Cautious optimism from Wärtsilä
Wärtsilä Corporation has issued its interim report for January to June 2010, in which it notes that the markets are recovering, but the situation continues to prove difficult and the restructuring programme continues.
In the marine sector, new vessel ordering activity continued to recover with about 100 ships being ordered per month. This is a clear improvement compared to 2009 when only some 400 vessels were ordered during the whole year. Contracting activity was strong in the bulk carrier segment with competitive new building prices, improved financing availability, and healthier earnings levels making investments attractive. The company says that last years' renegotiations and cancellations of vessel orders left the current vessel orderbooks at levels where the imbalance between fleet capacity and demand will be lower than earlier expectations. Activity in the offshore segment continued to be strong, and recovery in specialised tonnage continues.
Wärtsilä's share of the medium speed marine main engine market increased from 35% (at the end of the previous quarter) to 37%. The market share in low speed engines increased to 15% from 11%. In auxiliary engines, Wärtsilä's share remained at 1%. Due to the very low contracting volumes, Wärtsilä considers market shares to still be very sensitive to individual orders.
The service sector remains strong overall. But the company warns that pressure remains to reduce maintenance costs through postponing overhauls and focusing only on essential repairs.
Ordering activity for ship power showed clear signs of a pick-up and the order intake totalled €213 million , 215% above the corresponding period for the previous year, including some significant new contracts in South America. During the quarter Wärtsilä Ship Power registered 14% of its orders in the merchant segment and 57% in the offshore segment. Orders from the naval segment represented 6%, cruise and ferry segment 8%, specialist vessels segment 11% and ship design represented 3% of Ship Power's total order intake. Compared to the first quarter of 2010, order intake grew by 136% (from €90 million during the first quarter of 2010). For January-June 2010, ship power order intake was €303 million, an increase of 56% from the corresponding period in 2009.
At the end of the review period Wärtsilä's total order book stood at €4,315 million, a decrease of 26%. The Ship Power order book stood at €2,157 million,40% down. During January-June 2010, cancellations of €162 million materialised and were deducted from the order book.
In the marine industry, attractive new building prices, healthy earnings levels, and a more balanced vessel orderbook have led to a pick-up in market activity in all main vessel segments and this development is expected to continue throughout the year. For Wärtsilä, the most interesting developments are in specialised tonnage and in the offshore area.
Even though markets have bottomed out, Wärtsilä feels that the prevailing conditions will maintain ordering volumes at lower levels than during the previous peak years. Competition and price pressure among shipbuilding suppliers will remain intense. Wärtsilä expects Ship Power's order intake to clearly improve compared to 2009.
Although the risks have decreased substantially, the main risks within Ship Power remain the slippage of shipyard delivery schedules, as well as the risk of cancellation of existing orders.
Ole Johansson, president and CEO, said: "The second quarter of 2010 was strong for Wärtsilä in terms of ordering activity and it confirms clear signs of improvement in our operating environment. The recovery in the global economy is reflected in the contracting activity of the shipping industry where activity has clearly picked up during this year. The Power Plant markets have continued to be active and we closed several large contracts during the period. With the Services markets continuing to be stable, and following through restructuring measures to improve our efficiency and competitiveness globally, we reiterate our prospects for 2010."
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