On October 23, Finnish ship technology and power plant maker Wartsila reported lower than expected quarterly profit and new orders which downgraded the demand outlook for its services division, sending its shares down 9 percent.
Services account for almost half of the company’s revenue and Wartsila service orders from the marine sector have been slow to pick up as the global shipbuilding industry recovers from a lengthy downturn.
Postponed Investment Divisions
In addition, Wartsila said its power plant business was hit by postponed investment decisions by clients uncertain about the global environment due to ongoing trade disputes.
Wartsila Chief Executive Jaakko Eskola told, “We had expected somewhat more activity in the merchant and oil and gas (ship) segments. The global situation, the uncertainty, may have had its impact”, citing trade disputes without giving specific details.
Total third-quarter adjusted operating profit rose 8 percent from a year ago to 141 million euros ($162 million) but missed analysts’ average estimate of 152 million euros.
New orders
New orders were up 1 percent at 1.37 billion euros, compared to a market forecast of 1.50 billion euros. Shares in the company were down 9.0 percent at 12.90 euros by 0915 GMT, among the worst performers on the Euro STOXX 600 index.
OP Bank analyst Pekka Spolander said, “This was indeed a disappointment and it was due to the service business. Wartsila had already indicated that the profits would be focused on the last quarter but I don’t believe it could make up for all (the shortcomings in previous quarters)”.
Wartsila cut its full year demand outlook for the service business to “solid” from “good” and repeated its forecast for “good” demand for the ship technology and energy businesses.
Expected future growth
Eskola said he expected to see future growth on the back of a pick-up in shipbuilding, the need for renewable power plants as well as demands to reduce maritime emissions by 2020.
Wartsila is the market leader in so-called sulphur scrubbers that strip sulphur as fuels are burned, allowing ships to continue using high-sulphur fuel oil.
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Source: Reuters
