Wärtsilä’s Eskola: Impact of COVID-19 "Clearly Visible" on 1H Results

Wärtsilä Corporation’s half year financial report through June 2020 was littered with bad news due to the impact of the COVID-19 pandemic, with order intake and order book both down – 19% and 12% respectively in the January to June 2020 period. But the bad news was countered with a report of stable net sales and strong cash flow.

“The adverse impact of COVID-19 on both our own operations and those of our customers increased during the second quarter. This was clearly visible in the decrease in orders received across all businesses,” Jaakko Eskola, President and CEO, Wärtsilä. “The decline in demand was especially strong in the cruise industry. Customer interest in scrubber investments was another area of weakness, due to the turmoil in global oil markets. In the energy business, customers remained hesitant to commit to new investments. With this is mind, the order to supply a 200 MW flexible baseload power plant to South America showed that progress can be made, even in exceptional circumstances. Service activity was negatively affected in our businesses by the lower utilization of installations, as well as by virus containment measures.”

Despite the bad news, Eskola was able to point out some areas of strength: “Given this difficult back-drop, second quarter net sales held up reasonably well; this was mainly thanks to increased equipment deliveries, which offset the volume decline in services,” said Eskola. “The resulting sales mix weakened our profitability, as did COVID-19 driven cost inflation, lower than normal capacity utilization in our European factories, and the ongoing limited mobility of field service personnel despite some recent easing of travel restrictions. While visibility remains low, it is clear that the effects of the pandemic on our financial performance this year will be material. The short-term cost saving initiatives announced in the first quarter to moderate these effects have progressed according to plan. In the second quarter, we realized the first savings, both from reduced discretionary spending and worktime reductions.”

Some key figures (millions of Euros):
                                                                               Jan-June 2020        Jan-June 2019         % Change
Order intake                                                            2,259                        2,793                          -19%
of which services                                                    1,120                        1,277                           -12%
Order book, end of period                                       5,401                        6,157                           -12%
Net sales                                                                 2,390                        2,368                              1%
of which services                                                     1,103                        1,186                             -7%
Operating result                                                        101                            187                             -46%
Comparable operating result                                     111                            215                            -48%
Profit before taxes                                                      79                            162                             -51%
Personnel, end of period                                         18,334                      19,239                           -5%