Wärtsilä sees evidence of recovery

By the end of the third quarter, 1,150 vessels were ordered,which, it notes, is notably more than for all of 2009. Contracting activity continued to be good in the bulk carrier segment, supported mainly by Chinese ship owners. Backed by the recovery in trade volumes and attractive new building prices a pick-up was seen in the container vessel segment and this development is expected to continue. Some LNG vessel contracts were signed during the quarter after a long silent period. Activity in the offshore segment continued to be strong, and recovery in the more specialised tonnage continues.

China continued to strengthen its position in the shipbuilding industry, and dominated the market both in terms of number of vessels and tonnage. China’s market share in number of vessels was 49%, Korea’s 30%, Japan’s 7% and Europe’s 5%. During the review period, emerging shipbuilding regions, such as Brazil, Russia and the Philippines secured 9% of all contracts.

In ship power, the order intake for the third quarter totalled €176 million, which is 160% above the corresponding period in 2009. During the quarter, Wärtsilä noted increased activity in the offshore segment, including a number of orders featuring dual-fuel engine technology that enables vessels to run on clean LNG fuel. The company believes this highlights the success of its strategy to be a systems integrator, ship designer and solution provider. The offshore segment represented 43% of the total ship power orderbook.

However, even though more orders were received, market share decreased. Wärtsilä’s share of the medium speed main engine market decreased from 37% (at the end of the previous quarter) to 32%. The market share in low speed engines decreased to 12% from 15%, though in the auxiliary engine market Wärtsilä’s share increased to 3% from 1%.

The company was bolstered further by excellent results from the power plant sector, and also in services, despite pressure to reduce maintenance costs through postponing overhauls and focusing only on essential repairs. Wärtsilä says that its marine customers are increasingly looking for optimisation of assets to reduce costs and environmental footprint, driven by rising fuel prices and overcapacity in the market.

The planned restructuring continues, to cut costs and boost efficiency levels, with staff layoffs and factory closures continuing as previously announced.

According to president and CEO Ole Johansson: “The third quarter was strong for Wärtsilä at all levels, as net sales developed according to plan, profitability was strong, and cash flow from operating activities was at an all time high level. As a result of this positive development we now expect our profitability to exceed 10% for the year 2010. The improvements in Wärtsilä’s market environment that started in the second quarter have continued, and we expect the order intake for the full year to clearly exceed last year’s levels. Despite this, structural changes in the market, intense competition and price pressure support our restructuring and efficiency improvement measures which will ensure our competitiveness also in the future.”

Although net sales and profitability still show a decline overall, the decline is significantly lower than originally expected.