More was expected from Wärtsilä

Finnish engineering company Wärtsilä (OMX: WRTBV) was among the (too) many reporting quarterly earnings towards the end of this week. The power sources maker was expected to continue to deliver improved numbers but did not quite manage to do so. Even though net sales increased by 6% to 1.1 billion Euros, operating result fell ever so slightly to 113 million, which was based on a one percentage point fall in the operating margin. Second quarter EPS came to at 38 cents. Order intake of 1.2 billion was impressive particularly as it came on the heels of an improvement from Ship Power, where specialised vessel - segment has good demand and many pump, gas and environmental system orders were also received. Power Plant orders were down marginally as some large projects have been delayed.

It would seem that some further margins weakening has been observed since CEO President and CEO Björn Rosengren said the company is continuing to work towards reaching growth and profitability targets this year. Those are net sales growth of 5-10% and EBIT% of 10-11%. For the first half sales are up by 6% and operating margin stands at 10.2%. There were some organizational tweaks aimed at helping to reach those targets.

Emerging markets should still invest heavily in power generation capacity while Wärtsilä feels there is pent-up demand in OECD countries in this segment. Vessel contracting activity outlook in general is expected to be slightly lower than last year although some segments will see strong demand. Services demand is still robust but there is some uncertainty mainly from merchant shipping where scrapping, lay-ups, slow steaming, and low utilisation of vessels continue as overcapacity remains. First half-year revenue spread is 45% from services, 30% from power plants and 25% from Ship Power.