With its marine business recording a slight increase in deliveries and service activity over Q1 2019, Wärtsilä CEO Jaakko Eskola attributed a decline in marine orders to lack of scrubber investments due to narrowing fuel spreads and impacts from the coronavirus pandemic
The company reported reduced sales across the group’s activities with order intake down by 12% to €1.25Bn (US$1.35Bn) in Q1 2020 although the company saw slight growth in its marine equipment deliveries and service activity.
Overall, Wärtsilä’s Q1 results missed expectations with a 45% drop in quarterly profits and the share value dropped by more than 6% – an outcome the company attributed to the coronavirus pandemic – despite order intake falling less than expected.
CEO Jaakko Eskola said demand in the first quarter was reasonable in light of the present market conditions and attributed the decline in marine order intake to a lack of scrubber investments, as fuel spreads have narrowed amid the combined coronavirus-based demand slump and recent OPEC+ supply increases.
Mr Eskola continued, saying the effects of the coronavirus pandemic are becoming visible in the demand environment of the markets.
“The cruise segment in particular has been severely affected by the actions taken to contain the virus spread, while several energy project sites have been demobilised. The risk of weakening economic activity has caused shipowners and operators to re-evaluate their investment plans.”
He added that adjustments to the company’s cost base and securing the capacity for future growth are necessary and pointed to the copmany’s upcoming reorganisation.
In Q2, 2020 Wärtsilä will split its maritime operations into three businesses: One concentrated on marine power, another on onboard engineering and systems, and the third on simulation, vessel traffic and voyage solutions.
Hower Mr Eskola stressed that Wärtsilä remains committed to investing in R&D projects. Wärtsilä is developing the use of alternative, commercially viable fuels to reduce emissions and the company has received additional funding from state run Business Finland for its X-Ahead project.
Wärtsilä withdrew its market outlook for 2020 on 31 March pending an improvement in visibility.
In light of the weakened demand outlook and probable delivery postponements and challenges in accessing customer sites, Wärtsilä said it has reduced working hours and initiated temporary layoffs of staff in Finland and factories are running at lower capacity and with restricted operations for personnel.