SOLID FINANCIAL POSITION SUPPORTS OUR GROWTH AGENDA Marco Wirén, CFO & Executive Vice President 1
Business model based on growth opportunities and flexibility Faster than global GDP growth Flexible cost base Capital light expansion strategy Strong financial position Strong position in growing markets supported by solid service business Outsourced manufacturing model with low fixed costs Low capital expenditure requirements, expansion through joint ventures Customers advances create good cash flow generation. Low gearing supports M&A. 2
Net sales growth exceeds world GDP Wärtsilä s growth 2005 2014 GDP growth 2005 2014 1 7.9% 5260 6.1% 4612 4553 4209 4725 4654 4779 3763 3190 2520 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Note 1: World nominal GDP growth, USD denominated, IMF World Economic Outlook October 2014 3
Geographically dispersed sales limits dependence on specific economies USA 7% United Kingdom Norway 5% 3% 3% The Netherlands China and Hong Kong Russia 4% South Korea 9% 8% Brazil 1% Africa Singapore 4% 4% 3% Indonesia 4
Balanced customer segment exposure New equipment net sales Services net sales Traditional merchant 4% Cruise and Ferry 5% Special vessels 6% Navy 2% Other marine 2% Industrial 9% Utilities 14% Special vessels 8% Navy 7% Industrial 9% Utilities 15% Traditional merchant 16% Offshore 28% IPPs 17% Cruise and Ferry 12% IPPs 14% Gas carriers 13% Offshore 15% Gas carriers 4% Power Plants Ship Power 5
Flexibility in the cost base 21% 3% 12% 32% 14% 27% 65% 1% 25% Variable Semi-fixed Fixed Input materials Energy External services Depreciation and amortisation Employee benefit expenses Other operating expenses 6
Limited exposure to exchange rate risks Net sales by currency 2014 12% 2% Operating costs by currency 2014 26% 19% 67% 8% 7% 58% EUR USD NOK Other currencies Sales currency related principles: Equipment sales priced in euro Global spare parts price list in euros Local service work invoiced in local currency EUR USD NOK Other currencies Sensitivity analysis Impact of EUR exchange rate compared to other currencies: +/- 10% would result in -/+ 3.6% change in net sales Marginal impact on profitability 7 24 March, 2015 Marco Wirén
Limited exposure to exchange rate risks Transaction risks, fully hedged Equipment and spare parts sales mainly in euro Non-euro priced component purchases against the order book Translation risks limited, not hedged Local currency sales in non-euro countries Investments and goodwill in non-euro based subsidiaries Intragroup funding of subsidiaries in countries with not fully convertible home currencies 8 24 March, 2015 Marco Wirén
Our order book provides visibility Order book delivery time Order book rotation MEUR 4 530 69% NEW EQUIPMENT BUSINESS SHIP POWER 6 months-1.5 years POWER PLANTS 6 months-2 years 31% VOLUME BUSINESS SERVICES Average 3 months As of Dec 2014 To be delivered in 2015 To be delivered in 2016 and beyond 9
Sales guidance 2015 some growth expected MEUR 6000 5000 4000 +0-10% +0-10% +0-10% 3000 2000 Of which Services order book EUR 600 million 4 779 1000 3 100 0 Order book for 2015 deliveries 31.12.2014 Services' order intake for 2015 deliveries Ship Power & Power Plants' order intake for 2015 deliveries Sales 2015 Sales 2014 10
Solid profitability over the cycle MEUR 600 14% 500 400 10.7% 11.1% 10.9% 11.2% 11.9% 12% 10% 300 8% 6% 200 4% 100 2% 0 2010 2011 2012 2013 2014 0% EBIT before non-recurring items EBIT% before non-recurring items 2014 figures include continuing operations. Figures for 2010-2013 include both discontinued and continuing operations. 11
Balance sheet and capital allocation 12
Cash flow and working capital development Cash flow from operating activities MEUR Working capital MEUR 800 30% 800 30% 700 600 500 25% 20% 700 600 500 25% 20% 400 15% 400 15% 300 200 100 10% 5% 300 200 100 10% 5% 0 2010 2011 2012 2013 2014 0% 0 2010 2011 2012 2013 2014 0% Cash flow % of net sales Working capital % of net sales 13
Net debt and gearing on a low level Net debt MEUR 700 600 500 400 300 200 100 0-100 Gearing 1,0 0,8 0,6 0,4 0,2 0,0-200 2010 2011 2012 2013 2014-0,2 2010 2011 2012 2013 2014 14
Balanced loan maturity profiles Maturity profiles of long-term loans MEUR 140 120 100 80 60 40 20 Average maturity: 43 months Interest rate (average): 1.7% Committed revolving credit facilities MEUR 700 600 500 400 300 200 100 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2023+ 0 2014 2015 2016 2017 2018 2019 2020 15
Capital expenditure requirements low Capital expenditure & depreciation MEUR 140 120 100 80 60 40 20 Acquisitions MEUR 410 390 100 80 60 40 20 0 2010 2011 2012 2013 2014 0 2010 2011 2012 2013 2014 Capex, excl. acquisitions Depreciation, excl. acquisition related Acquisitions Acquisition related amortisation 16
Development of surplus values going forward MEUR 140 133 120 100 80 60 40 20 0 108 84 64 45 26 25 24 27 20 20 17 20 13 7 7 7 6 2 5 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Estimated amortisation Estimated year end value 17
Investing into existing business Priorities going forward R&D Total efficiency Cost of ownership Fuel flexibility and versatility Minimised environmental impact Reliability 138 139 2013 2014 Capex Secure quality of our equipment Capex for 2015, excluding growth, expected to be in line with depreciation and amortisation 116 93 2013 2014 Capitalised R&D 18
Strengthening market position through partnerships and acquisitions Reinforcing core competences through divestments and new partnerships Improving offering and market presence through acquisitions Priorities going forward Proceed with setting up of the CSSC Wärtsilä Engine Co. Ltd joint venture company Finalise L3 MSI acquisition and ensure smooth integration Pursue further M&A opportunities in Ship Power and Services 19
Focus on reaching our long-term profitability target 11.9% 14.0% Streamlining Increasing accountability Pricing Productivity Ensuring competitiveness Group efficiency program implemented during 2014 Setup of business line driven organisation Securing value based and market driven pricing Optimising lead times and focusing on continuous process improvement Investing into technological leadership 20 24 March, 2015 Marco Wirén
Growth is on our agenda Strategic focus areas provide organic growth opportunities Gas as a fuel Environmental solutions Smart Power Generation Medium scale LNG infrastructure Focus on growth markets Local manufacturing and joint ventures Acquisitions support growth targets L-3 MSI acquisition enables access to new markets 21
Thank you! www.wartsila.com 22