WÄRTSILÄ ANNUAL REPORT 2020 20 ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review CONTENTS ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review WÄRTSILÄ IN BRIEF Wärtsilä is a global leader in smart technologies and complete lifecycle solutions for THIS IS FINANCIAL the marine and energy markets. WÄRTSILÄ SUSTAINABILITY GOVERNANCE REVIEW By emphasising sustainable 1 innovation, total efficiency and data analytics, Wärtsilä maximises the environmental and economic This is Wärtsilä Sustainability Governance Financial review performance of the vessels and power plants of its customers. 2020 in brief 4 Sustainability at Wärtsilä 42 Corporate governance Board of Director’s report 144 www.wartsila.com Key figures 5 Stakeholder engagement 46 statement 109 Businesses in brief 6 Responsible business conduct 51 Annual General Meeting 110 Five years in figures 159 Highlights 7 People and culture 54 Shareholders’ Nomination Board 111 Environmental management 57 Board of Directors 112 Quarterly figures 161 CEO review 9 Occupational health and safety 62 Group management 118 Wärtsilä’s purpose is to enable Supply chain management 65 Internal control 122 Calculations of financial ratios 163 sustainable societies with smart Operating environment and strategy 12 External audit 124 technology. The demand for clean Operating environment 13 Sustainability data 67 Financial statements 165 and flexible energy, and the need Strategy 18 Economic 68 Remuneration report 125 Consolidated financial statements 165 for efficient and safe transportation Creating value 22 Environment 72 Parent company financial statements 227 are increasingly affecting the way Social 78 Risks and risk management 132 that customers operate. This forms Businesses 23 Compliance 84 Auditor’s report 238 the basis for Wärtsilä’s Smart Wärtsilä Marine Power 24 Marine and Smart Energy visions. Wärtsilä Marine Systems 26 Report profile 86 Wärtsilä in the capital markets 243 Wärtsilä Voyage 28 Materiality assessment 88 Wärtsilä Energy 30 Reporting principles 93 Information for shareholders 248 Wärtsilä Portfolio Business 32 Independent assurance report 96 GRI index 99 R&D and innovation 33 This Annual Report is not an xHTML document compliant with the ESEF (European Single Electronic Format) regulation. 2 ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review THIS IS WÄRTSILÄ ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review 2020 in brief CEO review Operating environment and strategy Businesses R&D and innovation 2020 IN BRIEF 4 ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review 2020 in brief CEO review Operating environment and strategy Businesses R&D and innovation WÄRTSILÄ’S MANUFACTURING AND R&D FOOTPRINT KEY FIGURES Vaasa, Finland 4-stroke engines and R&D Order intake Group net sales development MEUR MEUR 8,000 6,000 Suzhou, China 5,000 Production, assembly, 6,000 and sourcing 4,000 4,000 3,000 Wärtsilä CME (Zhenjiang, China) 2,000 Roddi, Italy Propulsion Wuxi, China 2,000 Voyage products Propulsion 1,000 Trieste, Italy 4-stroke engines 0 0 and propulsion 2016 2017 2018 2019 2020 2016 2017* 2018 2019 2020 Khopoli, India Auxiliary modules * Restated due to IFRS 15 Result Dividend/share, earnings/share Lost-time injury frequency rate (LTIF) WQDC (Shanghai, China) MEUR % EUR 4-stroke engines 700 14 1.00 3.0 CWEC (Shanghai, China) 4-stroke engines 600 12 CSSC Wärtsilä Electrical & 0.75 500 10 Automation (Shanghai, China) 2.0 Voyage solutions 400 8 0.50 Sites with Sites with sizeable Joint venture sites 300 6 engineering, R&D manufacturing 1.0 (fully owned) (fully owned) 200 4 0.25 100 2 0 0 0.00 0.0 2016 2017* 2018 2019 2020 2016 2017* 2018 2019 2020** 2016 2017 2018 2019 2020 Sales and Personnel Operations in service network Comparable operating result Dividend/share Profit before taxes Earnings/share Comparable operating result, % * Restated due to IFRS 15 countries locations * Restated due to IFRS 15 ** Proposal of the Board 17,792 >70 258 Dividend/share and earnings/share for 2016–2017 have been restated to reflect the increased number of shares. 5 ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review 2020 in brief CEO review Operating environment and strategy Businesses R&D and innovation BUSINESSES IN BRIEF Wärtsilä Marine Power Wärtsilä Marine Systems Wärtsilä Voyage Wärtsilä Energy Wärtsilä Marine Power leads the industry in its Wärtsilä Marine Systems offers high-quality Wärtsilä Voyage transforms how vessels perform Wärtsilä Energy leads the transition towards journey towards a decarbonised and sustainable products, solutions, and lifecycle services their voyage by leveraging the latest digital a 100% renewable energy future. We help future. Our portfolio of engines, propulsion related to the gas value chain, exhaust treatment technologies to deliver a step-change in safety, our customers unlock the value of the energy systems, hybrid technology, and integrated applications, seals & bearings, shaft line repair efficiency, reliability, and emissions. We are transition by optimising their energy systems powertrain systems deliver the reliability, safety, services, underwater services, and marine committed to creating a Smart Marine Ecosystem, and future-proofing their assets. Our offering and environmental performance that Wärtsilä’s electrical integrations. Our aim is to provide the whereby every vessel can connect to digital comprises flexible power plants, energy Smart Marine vision encompasses. We offer latest and most efficient solutions in line with services that make voyaging safer and greener. With management and storage systems, as well as our customers performance-based agreements, Wärtsilä’s Smart Marine Ecosystem vision for the broadest Smart Marine portfolio in the market, lifecycle services that enable increased efficiency lifecycle solutions, and an unrivalled global a safer, better, and more sustainable future for we are well positioned to lead the industry towards and guaranteed performance. network of maritime expertise. our customers. becoming digitally connected across the entire value chain and to be the first partner of choice when leveraging the latest digital technologies. Share of total net sales Personnel Share of total net sales Personnel Share of total net sales Personnel Share of total net sales Personnel 18% 8,355 1,897 5% 1,915 4,888 38% 35% 6 ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review 2020 in brief CEO review Operating environment and strategy Businesses R&D and innovation CHANGES IN THE ORGANISATIONAL STRUCTURE AND DEVELOPING FUTURE FUEL READINESS HIGHLIGHTS NEW MEMBERS IN THE BOARD OF MANAGEMENT Wärtsilä, in close customer cooperation with Knutsen OAS Wärtsilä reorganised its Marine Business into three Shipping AS and Repsol, as well as with the Sustainable Energy independent businesses, with the objective of accelerating Catapult Centre, will commence the world’s first long-term, strategy execution, simplifying the business structure, and full-scale, testing of ammonia as a fuel in a marine 4-stroke strengthening business presence in the Board of Management. combustion engine. The project will begin in the Sustainable HÅKAN AGNEVALL APPOINTED WÄRTSILÄ’S NEXT The new businesses, consisting of Wärtsilä Marine Power, Energy Catapult Centre’s testing facilities at Stord, Norway PRESIDENT AND CEO Wärtsilä Marine Systems, and Wärtsilä Voyage, became during the first quarter of 2021. Wärtsilä’s Board of Directors appointed Håkan Agnevall as the operational on 1 July 2020. new President and CEO for Wärtsilä. Mr Agnevall assumed In addition, Wärtsilä announced that it is developing the the role on 1 February 2021. He succeeds Jaakko Eskola, who Following this announcement, Roger Holm, previously the combustion process in its gas engines to enable them to burn continues as a senior advisor to the Board and executive team President of Wärtsilä Marine Business, was appointed President 100% hydrogen fuel. Wärtsilä has researched hydrogen as a until he retires on 30 June 2021. of Wärtsilä Marine Power, Tamara de Gruyter was appointed fuel for 20 years, and has tested its engines with blends of up to President of Wärtsilä Marine Systems, and Sean Fernback was 60% hydrogen and 40% natural gas. appointed President of Wärtsilä Voyage. Furthermore, Sushil Purohit was appointed President of Wärtsilä Energy. WÄRTSILÄ’S LONG-TERM COMMITMENT TO SUSTAINABILITY RECOGNISED BY DOW JONES SUSTAINABILITY INDICES For the fifth year in a row, Wärtsilä was selected as an index component of the Dow Jones Sustainability Indices (DJSI), both in the DJSI World and DJSI Europe indices. S&P Dow Jones Indices has been a pioneer in ESG indexing for 20 years. 7 ANNUAL REPORT 2020 This is Wärtsilä Sustainability Governance Financial review 2020 in brief CEO review Operating environment and strategy Businesses R&D and innovation SUCCESSFUL APPLICATION OF WÄRTSILÄ NAVI-PORT SUPPORTING THE TRANSITION TO WÄRTSILÄ POWERS THE WORLD’S LARGEST HIGHLIGHTS BENEFITS OF JUST-IN-TIME SAILING 100% RENEWABLE ELECTRICITY SYSTEMS NGO HOSPITAL SHIP Wärtsilä, together with project partners Carnival Maritime and Wärtsilä published an extensive interactive map Atlas of 100%