Wärtsilä’s scrubber order intake takes a hit as fuel price spread narrows
- Business & Finance
The Finnish technology group Wärtsilä has reported a 12 percent order intake fall during the first quarter of 2020 as a result of the global measures aimed at curbing the spread of the COVID-19 pandemic.
The order intake was worth EUR 1.2 billion when compared to EUR 1.4 billion in the same period last year, while the order book at the end of the quarter stood at EUR 5.7 billion, down by 4 percent year-on-year.
Profit before taxes for the quarter was EUR 43 million, down 45 percent when compared to EUR 78 million a year ago.
The company expects a greater impact to be felt on its earnings from March into the second and potentially the third quarter of the year depending on the pace of the recovery of the markets in which the company operates.
Consequently, Wärtsilä withdrew its market outlook for 2020 on 31 March 2020 pending an improvement in visibility.
According to Wärtsilä’s CEO Jaako Eskola the demand in the first quarter was reasonable having in mind the overall market situation, with the decline in marine order intake largely driven by the lack of scrubber investments, as fuel spreads have narrowed.
“The effects of the coronavirus pandemic are increasingly becoming visible in the demand environment of our markets. The cruise segment in particular has been severely affected by the actions taken to contain the virus spread, while several energy project sites have been demobilised. The risk of weakening economic activity has caused shipowners and operators to re-evaluate their investment plans,” Eskola said, adding that investment decisions for new power generation capacity are being shelved as well.
“The weakened demand outlook, in combination with anticipated delivery postponements and challenges in accessing customer sites, will have a material effect on our financial development this year. “
In order to mitigate this impact, the tech company has been on a cost-cutting mission saving approximately EUR 100 million by reducing working hours and initiating temporary layoffs, as well as by limiting the use of external personnel and consultants.
Eskola added that the company remains committed to investing in R&D projects that are critical to its long-term success, such as developing the use of alternative, commercially viable and environmentally friendly fuels to reduce greenhouse gas emissions in the shipping and energy sectors.
“I am therefore pleased to highlight both the advances we have recently made in testing the use of ammonia in our engines and fuel systems, as well as the funding we have received for the X-Ahead project. The aim of this project is to develop deep expertise in the technical and business potential of Power-to-X, which will be used to promote a carbon-neutral economy,” he pointed out.