Wartsila shares hit seven-year low after warning of tough 2020

HELSINKI (Reuters) - Finland's Wartsila WRT1V.HE warned on Friday of a tough outlook for 2020 due to weaker demand for its ship technology and power plants and took a surprise multi-million euros charge on project cost overruns.

Shares in the engineering group plummeted to their lowest level in seven years. “We are going to have, for the next year, a very challenging year,” Chief Executive Jaakko Eskola told a conference call.

The downbeat statement came only weeks after Wartsila on Sept. 18 issued a profit warning on a weaker-than-expected order intake, saying its comparable operating profit would fall by 100 million euros ($111 million) from the year before.

The company on Friday cut the 12-month demand outlook for its energy business to “weak” from “soft” after the unit fell to an operating loss of 9 million euros and sales declined 47%.

“If the downward trend of (energy equipment orders) continues and they keep being postponed, then we will be in a challenging situation,” Eskola told Reuters, attributing the decline to the transition to cleaner energy as well as to political and financial uncertainty in developing markets.

Wartsila’s exhaust gas cleaning business volumes have been growing as owners install sulfur scrubbers on new ships to comply with stricter rules coming into force on Jan. 1.

But Eskola said clients had begun to postpone scrubber investment decisions to see how marine fuel prices react to the new rules. “The outlook for sulfur scrubbers has not weakened,” he said.

The company also said its full-year result would be impacted by a one-time charge of 150 million euros ($167 million) including 84 million which had already been recognized.

The unforeseen charges reflected cost overruns in a handful of complex marine and energy projects, it said.

Eskola said problems in several projects in the same quarter were a coincidence. “Annually we have more than 700 projects and 15 of them went wrong. In that sense I’m not worried,” he told Reuters.

For the third quarter to Sept. 30 Wartsila’s comparable operating profit fell to 39 million euros from 141 million a year earlier. It made a loss per share of 0.01 euros versus a profit of 0.17 euros.

Analysts had expected a profit of 0.09 euros per share, a Refinitiv poll showed.

Shares were down 12.8% at 9.27 euros by 1038 GMT, having slumped as low as 9.25 euros, their lowest since October 2012.

(The story corrects name of chief executive throughout.)

Reporting by Anne Kauranen; Editing by Christian Schmollinger and David Holmes