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Wartsila Reports Q3 and 9-Month Results

Wartsila reported profit before taxes of 132 million euro on revenues of 1.2 billion euro for the third quarter ended Sept. 30, 2015, compared to profit before taxes of 129 million on revenues of 1.1 billion euro last year. For the nine-month period, profit before taxes was reported to be 345 million euro on revenues of 3.5 billion euro, compared to profit before taxes of 338 million euro on revenues of 3.6 billion euro last year.

“Net sales increased by 9% to EUR 1,222 million in the third quarter, supported by growth in aftermarket activities and by the contribution from L-3 Marine Systems International. Good development within Services contributed to profitability, which reached 13.1%. We are well on track to reach our guidance for sales and profitability development this year,” said Bjorn Rosengren, president and CEO, in a prepared statement.

According to Wartsila, competition in the power generation markets is increasing, and the current macroeconomic uncertainty continues to cause delays in customer decision-making. Nevertheless, the project pipeline is solid and the company continues to see opportunities for improved activity in the upcoming quarter. The Marine Solutions markets remain challenging. Low vessel contracting volumes, together with weak sentiment in the offshore segment, is impacting the order intake. However, the Services business is compensating for the lower demand in equipment markets. Improved maintenance demand from marine customers and stability within power plant service indicates a positive outlook for the rest of this year.

Rosengren said that Wartsila’s mission is to shape the marine and energy markets with advanced technologies while focusing on lifecycle performance. “We are well positioned to benefit from the ongoing fundamental changes in our end markets, and from the increasing demand for higher efficiency with fewer emissions. Furthermore, we have during the past few years initiated various measures to develop the efficiency and flexibility of our own operations. I am confident in Wartsila’s long-term opportunities for growth and improved profitability, and believe that Jaakko Eskola (president and CEO), with his strong and proven track record, is well suited to lead the company towards continued success. I would like to take this opportunity to thank our shareholders and the entire Wartsila organisation for the inspiring past four years.”

The market for liquid and gas fuelled power generation is expected to remain challenging as economic uncertainty continues. Despite the slower economic growth in the emerging markets, growth in electricity demand will support power plant investments. In the OECD countries, low economic growth continues to limit demand for new power plants. Low gas prices are driving demand in the U.S. The megatrend towards distributed, flexible gas-fired power generation is gaining further ground globally. The increasing deployment of intermittent renewable power, such as wind and solar, will require flexible solutions to balance the power systems. Electricity markets, all over the world, are being developed to accommodate the necessary flexibility.

The overall outlook for the shipping and shipbuilding markets remains challenging, according to Rosengren. He said that overcapacity continues to affect demand. Low oil prices are impacting investments in offshore exploration and development, resulting in weak contracting of offshore drilling units and support vessels. Gas carrier contracting is expected to remain on a normalized level. The outlook for the cruise segment remains positive thanks to an anticipated increase in Asian passenger traffic, while the outlook for ferries is supported by signs of economic recovery in the U.S. and Europe. The importance of fuel efficiency and environmental regulations are clearly visible. The regulatory environment is driving interest in gas as a marine fuel in the wider marine markets.

Wartsila also stated that the overall service market outlook is positive with growth opportunities in selected regions and segments. An increase in the installed base of medium-speed engines and propulsion equipment is offsetting the slower service demand for older installations and the uncertainty regarding short-term demand in the merchant marine segment. The service demand for installations operating on oil based fuels is expected to grow as low oil prices have had a favorable impact on operating costs. Although the decline in oil prices has resulted in a challenging outlook for offshore services in specific regions, the growth during recent years in the offshore installed base partially compensates for a potential decline in service volumes. The service outlook for gas fuelled vessels remains favorable. Service demand in the power plant segment continues to be good with an especially positive outlook in the Middle East and Africa. Customers in both the marine and power plant markets continue to show healthy interest in long-term service agreements.

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