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UPDATE 1-Finland's Wartsila lifts profit outlook on China deal
July 18, 2014 / 7:26 AM / 3 years ago

UPDATE 1-Finland's Wartsila lifts profit outlook on China deal

* Wartsila to move weak two-stroke engine business to joint venture

* Partners with China State Shipbuilding Corporation

* Q2 results above analysts’ expectations

* Shares rise more than 4 percent (Adds comments, share reaction)

HELSINKI, July 18 (Reuters) - Finland’s Wartsila said it would move its loss-making two-stroke ship engine business to a new joint venture controlled by partner China State Shipbuilding Corporation (CSSC), adding the deal would boost its profitability this year.

Wartsila will sell the two-stroke business, which provides engines for large container ships, for 46 million euros ($62 million) to the joint venture - of which it will hold 30 percent.

“The partnership will enhance the position of Wartsila’s two-stroke technology in the marine engine market, and will provide a strong base for future investments in leading two-stroke technology and customer support,” it said in a statement.

As a result of the deal, Wartsila lifted its full-year operating profit margin forecast to about 11.5 percent, from around 11 percent. It also specified its 2014 sales growth guidance at around 5 percent, from a previous 0-10 percent.

Shares in the company rose 4.3 percent in early Helsinki trading.

“Wartsila’s position in two-stroke has been weak, with a market share of around 10 percent. Technology development is very expensive, so a partnership is a logical move and the deal with a large player like CSSC looks reasonable,” said Inderes analyst Juha Kinnunen.

Wartsila said on Friday that its underlying operating profit in the second quarter rose 10 percent from a year earlier to 122 million euros, above analysts’ average forecast of 119 million.

$1 = 0.7395 Euros Reporting by Jussi Rosendahl; Editing by Sakari Suoninen and Pravin Char

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