
• Comparable operating result increased by 90% to EUR 177 million (93), which represents 10.8% of net sales (5.3).
• Operating result increased by 248% to EUR 128 million (37), which represents 7.8% of net sales (2.1).
• Basic earnings per share increased to 0.16 euro (0.05)
• Cash flow from operating activities increased to EUR 389 million (51)

Highlights from January–December 2023

• Order intake increased by 16% to EUR 7,070 million (6,074), and the organic growth was 22%
• Service order intake increased by 15% to EUR 3,519 million (3,066)
• Order book at the end of the period increased by 13% to EUR 6,694 million (5,906)
• Net sales increased by 3% to EUR 6,015 million (5,842), and the organic growth was 7%
• Book-to-bill amounted to 1.18 (1.04)
• Comparable operating result increased by 53% to EUR 497 million (325), which represents 8.3% of net sales (5.6)
• Operating result increased by EUR 427 million to EUR 402 million (-26), which represents 6.7% of net sales (-0.4)
• Basic earnings per share increased to 0.44 euro (-0.11)
• Cash flow from operating activities increased to EUR 822 million (-62)
• Dividend proposal 0.32 euro per share (0.26)

WÄRTSILÄ'S PROSPECTS

Marine

Wärtsilä expects the demand environment for the next 12 months (Q1/2024-Q4/2024) to be better than that of the comparison period.

Energy

Wärtsilä expects the demand environment for the next 12 months (Q1/2024-Q4/2024) to be better than that of the comparison period.

HÅKAN AGNEVALL, PRESIDENT & CEO: IMPROVING PROFITABILITY AND CONTINUING SERVICE GROWTH

“In 2023, Wärtsilä continued to develop positively in many ways. Our financial performance improved steadily throughout the year, and we achieved all-time highs in order intake, net sales, and cash flow from operating activities. We improved our profitability through growing services, improving the quality of revenues, and progressing in turning around Energy Storage & Optimisation and former Voyage operations. We mitigated the headwinds from cost inflation, geopolitical concerns, and a slowdown of global economic growth. The market sentiment for our businesses remained fairly positive in both marine and energy, and we maintained our focus on executing our strategy and supporting our customers in their decarbonisation journeys.

In the energy market, climate policy reached new milestones in 2023. At COP28, the United Nations Climate Change Conference, more than 120 countries pledged to triple global renewable energy capacity by 2030. The COP28 final declaration also called for transitioning away from fossil fuels, in line with Wärtsilä’s vision of a 100% renewable energy future and our readiness to enable engines to run on future fuels. During the year, the macroeconomy caused uncertainty in the overall investment environment, delaying decision-making especially in the engine power plants business. After a slow first three quarters of the year, our engine power plants business significantly picked up and achieved good order intake during the fourth quarter. As an example, we signed a contract to supply two 30 MW power plants for Indonesian state-owned utility PLN, each of them operating with three Wärtsilä 31DF dual-fuel engines. Wärtsilä’s engines will deliver high efficiency, reliable power generation, and fuel flexibility to contribute to Indonesia’s decarbonisation efforts.

In the marine market, the investment appetite for new ships remained healthy in 2023, despite capacity limitations at the main shipyards in South Korea and China and further increases in newbuild prices. In July, the International Maritime Organisation (IMO) updated its strategy on cutting greenhouse gas emissions from ships, with a more stringent goal of reaching net zero emissions by or around 2050. As a result, stakeholders are now more aligned globally on the requirements and investments needed to decarbonise the industry. This will accelerate the decarbonisation transition in marine where Wärtsilä solutions can make a real difference. Decarbonisation provides notable opportunities, not only for newbuilds, but also for retrofits and conversions as shipowners and operators seek to keep their existing fleets compliant and competitive. As an example, during the fourth quarter we agreed to retrofit ten tankers for the Singapore head-quartered global tanker operator Hafnia with our EnergoFlow and EnergoProFin propulsion solutions. With these Wärtsilä’s solutions, fuel efficiency is improved, emissions are reduced, operating costs are lowered, and both the Carbon Intensity Indicator (CII) rating and Energy Efficiency Existing Ship Index (EEXI) value are improved.

The ongoing war in Ukraine and the conflict in the Middle East have resulted in various risks to both the demand and supply environment. The heightened geopolitical tensions have increased risks related to further geopolitical fragmentation and increased overall uncertainty to the macroeconomic outlook. We have also seen disruptions at key waterways, which have led to longer trade distances and increased costs for shipowners and operators.

In 2023, order intake grew organically at 22%, and net sales organically at 7%. Equipment net sales decreased in Marine Systems and engine power plants. The comparable operating result increased by 53% to EUR 497 million with a comparable operating margin of 8.3%. This was mostly driven by continued growth in services and improved quality of revenues. Services accounted for 52% of our net sales, and we see additional growth opportunities by continuing to move up the service value ladder. Around 30% of our installed base is now under agreement coverage, and we are very proud that the customer renewal rate for our agreements is around 90%. This is a proof point of the value we are creating for our customers. After continued growth and operational improvements, our Energy Storage & Optimisation (ES&O) business is now profitable, and the turnaround of the business activities that earlier formed Voyage is now also going according to plan. Additionally, the delivery projects that we captured before the acceleration of cost inflation, and which burdened our profitability in 2022 and for the first three quarters of 2023, are delivered and are no longer a part of our orderbook. Our profitability was hampered by a single sizeable turnkey project in Gas Solutions, for which we took a total provision of EUR 48 million in 2023. Gas Solutions ceased offering turnkey projects several years ago, and the project in question is nearing completion. Cash flow from our operating activities significantly improved to EUR 822 million, driven by a better operating result, good level of received customer payments, and our continued working capital optimisation.

During the year, we actively managed our business portfolio to best support our strategy. Earlier in the year, the Automation, Navigation & Control Systems (ANCS) and the Marine Electrical Systems business units were moved from Marine Systems to Portfolio Business in preparation for a divestment. In November, we announced that the Gas Solutions business unit will also be moved to Portfolio Business, while the remaining two Marine Systems business units – Shaft Line Solutions and Exhaust Treatment – will be moved to Marine Power. From the beginning of 2024, Wärtsilä has two reporting segments: Marine and Energy. Portfolio Business will continue to be reported as other business activities. In October, we announced a strategic review of ES&O to accelerate its profitable growth in a way that benefits its customers, employees, and the value creation for Wärtsilä shareholders. This review is still ongoing, during which all potential alternatives will be considered. Such alternatives could include different ownership options of the ES&O business from continued full ownership to potential full or partial divestment of the business or other possible strategic alternatives.

To support our decarbonisation technology development, we have increased our R&D spending from the historical average of ~3% of net sales to ~4%. In 2023, we launched the world’s first 100% 4-stroke ammonia solution for marine applications, which will enable a significant advancement in sustainable shipping operations. We also introduced another four methanol-ready engines to our portfolio, setting a new industry benchmark with the broadest methanol engine portfolio. In 2025, we will deliver an engine concept ready for operating with pure hydrogen. We have also been testing our maritime carbon capture and storage (CCS) system at a 70% capture rate. We are preparing for the first pilot installation to take place in 2024 with the intention of launching the product in 2025. While much of the decarbonisation work is still ahead, Wärtsilä already today has solutions and technologies that enable the transition to low-emission shipping and 100% renewable power systems.

We expect the demand environment for the coming 12 months to be better than the comparison period in both the Marine business and in the Energy business. We are on a clear path to reach our financial targets. Key drivers for reaching our profitability target will be to continue moving up the service value ladder, improving the newbuild business supported by the decarbonisation transformation, increasing the profitability of Energy Storage & Optimisation, and continuing the divestments of our Portfolio Businesses. Wärtsilä is an established technology leader in the decarbonisation transformation. We can make a difference in our industries and the world, while securing our financial performance and delivering attractive long-term shareholder value. I would like to sincerely thank our customers for your trust in our solutions and services, all my Wärtsilä colleagues for your commitment towards reaching our common goals, and our shareholders for your confidence in Wärtsilä’s future success.”

KEY FIGURES

MEUR	10–12/2023	10–12/2022	Change	1–12/2023	1–12/2022	Change
Order intake	1,856	1,638	13%	7,070	6,074	16%
of which services	876	791	11%	3,519	3,066	15%
of which equipment	980	848	16%	3,550	3,008	18%
Order book, end of period				6,694	5,906	13%
Net sales	1,644	1,770	-7%	6,015	5,842	3%
of which services	843	784	8%	3,148	2,775	13%
of which equipment	800	987	-19%	2,867	3,067	-7%
Book-to-bill	1.13	0.93		1.18	1.04
Comparable adjusted EBITA*	182	99	85%	518	349	48%
% of net sales	11.1	5.6		8.6	6.0
Comparable operating result	177	93	90%	497	325	53%
% of net sales	10.8	5.3		8.3	5.6
Operating result	128	37	248%	402	-26	1673%
% of net sales	7.8	2.1		6.7	-0.4
Result before taxes	120	35	242%	364	-32	1240%
Basic earnings/share, EUR	0.16	0.05		0.44	-0.11
Cash flow from operating activities	389	51		822	-62
Net interest-bearing debt, end of period				35	481
Gearing				0.02	0.23
Solvency, %				37.0	35.3
*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.

BOARD OF DIRECTORS’ DIVIDEND PROPOSAL

The Board of Directors proposes that a dividend of EUR 0.32 per share shall be paid for the financial year 2023. The parent company’s distributable funds total EUR 1,074,016,204.80, which includes EUR 157,126,640.44 in net profit for the year. There are 589,023,390 shares with dividend rights. The dividend shall be paid in two instalments.

The first instalment of EUR 0.16 per share shall be paid to the shareholders who are registered in the list of shareholders maintained by Euroclear Finland Oy on the dividend record date of 11 March 2024. The payment day proposed by the Board for this instalment is 18 March 2024.

The second instalment of EUR 0.16 per share shall be paid in September 2024. The dividend record day of the second instalment shall be 11 September 2024, and the second instalment of the dividend shall be paid to shareholders who are registered in the list of shareholders maintained by Euroclear Finland Oy on such day. The Board proposes the second instalment is paid on 18 September 2024.

ANALYST AND PRESS CONFERENCE

A virtual analyst and press conference will be held as a webinar today, Wednesday 31 January 2024, at 10.00 a.m. Finnish time (8.00 a.m. UK time).

The service provider for the conference has changed. New service supports participating and stating questions both via web interface and by dialling in with a telephone. 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.

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.

https://wartsila.videosync.fi/q4-2023

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

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.

http://palvelu.flik.fi/teleconference/?id=10012487

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
[email protected]

Hanna-Maria Heikkinen
Vice President, Investor Relations
Tel. +358 10 709 1461
[email protected]  

For press information, please contact:

Saara Tahvanainen
Executive Vice President, Communications and Marketing
Tel. +358 40 589 0223
[email protected]

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