Wärtsilä sees earnings drop in 2022

Wärtsilä saw net sales increase by 22% in 2022, but suffered a loss of EUR26 million in large part because of the war in Ukraine and inflationary pressure.

The Finnish company announced its full-year financials during a presentation with financial analysts.

“The year 2022 was characterized by geopolitical tensions and uncertainty in the global business environment,” said Håkan Agnevall, president and CEO. “The war in Ukraine has had a strong direct and indirect impact on the markets we operate in, especially the energy markets. Following Russia’s attack on Ukraine, we exited from the Russian market. However, despite the continuing challenging market conditions, demand has remained at a good level both for equipment and services.”

For 2022, the company said order intakes increased by 6% and net sales grew by 22%. Operating results decreased by EUR 339 to Eur -26 million. This includes a write-down of EUR200 million related to the company’s exit from Russia and EUR 90 million related to the ramp-down of manufacturing in Trieste.

Agnevall also pointed to ongoing inflation, a series of internal changes—including the closure of the manufacturing facility in Trieste, Italy—as drags on earnings.

Marine markets

The company said it expects 2023 demand in the marine business (including marine power and marine systems) to be similar to that of last year. According to the company, marine market sentiment continued to improve in 2022 despite growing macroeconomic concerns.

The company said marine order activity in 2022 was supported by record orders for LNG carriers, especially in terms of order value. The company said there were 466 orders placed globally for alternative fuel capable vessels, representing 30% of all contracted ships and 60% of vessel capacity. The cruise sector’s focus shifted towards managing the capacity growth and occupancy levels in a profitable way and on mitigating the impact of rising operating costs.

The company’s marine saw strong service performance, but cost inflation was a challenge as was component unavailability. Agnevall noted a recently received an order for a hybrid propulsion system that ties batteries to a methanol engine for four heavy lift vessels being built in China.

Energy markets

In the company’s energy business, Agnevall said 42% of the company’s full year thermal order intake was related to balancing power. He added the company’s market share in gas and liquid fueled power plants increased from 7% to 8%.

Wärtsilä expects the demand environment to be better than last year.

“In the energy markets, the market situation remained volatile during the year,” Agnevall said. “The war in Ukraine, the consequent sanctions on Russia and the Covid-19 pandemic contributed to global cost inflation as well as price volatility in the energy markets. At the same time, climate policies around the world continue to evolve towards more ambitious decarbonization targets. We have seen that the demand for balancing power has been growing and we have signed important orders for both thermal balancing power and energy storage solutions throughout the year. In the fourth quarter, for example, we signed a contract to deliver a new grid-scale energy storage facility in the UK, and dual-fuel balancing engines for two new power plants in the USA, among others.”

Angevall said the company sees demand differences in US and Europe on energy.

“We can really see balancing demand moving very fast now in the US,” he said. “We see a strong market development both in thermal and in storage and the (Inflation Reduction Act) will further this transition.”

In Europe Angevall said the energy crisis has forced countries to seek out natural gas, LNG and coal for power, but “we see this as a relatively short-term phenomenon.”

But there are challenges—particularly in site permitting—before more renewables can be added in Europe, he said.

“Everybody wants green power, but not in my backyard,” he said. “The EU is working on a (permitting) framework, but this is a political issue and this is what we see holding back renewables right now.”

Agnevall said decarbonization continues to be an increasingly important topic for customers and said the energy shock caused by Russia’s invasion of Ukraine will have ripple effects in the power markets.

“The energy crisis has brought out a clear need and an ambition for a structural change in the energy sector,” Agnevall said.

2022 highlights

In July, the company announced plans to centralize 4-stroke engine manufacturing in Europe to Vaasa, Finland and to scale down manufacturing in Trieste, Italy. The estimated full annual cost savings are expected to be approximately EUR 35 million by 2025 and the associated transformation costs approximately EUR 130 million, out of which the cash flow impact is approximately EUR 75 million.

In July, the company completed the orderly exit from the Russian market and made a write-down of approximately EUR 200 million in the first quarter related to the exit.

In October, the company said it was integrating the Voyage business into Marine Power as a business unit. The integrated organization became effective as of Jan. 1.

In June, the company opened its Sustainable Technology Hub in Vaasa, Finland. The technology center enables agile development and efficient research of sustainable solutions for the marine and energy industries.

The Finnish company announced its full-year financials during a presentation with financial analysts.