Wärtsilä NSD Is Back On Track, Engine Orders Up 41%

Maritime Activity Reports, Inc.

August 9, 2000

Metra's - parent company of Wärtsilä NSD - reported that its 2Q net sales were $663.6 million, comparable growth 19%. The profit before extraordinary items was $15.2 million, comparable growth was $19.5 million. A driving force has been Wärtsilä NSD, which boasts an orderbook up 41%, and intake of new orders up 79% on same period last year.

Wärtsilä NSD posted an operating profit of $18.6 million, which is 3.6% of net sales.

Wärtsilä NSD became a wholly owned subsidiary of Metra on February 29, 2000 when Metra acquired the 15.4% minority holding owned by Fincantieri Cantieri Navali Italiani for nearly $100 million. The split-up of the Cummins Wärtsilä joint venture took place during February as well.

The acquisition of the outstanding minority shareholding in Wärtsilä NSD and Metra's participation in the Assa Abloy share issue constituted the bulk of capital expenditure during the reporting period.

Wärtsilä NSD's orderbook reached a record level at the close of the second quarter owing to major power plant orders received from India and Kenya and to a further increase in demand for marine propulsion systems. Power plant orders tripled and marine engine orders doubled between April and June compared to the low order intake in the same period last year.

Wärtsilä NSD's second-quarter net sales rose as planned. The restructuring measures contributed to raising profitability which is Wärtsilä NSD's main goal.

Shipyards around the world continued to report high orderbooks during the reporting period. South Korean shipyards were particularly successful in receiving orders for new medium-sized and large ships but increasingly also shipyards in Japan and China received orders as well. Demand was especially strong for container vessels, cruise ships and RoPax vessels. These are all ship types for which Wärtsilä NSD has proven, well established engine solutions. Wärtsilä and Sulzer engines retained their high market shares.

Wärtsilä NSD's smokeless EnviroEngine, launched in February, has contributed to the company's success and will be installed in several of the new cruise ships on order. This interest is expected to extend to other types of vessels, an indication of which is an order placed by a U.S. customer for a cargo vessel equipped with a Sulzer low-speed engine incorporating smokeless common rail technology. The engine will be built by Wärtsilä NSD's license manufacturer Hyundai in Korea. The industrial restructuring agreed upon with John Crane Lips strengthens Wärtsilä NSD's position as a ship power supplier. As a part of this Wärtsilä NSD will be the sole supplier of Lips propellers as a part of total propulsion packages. The agreement calls for transfer of Wärtsilä NSD's propeller manufacturing operation in Rubbestadsneset, Norway, along with its 120 employees, to John Crane Lips. The deal does not affect Wärtsilä NSD's service activities or manufacture of reduction gears, nor does it have any significant impact on Wärtsilä NSD's profit. Most of Wärtsilä NSD's product lines reported ongoing high utilization rates during the second quarter. Restructuring measures will be continued, especially in France and Italy. Wärtsilä NSD's Operating Excellence project aiming at total quality enhancement continues to run.

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