Wärtsilä launches actions to mitigate the impact of COVID-19 and withdraws its market outlook
The markets in which Wärtsilä operates are increasingly being affected by the coronavirus (COVID-19) outbreak and the measures taken to contain the pandemic across the globe. As a consequence, economic activity is expected to slow down globally. The length and depth of the downturn remain to be seen.
Wärtsilä has implemented a wide range of special arrangements in all impacted locations to ensure business continuation and to safeguard the health and safety of its personnel. Such measures include rearranging shifts and production to avoid contamination, optimised use of multiple sourcing, as well as using virtual tools in testing and validation and in service activities. Remote working is strongly encouraged where possible, enabled by digital collaboration technology. Most factories are in operation at this time, but they are running at a lower than usual capacity. Wärtsilä’s ability to deliver on customer commitments has thus far been mostly secured.
Order intake and invoicing have developed largely in line with expectations in January and February. However, intensifying restrictions are impacting Wärtsilä’s delivery schedules, access to customer sites, and ability to perform service activities. Supply chains and logistics are also seeing disruptions. Furthermore, deteriorating macroeconomic conditions and the effect of COVID-19 on customer operations are expected to lower the demand for Wärtsilä’s solutions and services. This will materially impact Wärtsilä’s net sales and earnings for 2020 starting in March. The full financial impact cannot be quantified at this time, as it will depend on the duration and severity of measures taken to contain the virus spread and the pace of an eventual market recovery. Wärtsilä has decided to withdraw its market outlook for 2020, until visibility has improved.
Wärtsilä is taking proactive steps to minimise the negative impact on its operations globally. Simultaneously, the company is ensuring its ability to both return to normalised operations when markets recover and capture future growth opportunities. The steps being taken include reducing working hours and initiating temporary layoffs, as well as streamlining hiring and minimising the use of external personnel and consultants. Discretionary spending will also be reduced, and non-critical development projects will be postponed. The actions will be implemented locally, depending on country-specific circumstances. Wärtsilä expects these measures to generate temporary cost savings in the range of EUR 100 million. The market situation will be continuously monitored and further actions taken as needed.
The fixed salaries of the members of Wärtsilä’s Board of Management will temporarily be cut by 20%. The resulting savings will be donated to support efforts aimed at combatting the impacts of the COVID-19 pandemic.
“As the virus and efforts to contain it have spread around the world, we are facing temporary disruptions to our operations and a weakening demand environment. The decision to reduce the worktime of many valuable colleagues is one I take heavy-heartedly, but it is necessary at this unprecedented moment. Meanwhile, the Board of Management and I are determined to see Wärtsilä through this crisis. I am confident that Wärtsilä has the experience, people, and spirit to position us for recovery, when that day comes. For the next weeks and months, our unwavering focus will be on ensuring the health and safety of our people and the customers, partners and communities we serve. Furthermore, we are dedicated to keeping societies running by securing the flow of marine transport and electricity production,” says Jaakko Eskola, President & CEO of Wärtsilä Corporation.
Previous market outlook for 2020 (published on 30 January 2020):
The demand for Wärtsilä’s services and solutions in the coming 12 months is expected to be somewhat below that of the previous 12 months. Demand by business area is anticipated to be as follows:
- Soft in Wärtsilä Marine Business, as low vessel contracting is expected to affect equipment ordering activity.
- Soft in Wärtsilä Energy Business. While some recovery in equipment order intake is anticipated, market conditions remain challenging.
Wärtsilä’s current order book for 2020 deliveries is EUR 3,571 million (3,696), comprised mainly of equipment deliveries.