UPDATE 2-Wartsila Q2 profit soars, cancellation risk eases

* Q2 EBIT 155 mln euros vs 133 mln fcast in Reuters poll

* Repeats 2009 outlook

* Says shipping order cancellation risk eases

* Shares open sharply higher

(Adds details, analyst comment, share price)

By Brett Young

HELSINKI, July 22 (Reuters) - Engineering group Wartsila (WRT1V.HE) 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.

Shares jumped on the result, up 8.5 percent at 26.26 euros at 0707 GMT, making it the top gainer on a flat Dow Jones Industrial Goods and Services index .SXNP

"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 percent year-on-year to 155 million euros ($220 million), trumping all forecasts in a Reuters poll, which produced an average estimate of 133 million.

Net sales at Wartsila, one of the world's biggest suppliers of marine engines, jumped 22 percent 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 percent year-on-year at its Power Plants unit and 31 percent in its Ship Power business in the quarter, with Services sales up 3 percent.

ORDER CANCELLATION RISK EASES

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

Its overall orderbook at the end of June stood at 5.8 billion euros, down 22 percent 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 800 million 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."

Wartsila stuck to its 2009 outlook saying, even with the risk of order cancellations, sales should grow 10-20 percent year-on-year with profitability to remain good. ($1=.7039 euros) (Reporting by Brett Young; Editing by Will Waterman and Mike Nesbit)