Wartsila hit by geopolitics, lower scrubber demand

Finnish technology company Wartsila's profit fell in the first half of this year, as macroeconomic and geopolitical uncertainty subdued activity in its energy business and fewer scrubber orders hit its marine business.

The firm made €121mn ($136mn) of profit in January-June, compared with €132mn in the same period last year.

Wartsila's order intake declined by 9pc from a year earlier to €2.8bn for the first half of this year, with investment decisions in the shipping industry adversely affected by trade tensions, geopolitical uncertainty and an anticipated slowdown in the global economy. The bulk carrier and container sectors were particularly affected, and access to finance is currently an issue for many shipowners, the company said.

The company's marine business accounted for around two-thirds of its order intake in the first half of this year — or around €1.9bn ($2.1bn), down by 2pc on the year. Orders received in the marine business in the second quarter were 9pc lower than a year earlier at €936mn.

Orders for marine equipment, such as scrubbers, fell by 13pc on the year to €523mn in the second quarter. The merchant segment, which includes traditional merchant vessels and gas carriers, provided 40pc of the equipment orders. Activity remained healthy in the cruise and ferry markets, Wartsila said.

"Uncertainty regarding fuel price development has slowed scrubber orders, which, in combination with concerns related to lower overall vessel contracting volumes, has prompted us to lower our marine demand outlook for the coming 12 months," Wartsila chief executive Jaakko Eskola said.

Scrubbers are air pollution control devices that will allow ships to continue burning high-sulphur fuel oil (HSFO) after the International Maritime Organisation's (IMO) 0.5pc sulphur cap is implemented from 1 January next year.

Investment in scrubber technology continues to be supported by the current pricing and availability of IMO-compliant fuels, but some customers have put off finalising purchase decisions because of uncertainty regarding future developments and limited delivery capacity for this year, Wartsila said.

Swedish scrubber supplier Alfa Laval also saw a decline in demand for scrubbers in the first six months of this year compared with a year earlier, but the firm said it had anticipated this.