Finnish engineering group Wartsila reported weaker-than-expected first-quarter earnings, hit by flaccid demand in its key shipping business, and reiterated that 2010 would be tough.
Wartsila shares were down 3.7 percent at 37.29 euros by 1223 GMT, compared to 1.6 percent stronger European industrial goods and services index .The stock was previously at the same level in late-March.
"First of all services sales were disappointing and then also the order intake outlook comments are not strong enough for the market to go up," said Handelsbanken analyst Tom Skogman. "I think there are still quite big worries for next year."
Wartsila is the world's top maker of medium-speed main engines, and trails Germany's MAN in low-speed main engines. The firm has been hit hard by the economic downturn and slow recovery, which has sapped demand for new vessels.
Underlying operating profit fell 28 percent versus a year ago to 94 million euros ($126 million), missing the average forecast of 98 million euros in a Reuters poll and at the low end of the forecasts.
Sales slid 26 percent to 922 million euros, missing all forecasts in the poll, and were down in all three units -- ship power, power plants and services -- but the fall was sharpest in its smaller power plants unit.
Wartsila rival ABB AG (ABBN.VX: Quote, Profile, Research) reported on Thursday falling first-quarter profits, citing sluggish demand, and warned the demand in power sector was unlikely to pick up soon.
SHIPPING OUTLOOK TOUGH
While Wartsila said there was a gradual recovery visible in the power generation market, the outlook for ship engines and services was more challenging.
"Despite many recent bulk carrier and some tanker orders, the market for merchant vessels is expected to remain slow for up to the end of 2011 ... recent orders can be seen as single orders placed as a result of attractive prices rather than any market trend," it said in a statement.The dry bulk shipping sector has been battered by the global economic slowdown, which has hurt demand for hiring vessels to transport commodities.
Analysts say ship owners are pushing back delivery dates of their new ships beyond 2010 because of the low demand.
Wartsila noted that market overcapacity and low investments from shipping companies had triggered more intense price competition. It said shipping order intake in 2010 should be "moderately better" than in 2009.
Wartsila estimated the cancellation risk in its orderbook was around 400 million euros ($537.7 million), mainly linked to 2011 deliveries, with the total orderbook worth 4.3 billion at end-March.
"I have ... spoken today about these first green sprouts, positive signs in shipbuilding and the ship power industry, which would indicate that we are say six to nine months behind some other industries" in recovering, Johansson told Reuters.
MORE JOB CUTS EXPECTED
In order to counter weak demand, Wartsila said in January it would move the majority of its propeller and auxiliary engine production to China, slashing some 1,400 jobs globally.
On Friday Johansson added the company would review all staff functions during the spring and might announce new job cuts later this year.
"When we have the level of the capacity reduction that we are addressing in the January programme, it should not be a surprise to anyone that we also need corresponding adjustments on the white collar side," Johansson said, declining to comment further.
Wartsila repeated 2010 net sales would fall 10-20 percent versus last year, with its underlying operating profit margin at 9-10 percent. (Additional reporting by Jonathan Saul; Editing by David Cowell and Rupert Winchester) ($1=.7439 euros)
Wartsila shares were down 3.7 percent at 37.29 euros by 1223 GMT, compared to 1.6 percent stronger European industrial goods and services index .The stock was previously at the same level in late-March.
"First of all services sales were disappointing and then also the order intake outlook comments are not strong enough for the market to go up," said Handelsbanken analyst Tom Skogman. "I think there are still quite big worries for next year."
Wartsila is the world's top maker of medium-speed main engines, and trails Germany's MAN in low-speed main engines. The firm has been hit hard by the economic downturn and slow recovery, which has sapped demand for new vessels.
Underlying operating profit fell 28 percent versus a year ago to 94 million euros ($126 million), missing the average forecast of 98 million euros in a Reuters poll and at the low end of the forecasts.
Sales slid 26 percent to 922 million euros, missing all forecasts in the poll, and were down in all three units -- ship power, power plants and services -- but the fall was sharpest in its smaller power plants unit.
Wartsila rival ABB AG (ABBN.VX: Quote, Profile, Research) reported on Thursday falling first-quarter profits, citing sluggish demand, and warned the demand in power sector was unlikely to pick up soon.
SHIPPING OUTLOOK TOUGH
While Wartsila said there was a gradual recovery visible in the power generation market, the outlook for ship engines and services was more challenging.
"Despite many recent bulk carrier and some tanker orders, the market for merchant vessels is expected to remain slow for up to the end of 2011 ... recent orders can be seen as single orders placed as a result of attractive prices rather than any market trend," it said in a statement.The dry bulk shipping sector has been battered by the global economic slowdown, which has hurt demand for hiring vessels to transport commodities.
Analysts say ship owners are pushing back delivery dates of their new ships beyond 2010 because of the low demand.
Wartsila noted that market overcapacity and low investments from shipping companies had triggered more intense price competition. It said shipping order intake in 2010 should be "moderately better" than in 2009.
Wartsila estimated the cancellation risk in its orderbook was around 400 million euros ($537.7 million), mainly linked to 2011 deliveries, with the total orderbook worth 4.3 billion at end-March.
"I have ... spoken today about these first green sprouts, positive signs in shipbuilding and the ship power industry, which would indicate that we are say six to nine months behind some other industries" in recovering, Johansson told Reuters.
MORE JOB CUTS EXPECTED
In order to counter weak demand, Wartsila said in January it would move the majority of its propeller and auxiliary engine production to China, slashing some 1,400 jobs globally.
On Friday Johansson added the company would review all staff functions during the spring and might announce new job cuts later this year.
"When we have the level of the capacity reduction that we are addressing in the January programme, it should not be a surprise to anyone that we also need corresponding adjustments on the white collar side," Johansson said, declining to comment further.
Wartsila repeated 2010 net sales would fall 10-20 percent versus last year, with its underlying operating profit margin at 9-10 percent. (Additional reporting by Jonathan Saul; Editing by David Cowell and Rupert Winchester) ($1=.7439 euros)