Interim reports | Wärtsilä made a wild result, and according to the company’s management, it is just the beginning

Engineering company Wärtsilä’s earnings have been strong at the beginning of the year, and the pace did not slow down in the second quarter of the year.

On Friday morning, the company reported on the strongly increased order collection, good turnover development and a wild increase of more than 60 percent in comparable turnover. All exceeded analysts’ consensus forecasts.

“The result of the quarter is proof that our strategy is being realized in a good way. Naturally, today we focus on decarbonization. It is a long-term policy that will be realized over decades”, says the CEO Håkan Agnevall for HS.

For the strong result in the second quarter, Agnevall also credits good activity in the core areas of the company’s shipping business, such as cruises, ferries and offshore vessels, as well as the development of the company’s service business.

Wärtsilä order intake grew by 10 percent in April–June to 1,854 million euros. The organic growth of order intake was 12 percent.

Wärtsilä’s net sales increased by seven percent to 1,556 million euros. Organic growth in turnover was nine percent.

The company’s comparable operating result grew by as much as 63 percent from the previous year and was 176 million euros. The comparable operating profit percentage rose to 11.3 percent from 7.4 percent in the comparison period.

In the consensus forecast compiled by Vara Research, analysts expected the company’s turnover to be EUR 1,545 million, order intake to be EUR 1,846 million and comparable operating result to EUR 153.8 million in the second quarter of the year.

Wärtsilä The change in the results has been fast during the Agnevalli era. Agnevall started as the company’s CEO in February 2021.

At that time, we were still in the middle of the corona crisis, and just over a year later, Russia attacked Ukraine. Wärtsilä was one of the companies that had to do it significant write-downs of its Russian operations.

For Wärtsilä, however, perhaps an even bigger upheaval has been the attitude of the world’s shipping industry and authorities towards reducing emissions.

Last summer, the international maritime organization IMO agreed to reduce the net emissions of ships to zero, and emissions trading for shipping began in the EU this year.

Turn towards lower-emission shipping is to Wärtsilä’s liking. Agnevall says that already at the beginning of his CEO term, the company made a conscious decision to build its strategy around decarbonization, i.e. getting rid of coal.

“We have invested, we have changed our organization and now it is starting to bear fruit on the financial side as well,” says Agnevall.

HS reported in June that the new, lower-emission guidelines for shipping will also be visible wild numbers of visitors at the Wärtsilä factory in Vaasa. Country manager Hannu Mäntymaa then told HS that about a thousand visitors visit the factory a month.

From the outside, it seems that Wärtsilä will continue to be at the forefront of the emission reduction trend in maritime transport. But what does the situation look like from the inside of the company?

“We are still in the early stages. It is difficult to predict the future, but when we look at the decarbonization theme as a whole, I would say that we are at the very beginning. I believe that in the long term we are in a very good position.”

Wärtsilä started developing engines running on alternative fuels already a quarter of a century ago. In the beginning, it mainly meant liquefied natural gas, or LNG, but now Wärtsilä is already talking about very low-emission fuels such as e-methanol and e-ammonia, the hydrogen in which is made from water with renewable electricity.

According to Agnevalli, technology leadership is an advantage for Wärtsilä already because it brings the company credibility among customers.

“Customers want to do business with one [yhtiön] with, which is a credible sounding board for what kind of solutions the customer should implement. So we believe that technology leadership is an advantage in this era of rapidly changing technologies.”

Results announcement in connection, Agnevall brought up two topics that are being talked about in the world’s markets: the instability of geopolitics and artificial intelligence.

Agnevall wrote in Wärtsilä’s earnings release that the second quarter of the energy market “was characterized by a strengthening of protectionist economic policy, which increases trade-related risks, for example in the form of import duties recently enacted in the United States and the EU”.

Agnevall states to HS that it is still too early to assess the effects of the protectionist trend on world trade, but he believes that it will have some effects.

“Perhaps trading will be more regional. But overall, I don’t think the world will benefit from increasing trade restrictions. If we look at it more broadly, the world has benefited enormously from free trade in the last 30-40 years. But attitudes have clearly changed.”

In the results bulletin Agnevall hinted at the new opportunities brought by the current artificial intelligence enthusiasm for Wärtsilä as well. He specifically mentioned the cooperation agreement signed in May with AVK, a supplier of electrical solutions for data centers.

How does a company like Wärtsilä benefit from the artificial intelligence boom?

“Extensive language models and other artificial intelligence applications require a lot of memory. So data center sizes will grow. In general, the data centers have been powered directly from the power grid and have had a smaller motor as a backup in case the power grid fails.”

Now, according to Agnevalli, data centers are becoming so large that they can no longer rely solely on the power grid, but must also acquire their own energy source. At that point, according to Agnevalli, the power plants produced by Wärtsilä enter the picture.

“It looks promising, but we are still evaluating this possibility.”