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Wartsila sees recovery in second quarter

Wartsila sees recovery in second quarter

Helsinki: Engineering group Wartsila has reported strong second-quarter earnings on Wednesday, powered by buoyant sales in its shipping and power plants units, and said the risk for shipping order cancellations had eased, writes Reuters. "This report is strong on every line... (and) it did not include any big ticket orders," said one Helsinki-based analyst speaking on condition on anonymity. "There had been two fears with Wartsila ahead of the result: the resilience of its after market operations (services) and the sustainability of its order backlog. There is now less downside risk for both," he said.

Second-quarter operating profit rose 25% year-on-year to 155m euros ($220m), with net sales jumping 22% from a year ago to 1.33 billion euros, also ahead of analysts' expectations. Wartsila, which does not give profit data for its units, said sales rose 39% year-on-year at its Power Plants unit and 31% in its Ship Power business in the quarter, with Services sales up 3%.

Wartsila said its second-quarter order inflow slumped 45% year-on-year to 785m euros, slightly better than market expectations, with a sharp 86% drop seen in its Ship Power unit.

Its overall orderbook at the end of June stood at 5.8 billion euros, down 22% versus a year ago.

The firm said shipping markets had been at a "virtual standstill" for more or less 9 months, and a quick recovery was unlikely.

But it soothed market jitters by lowering its estimate for potential shipping order cancellations. The firm's new estimate of 800m euros is down from 1 billion at end-March and halts the rising trend seen in previous quarters.

"It's a positive sign... but when it comes to ship orders in 2010 I'm still quite conservative," said eQ Bank analyst Erkki Vesola. "Usually the (market) cycles are quite long, so there could be some tame years ahead."  [22/07/09]