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W?rtsil? Cuts 600 Jobs

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Published Jul 17, 2015 1:50 AM by The Maritime Executive

Wärtsilä's Ship Power business, now renamed Marine Solutions, is cutting 600 jobs to realign its organization, operations and resources in response to the sluggish global marine market situation. 

Of 600 jobs cut, 160 will be in Finland. A portion of the job cuts will be realized through retirements.

In taking these measures, Wärtsilä seeks annual savings in the region of EUR 40 million ($45 million). The effect of the savings will materialize gradually beginning from the third quarter of 2015, and will take full effect by the end of 2016. The non-recurring costs related to the restructuring measures will be approximately EUR 25-30 million.

"The marine industry has been slow in recovering from the global economic crisis and new shipbuilding contracting is weak,” says Jaakko Eskola, President, Marine Solutions, Senior Executive Vice President, Wärtsilä Corporation.

“At the same time, the offshore oil and gas industry has been adversely affected by lower oil prices. In addition, there are risks related to vessel owners negotiating extensions to existing delivery contracts. The combined impact of these developments has created a challenging market situation for the entire marine sector.

“These unfortunate capacity adjustments have to be made in this current environment of low demand in order for us to maintain our competitive position in the global market. Despite streamlining the organization, our commitment to our customers remains absolutely solid.”

These realignment plans are aimed at adjusting Wärtsilä's Marine Solutions business to be able to efficiently respond to the needs of its various customer segments. The effect of these adjustments will be specified when the consultation processes are initiated in the affected countries according to local practices and legislation.

Currently, Wärtsilä Marine Solutions employs 7,217 people globally.

The company has just released its interim January to June interim report, announcing the following results:

SECOND QUARTER HIGHLIGHTS

- Order intake increased two percent to EUR 1,159 million 

- Net sales increased 10 percent to EUR 1,230 million 

- Book-to-bill 0.94 

- EBITA EUR 144 million, or 11.7 percent of net sales (EUR 138 million or 12.4 percent)

- Operating result before non-recurring items EUR 137 million, or 11.1 percent of net sales (EUR 132 million or 11.8 percent)

- Earnings per share 0.54 euro 

- Cash flow from operating activities EUR 47 million 

- Acquisition of L-3 Marine Systems International finalised

HIGHLIGHTS OF THE REVIEW PERIOD JANUARY-JUNE 2015

- Order intake increased eight percent to EUR 2,443 million 

- Net sales increased five percent to EUR 2,218 million 

- Book-to-bill 1.10 

- EBITA EUR 250 million, or 11.3 percent of net sales (EUR 243 million or 11.5 percent)

- Operating result before non-recurring items EUR 237 million, or 10.7 percent of net sales (EUR 230 million or 10.9 percent)

- Earnings per share 0.97 euro 

- Cash flow from operating activities EUR 84 million 

- Order book at the end of the period increased 20 percent to EUR 5,325 million 

Wärtsilä expects its net sales for 2015 to grow by 5-10 percent and its operational profitability (EBIT percent before non-recurring items) to be 12.0-12.5 percent. The guidance includes the impact of the L-3 Marine Systems International (MSI) acquisition. MSI is expected to contribute approximately EUR 250 million to net sales and EUR nine million to the operating result during 2015. Excluding purchase price allocation amortization, MSI's operating result is estimated to reach EUR 16 million.

Previously Wärtsilä expected its net sales to grow by 0-10 percent and its operational profitability (EBIT percent before non-recurring items) to be 12.0-12.5 percent, excluding the impact of the MSI acquisition.

CEO’s comments

Björn Rosengren, president and CEO said: "Environmental awareness and changing energy needs are increasingly steering investments in the markets in which we operate. The industry dynamics are changing, and we have fine-tuned our strategy accordingly. We seek growth by offering innovative and energy efficient lifecycle solutions, as well as by leveraging our leading position in gas based technology. 

“As we enter new market segments, such as Oil & Gas and LNG terminals, and acquire companies that bring new products to our portfolio, the scope of our offering becomes more than simply powering ships or building power plants. Therefore, we have decided to rename our Ship Power and Power Plants businesses Marine Solutions and Energy Solutions.

Supported by growth in service volumes and increased power plant deliveries, Wärtsilä's second quarter net sales grew by 10 percent to EUR 1,230 million. I am especially pleased with the development of the Services business; the second quarter saw growth in both order intake and sales, and the market outlook remains positive. Profitability was 11.1 percent for the second quarter and 10.7 percent for the first half. 

“In Energy Solutions, delayed decision-making in certain projects affected our order intake. However, our solid project pipeline gives me confidence in improved activity during the second half of the year. The marine markets continue to suffer from weak vessel demand caused primarily by overcapacity, depressed freight rates, and low oil prices. 

“Marine Solutions' order intake was on a good level despite the challenging market conditions. Still, we must ensure our future competitiveness in a low demand environment. Consequently, we have today announced plans to realign our Marine Solutions organization.

Our guidance has been updated to reflect the acquisition of L-3 Marine Systems International, which was finalized at the end of May. We now expect net sales growth of 5-10 percent and profitability to be 12.0-12.5 percent."