During the year 2001 Wärtsilä Corporation continued to streamline
its structure towards becoming a specialized engineering company. In May
Wärtsilä sold about one third of its holding in Assa Abloy or 20
million shares and in June we sold all of our remaining 46.7% shareholding
in Sanitec. The proceeds from these transactions EUR 764.4 million and the
earnings of 6.32 euro per share will be used in accordance with our long-term
ambitions to develop the group. They will also enable us to distribute an
extra dividend on the year 2001.
The year 2001 took Wärtsilä’s Power Divisions a number of important
steps towards their strategic objectives. These are to lead the ship power
and distributed power markets by providing the most competitive, reliable
and environmentally sound solutions. We aim to support our marine and power
plant customers throughout the -lifetime of their equipment with high-quality
service, -operation and maintenance.
The shipbuilding industries peaked as expected during the year in terms of
order-book level. The order intake slowed down and the trend was further
amplified by the recessional trends in the world economy during the latter
part of the year. The lower demand will further increase competition among
the shipyards. Wärtsilä has an important role in assisting yards
to develop their competitiveness, as our ship power supplier concept offering
complete propulsion systems reduces engineering costs and speeds up construction
time. The acquisition of John Crane-Lips, which was completed in January
2002, is one of the building blocks of this strategy and will add about EUR
235 million in revenue to our Marine business and enhance earnings in the
longer run.
Wärtsilä’s power plant business, originally created around our
heavy fuel burning diesel engines, has developed significantly. It is today
a recognized global supplier of plants intended for distributed power generation
based on oil, gas, Orimulsion® and biofuel in the size range up to 150
MW.
The traditional heavy fuel business remained rather flat during the year
whereas the gas business, particularly in the USA, developed very well in
the beginning of the year. The tragic events of September 11th led to the
delay of several promising projects but due to the underlying demand for
new capacity we continue to remain -optimistic about the future.
In the spirit of the Kyoto agreement, much of the world is today putting
strong emphasis on carbon dioxide emissions. Initiatives, for example within
the EU to increase the share of renewable power as part of total power production,
is the basis for Wärtsilä’s entry into bio-mass burning technology
through the acquisition of Sermet Oy, a leading company in this field in
Finland. Our intention is to leverage our established worldwide sales and
project handling capabilities for selling and commissioning small biopower
plants globally.
Our Service business grew in 2001 in line with our long-term objectives by
12.6%. We consider extended maintenance and operation a strategic focus area.
Today about 5,000 of our employees are directly involved in service, operations
and maintenance. By the end of the year, we operated approximately 1,700
MW of power plants at 80 locations with several big additional projects under
negotiation. We believe that the extended maintenance concept will gradually
gain acceptance not only in power plants but also at sea. The acquisition
of Ciserv in Gothenburg, Sweden will complement our network by offering a
wide selection of ship service activities.
Imatra Steel, a wholly owned company within the Wärtsilä Group,
supplies the European automotive and engineering industries with special
steel products. The recessionary tendencies within the world economy hit
the steel industry severely during the year. Imatra Steel -continued to consolidate
its position as a key supplier of forged components to the automotive industry
by the -acquisition of a forge in the United Kingdom – today called Imatra
Stampings.
Again in 2001 we took important steps within our Power divisions towards
reaching the 7-8% EBIT margin target that we have set for 2003. Operationally
we reached 4.0%. We consider the profitability of our Power divisions to
be decisive to raising the value of our group and we initiated further rationalization
of our product portfolio and production processes to improve profitability.
During 2001 it became evident that demand in the market will not support
the engine manufacturing capacity currently available in the group. At the
end of the year, negotiations were started with the parties involved with
the objective to discontinue our activities in Zwolle and to transform our
local company in the Netherlands into a sales and service unit. The final
outcome of these -negotiations is still open but we expect them to result
in a considerable improvement of profitability in 2003.
We have made a provision of EUR 122.4 million for the costs arising from
the restructuring measures at group level. On the other hand we have booked
significant non-recurring gains from the sale of Sanitec and Assa Abloy shares.
I would like to take this opportunity to thank our customers for the trust
and loyalty that they have shown in our products and services. I would also
like to thank you, our shareholders, for the confidence you have shown in
the company and its management. And last but not least I also thank all our
employees for your efforts to make the Wärtsilä products and services
our customers’ first choice.
During the year 2001 Wärtsilä Corporation continued to streamline
its structure towards becoming a specialized engineering company. In May
Wärtsilä sold about one third of its holding in Assa Abloy or 20
million shares and in June we sold all of our remaining 46.7% shareholding
in Sanitec. The proceeds from these transactions EUR 764.4 million and the
earnings of 6.32 euro per share will be used in accordance with our long-term
ambitions to develop the group. They will also enable us to distribute an
extra dividend on the year 2001.
