The Hindu Business Line : Wartsila hopes to ride tough times on strong order book

During the current year, Wartsila’s capital expenditure across various locations globally is about €200 million (Rs 1,050 crore) with a similar level of investments planned in 2009.

R. Balaji

Chennai, Oct. 9 With an order book of €7.5 billion (Rs 48,750 cr) that would keep it busy up to and through most of 2010, the multinational Wartsila Corporation expects to come through the international financial turmoil relatively unscathed though it is keeping a close watch on developments, according to the company’s President and CEO, Mr Ole Johansson.

The main areas of operations for the Finnish manufacturing company are supplying ship power, power plants and servicing and maintenance of these equipment.

Wartsila is a €3.7-billion (Rs 24,050 cr) company that expects to grow by 25 per cent in the current year against 18 per cent in the previous year and 26 per cent the year before. Ship power and power plant supply account for about 30 per cent of the business each with servicing bringing in 40 per cent, he said.

The financial crisis in the international markets is a cause for concern as industries across various sectors are hit and there is some postponement or cancellation of projects. But the adverse impact is not uniform across industries, with construction and consumer goods being the worst affected. Wartsila is not in these areas, he said.

Order advances

Also, Wartsila’s strong order book gives it time to react to changes in markets. The orders are additionally secured by an advance payment of €1.5 billion (Rs 9,750 crore). The inflow of orders also continues to be “fairly good”, he said. Till now it has been easy to plan for growth but now it is difficult to assess what can happen over the next six months with companies keeping their capital expenditure programme flexible, Mr Johansson said.

During the current year, Wartsila’s capital expenditure across various locations globally is about €200 million (Rs 1,050 crore) with a similar level of investments planned in 2009.

Wartsila has invested €8 million (Rs 52 crore) in the last two years in India and plans to invest more, he said without specifying the numbers.

In the two areas of manufacturing that Wartsila is in, power plants and ship power equipment, the demand for power plant poses no concern as there is “no uncertainty globally with demand on high levels,” he said.

Ship power

Wartsila is a supplier of liquid fuel and natural gas-based power plants for decentralised power generation. This sector has been buoyant across the globe despite the hike in oil prices “because consumers have learned to appreciate reliable power”, he said.

In ship power — Wartsila is a leading supplier of engines, generating sets, gears, propulsion equipment across various segments of the marine industry — the company faces a “capacity restraint” and the order book is good, he said.

Mr Jaakko Eskola, Group Vice-President (Ship Power), Wartsila Corporation Ship Power, said some segments could be hit as there is over capacity, particularly in bulk carriers and large tankers. But there is good growth in other segments like support vessels with offshore activity. The financial crisis in the international markets has hit the finances of shipyards and businesses, which has resulted in some delay in orders. But fundamentals are still strong and the order book is there, he said.

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