Annual Report 2002 BUSINESS REVIEW 2002 Information for Shareholders Annual general meeting Letters, e-mails and faxes informing Interim reports 2003 The Annual General Meeting of of the participation at the Annual Wärtsilä Corporation will publish Wärtsilä Corporation will take place General Meeting must reach the Interim Reports on its financial on Wednesday 12 March 2003, Company before the notification performance during 2003 as follows: beginning at 4 p.m., in the Congress period expires at 4 p.m. on Friday Wing of the Helsinki Fair Centre, 7 March 2003. 29 April 2003 January-March address Messuaukio 1, 00520 Letters authorizing a proxy to 31 July 2003 January-June Helsinki. exercise a shareholder’s voting right at 31 October 2003 January- the Annual General Meeting should September. Right to attend reach the Company before the Shareholders who have been regis- notification period expires. These Interim Reports are published tered no later than 2 March 2003 in in English, Finnish and Swedish on the Company’s list of shareholders Payment of dividend Wärtsilä’s Internet site. Interim maintained by the Finnish Central The Board of Directors will propose Reports will be sent by post on Securities Depository Ltd have the to the Annual General Meeting that request. Interim Report orders: right to attend the Annual General a normal dividend of EUR 0.25 and tel. +358 10 709 0000/Corporate Meeting. an extra dividend of EUR 1.50 or Communications or Internet: altogether EUR 1.75 per share to be www.wartsila.com. Notification of attendance paid on the 2002 financial period. Shareholders wishing to attend the The dividend will be paid to share- Stock exchange releases: Annual General Meeting are required holders who are registered in the list Wärtsilä´s Stock Exchange releases to inform the Company thereof not of shareholders maintained by are available in English, Finnish and later than 4 p.m. on 7 March 2003 Finnish Central Securities Swedish on Wärtsilä´s Internet site. either in writing, by e-mail, by fax or Depository Ltd on the record date, by telephone. which is 17 March 2003. The Information material orders dividend payment date proposed by Wärtsilä’s Annual and Interim Address: the Board is 24 March 2003. Reports, brochures and releases are Wärtsilä Corporation available at the Communications Share Register Annual report 2002 Department, tel. +358 10 709 0000 P.O. Box 196 This Annual Report is also available or they can be ordered via Internet FIN-00531 Helsinki in Finnish and Swedish and may be www.wartsila.com. Finland downloaded at Wärtsilä’s Internet Telephone +358 10 709 5282, site, www.wartsila.com. between 10 am and 2 p.m. on weekdays fax +358 10 709 5283 e-mail: [email protected] Contents Business Review 2002 Information for Shareholders 2 Wärtsilä in Brief 4 Highlights 2002 6 Mission, Vision. Targets and Strategy 8 Chief Executive’s Review 10 Board of Directors 11 Board of Management 12 Human Resources 14 Environment 16 Power Divisions 18 Marine 22 Power Plants 26 Service 30 Imatra Steel 32 Wärtsilä’s Holdings 34 Main Releases 2002 36 Glossary 38 Addresses Wärtsilä in Brief Wärtsilä Marine Power Plants Wärtsilä is the leading global ship Wärtsilä is the leading supplier of Wärtsilä is a leading global provider of power supplier and a major provider ship machinery, propulsion and power plants for decentralized power of solutions for decentralized power manoeuvring solutions for all types generation. Wärtsilä provides power generation and of supporting of marine vessels and offshore plants for baseload, peaking, and services. In addition Wärtsilä applications. combined heat and power applica- operates a Nordic engineering steel tions. We also supply solutions for gas company Imatra Steel and manages compression and for oil and gas a substantial shareholding to support pumping. The product range com- the development of its core busi- prises gas- and oil-fired power plants ness. with outputs from 1 to 300 MW and biofuelled power plants with outputs from 3 to 25 MW. Strategy Strategy Strategy Power on Land and at Sea The Ship Power Supplier Power for a Changing World Wärtsilä improves the performance Power solutions for decentralized and profitability of its customers’ power generation fast, flexibly and businesses by providing reliable with respect for the environment. and cost-effective total propulsion The total service and operation systems while fully respecting concept adds value for the cus- environmental demands. tomer at every stage of the plant’s lifecycle. Key figures 2002 Key figures 2002 Key figures 2002 • Net sales MEUR 2,519.0 • Net sales MEUR 763.4 • Net sales MEUR 666.0 • Operating profit MEUR 188.9 • Order intake MEUR 506.7 • Order intake MEUR 427.9 • Profit before extraordinary items • Year-end order book MEUR 617.7 • Year-end order book MEUR 255.2 MEUR 170.4 • Balance sheet total MEUR 2,685.0 • Gearing 0.50 • Personnel at year end 12,459 Net sales by divisions 2002 Market share of medium- Market share of Wärtsilä and low-speed main engines Power Plants Service 34% (34%) Medium-speed engines Low-speed engines Wärtsilä 8% (5%) Marine 30% (25%) Wärtsilä 34 % (37 %) Wärtsilä 25 % (26 %) Gas turbines 29% (50%) Power Plants 26% (32%) Orders 6/01-5/02 Orders 6/01-5/02 Other Engine manufacturers 63% (45%) Imatra Steel 8% (8%) Source: Diesel & Gas Turbine Worldwide Source: Diesel & Gas Turbine Worldwide Other 2% (1%) 2 Wärtsilä Corporation Service Imatra Steel Holdings Wärtsilä supports its customers Imatra Steel is Wärtsilä’s special Assa Abloy and Wärtsilä Real Estate throughout the lifecycle of its engineering steels company. Imatra are the main holdings. products by ensuring lifetime Steel produces round, square and • Assa Abloy 7.6% efficiency. Wärtsilä’s Service business flat special steel bars, forged engine • Wärtsilä Real Estate 100% is founded upon the Group’s global and front axle components, leaf base of installed engines and power springs and tubular stabilizer bars. plants. Wärtsilä is close to its The company’s customers are customers through subsidiaries in European automotive and mechani- roughly 60 countries. cal engineering companies. Strategy Strategy Strategy The Total Service Provider A Skilful Niche Player Holdings create financial resources Keeping the customers’ investments Special engineering steels and for developing Wärtsilä’s core productive by optimizing their automotive components business, the Power Divisions. operations throughout the product lifecycle. Key figures 2002 Key figures 2002 Key figures 2002 • Net sales MEUR 843.4 • Net sales MEUR 200.4 • Market value of Wärtsilä’s holdings • Personnel at year end 5,644 • Operating profit MEUR 3.2 on 31 December 2002: • Long-term service agreements • Profit before extraordinary • Assa Abloy MEUR 302.4 for 9,756 MW items MEUR -0.4 • Wärtsilä Real Estate, book value • O&M agreements 2,056 MW • Personnel at year end 1,391 MEUR 21.9 Wärtsilä´s engine base Imatra Steel net sales by Assa Abloy share price market area 2002 development 1998-2002 1,000 MW SEK 140 200 120 100 100 80 60.000 60 25 40 20 0 Finland 14% (15%) Other nordic countries 38% (36%) Power Plants 4 Other EU countries 47% (46%) 94 95 96 97 98 99 00 01 02 Marine engines Other countries 1% (3%) Traded shares (x 1,000) Low-speed Series B General index Medium-speed Wärtsilä Corporation 33 WÄRTSILÄ 2002 >> Highlights of 2002 POWER DIVISIONS • The Power Plants division’s organization was restruc- Marine tured to increase the flexibility required by prevailing • The John Crane-Lips acquisition strengthened market conditions. A new functional organization was Wärtsilä’s position as the leading global supplier of adopted in November. ship power and propulsion solutions. Renamed Wärtsilä Propulsion, this company increased Marine’s • Power plant activity was highest in Latin America. sales by 25.3%. • Large 100 MW order for pumping units gained in • Marine’s order intake became livelier during the au- September for crude oil pipeline in Turkey. tumn and in the final quarter was almost double the volume in the same period one year earlier. • Clear growth in interest in biofuelled power plants. • Wärtsilä signed a co-operation agreement with Service Mitsubishi Heavy Industries Ltd in September on the • The Service division showed further growth. Three development of a new low-speed marine diesel engine. new Ciserv companies were acquired, each with its own specialist expertise in marine service. Power Plants • The volume of power plant orders declined, • Service focused on developing new service products profitability improved. and accelerating deliveries. • The volume of projects was good, financing was • Wärtsilä Land and Sea Academy was set up to provide problematic. training for marine and power plant customers. Wärtsilä Group’s net sales by divisions 2002 Power Divisions, net sales by division 2002 Service 33.5% (33.5%) Service 36.4% (36.4%) Marine 30.3% (25.2%) Marine 32.9% (27.4%) Power plants 26.4% (32.2%) Power Plants 28.7% (35.0%) Imatra Steel 8.0% (7.9%) Other 2.0% (1.2%) Other 1.8% (1.1%) Key ratios Year Most recent quarters EUR million 2000 2001 2002 1-3/02 4-6/02 7-9/02 10-12/02 Net sales 2,706.8 2,358.7 2,519.0 580.9 701.4 510.3 726.4 Operational EBIT 111.4 95.8 77.8 4.2 33.6 16.1 23.9 Operating profit 367.1 523.9 188.9 4.2 144.7 16.1 23.9 Profit before extraordinary items 336.1 508.7 170.4 3.6 143.7 10.6 12.5 Earnings per share, euro 4.20 5.53 2.05 -0.02 1.60 0.05 0.42 Balance sheet total 2,465.3 2,405.0 2,685.0 2,438.5 2,819.4 2,737.1 2,685.0 Interest-bearing liabilities, gross 485.0 168.3 624.3 434.6 612.7 641.8 624.3 Convertible subordinated debentures 117.2 28.1 27.9 28.1 27.9 27.9 27.9 Cash and bank balances 118.9 184.6 185.8 197.3 212.5 145.3 185.8 Personnel end of period 10,564 11,122 12,459 11,115 12,362 12,430 12,459 4 Wärtsilä Corporation Wärtsilä bioplants use the patented BioGrate combustion technology, which is especially suitable for extremely wet wood residues, bark and sawdust.